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Policy Coordination: From FDI to a Broader Framework to Promote Innovation—The Case of Costa Rica

Abstract

In recent decades, Costa Rica viewed FDI attraction as a strategic option to sustain growth, promote structural change, and create better jobs. The successful record of FDI investment in the country fostered profound changes in the country’s trade specialization, inducing derived demands for new and better skills in the population and wider availability of entrepreneurial and technical capabilities in specific industrial clusters. In fact, labor mobility from global to domestic firms has had a positive impact on rate of creation and survival of knowledge-intensive firms in the country (Monge-Gonzalez 2012). However, the linkages between local and foreign companies in Costa Rica are still weak, and R&D and innovation investments are coming short for the country needs (Crespi and Tacsir, Inversion en ciencia, tecnologia e innovación.Proyectando a Costa Rica, Editorial Academica Espanola, Saarbrucken, Germany, pp 18–26, 2012; Crespi, Nota Tecnica sobre el Sistema de Innovacion en Costa Rica. IDB Technical Note, 2010). In this scenario, Costa Rica, joining an emerging world trend, has been shifting gradually toward a more selective policy approach to FDI by targeting certain knowledge-intensive sectors, while some global firms have recently moved toward more sophisticated activities in the country. In fact, the private sector concentrates slightly more than 2,000 employees working on R&D, out of 6,000 that the country totals. The success of this new endeavor will depend on the coordination and the capacity to “activate” OCDE (Attracting Knowledge-Intensive FDI to Costa Rica: Challenges and Policy Options, OECD Development Centre, Making Development Happen Series No. 1, Paris, 2012) government policies beyond investment promotion, per se. Public institutions like CINDE have earned a reputation for their success in attracting high-tech FDI and coordination capabilities across the public sector and timely response to specific private demands. Similarly, the more recent creation of the Presidential Council for Competitiveness and Innovation (PCCI) in 2010 aims at improving the governance of this new approach to development, through the coordination of the needed policies. The contribution of this chapter is twofold. First, it will discuss to what extent the national policies and institutions have so far contributed to promote the exhibited upgrading of local operations. Second, it will describe the current efforts to move to a wider development strategy, where the focus is on knowledge-intensive activities and innovation.

Keywords

  • Foreign Direct Investment
  • Knowledge Spillover
  • Domestic Firm
  • Local Firm
  • Local Supplier

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Fig. 1

Notes

  1. 1.

    This section is based on Monge-González et al. (2010).

  2. 2.

    Melo and Rodríguez-Clare (2006) define PDPs as policies that aim to strengthen the productive structure of a particular national economy. This definition includes any measure, policy or program aimed at improving the growth and competitiveness of large sectors of the economy (manufacturing, agriculture); specific sectors (textiles, automobile industry, software production, etc.); or the growth of certain key activities (research and development, exports, fixed capital formation, human capital formation).

  3. 3.

    Monge-Ariño (2011) highlights that FDI has remained above its long-term average (3 %) during the years in which the WTO rules have been in force.

  4. 4.

    The first two aforementioned sectors grew from 7 to 35 % of all exported goods between 1997 and 2008 (Agosín et al. 2009).

  5. 5.

    This estimate excludes biology from STEM. Biology, presents an unusual unemployment rate of around 20 %.

  6. 6.

    The GVCs with the highest average domestic component of exports (DCE) were aeronautic/aerospace and medical devices, scoring 71 and 59 % respectively. In the case of the former, the high average can be explained by the fact that two-thirds of its exports correspond to services activities which score the highest DCE percentages overall. In regards to the latter, the high average DCE seems to respond—at least in part, to the growing domestic capacity to provide some services that had to be purchased abroad in the past. It is worth noting as well that these two GVCs are the ones with the largest range of variation for the firms’ individual DCE scores. In turn, the GVC with the lowest average DCE is electronics, which probably responds to the fact that the production of this chain is highly globalized and still receives a considerable share of intermediate inputs from other countries. Curiously, the automotive GVC scored the DCE that is closest to the overall average and at the same time it displays the lowest range of variation across the firms’ individual DCE scores.

  7. 7.

    In between 1997 and 2007, CINDE was responsible for attracting 42 % of the FDI received by Costa Rica and 89 % of the investments attracted through the EPZ regime.

  8. 8.

    See File 7870 of the Export Processing Zones and Industrial Parks Law (Law 6695 of 1981).

  9. 9.

    Some businesses abandoned the project for various reasons, most often because they were in disagreement with the research unit assigned to them for joint implementation of the project.

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Monge-González, R., Tacsir, E. (2014). Policy Coordination: From FDI to a Broader Framework to Promote Innovation—The Case of Costa Rica. In: Crespi, G., Dutrénit, G. (eds) Science, Technology and Innovation Policies for Development. Springer, Cham. https://doi.org/10.1007/978-3-319-04108-7_9

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