Industrial policy for innovation: why does it matter?

Abstract

This paper explores the relationship between industrial policy, innovation, and productivity in the Philippines. It argues that strategic industrial policies can promote innovation by incentivizing market-oriented research and development and commercialization, developing necessary innovation infrastructure, and fostering a skilled workforce equipped to work with new technologies and adapt to changing market demands. The paper also focuses on the importance of connecting innovation and entrepreneurship ecosystems, highlighting the challenges facing the Philippines in this area. It specifically analyzes the country’s startup ecosystem and recommends the establishment of Regional Inclusive Innovation Centers (RIICs) to facilitate collaboration among various stakeholders. Finally, the paper discusses the adoption and adaptation of artificial intelligence and Industry 4.0 technologies and their potential to drive productivity gains and transform the Philippine economy.

JEL classification: O31, O32