Post on 27-Aug-2018
transcript
WORKING PAPER
A systematic MIT approach for assessing ‘innovation-driven entrepreneurship’ in ecosystems (iEcosystems)
Prof. Fiona MurrayAssociate Dean for Innovation, MIT Sloan School of ManagementCo-Director, MIT Innovation Initiative
Dr. Phil BuddenSenior Lecturer, MIT Sloan School of Management
SEPTEMBER 2017
1
A systematic MIT Approach for assessing 'innovation-driven entrepreneurship' in ecosystems
Dr.PhilBuddenMITSloanSchoolofManagement
Prof.FionaMurray
MITSloanSchoolofManagementMITInnovationInitiative
WorkingPaper
September2017
PublishedbyMIT’sLaboratoryforInnovationScience&Policy
1
A systematic MIT approach for assessing 'innovation-driven-entrepreneurship' in ecosystems
‘Innovation’andentrepreneurshiparenowmuchsoughtafter,butnotalwayswell-defined,andevenlessoftenwellmeasured.ThisWorkingPaperdrawsuponourMITapproachtoinnovation,entrepreneurshipandthepowerfulcombinationof'innovation-drivenentrepreneurship'tosuggestamethodtocaptureasetofglobally-availablemetricstoassesstheseandtheecosystemsinwhichtheyflourish.OurMITapproachisguidedbyafewcriticalinsightsthatderivefromourresearch-informedframeworkandourexperienceofworkingwithalargenumberofdecision-makerswhoseekcomparablemetricsthatmakesenseandyetarenotoverlycomplex:
• Ourmetricsaredesignedtocapturebothinnovationandentrepreneurshipwhichweidentifyinsuccessfulecosystemsandhighlightthespecialblendof'innovation-drivenentrepreneurship';
• Insuchecosystems,therearefourkeyelementsinourframeworktomeasure:foundationalinstitutions,separateinnovationandentrepreneurshipcapacities,comparativeadvantage,andimpact;
• Startingwithfoundationalinstitutions,weseekglobally-availablemetricsthatallowformaximumcomparability,bothovertimeaswellasincomparisontootherecosystems,withthecaveatthatthesearetypicallyavailableonanationalnotasub-national'regional'level.
• Emphasizingmetricsforbothinnovationandentrepreneurshipcapacities,wethenfocusonthekeyinputsintothesetwodistinctivecapacities–measuredin5areas:humancapital,funding,infrastructure,demandandculture/incentives;
• Buildingontheinputsintoinnovationandentrepreneurshipcapacities,wethenincludemetricsthatcaptureintermediateoutputs(thatinturncanleadtolongertermregional'comparativeadvantage'andultimately'impact');
OurWorkingPaperisinformedbyourworkwithmanycolleaguesbutmostespeciallywithourfellowfacultymembers,ScottSternandBillAulet.Wecontinuetobeguidedbyourexperiencewithdecision-makerswhooftenassessandanalyzetherelativestrengthsofchoseninnovationecosystemsandthusneedasetofbasicmetricstoguidethem.Assuch,wepresentthisWorkingPapertocapturewhatwehavelearnedsofar,andtoseekfurtherfeedbackfromresearchers,practitionersanddecision-makers.
2
Manystakeholdersareassessingtheirecosystems,andusingavarietyofnamestodescribethem.Thougharangeoflabelsiswidelyused(includingbyMIT)andshouldberespected,referencesinourWorkingPapershouldbeconsideredasbeingtothefuller(ifnotpithy)‘innovation-drivenentrepreneurshipecosystems’(‘iEcosystems’).1Whatmattersisthatwearealltryingtounderstandthesamebasicphenomena.GovernmentsandUniversities,forexample,maydefinetheir‘home’ecosystemsfromaninnovationperspective,andundertakeassessmentofeghowtheycomparetootherbenchmarkregions.Ontheotherhand,Corporates,CapitalinvestorsorevenmobileEntrepreneursmaybecomparinganumberofecosystems–anddefiningtheminavarietyofways-tomakeadecisionastoapossiblelocationforspecificinnovationactivity,entrepreneurshipventuresand/orcollaboration.Aswithanysuchanalysis,therearealreadymanyapproaches,‘ecosystem’definitionsanddatasourcesthatarerelevant(andwereviewthemostwidelyusedandrelevantofthesehere).Indeed,inrecentyears,anumberoforganizationshavesoughttocreatemetricsandindicestoranklocationsonbothinnovationand/orentrepreneurshipdimensions,andindoingsohaveprovidedorderingsofcities,regionsorcountries.Thisis,atonelevel,awelcomestepforwardsbeyondjustlookingatsayR&Dfor‘innovation’orthenumberofnewenterprisesfor‘entrepreneurship’.Thisexplosionofinformation,however,hasnotalwaysbeenaccompaniedbygreaterclarity,norhasitfacilitateddecision-makingbecausetheseapproachesareoftenhardtodecipherorarebasedonacollectionofmeasuresthatarenotclearlydefined.Manydonothaveglobalcoverage(butarelimitedtotheEUorUS),whereasothersdonotdifferentiate‘innovation’and'entrepreneurship'.FromourMITperspective,theyoftenalsoconflatethe'inputs'forinnovationandentrepreneurship(andfailtospecifywhatareintermediate'outputs'),sodonotprovideaclearguidefordecision-makers.Ourapproach,asoutlinedinthisWorkingPaper,istodevelopasimplebutcomprehensivemeasurementapproach,informedbyourMITtheoryofinnovation-drivenentrepreneurshipandtheecosystems(‘iEcosystems’)inwhichitflourishes.Whereourapproachaddsvalueisprovidingaclearframeworkforanalyzingsuchecosystems–our'theory'ifyouwill-andthenselectingmeasuresaccordingly.
1MITitselfanditsfacultyareassociatedwithavarietyofsuch‘ecosystem’names:eg“EntrepreneurialEcosystems”(https://portal.scotlandeuropa.com/event-listings/view/36);“iEcosystems”(https://innovation.mit.edu/event/mit-iecosystem-symposium/);“Innovationecosystems”(https://executive.mit.edu/openenrollment/program/innovation-ecosystems-a-new-approach-to-accelerating-corporate-innovation-and-entrepreneurship/#.Wb1uFq3MxE4).
3
Withinourframework,itisthekeydifferentiationbetweenthe‘innovation’and‘entrepreneurship’capacities,andamong‘inputs’and‘outputs’,thatplacesthisapartfrommostothermethods.Withourframeworkasastartingpoint,weengageinadeepassessmentofthemostwidelyavailableandusefulmeasuresandindices.Buildingonthedatafoundationsbuiltbyothers,wesuggestarangeofbasicmetricsthatallowforglobalcomparisonofmoreconsistentlyavailablenationaldata.SubsequentworkwilladdressotherelementsofourMITframework,mostimportantlytherangeof‘impact’measuresthatcanbemostappropriatelyusedtotracktheprogressofan‘iEcosystem’.Thisincludesidentifyingandanalyzingcomparableregionalandlocaldata,whichareoftenhardertocollatethanthehigh-levelnationaldata,andyetareimportanttoassessingregionalimpact.Insomeways,thedataforspecific‘policyand/orprograminterventions’(PPIs)mightbeeasiertocollectandthenassess,butthisshouldbedonewithaneyetothebasicnational-levelmetrics,andwhatcanbefoundattheregionalandlocallevels.
4
1. A Framework for analyzing ‘innovation Ecosystems’ Todefinethephenomenaofwhatarecommonlydescribedas‘innovationecosystems’or'entrepreneurshipecosystems'(iEcosystems),wedrawonourownanalysisof'innovation-drivenentrepreneurship'andthatofourMITcolleagueswithwhomwehavecollaboratedonmuchofthismaterial.2Wearealsoguidedbylessonslearnedfromteachingthisframeworkinarangeofglobalsettingsandwithdecision-makersfromdifferentstakeholdergroups,butespeciallyfromgovernmentandcorporates.3WhilenottheplacetoexplorealltheintellectualfoundationsoftheMITiEcosystemframework,theapproachhereemphasizesamorecomprehensiveunderstandingofthe‘system’thatunderpinsinnovation-drivenentrepreneurshipintheseecosystems.Forsimplicity,webreakthe‘system’downintofourcoreelements(seeFigurebelow).Takentogether,theseelementsleadto‘comparativeadvantage’andultimately(toagreaterorlesserextent)‘impact’withinaniEcosystem.
--Fig.One:the‘system’forinnovation-drivenentrepreneurship--
2WeparticularlyrecognizetheworkthatwehavedoneincollaborationwithourMITcolleagues–ProfessorScottSternandProfessorofPracticeBillAulet.3Teachinghasraisedandrefinedthismaterialinanumberofsettings,bothincustomandExecEdsettings,andalsoinformalcourses:‘Innovation-DrivenEntrepreneurialAdvantage’(IDEA,2011+),‘RegionalEntrepreneurshipAccelerationLab’(REAL,2012+),‘RegionalEntrepreneurshipAccelerationProgram’(REAP,2012+),‘Innovationdiplomats’(2014+)and‘InnovationEcosystems’(2016+).
