Towards a Restructuring of the Innovation Payoffs

Overcoming Barriers to Caribbean Innovation

Silburn Clarke, FRICS

Chairman, Digital Society Jamaica

a. The Innovation- Productivity-Competitiveness-Prosperity Challenge

b. We are in the throes of the Knowledge Economy• Emergence of Knowledge Economy• Correlations

c. Where does Firm Sustainable Competitive Advantage arise from• Firm Level• Knowledge, Innovation, Creativity (KIC Factors)

d. 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

CARIBBEAN GROWTH FORUMPRESENTATION OUTLINE

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

Innovative Capacity

Competitiveness Improvement

Prosperity

Begins with research and development

Productivity Growth

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 fast-growing East Asian region (World Bank , 2011).

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 ).

INNOVATION CRISIS, PARADOX and CONUNDRUM

Global economy has been in transition since the 1980’s to what is variously termed a New Economy, Digital Economy or a Knowledge Economy

B. THE NEW KNOWLEDGE ECONOMY

3. The traditional economic model is dead !!

•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 2010

Welcome the New Economy!!

Global Shift to the Knowledge Economy

RESOURCE-BASED ECONOMIES EFFICIENCY-BASED ECONOMIES INNOVATION ECONOMIES

TransitionI to II

JamaicaGuyana

TransitionII to III

TrinidadBarbados

Stage II

Dom RepPanama

Costa Rica

Stage III

???

Stage I

HondurasNicaragua

Countries compete based on theirfactor endowments: primarilyunskilled labour and naturalresources.

Compete on the basis of price andsell basic products or commodities,with their low productivityreflected in low wages.

Countries begin to develop moreefficient production processes andincrease product quality.

Competitiveness is increasingly drivenby higher education and training.

Wages have risen and they cannotincrease prices

Companies must compete byproducing new and different goodsusing the most sophisticatedproduction processes and throughinnovation.

Wages will have risen by so much thatthey are only able to sustain thosehigher wages and the associatedstandard of living by higher valueproduction

The Shift to Knowledge and Innovation

Henrekson, Stockholm School of Economics,

INNOVATION ACTIVITY EXPANDS THE PRODUCTION POSSIBILITY FRONTIER

Micro Small Medium Businesses

Innovating Firms

•Through Knowledge, Innovation and Creativity (KIC)

•The Resource Based View (RBV) identifies the combination of Valuable, Rare, Non-Inimitable 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?

C. Sustainable Competitive Advantage

• 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)

How can businesses create wealth and prosperity?

SUSTAINABLE COMPETITIVE ADVANTAGE MODEL

Is the resource or capability valuable ?

Is it heterogeneouslydistributed across

all firms ?

Is resource or capability imperfectly mobile ?

Competitive disadvantage

Competitive parity

Sustained Competitive Advantage

Temporary Competitive Advantage

YES

YES

YES

NO

NO

NO

Mata, Feurst, Barney (1995)

Acquired /Imported Innovations

IndigenousInnovations

Is the organisational model embedded

?

YES

•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 English-speaking 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

Reorienting the Caribbean Firm

WEF - Firm Capacity for Innovation

D. STATE OF CARIBBEAN FIRMS

Pronounced uniform regional group inflexion

How do we radically transform the Firm Innovation Outcomes ?

STATE OF CARIBBEAN FIRMS

FIRM-LEVEL INNOVATION ACROSS CARIBBEAN

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

E. BUILDING a CULTURE and PROCESS for CREATIVE PROBLEM-SOLVING

BUILDING a CULTURE and PROCESS for CREATIVE PROBLEM-SOLVING

Creativity Thinking Skills Innovative

Results =

Content+

Process+

Process Skills

+Tools

+Style

Create OptionsNo JudgmentNo Logic

Evaluate OptionsYes JudgmentYes Logic

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 andinimitable flowing from the creative minds of motivated talent

• The Caribbean is traditionally a heavy consumer of basic andubiquitous IT

• But a poor creator/producer of IT solutions and Export IT

• Region must shift focus to producing value products, servicesand solutions for domestic and global spaces

PROMISING POINTERS TO RAMP UP THE ICT VALUE-CHAIN

• The GoJ/World Bank Digital Jam 2.0 Programme, has provided somepointers 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 the24 hour Sports-based CodeSprint or Sports Hackathon

• 60 mobile application proposals submitted with over half adjudgedas being of value to market

Firm Innovation starts with individual employee creativity; creative thinking and creative performance.

Firm Leadership which builds Supportive Work Contexts facilitate Intrinsic Motivation which nurtures Employee Creativity

EMPLOYEE CREATIVITY

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.

F. PERSPECTIVES and CONSENSUS

TOP CONSTRAINTS - Business Perspective

POLICYMAKERS PERSPECTIVE

TRIPLE HELIX - Model for Building Tripartite Consensus

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-industry-government 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, forexample, when the rules of the game for the disposition of intellectual propertyproduced from government sponsored research were changed in the USA, technologytransfer activities spread to a much broader range of universities, resulting in theemergence of an academic technology transfer profession and in facilitation for thecapitalisation of knowledge spillovers through commercialisation or where recipients ofgovernment-sponsored innovation and competitiveness awards are encouraged toshare insights and strategies and also to mentor other firms

· The third dimension is the creation of a new overlay of trilateralnetworks, frameworks, organizations and institutions from the interaction among thethree helices, formed for the purpose of coming up with new ideas and formats forhigh-tech knowledge-based development. These trilateral networks operate at boththe macro strategic level as well as the micro operational level

( adapted from Etzkowitz 2002)

Constraints / Perspectives Source Business Policy Academia

Inefficient government bureaucracy GCR/DB X

Poor work ethic in national labour force GCR/DB X

Firm Capacity for Innovation is low GCR X

Business sophistication is low GCR X

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

JCS/WITSA X X

Main Development Constraints are knowledge USES and CREATION (MORE basic and ubiquitious “ICT” does notnecessarily translates to Improved Competitiveness )

Elliott X

Economic payoffs should encourage high skilled, entrepreneurial behaviours

Elliott X X

LACK OF CONVERGENCE ON MAJOR CONSTRAITS

• 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 tripartiteconsensus and providing a structure and culture for operationalisinga sustained national innovation processes

G. MESSAGES TO TAKE HOME

THANK YOU !