Overcoming Barriers to Caribbean Innovation Towards a Restructuring of the Innovation Payoffs
Silburn Clarke, FRICS Chairman, Digital Society Jamaica
CARIBBEAN GROWTH FORUM PRESENTATION OUTLINE a.
The Innovation- Productivity-Competitiveness-Prosperity Challenge
b.
We are in the throes of the Knowledge Economy • •
c.
Where does Firm Sustainable Competitive Advantage arise from • •
d.
Emergence of Knowledge Economy Correlations
Firm Level Knowledge, Innovation, Creativity (KIC Factors)
Status of Caribbean Firms •
Review of Capacity for Innovation
e. Unleashing the Human Talent Potential • •
Creativity Problem Solving / Training Talent in Creativity Supportive Firm Climate for fostering Creativity
f. Perspectives and Consensus • •
Businesses, Policymakers & Academia Triple Helix Model
g. Take Home Messages
DEFINITIONAL
Innovation.... Value creation in the market from New or Improved products, processes, methodologies, business models, or services
Schumpeter 1934
INNOVATION IS A FIRM LEVEL CONSTRUCT
Clarke 2012
The Innovation-Productivity-Competitiveness-Prosperity Link Prosperity
Competitiveness Improvement Productivity Growth
Innovative Capacity
Begins with research and development
INNOVATION CRISIS, PARADOX and CONUNDRUM Jamaica’s economy had been trapped in a low-growth, low-productivity mode for nearly four decades resulting in the stagnation of the standard of living of its peoples (Jamaica Productivity Centre, 2010 and World Bank, 2011). Paradoxically, for the past two decades, Jamaica has enjoyed both exceptionally high levels of foreign investment (Williams & Deslandes, 2008) as well as a rate of total fixed investment, over the two decades from the 90’s to the mid-2000’s, which was close to those of the fastgrowing East Asian region (World Bank , 2011).
INNOVATION CRISIS, PARADOX and CONUNDRUM The productivity of Jamaican firms is chronically low and uncompetitive (JPC, 2010). The country’s global competitiveness ranking has slipped from 91 through 96 to 107 over the last three year period 2009 to 2011; WEF, 2010 and 2011). A sub-index of the “firm capacity for innovation” of Jamaican businesses revealed a dismally low collective national rating of 107 out of 139 when compared to national ratings in other economies around the globe in 2010, (WEF, 2010). On the recent 2011 Global Innovation Index Jamaica was ranked 92nd out of 125 countries (INSEAD, 2011 ).
B. THE NEW KNOWLEDGE ECONOMY Global economy has been in transition since the 1980’s to what is variously termed a New Economy, Digital Economy or a Knowledge Economy
The traditional economic model is dead !! Welcome the New Economy!!
Umemoto 2006
•The model of the last 2 eras (agricultural and industrial ) indicated that Land, Labour (low-cost) and Capital (LLC) were the key factors of economic production •Knowledge has become the main resource
Welcome the New Economy!!
“The global pace of innovation is accelerating (not only in products and services, but also in processes, markets, sourcing, business models, etc.) “ Umemoto 2006
Global Shift to the Knowledge Economy
The Shift to Knowledge and Innovation Stage I
Transition I to II
Stage II
Transition II to III
Stage III
Honduras Nicaragua
Jamaica Guyana
Dom Rep Panama Costa Rica
Trinidad Barbados
???
RESOURCE-BASED ECONOMIES
EFFICIENCY-BASED ECONOMIES
Countries compete based on their factor endowments: primarily unskilled labour and natural resources.
Countries begin to develop more efficient production processes and increase product quality.
Compete on the basis of price and sell basic products or commodities, with their low productivity reflected in low wages.