5
Workingfromthebottomofthesystemup,weexploreeachoftheseelementsinturn.Foundationalinstitutionsarethoseinstitutions,rules,practicesandnormsthatareoftentakenforgranted,butensurethatinvestmentsinawidevarietyofcapacitiesandassetscanbeeffectivelyprotectedandleveragedtothebenefitoftheeconomy.Atthecore,theyincluderuleoflaw(andconverselylackofcorruption),protectionofpropertyrights(especiallyforintellectualproperty),financialinstitutions,freedomfornewideas(includingscientificopenness),andgeneraleaseofdoingbusiness.Thetwo‘capacities’arethetwinenginesofthe‘system’,restingonthefoundationalinstitutionsandcombiningdistinctive‘inputs’toultimatelydriveimpact,oftenintheformof‘innovation-drivenenterprises’(IDEs),ratherthanstandard‘small/medium-sizedenterprises’(SMEs).4AkeycontributionfromMIT’sworkoninnovation,entrepreneurshipandecosystemsistoseparateoutthesetwocapacities:5
o InnovationCapacity(I-Cap)is,inourdefinition,thecapacityofaplace–acity,aregionoranation–todevelop‘new-to-the-world’ideasandtotakethemfrom‘inceptiontoimpact’(whetherthisbetoeconomic,socialand/orenvironmentalimpact).Inotherwords,innovationcapacitycoversnotonlythedevelopmentofbasicscienceandresearchbutalsothetranslationoftheir‘solutions’intousefulproducts,technologiesand/orservicesthattrulysolveproblems.
o EntrepreneurshipCapacity(E-Cap)emphasizesasubsetofthemoregeneral
entrepreneurialcapabilityandconditionsforformingenterprises:thelattersupportsalltypesofentrepreneurship(leadingmostlytoSMEsratherthan‘IDEs’).6Theaspectsof‘E-Cap’mostinteresttoinnovationaretheonessupportingthis'innovation-driven’sideofentrepreneurshipcapacity,tailoredtosupportthegrowthofIDEsinaspecificplace–suchasacity,regionornation.
Buildingonfoundationalinstitutions,itisthecombinationof(andlinkagesbetween)innovationandentrepreneurshipcapacitieswithinacity,regionornationthatdrivesimpact.However,innovation-andentrepreneurial-capacityarenotalwaysgeneralassetsdevelopedinaregionalcontext:theyaremorelikelytobespecializedaroundareasofexpertise,whichwethinkofasabroaderformofcomparativeadvantage. 4ThisdistinctionbetweenSMEsand‘Innovation-DrivenEnterprises’(IDEs)highlightsthedistinctivesetofstart-upsthatareentrepreneurialbutalsohaveasourceofadvantagegroundedininnovation(seeAulet&Murray2012).5Forthiskeyandrecentinsightofseparatecapacities,wearegratefultoProfessorScottSternandProfessorFionaMurray.Thisbuildsontheground-breakingworkbyPorter,FurmanandStern(1999)on‘innovativecapacity’.6Seeourdraft‘TypologyonEnterprises’workingpaper,whichlooksattherangeoftheseinvariousglobally-availabledefinitions,frommicro-to‘smallandmedium-sizedenterprises(SMEs).
6
ComparativeAdvantageofanyregion'seconomyisbasedonspecificareasofstrengththatdifferentiateitfromothersaroundit,increasinglyglobally.7For‘innovation-drivenentrepreneurshipecosystems’(iEcosystems),such‘comparativeadvantage’isshapedbyunderlyingstrengthsinbothinnovationandentrepreneurshipcapacitiesbutisalsodistinctive.Aregion’scomparativeadvantagewilloftenfindexpressioningeographicalclustersorindustrialsectors-asagglomerationandspecializationremainfactorseveninthislatestphaseoftheindustrialrevolution–whethertheybeclustersinthelifesciences,ITservicesoreducation.Wehavealsofoundthatcomparativeadvantagecanbeusefullyexpressednotonlyinbackwardreflectionuponexisting,well-definedclusters,butinforward-leaningareasofexpertiseandspecializatione.g.‘Oceans’,SmartCityInfrastructure,etc.InthecaseofaregionlikeGreaterBoston,forexample,this‘comparativeadvantage’isinlifesciences,and,recently,cleanenergyandhardware.ForPittsburgh,itisrobotics:forSingapore,maybe‘smartcityinfrastructure’.IncountriessuchasChileandMorocco,potentialsourcesofcomparativeadvantagefortheecosystemarelikelyfocusedonmining-itssafety,waterandenergyneeds,andnewusesforspecificminerals.Theresulting‘impact’comesfromthecombinationofinnovation-andentrepreneurial-capacities,whencombinedwithcorecomparativeadvantageandoftentakingspecificactionsthrough‘programandpolicyinterventions’(PPIs).SuchPPIscanbemeasuredinavarietyofdifferentways,andsuchmeasurementiskeytotheirevaluation.Thekey‘impact’metricsare,inpart,amatterofchoiceandprioritisationonthepartofthedecision-makersandiEcosystemstakeholders.Itshouldberecognizedthateventhemostprofoundinterventionsinthesystemwillonlydrivemeasurablechangesinimpactoverthelongerrun.Atthehighestlevel,impactcanbecapturedintheformofeconomicorsocialprogressindicators.Foreconomicprogress,themostcommonlyusedmetricisGDPpercapita:thisisnotwithoutitsproblems,butitiswidelyused.Forsocialprogress,indicatorssuchastheSocialProgressIndex(SPI)orUNSustainableDevelopmentGoals(SGDs)maybemoreappropriate.8
7InhisWealthofNations(1776),AdamSmithintroducedtheconceptof“absoluteadvantage”whichDavidRicardodevelopedintowhathassincebeenknownas“comparativeadvantage”fromhisPrinciplesofPoliticaleconomyandTaxation(1817).TheregionalizedgeographicaldimensionwasintroducedbyAlfredMarshallinhistreatmentof“industrialdistricts”inhisPrinciplesofEconomics(1890),anddevelopedbyMichaelPorterwith‘clusters’inhisCompetitiveAdvantageofNations(1990).Likewise,thenotionofflexiblespecialization(PioreandSabel)aswellasthe‘varietiesofcapitalism’literaturealsofocusedattentiononparticularregionalexpertise. 8SPI(https://www.socialprogressindex.com)andUNSDGs(https://sustainabledevelopment.un.org).
7
Otherdecision-makerswilldefine‘impact’differently–suchasqualitativechangese.g.inlocalattitudestowardssuchentrepreneurship–andthereforemeasureitwithdifferent(oftensurvey-based)metrics,tailoredtothestrategiesandaspirationsofkeystakeholders.Atamoregranularlevel,impactcanbecapturedintermsofthetypesofstart-upsthatarebeingcreatedandgrowwithintheecosystem–egthelevelofjobcreationandlevelsofvaluation.Onenovelmetricofparticularinterestistheriseinthenumberandqualityof‘innovation-drivenenterprises’(IDEs)-enterprisesthatblendinnovationandentrepreneurship,andindoingsohavethepotentialforextraordinaryjobcreationandthepotentialtodevelopsolutionstoimportantproblems(atascalethatismoresignificantthantraditionalsmall/medium-sizedenterprise(SME)start-ups).9Intheevenshorterrun,itispossibletomeasuretheimpactofspecificPPIinterventionsinanecosystemthattakeplaceattheregional(ornational)level,where‘impact’mightbemosteasilytargetedandevaluated.Inthosecases,themetricsrequiredtoevaluatetheintervention–whetheritbeapolicyoraprogram–requireawell-designedsetofmetricstocaptureearlyimpact.
9TheseIDEsareasubsetofallstart-ups,manyofwhichwillbeonthetrajectoryoflessexponentialgrowth.Assuch,theyareacriticalvehicleforadvancingnewsolutionstoimportantproblems,forlongrunjobcreation,andultimatelyforeconomicgrowthandsocialprogress.ApproachestomeasuringandmappingsuchIDEsalongan“EntrepreneurialQualityIndex”(EQI)–fromhighlevelsofpotentialbasedoninnovation,tomuchlowerlevels,areunderdevelopmentbyProfessorScottSternandJorgeGuzman.See,forexample,http://www.startupmaps.us/
8
2. Common Indices of Innovation and Rankings for Entrepreneurship Inourexperience,achallengeformostdecision-makers,andforallthoseworkingwithincomplexinnovationecosystems,istodevelopasimplesetofmetricstoevaluatethecurrent‘as-is’stateoftheirecosystem,toassessitsperformancerelativetootherbenchmarklocations,toinformchoicesandthentotrackprogressandevaluateimpact.Thesechallengesariseforanumberofdifferentreasons:
• First,'innovation'and'entrepreneurship'arehardtoassess,asisthe‘impact’resultingfromchoices:incaseswhere‘innovation-drivenenterprises’arethesignofsuccess,theycanbecomplextomeasureinandofthemselves,especiallyastheytaketimetoemerge,evenaftersystem-levelchangesandefforts.
• Second,‘impact’arisesfromacomplexunderlying‘system’sothatthereisno
singularmetricthatcancapturethestateofthatecosystem,andsoinsteadweneedmeasuresofvarioussystemelements.
• Third,I-CapandE-Caparetheresultofmultipleinputs(aswellasofeffective
transformationoftheseinto‘outputs’for‘comparativeadvantage’and‘impact’)leadingtotheneedforabasketofinputmeasuresforeachcapacity.
