Date post: | 09-Apr-2018 |
Category: |
Documents |
Upload: | malasanisreelakshmi |
View: | 217 times |
Download: | 2 times |
of 39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
1/39
ENTREPRENEURSHIP AND
INNOVATION ASSTRATEGIES TO MANAGE
THE CRISIS
Jerry CourvisanosCentre for Regional Innovation and
Competitiveness and the School of Business
APEC Symposium on SME Strategies to Managethe Impacts of the Global Financial Crisis (GFC)
9 June 2009
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
2/39
Human ingenuity and technological
innovation can do the job for us, butonly if there is genuine global
commitment to change. As with
addressing climate change, bothdeveloped and developing countrieshave to modify the trajectory of their
impact on the natural environment.Tanner, Lindsay. (2009), Gear change on recoveryroad, The Age, Business Day, April 16, p. 8).
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
3/39
Outline
Background: The GFC and post-GFC Stimulus and innovation
SMEs and capitalism
Susceptibility in crisis
in previous global downturns in East Asian financial crisis of 1997
GFC and innovation
Climate change crisis and innovation
Strategy out of the two crises: eco-sustainable Role of APEC member nations in this strategy
Role of SMEs in APEC in this strategy
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
4/39
Background: The GFC
IMF: the great recession unusuallylong and severe with sluggish recovery
Stiglitz: new model of growth needs to
replace the consumerist-debt model Ed Kane: Zombie banks gambling on
resurrectionresult of bank bailouts
Deleveraging will take a very long time
Developing a new growth engine willtake even longer & requires innovation
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
5/39
Background: Post-GFC
Innovation for the new Post-GFC growth modelneeds to meet three requirements:1. Long term investment in physical capital
- not short-term financial capital - mustunderpin innovation (no cheap credit)
2. Consumption and trade need to support thephysical investment, not drive growth (nomassive consumerism)
3. Growth must be designed for ecologically
sustainability, not high speed growth to themaximum (no inadequate pollution costing)Without these three, any attempt atinnovation-based growth will be afalse dawn
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
6/39
Stimulusand Innovation
Two strategies for the recession have beenimplemented world-wide:1.Monetary and fiscal stimulus consisting of
increase money supply (m), cash benefits (s),tax cuts (m), improve training and education(m), bring forward infrastructure spending (l).Various short (s), medium (m) and long (l)term Keynesian macro reflation policies (Keynes,1936)
2.Innovation consisting of new knowledgeapplication - technology or organisation-basedemerging in public (e.g. defence) &private (e.g. ICT) sectors (Kalecki, 1971)
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
7/39
Stimuluscreates floor
Keynesian reflation stimulus aims to limit depthof downturn and provide some psychologicalconfidence as precondition to the first phase inrecovery, with prices beginning to rise
Problem: How to sustain reflation? At cycle trough, there are many false
dawns as investors, banks, consumers,economists and politicians react to
stimulus measures with confidence thatinevitably is short-livedlack substance
No new growth engine emerges todrive economy upwards
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
8/39
Innovation creates engine
Historically, engines of growth emerged out ofinnovation that latches on to the stimuluspolicies, like well-built train tracks (especiallyinfrastructure & training), and provide the ability
topower up the economic cycle
Post-1890s depression: US electricity generation
Post-1930s depression: WWII war machine &reconstruction (mechanical engines, consumerism)
Post-1989-91 recession: ICT & knowledge base Post-GFC: (needs to be) eco-innovation
Requirement: To chart path of post-GFC
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
9/39
SMEsand Capitalism
SMEs are a significant element in the path ofpost-GFC recovery
Schumpeter (1911) father of innovation studies-identified SMEs - as they established R&D
(technological) and marketing (organisational)power in post-1890s
Post-1930s, Schumpeter (1939) large firmsproviding same two innovation powers but withnegative impacts, complemented by SMEs
Post-1989-91, symbiotic relation between largehardware & software platforms and SMEssoftware services
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
10/39
Susceptibility in Crisis
How the engines of innovation develop,depends on a firms fragile confidence (oruncertainty), given level of investment orders
Susceptibility is the degree of fragility to
investment commitments - related to financialrisk, excess capacity and profits
Commercialising innovation requires seriousinvestment commitmentwhich in crisis is
problematic (with high debt & excess capacity; low profits) Stimulus policies provide a floor, but do not
directly address susceptibility...what is neededare structural policies (for innovationand investment)
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
11/39
Susceptibility in Crisis
in previous global downturns Expansion out of 1970s downturn was weak
with no industry structural change policies andlittle significant innovation
