adopt, adapt, advance: innovating for the future€¦ · adopt, adapt, advance: picking the...
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Adopt, Adapt, Advance: Innovating for the Future
ERBD wishes to acknowledge
Flagship Forum Partner
Major Forum Partners
Special Event Partner
Forum Partners
3
54
32
1
The Panel
12 4
5
1.Hakan Ayen
2.Beata Javorcik
3.Ralph de Haas
4.George Chirakadze
5.Albert Bravo-Biosca
TEXTTEXT
TRANSITIONREPORT2014
tr.ebrd.com
Produced by the Office of the Chief Economist, EBRD.
© European Bank for Reconstruction and Development
Adopt, Adapt, Advance: Innovating for
the Future
Background: Economic convergence is
slowing down
Sources: IMF WEO, EBRD REP, weighted averages.
5
-4
-2
0
2
4
6
8
10
12
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Re
al
GD
P g
row
th i
n e
xce
ss o
f A
dv.
Ec.
, p
er
cen
t
Emerging markets relative to
advanced economies
CESEE region relative to advanced
economies
-4
-2
0
2
4
6
8
10
12
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Re
al
GD
P g
row
th i
n e
xce
ss o
f A
dv.
Ec.
, p
er
cen
t
Emerging markets relative to
advanced economies
CESEE region relative to advanced
economies
Georgia relative to advanced
economies
Share of firms
Share of firms
Share of firms
Share of firms
ProductivityProductivityProductivityProductivity
Transition regionTransition regionTransition regionTransition region
IsraelIsraelIsraelIsrael
6
Firms need to become more productive
• Some firms are as productive as leaders in advanced markets…
• …but laggards must adopt and adapt – or die – to raise aggregate
productivity and get countries unstuck
Adopt, Adapt, Advance: Picking the low-hanging fruit
Innovation is about improving productivity within firms
Innovation goes well beyond R&D in high-tech sectors
Products and production processes new to the firm
Firms Adopt, Adapt and Advance towards technological frontier
7
8
Who innovates the most?
Growth 1993-2010
9
Exporters
Source: : BEEPS V, MENA ES
Growth 1993-2010
% o
f fi
rms
tha
t in
no
va
te
10
Firms in global value chains
Source: : BEEPS V, MENA ES
Growth 1993-2010
Hig
he
r li
ke
lih
oo
d o
f in
no
va
tio
n
(GV
C v
s. n
on
-GV
C f
irm
s)
Firms with access to credit
0%
5%
10%
15%
20%
Product innovation Process innovation
Percentage of firms that innovate
Percentage of firms that innovate
Percentage of firms that innovate
Percentage of firms that innovate
No credit demandNo credit demandNo credit demandNo credit demand Unfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demand Fulfilled credit demandFulfilled credit demandFulfilled credit demandFulfilled credit demand
0%
5%
10%
15%
20%
Product innovation Process innovation
Percentage of firms that innovate
Percentage of firms that innovate
Percentage of firms that innovate
Percentage of firms that innovate
No credit demandNo credit demandNo credit demandNo credit demand Unfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demand Fulfilled credit demandFulfilled credit demandFulfilled credit demandFulfilled credit demand
11
12
Who should innovate
more (or perhaps less)?
Growth 1993-2010
0
50
100
150
200
250
Higher-tech sectors Medium-low-tech sectors Low-tech sectors
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovation Impact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivity
0
50
100
150
200
250
Higher-tech sectors Medium-low-tech sectors Low-tech sectors
0
5
10
15
20
25
30
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage increase in labour productivity
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firm
s that innovate
Percentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovation Impact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivity
Pay-off from innovation highest in low-tech industries
13
14
Less advanced countries: Management matters most?
Source: BEEPS V, MENA ES
Growth 1993-2010
Incr
ea
se in
pro
du
ctiv
ity
, %
Management needs to be improved before new processes can yield substantial productivity gains
Incr
ea
se in
pro
du
ctiv
ity
, %
3
54
32
1
The Panel
12 4
5
1.Hakan Ayen
2.Beata Javorcik
3.Ralph de Haas
4.George Chirakadze
5.Albert Bravo-Biosca
Harnessing FDIfor Economic Growth
Beata JavorcikUniversity of Oxford
What are the essential ingredients for fast and sustained economic growth?
