Ecosystem, Entrepreneurship and Innovation: (Bad) Equilibrium

WorkshopWBCAF
WashingtonDC,World Bank,September 6,2013

Marco Kamiya Direccin de Polticas Pblicas y Competitividad Vicepresidencia de Estrategias de Desarrollo y Polticas Pblicas

EnterpriseDevelopmentEcosystems
SilVal Israel Innovation Patents Universities Overseasnetworks Entrepreneurial Talent (Managerial/Labor) Teachingtechniques TrainingforBusiness plans,etc. TechTransfer Centers Finance AngelInvestors/Seed Venture Capital EquityInvestment Developed Incipient Inexistent Sing Bra Chi Mex Colo

Entrepreneurs andPoliciesforEcosystem

Entrepreneurial Ecosystems

StartUps

Dynamic Sectors

Entrepreneurs

Entrepreneurship
1. Whytherearesofewnewdynamicfirms? 2. Isitculturaltraitsthatprevententrepreneursto appear? 3. Whyfirmsdontgroworstayinlow productivitysegments? 4. Isthereabadequilibriumpreventingfirmsto grow?

FirmDistribution bySize

Asalariados

Desocupados

EstadosUnidos

Mxico

Per

FirmDistribution byNumberofEmployees

Asalariados

Desocupados

EstadosUnidos

Mxico

Per

Distribution ofLaborForce

Entrepreneurs:SimilarAttributes

Distribution ofAttributesinSelectedLAC CitiesandinLosAngeles

LAandLAC:TolerancetoRisk

MicroenterprisesandSelfEmployed:Escaping fromUnemployment

Traits Education Family environment Features proentrepreneurship Preference for salary jobs Previous job/background 25% Similarto Employers Similarto salaried workers (Formaland informal) 75%

Younger firms not small firmscreates the jobs

Panel A: Total Employment Cohort: Establishment's initial year of operation Year 1994 1997 2009 2009-1994
before 1970 1970 to 1979 1980 to 1984 1985 to 1989 1990 to 1994 1995 to 1997 1998 to 2003 2004 to 2009

Total 636,061 615,360 643,498 7,437

316,612 279,372 203,989 -112,623

139,428 124,205 98,969 -40,459

80,396 75,739 67,484 -12,912

73,248 74,119 73,960 712

26,377 44,811 72,750 46,373

17,114 39,525 39,525

57,008 57,008

29,813 29,813

1994 1997 2009 2009-1994

1,756 1,643 1,029 -727

1,931 1,891 1,114 -817

Panel B: Number of establishments 1,500 1,484 593 1,511 968 -532 1,585 1,235 -249 1,032 1,286 693

375 740 740

1,487 1,487

969 969

7,264 8,037 8,828 1,564

1994 1997 2009 2009-1994

180.3 170 198.2 17.94

72.2 65.7 88.8 16.64

Panel C: Mean of Employment 53.6 49.4 44.5 50.1 69.7 16.12 46.8 59.9 10.53 43.4 56.6 12.09 45.6 53.4 53.41 76 76 63 63

87.6 76.6 72.9 -14.67

Source:Haltiwanger andEslava(2012)

Lack ofDynamism inFormalFirms

40years later US 8times

Mexico

Double

What explains lack ofdynamism inlarge firms?

The Four Elements of the Entrepreneurial Ecosystem

InnovationisnotEverything
Theory Innovation

Science

R+D (Researchand Development) Patentable/ registered proprietary research

ScalingUp/ Commercialization

Theoretical progressin science

Advancesin basicscience

Processes

Intheabsenceofstronguniversityprivatealliances TechnologyTransferCentersandmechanismtoshare networks(PPdialogues)areimportant.

InnovationandEntrepreneurship: MissingLink
Laboratories

Innovation

Universities Corporations

Research Centers

Entrepreneurship

TechTransfer Centersat Universitiesand Laboratories

Educationand Entrepreneurial Talent

Finance

Angel Investors

Seed Capital

Venture Capital

Private Equity

NationalSystemsofInnovation
Japan 1970R&D/GDP2.5% MilitaryorspaceR&Dlessthan 2% EnterpriselevelR&D67% Stronglinkagebetweenproducer andsubcontractor Strong cooperationmanagement andworkforce
Freeman(1995)

USSR 1970R&D/GDP4.0% Militaryorspace R&Dmorethan 70% Enterpriselevel lessthan10%

Japan60s70s QualityControlandMng Techniques Vocationaltrainingbyfirms R&Dpublicandprivateatfirmlevel Intrapreneurship Korea, Taiwan, 70s80s ASEAN Countries, China 90s

Distribucindelfinanciamientopblicoal ecosistemacomoporcentajedelPIB

Mapadepolticas:distribucindelapoyo financieroportamaodefirma

PoliciesforEntrepreneurship
Policiesshould identifytransformationalanddynamicfirmsas wellasstrengtheningemployabilityofsubsistencemicro entrepreneurs. Challenge:howtoreachthe25%ofcapablemicro entrepreneursthatareinthebottomofthepyramid? Howtodesigninnovationpoliciesthatavoidcrowdingoutand supportprivateR&Dwithtechnicalenhancement.

IdeasforCooperationWBCAFfor Entrepreneurship
DesignofPublicPrivatedialoguesforEntrepreneurship Employabilityofsubsistenceworkers,managerialcapacities ofmanagers,qualitytraining. Institutionalcapacityforpolicydesign Spinoffpromotionmechanisms Cluster/ValueChainbasedentrepreneurship

MarcoKamiya DireccindePolticasPblicasyCompetitividad VicepresidenciadeEstrategiasdeDesarrolloyPolticasPblicas