InnovaLatino: Fostering Innovation in Latin America is the result of a two-year collaboration between the leading international business

school INSEAD and the OECD Development Centre, and funded by the Fundación Telefónica. 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 national development strategies. This InnovaLatino report draws upon new evidence, information and analysis regarding innovation in Latin America. The report presents results from an exclusive survey of over 1500 manufacturing firms from eight countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, and Uruguay). The report also brings together over 50 case studies – “vignettes” – of various firms and organizations identified as innovation leaders in their sectors. Together, these data highlight that innovation means more than catching-up or even leapfrogging by imitating innovative firms from more developed economies. In several revealing cases, Latin American businesses are redefining global business by developing new business models. The report highlights several critical success factors for fostering innovation and describes how several countries have institutionalised good practices that create a better environment for innovation. InnovaLatino highlights five aspects of Latin American economic reality in order tooffer important lessons for countries seeking to strengthen their innovation capacity: innovation in a natural-resource-abundant economies; policies to build innovation skills by enhancing formal education and linking universities and the business sector; partnering and cluster policies; innovation and green growth; and the importance of information systems to monitor and assess innovation policies. Latin American economies – like other emerging markets – illustrate that our conception of innovation can no longer be limited to the activities of laboratories and investment in research and development. In a changing world where emerging economies are rapidly developing and increasing their relevance, Latin America has to be an innovation leader. InnovaLatino: Fostering Innovation in Latin America shows that Latin American organisations offer many examples of successful innovations. Business leaders and public policy makers must focus on multiplying those examples and ensure that innovation at the micro level translates into more productive economies at the macro level.

InnovaLatino: Fostering Innovation in Latin America

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InnovaLatino: Fostering Innovation in Latin America

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Published by Ariel and Fundación Telefónica, in collaboration with Editorial Planeta, who does not necessarily share the views expressed in it. All contents are the solely responsibility of their authors. © Fundación Telefónica, 2011 Gran Vía, 28 28013 Madrid (España) © Editorial Ariel, S.A., 2011 Avda. Diagonal, 662-664 08034 Barcelona (España) © of the texts: OECD © of the texts: INSEAD © of the texts: Fundación Telefónica © of the cover: Mauco Sosa / Neo Labels Company S.L. Editorial coordination of Fundación Telefónica: Rosa María Sáinz Peña First printing: May 2011 ISBN: 978-84-08-10449-0 Legal Deposit: M. 23.083-2011 Printing and binding: Unigraf, S.L. Printed in Spain
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InnovaLatino: fostering innovation in Latin America

colección Fundación Telefónica

Index
Foreword, by Cesar Alierta ...................................................................................................................................................................................................................................................................................................................................................................................... Acknowledgements ................................................................................................................................................................................................................................................................................................................................................................................................................ Preface, by Soumitra Dutta and Mario Pezzini.................................................................................................................................................................................................................................................................................................. Executive Summary ................................................................................................................................................................................................................................................................................................................................................................................................................. 1 Innovation in Latin America................................................................................................................................................................................................................................................................................................................................................................ 1.1 Defining Innovation: What is Innovation? Who Innovates? ...................................................................................................................................................................................................... 1.2 Why Innovation Matters for Development........................................................................................................................................................................................................................................................................... 1.3 Innovation Performance in Latin America in a Comparative Perspective.............................................................................................................................................. 1.4 Developing New Indicators of Innovation............................................................................................................................................................................................................................................................................... A.1 The 2010 InnovaLatino Survey ................................................................................................................................................................................................................................................................................................................................ Innovation in Latin America: Evidence from the Region .......................................................................................................................................................................................................................................... 2.1 Institutional Changes for More Effective Innovation Policies .............................................................................................................................................................................................. 2.2 Examples of Innovation in the Business Sector ........................................................................................................................................................................................................................................................ 2.3 Latin American Innovation in Times of Economic Crisis ..................................................................................................................................................................................................................... 2.4 Country Profiles............................................................................................................................................................................................................................................................................................................................................................................................. Innovation in Latin America: mobile applications adoption and socio-economic development .................................................................. 3.1 Mobile Penetration in Latin America..................................................................................................................................................................................................................................................................................................... 3.2 The Mobile Applications Ecosystem .......................................................................................................................................................................................................................................................................................................
3.2.1 Socio-economic Development................................................................................................................................................................................................................................................................................................................. 3.2.2 Evolution of the Mobile Ecosystem .............................................................................................................................................................................................................................................................................................. 3.2.3 User Adoption Levers .................................................................................................................................................................................................................................................................................................................................................... 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.3.6 Spread of Mobile Applications Capable Handsets ..................................................................................................................................................................................................................................... Extend Data Network Coverage while Reducing Entry Barriers.................................................................................................................................................................................. Convergence in Enabling Platforms............................................................................................................................................................................................................................................................................................ Encourage Mobile Application Development Ecosystems....................................................................................................................................................................................................... Develop Cross-industry Agreements ......................................................................................................................................................................................................................................................................................... Foster Public Private Partnerships.................................................................................................................................................................................................................................................................................................... 3.1.1 The Socio-Economic Impact of Mobile Telephony ......................................................................................................................................................................................................................................

VII XI XIII XV 1 3 9 15 19 25 27 28 35 38 39 59 60 60 63 64 66 69 71 72 73 73 74 74 74 75 76 76 78 83 88 89 91 95

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3.3 The future of mobile applications in Latin America ......................................................................................................................................................................................................................................

4 Ways Forward for Innovation Policy in Latin America..................................................................................................................................................................................................................................................... 4.1 Five challenges to innovation in Latin America ......................................................................................................................................................................................................................................................... 4.1.1 Innovation in a Natural-Resource-Abundant Economy................................................................................................................................................................................................................ 4.1.2 Human Resources, Education and the University-Business Link ................................................................................................................................................................................ 4.1.3 Partnering and Cluster Policies .............................................................................................................................................................................................................................................................................................................. 4.1.4 Innovating and Green Growth............................................................................................................................................................................................................................................................................................................... 4.1.5 Measurement................................................................................................................................................................................................................................................................................................................................................................................ 4.2 Towards an Effective Policy Agenda for Innovation......................................................................................................................................................................................................................................... Vignettes..............................................................................................................................................................................................................................................................................................................................................................................................................................................................

References......................................................................................................................................................................................................................................................................................................................................................................................................................................................... 125 Acronyms and Abbreviations.......................................................................................................................................................................................................................................................................................................................................................................... 131

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including public health.4 billion was set aside for Latin America. below the global (0. with high value added and strong technological components. the good news is that from Mexico to Chile. health. many countries are well on their way in achieving this. encompassing all spheres. and in fomenting the start-ups and leading industries of the USA and Israel. or justice. adequate financing. Today. The private sector will play a key role in developing capacity for financing business and entrepreneurial innovation. were it necessary. as they set the standard for growth and their middle classes expand. nonetheless. During this decade. providing yet another reason for companies from developed countries to position themselves in emerging markets. on the other. representing barely 2% of the world total. Promoting innovation has become imperative for big and small business groups. We can imagine that in the future. a boom of emerging multinationals in leading sectors. approximately 21. The rhetoric transcends the fields of technology or business.500 multinationals are currently located in emerging economies. The fact that one of the founders of Facebook is. Begetting more companies and entrepreneurs requires time and the set-up of a complex favourable ecosystem – efforts to this end need to encompass investments in education.Foreword O ver the past decades. 2010-2020 will be the decade of emerging economies. only USD 4. the Mexican cement-company Cemex or the Chinese battery-manufacturer BYD. can be used as proof. According to the United Nations. on a par with Africa. increasing levels of “re-imported” innovation from emerging economies by multinationals from OECD member countries. Inno- .500 billion raised globally through these vehicles.19%). also offering unparalleled opportunities for public-private partnerships. of the over USD 3. for associations and individuals. Latin American Huaweis or Facebooks. in fact. A silent revolution is underway. These funds were fundamental in the take-off in Palo Alto and Tel Aviv. competitiveness and economic development. Although Latin America is not Palo Alto or Tel Aviv in terms of technological companies and start-ups.03% of Latin America’s regional GDP. logistics. Some of these are already world leaders in their respective sectors: for example. This will also affect the profile of multinationals from OECD-member countries. In 2009. Emerging economies are no longer characterised by low technological intensity. Whereas in the USA they reach 0. technological giants. Today. The 20th century was characterised by the unprecedented development of scientific and technological innovation.3% of GDP. and whose eventual obsolescence is an integral part of design. pure good will not suffice – but it is an essential condition. We know that Latin America can generate companies in leading sectors. Investment in venture capital and private equity lags behind in Latin America. financial markets and institutional funds participate much more actively in financing innovative companies. they represent only 0. We can observe two powerful trends: on the one hand. while at the same time aiming to eliminate barriers to creative impulses in the market. where new markets are created through products and services that are being permanently upgraded. the tide has turned. we will see many more emerging multinationals project their innovations a global level. via Colombia or Brazil. Companies and countries in the region are conscious of having entered a new era of innovation. More innovative companies from the region reaching a global scale will positively impact the region’s productive diversification. Brazilian. and has become relevant in all spheres of society. of the immense pool of talent that exists in Latin America. innovation is an essential characteristic of both developing and emerging economies. from the technical to the commercial and organisational. Indeed.17%) and European averages (0. such as education. often authored by prestigious scholars. and even raw materials and agro-industry. such as telecommunications and aeronautics. important private-sector and governmental initiatives are sprouting. in particular in the following sectors: high-tech. for States and regions. Notwithstanding this complexity. and as they become the originators of more disruptive innovations. the management of innovation and business creativity has been the focus of many a report. National and regional public authorities are multiplying policies destined to stimulate and encourage innovation. will see the day. Having recognised the fundamental value of innovation in fomenting business creation and sustainability. article and book. Clearly.

Through its Foundation. The Report contributes to the debate on key success factors for the business community’s innovation processes and for innovation incentives proposed by public policy.vating and entrepreneurial have become some of the most attractive terms in public rhetoric throughout the region. In particular. an academic institution dedicated to business training and research. to convert short-term capital into long-term capital. they have to compete with the dynamism of other emerging economies. Telefónica partnered with two prestigious institutions recognised for their analysis of innovation: the Organisation for Economic Co-operation and Development (OECD). We hope that InnovaLatino. In its countries of presence. be it technical. Latin America today is a leading region in terms of economic dynamism. and INSEAD. The objective of InnovaLatino is to identify sectors and experiences with the highest potential for the region. whose tradition guarantees intensive dialogue with key private and public actors in economic and social development. in a region in full transcendence. will contribute to the definition of a new innovation agenda in the region. and how the culture of innovation. commercial or financial. Latin America is at a cross-roads. Many countries in Latin America no longer stop at catching up with developed economies. whose prestige is recognised in the management of creation and innovation. as well as creativity and courage in the face of new social and technological challenges. the InnovaLatino Report studies initiatives to stimulate innovation and to unfold new public and private policies across different countries. Cesar Alierta Chairman of Telefónica Foundation . highlighting success stories that deserve to be compared to global best practices and extracting conclusions for the definition of policies that promote innovation in particular country contexts. will be key to maintain and increase the current economic dynamism of the region. Telefónica remains loyal to its commitment to the region and its position as one of the principle global telecommunication operators. through its multidimensional focus. The imperative of innovation is more pressing than ever before. Telefónica contributes to economic and social development through a range of innovative services and solutions intervening in multiple spheres of society. The InnovaLatino Report aims to stimulate our attention to the efforts in favour of innovation in business and social sectors. It also studies the impact that the deployment of mobile telecommunications has had on the creation of new social and business capacities in the region’s markets. The strategy should rely on the collaboration of different actors who can respond to the challenges currently faced by the region. They can also appreciate how these practices will contribute to economic growth and sustainability in their geographic sphere of influence. organisational. The business community and the so-called decision-makers. disseminated through different social actors. The boom in raw materials should not be seen as the end of the line – rather. The general public can identify how innovation is gradually transforming Latin America. and to support the emergence of Latin American Huaweis and Facebooks over the next decade. will find useful baseline information for the definition of their innovation strategy. both private and public. the current moment is a unique opportunity to invest in innovation and diversification.