Susceptibility was only marginally ameliorated Expansion out of the early 1990s downturn was
strong with neo-liberal deregulatory policiesthat allowed structural change to information-
based economy Susceptibility was significantly ameliorated but at the cost of building massive speculative
investments following dot.com crash
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
12/39
Susceptibility in Crisis
in East Asian financial crisis of 1997 Exceptionally high susceptibility by East Asian
economies in 1997 forced these economies toaddress fragile innovation, high investmentsusceptibility and speculation
Japan did not restructure industrial or financialsystems, with zombie banks & highly susceptibleindustrial investment leading to a decade longpoor economic growth (S. Korea to less extent)
Other East Asian economies directly addressedthese concerns and reduced significantlysusceptibilitystructural change occurred
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
13/39
GFC and Innovation: FrameworkSet up a dynamic circular flow link between innovation (H)
and investment (I):
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
14/39
GFC and Innovation: Stylised Facts
Correspondence and contradiction in GFC: GFC exposed by the impact of entrepreneurial
innovation in increasingly deregulated neo-liberalised economies
Innovation cyclical framework operating in avirtuous circle since the major recession of theearly 1990s with the interaction of ICT andfinancial innovation
As innovation stimulated investment and AD;Tgrew through expansion phase to powerdiffusion of incremental RD and
supporting investment
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
15/39
GFC and Innovation: Stylised Facts
As the boom gathered momentum, gearingratios and, then, excess capacity both increased,while value creation from marginal incrementalinnovation became progressively lower
Also, funds (esp. after dot-com crash) shifted toincreasingly speculative and Ponzi investment
Risk existed through the boom, became greatlyexposed through fundamental uncertainty
Innovation framework suddenly turned into avicious circle of lower investment, reduced AD,falling T; stymieing innovation
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
16/39
GFC and Institutional Settings
Stylised facts unfold differently due to specificinstitutional settings for susceptibility exposure
Sheehan (2009) recently identified diversetransmission mechanisms by which the GFC
unfolds in different economiessee Table 1 US, EU, Japan & Korea impact through financial
and wealth effects
Other S. East Asian and Australia impact throughexport shockssee Charts 1, 2 & Table 2
China mixture of consumer & exports (mild)
Susceptibility hitallviaexpectations
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
17/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
18/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
19/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
20/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
21/39
GFC and Institutional Settings APEC member countries not in Table 1 reflect
significant aspects of some groups in the table
Canada is in the same category as Australia -both having weathered the financial storm betterdue to relatively less deregulated financialsystems, but commodity exports and terms oftrade affected with a time lag
All Latin American APEC have been affected like
the export-oriented S.E Asian economies Mexico most exposed and Peru the least
All economic drivers specified derive from cheapmoney and cheap polluted energy -
neither driver is viable anymore
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
22/39
GFC and Institutional Settings
APEC is made up of members with as vast arange of capitalist institutional settings as existon the global stage, from very advanced (e.g.USA) to very underdeveloped (e.g. PNG).
Diverse institutions within capitalism determinethe specific nature of entrepreneurship andinnovation within different types of capitalisteconomies: distinctive patterns of relations arise
Two research literatures, comparative capitalism
and varieties of capitalism, develop theseconcepts in detail
Thus, differences in institutional settingsinfluence strategies outlined next
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
23/39
Climate Change Crisisand
Innovation: Post-GFC Need paradigm shift to ecological sustainability
with a low-emissions economy: innovation policy
Focus on stabilising greenhouse gas (GHG)emissions to avoid most dangerous climate
change aspects Need to guarantee safe climate and CO2 levels,
sufficient to retain - ice sheets, large ecosystems(esp. water), developing countries livelihoods
and coastal megacities Impossible to secure this guarantee with current
knowledge, need to act to avoid dangerousoutcomes now and learn-by-doing
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
24/39
Climate Change Crisisand
Innovation: Post-GFC Entrepreneurship operates on the same principle;
acting now when the moment is opportune andlearn as entrepreneurs proceed, iterativelyadjusting business strategy with knowledge from
doing GFC provides opportunity for eco-innovation
Van Berkel (2007) defines eco-innovation asenvironment-informed and -driven
improvements and innovations in products,services and processes that deliver more value toproducers and/or consumers while progressivelyreducing net environmental impacts.
