Implementing Innovation Policies: Capabilities of National Development Banks for Innovation Financing

Abstract

This comparative note describes common and distinct practices on capabilities to support the innovation activities of seven national development banks (NDB): BNDES (Brazil), CORFO (Chile), China Development Bank, CDB (China), BANCOLDEX (Colombia), Bpifrance (France), Korean Development Bank, KDB (South Korea), and NAFINSA (Mexico). The analysis studies the strategies followed by the selected NDBs for the design and implementation of innovation support programs and the capacities they need to be successful. Little is known about the experience of these NDBs in the world that have been the most successful in designing and implementing programs to support innovation. Building on the primary data collected through flexible semi-structured interviews with current or former NDBs officials, validated and supplemented by interviews with stakeholders outside the NDB, this study asks the following research questions: (i) What priority do NDBs assign to the financing of innovation projects?; (ii) Which operational models would be most effective in financing high-potential innovation projects, avoiding capture? Should they operate on the first and/or second tier?; (iii) What capabilities (a) governance; (b) technical (financial and technological); and (c) operational (implementation and sustainability) should NDBs develop to support innovation credit?; (iv) how, based on their contact with clients, can NDBs help identify market failures faced by innovative companies and thus produce and organize information on potential projects with high social returns?; and (v) What is the best framework for coordinating the work of the NDBs with the innovation agencies?