• Fourth,thereiswidespreaddisagreementandalackonclarityinthesortsof
measuresthatareuseful,leadingtoaproliferationofmeasuresandindices,withvarious‘rankings’placingnationsandregionsinapeckingorderwithouttheunderlyingassumptions(andcalculations)alwaysbeingsoclear.
Theriseinpopularityofinnovation‘indices’andentrepreneurship'rankings’meansthatdecision-makersarepresentedwithevermoreinformationonwhichtobasedecisions,butwithlessguidanceonhowtoassesstheseordeterminethemostappropriatemeasuresfortheirecosystemorprogram/policyinterventions.Beforeturningtoourownproposedseriesofmetrics,wereview(andprovidelimitedcommentaryon)arangeofthemostcommonlyusedindices–andtheirbasketsofmeasures-soastobeabletocompareourapproachtotheseexistingones,andshowwhyweseetheneedforadditionalcontributions(suchasourown)inthisalreadycrowdedfield!Whatfollowsisabriefsummaryofthemostwidely-usedrankingsandindices:furtherdetailsonthese(andtheirunderlyingdata)aresetoutinAppendixA.
9
First,weexploreinnovation-orientedindicesandmeasuresincludingtheGlobalCompetitivenessIndex(GCI,whichisbroaderthaninnovation),BloombergInnovationIndex(BII),GlobalInnovationIndex(GII),andtheEuropeanInnovationScorecard(EIS).TheGlobalCompetitivenessIndex(GCI)hasbeenpublishedeveryyearsince2004,bytheWorldEconomicForum(WEF).Itlooksatthesetsofinstitutions,policies,andfactorsthatdeterminethelevelofproductivityofacountry.TheIndexwasdevelopedbyProfSala-i-MartinandProf.ArtadiandintegratedtheGrowthDevelopmentIndexbyProfSachsandBusinessCompetitivenessIndexbyProfPorter.GCIreliesheavilyontheWEF'sExecutiveOpinionSurveysandstructuresitselfonto12pillarsthatmakeuparegion’scompetitiveness,rangingfromInstitutionstoGoodMarketEfficiencies.TheGCI’sInnovationPillarcorrelatesmostcloselywiththeI-Cap‘demand’componentoftheMITFramework.Givenitsscope,GCIalsoprovidesinformationthatisusefullylinkedtoouranalysisof“Foundations”andlessrelevantforI-CapandE-CapalthoughseveralofthemeasuresintheGCIdoallowustoexploreconceptsforwhichsurvey-basedopinionsarerelevantandoftentheonlymeansofmeasurement.Morenarrowlyfocusedoninnovation,theBloombergInnovationIndex(BII)hasbeenpublishedbytheBloombergGroupsince2012.Itranksthetop50mostinnovativecountriesthatareratedagainst6-7parameters.Theseparametersfocusonlyoninnovationbutareagoodmeasureofinnovationandtheselectionofvariablesmakestheindexrobustandratherstraightforward.However,itsstrengthisalsoitsweakness:byfocusingsolelyonsofewparameters,itmissesascopeofinformationneededtoassesstheinnovation-capacity.Moreover,severaloftheindexvariablese.g.patents,areelementswewoulddeemtobeoutputsofinnovationcapacity(atleastoutputsalongthepathtostrongI-Cap)andsomixinputsandoutputsinawaythatmaketheleversofchangehardtoidentify.GlobalInnovationIndex(GII)ispublishedbyCornell,INSEAD,andtheWIPO,andrankscountriesbytheircapacityfor,andsuccessin,innovation.Thereporthasbeenpublishedannuallysince2007.GIIrankscountriesbasedonacollectionofover80varioussingularandcomposedindicatorstostudytheinnovationanditsenvironment.GIIisoneoftheclosestindexestotheMITFramework,asanumberoftheseindividualvariablesoverlapping,butitdoesnotaddressE-Capwithprecision.TheEuropeanInnovationScoreboard(EIS)isanannualpublicationbytheEuropeanCommission,preparedbyMaastrichtUniversity.ItprovidesacomparativeanalysisofinnovationperformanceinEUandotherEuropeancountriesandregionalneighbors.Theearliesteditioninaconsolidatedstateisfrom2010,althoughearliereditions(with
10
aslightlydifferentsetofparameters)goingbackto2007areavailable.TheRegionalInnovationScoreboardisaregionalextensionoftheEIS,publishedeverytwoyears.TheEIScollectsanumberofparametersthatfitintotheMITframework,butitsscopeislimitedtoEuropeanditssurroundings.Withrespecttoentrepreneurship-focusedrankings,wehavereviewedthreeindices:theGlobalEntrepreneurshipMonitor(GEM),theGlobalEntrepreneurshipIndex(GEI)andtheGlobalStartupEcosystemReport.TheGlobalEntrepreneurshipMonitor(GEM)isdevelopedbyaconsortiumofcorporations,universities,topresearchinstitutionsandgovernmentlaboratoriesthatannuallypublishesstudiesonthestateofentrepreneurshipinover70countries.Itconductstheresearchthroughaseriesofinterviewsandsurveys:anannualsurveyandinterviewsofarepresentativesampleofthepopulation(theAdultSurveyPopulation)andasurveyoftheexpertsinthecountry(theNationalExpertSurvey).ThisGEMservesasaprimarysourceformanyotherentrepreneurialindices.Wewilldrawuponsomeofitsmeasuresofentrepreneurialculture/incentivesasthebest,andmostcomparative,measuresoftheunderlyingattitudestowardsentrepreneurship.TheGlobalEntrepreneurshipIndex(GEI)wascreatedbytheGlobalEntrepreneurshipandDevelopmentInstitute(GEDI),developedbyImperialCollegeLondon,theLondonSchoolofEconomics,theUniversityofPecsandGeorgeMasonUniversity.Itcreatesaframeworktostudyindividualandinstitutionalfactorsthatleadtoentrepreneurialactivities.TheIndexfocusesonstudyingtheentrepreneurshipenvironmentanditsoutputs,lookingatanumberofparameterstodefineattitudes,abilities,andaspirationsofindividuals,andinstitutionalfactorsaffectingthose.Often,these‘individual-institutional’factorsarefurtherpaired,e.g.perceptionofentrepreneurshipasacareerchoiceandcorruptionindexintoasinglevariable,loweringtheresolutionofthestudy.TnonethelessausefulindexforE-Cap,albeitonewithmanydifferentelements,againmixinginputsandoutputsinawaythatmakesitchallengingtoidentifyleversofchange.10GlobalStartupEcosystemReportisanewstudyfrom2017byStartupGenomethatlooksintoanumberofselectedtechEcosystems.Itlooksingreatdetailatthedemographics,performing,fundingandinfrastructure.Aparticularfocusisontalent
10ThisframeworkisfurtherextendedtoaFemaleEntrepreneurshipIndex,andaRegionalEntrepreneurshipIndexfortheEuropeanUnion.
11
andotherresourceattractionforselectedareas,however,thisscopeisalsothelimitofthestudy.
Lastlyweexploretherangeofuniquesourcesofdatathatprovidemanyofthekeydatainputsintotheindicesdefinedabove,andwhichserveasthebedrockofourapproachtosystematicallymeasuringinnovationecosystems(atthenationallevel).TheseincludetheWorldBank,UNESCO,andOECD.
TheWorldBank(WB)WorldDevelopmentIndicators(WDI)istheBank’sprimarycollectionofmetrics,collectedfromofficialsourcesfromaroundtheworld.Itcoversover1500variables.Thedataisavailablefor1990(forselectedcountries)until2015(latesttodate)andiscomprehensiveinitscoverageincludingupto264countriesforsomemeasuresinsomeyears.Itcoversawealthofdetaileddataaboutthestructureofthenationaleconomy,agriculture,energyandeducation.
UNESCO’sInstituteforStatistics(UIS)isaparticularlyrobustsourceforR&Ddata,whichiscollectedthroughtheInstitute’ssurveyonR&Dstatistics(incollaborationwiththeOECD)andavailablefrom1996untilthecurrentyear.TheUISalsoworksincollaborationwiththeLatinAmericanNetworkonScienceandTechnologyindicatorsandtheAfricanUnion.Itscoverageisforover70countriesfordataavailableannuallyorbi-annually.ItisusedtotrackprogressontheUNSDGsespeciallyforTarget9.5whichaskscountriesto“Enhancescientificresearch,upgradethetechnologicalcapabilitiesofindustrialsectorsinallcountries,inparticulardevelopingcountries,including,by2030,encouraginginnovationandsubstantiallyincreasingthenumberofresearchanddevelopmentworkersper1millionpeopleandpublicandprivateresearchanddevelopmentspending.”Itsmorerecentinnovationdatacollectionemphasizesthetypesandoriginsofinnovation(e.g.product,process,organizationalormarket)aswellaswhereinnovationtakesplace(inuniversities,contractors,firmsetc.)ItprovidesnewinsightsintoinnovationcapacitybeyondR&Dspending.
TheOECDprovidescomprehensiveinnovationdatabutonlyforthesubsetofOECDcountriesthatitengages.AsthedeveloperoftheOsloManual,itprovidescriticalguidanceonthecollectionofinnovationdataandstatisticsfromindustry.OECDincreasinglygathersdataonentrepreneurshipaswellasinnovation.
