chapter  2
48 Pages

Sectoral systems for health innovation and development

This chapter analyses the main characteristics of sectoral innovation systems for health in latecomer countries and advances two main propositions. First, while a sectoral innovation system has several components, its success depends on institutions that help coordinate efforts of all actors in the system. Institutions, defined as the “rules of the game” and institutional capacity defined as “the capacity of the state to provide the basic rules for actor interaction and coordination”, lie at the heart of the issue. While institutional and innovation economics have addressed issues of institutional variances and their impact on innovative performance, there is a need to view these in conjunction with developmental concerns that confront the latecomers specifically. Second, health innovation is a much broader and more complex sector than pharmaceuticals or biotechnology. It not only has a broader technological base and a wider range of actors, but it spans well beyond the realm of mere technological innovation to include social and institutional innovations. It therefore calls for rigorous framework that could help analyse the issues in building capacity. This chapter begins with a discussion of the triangulated relationship between innovation, knowledge and development, and maps out the main characteristics of innovation in resource-constrained environments. Whereas knowledge, skills and experience are key in building technological capabilities, modes of learning as promoted through institutional coordination are the precursors of innovation capacity. This section will show how innovation capacity holds the key to how countries master the knowledge they have, and how learning process conditions the accumulation of technological capabilities for actors to innovate, access new forms of knowledge to move into higher domains towards the global frontier. The analysis makes a distinction between information and knowledge and the means by which they are created, thereby moving the discussion away from the lure of simple, magic-bullet incentives like IPRs, to holistic perceptions based on innovation policy. Section 2.2 elaborates the salient features of sectoral systems of innovation in the latecomer context. Health innovation as a sectoral system has its own knowledge bases, actor configurations and boundaries and these are analysed in Section 2.3. In keeping with the fundamental hypotheses that inform this book, Section 2.4 discusses the importance of sector specific “push” institutions in building local health innovation capacity. The changing

regulatory landscape, the newly emerging global “push” institutions and their impact on health innovation is then discussed to show the wide divergences these might have on country specific capacity to perform health innovation. The analysis in Section 2.4 onwards brings out two important results. First, integrating the local push institutions and global pull institutions to build capacity for health innovation calls for extensive and advanced policy formulation skills within countries, which itself is a public good. A state’s own capacity to formulate policy vision and sustain it through appropriate implementation strategies for health innovation relies on the availability of good human skills and accountable and transparent governance processes, and it is institutions that facilitate their presence and functioning. Second, it is the ability of states to identify local priorities, build local institutions accordingly and leverage the global “pull” factors to local needs that determines the ability to succeed. In other words, the various global institutional changes that impinge upon the sectoral system’s ability to respond need to be mitigated and structured through state action. State actions manifest in the capability to identify market failures and opportunities, strategic choices that are made in the form of policies and the apparatus put in place to implement such policies. State’s capacity to influence the technology choices of actors and sectors and its ability to enforce them through relevant organizations lies at the heart of building capacity in health innovation in latecomer countries. The analysis conducted in this chapter is furthered through the evidence in the country specific chapters that follows from Chapters 3 to 7 on precisely these issues.