Competitiveness is increasingly driven by higher education and training. Wages have risen and they cannot increase prices
INNOVATION ECONOMIES
Companies must compete by producing new and different goods using the most sophisticated production processes and through innovation. Wages will have risen by so much that they are only able to sustain those higher wages and the associated standard of living by higher value production
INNOVATION ACTIVITY EXPANDS THE PRODUCTION POSSIBILITY FRONTIER
Micro Small Medium Businesses
Innovating Firms
Efficiency Factors
Henrekson, Stockholm School of Economics
C. Sustainable Competitive Advantage How can businesses create wealth and prosperity? •Through Knowledge, Innovation and Creativity (KIC) •The Resource Based View (RBV) identifies the combination of Valuable, Rare, NonInimitable and Organisation (VRIO) resources and capabilities as the source of firm modern competition (Wernerfelt 1984, Barney 1991) •Valuable resources and capabilities ….only gives competitive parity •Valuable and Rare resources and capabilities ….. only gives temporary competitive advantage
How can businesses create wealth and prosperity?
• Resources and capabilities which are Valuable, Rare, Inimitable plus supported by an Organisational context, culture and processes that can exploit these resources and capabilities especially where these are tacitly embedded or intangible (VRIO).…yields Sustained Competitive Advantage (Wernerfelt 1984, Barney 1991, Peteraf 1993, Bounfour 2003) •Dynamic Organisational Capabilities flows from a grounding in Knowledge, Innovation and Creativity (Teece et al 1997, Grant 1996, Eisenhardt and Martin 2000) •Knowledge resources are identified as being at the heart of the advantages under the Resource Based View (Conner and Prahalad, 1996) and in building national intellectual capital for global competitiveness (Stahle and Bounfour, 2008)
SUSTAINABLE COMPETITIVE ADVANTAGE MODEL NO
Is the resource or capability valuable ?
YES
NO
Is it heterogeneously distributed across all firms ?
YES Is resource or capability imperfectly mobile ?
Acquired /Imported Innovations
YES NO
Competitive disadvantage Mata, Feurst, Barney (1995)
Competitive parity
Temporary Competitive Advantage
Is the organisational model embedded ?
Indigenous Innovations YES
Sustained Competitive Advantage
Reorienting the Caribbean Firm •Caribbean cannot assert any globally distinctive VRIO resources or capabilities from factors derived from factors structurally bounded to the old agro-industrial model •They are no longer relevant; have not been relevant for a long time •We have no distinctive land assists, no low-cost labour factor, no unique capital factor •We have to start investing our time and energies into creating, enhancing, preserving our own KIC factor for maximal global economic leverage •Caribbean has to build its own capacity for creating indigenous innovations. The Englishspeaking Caribbean continues to be the only regional block of the world that is yet to develop a software exporting capability; (Duggan, 2008 citing Erran Carmel) •That is where our unique and special VRIO resources and capabilities lie
D. STATE OF CARIBBEAN FIRMS WEF - Firm Capacity for Innovation Pronounced uniform regional group inflexion
STATE OF CARIBBEAN FIRMS How do we radically transform the Firm Innovation Outcomes ?
FIRM-LEVEL INNOVATION ACROSS CARIBBEAN
Resource-rich ≠ capacity to innovate
E. BUILDING a CULTURE and PROCESS for CREATIVE PROBLEM-SOLVING Innovation comes out of creative thinking and creative performance; we must learn to think creatively and to do creatively Requires reshaping the mental models and mindsets by learning by doing Requires both Divergent and Convergent thinking
EMPLOYEE CREATIVITY Firm Innovation starts with individual employee creativity; creative thinking, fact finding and creative performance. Firm Leadership which builds Supportive Work Contexts facilitate Intrinsic Motivation which nurtures Employee Creativity
BUILDING a CULTURE and PROCESS for CREATIVE PROBLEM-SOLVING Innovative Results = Content + Process + Process Skills + Tools + Style
Creativity Thinking Skills
Create Options
No Judgment No Logic
Evaluate Options
Yes Judgment Yes Logic
Basadur 2012
OPPORTUNITIES TO RAMP UP THE ICT VALUE-CHAIN •
Ubiquitous resources and capabilities such as generic IT, does not give any advantages; they are Valuable and hence gives comparative parity at best.
