**Table 5.1  Strengths and Weaknesses of the Chilean National Innovation System**

||**Strengths**|**Weaknesses**|
|---|---|---|
|-<br>-<br>-<br>-<br>-<br>-<br>-|Broad University Network<br>Strong competitive environment<br>Open economy<br>Strong foreign direct investment<br>Free Trade Agreements and<br>complementary economy with the<br>European Union, the United States,<br>Canada and Mexico.<br>Export orientation<br>Availability of public resources to<br>promote innovation|-<br>Low level of quality of education<br>-<br>Low percentage of population with post-secondary education<br>-<br>Excessive focus on basic scientific research and a decline in<br>applied science and technology development<br>-<br>Few patent applications<br>-<br>Inadequate training of personnel in the sciences and<br>technologies<br>-<br>Little investment in R&D<br>-<br>Low proportion of R&D research done by enterprises<br>-<br>Limited collaboration between businesses and universities<br>-<br>Weak technological institutes, and without a culture of<br>collaboration|

Source: Brunner (2001); Mullin et al. (1999); Mullin et al. (2000); Bitrán (2002); Benavente, and Crespi, (1998), and interviews with experts.

Three factors limit the Chilean National Innovation System: (1) low levels of education in reading and mathematics, (2) a very small investment rate in applied technology, and (3) an even lower commitment from private firms. The low quality of education is reflected in low comprehension reading levels and knowledge of mathematics, compared to countries with similar GDP levels. In addition, given its impact on the transition to an innovation economy, a more worrisome aspect is the very low level of resources dedicated to technological innovation—only 0.7 percent of GDP. This is far below the 2 percent average in OECD countries. In Chile, the private sector only contributes 25 percent of the total amount applied to basic research. This translates into a very low investment in applied research or transfer activities; if increased, these investments could lead to improved firm performance.<sup>57</sup> — However, innovation for its own sake is not the answer business applications are what matter. Given the importance that exports have in the national economy, Chilean firms are well aware that businesses compete in the global economy. But if firms do not integrate technological innovation into their business plans, the public sector’s efforts to create an intensive knowledge-based economy will be ineffective. Moreover, because of the lack of concrete applications or relevance, the resources assigned to science and technology may not produce the desired results. Innovative technologies with business applications promise much more for the modern economy.

To that end, the National Commission of Science and Technology (CONICYT) and the Presidential Scientific Advisory Commission are responsible for formulating and overseeing Chile’s strategy for scientific and technological development. In addition, the Presidential Commission on the Development of New Information and Communication Technologies and the Biotechnology Development Commission have sought to provide an integrated and macro level approach to innovation. As a result, Chile has developed myriad policies, programs and policy instruments for research and innovation. To make the strategy more effective, representatives of the beneficiaries— research institutions, universities and private firms—should be involved in the design and implementation of this strategy. The government would benefit from devising an overall strategy and coordinating its initiatives in these areas, by aligning managerial responsibilities with accountability for results, and introducing consistent budgeting and monitoring process. Further, it will be important

> 57 In the OECD countries, the private sector’s support of R&D fluctuates between 40 and 70 percent.  In Chile more than 55 percent of the resources in science and technology are dedicated to basic research. In Korea, the figure is 12.6 percent; in Spain, 22 percent; and in the United States, 18.3 percent. See Brunner, 2001; Bitrán, E. 2002;. De Ferranti, et. al. 2003.

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