Luciana Cainelli. Moreover. William Maloney (World Bank). We would also like to recognise the active participation in various stages of the authoring process of colleagues from a wide range of institutions. Ana González.Acknowledgements T his Project has been developed under the supervision of Soumitra Dutta. Léa Contier de Freitas (Ministry Science & Technology of Brazil). Telefónica Latinoamérica). Francisco Sagasti (FORO Nacional/ Internacional). From both INSEAD and the OECD. João Carlos Ferraz (BNDES. Brazil). Shilpa Dodda. Alicia Bárcena (Secretary Gen- . Alba Martínez. Daniel Malkin. Gabriel Casaburi (IDB). the Experts’ Meeting on the subject of “Benchmarking Innovation for Development in Latin America”. Nils Fonstad and Caroline Paunov. Martín Redrado (President of the Central Bank of Argentina). José María Álvarez-Pallete (Executive President. and formely an energetic member of the project’s steering committee representing Telefónica. Carlos Osorio (Adolfo Ibañez University. Fred Gault (International Development Research Centre. André Nassif (BNDES. Severin Resch and Nijole Vileikis to the final version of this report are gratefully acknowledged. Juan Carlos Navarro and Flora Painter from the InterAmerican Development Bank. Alejandra Valenzuela for proof-reading help. from the OECD. Emilio Azcárraga Jean (President & Chief Executive Officer. The authors are grateful to the Inter-American Development Bank (IDB) – not just for their substantive input but also for co-financing project events with us. Rolando Avendaño. Lene Rousseau and Vicky Zachariadou for their support to the process of elaborating the report and dissemination activities. Brazil). Televisa. Jean Guinet Vladimir López Bassols. Special thanks are due to Diego Molano. the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). Lead authors of the report were Lourdes Casanova. Mario Cimoli (ECLAC). in particular those who participated in key events of the InnovaLatino project: the “Innovation Indicators for Latin America” Workshop. Canada). and the panel discussion on “Fostering Innovation in Latin America” at the III Latin America and the Caribbean . Jeff Dayton-Johnson. Cristina Casanova. and the Brazilian National Bank for Economic and Social Development (BNDES). Chile). and Mario Pezzini. Rita Da Costa. This report benefited greatly from the advice and input provided by several individuals. Raúl Rivera Andueza (Foro Pro Innovación. César Alierta (Executive President. Elsa Miroux. Annalisa Primi. Director of the OECD Development Centre. Gustavo Crespi (IDB). The team thanks the members for their valuable contributions: Gastón Acurio (CEO. María Urbano. Yunuen Millán. Francesca Castellani. Daniela Fina. Academic Director of INSEAD eLab and Roland Berger Professor of Business and Technology. The insights and support of the members of the InnovaLatino Advisory Board is gratefully acknowledged. These colleagues include: Mario Albornoz (RICYT). Laura Álfaro (Harvard Business School). Béatrice Melin. Peru). Carlos Henrique de Brito Cruz (FAPESP). as well as Alessandra Colecchia. Argentina). Brazil). Mexico). Jonathan Eaton (Pennsylvania State University). Meenakshi Bhutoria. Nallely Carro. Carlos Álvarez. Orlando Jiménez (Ministry of Economics of Chile). Mauriana Favilla. Christian Daude. Chile). Minister of Information Technology and Communications of the Government of Colombia. Mauricio Cárdenas (Brookings Institution). Rafael Oliva (BNDES. We would like to especially mention key contributions from Juan José Llisterri. Jorge Souto (INDEC). The two institutions would also like to thank Adrià Alsina. held in Buenos Aires in September 2009. the participation of Christos Mastoras and Juan José de la Torre from Booz & Co in the development of the MAAF framework in Chapter 3 is gratefully acknowledged. Michèle Girard. Special thanks to Hazel Hamelin for her support in editing the report. the contributions of Ángel Alonso Arroba. Magali Geney. Lino Barañao (Minister of Science. Telefónica). held in Paris in March 2009. Carol Cordeiro. Andrea Saltelli (European Commission). Beatriz Nofal (Agencia Nacional de Desarrollo de Inversiones. Thays Cunha. Astrid and Gastón. Marcelo Arguelles (Bio Sidus). the Ibero-American Secretariat (SEGIB). as well as Paula Anderson. Hugo Hollanders (UNU-MERIT).European Union Business Summit in Madrid in May 2010. Anna Pietikäinen. Carolina Hartley. Roxana Romero. Technology and Innovation of Argentina). and Andrew Wyckoff.

Javier Nadal. Francisco Blanco for his role in the inception of the project. Gilberto Marín Quintero (President. Juan José Gutiérrez (President. Mexico). Javier Santiso and Mercedes Temboury. SEGIB). OECD Development Centre). IDB) and Mario Pezzini (Director. . Andrónico Luksic (Director & Vicepresident. BNDES). Luis Alberto Moreno (President. Ignacio Cobisa. as well as Luís Abril. Clarisa Estol (Former President.eral. ECLAC). Pamela Cox (Vicepresident. Chile). Enrique Iglesias (Secretary General. Banco de Chile ADS. World Bank). Latin America and the Caribbean. Frank Brown (Dean. Pollo Campero. Arancha Dias-Llado. INSEAD). Luciano Coutinho (President. Finally. Guatemala). We would like to express our gratitude in particular to several colleagues from the Foundation and the Telefónica corporation: firstly. José de la Peña Aznar. Mabesa. we would like to thank the Telefónica Foundation for its generous financial support for this project. Luiz Fernando Furlan (Co-Chairman of the Board Brasil Foods SA). Argentina). Banco Hipotecario.

We provide some pointers on how to do this. INSEAD is one of the world’s leading and largest graduate business schools. supported by the Telefónica Foundation. Many speak of the beginning of a Latin American decade. Latin American countries and Latin American companies can become global leaders. On a global level. The region’s macroeconomic performance and resilience to the crisis prove that governments have the capacity to design and carry out responsive and sustainable policies. during which the region will grow steadily and address long-standing development challenges. This report has been produced jointly by INSEAD and the OECD Development Centre. These efforts now need to be continued and intensified. but rather as a platform for further debate -. Growth projections are encouraging. we hope. In this new context. bringing together people. cultures and ideas from around the world to change lives and transform organisations. how to best measure and monitor innovation and policies to promote it. to invest in human capital. Latin America must focus not only on catching up with its Northern neighbours but also on competing and collaborating with other emerging economies like China and India.Preface L atin America has emerged from the global financial crisis. and higher than those forecast for OECD economies. to promote further partnering and cluster policies for innovation. This report is not intended as the end of a project. poverty alleviation and the curbing of inequality. earlier and more vigourously than many other parts of the world. Governments should concentrate on exploring how to introduce innovation in natural-resource sectors. even as most research and development expenditure in the region is concentrated in the public sector. and. will promote more and better innovation in Latin America. Many countries in Latin America have already made large strides to tackle these challenges. Soumitra Dutta Academic Director of INSEAD eLab INSEAD Mario Pezzini Director OECD Development Centre . The OECD Development Centre helps policy makers in OECD and developing countries find innovative solutions to the global challenges of development. The region’s economies can make the leap and become global leaders by investing in innovation more inclusively and more systemically. finally. in order to reach the full development potential of innovation. Why focus on innovation in this context? A new scenario in innovation is emerging. to link innovation with green growth. This collaboration between a private and a public organisation has been conducive to a multi-dimensional assessment of the state of innovation in Latin America. Pro-innovation policies and financing need to be based on a comprehensive understanding of innovation.a debate that. taking into account Latin America’s specific characteristics. This report’s original firm-level indicators and data show that small and large firms in the region are innovating in this broader sense. Our conception of innovation can no longer be limited to the activities of laboratories and investment in research and development. and the elaboration of comprehensive policy options for the region’s governments for driving forward this important agenda. An improved fiscal space provides the region with a new window of opportunity for overcoming the eternal challenge of low productivity by engaging in more sustainable models of growth.

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The initial sampling framework was established by the Gallup Consultancy Group and Ipsos International implemented the survey across eight countries – Argentina. Peru. for example. Two hundred cases were randomly selected from a list for each country. Brazil. based on publicly available firm registries including credit bureaus. exports and foreign trade. The oversampling of larger firms was necessary to capture innovative activity. Colombia. allowing for uniformity of what is meant by “innovation” across different firms. On all of these counts Latin America fares badly in comparison with OECD countries. published by the OECD and European Union. . 1 For a complete description of the 2010 InnovaLatino Survey and its methodology. Individual chapters pose a series of questions that are fundamental to our understanding of economic development and the contribution of science. The disadvantage of this restriction is that services – a large but heterogeneous sector of the economy in all Latin American countries. not representative of the entire population of firms in the eight countries covered. innovation can enhance or undermine the survival rate of firms. Among Latin American economies. The objective was to gather up-to-date information on innovation activities among a large number of firms in the region. and Uruguay – via its respective country offices. industry chambers.or business model. Conventional measures of innovation activity include expenditure on research and development (R&D). These weights were constructed with reference to firm size and innovation-intensity of the firm’s sub-sector. while that of China has picked up sharply. ranging from hospitals and universities to informal street vendors – are not represented among the surveyed firms. 3 classification). marketing. The United States. and even social outcomes like better health. although it may reduce or widen earnings inequality among working people. As a result of the restriction to manufacturing and the emphasis on larger firms. which is highly concentrated in (though not entirely restricted to) larger firms according to survey evidence in many countries.1 The 2010 InnovaLatino Survey The 2010 InnovaLatino Survey was implemented under the supervision of the OECD Development Centre. please refer to the Box in the Executive Summary or Appendix 1 of Chapter 1: The 2010 InnovaLatino Survey. although the world share of each of these OECD members has been gently slipping in recent years. Costa Rica. as well as with emerging economies in Asia. provides a multi-dimensional overview of the state of innovation across Latin America and makes policy recommendations to government and business leaders in the region (and beyond) with the aim of promoting more and better innovation in the service of economic and social progress. the initial sample is. Innovation can improve wages for skilled workers. but both the level and growth of its world share remain tiny (Figure 1).Executive Summary This report by the InnovaLatino project. It is an inherently risky proposition – not all innovators succeed. by design. industry associations and phone directories. Innovation is important for development because it contributes to economic growth. As such the survey responses reported and analysed in this report will not always coincide those reported based on other surveys. and how is it different in Latin America? According to the widely-used Oslo Manual guidelines for measuring innovation. Similarly. Brazil leads in R&D. higher levels of productivity. production process. Chile. The survey targeted only firms in the manufacturing sector (comprising categories 15-37 of the ISIC Rev. the European Union and Japan dominate worldwide research and development (R&D). making the monitoring of trends in inequality and the supply of skilled workers of prime concern to policy makers. and post-stratification weights based on firm size and sector of activity were implemented to better reflect the population of firms in each country. including information regarding the impact of the 2008-2009 economic crisis upon firms’ innovation projects. The survey was implemented between November 2009 and January 2010 in all eight countries. patents and scientific publications. Mexico. a joint venture between the business school INSEAD and the OECD Development Centre. The scope and methodology of the survey differ from those of national innovation surveys implemented by national statistical agencies in many of these countries. technology and entrepreneurship to that process. What is innovation. innovation centres on firms and takes the form of the adoption of a new product. A random stratified sample was selected aiming at over-representing medium and large firms in terms of employment.

percentage) 32% 27% 23% 13% 9% 1. percentage) 116% 100% 80% 60% 37% 40% 20% 16% 14% 7% 6% 4% 11% 0% 3% India 9% China Russian South Africa 1997 Brazil 2007 .4% 1.8% 1. GLobAL InnovATIon TrenDS In oeCD reGIonS AnD SeLeCTeD eMerGInG eConoMIeS 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2% 1.InnovaLatino: Fostering Innovation in Latin America XIV Figure 1.4% 1996 1997 16% 37% Evolution of global share of total R&D (1996-2007.5% 2007 1998 1999 United States EU-27 2000 2001 2002 Japan China 2003 2004 2005 India Brazil 2006 120% Global share of triadic patent families (1997-2007.