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
25/39
Climate Change Crisisand
Innovation: Post-GFC Jones & Sheehan (2009) estimates, working from
10% reduction of emissions and fossil fuels in2010 due to GFC-reduced production, with fullrecovery in 2025 no direct long term benefit if
no eco-innovation paradigm shift GFC can provide springboard to lower emissions
path by eco-innovation now, reducing risks anduncertainty through entrepreneurial activity
Begin with applying the Obama US emissionsreduction policy as a target (-14/-83% GHG by2020/50) across OECD, with developing APECeconomies following with lagsee Jones & Sheehan (2009) estimate charts
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
26/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
27/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
28/39
Strategy out of the Two Crises
Need more than stimulus as strategy out of GFCand GHG crisesneed public innovation policy
Much more than structural policies - need toincorporate targets (or goals) well into the long
term future, and be democratically implemented(people are committed)
Establish the eco-sustainable framework whichincorporates public innovation policy to induce
paradigm shift in the private sector (like: grid forelectricity, war for mass production, defencecomputer system for ICT)
Assist in ameliorating susceptibility
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
29/39
Eco-sustainable Framework fourelementsof innovation policy
1. Agreed ecological sustainable rules (orconventions) precautionary principle
2. Perspective (iterative) planning flexible,
local-based democratic motivation and localvoluntary conformity towards regionalecologically appropriate goalslearn-by-doing
3. Cumulative effective demand with strong local
niche market share for environmental-basedgoods & servicesstimulus support
4. Investment and finance planningunderpinning above
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
30/39
Role of APEC MemberNations in
Eco-sustainability Strategy
Due to the varieties of capitalism covered underthe APEC umbrella, this innovation framework foreco-sustainability must be applied differentlyaccording to institutional settings
Clear USA and China must lead - signs are there:Obamas emission policy and Chinas politicalstatementsboth their R&D is more important
Krugman (2009) whole game is about tochange: ecological rules setting
Planning is too slow link to stimulus
Strong local ecological niche marketsmatter, not export markets
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
31/39
Role of APEC MemberNations in
Eco-sustainability Strategy
APEC is committed to information sharingmechanisms-vital set out & assist implementingthe innovation framework for eco-sustainability
APEC is committed to accelerating regionaleconomic integration (REI) - better to work forsub-regional integration within a broader APECREI eco-sustainability agenda
Governments need to inspire & lead -entrepreneurs will follow (not the other way around) see New Deal, Post-War Reconstruction, Marshall Plan,Dirigisme East Asian Industrialisation
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
32/39
Role ofSMEs in APEC in
Eco-sustainability Strategy 45 m. SMEs in APEC account for over 90% of
all firms, employ 60-80% of workforce, butonly 30-35% of exports (APEC fact sheet SMEs, Feb. 09)
Post-GFC recovery requires entrepreneurs in
SMEs to follow eco-sustainability path SMEs are flexible and able to develop eco-
innovation much better than the large deadgiants of 20th Century capitalism (e.g. GM)
SMEs have relative advantage in APEC, homegrown and address domestic niche mkts. first Export-orient model for SMEs no longer
appropriate. Consumerism is dead(credit and climate have changed)
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
33/39
Role ofSMEs in APEC in
Eco-sustainability Strategy
APEC needs to support these SMEs by:
Addressing eco-sustainable infrastructure needs
Implement structural reforms already set up
(anti-corruption, customs, strict IPRs limits) Education and training for women (more eco-