12
3. MIT’s Approach to ‘Innovation-driven Entrepreneurship’ Metrics Giventhemanyindicesandplethoraofdataoutlinedabove,wehavechosenanalternativeapproachthatstartswithourdefinitionofthe‘system’,thenbreakseachpartintoalimitedseriesofrelevantmetrics.Inlinewithourmodelofthe‘system’,wethereforeselectmetricsforeachofthecorecomponents,asfollows:
i. Innovation-drivenentrepreneurship‘impact’
ii. ComparativeAdvantageofregions
iii. InnovationandEntrepreneurshipCapacities
iv. FoundationalInstitutions
Inselectingthespecificmeasures,weareguidedbythefollowingsimplecriteria:
1. Measuresthataresimple,self-explanatoryandasclosetotheunderlyingphenomenaaspossible;
2. Measuresthatcapturedistinctiveelementsofthesystemwithaslittleduplicationoroverlapaspossible,soastobeparsimonious;
3. Measuresthatarewidelyavailableacrosscountriesaroundtheworld(notjusttheOECD,EUorUS)whilerecognizingthatthesemeasuresarenotalwaysavailableatthesub-nationalregionallevel;
4. Measuresthatmightbereplicatedormeasuredwithsimplicitybycountrieswhodonothaveexistingcoverage;
5. Measuresthatareobjectivegivenpreferenceoverthosethataresubjective,expectwherethosemeasuresarenotavailable;
6. Measuresthataredirectlycapturedratherthanthosethatcontainmultipleelements.
InthisWorkingPaper,westartbysettingoutmetricsforthebaseoftheecosystempyramid–itsFoundationalInstitutions.Wethenturntothecoreofourwork–theselectionofasmallbasketformetricswhicharethecritical‘inputs’intoboththeinnovationandentrepreneurshipcapacitiesofthesystem.Wethenaddresstheintermediate‘outputs’fromthesecapacities,andthe‘comparativeadvantage’(includingregionalclusters)whichisshapedbythesecapacities.Furtherworkwillexamineanddiscussarangeofdifferentapproachestocapturingthe’impact’desiredforspecificecosystems.
13
3a. Measuring ‘Foundational Institutions’ Manyorganizationsandscholarshaveexploredtheimportanceoffoundationalinstitutionsthatservetosupportbroadereconomicdevelopmentinanation,whichhasanobviousread-acrosstotheestablishmentofavibrantinnovationecosystemwithinit.Belowwehaveselectedashortlistofmetricsfromtheserankingsthatcapturesomeofthekeyfoundationalinstitutions.Ofcourse,theseindicesprovidemuchgreaterdepthwhichmayberelevantforsomedecision-makersversusothersandinsomespecificcontexts.Forour‘innovation’purposes,weconsiderahandfulofmeasuresthatcaptureourconceptionoffoundationalinstitutions(andthestrengthofthese),includingruleoflaw,propertyrights,easeofdoingbusiness,andlevelsofcorruption.FromtheWorldBankGroup’s(WB)DoingBusiness(DB)11site,welookatheadline‘Easeofdoingbusiness’(DB)rankingsbutalsotoanumberofitsconstituentinnovation-relatedmetrics(eg‘Topics’likestartingabusiness,resolvinginsolvency,etc)andtheir‘Distancetofrontier’(DF).FromtheHeritageFoundation’sIndexofEconomicFreedom12(IEF),welookbelowtheheadline‘overallscore’andwithinitsfourkeycategoriesforparticularareasofinstitutionalconcern(egpropertyrights).Finally,fromTransparencyInternational(TI),theheadlinefiguresfromitsCorruptionPerceptionsIndexprovideausefulbenchmarkforcountries(byperception)andtheoveralltrends.Easeofdoingbusiness(WB) CompositecountryrankingfromtheWorldBankacross10
topicsrelevanttoeaseofoperatingprivate-sectorfirms.Startingabusiness(WB) Rankingofthesimplicityofstartinganewbusinessfor
entrepreneursincorporatingandregisteringanewfirm.Payingtaxes(WB) Rankingleveloftaxratesandadministrativeburdenintax
paymentfortypicalmedium-sizefirms.ResolvingInsolvency(WB) Rankinglevelofweaknessesininsolvencylawandmain
bottlenecksintheprocess.Enforcingcontracts(WB) Rankingleveloftime/costforresolvingacommercialdispute
includingdegreeofgoodpracticesinthecourtsystem.PropertyRights(IEF) Scoreacrossthestrengthoflawsallowingindividualsto
accumulatefivetypesofpropertyrights(includingIPRs).GovernmentIntegrity(IEF) Scorecapturinglevelsoftrust,transparencyandabsenceof
corruption.LaborFreedom(IEF) Scorecapturingflexibilityandefficiencyofacountry’slabor
marketincludinghindrancetohiringetc.Tradefreedom(IEF) Scorecapturingtariffandnon-tariffbarrierstoimportsand
exports.CorruptionPerceptionsIndex(TI) Overallrankingofcountriesintheircompositelevelof
perceivedcorruption(highrankingimplieshighcorruption).
11http://www.doingbusiness.org12http://www.heritage.org/index/
14
3b. Measuring Innovation and Entrepreneurship Capacities Together,I-CapandE-Capcapturethesensethatasystemiscapableoftwoparticularactivities:innovationandentrepreneurshiprespectively.Asastartingpoint,weusefullythinkofa‘capacity’asasortof‘productionfunction’-i.e.awayofrelatingaseriesofwell-definedinputstotheoutputs,inthiscaseofentrepreneurialorinnovativecapacityoutputs.Throughadecision-makinglens,itiscriticalthattheinputsintotheproductionfunctionbedefinedandthenoptimizedfor-oratleastmadeasappropriateaspossiblefor–innovation(movingideasfrominceptione.g.inthelabthroughtoimpactinavarietyoforganizationalsettingsnotjustinstart-upenterprises)andentrepreneurship(thecreationofstart-upsandthescale-upofallnewenterprises).WeconsiderfivecriticalinputsintotheI-CapandE-Capproductionfunctions,basedonMITresearchaboutthedriversof‘innovation-drivenentrepreneurship’inavarietyoflocations–somewithintheUnitedStatesbutalsofromregionsworldwide(includingSingapore,Tokyo,Finland,Scotland,London,Israel,etc.).
--Figure2:MITI-Cap/E-Capframework–Thissimplifiedframeworkallowsdecision-makerstodeterminetheirsystems’greatestpointsofweaknessandthusidentifythepointsofleverage.Thesefivecomponentsare:• HumanCapital(people)–theappropriatehumantalent(fromwithinaregion,or
attractedintoaregion)withrelevanteducation,trainingandexperienceforeitherinnovationorentrepreneurship(orboth).
• Funding–avarietyoftypesofcapital(fromthepublicandprivatesectors)that
supportinnovationandentrepreneurshipbothattheiroriginsbutalsothroughoutthejourneyfromideatoimpact,orstart-uptoscale-up.
15
• Infrastructure–thephysicalinfrastructurethatisnecessarytosupportinnovation
andentrepreneurshipattheirdifferentstages–includingspaceaswellasequipmentrequiredfordiscovery,productionandsupplychains,etc.
• Demand–thelevelandnatureofspecializeddemandfortheoutputsof
innovationandentrepreneurialcapacitiessuppliedbydifferentorganizationsinthesystem.
• Culture&incentives–thenatureofrolemodelsandindividualswhoare
celebrated,thesocialnorms(‘culture’)thatshapeacceptablecareerchoicesandtheincentivesthatshapeindividualandteambehaviors.
ForeachofthedifferentinputsintoI-CapandE-Cap,weselectabasketofmeasuresthatcapturesthestrengthofthesespecificelements(withoutbeingtoorepetitiveandoverlapping).Startingbelowweoutlineeachoftheseinturn.
16
3b.i. Measuring Innovation Capacity (I-Cap) Inputs
Human Capital: Thenumberandqualityofinnovationsthatmovefromideatoimpactarecriticallydependentonwhoistrainedinthevariousskillsthatareessentialtotheinnovationprocessandtheavailabilityofsuchhigh-qualityhumantalentintheregionofstudy.Humancapitaldependsonthequalityofeducation,thelevelofeducationalattainmentandemploymentintheirfields.WeincludefiveelementsinmeasuringhumancapitalasaninputintoI-Cap.
Funding: ResearchandDevelopment(R&D)aswellasthelaterstagesofinnovationisanexpensiveandriskyprocessthatrequiresalotoffinancialsupport.CountriesvaryinthedegreetheyprovideforR&D,withsomededicatingalargerportionofpublicfunding,othersleavingittothebusinesssectors.WeincludefourelementsrepresentingfundingasaninputintoI-Cap.
Infrastructure: InfrastructuretosupportI-Capspanstherangefromhighlyspecializedtechnologicalsupporttoinformationaccesssupporte.g.theavailabilityofgoodtelephonyandInternetconnections.Infrastructuretosupportthelaterstagesofinnovationalsocomesthroughsophisticatedproductionprocessesthatcanservetoproduceinnovationsatalargescale.WeincludefourelementsinmeasuringbothhardandsoftinfrastructureasaninputintoI-Cap.
Demand: Demandforinnovationcanbeintrinsicand/orextrinsic.Herewestudytheinteractionamonginnovatorsindifferentsectors,aswellasbuyersandtheirwillingnesstoadoptnewinnovations.Weusethreeelementstomeasuredemand.