Source: UNESCO Science Report 2010.3% 2% 0% 0. The data come mainly from the database Worldwide Patent Statistical Database (September 2009) of the european Patent office. R&D data includes 30 OECD and 79 non-OECD economies.1% 3.5% 15% 13% 10% 7% 5% 5% 3% 1. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 21% Change in global share of total R&D (1996-2007.6% 1.1% 25% 20% 18.1% 25. percentage) 91% 18% 21% 12% 21% 12% 13% 2% 3% China Russian 1996 India 2007 Brazil South Africa (2006) 30% Global share of scientific publications (1997-2007.4% EU-27 United States Japan 1997 China 2007 India Russian Brazil . Patent Database 2010 and Scopus Database 2009.Executive Summary XV note: Patent counts are based on the priority date.6% 2. percentage) 28% 25. the inventor’s country of residence and fractional counts.

and. most important. Mobile services can not only increase the access of citizens to government services such as tax filing and school registration but can also improve the flow of information between the government and its citizens and increase the engagement of society in general in governmental decisions. well above the global average of 58%. ensuring that these micro-level innovations add up to macro-level improvements in economic development. new may also mean “new to the national market” or “new to the innovating firm”. The key for policy makers and business leaders. Source: 2010 InnovaLatino Survey. While by definition an innovation must be “new”. and among small and medium enterprises. the interaction of public and private actors. Governments are turning to mobile applications to give lower-income groups access to public services. FIrMS InTroDuCInG ProDuCT InnovATIonS ThAT Are neW To The WorLD. The number of mobile subscribers reached 462 million in 2009. is how to encourage productive risk taking so that firms choose new-to-the-market and new-to-the-firm innovations that move their economies closer to the technological frontier (as broadly understood). A survey of more than 1. in which the boundaries between traditional banks and telecom operators have blurred (spurred in part by liberalisation and deregulation in financial and telecommunications markets). A case in point is m-financial services. .500 large manufacturing firms in Latin America carried out for this report suggests that “world’s first” innovations are a relatively small share of the total reported by firms (Figure 2). including competition among competing technical standards. almost five times the number of fixed lines. such as the adoption of a “world’s first” product elaborated in a laboratory and protected by patents. Mobile phones have increased the efficiency of business activities for actors in the informal economy. and above levels observed in other emerging markets in Africa or Asia. But these conventional measures do not tell the whole story. Since the liberalisation of telecommunications markets across Latin America in the 1990s. then. the national market or the firm. the arena has been marked by new operators. small business users save time on journeys around congested cities or between isolated rural communities.InnovaLatino: Fostering Innovation in Latin America XVI Figure 2. The future of mobile applications – and their potential to bring socio-economic benefits – depends upon a mix of technological and economic factors. the complicated web of socioeconomic consequences of these processes for development in Latin America. The case of mobile applications Mobile applications provide an informative window to look in greater depth at the interrelationship between technological progress and technological adoption. (AS A PerCenTAGe oF ProDuCT InnovATInG FIrMS In MAnuFACTurInG) 100% 80% 60% 40% 20% 0% 18% 49% 14% 54% 36% 9% 48% 15% 49% 23% 17% 40% 17% 43% 10% 36% 58% 33% Overall 32% Argentina 6% Brazil 58% 42% Mexico 43% Chile 36% 19% Firm 40% Peru 54% Uruguay Colombia Costa Rica National Global note: Percentage of manufacturing firms reporting product innovations to the world. In particular. representing a penetration of approximately 85%. The nATIonAL MArkeT or To The FIrM. Such mobile applications hold considerable promise in private markets as well. increased competition and high levels of subscription – particularly among mobile telephone users.

As countries pursue that educational goal. targeted support to micro. The country has also established a Fund for Innovation and Competitiveness that channels a portion of copper export revenues to foster investment in innovation. which in recent years has created an innovation incubator and venture capital vehicles to promote innovation. Brazil’s institutional innovations include the widely-praised activities of FINEP. Brazil’s Embraer. in spite of its rocky prospects during the global financial crisis. entrepreneurs. using its in-house engineering expertise to combine manufactured inputs from high-income economies. Such examples from relatively large and globally oriented firms have been matched by others from small and medium sized firms. In particular. Argentina has created a new Ministry of Science Technology and Productive Innovation. an aircraft manufacturer. decision makers must focus their energies on developing a new innovation policy agenda and move quickly to put it in place. This report presents some general strategic orientations that should be useful to many national governments in the region. suppliers and customers of firms. based on a handful of highly visible high-quality wines) that allow it to successfully position its wines in export markets around the world. A second group of actors in an innovation system are firms. (How the world has changed!) But these opportunities must be seized by governments and firms alike to put Latin American economies on a higher growth path. During the last decade. Innovation policy should recognise the diversity of firms in terms of size and sectoral specificities. has developed a “reverse outsourcing” model of product innovation. Prices of its commodity exports are once again headed upwards. 2. adopt. Finally.Executive Summary XVII What is happening in national innovation systems in Latin America? If Latin American firms are not innovating at the same rate as their counterparts elsewhere – whether we apply a broad or a narrow definition – there are nevertheless encouraging signs of positive change in many countries in the region. has pioneered a business model for the effective absorption of acquired firms that helped fuel Cemex’s global growth. small and medium-size enterprises . These opportunities will inevitably be accompanied by new challenges. Innovations of every kind can be found in the business domain and across different sectors of the economy. for example. However. the federal innovation financing agency. they will equip their economies to become better able to absorb. Businesses are the place where knowledge and ideas are translated into new products. employees. levels. What are the key components of an innovation policy agenda for Latin America? Latin America is poised before a window of opportunity. managers. As such. 1. Empowering people to innovate calls for more and better education for all. Similarly. Chilean winery Viña Concha y Toro has developed a marketing innovation (the so-called “silver bullet” strategy. Such changes can be seen in the policy-making apparatus and also in the activities of countless businesses. adapt and generate new ideas and technologies. Chile has created a National Council for Innovation and Competitiveness to ensure that ministries and departments co-ordinate their actions and take a suitably long-term view of innovation policy. services and business models. several countries have institutionalised good practices in ways that promise to create a better environment for innovation. Innovation in Latin America starts with people – researchers. and render them more capable of confronting the social deficits that still mark the region. a promising institutional innovation to promote more coherent policy making. not least the difficulty of innovating in a context of appreciating national currencies. and in many cases sub-national. On the policy-making side. and social entrepreneurs with non-profit objectives. and foster actions and instruments suited to the characteristics of the economy. Substantial sums of capital are flowing into the region as global investors increasingly see it as a safe haven compared to troubled economies in Europe and other traditionally desirable investment destinations. operationalising these means first moving to the particularities of the national. The Mexican cement multinational Cemex.

standards.and demand-side policies. In addition to coherence among ministries. innovation policy implies greater coherence between supply. The former typically include funding basic research or increasing levels of schooling. offer an important platform for boosting entrepreneurial activity in many countries of the region. As innovation is an inherently risky undertaking which requires long-term financial commitment. It requires investment and the provision of adequate regulatory frameworks. and tax measures. actors and policy domains. in particular. 7. pricing. Strengthening institutional and infrastructure capacities for scientific research and developing incentives to support the diffusion and application of scientific outcomes to production development are key elements of success in innovation policies. but also for the provision of basic public services like health and education to disadvantaged sectors of the population. . Successful innovation policy requires a long-term commitment from legitimate institutions with clear mandates. calling for improved means for designing and implementing coherent policies. 4. 3. 6. as well as coordinated action between ministries. consumer education. the latter include smart regulations. public policy must encourage adequate financing to enterprises. High-speed broadband connections. 5. Roughly one out of two workers in the region is part of the informal sector and in some countries a majority of middle-class householders work in the informal sector. Effective innovation policies cannot overlook this part of the economy. agencies and other levels of government. A tangible and intangible infrastructure for innovation is crucial.InnovaLatino: Fostering Innovation in Latin America XVIII is vital given their importance for employment generation and also because of their vulnerability to failure in their early years. 8. Policy measures to unleash and support entrepreneurial creativity in Latin America cannot ignore policies directed toward the informal sector.

Chapter 1 Innovation in Latin America .

By participating in the global debate on how to foster innovation for growth.1). It is organised as follows: • Chapter 1 provides a brief overview of what innovation means and why it is important not only to investors and business owners. but more generally for economic and social development. and the region’s policy makers recognise that enhancing innovation can help to close that gap.1). in its many dimensions. The objective of the InnovaLatino project (box 1. to celebrate Latin American innovation wherever it has emerged. Latin American Economic Outlook 2011. The InnovaLatino report discusses the features and challenges of innovation for the region and presents initial elements of an innovation policy agenda. The innovation performance of Latin America is placed in a global context. technology and innovation (Figure 1. Decision makers in Latin America face the same challenges as in many OECD economies – seeking to consolidate existing innovation processes. policy makers and business leaders are rethinking the paradigm for successful economic development and looking for new sources of growth. China has dramatically increased both expenditure and employment in R&D. marketing methods. and the policy measures that might help to close it.2 But to achieve sustainable growth and development at a rate sufficient to address social needs in the region. reflecting the urgency for Latin America to close the innovation gap relative to OECD countries and other emerging economies. successes and failures in policy and business practices can be identified and imitated. As the western world struggles to recover from the global financial crisis. India and South Africa are likewise increasing their presence in global science. In Latin America and the Caribbean. It is not alone: Brazil. including policies to promote more and better innovation. Brazil. innovation. By conventional measures – such as research and development (R&D) as a share of economic activity or the number of patents filed – Latin America suffers from an innova- 1 IDB (2010) exhaustively reviews the Latin American productivity gap.Chapter Innovation in Latin America 1 Innovation is imperative for firms to respond successfully to new opportunities and threats. Productivity has lagged in Latin America relative to OECD countries and other emerging economies. the Russian Federation. Latin America is both a protagonist in the expansion of global innovation and challenged by the emergence of new actors such as China and India. of which this is the first report. While the challenges for Latin America are specific to its context and history. structural changes in economic development strategies will be needed. a sign that they are strengthening their domestic capacity to innovate. is to contribute to and inform these debates. and for countries to enhance their development and social well-being. challenging decades of primacy of a small number of high-income OECD countries. new players are emerging in the innovation arena. See also the InnovaLatino background paper by Daude (2010). The report draws attention to the variety of innovations happening in the region and makes the case for moving innovation higher up the policy agenda. which focuses on the productivity-innovation link in Latin America. and business models – has risen to the top of the agenda for decision makers in government and business alike. China and South Africa have reduced the share of their patents involving international co-invention over the past decade.1 Innovative businesses will also be necessary to make future growth cleaner and more environmentally sustainable. and shaped by the heterogeneity that characterises production structures across and within its countries. supporting investment in innovative sectors (such as green technologies). Partly in response to the financial crisis that began in 2008. Most Latin American economies were surprisingly resilient to the global financial crisis. Moreover. and creating the conditions to bring more players into the innovation game. a resilience due in part to disciplined macro-economic policies and mitigating external factors. In their search. innovation – the adoption of new products. . production processes. there will be a rising need for institutions and policies that support and orient the transition to new growth models. the experiences of other countries can be relevant to the region. including China and India. 2 OECD (2010e). will loom large as a powerful promoter of sustainable and inclusive growth and development. and to encourage it where it has not.

