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Innovation in Latin America: Diagnosis and Questions

Innovation in Latin America: Diagnosis and Questions . William F. Maloney World Bank. Mexico, DF, July 2010. MEn. Engineers in North America ~1900. Bottom quintile Quintile 2 Quintile 3 Quintile 4 Top quintile. Source: Maloney and Valencia (2010).

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Innovation in Latin America: Diagnosis and Questions

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  1. Innovation in Latin America: Diagnosis and Questions William F. Maloney World Bank Mexico, DF, July 2010

  2. MEn Engineers in North America ~1900 Bottom quintile Quintile 2 Quintile 3 Quintile 4 Top quintile Source: Maloney and Valencia (2010)

  3. Throughout LA, there was a lack of national innovative capacity Engineers and GDP/Capita ~1900 Engineers per each 100,000 workers GDP/Capita (US$ ~1990) Source: Maloney and Valencia (2010)

  4. Half of the GDP difference is represented by Total Factor Productivity (TFP) Source: Calderón, Fajnzylber and Loayza (2002)

  5. Innovation Diagnoses: 3 Big Questions

  6. 1. Do we have an innovation problem or another distortion? • The TFP is a measure of our ignorance, nothing more • Allocation of production factors • Micro rigidities that prevent the entry of more productive companies? • Haltiwanger– poor allocation could reduce the EU's GDP by EU 40% • Hsieh and Klenow (2007) India and Chile 35-60% more productive with a good allocation • Allocation within the company (labor markets?) • Chile– new restrictions cost .5% in annual growth • Technological progress (innovation): knowledge accumulation.

  7. 2. Is it a question of knowledge accumulation or of accumulation in general? R&D and K/L R&D K/L Source: Rodriguez and Maloney (2005)

  8. Returns on R&D vs. Distance to the Frontier: Complementary factors are key Distance to the economic frontier (z) Poor countries: low complementarity Advanced: innovative Distance to the technological frontier Medium income: imitator/innovative Source: Goñi, Lederman and Maloney (2008)

  9. 3. What kind of innovation is required? Source: Goñi, Lederman and Maloney (2008)

  10. We should look at the PRODUCTIVITY system as a whole • We should place innovation in the context of accumulation in general with the company at the center • Financial markets? Entrepreneurship? Marketing? Other barriers? • Kiwis– how to leave the island • Without this, there is a risk that increasing the C&T would be "pushing on a thread"

  11. Innovation System Structure Accumulation/Allocation Innovation Supply Demand Universities/ Research centers/ Technology extension The company K A • Barriers for accumulation/allocation • Financing • Entry/Exit barriers • Regulatory/investment climate • Barriers to knowledge accumulation • Market failures (&IP) • Venture capital (VC) • Restrictions (employment, etc.) • Macro Framework • Competitive Structure • Trade Regime • International Trade • Entrepreneurial Spirit • Human capital • Quality systems • Dissemination of best practices/processes • Science and technology system • International links

  12. How do we know if the system is working?

  13. The raw material of innovation: Education Performance Standardized mathematics tests Education Expenditure / Per capita GDP

  14. New Measurements of Management Quality Source: Bloom & Van Reenen (2009) – Definition: “Average country management score, (monitoring, targets and incentives management scored on a 1 to 5 scale)”

  15. The efficiency of generating knowledge is low in LA Patents = B1R&D + BpCountry*R&D Source: Bosch, Lederman and Maloney (2009)

  16. University/Business Cooperation is low...(business interviews - rating from 1 to 7) Coop. Univ/Business Quality of scientific inst.

  17. ...And the Links between University/Global Knowledge Centers are Weak Students studying in the US / Tertiary Students Source: Maloney (2009)

  18. END www.worldbank.org/laceconomist

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