Culture & Incentives: CultureandIncentivestopursueinnovationareanimportantfactorinhowmuchI-Capacountryhas.Isthereculturalsupportforthepursuitoftechnologicalinnovations?Howpopularisscienceandengineeringasacourseofstudyinyouryoungpopulationandhowdotheyviewinnovation?Whilehardtoevaluate,fornow,weincludetwoelementsinmeasuringcultureandincentivesasinputsintoI-Cap.
17
Innovation Capacity (I-Cap) Inputs HUMANCAPITALQualityofSTEMeducation(GCI) HigherqualityofScience,Technology,EngineeringandMath(STEM)
educationleadstoahigherrateofmoreadvancedtechnologicalbreakthroughsmade
STEMGraduatespercapita(OECD) Arethereenoughgraduatestrainedinthecountrytosustaintheinnovativework?
NewPhDgraduatespercapita(EIS) ArethereenoughgraduatestrainedinresearchfortheanalyticalworkbehindtheR&D?
AvailabilityofScientists&Engineers(GCI)
Arethereenoughscientificandengineersstaffavailabletobeengagedinscientificwork?
Researchers/ProfessionalsengagedinR&Dpermillionpopulation(GII)
R&DcannotbedonewiththespecializedtrainedstaffinemploymentdirectlyinR&D.Arethereenoughresearchersengaged?
FUNDINGR&Dexpenditureasa%GDP(UNESCO)
HowmuchfundingdoesR&DreceiveinyourcountryasapercentageofGDP?
R&Dexpenditurein'000currentPPP$(UNESCO)
HowmuchfundingdoesR&Dreceiveinyourcountryinabsoluteterms?
PublicR&DExpenditureas%oftotalR&Dexpenditure(UNESCO)
HowmuchR&Dissupportedbythegovernmentthroughgrantsoreducation?
BusinessExpenditureas%oftotalR&Dexpenditure(UNESCO)
HowmuchR&Dfinancialsupportiscarriedoutbyprivatesector?
INFRASTRUCTUREICTaccess(GII) Isiteasytohaveaccesstointernetandcommunicationstechnologies?InternetBandwidth(GCI) Couldtheinnovationpacebehamperedbytheinternetspeed?That
couldlimitcommunicationvarietyandspeed.ProductionProcessSophistication(GCI)
Istheworkmostlydoneusinglabor-intensivemethodsandpreviousgenerationsofprocesstechnology,orisitdoneusingleadingandmostefficientprocessingtechnology?
Availabilityoflatesttechnologies(GCI)
Technologicalprogressrequiresmoreandmoresophisticatedscientificandotherequipment.Nothavingaccesstotheseadvancementsmaybeadisadvantagetoaregion’scapacitytoconductresearch.
DEMANDGovernmentprocurementofadvancedtechnology(GCI)
Governmentscancreatedemandfortechnologies,e.g.viamilitaryorcivilcontracts,thatsupportinnovationindirectorindirectways.
University-industryresearchcollaborations(GII)
Industriesthatareworkingclosetouniversitiescancreatedemandforthedirectionofresearchconductedinacademia.Whatisthedegreeofsuchcollaborationsinyourregion?
Trade,Competition&Marketscale(GII)
Isthereadomesticmarketlargeenoughfornewinnovations?Istheaccesstointernationalmarketseasy?Howlargearethebarrierstoentryfornewinnovation?
CULTURE&INCENTIVESQualityofscientificresearchinstitutions(GCI)
Highprestigeandhighqualityofscientificresearchinstitutionscanattracttalentfromthecountryandtheinternationalscope
Graduatesinscience&engineering(%)(GII)
Howalluringisittobechoosingadegreeinscienceandengineering?
18
3b.ii. Measuring Entrepreneurship Capacity (E-Cap) Inputs
Human Capital:HumanCapitalforE-Capismorecomplextomeasurebutconceptuallyitreferstothenumberofpeopleinaregion/nationwiththerelevantskillsandknowledgetobuildanenterprisefromstart-upthroughtogrowthandscale.Itmaybederivedfromrelevanteducation,training,andexperience.Giventhatitchallengingtocapturehumancapitalforentrepreneurship,weincludetwoelementsinmeasuringhumancapitalasaninputintoE-Cap.
Funding: Anewenterpriseoftenrequiresinvestmentintheformofexternal‘riskcapital’,rangingfromangelequityfundingorthenVentureCapital(VC),throughtodebtfinanceandcreditarrangements.(Assuch‘riskcapital’isdefinedasfundingforseedandstart-upfinanceaswellaslaterroundsrequiringthecapitalforexpansionandreplacement.InouranalysisofinputsintoE-Cap,weattempttocapturehowaccessiblesuchfundingis.TheguidingquestionsarehowtransparentandefficientisthecreditsystemandhowavailableandcommonistheVCfunding.WethereforeincludefiveelementsinmeasuringfundingasaninputintoE-Cap.
Infrastructure: InfrastructureforE-CapismorebasicthanthatwhichmightberelevantforI-Cap,howeveritincludesanumberofdifferentelements.Welookattheinfrastructurefortelecommunicationsandforgoodstransfer,whichcouldbecrucialforthelifeexpectancyofastart-up,thenumberofInternetusers(asameasureofaccesstoon-lineproductsandservices),andlogisticssoastoexplorethedeliveryofproductsfromsuppliersandtocustomers.Weincludethreeelementstomeasureinfrastructure.
Demand: Demandfornewproductsandservicescouldbepredicted,toacertainextent,bythesizeofthedomesticmarket(atleastasastartingpoint).Isthedomesticmarketattractiveenoughfortheproducts/servicesofanewenterprise?Thedemandcouldalsobeaffectedbythesensitivityofcustomertopriceorqualityoftheproduct.Whatistheshareofmendeclaringthattheywouldrathertakeariskandstartanewbusinessthanworkforsomeoneelse?Weincludetwoelementstocapturedemand.
Culture & Incentives: Cultureiswidelyregardedasanimportantfactorthatmaysupportorinhibitthesuccessofanyentrepreneurial.Inourindexwewishtoexplorehowculturallyacceptedentrepreneurshipis:Arethewinnerscelebratedsufficientlyandifabusinessisafailure,howacceptingisthesociety?Dothesurroundingpoliciesmakeiteasierorharder?Furthermore,whatarethepositiveornegativeincentivesinyourarea?Ifthebusinesswasafailure,doesitaffectone’schancesforstartinganewenterprise?WethereforeincludeatotalofeightelementsinmeasuringcultureandincentivesasaninputintoE-Cap!
19
Entrepreneurial Capacity (E-Cap) Inputs HUMANCAPITAL%schoolgradsintertiaryeducation(GII)
Relevanteducationreferstothelevelofeducationpopulationreceives.Whatistheproportionofpeoplewithcompletedsecondaryeducationhowareenrolledinuniversitiesortheirequivalents?
Entrepreneurshipperceivedcapabilities(GEM)
Whatshareoftheadultpopulationwhobelievetheyhavetherequiredskillsandknowledgetostartabusiness?
FUNDINGEasyAccesstoLoans(GCI) Howeasyisitforbusinessestoobtainabankloan?EaseofCredit(GII) Howeasyistotakecreditintermsoflegalrightsandcreditinformation?
Arethelegalrightsstrongenough,andisthelendingfacilitatedenough?Venturecapital(VC)availability(GCI)
Howeasyisitforstart-upentrepreneurswithinnovativebutriskyprojectstoobtainequityfunding?Often,forenterprisesthataredevelopingorusingnewtechnologies,VCistheonlyavailablecapital.
VCinvestment(EIS) WhatistheshareofVCinvestmenttoyourcountry’sGDP?VCdeals(GII) Asanindex,howcommonisVCinthelocation?Howmanydealstake
placeperyear?INFRASTRUCTUREElectricity&telephonyinfrastructure(GCI)
Istheelectricitysupplysufficientlystable?Howmanytelephonesarethereperinhabitants?Whataboutthemobiletelephonesubscriptions?
Numberofinternetusers(UN)
WhatistheshareofInternetusersinaregion?Internetcanbeusedviaacomputer,mobilephone,personaldigitalassistantetc.
Logisticsperformance(WorldBank)
Howwelldevelopedisthelogisticsperformance?Thisincludestheefficiencyofclearanceprocessbycustoms,tradeandtransportationinfrastructure;andrelianceontimelydeliveryofshipments.
DEMANDBuyersophistication(GCI) Onwhatbasisdobuyersmakepurchasedecisions,priceorperformance?DomesticMarketScale(GII) Howlargeisthedomesticmarketsize?CULTURE&INCENTIVESEntrepreneurialintention(GEM)
Howmanypeoplehaveintentionstostartanewbusinesswithinthenextthreeyears?
AttitudestowardsEntrepreneurialRisk(OECD)
Whatistheshareofindividualsdeclaringthattheywouldrathertakeariskandstartanewbusinessthanworkforsomeoneelse?
MaleAttitudestowardsEntrepreneurialRisk(OECD)
Whatistheshareofmendeclaringthattheywouldrathertakeariskandstartanewbusinessthanworkforsomeoneelse?
FemaleAttitudestowardsEntrepreneurialRisk(OECD)
Whatistheshareofwomendeclaringthattheywouldrathertakeariskandstartanewbusinessthanworkforsomeoneelse?