The InnovALATIno ProjeCT InnovaLatino is a joint project between the OECD Development Centre and the business school INSEAD (led by its eLab). to provide recent data on their innovation strategies (further details are provided in the appendix to this chapter). the region has not only witnessed a dramatic uptake in mobile telephony but also the deployment of this innovative technology for socio-economic development. Within a decade. Innovation in Latin America 3 box 1. In April 2009. enhancing the viability of small enterprises. Even applying alternative indicators.1. supporting the growth of the telecom market and overall socio-economic development of Latin American markets. team members have participated in a large number of forums and conferences. Several countries have created new. iv) opportunities for future innovation linked to green growth. Moreover. supported by the Telefónica Foundation. An October 2009 workshop organised in co-operation with the IDB in Buenos Aires brought together policy makers from Argentina. and advocating greater policy attention to innovation in national development strategies. 2005a) – first published by the OECD and Eurostat in 1992 and currently in its third edition – defines innovation at the firm level as “the implementation of a new or significantly improved . the team hosted a workshop on innovation indicators in Paris. Since the project’s inception. and trends in innovation investment in response to the global context. things are on the move in Latin America’s innovation ecosystem.innovalatino.org) aims to provide country-level information and indicators of economic performance. iii) collaborative arrangements between public and private institutions in the development of innovative and technology transfer activities and the development of cluster policies. policy makers and experts are central to the project. New capabilities provided by mobile devices are creating opportunities for improving the lives of the lower socio-economic segments of society. 1. presenting project results. The next chapter focuses on innovation in a sector where Latin America has emerged as a global leader – mobile telecommunications. more coherent institutions for encouraging innovation and have implemented new policies on innovation. ii) the education system and other institutions linked to the development of skilled human resources. communicating the message of celebrating innovation. the project designed and sponsored a survey of 1. In preparation for this report. both in the sense of drawing attention to and learning lessons from innovation experiments underway in the region. and a host of think-tanks and research institutions from OECD and Latin American countries. To this end. statistics suggest that Latin American governments and businesses have much work to do.1 Defining Innovation: What is Innovation? Who Innovates? The Oslo Manual (OECD/Eurostat. Chile. • • • tion gap. Intense dialogue and consultation with key stakeholders. Accompanying the publication of this first project report is a series of more technical background papers by members of the project team. v) appropriate measures for monitoring and evaluating progress in innovation. The objective of the project is to research innovation dynamics in the business sector in Latin America. the Inter-American Development Bank (IDB). with participants from the Ibero-American Network of Science and Technology (RICYT). A project website (www. Uruguay and renowned international experts on innovation and development. Brazil. combining economic and statistical analysis with case studies of different innovators. will provide useful input to that collective effort. The final chapter focuses on five dimensions of a new innovation agenda for Latin America: i) structural challenges for innovation in a natural resource-abundant economy. as well as case studies of innovative firms. the changing face of innovation means that developing countries are no longer simply trying to catch up with high-income economies. Despite lagging behind. This report. it is hoped. the project team has undertaken original research. the UN Economic Commission for Latin America and the Caribbean (ECLAC).500 relatively large manufacturing firms in eight countries of the region. Businesses both private and public are also demonstrating that innovation is happening in Latin America (covered in Chapter 2). but also competing with dynamic emerging economies in some sectors. and staging a special panel on ‘Innovation in Latin America’ during the Business Summit of the EU-LAC Summit in Madrid in May 2010.1. the European Commission.

5% 2007 1998 1999 United States EU-27 2000 2001 2002 Japan China 2003 2004 2005 India Brazil 2006 120% Global share of triadic patent families (1997-2007.1.8% 1. GLobAL InnovATIon TrenDS In oeCD reGIonS AnD SeLeCTeD eMerGInG eConoMIeS 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2% 1.4% 1996 1997 16% 37% Evolution of global share of total R&D (1996-2007.InnovaLatino: Fostering Innovation in Latin America 4 Figure 1.4% 1. percentage) 116% 100% 80% 60% 37% 40% 20% 16% 14% 7% 6% 4% 11% 0% 3% India 9% China Russian South Africa 1997 Brazil 2007 . percentage) 32% 27% 23% 13% 9% 1.

1% 3.1% 25. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 21% Change in global share of total R&D (1996-2007. Innovation in Latin America 5 note: Patent counts are based on the priority date.6% 2. Source: UNESCO Science Report 2010.5% 15% 13% 10% 7% 5% 5% 3% 1.1% 25% 20% 18. The data come mainly from the database Worldwide Patent Statistical Database (September 2009) of the european Patent office. percentage) 91% 18% 21% 12% 21% 12% 13% 2% 3% China Russian 1996 India 2007 Brazil South Africa (2006) 30% Global share of scientific publications (1997-2007.6% 1.3% 2% 0% 0.4% EU-27 United States Japan 1997 China 2007 India Russian Brazil . percentage) 28% 25. the inventor’s country of residence and fractional counts. Patent Database 2010 and Scopus Database 2009.1. R&D data includes 30 OECD and 79 non-OECD economies.

This international firm employs 15. have become a globally successful brand.4 The VASIMR is an electro-magnetic thruster for spacecraft propulsion that may one day be used for space transport. The brand has gone from 44 different models in 1993 to over 6. Peru and El Salvador. workplace organisation or external relations”. Far from being limited to products generated by laboratory research. There are thus four types of innovation. Cinépolis entered India.6 Cinépolis is a good example of business model innovation because the firm has successfully adapted the traditional movie theatre venue into a space where all kinds of entertainment can be enjoyed collectively. box 1. . This definition focuses on innovation as an economic phenomenon which has impacts on the performance of businesses and of the economy as a whole. 6 Casanova (2009). Chang Díaz has founded a company (Ad Astra). in the context of developing economies. During its first 30 years. making it the fourth movie distributor in the world and the largest film distributor and theatre chain in Latin America. Alpargatas repositioned the brand from the low end of the market to the high end. Panama. thanks to the firm’s marketing innovation. produced by Brazilian footwear and textile company Alpargatas. Going against all expectations and common practice. a new marketing method. 3 In Latin America. one of the biggest film markets in the world. In June 2010. Although Brazil had its own supply of excellent engineers in aeronautics. Brazil and Chile follow the Oslo Manual in their definition of innovation at the firm level. or a new organisational method in business practices. investing in advertising and exports to make Havaianas high-end footwear among consumers in Europe and the United States. Guatemala. the company initially did not have the resources to invest in the production of planes. which includes some nuances in the methodology designed to capture the characteristics of innovative processes in the region better. while countries like Argentina and Uruguay follow the Bogotá Manual. This was its main competitive advantage when entering India. Colombia. After opening its first cinema in Mexico in 1993. or process. This report will accordingly consider the social dimension of innovation. the firm’s management radically changed its strategy. in box 1. Cinépolis today owns 2. 4 See Chang-Díaz (2000). this model of risk sharing has become a globally accepted “standard” for the aeronautical industry at large. The Variable Specific Impulse Magnetoplasma Rocket (VASIMR). Cinépolis introduced the concept of multiplexes with modern equipment that include stadium-sized cinemas equipped with a digital sound systems and enormous screens. 5 Casanova (2009).2. While this economic sense of innovation is emphasised in this report. to the market. Cinépolis reached an agreement with FIFA for exclusive rights to broadcast the football World Cup matches in its cinemas with digital quality. In Latin America. a new process. As shown by innovation surveys in the region. united by the notion of novelty: a new good.190 people and has a presence in Mexico. the potential of innovation to address wider social challenges is equally important.2 provides a Latin American example of each type of innovation.3 4 5 6 There are three ways in which an innovation can satisfy the “novelty” condition central to its definition: innovations can be new to the firm. or to the world. to develop the VASIMR and other advances in rocket propulsion technology. The Brazilian plane maker Embraer has built its success on an innovative manufacturing process and organisation in which it shares risks with and outsources production to partners in developed economies. a new way of selling something or organising the workplace. developed by Costa Rican astronaut and physicist Franklin Chang Díaz is a textbook example of product innovation that is new to the world. the range of activities embraced by these four types of innovation is remarkably broad. During the 1990s. Costa Rica. LATIn AMerICAn exAMPLeS oF DIFFerenT TyPeS oF InnovATIonS These examples of innovation in Latin America illustrate the various categories of the concept. Havaianas were considered a cheap sandal for low-income consumers in Brazil. In 2010. and plans to enter the Chilean and Argentinian markets next. based in the United States and Costa Rica. Hence out of necessity it had to innovate and share risks and returns with partners from developed economies who designed parts of the plane for Embraer in return for a share of the returns generated from the sales.000 today. and demonstrate the range of innovations taking place in the region.320 screens worldwide.InnovaLatino: Fostering Innovation in Latin America 6 product (good or service). Today.5 Havaianas flip-flops.

capturing a portion of the value created by an activity).e.4). Taken together these help define different types of innovators (box 1.2. yielding six varieties of innovators (Figure 1. 7 Consistent with the methodology of country-surveys. at the end of this chapter. healthcare for the poor. the number of full-time equivalents (FTEs) in the organisation). where the government has actively shaped an environment that supports customers and users as innovators (box 1. for more on the methodology for the InnovaLatino Survey. . The second dimension distinguishes between organisations driven primarily by maximising profits and those driven by maximising social benefits. Source: 2010 InnovaLatino Survey. Words such as “hybrid” and “blended” are often used in the definition of social entrepreneurship. Innovation in Latin America 7 Latin America the majority of innovations carried out by firms are new to the firm or to the domestic market. particularly among marginalized groups. While the proportion differs across countries. Social innovation can be defined as initiatives where social improvements are the primary objective and generating profit is a secondary concern.g. for example. the share of firms introducing “world’s first” products is less than 35% for all cases. engaging in activities that increase the utility of society’s members after accounting for the resources used in those activities) rather than value appropriation from an activity (i. It also influences the kinds of resources it has access to for innovating. Figura 1.e.3). Please see Appendix 1. More specifically. four out of five businesses that introduced a new product define it as an innovation for the national market or firm. The first dimension is by size of the organisation (e.. Therefore. The nATIonAL MArkeT or To The FIrM. but not for the world market (Figure 1. the national market or the firm. these results should be interpreted in conjunction with other evidence to draw cross-country conclusions.3). such as poverty reduction. Social entrepreneurs are an important driver of social development in the way they enhance empowerment. Size both enables and constrains how effectively and efficiently an organisation engages in innovation activities. Innovators can be differentiated along two dimensions. Statistics from the 2010 InnovaLatino Survey confirm that most innovations in Latin America are not new to the world. These distinctions are significant because they represent different approaches to innovation and consequently underscore a challenge for those intent on fostering innovation: policy makers should specify what kind of innovator they seek to support with a particular policy tool. Nonprofits generating earned income can be a source of controversy.7 In addition to different types of innovations. the answers are based on the opinions of participants. FIrMS InTroDuCInG ProDuCT InnovATIonS ThAT Are neW To The WorLD. and improved literacy. 8 See the work of INSEAD professor Filipe Santos (2009). others also have a commercial objective.. depending on the size of the organisation and the primary type of benefit sought. there are different types of innovators.8 Understanding the benefits that an innovator seeks enables analysts to assess more accurately what critical success factors correlate with different outputs. Some social entrepreneurial initiatives are purely charitable. Social entrepreneurs pursue their social objectives drawing on a variety of funding models that range from fully reliant on philanthropy and government subsidies to fully commercial. Santos (2009) argues that social entrepreneurs are predominantly focused on value creation from an activity (i.1. social justice. (AS A PerCenTAGe oF ProDuCT InnovATInG FIrMS In MAnuFACTurInG) 100% 80% 60% 40% 20% 0% 18% 49% 14% 54% 36% 9% 48% 15% 49% 23% 17% 40% 17% 43% 10% 36% 58% 33% Overall 32% Argentina 6% Brazil 58% 42% Mexico 43% Chile 36% 19% Firm 40% Peru 54% Uruguay Colombia Costa Rica National Global note: Percentage of manufacturing firms reporting product innovations to the world.2). Brazil offers a relevant example. Customers and users alike can be innovators. In the category of product innovation.

PerCenTAGe oF MAnuFACTurInG FIrMS ThAT APPLIeD For InTeLLeCTuAL ProPerTy rIGhTS ProTeCTIon 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 78% 70% 50% 42% 77% 79% 85% 75% 74% 62% 46% 33% 48% 47% 36% 56% Argentina Brazil Chile Colombia Large Costa Rica Small Mexico Peru Uruguay note: Small firms are those with 50 or fewer employees. Figure 1.InnovaLatino: Fostering Innovation in Latin America 8 Figure 1. Global Latinas) Corporate social responsibility Public institutions Organization size Small to medium (10-50) SMEs and entrepreneurs Social entrepreneurs Individual Profits for owners Customers & users Social benefits Primary type of benefit sought Source: Authors.g. Source: 2010 InnovaLatino Survey.3. . SIx DIFFerenT InnovATorS bASeD on TWo DIMenSIonS Large (> 50) Large firms (e.4. large firms are the remainder.

