**4. New approaches for innovation promotion**

Already in 2007, [25] referred that the economies in the process of industrialization marked an evolution in the design of STI policies. This evolution begins with a focus on the promotion of R&D, entrepreneurship, and business development with a

#### *Challenges for the Promotion of Innovation and R&D in Latin America: A Territorial Perspective DOI: http://dx.doi.org/10.5772/intechopen.112289*

general approach and then points toward a targeted approach, that is, aimed at promoting specific sectors, specialization, and the promotion of venture capital markets.

Similarly, some Latin American thinkers devoted their attention to innovation promotion policies in the country's specific sectors or strategic areas. These types of policies were called vertical [17]. This type of approach became more relevant in the 2010s (although in other countries, it was earlier), with the adoption of new European criteria for the administration of regional funds for innovation, focused on smart specialization (RIS3: Research and Innovation Strategies for Smart Specialization) and the territorial approach to promoting innovation. This approach focuses on supporting the existing strengths in the regions and searching for new possibilities for their development. Therefore, R&D&I resources are concentrated on limited priorities, which in a short time can lead to a technical transformation of existing sectors, and in the long term, to the emergence of new technologically advanced industries [26]; this marks a shift in thinking that goes beyond market failure arguments toward arguments based more on the logic of strengthening regional innovation systems [27].

From 2013 onwards, specialization initiatives have been developed in Latin America to promote innovation at the regional level. In each country, these processes have been taking place at different times and different levels, beginning with the development of pilot projects to be later replicated in other regions. Countries, such as Colombia and Chile, have been pioneers; other countries, such as Peru, started later and are still in the implementation process [28].

However, innovation strategies based on smart specialization are not unique examples of regional initiatives with a vertical orientation. For instance, in Argentina, between 2000 and 2008, technological poles were created in the provinces of Rosario, Córdova, and Buenos Aires, focusing on developing high-potential technological areas; this gave rise to different initiatives of technological clusters in other regions [29]. On the other hand, in Chile, from the year 2000, there was the progressive creation of fourteen regional research centers, each in specialized topics according to regional vocations, led by regional governments [30].

In 2022, Alatrista A [31] carried out an analysis of the policies implemented in 12 Latin American regions, San Juan, Santa Fe, and Formosa from Argentina, O'Higgins, Coquimbo, Aysén, and Biobio from Chile, Antioquía, Cundinamarca, and Arauca from Colombia, Arequipa, Ayacucho, Cajarmarca and Huancavelica of Peru. In the study, 22 innovation promotion policies were grouped into four types: type A: "Strengthen and maintain human capital create critical mass and increase connectivity between actors," Type B: "Stimulate knowledge absorption and entrepreneurial dynamics," type C: "Modernize productive activities toward value-added niches: Form innovative ecosystem," type D: "Strengthen excellence in knowledge creation and development of high-tech industries."

The table shows the number of regional policies implemented by local organizations, organized by each type, and differentiating whether they are horizontal (h) or vertical (v). For example, the Argentine regions implemented three of the nine horizontal policies identified for type A, having also implemented the only vertical policy identified for type A.

As shown in **Table 2**, the analyzed regions of Argentina, Chile, and Colombia showed more significant activity in implementing innovation policies concerning the Peruvian regions. This increased activity is also reflected in the implementation of vertically oriented policies, which shows interest in developing certain sectors or specific technologies. Regional or local bodies' regional policy implementation activity shows that regions have different capacities to promote innovation.


#### **Table 2.**

*Innovation policies implemented by 12 Latin American regions.*

The study mentioned above, based on the perception of different experts in each country [31], showed a comparative analysis of the capacity of regional organizations to implement initiatives to promote regional innovation using four criteria: Degree of decentralization of decision-making and resources regarding STI policy, degree of formalization/maturity of the regional policy, development of the executing body of innovation policies, and resources deployed for the regional promotion of innovation. The results show that regions in Argentina, Chile, and Colombia have a medium capacity, while the Peruvian regions show low or even nonexistent capacity.

These results show the vital importance of the empowerment and leadership of regional and local governments to promote their innovation policies. Here, the national context and the decentralization efforts of science, technology, and innovation policy play a relevant role.

In the last years, strengthening regional capacities to promote innovation has become a priority in several Latin American countries. Colombia's national innovation policy aims to improve multilevel governance of the national system of science, technology, and innovation (SNCTI) based on the strengthening of regional capacities in STI [32]. On the other hand, the national innovation policy of Chile identifies within its essential priorities the development of regional R + D + i capacities, together with the national plan of centers of excellence [33]. In Argentina, the national science, technology, and innovation plan (PNCTI) establish territorial agendas and regional agendas as one of four main agendas, which focus on identifying priority issues for regional development and their definition within the framework of the regional science and technology councils (CRECYT) [34]. Other countries, such as Peru, have presented recent proposals to promote regional capacities such as the initiative of regional development agencies. However, the national innovation policy still needs to prioritize strengthening regional capacity. In fact, unlike the other analyzed countries, Peru's Ministry of Science, Technology, and Innovation has not yet been implemented (**Box 3**).