Fearoffailure(GEM) Whatshareoftheadultpopulationwhoindicatethatfearoffailurewouldpreventthemfromsettingupabusiness?
EntrepreneurshipasaGoodCareerchoice(GEM)
Whatshareoftheadultpopulationagreeswiththestatementthatmostpeopleconsiderstartingabusinessasadesirablecareerchoice?
HighStatustoSuccessfulEntrepreneurs(GEM)
Whatshareofpopulationagreeswiththestatementthatintheircountrysuccessfulentrepreneursreceivehighstatus?
BusinessFreedom(HeritageFoundation)
Howlimitedisanindividual’sabilitytoestablishandrunanenterprisewithoutundueinterferencefromthestate?Thisparameterisanimportantdis/incentiveforentrepreneurship.
20
3b.iii. Measuring Innovation and Entrepreneurship Capacities' Outputs Whileinnovation-andentrepreneurship-capacitiescanbethoughtofashavingarangeofinputs(thatfitintofivedistinctivecategories),therearealsosomeeasytomeasure(thoughincomplete)outputsofbothinnovation-andentrepreneurship-capacities.Thesesimpleoutputsarenotadequatetocapturethe(ever-changing)impactofan‘innovation-drivenentrepreneurship’ecosystem.Theyarestilluseful,however,asintermediateoutputswithwhichtoevaluatetheeffectivenessofthetwinenginesoftheinnovationandentrepreneurshipcapacities:
- InnovationCapacity(I-Cap)Outputsinclude,atthesimplestlevel,thenumberofresearchpublicationsproducedeachyearbyacountry,and(thoughanincompletewayofmeasuringinnovation)thenumberofpatentapplicationsfiledand/orgrantedeachyear.Obviously,alltheusualcaveatsaboutthelimitationsofusingpublicationsandpatentsasmeasuresofinnovationapply,buttheyremainusefuloutput(ratherthanimpact)measures,especiallywhenconsideredovertimeoragainstothernations.
- EntrepreneurialCapacity(E-Cap)Outputsinclude,inthemostsimplisticfashion,
thenumberofnewstart-upenterprisesestablishedeachyear.Thisisagoodmeasureofbasicentrepreneurshipcapacityoutputthatcanbefurtherrefinedwhenweconsider‘impact’measurestoconsidertheentrepreneurialquality(orpotential)ofthesestart-ups,andtheiroutcomeseg.venturefundraising,jobcreation,publiclisting,etc.
AllofthesemeasurescanbeconsideredintermsofpopulationandGDP.ThesetwodifferentdenominatorsallowtheoutputsofI-CapandE-Captobecomparedmoregloballyagainstabaselineofeitherpopulationoreconomicscale.ByestablishingsomesimplebenchmarksfortheeffectivenessoftheenginesofI-CapandE-Capacity,itispossibletodevelopanunderstandingofwhereacountryofinterestlieswithinoneofthefourI-Cap/E-Capquadrants:
• highI-Cap/highE-Cap(forexampleIsraelandpartsoftheUnitedStates),• highI-Cap/lowE-Cap(forexamplecountriessuchasSouthKorea);• lowI-Cap/highE-Cap(forexampleThailand,Nigeriaetc.);andfinally• lowI-Cap/lowE-Cap(thoughthisisrare).
21
3c. Measuring the ‘Comparative Advantage’ of Regions Aswenotedinourintroduction,the‘comparativeadvantage’ofaregionisbasedonspecificareasofstrengththatdifferentiateitfromothersaroundit–locallyorglobally.Insomeinstances,suchadvantageariseswithinacountryhavingthatregionbethemostsuccessfulinthenation.Forexample,BangaloreisIndia’smostsuccessfulregionforinformationtechnology,CambridgeissucharegionforlifesciencesintheUnitedKingdom,andBerlinforcreativemediainGermany.Ontheotherhand,someregionshavecomparativeadvantagethatisglobalinstature–inotherwords,theregionisuniqueontheglobalstage.SiliconValleyisthemostobviousexample,havingglobalcomparativeadvantageinarangeofsectorsincludingB2CandB2Bsoftwareandmuchhardware.Similarly,Boston’sKendallSquarehasemergedastheleadinggloballocationwithacomparativeadvantageinthelifescience.Comparativeadvantagecanmosteasilybemeasuredthroughanassessmentoftheexistingeconomic‘clusters’inagivenregion–whichidentifiestherelativestrengthsinthatplace.Therelativenationalorinternationalstandingareoftenmoredifficulttomeasure,althoughthiscanbedoneatanationalscale.Such‘cluster’analysishasbeenundertakenfortheUnitedStates,Europeandotherselectednations.13Assuch,itcanprovideausefulstartingpointforregionsthataresocoveredtoinvestigatetheir‘asis’competitivestate.Someregionsfindthemselvesseekingcompetitiveadvantageina‘cluster’thatisnotpartofthetraditionallist,suchas‘oceans’forseveralborderingthenorthAtlanticwhichhaverecentlyidentifieditastheirclusterfocusofchoice.Aswellasexploringstrongclusters,itisalsousefultofindmeasuresthatcapturethecollectionofspecializedassets,criticaltalentanduniquechallengesthatmightbecraftedinto‘comparativeadvantage’inamoreforward-lookingfashion.Forexample,inChile,theobviousstrengthsintheminingclusterarebeingfusedwithchallengesinmining-relatedhealth,environmentandenergysoastoprovideaplatformforanewgenerationofinnovation-drivenentrepreneurialstartups.London’semergenceasa“TechCity”builtoncreativetalentinmediaandarts,fromsoftwaretalentunleashedfromthefinancialsectorin2008,andthepresenceofmanymulti-nationalheadquartersinthecity.
13ThemostfullydevelopedmeasuresofeconomicclustershavebeendevelopedbyDelgado,PorterandSternaspartoftheUSClusterMappingProject.AndbytheEuropeanClusterobservatory.
22
Ofcourse,measuringsuchcomparativeadvantageoreventhefoundationsofadvantageisnotsimple.Anditisnotlikelytobesuitableforthedevelopmentandapplicationofstandardmetricsintheveinofotherelementsofourframework.Wethereforerecommendthatregionsworkwiththeirstakeholderstoexploredifferentperspectivesandopinionsonthecurrentsourcesofcomparativeadvantagee.g.existingstrongsectors,andfuturesourcesofcomparativeadvantagesuchaspotentiallypowerfulfutureopportunitiesbasedonkeyassets,talentandchallenges.Inallthiswork,itiscriticaltoconsiderthedegreetowhichanycluster,assetortalentisnational,continental,orglobal.Thisoftenrequiresanhonestandclear-eyedassessment:asanexample,atoneperiodintime,over40ofthestatesintheUSclaimedtobe‘inthetopthree’lifescienceclusters.Ontheotherhand,aregionsuchassouthWales(intheUK)hadnoteditsnationalcomparativeadvantageincompoundsemi-conductors,whileinfactitwasactuallyglobalinitsdegreeofadvantage.Thevalidityofclaimsto‘globaladvantage’islikelytoberarebecause,giventhenaturalnatureofagglomeration,onlyasmallnumberofregionswillrisetotrulyglobalsignificanceinanygiveneconomicarena.Fromameasurementperspective,wewouldthereforeadvisedevelopingasimplecollectionofmeasuresandmetrics:
Leadingcurrenteconomicclusters
Rankingthethreetofourstrongesteconomicsectorsorclustersintheregion,withadditionalrankinginformationonthedegreeofcompetitivenessofthosesectors/clustersattheinternationallevel.
Leadingassets Rankingofthethreemostimportantassetsintheregione.g.physicalassets.
Leadingareasofexpertiseandtalent
Rankingofthethreemostimportantareasofexpertiseandtalentintheregione.g.AI,creativeartsetc.withrankinginformationonthedegreeofcompetitivenessattheinternationallevel.
Criticalproblems/challenges
Rankingofthethreemostcriticalchallengesfortheregione.g.watershortages,defensesecurity,thatmightbeofbroaderrelevancetoothermarkets.
23
4. Conclusions Ourapproachtomeasuring‘innovation-drivenentrepreneurship’inanecosystemisgroundedinaclearframeworkforunderstandingthisasa‘system’inwhicharangeofinputsarecombined,onthe(moreorlessstrong)bedrockofinstitutionalfoundations.