5. Source: 2010 InnovaLatino Survey. public R&D and foreign R&D all have positive and significant effects on productivity growth. Government and university-led research has a positive and significant effect on productivity.2 Why Innovation Matters for Development Does innovation contribute to both general economic performance and social welfare? The question is worth asking. exports. Khan and Luintel. its impact increases over time and is higher in countries with R&D intensity. Econometric analysis of OECD countries during the 1980s and 1990s finds that the level of R&D intensity has a significant effect on growth in real per capita GDP. In particular. at least in the short to medium 9 See Grossman and Helpman (1991) and Aghion and Howitt (1998) for a detailed discussion on the role of innovation for growth. suggesting the presence of increasing returns. including growth. as predicated by economic theory and confirmed by statistical analysis. Economic Growth. and health and well-being. Beyond investments in physical and human capital. Similar evidence exists for process innovations and firm productivity. productivity. Box 1. Results of the OECD Microdata Project find that most successful product innovators are also more productive (OECD. 2010d).3 in OECD (2010d) provides an overview on the relationship between innovation and growth. This section briefly reviews the evidence that innovation (according to a variety of measures) makes an important contribution on a number of dimensions. Cross-country studies find a positive correlation between aggregate R&D expenditures and GDP growth. PerCenTAGe oF MAnuFACTurInG FIrMS WITh ACCeSS To ForeIGn MAChInery 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15% Argentina 14% Brazil Chile Colombia Large note: Small firms are those with 50 or fewer employees. 76% 79% 69% 86% 82% 72% 51% 37% 23% 86% 33% 34% 43% 27% Costa Rica Small Mexico Peru Uruguay 1. if a firm that introduces a new product incurs significant adjustment costs these might depress productivity. Moreover. for instance. particularly for middle-income economies like those in Latin America. However. Innovation in Latin America 9 Figure 1. business R&D had a positive and significant impact on total factor productivity (TFP). Moreover. innovation investments are critical for long-term economic growth. Innovation has had mixed effects on firm productivity. 2006). Economies with higher rates of R&D investment have higher growth rates. as does the stock of human capital (OECD 2003. firm survival. there may be circumstances where positive effects will not be immediate. and that stocks of domestic business R&D. there should be a strong case that such innovations confer economic and social benefits (beyond private returns to innovators) on citizens in general and the least favoured members of society in particular. where vast development deficits exist.1.9 Firm Productivity and Exporting Activities of Firms. . wage inequality. if governments are called upon to foster innovation using public resources. employment. large firms are the remainder.

Guerra Creativa uses this process to design logos. the first in the sector to receive it following its 2006 prize for “Leadership and Innovation in the business model applied to the Agricultural Sector”. former President of the World Bank and the Wolfensohn Institute. Paraguay and Uruguay. by Arturo Franco. the company has grown into one of the largest grain producers and agricultural service providers in the world .org received financial support from companies like Axtel. CDI is in the process of expanding to the Middle East and North Africa (MENA) region. whose initial intention was to use the internet to more efficiently link employees from corporations looking for volunteer opportunities with the organisations offering them.InnovaLatino: Fostering Innovation in Latin America 10 box 1. When CDI mobilised five internal working groups from different disciplines to innovate new solutions for efficient growth. new services with business plans. awards scholarships to doctoral students. Los Grobo’s innovative business model consists of an information-technology facilitated network of 3.org provides people looking to volunteer a place on the web where they can search and compare various NGOs. Causas. Public Institutions: Public institutions are also significant innovators. when Adolfo Grobocopatel founded Los Grobo. At the same time. Time magazine named Baggio one of “50 Latin American Leaders of the New Millennium”. a former Intel executive. founded the Centre for Digital Inclusion (CDI) based on the concept of helping people to help themselves. Corporate Social responsibility: Causas. and most importantly. with step-by-step instructions for different techniques and advice from their interactive creative director. Currently.yet it owns no land. Gustavo Grobocopatel. and 203 companies have received funding for scientific innovation activities. Since 2006. 100 people provide inputs such as seeds. With a USD200 million budget. it has developed into a comprehensive online directory of Mexican civil society.000 designs and a total membership of 6. 21 days). in 2000 it became the first grain producer in the world certified as ISO 9001 compliant.726 educators and 600. Guerra Creativa also enables designers to interact and learn from each other. is a public entity that promotes science.. websites. Brazil. and Scotiabank.org has verified.650 NGOs. to be followed by India and other parts of Africa. Causas. If a client wants a new logo or webpage. Social entrepreneurs: In 1995. registered and classified over 9. FIve DIFFerenT TyPeS oF InnovATorS In LATIn AMerICA Large Firms: Since 1984. finance. revised performance indicators.000 social action opportunities for their employees. social action. Colciencias funds research in universities and companies. but many. A section of the site allows users to get exclusive tutorials. The entity is focused on creating an attractive research environment for scientists in Colombia and has been active in establishing collaboration with research institutions in Europe and the United States. as well as blog. With the support of James Wolfensohn.. Adolfo’s son and now president of Los Grobo. “Leadership in innovative organisational models applied to agriculture” by Fundece. no tractors. a new monitoring process. founded in 1995. new courses. At its headquarters.org Corporate Volunteering Programme that generated more than 3. Causas. CDI Community Centres have three principal objectives: they are self-managed. there are CDI franchises in 753 schools in Brazil and 100 abroad with 1.g. Coca-Cola Femsa.3. explains: “We are not big. students will have used technology as the main tool to initiate. Vidal Cantu and Adolfo Franco. Cinepolis. Small and medium size firms: Guerra Creativa provides design services by leveraging crowd sourcing in ways not previously seen in concept-to-design processes. This unique approach requires that by the end of each four-month course. 1. plan.000 clients.org was one of the winners of the National Solidarity and Volunteering Awards given by the government of Mexico. then will enable the client to evaluate entries (often over 100). Los Grobo provides logistical and grain storage services to farmers. post videos and photographs.org gives each civil organisation in Mexico a free domain and hosts a simple website where an NGO can communicate its mission and vision. and the deployment of technologies such as GPS and agricultural simulation models to help the network of farmers manage soil resources and deal with climate risk. and they implement the CDI pedagogy. Colciencias in Colombia. it has received the “Solidarity entrepreneur award” given by Ecumenical & Social Forum. self-sustainable. and first place in a CSR Survey organised by the magazine Valor Sostenible.161 research groups have received funding from the programme.. Source: INSEAD (2010). 1. stationery. which is more than twice the average salary of a teacher in the public school system). Causas. Guerra Creativa will host a design contest for a fixed period (e. Rodrigo Baggio. Los Grobo received the Argentine National Prize for Quality in 2010. nor harvesters. It was featured in the “Best Sustainability Report” developed by the Global Reporting Initiative. In the first stage of the programme. to select a winner.036 volunteers. Currently. Causas. technical advice. technical development centres. hosts exhibitions of their work online and provides feedback on the designs of others. 22 technological development centres have been created. and an online platform for communication and collaboration.” Los Grobo has received significant global recognition.400 designers who have already uploaded more than 11. solicit volunteers.800 small and medium agricultural suppliers. A number of Latin American governments have launched public programmes to tackle poverty in innovative and effective ways. implement and complete a “social advocacy project” aimed at changing an aspect of their lives. 1. the community includes 3. and produces soy. technology and innovation activities. and helps set up regional information technology projects.000 people from low-income communities have been certified. corn and wheat on a total of 300.045 doctoral students have received scholarships. most of them co-funded by the firms. These companies also participated in Causas. Participating NGOs can also administer their own websites. the result was the creation of a new multimedia learning environment. In 2009. Consequently.org is an NGO created in 2005.000 hectares in Argentina. sale and marketing of crops. . CDI provides the teachers with training on the use of computers and pays them higher-than-average salaries (USD200 per month. flash or 3D designs.

2001). There is also evidence that product innovation specifically may weaken or even reverse TFP growth (Parisi et al. that an innovation originates from a producer who then supplies it to consumers via goods and services that are for sale (Baldwin and von Hippel. economists. Eric von Hippel and colleagues (Baldwin and von Hippel 2009. It has cited several reasons for promoting the use and development of free open-source software: the costs of use are significantly less than commercially developed alternatives and thus it is more accessible to a broader segment of the population. Source: INSEAD (2010). it must not restrict anyone from making use of the programme in a specific field of endeavour.. This type of innovator is becoming more prevalent as developments in Information and Communication Technologies (ICTs) enable customers and users to increasingly draw on ICTs as platforms for engaging in collaborative activities that were previously too costly to practice and coordinate. However. The government estimated that the cost of the PCs. . and thanks to the 1 to 10 model. suppliers or competitors could conceivably enjoy productivity gains as a result of positive spillovers from the innovating firm. and communication). 2009).000 Linux-based virtualised desktops in each of the country’s 5. Latin American economists. discarded old computers can be reused by replacing their out-of-date operating systems with open-source operating systems. At the time. such as stating preference for opensource software and mandating its use in a programme that helps subsidise financing for low-cost personal computers. policy makers. this was the largest such deployment in the world. and “provider-developed” if the developer expects to benefit from sales.. such as its licence must allow for free redistribution. But even if the innovating firm suffers in terms of productivity for a time. business and government agencies – from the national. are collaborations between key external partners (or. from the perspective of a producer. access to the source code. and business managers of large firms assumed that innovation followed a producer-developed mode – i.1. Since 2003. Innovation in Latin America 11 box 1. accelerating its use by universities. CuSToMerS AnD uSerS AS InnovATorS In brAzIL Customers and users are individuals and groups who engage in activities that create new value for themselves and for fellow users. (2008).” (2009: 2) For several years.. von Hippel 2005) provides a complementary approach to framing user-based innovation: Innovation users are individuals or firms that expect benefit from using an innovation. term. innovations by customers and users are increasingly a viable and attractive alternative to producer-developed innovations. After Baldwin and von Hippel modelled different modes of innovation based on a variety of costs (design. The government has promoted the use of open-source by a series of policy initiatives. policy makers. A popular genre of user-generated innovations is open-source software – software that is developed by users (who often happen to be professional software developers) and meets a specific set of criteria. A significantly negative impact of technological adjustments on TFP was found in a study of Colombian plants (Hugget and Ospina. An innovation is “user-developed” if the developer expects to benefit from its use. Harrison et al.. about USD9 million in energy costs annually. 2006) likewise shows a positive impact of innovation on productivity. would be less than USD50 per seat and that Brazil would save roughly USD47 million in up-front costs with this switch. when Sergio Amadeu was appointed by President Silva to head Brazil’s National Institute of Information Technology. (2007)). the licence must not discriminate against any person or group.10 In high-income countries there 10 A study of Argentinian firms (Chudnovsky et al. with the PC sharing hardware and software. they concluded that: “Innovation by individual users and also open collaborative innovation are modes of innovating that increasingly compete with and may displace producer innovation in many parts of the economy. customers and users) (Chesbrough 2003). collaborations between a producer and key partners. In February 2009. This is most evident in Brazil. firms have developed ways to profit (not necessarily directly) from these types of collaborative efforts. and Hall et al. (2006). 2009).560 municipalities. its customers. such as innovation by customers and users. and the software must be software independent and technology-neutral (Open Source Initiative. This may explain why positive productivity effects are not always found..e. and it gives people more software options to choose from. to state. architectures. Brazil’s Ministry of Education announced it would be supplying 356. “Open innovation systems”. Traditionally. while innovation providers are firms or individuals that expect to benefit from selling a product or service based on one or more innovations. customers and users) that emphasise the value of integrating knowledge from outside of the producer firm (i. typically drawing on and adapting existing products or services.4. Oliveira and von Hippel 2009. modifications and derived works. for example. it provides opportunities for more people to develop valuable ICT-related skills.e. In addition. the Brazilian government has promoted the adoption of open source software. and business managers have expanded from traditional approaches to innovation to include and foster alternative modes. from key partners. to regional level.