OpennessImport
knowledgeExploit global
demandMacroeconomic
stabilityModest inflation
Sustainable public finances
Long-term focus
High savings
Market allocation
Prices guide resources
Leadership and governance
Credible commitment to growth
Credible commitment to inclusion
Capable administration
Multinational firms (MNCs) are creators of knowledge
� MNCs are responsible for most of the world’s R&D
� 700 multinational corporations accounted for 46% of the world’s total R&D expenditure and 69% of the world’s business R&D in 2002 (UNCTAD 2005)
MNCs’ R&D budgets may exceed R&D spending of countries (2002, $bn)
Knowledge brought by MNCs boosts the performance of FDI recipients
Total factor productivity (in logs)
Pre-acquisition
Year
Acquisition
yearOne year later Two years later
FDI recipients 0.864 1.079 1.142 1.215
Control group 0.867 0.976 1.022 1.083
Difference 0.106*** 0.122*** 0.135***
(0.034) (0.045) (0.051)
Knowledge brought by MNCs boosts the performance of FDI recipients
Total factor productivity (in logs)
Pre-acquisition
Year
Acquisition
yearOne year later Two years later
FDI recipients 0.864 1.079 1.142 1.215
Control group 0.867 0.976 1.022 1.083
Difference 0.106*** 0.122*** 0.135***
(0.034) (0.045) (0.051)
Knowledge brought by MNCs boosts the performance of FDI recipients
Total factor productivity (in logs)
Pre-acquisition
Year
Acquisition
yearOne year later Two years later
FDI recipients 0.864 1.079 1.142 1.215
Control group 0.867 0.976 1.022 1.083
Difference 0.106*** 0.122*** 0.135***
(0.034) (0.045) (0.051)
Foreign ownership leads to rapid changes
(d) Employment
5.40
5.60
5.80
6.00
t-1 t0 t+1 t+2
(e) Average wage
7.60
7.80
8.00
8.20
8.40
8.60
8.80
9.00
t-1 t0 t+1 t+2
(c) Output
10.00
10.20
10.40
10.60
10.80
11.00
11.20
11.40
t-1 t0 t+1 t+2
Foreign ownership facilitates integration into global markets
(h) Export share
15
20
25
30
35
t-1 t0 t+1 t+2
(i) Import input share
15
20
25
30
35
40
45
t-1 t0 t+1 t+2
MNCsLocal suppliers
Knowledge brought by MNCs spills over to local suppliers
Higher productivityMoving up the value chainIncreased complexity of products
Conclusion
� By serving as a channel of knowledge transfer, FDI inflows can stimulate economic growth and innovation in host countries
Thank you
3
54
32
1
The Panel
12 4
5
1.Hakan Ayen
2.Beata Javorcik
3.Ralph de Haas
4.George Chirakadze
5.Albert Bravo-Biosca
• T h e n e w g l o b a l l a b o r a t o r y f o r i n n o v a t i o n
a n d g r o w t h p o l i c y
Albert Bravo-Biosca
EBRD Annual Meeting, 15th May 2015
Why do we need more
experimentation?
Policy Business
Innovation and
entrepreneurship
policy…
… but little
evidence on
what works,
and what
doesn’t
Typically start big…
…without
prior small-
scale testing
Why not trial different designs to learn what works?
What is an experiment? A continuum of definitions…
Trying something new
Trying something new and put in place the
systems to learn
RCTs
• No rigorous learning or evaluation strategy
• No real “testing mindset”
• A “pilot”
• Rigorous formal research design
• Test a hypothesis
• Codifying and sharing resulting knowledge
• Sometimes but not always with some form of control group
• Randomised controlled trials
• Control group created by the programme manager/researcher using a lottery
• Field vs. “lab” experiments
• Different from a natural experiment
1. Experiment
Control group
2. Evaluate 3. Scale-up
IGL is a new global collaboration led by
Nesta that develops and tests different
approaches to support innovation,
entrepreneurship and growth
Our aims:
1. Improve the evidence base on the effectiveness of interventions
2. Encourage experimentation with new interventions
3. Push forward the knowledge frontier
Our partners
And on-going discussions with several other organisations
IGL Research Network
Some of our projects
Incentivising employees to contribute new ideas
Supporting technology development in emerging economies
Increasing bank lending for intangible-rich SMEs
www.innovationgrowthlab.org
• T h e n e w g l o b a l l a b o r a t o r y f o r i n n o v a t i o n
a n d g r o w t h p o l i c y
3
54
32
1
The Panel
12 4
5
1.Hakan Ayen
2.Beata Javorcik
3.Ralph de Haas
4.George Chirakadze
5.Albert Bravo-Biosca
The floor is open for questions