Asthefoundationsforthewholesystem,theunderlying‘institutions’areimportant,eventhoughtheymightnotbeamenabletomajorchangeintheshortterm.Despitethis,itisimportanttobehonestandclear-eyedaboutthem,butthenturntohowtoproceedinthecircumstances,giventhechallenges–orperhapseventheopportunities–whichtheyprovide.Forbothanalyticalanddecision-makingpurposes,theinnovationcapacity(I-Cap)andentrepreneurshipcapacity(E-Cap)canbeusefullyseparatedintothe'twinengines'ofthesystem,eachwithaseparateseriesofinputstofuelthem.Eitherorbothoftheseenginescanbestrongerorweakerinanygivencountry,contributingtoanecosystem,andthisassessmentcanbecapturedinaseriesofsimpleoutputmetrics.Thesethenfeedinto'comparativeadvantage'attheregionallevel(includingclusters),whichisausefulintermediateprismthroughwhichtoconsidertheoutputsofbothentrepreneurshipandinnovationcapacities.Beyondthat,thehealthofinnovation-drivenentrepreneurshipinanecosystem–asasnapshotintime,orovertime-mustbecapturedthroughaseriesofhigher-levelimpactmeasuresthatareappropriatefortheparticularcircumstances.Asastartingpoint,wehaveprovideddecision-makerswithaframeworktounderstandtheinnovation-drivenentrepreneurshipintheiriEcosystemandsomesimplemeasures
24
thatcapturetheinstitutionalfoundations,andbothinnovationandentrepreneurshipcapacities.Whilenotassatisfyingasasingularindex,wefindthisapproachtobemoreintellectuallyrobustandmoreusefulintermsofguidingsubsequentactionsofdecision-makers–betheywithingovernment,corporations,universitiesorotherstakeholders.Infuturework,wewillexpanduponourdiscussionof'impact'withavarietyofmeasuresfromhigh-levelnationalones(suchasGDP,SPIortheUN’sSDGs)throughmoreregionalones(suchasEQIforthe‘IDEs’)tomoretargetedevaluationsofregion-specific‘policyandprograminterventions’(PPIs).Inthemeantime,wepresentthisWorkingPapertocapturewhatwehavelearnedsofar,andtoseekfurtherfeedbackfromresearchers,practitionersanddecision-makers.
25
Appendix A: Data Sources & Indices Takentogether,ourdataourdrawnfromarangeofsources.Belowwepresenteachofthesesourcesinturn.
Bloomberg Innovation Index (BII) Theindexranks50countriesthatcametopaccordingtothefollowingsixparameters:R&D,Manufacturing,NumberofHigh-TechCompanies,Post-Secondaryeducationenrolment,NumberofResearchpersonnelandNumberofPatents.TheBloombergInnovationIndexisavailablefrom2012,andtheindexmatchestheMITframeworkontheHumanCapita,Funding,InfrastructureandPerformance(seeTable 1)Table 1, Bloomberg Innovation Index’s structure and indicators, and tis links to the MIT Framework (in brackets)
R&D(FUNDING) R&Dexpenditureas%GDP
Manufacturing(INFRASTRUCTURE)
Manufacturingvalueaddedpercapita
HighTechCompanies(IDEPERFORMANCE)
#domestichightechpubliccompaniesasashareoftotalglobal#high-techcompanies
PostSecondaryEducation(HUMANCAPITAL)
%schoolgraduatesenrolledinpost-secondaryinstitutions,%workforcewithtertiarydegrees;annualscience/enggradsas%
ResearchPersonnel(HUMANCAPITAL)
Professionals(includingPhDStudents)engagedinR&Dper1millionpeople
Patents(I-CapPERFORMANCE)
Residentpatentfilingsper1Mpeople;utilitypatentsgrantedaspercentageofworldtotal.
26
Global Innovation Index (GII) TheIndex,publishedbyCornell,theWorldIntellectualPropertyOrganization(WIPO)andINSEADamongothers,hassomeoftheclosestoverlapswiththeMITapproach.Itcovers128economiesandfocusesoninnovation-orientedmetrics.ThelargestoverlapwiththeMITFrameworkisontheiCapside,excludingtheCulture&Inventiveparts(seeTable 2) Table 2, Global Innovation Index structure and components and their mapping to the MIT Framework. PPL is human talent, $ is funding, INF is infrastructure, INS is institutions, IDE = Innovation-driven Enterprise performance, DMD is demand and PLC is policy.
HUMANCAPITAL&RESEARCH
Education PPL.
Expenditureoneducation,%GDP;Gov'texpenditure/pupil(%GDP/cap);Schoollifeexpectancy(years);PISAscalesinreading,math&science;Pupil-teacherratioinsecondaryeducation
Tertiaryeducation PPL. Tertiaryenrolment,%gross;Graduatesinscience
&engineering,%,Tertiaryinboundmobility,%
Research&development
PPL.$
Researchers,FTE/mnpop;ERD,$GDP;GlobalR&DCompanies,avg.expend.Top3,mln$US,QSuniversityranking,avr.scoretop3
KNOWLEDGE&TECHNOLOGYOUTPUTS
Knowledgecreation PPL.
Patentsbyorigin/nlPPP$GDP;PCTpatentapplications/bnPPP$;Utilitymodelsbyorigin/bnPPP$;Scientific&technicalarticles/bnPPP$GDP,Citabledocuments,Hindex
KnowledgeImpact
IDE.INF.
GrowthrateofPPP$';Newbusinesses/thpop15-64;Computersoftwarespending,%GDP,ISO9001qualitycertificates,/blnPPP$GDP,High-#medium-high-techmanufactures,%
KnowledgeDiffusion
PPL.FND.
Intellectualpropertyreceipts,%totaltrade,High-techexportslessre-exports,%totaltrade;ICTservicesexports,%totaltrade;FDInetoutflows,%GDP
CREATIVEOUTPUTS
IntangibleAssets
PPL.INF.
Trademarksbyorigin/bbPPP$GDP;Industrialdesignsbyorigin/blnPPP$GDP;ICTs&businessmodelcreation;ICTs&organizationalmodelcreation
Creativegoods&services IDE.
Culture&creativeservicesexports,%oftotaltrade,Nationalfeaturefilms/mnpop15-69,Globalent.&mediamarket/thpop15-69,Printing&publishingmanufactures,%;Creativegoodsexports,%totaltrade
27
Onlinecreativity INF.
Generictop-leveldomains(TLDs)/thpop.15-69;Country-codeTLDs/thpop15-69;Wikipediaedits/mlnpop.15-69;VideouploadsonYouTube/pop15-69
BUSINESSSOPHISTI-CATION
Knowledgeworkers
IDE.$
Knowledge-intensiveemployment,%;firmsofferingformaltraining,%offirms;GERDperformedbybusinesses,%ofGDP;GERDfinancedbybusiness,%;femalesemployedwithadvanceddegrees,%total
Innovationlinkages
DMD.IDE.
University/Industryresearchcollaboration;Stateofclusterdevelopment;GERDfinancedbyabroad,%;JV-strategicalliancedeals/blnPPP$GDP;Patentfamilies2+offices/blnPPP$GDP
Knowledgeabsorption
IDEPPL.
Intellectualpropertypayments,%totaltrade;High-techimportslessre-imports,%totaltrade;ICTservicesimports,%totaltrade;FDInetinflows,%GDP;Researchtalent,%inbusinessenterprise
INSTITUTIONS
Politicalenvironment INS. Politicalstability&safety;Government
effectivenessRegulatoryenvironment INS. Regulatoryquality;Ruleoflaw;Costof
redundancydismissal,salaryweeksBusinessEnvironment INS. EaseofStartingabusiness;EaseofResolving
insolvency;EaseofPayingtaxes
INFRA-STRUCTURE
ICTs INF. ICTaccess;ICTuse;Gov't'sonlineservice;E-participation
GeneralInfrastructure INF. Electricityoutput;Logisticsperformance;Gross
Cap.Formation
EcologicalSustainability INS.
GDP/unitofenergyuse;Environmentalperformance;ISO14001environmentalcertificates/bnPPP$GDP
MARKETSOPHISTI-CATION
Credit $ Easeofgettingcredit;Domesticcredittoprivatesector,%GDP;Microfinancegrossloans,%GDP
Investment INS.$
Easeofprotectingminorityinvestors;Marketcapitalization,%GDP;Totalvalueofstockstraded,%GDP;VentureCapitaldeals/bnPPP$GDP
Trade,Competition&MarketScale
PLC. Appliedtariffrate,%;Intensityoflocalcompetition;Domesticmarketscale/bnPPP$
28
Global Competitiveness Report (GCR, by WEF) Theglobalcompetitivenessreport(GCR)ispublishedbytheWorldEconomicForum(WEF)inDavos.MostofitsindicatorsarecomingfromtheExecutiveOpinionSurveys,buttheothersincludeUN(UNESCO)statistics,InternationalTelecommunicationsUnion,WorldTradeOrganizationandtheInternationalMonetaryFund.TheReportcovers138economics,withseparateAfricareporttocoverallAfricancountries.IthasastrongoverlapwiththeMITFramework,particularlyonthefoundations,infrastructureandfunding(seeTable 3).However,itdoesnothaveanycomparableoverlaponthecultureandincentives.Table 3, Global Competitiveness Report structure and mapping to the MIT Framework. PPL is human talent, $ is funding, INF is infrastructure, INS is institutions, IDE = Innovation-driven Enterprise performance, DMD is demand and PLC is policy.
1 Institutions INS.
Propertyrights,Intellectualpropertyprotection,Diversionofpublicfunds,Publictrustinpoliticians,Irregularpaymentsandbribes,Judicialindependence,Favoritismindecisionsofgovernmentofficials,Wastefulnessofgovernmentspending,Burdenofgovernmentregulation,EfficiencyoflegalframeworkinsettlingdisputeEfficiencyoflegalframeworkinchallengingregs,Businesscostsofterrorism,Businesscostsofcrimeandviolence,Organizedcrime,Reliabilityofpoliceservices,Ethicalbehavioroffirms,Strengthofauditingandreportingstandard,Efficacyofcorporateboards,Protectionofminorityshareholders’interestsStrengthofinvestorprotection
2 Infrastructure INF.
Qualityofoverallinfrastructure,Qualityofroads,Qualityofrailroadinfrastructure,Qualityofportinfrastructure,Qualityofairtransportinfrastructure,Availableairlineseatkm/week,millionsQualityofelectricitysupply,Fixedtelephonelines/100pop.Mobiletelephonesubscriptions/100pop.