. (2008) find pro-employment effects of innovation in OECD countries. This may be because process innovations can in some circumstances turn out to be labour-replacing without off-setting increases in labour demand from increased production. 15 Bustos (2009) shows for Argentina. Brouwer et al. 16 Esteve Perez et al. however. see e.g. Are innovating firms more susceptible to failure. since R&D activities are generally related to technologically-intensive innovations and few firms in developing countries are engaged in such activities. Chile and Mexico. suggesting moreover that dynamic firms have greater export opportunities. In OECD countries.11 It is likely that exporting activities can both be both outcomes and enablers of innovation activities. Also. Lopez (2004) and Alvarez and Lopez (2005) provide evidence of productivity changes prior to exporting activities. Innovation is an inherently risky activity. This is particularly likely to occur if innovations successfully expand firms’ markets. Significant evidence demonstrates that good firm performance leads to export activities. thereby increasing demand for workers. An important explanatory factor is that exporting involves substantial costs that have to be recovered and only those firms with significant profit potentials will do so (Clerides et al. for example. 1998). partly driven by technological upgrading (often as a result of openness to foreign trade). about two-thirds of firms in the 2010 InnovaLatino Survey. Roper and Love (2002) for the United Kingdom and Germany. Fajnzylber and Fernandes (2009) look at skills demand and technology adoption from abroad and find evidence of a positive relationship in the case of Brazil. innovations may increase demand for skilled workers at the expense of unskilled workers. Or more generally. innovation is still potentially a net creator of jobs: if the effect of the change is to reduce the firm’s costs. where society is marked by high levels of income inequality. For instance. including both large and small firms. For studies that find no relationship. 12 Holmes and Schmitz (2001) model the possibility that innovation incentives rise as export markets expand. hold for all periods systematically across all countries. This evidence does not. For process innovations. 13 Vivarelli and Pianta (2000). (2004) and Hall (1987) find a positive impact for R&D activities on firm survival. Firm survival. Greenan and Guellec (2000).13 Some types of innovation. and Klette and Forre (1998). (even if the most successful are outstanding performers) or more likely to endure? The answer to this question has major implications for the social effects of innovation. Verhoogen (2008) finds similar evidence of an even stronger innovation-related measure – product quality upgrading – on skills upgrading.16 However. Innovation impacts on well-being by creating demand for new and possibly better paid jobs. that evidence only speaks to a small part of innovation in Latin America and other developing countries.14 On average. the evidence is less consistent.g. or a negative one. Just as technologies generate different levels of demand for skilled and unskilled workers. Cefis and Marsili (2006) find a positive effect for innovation on firm survival but their study relies on subjective measures of innovation for a cross-section of firms. Similarly. found that innovation led to both job creation and job saving (Figure 1. Basile (2001) for Italy. however. (1993). with resulting impacts on wage inequality in Mexico over the 1990s. Baldwin and Gu (2004) find for a set of Canadian firms that exporters tend to be more innovative before and after export market entry. after new machinery has been introduced. changes in the skills composition of the labour force could reverse such trends. researchers will tend to underestimate the offsetting job creation effects. The varying effects of innovation on employment growth can account for the mixed evidence from statistical studies of the subject. in that case. during the period 1992-6. have seen greater wage inequality over recent decades. innovating firms are less likely to drop out of the market 11 See e. But it is equally possible that findings are affected by data limitations. may be labour-replacing.15 In the long run.InnovaLatino: Fostering Innovation in Latin America 12 is a positive association between export intensity and innovation. however. for their sectoral level analysis. But even in such a case. Van Reenen (1997).6). that increases in wage inequality are due to trade-induced technology adoption that demands skills upgrading. suggesting that innovation is a key ingredient for benefitting from trade. 14 Most (but not all) studies find a positive effect of product innovation on employment. as increases in labour demand spurred by innovations may only arise in future time periods. and thus the price of the good it sells. at least in Chile’s case. Wage inequality.. then demand for the product will rise. Esquivel and Rodríguez-López (2003) and Gallego (2006) likewise find suggestive evidence that technological change contributed to wage inequality in Mexico over 1994–2000 and in Chile in the 1980s. whereas labour replacements of technologies will arise at the same time as new machinery is introduced. and Harrison et al. Pavcnik (2003) finds no evidence of a relationship between technology adoption and skills upgrading for the case of Chilean manufacturing firm employees. Greenan and Guellec (1997). by contrast. the primary direction of causation is controversial.12 Employment. an innovation may change the dynamics of the labour market. In Latin America. In Chile. (2007) provide econometric evidence based on information on productivity and R&D. Aw et al. creating a demand for new types of jobs. this could be particularly harmful. Plant shutdowns lead to unemployment and a host of other negative impacts. whereby wages for skilled workers have risen relative to their less skilled counterparts. R&D investment has an impact on the survival rate of innovating firms that is positive overall.

Germany. 17 Fernandes and Paunov (2009) find that for Chilean firms. countries that had lower levels of life expectancy in 1960 have seen more rapid improvements on that measure. Indeed. given that the probability of exiting the market for all firms in the sample is 10 per cent overall. The diffusion and adoption of innovations in health care occurs through channels largely outside of private markets. For example.18 and health investments are larger (in absolute and relative terms) in developed countries.7). and the U. industry and technology. Cautious innovation mimics the risk-minimising diversification principles from the finance literature. for OECD countries this average is more than six times Latin America’s (around 2100 US dollars). the U. whereas more risky innovations do not enhance firm survival. Innovation clearly impacts on social well-being and quality of life.1. While this report focuses primarily on firms. markets and regions. according to OECD figures. and Latin American and Caribbean countries have been part of the process (Figure 1. The application of ICTs in the delivery of public health services provides another example of the relationship between innovation (as embodied in ICTs) and health outcomes (see Chapter 3). when they adopt cautious innovations.17 Health. the probability that innovators exit the market is one percentage point lower than for non-innovating firms. new projects that are relatively small relative to their overall volume of sales. the benefits of innovation extend beyond actors and institutions directly involved in innovation activities. Exploring the role that risk may play for the relationship between innovation and survival. as of 2002 almost 85 per cent of the OECD’s R&D expenditure in the pharmaceutical sector was concentrated in just five countries (France. for example.S.). that is.6.html . Brazil.K. Japan. Latin American countries are converging with richer countries in terms of life expectancy much more rapidly than their productivity performance might suggest.who. Data are available at: http://www. 18 For example. most R&D in the area of medical research and equipment is done in a small number of countries. PerCenTAGe oF MAnuFACTurInG FIrMS rePorTInG InnovATIon LeD To job CreATIon AnD job SAvInGS 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Argentina 41% 30% 78% 80% 57%56% 63% 59% 69% 67% 75% 77% 62% 54% 43% 38% Brazil Chile Colombia Costa Rica Job savings Mexico Peru Uruguay Job creation note: Small firms are those with 50 or fewer employees. Innovation in Latin America 13 Figure 1. 19 According to World Health Organization’s statistics while the average per capita public health expenditure in Latin America and the Caribbean is around 320 US dollars (in PPP terms). large firms are the remainder.19 pointing to the importance of technological progress and knowledge as a major driver of the reduction in mortality rates around the world. in which public policy plays an important role. a large effect in practical terms. they find that only cautious product innovation has a significant positive effect on survival. has developed an extensive capacity in the biopharmaceutical industry thanks to a strong public commitment to R&D and a well-articulated policy mix on health. new innovations will only be introduced on a small scale relative to the overall production. Source: 2010 InnovaLatino Survey.int/whosis/en/index.

6 3.1 Lesotho Suazilandia Zimbabwe –0.InnovaLatino: Fostering Innovation in Latin America 14 Figure 1.which is measured on the vertical axis -.7 China 0.over the subsequent 47 years.1 4.9 4 4.7 3.3 4. logs) 3.2 0.7.5 Guinea Vietnam Saudi Arabia Nepal Bangladesh 0.5 3. based on World Bank.3 0.1960 0 Ukraine Zambia –0.4 note: The figures show trends in life expectancy for a panel of 170 countries over the period 1960-2007.8 Life Expectancy (1960.6 The Gambia Oman Bhutan Indonesia 0. the downward slope of the best-fit line in this figure indicates that countries with lower initial levels of life expectancy (in 1960) enjoyed a larger increase in life expectancy -. CATChInG uP In LIFe exPeCTAnCy 1960-2007 0. World Development Indicators.4 3. “beta convergence” is said to occur if the countries with lower initial levels of life expectancy improve more quickly over time. Latin American and Caribbean countries are shown in red.4 0.2 4.8 0. Source: Daude (2010).1 Libia Egypt Maldivas Jordania Algeria Senegal Bolivia Guatemala Morocco India HondurasNicaragua Papua New Guinea Siria Eritrea Madagascar Comoros Vanuatu Mali United Arab Emirates Mauritania Peru Burkina Faso Sudan Laos Tunisia Iran Republic of the Korea Samoa Djibouti Niger Mongolia El Salvador Qatar Haiti Gabon Equatorial Guinea Afghanistan Cambodia Turkey Ecuador Ethiopia Dominican Republic Pakistan Togo Chile Cape Verde MalaysiaBahrain Macau Benin Guinea-Bissau Philippines Mexico Kuwait Sierra Leone Somalia São Tomé and Príncipe Ghana Colombia Costa Rica Brazil Solomon Islands Thailand Panama Singapore Angola Malawi Brunei Venezuela Belize Hong Kong Fiji Mauritius Albania Portugal Cuba Japan Luxembourg Bosnia and Herzegovina Chad Tonga Macedonia Germany Micronesia Lebanon Barbados Greece Belgium Republic of the Congo Cameroon Nigeria Canada Iraq Mozambique Tajikistan Guyana Sri Lanka Argentina France Finland Suriname Spain Australia Israel Burundi Uganda The Bahamas Croatia Ireland Puerto Rico Slovenia New Zealand Netherlands Antilles Kenya Central African Republic Paraguay Poland Malta United Kingdom Tanzania Uzbekistan Democratic Republic of the Congo Turkmenistan Jamaica SwedenUnited States Uruguay Italy Switzerland Liberia Moldova Romania Namibia Grenada Armenia Austria Netherlands Cyprus Georgia Norway Côte d'Ivoire Rwanda Hungary Denmark Trinidad and Tobago Estonia Czech Republic Bulgaria Belarus Azerbaijan Latvia South Africa Lithuania Botswana Log difference Life Expectancy 2007 . Thus. .2 3.

and that it may increase firms’ capacities to adapt new technologies more generally. Latin American economies are well below the OECD average.09% 0. mining and petroleum extraction – account for a larger share of GDP in Latin America than in OECD countries. OECD Statistics.67% 0. At the same time.0% 3.15% 0.) Figure 1.33% 1. World Bank. There is nevertheless a wide diversity within OECD economies.58% 1. World Development Indicators. and therefore aggregate R&D investment rates in Latin America could be expected to be lower.35% 2. Note that R&D is necessary for certain kinds of product innovations.05% 0. finding that when this correction is made only part of the R&D gap disappears.02% 2.38% 0. .37% 3. it must be highlighted that Latin America is a heterogeneous region. except Mexico and Greece (2007). Source: Main Science and Technology Indicators (2010-2).8). The average for Latin America is computed for the Latin American countries in the graph including Mexico and Chile and use World bank data.5% 1.15% 0.5% 4% 0% 0. The different economic structures of OECD and Latin American states may lead one to expect lower rates of R&D investment in the latter. Economic sectors with lower R&D intensity – for example.51% 0.25% 0.28% 0. Poland and Turkey closer to Latin America than to the top performers. characterised by the coexistence of different production structures.37% 0.0% notes: All oeCD values for 2008. Innovation in Latin America 15 1.3 Innovation Performance in Latin America in a Comparative Perspective A frequently cited indicator of innovation performance is R&D investment as a share of gross domestic product (GDP). including oeCD average.02% 2. (In Chapter IV we attempt to compare more carefully R&D investment rates within sectors between Latin America and OECD countries.0% 1. natural resource-based sectors such as agriculture.18% 0.5% 2. with some OECD countries such as Greece. In this discussion.30% 0.04% 0.5% 3.8.51% 1.77% 2. R&D investment measures only a part of the innovation economy.57% 0. and the regional average is barely above a tenth of the R&D expenditure of South Korea (Figure 1.1. r&D exPenDITure AS A ShAre oF GDP (In PerCenTAGeS) (2007 or LATeST AvAILAbLe yeAr IF InDICATeD) Honduras (2004) Nicaragua (2002) Guatemala (2006) Paraguay (2005) Peru (2004) Ecuador Colombia (2006) Panama (2005) Bolivia (2002) Uruguay (2006) Costa Rica (2004) Mexico Argentina Chile (2004) Brazil (2006) Latin America OECD Poland Greece Portugal Spain France United States South Korea 0.05% 0.36% 0.

