Entrepreneurship and Innovation in Developing Countries :

How the ITA can help

Bruno Lanvin, the World Bank

WTO, Geneva – 18 October 04

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

Engines of globalization

Four Ways ofBeing Global

(2003)

Source: Foreign Policy and A.T. Kearney

Is Globalization Slowing Down?Globalization advanced briskly until 1997, when the financial crises that hit various developing regions weakened trade flows and undercut gains in global integration. So why did overall integration still increase during this period? Simple: Technology has become the engine of globalization.

Technology factors: Percentageof population online, number of internet hosts per capita, and number of secure servers per

capitaNon-technology factors: Tradein goods and services, capital flows, and personal contact.

Source: Foreign Policy and A.T. Kearney

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

Obstacles to entrepreneurship in DCs

Source: World Development Report, 2005 (World Bank)

Source: World Development Report, 2005 (World Bank)

Source: World Development Report, 2005 (World Bank)

Sources of growth

Growth in inputsEfficiency in factor allocationInnovation (useful knowledge)

Vehicles (trade, FDI,..)Cross-border educationetc …

Rule of LawCorruption

Growth

InnovationEntrepreneurship

RegulatoryCompetitionFramework

Governance

T of TechOpenness

IPRs

ExportsInternationalcompetition

TradePolicy

Niches &Alliances

F.D.I.

Domesticsavings

Monetary& FiscalPolicies

Macro-Economic

Policies

CapitalFormation

GlobalReach

Growth, Innovation, Enterpreneurship

The crucial role of innovation

Technological innovationDisruptive vs incremental ?Individual vs collective

Process innovationNon technological innovationShifting value along the chain

Source: World Development Report, 2005 (World Bank)

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

8.00

Leaders

Fac

ilit

ato

rs

y = 0.6839x + 1.93992

R = 0.3991

GUA

ZIM

PAR

BOL

VEN

ARG

HON

ECU

PAN

EGY

ELS

PHI

PER

INO

TUR

ROM

NICBAN

NIA

MAU

UKR

RUS

URU

GRE

BUL

DOM

JOR

SLK

POL

COS

COL

TRI

MEX

SAFSLV

LIT

LAT

VIE

JAM

THA

INI

CHL

ITA

BEL

GER

AUT

NOR

SRICZE

LUX

HUN

CHN

IRE

MLT

POR

BRA

NWZ

JAPEST

NETAUL

FRA

SPADEN

KOR

SWIICE

SWEUSA

HKG

UK

CAN

ISR

TAI

FIN

SIN

2.00

3.00

4.00

5.00

6.00

7.00

2.00 3.00 4.00 5.00 6.00 7.00

Note : the ‘Government’ variable of the GITR index has been used as proxy for Government leadership (x), whereas ‘Competition in telecoms’ has been used as an indicator of the effectiveness of Governments as facilitators (y)

First circle (top performers)

Second circle (the contestants)

Third circle (ready or not)

Strong Public Sector

Source : World Economic Forum/INSEAD/infoDev

Multi-purpose IT The example of trade facilitation

Trade competitiveness

Attraction of FDI

Governance (transparency, accountability,..)

Potential for additional off-shoring ?In G-7 countries, 1-5% of active population could be affected (World Bank 1995)

Maximum number of current jobs affected in US: 14 mn (Bardhan and Kroll 2003)

Projected number of US services jobs outsourced by 2015 : 3.4 mn (Forrester 2004)

In financial services alone, 2 mn jobs could be affected during the next 5 years (Deloitte & Touche 2003)

70% of the biggest 1000 firms have not outsourced services jobs towards lower-cost countriesDelayed cost-savings measured are estimated at 20-40%Source : World Investment Report, 2004 (UNCTAD)

IT and development

GlobalizationEntrepreneurship, innovation and growthEfficiency and transparencyRegulatory and legal frameworkIssues and challenges ahead

How can ITA help ?How is 2004 different from 1996 ?

Globalization becoming information-centric (competitiveness, efficiency, governance) Life-cycle of IT products becoming shorter

(=> lesser tolerance to procedural obstacles)

Mainstreaming of IT as a development tool (DOT Force, MDGs, WSIS)

Proper regulatory and legal frameworks have proved their power to bring prices down internallyITA can contribute to turn all of the above into powerful instruments for development

Merci

blanvin@worldbank.org