•
Competitive Advantage comes from IT-enabled processes, systems, applications and routines that are novel, unique and inimitable flowing from the creative minds of motivated talent
•
The Caribbean is traditionally a heavy consumer of basic and ubiquitous IT
•
But a poor creator/producer of IT solutions and Export IT
•
Region must shift focus to producing value products, services and solutions for domestic and global spaces
PROMISING POINTERS TO RAMP UP THE ICT VALUECHAIN •
The GoJ/World Bank Digital Jam 2.0 Programme, has provided some pointers as to the untapped potential of Caribbean talent for ICT Creativity
•
Over 300 youngsters have responded to call to showcase their creativity using ICT ; 200 on the Mobile Apps track and 100 in the 24 hour Sports-based CodeSprint or Sports Hackathon
•
60 mobile application proposals submitted with over half adjudged as being of value to market
F.
PERSPECTIVES and CONSENSUS
Governments, Businesses and Academia tend to look at the challenge of firm productivity and national competitiveness from very different perspectives. These differing viewpoints may partially explain why the regional innovation outcomes have been underwhelming for decades The perspective portrayed by the Doing Business Survey is a reflection of the Business Sector and so is understandably not critical of business practices, leadership, management practices, or entrepreneurial orientation. Business owners and TMT’s tend to be severely critical of governmental policy-makers in discourses on business challenges.
TOP CONSTRAINTS - Business Perspective
POLICYMAKERS PERSPECTIVE - They’ve Got it Right
LACK OF CONVERGENCE ON MAJOR CONSTRAITS Constraints / Perspectives
Source
Business
Inefficient government bureaucracy
GCR/DB
X
Poor work ethic in national labour force
GCR/DB
X
Policy
Firm Capacity for Innovation is low
GCR
X
Business sophistication is low
GCR
X
Academia
Low absorptive capacity
X
X
Low level of business networking
X
X
Promote Innovative Entrepreneurship
X
X
Creative Firm Leadership
X
X
Facilitate growth and development of software development industry Main Development Constraints are knowledge USES and CREATION (MORE basic and ubiquitious “ICT” does not
JCS/WITSA
X
X
Elliott
X
necessarily translates to Improved Competitiveness )
Economic payoffs should encourage high skilled, entrepreneurial behaviours
Elliott
X
X
Building Tripartite Consensus – The TRIPLE HELIX Model The "triple helix" is a spiral model of innovation that captures multiple reciprocal relationships at different points in the process of knowledge capitalization. The triple helix denotes the university-industrygovernment relationship as one of relatively equal, yet interdependent, institutional spheres which overlap and take the role of the other. · The first dimension of the triple helix model is internal transformation in each of the helices, such as the development of lateral ties among companies through strategic alliances (clustering) or an assumption of an economic development mission by universities or by the building of synergistic lateral ties amongst government research institutes and labs ·
TRIPLE HELIX · The second dimension is the symbiotic influence of one helix upon another, for example, when the rules of the game for the disposition of intellectual property produced from government sponsored research were changed in the USA, technology transfer activities spread to a much broader range of universities, resulting in the emergence of an academic technology transfer profession and in facilitation for the capitalisation of knowledge spillovers through commercialisation or where recipients of government-sponsored innovation and competitiveness awards are encouraged to share insights and strategies and also to mentor other firms · The third dimension is the creation of a new overlay of trilateral networks, frameworks, organizations and institutions from the interaction among the three helices, formed for the purpose of coming up with new ideas and formats for high-tech knowledge-based development. These trilateral networks operate at both the macro strategic level as well as the micro operational level ( adapted from Etzkowitz 2002)
G. MESSAGES TO TAKE HOME •
Need to structure economic payoffs to favour innovators and the innovating firms in order to drive sustainability, flexibility, competitiveness and prosperity
•
Expand / Enhance the human talent pool by infusing creative thinking, creative problem finding and solving within schools, universities, business firms and the government
•
Adopt Triple Helix Approach as broad model for building tripartite consensus and providing a structure, process and culture for operationalising a sustained shift in national and regional innovation outcomes
THANK YOU !
Silburn Clarke, FRICS
[email protected]