Although the capacities of regional or local governments are crucial to promoting innovation, other factors could also limit regions' ability to boost areas or technologies with high potential. One factor may be the strong economic dependence on the exploitation of raw materials since a kind of "core rigidity" could be generated [35]. The latter finds an analogy in the new approaches to productive diversification, which show the vital importance of a specific region's trajectory and natural capacities to jump into new sectors or areas of specialization [36]. In the words of [37], "the probability that a country will become a significant exporter of a

In recent decades, Peru has implemented different mechanisms to promote innovation in the context of low scientific-technological infrastructure capacity.

Since 2010, the Ministry of Production has implemented the main financing mechanisms focused on business innovation. Likewise, strategic documents have been prepared, such as the Framework Law on Science, Technology and Technological Innovation, promulgated in 2004; the National CTI Plan, published in 2006; and the National Innovation Policy, published in 2016.

In that same year, the territorial concept of identifying areas of specialization in the regions was introduced. In 2016, two pilot projects began (Piura and Arequipa); and by 2020, six additional regions were financed for the same purpose. Additionally, since 2022, regional development agencies have been promoted. (In Chile, this decentralization process began at least 20 years earlier with the implementation of regional centers of excellence strategy and later the implementation of regional innovation strategies.)

However, the eight principles and the four objectives planned in the national innovation policy are separate from specialization or territoriality. No objective proposes a decentralized strategy from the regions. This fact shows the challenge of being able to adapt national strategies to modern approaches. This fact suggests that the delay in adopting certain practices could force premature policy changes, leading to a short time of maturation that could affect their performance. Adaptation becomes an important challenge for the promotion of innovation in Peru.

#### **Box 3.**

*Peru and the challenge of adapting innovation policy.*

product in a four-year period increases with the fraction of related products already exported by that country."

On the other hand, the concept of technological innovation systems (TIS) and their interactions with different contexts or structures, such as technological, sectoral, geographical, and political [38], have become important. The TIS approach can help transcend the limitations and low regional capacities for promoting innovation [31]. Under this approach, regions can use internal networks or connections with other regions that have developed related technologies. These collaboration networks can even become cases of extra-regional exchange, as in the case of some regions of China [36]. Recent initiatives to promote the renewable energy sector in the Arequipa-Peru region have been joined by different actors from Puno. This region has not yet implemented a specialization strategy. Here, it is important to note that some Latin American regions have identified common areas of specialization. For example, mining is an area of specialization for various regions, including San Juan (Argentina), Arequipa (Peru), Antioquia (Colombia), and Antofagasta (Chile); on the other hand, biotechnology was identified in San Juan (Argentina), Lima (Peru), Antioquía (Colombia), and Valparaíso (Chile) among other regions.

Beyond vertical policies promoting strategic clusters, areas, or sectors, some Latin American countries have recently focused on policies to support and foster entrepreneurship ecosystems and the generation of impact companies, especially startups [17]. Among them, the boost to the venture capital markets becomes relevant.

Between 2005 and 2011, the birth of the venture capital market in Latin America took place, with slow growth, limited investment, limited development of high-tech ventures, and certain failures [39, 40]. In recent years these figures have evolved strongly, according to reports from the Latin American Venture Capital Association (LAVCA), Venture Capital investments in Latin America doubled in 2020, reaching USD\$5.4 billion.

As can be seen in **Figure 4**, there is a clear trend to boost the venture capital market. Although these figures are increasing in all countries, the proportion of investments is shown more clearly in Argentina, Chile, and Colombia, which, in a certain way, narrows the investment gap with giant China.

#### **Figure 4.**

*Investment in venture capital as a percentage of GDP.*

The development of the venture capital market has different drivers in Latin American countries. For example, in some cases, private sector institutions lead the process such as the case of EPM, Sura, Bancolombia, and Grupo Bios in Colombia. In cases like Chile, the governmental public sector stands out such as the case of CORFO and Fundación Chile and their initiatives: "Startup Chile" and "Chile Global Ventures". In Peru, the presence of UTEC stands out, a private capital technological university, which has promoted the venture capital market in Peru.

As shown by [12], some Latin American universities are becoming business centers that support innovation in their ecosystems. Many have implemented accelerators, incubators, and centers for developing entrepreneurship and innovation. They frequently are open to external stakeholders such as entrepreneurs and SMEs. Additionally, many universities use their multicampus strategy to amplify their impact and engagement. The leadership of the academic sector can be of special relevance to strengthening regional innovation systems with limited capacities.