sensitive), minorities (reduce immigration from APECs lessdeveloped), eco-creativity (how to go green)
Institutional lending - ameliorate susceptibility
Chart shows small business activity (strength ofentrepreneurial activity in APEC emerging)
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
34/39
Total entrepreneurial activity by country and region in 2005Source: Schaper and Volery (2007, p.16)
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
35/39
Conclusion: Role of APEC Shift innovation focus from minor incremental
(powered by previous boom) to radical &incremental (powered by anti-GHG emissiontechnology)
Supportive structures for radical and incrementaleco-innovation to shift economies out ofrecession need to be grasped and enhanced
Accept carbon tariff (ETS or tax) to reflect actualcosts
Not enough to simply resist restrictions on trade
and investment No longer export-orientation model
(raw materials and consumerism) Amelioration of susceptibility in
this strategic shift
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
36/39
Conclusion: Role of APEC
Strength in diversity:
USA to lead reduction emissionsChinas energy use to offer climate change
empowermentAdvanced Commodity Exporters (Aus, NZ, CA)
to lead shift towards niche renewable energymarketsAsia Developed to finance & provide ICT
support for eco-innovationAsia Emerging and Latin American to follow
through with micro-enterprises in eco-innovationSmaller Other to develop domestic eco-
niche with much APEC assistance
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
37/39
Selected BibliographyEntrepreneurship and SMEs Schumpeter, J.A. (1911/1938), The Theory ofEconomic Development,
Cambridge, MA.: Harvard University Press [Germanoriginal 1911]. Schumpeter, J.A. (1939), Business Cycles: A Theoretical, Historical and
Statistical Analysis ofthe Capitalist Process, Volumes I & II, New York:McGraw-Hill.
Schaper, M. and Volery, T. (2007), Entrepreneurship and SmallBusiness:2nd Pacific Rim Edition, Milton, Qld: JohnWiley & Sons Australia.
Dirigiste Government Policy Keynes, J.M. (1936), The General Theory of Employment, Interest and
Money, Macmillan, London. Kalecki, M. (1971), Selected Essays onthe Dynamics ofthe Capitalist
Economy, 1933-1970, Cambridge: Cambridge UniversityPress. Cornwall, J. (1983), The Conditions for Economic Recovery: A Post-
KeynesianAnalysis, Oxford: Martin Robertson.
Wade, R. (1990), Governing the Market: Economic Theoryand the Role ofGovernmentin East Asian Industrialization, Princeton, N.J.: PrincetonUniversityPress.
Bell, S. (ed.) (2000), The Unemployment Crisis inAustralia: Which WayOut?, Cambridge, Cambridge UniversityPress.
Bernanke, B. (2000), Essays on The Great Depression, Princeton, N.J.:PrincetonUniversityPress.
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
38/39
8/8/2019 Entrepreneurship and Innovation as Strategies to Manage the Crisis
39/39
Selected Bibliography
Climate Change
Van Berkel, R. (2007), Eco-innovation: Opportunities for advancing wasteprevention, International Journal of Environmental TechnologyandManagement, Vol. 7 (5-6), pp. 527-50.
Jones, R. and Sheehan, P. (2009), New Strategies for Adaptation andMitigation, paper presented at the Conference Emerging fromthe GlobalStorm: Growthand Climate Change Policies in Australia, Victoria University,Melbourne, 15 April.
Eco-sustainable Framework Courvisanos, J. (2005), A post-Keynesian Innovation Policyfor Sustainable
Development, International Journal of Environment, Workplace andEmployment, Volume 1 (2), pp. 187-202.
Courvisanos, J. (2009), Regional Innovation for Sustainable Development:An Australian Perspective, Journal ofInnovation Economics, Volume 3 (1),pp. 119-43.
Courvisanos, J. (2009), Innovation Policyand Social Learning: An EconomicFramework for Sustainable Development in Regional Australia, in J. Martin,B. Jorgensen and S. Taylor (eds), Climate Change and Social Learning,Ballarat: VURRN Press.
Courvisanos, J. and Jain, A. (2006), A Framework for SustainableEcotourism: Application to Costa Rica, Tourismand Hospitality: Planningand Development, Volume 3 (2), pp. 131-42