Science, Technology and Innovation Outlook 2023

Enabling transitions in times of disruption

The pandemic has been a reminder that science, technology and innovation (STI) policy is essential to build resiliency and enable adaptation to shocks. It is also a critical enabler of sustainability transitions – notably the green transition. International co-operation on these issues will be crucial but is challenged by rising geopolitical tensions and strategic competition in key emerging technologies. The OECD STI Outlook 2023 explores these and other key trends and issues that require STI policy to adapt to new conditions.

STI policy in times of global crises

The COVID-19 pandemic and Russia's war of aggression against Ukraine are causing significant consequences for economies and societies, with high inflation rates and a potential economic slowdown possibly threatening STI expenditures. Yet, long-term investments in R&D, skills and infrastructures will be necessary to meet global challenges like climate change and future pandemic threats.

Data on gross domestic expenditure on R&D (GERD) show these have largely held up during the COVID-19 crisis. OECD GERD grew 2.1% between 2019-20, marking the first time a global recession has not translated into falls in R&D expenditures. This reflects how investments in R&D were an integral part of the response to the pandemic. Provisional data for 2021 show OECD GERD growing 4.5% between 2020-21. Following these increases, the R&D intensity of the European Union stood at 2.15% and the United States at 3.46% in 2021. By comparison, China’s R&D intensity stood at 2.45% in 2021, having grown from 1.71% in 2010.

STI policy in times of strategic competition

The growing ascendancy of China in frontier technologies is raising concerns for liberal market economies. These include rising competition in critical technologies that will underpin future economic competitiveness and national security; and growing vulnerability from technology supply-chain interdependencies, for example, in semiconductors and critical minerals. Concepts like "technology sovereignty" and "strategic autonomy" have emerged as frames for STI policy aimed at reducing interdependency risks, enhancing industrial performance, and strengthening international STI alliances.

These efforts are complicated by the interdependent and multinational nature of contemporary technological innovation. For example, economies have become increasingly interconnected in global value chains over the last few decades, and China is now the largest importer and exporter of intermediate products in high and medium-high R&D-intensive economic activities. Deep and extensive international science linkages have also built up over the same period.

Interdependencies like these would make potential decoupling between China and OECD countries highly disruptive and costly. This is also at a time when global challenges call for global solutions underpinned by international STI co-operation. A major test for multilateralism will be to reconcile growing strategic competition with the need to address global challenges like climate change. A risk management-based approach and continuous co-ordination between STI policy and other domains will be essential to strike an appropriate balance.

STI policy for sustainability transitions

Without a major acceleration in low-carbon innovation, reaching net‐zero emissions by 2050 will be unachievable. Governments must be more ambitious and act with greater urgency in their STI policies to support sustainability transitions in systems like energy, food and transport, which depend on the development and deployment of enabling technologies. Significant levels of investment are needed across the entire innovation chain to meet the scale and pace of the net-zero transition.

Greater directionality in research and innovation activities is also needed to encourage multiple actors to work towards common goals and solutions. However, this presents a break from the recent orientation of STI policy, where, over the last couple of decades, the STI policy mix has become less directive in the research and technologies it supports. For example, governments have shifted their support for business R&D away from direct support instruments towards a greater reliance on R&D tax incentives. Both types of measures provide useful support to business R&D, but the growing urgency to deal with climate change points to the need for a more directive approach.


Mobilising science in times of crisis: Lessons learned from COVID-19

The COVID-19 crisis demonstrated the importance of science in developing solutions for global challenges. To prepare for future crises such as climate change or pandemics, collaboration between scientists, policymakers, and the public is key to success, but this requires changes to academic culture and incentives. Many of the required changes – including in research performance assessment, public engagement, and transdisciplinary research – are already underway but have not yet been adopted at the necessary scale and speed because of inertia in science systems. More radical change is necessary to spur science to engage with other societal stakeholders to produce the broader range of outputs and solutions that are urgently required to deal with complex global challenges and crises.

Reaching net zero: Do mission-oriented policies deliver?

Government support for innovation typically comes from different ministries and agencies, but mission-oriented policies bundle together interventions to achieve ambitious goals. With over 80 missions launched recently, they are popular for meeting net-zero targets, with clear objectives and measurable objectives. They promote broader co-ordination of policy plans across administrative silos, and better integrate various support instruments across the different stages of the innovation chain.

However, while missions improve on disjointed STI policies, they fall short of enacting transformative change. Early indications suggest they lack sufficient scale and reach to non-STI policy domains to have their intended wide-ranging impact. The challenge remains to move these initiatives from effective coordination platforms to integrated policy frameworks that mobilise and align a wide range of actors. Changes require significant political support and adaptation of incentive structures and practices within public administrations.

Emerging technology governance: Towards an anticipatory framework

Emerging technologies have the potential to drive much-needed transformations and responses to crises, but they also pose risks and challenges. In this context, technology governance has evolved to address the high uncertainty, risk, and complexity associated with emerging technologies. While there is no one-size-fits-all approach, a general and anticipatory framework for governing emerging technologies could be useful at the national or international level. It could help anticipate concerns, address them through open and inclusive processes, and align innovation trajectories with societal goals.

The OECD is developing an anticipatory policy framework to embed values more purposefully into the technology development process. This could help shift the focus of governance from exclusively managing the risks of technologies to engaging stakeholders in the innovation process early on. Using upstream design principles and tools can help balance the need to drive the development and scale-up of technologies with helping to realise just transitions and values-based technology.

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