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Innovation as a Driver of Productivity and Economic Growth
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The Innovation for Development Report 2010–2011 Papers


Augusto López-Claros
bio notes

 1.1 Factors, Policies and Institutions Underpinning Country
     Innovation: Results from the Innovation Capacity Index

Augusto López-Claros
Founder EFD–Global Consulting Network;
Honorary Professor, European Business School

Yasmina N. Mata
EFD–Global Consulting Network

Summary:

For summary of this paper and link to full text of chapter, please click here » ICI


Yasmina Mata
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Pamela Hartigan
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 2.1 Creating Blueprints for Business in the 21st Century: Social
     Entrepreneurship Shows the Way

Pamela Hartigan
Director, Skoll Centre for Entrepreneurship,
Saïd Business School, University of Oxford





 Summary:

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In the chapter entitled “Creating Blueprints for Business in the 21st Century: Social Entrepreneurship Shows the Way,” author Pamela Hartigan describes projects headquartered in six countries (Singapore, India, France, Mexico, the United States, and the United Kingdom), but having an impact far beyond those borders. In contrast to “charitable” work, with which it is often confused, she defines social entrepreneurship as the “resourceful, pragmatic, innovative, and visionary” creation of a new or improved product or service, not with the expectation of sale or profit generation for entrepreneur or investors, but, rather, to address market and/or government failures, to deliver goods and services needed to address social, economic, or environmental challenges which governments are generally unable or unwilling to tackle. Distinguishing social entrepreneurs from other actors in the citizen sector, Hartigan proceeds to discuss the “distinctive domain” and driver of social entrepreneurship, neglected positive externalities. The remainder of the paper outlines significant projects—both profit-making and non-profit—which harness positive externalities through new organizational forms and ways of operating, creating organizations that are innovative, philosophically positive, and morally compelling. She shows how each venture responds to an opportunity and uses a business model which challenges the traditional legal frameworks that dichotomize “do-good” from money-making organizations. To cite only three of her fascinating examples: the World Toilet Organization is a global service-platform network providing solutions to sanitation challenges around the world, focusing on toilets instead of water, providing governments with solutions that promote sanitation and public health policies, and in which all toilet and sanitation organizations can learn from one another and leverage media and global support. Two avid motorcyclists created Riders for Health, a program for maintenance and management of neglected motorcycles and other vehicles in remote, hard-to-access African communities, such as the vehicle fleets used by Ministries of Health and NGOs in the delivery of essential healthcare services and preventative health education to rural populations. The Aravind Eye Care Hospital, modeled on McDonald’s, gives sight to the blind and visually impaired. They perform up to 1,000 sight-restoring surgeries daily—at a fraction of the cost of similar procedures in other countries—provide eye-screening camps in remote areas, and train medical personnel around the globe.


Robert Rosenfeld
bio notes

 2.2 Organizations Don't Invent, People Do: Trust Is the Foundation

Robert Rosenfeld
President & CEO,
Idea Connections Systems, Inc.

Gary Wilhelmi
Vice President,
Idea Connections Systems, Inc.

Andrew Harrison Andrew Harrison
Communications Director,
Idea Connections Systems, Inc.


Gary Wilhelmi
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 Summary:

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Three authors have collaborated on the chapter entitled “Organizations Don’t Innovate, People Do: Trust Is the Foundation,” based on a lively, hands-on workshop given for business personnel, and focused on the motivations and culture of innovators and their interactions with others. Their jumpingoff point is the humorous story of how “Boss” Charles Kettering, founder of General Motors, succeeded in reducing the time to paint a new car from 17 hours to one, over the obstinate and disbelieving objections of all those involved in the process. They then walk the reader through a series of exercises designed to elicit greater understanding of the “people side” of innovation, how individuals behave and interact with others, and how leaders and managers can develop new ways of responding to the human challenges of innovation. Innovation is intriguingly described as a “continuum,” defined as any change, whether revolutionary, expansionary, or evolutionary, that leads to a quantifiable gain in a process. In order to transform the understanding of such ideas into action within an organization, trust is the foundational principle that makes such innovation happen. Whether among three or 30,000, it is trust that encourages imagination, allows for risk, spurs the passion for solving difficult problems, and profoundly affects productivity, quality, turnover, absenteeism, motivation and, ultimately, the generation of the quantifiable gains sought by innovating. Challenging readers to consider the real people they have trusted—or not—in their past experience, the authors discuss the culture of trust that allows people to care about their organization, jobs, co-workers, and customers, and to be more creative and innovative by reducing or eliminating the fear of individual failure. Digging deeper, they illustrate the processes of communication and “filtering” systems that enable people to either be open to understanding and change, or close off and “protect.” Finally, distinguishing between “head” and “heart” trust, they provide a tool for readers to calibrate the degrees and quality of trust which they have in others, whether in the workplace, in the family, or among friends, as a way forward in establishing “creativity partnerships” that can lead to successful innovation.globe.


