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Article

Why are companies less
likely to invest in R&D in Brazil

RUY DE QUADROS CARVALHO

HThere is consensus across various social segments and at different levels of government that one of the main problems for expanding the capacity to generate technological innovations in Brazil is the weak engagement of industrial and service companies with technological activities. According to information from PINTEC/IBGE, the industrial sector spent around 3,7 billion reais on internal R&D and around 630 million reais on externally contracted R&D in 2000. Added together, these values ​​corresponded to 0,37. 1999% of Brazilian GDP that year. Although using a different source (ANPEI base) and, therefore, strictly speaking, not comparable, this value does not represent a substantial variation in relation to what was determined by the MCT for the year 0,33 (1998% of GDP) and published in the Book Green Science, Technology and Innovation. This same publication indicated that, in 0,7, in Australia companies' R&D expenditure corresponded to 1,8% of GDP, while in South Korea, the equivalent expenditure was XNUMX%.

This article seeks to discuss some of the factors determining the small participation of Brazilian private companies in R&D activities, whether internal or contracted. It is the result of the vision developed by the author based on his research activity with companies and business associations. The actions of public authorities in this matter require an adequate understanding of the conduct of companies, as there is a rationality for their current behavior and it is important to avoid treating the problem by searching for the "culprits".

The main factors that determine the low propensity of Brazilian companies to spend on R&D are twofold: on the one hand, factors linked to macroeconomic management, which affect investment decisions in general; on the other, microeconomic and more permanent factors. Macroeconomic conditions are those most frequently presented by companies and business entities to justify low investment in technological activities, especially in R&D. They concern the instability associated with problems in the external sector, which are reflected in the sharp fluctuation of the real. Economic instability increases the already high risk of investing in the development of new technologies and makes long-term planning difficult; This is a requirement for this type of investment, whose return is typically long-term. Furthermore, the conduct of economic policy in the face of external instability has been based on maintaining high interest rates. This ends up substantially increasing the cost of capital for investment in R&D, even in the preferred lines of Finep and other agencies. In turn, the high cost of capital and dependence on imported inputs of greater technological complexity compress the operational profitability of companies, which limits the possibilities of self-financing.

Evidently, problems of this nature affect investment in general, not just expenditure on R&D. However, investment in technology development is more sensitive to them (compared, for example, to equipment replacement), due to their greater risk. Companies that systematically invest in R&D prefer to extend their disbursement period and fully self-finance (despite the limitations of self-financing) - which explains why companies do not fully utilize the volume of credit available to finance development projects technological. In this sense, it is important to support the MCT initiative, launched last year, of using resources from the Yellow-Green Fund to subsidize interest reduction (equalization) on technological development projects considered priorities.

Regardless of the management of interest rates, exchange rates and the macroeconomic environment, the high risk and long maturation period of the investment in the development of new technologies are characteristics that burden this type of investment. In order to compensate for this bias and encourage private investment, most industrialized countries adopt two types of financing programs for company R&D, with a burden on public funds. One modality is tax incentive programs for R&D, in accordance with Law 8661/93. Tax incentives for R&D are applied horizontally and mainly benefit large companies, which tend to pay more taxes. The other modality is direct financing programs for companies, and, in international experience, most of them take the form of "technological orders", in which the public authorities contract and partially subsidize research of public interest carried out by companies. This type of instrument is more selective and suitable for stimulating the achievement of sectoral technological development objectives and for promoting R&D in small and medium-sized companies. In this sense, the two types of programs - tax incentives and direct financing - represent complementary action tools, reaching different targets.

In Brazil, the only recent experience of financing private R&D with public funding was through Law 8661/93. This, however, was only effective between 1994 and 1998, since Law 9532/97, which modified it, reduced its benefits to the point of making it harmless. The response from the private sector, during the period in which the law was in effect, was positive, with a ratio of R$10,00 in private investment for every R1,00 in tax exemption. The limitations of Law 8661 from the point of view of technological development did not arise from the tax incentive instrument itself, but from the very broad and liberal approach to what could be considered technological activity for incentive purposes. In this sense, it is considered that the instrument must be revived, with a more restricted approach, in order to effectively encourage the development of new technologies by companies. On the other hand, if supported by the current government and approved in Congress, the Innovation Law would make it possible to contract "public interest research" with private companies, an instrument that would be important to enable the participation of companies in achieving the objectives of Sector Funds.

More difficult to overcome are problems of a microeconomic nature that are related to the historical conformation of the Brazilian productive structure. Firstly, the limited implementation of technology-intensive sectors in the Brazilian industrial and services structure is an important determinant for understanding the small size of R&D activities developed in Brazil. While the sectors producing information and communication technologies can account for up to 25% of the industrial product in the most developed countries, they are less than 10% of the industrial GDP in Brazil. Now, the low presence of high-technology sectors in the productive structure takes its toll not only on the growing deficit in the trade and services balance of these sectors, but also on the volume of R&D carried out by the private sector, since these are energy-intensive sectors. R&D. Evidently the implementation of industries producing information technologies is primarily a question of industrial policy. However, as the location of this type of investment is largely conditioned by the technological capabilities and the R&D-stimulating environment present in the country that intends to attract it, the articulation of industrial policy with ST&I policy in pursuit of this objective is essential.

Secondly, the extensive internationalization of technology-intensive and intermediate sectors contributes to the relative weakness of Brazilian business R&D. Although multinational companies, on average, carry out more intense technological effort than national companies (which is confirmed by information from PAEP/SEADE), it must be considered that new technological research carried out by these companies tends to be carried out in their headquarters and not their subsidiaries. Although this varies according to the strategy of each corporation, and although today the trend towards internationalization of R&D opens up prospects for multinational companies to root more of their R&D activities in their subsidiaries (especially if motivated by policies aimed at these objectives ), the situation as it stands today implies that the main R&D activities of multinational companies operating in Brazil, in the most R&D-intensive sectors, are carried out outside the country. The activities that are carried out here have more to do with D - adaptation and product development - than with P - technological research. Extending the scope of these activities, so that they increase their total volume and include a greater proportion of P, is one of the challenges of a modern technology policy.

Last but not least, it is necessary to emphasize the issue of the fragility of small and medium-sized national companies in the main chains of knowledge diffusion and production in the productive sector. It is true that the activities of technology-based companies have grown, especially those derived from university research. But research has shown that its economic weight is still limited. Unlike countries where the weight of product and process engineering carried out in SMEs is decisive for the competitiveness of production chains as a whole (Germany is a good example in this sense), in Brazil SMEs constitute the weak link in the chain, even in terms of simple technological diffusion, presenting marked deficiencies in terms of financial, technological and managerial capacity. In this sense, a point greatly emphasized by companies is the need to create mechanisms that take technological information - technological opportunities, availability and price of new technologies, etc. - to small and medium-sized companies, a type of service that is extremely incipient and limited in Brazil. .

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