Insead has just released InnovaLatino, the result of a two-year collaboration between Insead and the OECD Development Centre, and funded by the Telefónica Foundation. The objective of InnovaLatino was to research innovation dynamics in the business and public sectors in Latin America, drawing attention to and learning lessons from innovation experiments underway in the region, and advocating greater policy attention to innovation in the national development strategies. To go in depth in the survey, RCR Wireless Newsasked questions to co-authors Soumitra Dutta, Roland Berger professor of business and technology, and academic director, eLab at Insead, and Daniela Benavente, senior research fellow at Insead.
In terms of IT and telecommunications, how do you analyze Latam from the innovation perspective? What could governments and private companies be doing to increase innovation?
The study says that “despite lagging behind, things are on the move in Latin America’s innovation ecosystem.” What do you point out that could serve as an example?
When compared to the U.S., European countries, Japan and even China, Latam still has to improve its rankings. What has been done? Which Latam’s countries are working hard to bring more innovation?
Among Latam countries, which one do you highlight as most innovative and least innovative? And why?
A heat-map included in the report shows that the LCN region comes in fifth place in terms of the sum of average regional scores, after North America, Europe and Central Asia, East Asia and the Pacific, Middle East and North Africa, but ahead of South Asia and Sub-Saharan Africa. While this order is kept for all input pillars, Latam countries come behind South Asia (which includes India, Sri Lanka, Bangladesh and Pakistan) on all output dimensions and on the Output Sub-Index. Much needs to be done at that level.
What did China do to improve its position in ranking?
China is the only non-high income country in the top 30, achieving positions 29 on the GII, 43rd on the Input Sub-Index and 14th on the Output Sub-index. It tops the ranking among lower-middle income countries on all three indexes and is among the top 10 efficient innovators. China exhibits several strengths: it ranks among the top 30 on Market (26th) and Business sophistication (29th), and achieved a commendable 9th position on Scientific Outputs.
At the indicator level, on the input side China is ranked 1st on the OECD PISA scales on reading, maths and science (Shangai), 24th on gross expenditure on R&D (at 1.4% of GDP), 2nd on gross capital formation (at 47.7% of GDP), 13th on domestic credit to the private sector (at 127.3% of GDP), the 5th most dynamic stock market (stocks traded reaching 179.7% of GDP), 1st on firms offering formal training (84.8%), 10th and 6th on R&D performed and financed by business, and 4th on high-tech imports (26.8% of total imports).
On the output side (14th), China ranks 12th, 9th and 21st on knowledge creation, impact and diffusion, obtaining its leverage from top 10 positions on patent, utility model and trademark applications by residents at the domestic level, growth rate of labor productivity (at an impressive rate of 8.4%), high-tech exports (at 29.9% of total exports) and creative goods exports (at 5.9% of total exports).
What could Latin America learn from China?
China’s results are a bit puzzling. It shows weaknesses on the Institutions pillar, with some of the worst scores on political environment (108th) and on two indicators which are key to entrepreneurship: time to start a business (ranked 104th with 38 days) and total tax rate (ranked 115th at 63.5% of profits). It also lags behind in the elementary and tertiary education sub-pillars, with low levels of expenditure, school life expectancy, tertiary enrolment and mobility. It also shows relatively poor performances on the enabling conditions for credit, investment and trade, with scores on the third quintile on strength of legal rights for credit, depth of credit information, strength of investor protection, applied tariff rate.
And yet China is among the most dynamic markets for credit, stocks, venture capital, joint venture and strategic alliance deals, with high levels of spending on computer software and growth of GDP per person engaged, together with good scores on knowledge absorption and diffusion and on intellectual property indicators.
China’s dynamism might be due to some policy-mix that allows for pockets of excellence around key regional clusters (China ranks 7th on state of cluster development) or industries, driving upwards the IP results, growth, productivity, etc.; while large areas of the territory might still be under-developed, explaining the lower average scores. A similar pattern can be found in most of the large, low-income efficient innovators.
Regarding BRIC countries – from innovation in ICT perspective – how do you analyze each country?
India is ranked 62nd and 8th among lower-middle income countries, with a commendable 44th position on the Output Sub-Index and position 87 on the input side. India achieves positions among the top 40 on R&D (35th), General infrastructure (11th), and Investment (15th). On the output side, it is 33rd on Knowledge diffusion (32nd on high-tech exports, 4th on computer and communication service exports, and 38th on FDI net outflows), and 38th on Creative outputs.
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