William Kerr
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 2.3 Breakthrough Inventions and the Growth of Innovation Clusters

William R. Kerr
Associate Professor,
Harvard Business School


 Summary:

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In his chapter entitled “Breakthrough Inventions and the Growth of Innovation Clusters,” author William Kerr questions the prevalent theory that cities and industries tend to follow the geographic locations of breakthrough innovations. Kerr contends that the model, according to which centers of innovation are dictated by where frontier inventions occur, and that the industry migrates to be close to these new innovations, does, indeed, fit the distribution of cities and industries well in several countries. However, he suggests, one might just as easily argue that new technologies are simply transported to the existing cluster. His paper describes research to investigate whether breakthrough inventions do, in fact, draw subsequent research efforts for a technology to a local area and outlines the empirical work done to verify these spatial movements, the speed at which reallocations occur, and their economic consequences. After first classifying breakthrough inventions—such as resins, surgical instruments, and optics—he then models the relative number of breakthrough inventions that occurred in various locations. A given city’s share of breakthrough patents for a specific technology is divided by the city’s overall share of patents for the technology, and compared to their general degree of activity in the technology field. High values indicate that a city was disproportionately the center of new breakthrough innovations for a technology. Kerr then looked at whether the places with relatively high shares of breakthrough inventions outperformed their closest peers. A surprising outcome of his findings was that immigrants play a disproportionate role in the question of geographic reallocation. The workforce of immigrants—who represent 24 and 47 percent of US scientists and engineers with B.A. and Ph.D. degrees, respectively—are not only more geographically mobile, but are more flexible in deciding their initial location upon immigration to the US, thus influencing the geography of innovation. Kerr’s research provides qualitative support for theoretical models by which centers of breakthrough innovation do experience subsequent growth in innovation relative to their peer locations, and for the strategic importance of the mobility of a given industry’s labor force in speeding up reallocation.


Björn Johnson
bio notes

 2.4 The Learning Economy as a Phase in Economic Development:
     Contradictions and Institutional Responses

Björn Johnson
Senior Associate Professor & Reader in Economics,
Aalborg University


 Summary:

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Writing about “The Learning Economy as a Phase in Economic Development: Contradictions and Institutional Responses,” Björn Johnson offers the view that the current “essentialist” economics—in which processes are often not situated in real time and do not consider the diversity of specific market economies—is methodologically inadequate for understanding the specifics of the contemporary learning economy. Basing his description on the concept of dialectics, he examines some of the drivers of and contradictions in the changing dynamics of capitalist systems, such as the interrelations between technology and institutions, and concludes that without taking technical, organizational and institutional innovation into consideration in the analysis, it is not possible to understand economic development. Johnson contends that the learning economy develops not only by means of continuous and rapid technological change, but also through institutional reactions to its own contradictions, such as the way knowledge does not always translate into usable commodities; how new knowledge may be incompatible with old knowledge in a society; how knowledge diversification can lead to fragmentation and close down some learning possibilities; short-term vs. long-term decisionmaking; or the tension between indigenous and foreign knowledge in developing countries. Beyond these general categories, the author analyzes more closely the way firms typically innovate, using either the DUI (doing, using, and interacting) mode or the STI (science, technology, and innovation) mode or a combination of both. But the inherent myopia which results from habits of thought also opens up new perspectives when different bodies of knowledge collide and feed on each other. Although mixing different types of knowledge is not always easy, whether unintentional or encouraged by organizational change in support of mixed strategies, the learning economy demands that the contradictions and tensions be consciously tackled so that new perspectives and options be opened up and the innovation process supported.


Mahmud Samandari
bio notes

 2.5 Innovation: Thoughts on Purpose, Definition, and Governance

Mahmud Samandari
Startups Coach, Swiss Federal Commission for Technology & Innovation;
CEO, InnovaRadion


 Summary:

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In his insightful article “Innovation: Thoughts on Purpose, Definition, and Governance,” author Mahmud Samandari first summarizes the way in which innovation has revolutionized how the majority of human beings live, learn, obtain information, obtain goods and services, relate to and participate in government and politics, view and handle money, etc. He goes on to describe the profound changes over time in the paradigm of innovation, with less emphasis on regulation and insistence on copyright and intellectual property, the vanishing of national borders as the vast majority of innovation is conducted outside of the country headquarters of its investors, and as crowdsourcing and networking have become virtually ubiquitous tools of the trade. As a result, innovation has become “collaborative” as never before in history, with firms and individuals working more cooperatively across previously impermeable barriers. He then explores some of the myriad purposes which innovation has served and the surprising ways in which it has come about, from economic gain and return on investment, increasing human comfort or crop yield, military superiority and national prestige, to the drive for individual fame and notoriety, and even sheer accident, as was the case of gun-powder and the telephone. Some of the unintended and unforeseen consequences of innovation are also discussed, such as the phenomenon of suburban sprawl resulting from the emphasis on the automobile, and worrisome social isolation as a result of the advances in television and ICT. In the concluding discussion, the author shares his conviction that what is now needed is a “values-based” approach to innovation, whereby shared values become the foundation for making conscious decisions which “align with the future we want to experience.” Using the analogy of the acorn which is “pulled” to its ultimate destiny of becoming an oak tree, so human beings can decide to use innovation to extend human productivity, raise standards of health and well-being, sharpen and refine the potential of the human brain and “stimulate the intellectual, moral, and spiritual life” of the whole human family. Such a conscious, ethical, multidisciplinary approach to innovation, rather than being perceived as restricting, may be seen as revealing our human potential for organic, goal-oriented, sustainable growth, aimed at identifying and working toward the common good.


