COMMENTARY

Research and development as a source of economic growth

In Summary

•Research and development is often referred to as the  backbone of innovation

Innovation-Growth
Innovation-Growth
Image: FILE

In this age of accelerated technological development, it is trite that innovation is a key factor of economic growth. Through innovation, new ideas are introduced into the market, novel methods and practices that increase productivity and maximize on efficiency are developed, and more consumer – centric products and solutions arrived at. However, while debate on the economic benefits of innovation is widespread, public discourse on the backbone of innovation is largely and unexpectedly missing.

Research and development (R&D) is often times referred to as the fuel – or the backbone – of innovation. Through R&D, the invention of better production techniques and the promotion of more efficient processing methods are introduced into the market, and serve to benefit the economy in the long run. Simply stated, R&D activities enable scientists and researchers to develop new knowledge, techniques and technologies. As technological advancements are made, industries can produce more with either the same or fewer resources, thereby increasing productivity, and ultimately economic growth.

In Kenya, the benefits of R&D efforts are largely evidenced in the health sector. With diseases and conditions such as Tuberculosis, Malaria and HIV/AIDS having negatively impacted the life expectancy of the ordinary Mwananchi from historical analysis, efforts to develop key solutions to these challenges led to the increase in tailored R&D efforts. This in turn led to Kenya being a top contributor to the medical field, with specific focus on the treatment and management of Tuberculosis, Malaria and HIV/AIDS. Notably, diseases that once served as a death warrant to the Kenyan populace are now manageable and experiencing incidence declines. It is to be observed, however, that Kenyan R&D efforts were not conducted in a vacuum but benefited from industry and global collaborations.

 

The R&D success story that is noted in the Kenyan medical field can be replicated in other industries, provided that adequate resources are made available. This will serve to fuel growth in the respective industries, given the link between R&D and economic growth. A number of studies in the recent past indicate that a modest increase of 1% of GDP in R&D spending can potentially lead to a 2.2% increase in economic growth. This is untapped growth that would serve to fit into Kenya’s accelerated development narrative.

While the untapped growth promised by R&D activities is indeed desirable, it is imperative to separate the roles of the private sector and government in both incentivizing increased spending on R&D and financing R&D efforts. While R&D efforts have been largely spearheaded by the government in the health sector, the same model may not work elsewhere.

In the spirit of free market economics, the role of government in R&D should be maintained to creating an environment that promotes and rewards R&D efforts by private sector players that will serve to benefit the country at large. This includes the introduction of fiscal measures, such as tax rebates and tax allowances, that incentivise private sector funded R&D activities.

Karen Kandie – MD IDB Capital