information on obtained patents rather than patent applications. the case of 20 Figure 1. this indicator does not capture the effective value-added generated in the country. 21 WIPO (2008).000 4. Data from the EPO. The patenting gap between OECD and Latin American countries is wide.406 7. However. with a small number of leaders (not all of them OECD countries) dominating in patent activity.000 3.000 2. even the top Latin American performers – Brazil and Mexico – are well below the OECD average (Figure 1. and there are some caveats regarding its interpretation.9). South Korea. Source: OECD Patent Database. In 2006. Latin American countries are less specialised in high-tech exports than OECD economies (Figure 1. Another option would have been to use applications/patents obtained at USPTO.9. .000 0 note: These statistics are simple counts based on the date of application and the applicant’s country of residence. is used in the interest of comparability in quality of patents. Japan.21 The share of high-technology exports as a share of all manufacturing exports are usually used as a proxy for technological specialisation of production structures. PATenT APPLICATIonS To The euroPeAn PATenT oFFICe (2008. For example. The oeCD average is obtained using information for 31 oeCD countries including Mexico and Chile (which are also included in the average for Latin America) and excluding Slovenia. however. The average for Latin America is computed only for the Latin American countries included in the graph. Note that we chose these specific data out of a concern over their comparability.InnovaLatino: Fostering Innovation in Latin America 16 Figure 1.10).000 6.20 As for R&D investment. This. 2009. Patent applications provide another indicator of the innovation intensity of an economy.000 5.215 1.092 1. by PrIorITy DATe AnD CounTry oF reSIDenCe oF APPLICAnTS AnD InvenTorS) Venezuela 0 Uruguay 1 El Salvador 1 Peru 2 Guatemala 3 Ecuador 3 Costa Rica 3 Panama 9 Colombia 15 Argentina 19 Chile 23 133 Mexico 359 Brazil 44 Latin America OECD Portugal Greece Poland Hungary Turkey Spain South Korea 73 75 106 148 270 4.000 6. including triadic patent statistics. rather than national patent offices. the United States. a high degree of heterogeneity among OECD countries exists.9 shows the number of patent applications to the European Patent Office (EPO) under the patent co-operation treaty protecting inventions in each of the 142 signatory countries. is not to deny that other indicators might be equally appropriate. Germany and China represented 76 per cent of all patent filings.

49% 17. defining TFP requires defining the economy’s production function. A denotes TFP of economy i at time t.1.38% 9. in Mexico. the increase is attributable to TFP growth.45% 35% 40% 45% 0% 5% 10% notes: high-technology exports are defined as products with high r&D intensity.97% 7. Average for oeCD for 2008. are combined to generate output. Average for Latin America is computed only for the Latin American countries included in the graph.87% 15% 20% 24. Productivity can be used as another much broader measure. an increase in A.35% 4.22 Suppose that one knows the quantities of all the inputs – types of la- 22 Formally.21% 2. Y: Yu = AuFu(Xu) where F specifies the production technology -. pharmaceuticals. Source: World Bank. since A cannot commonly be observed in the data it is obtained as a residual using information on output. that is. In line with expectations.12% 4.02% 9.10. scientific instruments. and there is no change in the input vector X. but is less pronounced in the case of trademarks (Figure 1. The oeCD average is obtained using information for all 32 oeCD countries including Mexico and Chile (which is also included in the average for Latin America). foods and beverages. and electrical machinery. such as textiles.15% 25% 30% 33. such as in aerospace.96% 19.03% 1.74% 5. the gap between Latin America and OECD countries persists.41% 38.24% 8. Trademarks are also more frequently used in sectors with relatively greater importance in Latin America.46% 4. specifying how inputs. In principle.16% 5.23% 3. hIGh-TeChnoLoGy exPorTS AS A ShAre oF ToTAL MAnuFACTurInG exPorTS (In PerCenTAGeS) (2008 or LATeST AvAILAbLe yeAr IF InDICATeD) Panama Honduras (2007) Peru Venezuela Colombia Guatemala Uruguay El Salvador Bolivia Nicaragua (2007) Ecuador Chile Dominican Republic Argentina Paraguay Brazil Mexico Costa Rica Latin America OECD Turkey Spain (2007) Poland Portugal Greece Japan Hungary South Korea (2007) 0. the TFP measure proceeds as in the following illustration. .55% 6.43% 4.65% 14. Note that if Y increases between t and t+1. maquila activities have a similar effect on statistics. X. Innovation in Latin America 17 Figure 1.72% 1.23% 4. prices and assumptions regarding the production functions.32% 11. World Development Indicators.51% 3. Empirically.75% 4.11).the way outputs are transformed into output. Trademarks can be used as a proxy for complementary innovation activities and offer an interesting perspective on the intensity of investment in the protection of intangible elements of innovation.53% 9. Costa Rica is basically explained by Intel’s share of activity in the small economy. computers. Changes in productivity at the macroeconomic level are typically measured using the concept of total factor productivity (TFP).15% 7.

4 4.11.1 13. but that GDP is higher in the latter year.3 56.0 6. Figure 1. .4 4. also included in the average for Latin America. For this reason.6 0 3. which is roughly speaking the efficiency with which inputs are combined.3 6. – between 2010 and 2011.7 15.12). and Brazil’s nearly matched the US rate (Figure 1.5 150 200 0 250 246. etc. World Bank. TrADeMArk APPLICATIonS.5 19 97. infrastructure. hence readers may suspect that TFP has reversed the trend in recent years.2 1.9 2. – used to produce Argentina’s gross domestic product in 2010. Chile’s TFP growth exceeded that of the United States over the last half century.2 300 note: The number of applications refers to those presented for registration with the national or regional trademark office. etc.23 23 The way that TFP is measured requires a lot of statistical information. The average for the oeCD was obtained using 31 oeCD countries.4 14. which means that it is usually only available with a considerable lag. no depreciation in equipment. At least part of TFP growth can be explained by innovation.3 14. early indications from some countries suggest that it is highly unlikely that there has been any inflection point in the graph of TFP in more recent years.InnovaLatino: Fostering Innovation in Latin America 18 Figure 1. which should allow an economy to produce more output from a given quantity of labour and capital.9 62.9 47. bour. The difference in growth is attributed to TFP.9 6.12 ends in 2005.4 5. While complete and up-to-date data are not yet available for all of the countries in this graphic. The average for Latin America is based only on those countries of the region included in the figure.1 50 100 107. which witnessed vigorous economic growth leading up to the global economic crisis.8 55.1 15 30. Now suppose that there is absolutely no change in the available inputs – no growth in the labour force. no new machines. equipment.7 1.0 6. including Chile and Mexico. DIreCT reSIDenTS Nicaragua (2007) El Salvador (1997) Bolivia (2007) Honduras (2007) Uruguay Panama Costa Rica (2007) Guatemala (2007) Paraguay (1993) Ecuador (2007) Venezuela (2000) Colombia (2007) Peru Chile (2007) Argentina (2007) Mexico Brazil Latin America OECD Hungary Greece Poland Portugal Spain Turkey South Korea United States 1. Source: World Development Indicators.

signalling a concrete and important payoff from innovation activities. That this plays a potentially important role in growth can be seen by jointly considering changes in the value of output per worker (Figure 1. While this indicates that the set of innovators is far wider and that cross-industry differences may be less powerful. 1. Innovation derives from a combination of tangible and intangible assets and investments.758 0. Prominent examples of new measures for OECD countries are those focusing on investment in intangibles and data from firm innovation surveys.842 0. including the percentage of firms that introduce new-to-market products and marketing and organisational processes (to measure innovation at the firm level). as well as trademarks and immaterial assets for which customers are ready to pay (such as design). To better measure innovation. equipment and structures. Innovation in Latin America 19 Figure 1. it is also the case that inno- . If the ratio is greater than one.13).12.68 0. ToTAL FACTor ProDuCTIvITy (TFP) rATIo (2005 verSuS 1960) Chile United States Panama Brazil Dominican Republic Ecuador Uruguay Bolivia Colombia Peru Jamaica Latin America Mexico Argentina Costa Rica Paraguay El Salvador Venezuela Honduras Nicaragua 0 0.28 1.4 Developing New Indicators of Innovation The statistical evidence provided above highlights some aspects of innovation activities in Latin America.483 1.833 0.4 0.6 1.088 1.144 1.8 note: For each country.938 0. Interestingly. TFP has increased over those 45 years.306 1. Source: Daude (2010). when the dimensions of innovation beyond R&D are taken into account.273 1. otherwise. meanwhile. the bar shows the ratio of TFP in 2005 to TFP in 1960.199 1. Efforts are under way to develop such indicators for Latin American countries as the basis of a better understanding of their innovation performance.895 0. software.117 1. The “tangibles” include machinery. the economic sectors in OECD countries where high rates of innovation are observed include sectors not conventionally thought of as innovative. Printing and paper products or textiles and clothing.8 1 1. seeks to broaden the set of variables used to monitor innovation performance to include those more relevant to developing countries.943 0.965 0. for example. in some countries have rates of innovation as high as those observed in communications or financial services. INSEAD’s Global Innovation Index (GII). An analysis of this relationship reveals that intangible assets represent a large share of the increase in labour productivity over the last decade.552 0.829 0. while the “intangibles” cover organisational and human capabilities. it has declined.6 1.4 1.2 1.2 0.083 0. policy makers and researchers are moving beyond the aforementioned indicators. By developing a set of additional indicators other features of innovation can be better understood.1.694 0.

24 OECD analyses at the firm level help to show the complementary nature of innovation including. They do not yet reflect standardised methods and definitions. MArkeT SeCTor.14). For this reason. One-dimensional measures – as presented in this chapter – are often too limited to capture the diversity in innovation in emerging markets. Figures for japan refer to the whole economy.5% 8. a higher share of businesses with in-house R&D introduced new products than those without an R&D capacity. 24 OECD (2010a). differentiating by R&D and non-R&D performers (Figure 1.13.5% 2% 7% 3% 5% 5% 8% 8% 3% 5% 5% 7. InTAnGIbLe CAPITAL ACCounTS For A LArGe ShAre oF LAbour ProDuCTIvITy GroWTh PerCenTAGe ConTrIbuTIonS.org. Mexico and Australia – non-R&D firms introduced new products at nearly the same rate as their R&D counterparts. demonstrating the importance of R&D. e. INSEAD developed the Global Innovation Index (GII) in 2007 (box 1. the share of firms that introduce new-to-market product innovation. labour productivity can be affected by demographic trends and employment dynamics.5).g. Reference to COINVEST http://www.uk/ vation tends to be dominated by a relatively small proportion of firms. In all countries.4% 3% Re Slo pu va ec bli k c h Re pu bl ic Sw ed en m ce ce d k ria lia n y n ai es an do pa an ar at an ee ra st nm ng Au Gr St Au Fi Fr ite Cz Un note: The estimates are based on national studies. for example. less than 10 per cent of firms account for 80 per cent of innovation expenditure and innovation sales. In Australia.5% 19% 7% 4% 4% 2% 1% 1% 19% 11% 10% 19% 2% 10% 7% 8% 5% 6% 8% 5.InnovaLatino: Fostering Innovation in Latin America 20 Figure 1. for example. based on COINVEST and national studies. But in many countries – including Luxembourg. in Spain. a composite indicator which emphasises alternative mechanisms for financing such as the availability of micro-finance to stimulate innovation at the grassroots level in emerging markets.coinvest. Norway. 1995-2006 (or neAreST AvAILAbLe yeAr) 70% 60% 50% 40% 30% 20% 10% 0% 27% 61% 45% 40% 32% 30% 30% 30% 29% 22% 20% 20% 19. As shown in various oeCD studies. Source: OECD. Un Contribution to intangible capital Contribution from tangible capital Labour productivity growth ite d De Ge Ki d rm nl st Ja Sp Ita ly .