José María Figueres
bio notes

 2.6 There Is No Planet B!

José María Figueres
Former President, Costa Rica;
CEO, Concordia21



 Summary:

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In his evocative essay “There is no Planet B!” José María Figueres tells us how the first international climate change agreement, known as the Kyoto Protocol, was hammered out, calling upon 37 industrialized nations to reduce their carbon emissions by 5.2 percent from their 1990 level. Although 114 countries have signed the Protocol, the largest emitters (the U.S. and China) have not, and little progress was made, with the exception of a few countries which turned proactive environmental policies into good business opportunities. The business-as-usual attitude to climate change chosen by the international community meant that valuable time was lost. Figueres cites five reasons why this trend must be reversed: 1) climate change is real and, given leadership and action, it is possible to mitigate carbon emissions and begin to reverse serious damage; 2) the scientific community largely agrees on the reality and impact of climate change and has determined the dangers of adding 2.5 ppm of atmospheric carbon yearly; 3) people are now willing to make changes to safeguard future generations; 4) encouraged by knowledgeable NGOs, governments can now establish regulatory frameworks and put a price on carbon; 5) finally, with entrepreneurship, management skills, and the ability to muster capital and resources behind new and innovative models, business can make or break the fight against climate change. He describes the next summit, held in Copenhagen following the November 2008 financial meltdown, as a dismal failure, with no expected outcomes materializing. Three factors transformed his disillusionment into hope: first, the growing realization that there is no “Planet B” and that although the Copenhagen Accord was achieved by only five countries, it left the door open for other nations to adopt; second, the science of climate change is finally accepted; third, the promising signs that major businesses are now in the forefront of change, understand the opportunities provided by the environment to bolster their bottom line, strengthen brand value, consolidate customer loyalty, and increase market share. In the world after Copenhagen, countries will not wait for others to transform “green” into a new competitive advantage. Instead of all-inclusive solutions, the approaching Cancun conference will allow separate agreements to be reached, laying the foundation for further agreements down the road.


Hulya Ulku
bio notes

 2.7 Technological Capability, Innovation, and Productivity in Least Developed
     and Developing Countries

Hulya Ulku
Lecturer in Development Economics,
Institute for Development Policy & Management, University of Manchester


 Summary:

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In her chapter entitled “Technological Capability, Innovation and Productivity in Least-Developed and Developing Countries,” author Hulya Ulku investigates the rankings of least-developed countries (LDCs) and developing countries on the key indicators of technological capability, innovation and productivity. She analyzes the associations between technological capability/knowledge spillover and innovation/productivity in the two groups of countries. She shows that, while LDCs closely follow developing countries in some of the basic human capital capacity indicators and passive knowledge spillover channels, they lag far behind in physical and digital infrastructure, direct knowledge spillover channels, innovation, and labor productivity. In terms of the association of the four pillars of technological capability (physical and digital infrastructure, human capital capacity, and institutional environment) and knowledge spillover with innovation and productivity, she demonstrates that human capital capacity has the strongest association with both innovation and productivity in LDCs. As regards the developing countries, she provides evidence that the associations of both the technological capability and knowledge spillover channels with innovation and productivity is much stronger in these countries as compared to LDCs, although they also have a weak association between knowledge spillover, innovation, and productivity. An important finding concerns the fact that innovation is strongly associated with productivity in developing countries, whereas this association is not significant in LDCs. In addition, it seems that the scientific knowledge base in LDCs and lower-middle-income developing countries is geared more toward agriculture, while in upper-middle-income countries it is geared toward the manufacturing sector. Based on her findings, Ulku concludes that LDCs need to prioritize the promotion of physical and digital infrastructure and strengthen their human capital capacity, while developing countries need to focus on the promotion of absorptive capacity to take better advantage of knowledge spillovers. She points out the crucial role of government in both the development of national science and technology policies and promotion of technological innovation in industries with a strong local knowledge base and linkages with the rest of the economy.

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Copyright © 2010
The Innovation for Development Report
Augusto López-Claros, Editor