3 Macroeconomicenvironment FND.
Qualityofelectricitysupply;Fixedtelephonelines/100pop;Mobiletelephonesubscriptions/100pop;Governmentbudgetbalance,%GDP;Grossnationalsavings,%GDP*Inflation,annual%change;Generalgovernmentdebt,%GDP;Countrycreditrating
4 Healthandprimaryeducation
PPL.
Malariacases/100,000pop.Businessimpactofmalaria,Tuberculosiscases/100,000pop.Businessimpactoftuberculosis,HIVprevalence,%adultpop.BusinessimpactofHIV/AIDS,Infantmortality,deaths/1,000livebirthsLifeexpectancy,yearsQualityofprimaryeducation,Primaryeducationenrollment,net%
5 Highereducation&training
PPL.
2°educationenrollment,gross%;3°educationenrollment,gross%Qualityoftheeducationsystem,Qualityofmathandscienceeducation,Qualityofmanagementschools,Internetaccessinschools,Availabilityofresearchandtrainingservices,Extentofstafftraining,Intensityoflocalcompetition
29
6 Goodsmarketefficiency
FNDDMD..
Intensityoflocalcompetition,Extentofmarketdominance,Effectivenessofanti-monopolypolicy,Effectoftaxationonincentivestoinvest,Totaltaxrate,%profits,No.procedurestostartabusinessNo.daystostartabusinessAgriculturalpolicycosts,Prevalenceoftradebarriers,Tradetariffs,%dutyPrevalenceofforeignownership,BusinessimpactofrulesonFDI,Burdenofcustomsprocedures,ImportsasapercentageofGDPDegreeofcustomerorientation,Buyersophistication
7 Labormarketefficiency DMD.
Cooperationinlabor-employerrelations,Flexibilityofwagedetermination,Hiringandfiringpractices,Redundancycosts,weeksofsalaryEffectoftaxationonincentivestowork,Payandproductivity,Relianceonprofessionalmanagement,Countrycapacitytoretaintalent,Countrycapacitytoattracttalent,Womeninlaborforce,ratiotomen
8 Financialmarketdevelopment $
Financialservicesmeetingbusinessneeds,Affordabilityoffinancialservices,Financingthroughlocalequitymarket,Easeofaccesstoloans,Venturecapitalavailability,Soundnessofbanks,Regulationofsecuritiesexchanges,Legalrightsindex
9 Technologicalreadiness INF.
Availabilityoflatesttechnologies;Firm-leveltechnologyabsorption;FDIandtechnologytransfer,IndividualsusingInternet,%FixedbroadbandInternetsubscriptions/100pop.Int’lInternetbandwidth,kb/speruser;Mobilebroadbandsubscriptions/100pop.
10 Marketsize DMD. Domesticmarketsizeindex,Foreignmarketsizeindex,GDP(PPP$billions)ExportsasapercentageofGDP
11 Businesssophistication INF.
Localsupplierquantity,Localsupplierquality,Stateofclusterdevelopment,Natureofcompetitiveadvantage,Valuechainbreadth,Controlofinternationaldistribution,Productionprocesssophistication,Extentofmarketing,Willingnesstodelegateauthority
12 Innovation IDE.
Capacityforinnovation,Qualityofscientificresearchinstitutions,CompanyspendingonR&D,University-industrycollaborationinR&D,Gov’tprocurementofadvancedtechproducts,Availabilityofscientistsandengineers,PCTpatents,applications/millionpop.
30
European Innovation Scoreboard (EIS) TheEuropeanInnovationScoreboard(EIS)wasoriginallyconductedusingthemethodologydevelopedwiththeOECD,calledtheOsloManualintheearly2000.RatherdeepindetailandwithmanyelementsmappingtotheMITFramework(mostlyi-Cap)(seeTable 4),itscoverageislimitedtotheEUstatesandneighboringcountries. Table 4, European Innovation Scoreboard structure. PPL is human talent, $ is funding, INF is infrastructure, INS is institutions, IDE = Innovation-driven Enterprise performance, DMD is demand and PLC is policy.
FRAMEWORKCONDITIONS
Humanresources PPL. Newdoctorategraduates,Populationcompletedtertiaryeducation,Lifelonglearning
Attractiveresearchsystems PPL.
Internationalscientificco-publications,Scientificpublicationsamongtop10%mostcited,Foreigndoctoratestudents
Innovation-friendlyenvironment
INF.Broadbandpenetration,Opportunity-drivenentrepreneurship
INVESTMENTS
Financeandsupport $.
R&Dexpenditureinthepublicsector,Venturecapitalinvestments
Firminvestments $,PPL.R&Dexpenditureinthebusinesssector,Non-R&Dinnovationexpenditure,EnterprisesprovidingICTtraining
INNOVATIONACTIVITIES
Innovators IDE.SMEswithproductorprocessinnovations,SMEswithmarketingororganisationalinnovations,SMEsinnovatingin-house
Linkages IDE.InnovativeSMEscollaboratingwithothers,Public-privateco-publications,Privateco-fundingofpublicR&Dexpenditures
IntellectualassetsPPL. PCTpatentapplications,Trademarkapplications,Designapplications
IMPACTS
Employmentimpacts
IDE. Employmentinknowledge-intensiveactivities,Employmentfast-growingfirmsinnovativesectors
EconomiceffectsDMD.IDE.
Medium&hightechproductexports,Knowledge-intensiveservicesexports,Salesofnew-to-marketandnew-to-firminnovations
32
Global Entrepreneurship Index (GEI, from GEDI) TheGlobalEntrepreneurshipIndex(GEI)looksatfactorsimpactingentrepreneurship,butstudyingbothindividuallevelandinstitutionallevelparameters.Table 5belowgivesanoverviewofitsstructureandhowitoverlapswiththeMITFramework.Table 5 Global Entrepreneurship Index structure and linkages to the MIT Framework.. PPL is human talent, $ is funding, INF is infrastructure, INS is institutions, IDE = Innovation-driven Enterprise performance, DMD is demand and PLC is policy.
ATTITUDES
OpportunityPerception PPL.
Opportunityrecognition
Freedom(Economicfreedom*Propertyrights)
Start-upSkillsPPL.SkillPerception
Education(Tertiaryeducation*qualityofeducation)
RiskAcceptance PPL.
RiskPerception
CountryRisk
Networking PPL.INF.
KnowEntrepreneurs
Agglomeration(Urbanization*infrastructure)
CulturalSupport
PPL.INS.
Careerstatus
Corruption
ABILITIES
OpportunityStart-up
PPL.INS.
OpportunitymotivationGovernance(Taxation*Goodgovernance)
TechnologyAbsorption
INF.PPL.
TechnologyLevelTechnologyabsorption
HumanCapital PPL.
EducationalLevelLaborMarket(StaffTraining*Labourfreedom)
Competition IDE.DMDCompetitorsCompetitiveness(Marketdominance*Regulation)
ASPIRATION
ProductInnovation IDE.
NewProductTechTransfer
ProcessInnovation
IDE.$,INS.
NewTechnologyScience(GERD*(AveragequalityofscientificinstitutionsandAvailabilityofScientistsandEngineers)
HighGrowth IDE.$
GazelleFinanceandStrategy(VentureCapital*BusinessSophistication)
Internationalization
IDE.PLC.
ExportEconomicComplexity
RiskCapital $PLC.
InformalInvestmentDepthofCapitalMarket
33
Global Entrepreneurship Monitor (GEM) TheGEMisaconsortiumofcorporations,universities,topresearchinstitutionsandgovernmentlaboratoriesthatannuallypublishesastudyonthestateofentrepreneurshipinover70countries.Itconductstheresearchthroughaseriesofinterviewsandsurveys,anannualsurveyandinterviews,ofthepopulation(theAdultSurveyPopulation)andtheexpertsinthecountry(theNationalExpertSurvey).ThisGEMservesasaprimarysourceformanyotherentrepreneurialindices.ItisoneofthefewtoprovidedataontheCulture&IncentivespartoftheMITFramework(seeTable 6below).Table 6, Global Entrepreneurship Monitor structure and linkages to the MIT Framework.. PPL is human talent, $ is funding, INF is infrastructure, INS is institutions, IDE = Innovation-driven Enterprise performance, DMD is demand and PLC is policy.
Self-PerceptionsAboutEntrepreneurship(PEOPLE)
Perceivedopportunities,perceivedcapabilities,undeterredbyfearoffailure
Activity(IDEPERFORMANCE)
TotalEarly-StageEntrepreneurshipActivity,Establishedbusinessownershiprate,EntrepreneurialEmployeeActivity
MotivationalIndex(CULTURE&INCENTIVES)
Improvement-DrivenOpportunity/NecessityMotive
GenderEquality(PEOPLE,CULTURE&INCENTIVES)
Female/MaleRatio,Female/MaleOpportunityRatio
EntrepreneurshipImpact(IDEPERFORMANCE)
Jobexpectations,Innovation,Industry(%inBusinessServicesSector)
SocietalValueaboutEntrepreneurship(CULTURE&INCENTIVES)
Highstatustoentrepreneurs,entrepreneurshipagoodcareerchoice