The launch of an Innovation Strategy by the OECD at its ministerial-level council meeting in May 2010 points to the importance of focusing more on non-technological innovations and the contribution of innovations to development – has preceded the emerging paradigm in OECD countries (box 1. neW-To-MArkeT ProDuCT InnovATorS. business models and societal wellbeing – is. Measuring Innovation: A New Perspective. Innovation in Latin America 21 Figure 1. better-tailored policy models. a key concern of Latin American innovation and development thinking. In some ways. Innovation microdata project.14. OECD. 2004-06 80% 70% 60% 52% 50% 40% 30% 20% 10% 0% 31% 30% 33% 29% 29% 20% 12% 20% 24% 67% 65% 65% 63% 62% 61% 58% 57% 54% 53% 52% 52% 51% 50% 48% 43% 45% 43% 42% 40% 39% 39% 34% 30% 20% 23% 25% 13% 27% 17% 16% 9% 7% 9% note: In Luxembourg 52% of non-r&D performers introduced new-to-market innovations as compared to 63% of in-house r&D performers. and always has been. Indeed. one of the key messages of the OECD Innovation Strategy – the need to link technological change with a clear vision of its impacts on the demand side.m ni an a uf Ch ac il tu e rin No g) rw M ex Be ay ico lg (2 ium 00 6 De -07 nm ) ar So Jap k ut an h (19 It Af a ric 99 ly a -20 (2 00 01) Au So 2st 04 ut ra h lia S ) Ko re (2 pai 00 n a (2 600 U 5. new opportunities and the increasing speed at which changes take place requires new. and the changing innovation scenarios characterised by new technological paradigms.1. m K ga an ing l uf do ac m tu rin g) Innovative firms without R&D Innovative firms with in-house R&D . Latin America and the Caribbean. based on OECD.nit Por 07) 07 ed tu . Paris. Though the above efforts address a broader range of countries (beyond Latin America) – many of the messages of the strategy are relevant and useful for Latin America and the Caribbean.6). Source: OECD (2010). is facing rising challenges in a global context characterised by the growing relevance of worldwide innovation networks and a growing need for endogenous capacities to reap the benefits Cz Au e Ice ch str la Re ia nd pu (2 bli 0 c Lu 02 xe -0 m 4) bo u Ire rg la Ca S n Ne we d na da th de er n (2 la 00 nd 2Es s 04 to . innovation is a common challenge for all world economies.

globalinnovationindex. entrepreneurship rates and employment in the knowledge-intensive sector. InSeAD’S GLobAL InnovATIon InDex The Global Innovation Index (GII) was developed by INSEAD in 2007 as a research project and a methodological tool to assess countries’ ability and preparedness to leverage innovation advances for increased competitiveness and development. and the World Bank. growth rate of labour productivity. It covers factors like number of patents. ICT and General Infrastructure: Infrastructure is a crucial pillar that supports innovation by feeding into the innovation system through two channels. It includes many non-traditional measures of outputs of innovation activities. The most recent third edition of the GII.listed below -. the United Nations. as well as survey data from the Executive Opinion Survey conducted annually by the World Economic Forum. such as the International Telecommunication Union (ITU). . thus raising productivity levels and consequently overall efficiency. It uses indicators from various sources. Not only does it foster the growth of businesses. of a rapidly changing global arena and close the innovation gap. including hard data collected by international organisations.InnovaLatino: Fostering Innovation in Latin America 22 box 1.org.globalinnovationindex.to create a composite indicator. Each of these is further broken down into sub-pillars (see www. Creative outputs: The second output pillar measures whether innovation has produced results in the creative industry and raised standards of living. business Sophistication: This pillar captures the nature of the business environment and its conduciveness to innovation activity in the economy. Scientific outputs: This is the first pillar of the outcome of innovation. The GII uses this wide range of indicators which relate to a broad set of issues -. While developed markets exhibit structured financial set-ups and a well-functioning venture capital market. this pillar recognises that in emerging markets a large portion of the economy is informal. it also raises the standard of living in the economy. An extensive network of infrastructure thus forms the backbone of any economy by aiding smooth transaction. Nurturing a regulatory framework that attracts business and helps to foster their growth by giving them an adequate measure of incentive and protection is essential for every nation that plans to boost innovation. The entire report can be downloaded from : www. The remainder of this report looks at what governments and businesses in the region are doing to close that gap and concludes by making recommendations for policy makers. transportation and delivery of capital.5. human Capacity: The level and standard of education and research activity in a country are the prime determinants of its innovation capacity. ranks 132 economies around the world and provides useful regional comparisons and overall lessons.org and the site also provides access to the underlyling ata and associated modelling tools. Market Sophistication: This pillar tries to capture the state of credit availability and the condition of creditors and investors in an economy. This pillar covers most variables which are traditionally seen as measures of innovation. number of scientific publications. The GII combines information from five input pillars and two output pillars. But human capital and the rate of innovation are interdependent and complementary to each other. Source: www.globalinnovationindex.org for more details): Institutions: This pillar tries to capture the macroeconomic stability and the institutional framework of a country. bringing down transaction costs and in turn increasing market accessibility. published in 2010.

). 2010a). Innovation in Latin America 23 box 1. Finally. The oeCD InnovATIon STrATeGy The OECD Innovation Strategy draws on significant work carried out by more than 15 committees and their working parties across 10 OECD directorates. and monitor the implementation of the strategy (OECD.1. including numerous analytical projects. . innovation is no longer the exclusive domain of a small number of high-income countries. to find new. innovation must increasingly be green. conferences. high-level expert advisory group has provided guidance throughout the development of the project. human resources and the productive application of new ideas.6. Third. Second. a series of country roundtables with policymakers and stakeholders. workshops. etc. notably China and India. innovation requires matching R&D investments with a series of investments in capabilities. institutions. are demonstrating leadership in innovation. customers. • A compendium of indicators to help position economies in the context of a broad notion of innovation. a development that both challenges the position of Latin American economies and offers new opportunities. 2010b) Four aspects of the Innovation Strategy are directly relevant to Latin America. track developments in innovation processes. not only deriving from strictly technological advances. emerging economies. These Innovation Strategy deliverables provide policy makers with a comprehensive and cross-cutting policy guidance package setting out the priorities for structural reforms that can accelerate innovation-led growth: • In-depth OECD analysis of policies for innovation (OECD. more sustainable models of economic development and address increasingly pressing environmental challenges. successful innovation increasingly involves various forms of collaboration among a rising set of stakeholders (firms. First. A specialist.

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2003/2004 National Firm Census. Nevertheless. the survey design and methodology was different than the case of innovation surveys periodically undertaken (usually among a much larger sample of firms) by national statistical authorities. As such. only asked about innovation undertaken during the previous year. innovation surveys of the service sector have addressed this problem by looking only at a narrow slice of service providers: just hospitals. The Table 1. asking whether innovations were new to the market or only to the firm. and Uruguay – via its respective country offices. hospitals and a much broader set of economic activities. Peru. 2007 Information provided directly by the Statistical Office . The initial sampling framework was established by the Gallup Consultancy Group and Ipsos International implemented the survey across eight countries – Argentina. motivated in part by an interest in the effects of the global financial crisis.A1. and they provided information after the survey. Rather. based on publicly available firm registries including credit bureaus. The InnovaLatino Survey used Oslo-Manual type questions: e. other innovation surveys sometimes ask firms about innovative activity during the last two to three years. allowing for uniformity of what is meant by “innovation” across different firms. A random stratified sample was selected aiming at over-representing medium and large firms in terms of employment. as well as insights regarding how these strategies have been affected by the 2008-9 economic crisis. industry associations and phone directories. by CounTry 1 Country Argentina Brazil Chile Colombia Costa Rica Mexico Peru Uruguay Agency INDEC IBGE INE DANE INEC INEGI INEI INE Data Source National Economic Census.) The disadvantage of this restriction is that services – a large sector of the economy in all Latin American countries – are not represented among the surveyed firms.Appendix The 2010 InnovaLatino Survey The 2010 InnovaLatino Survey was implemented under the supervision of the OECD Development Centre.g. Chile. Mexico. The objective was to gather up-to-date information on innovation activities among a large number of firms in the region.A1. though they were consulted beforehand in some cases. Two hundred cases were randomly selected from a list for each country. Brazil. as is detailed in Table 1. 2004 National Firm Census. 2004 National Manufacturing Census. (In some countries. Such uniformity is difficult to find in the service sector. the InnovaLatino Survey. television repair providers. for example. which includes insurance firms. The survey targeted only firms in the manufacturing sector (comprising categories 15-37 of the ISIC Rev. etc. for example. industry chambers. asking which among four types of innovations were undertaken. 3 classification). The objective was not to duplicate or update national innovation surveys based on nationally representative samples. including information regarding the impact of the current economic crisis upon firms’ innovation projects. 2006 Information provided directly by the Statistical Office National Economic Census. Costa Rica. As such. the responses reported and analysed in this report provide evidence on the innovation strategies used by manufacturing firms in eight Latin American countries. SourCeS uSeD To obTAIn PoPuLATIon ShAreS. the summary statistics reported in this report will not necessarily correspond to statistics published by national authorities based on their own innovation surveys. the survey was not elaborated jointly with national statistical agencies. For example. 2004 Manufacturing Firm Census (ENIA). Colombia.

whenever the latter was directly involved in conducting the business of the firm. The two size categories chosen are i) firms with more than 50 employees and ii) firms with 50 and fewer employees. The latter categorisation is based on the OECD classification based on R&D-intensities of sectors.1 Weights are then obtained for each country for each of these four categories by dividing the population shares by the sample shares. 30. In the large majority of cases this involved interviewing the highest ranking officer or the owner of the firm. the initial sample is. 31.507 valid observations were obtained. 1 http://epp. 36.A1). Post-stratification weights based on firm size and sector of activity were implemented to better reflect the population of firms in each country. 33. Special care was taken to interview those most closely involved with innovation activities of the firm. 24.eu/cache/ITY_SDDS/Annexes/htec_esms_an3. 32. 25. 27. by design. 19. 26. The two sectoral categories are i) medium and high-technology sectors (including ISIC Categories 23. A double strategy was used to interview the identified individuals with 80% phone-assisted and 20% in-person interviews. which is highly concentrated in (though not entirely restricted to) larger firms according to survey evidence in many countries.ec. As a result of the restriction to manufacturing and the emphasis on larger firms. 16. 20. 17. A total of 1.europa.eurostat. 21. Note that such post-survey adjustments are not a substitute for a fully-stratified sample before the fact. not representative of the entire population of firms in the eight countries covered. These weights are applied for all statistics reported throughout the report. These weights were constructed with reference to firm size and innovationintensity of the firm’s sub-sector. 37). Population shares were retrieved from the the most recent available information provided by National Statistical Offices. 22. 18. 28. with the sources and years differing by country (details are provided in Table 1.pdf . 35) and ii) low-technology sectors (including ISIC Categories 15. 29. 34. The survey was implemented between November 2009 and January 2010 in all eight countries.InnovaLatino: Fostering Innovation in Latin America 26 oversampling of larger firms was necessary to capture innovative activity.

Chapter 2 Innovation in Latin America: evidence from the region .

A second set of factors relates to structural conditions and technological incentives.2). See Groenewegen. focusing on changes in policy making in several countries that aim to provide a more effective and coherent innovation policy environment. and micro-characteristics such as human resources and education. as the quantitative evidence in Chapter 1 illustrates. such as the production structure of an economy (specialisation. which limits spillover effects. and economically useful. though not always strictly comparable with the systematic analysis included in OECD Innovation Policy Reviews. regulatory environment and infrastructure development.1 Institutional Changes for More Effective Innovation Policies Innovation is affected by several policy and structural dimensions. J.1 is particularly relevant for policy analysis. such as firms. 2.” The analytical objective is to apply a systemic approach to innovation in which the interaction between technology.. have described an NIS as “a historically grown subsystem of the national economy in which various organisations and institutions interact with and influence one another in the carrying out of innovative activity. organisations and institutions. national innovation systems are generally characterised by: (i) R&D financing centred on public research institutions (typically 60 per cent of overall innovation expenditure is publicly financed).Chapter Innovation in Latin America: evidence from the region 2 Innovation is a systemic phenomenon which requires the interaction of institutional and market incentives. The assessment of policy frameworks in the region focuses on Chile and Mexico. it presents a framework for understanding innovation decision making within businesses. research centres and universities. The emphasis on Chile and Mexico stems from the availability of these studies but it should not be inferred that innovation policy is unimportant in the other countries of Latin America. heterogeneity of actors. including: 1 Lundvall (1999. other studies on Brazil and Argentina are reviewed here. and (iii) a lower propensity of businesses to innovate compared with other emerging markets or OECD countries. the availability of business services. institutions. et al (2006) for a review of the evolution of the NIS concept. using a single methodology and comparable quantitative and qualitative indicators. This chapter looks at recent changes to innovation systems in Latin America in two dimensions. One relates to framework conditions: macroeconomic stability. the institutional domain. Experiences in OECD and Latin American countries have shown that the performance of innovation systems rests upon the coexistence of targeted. and intellectual property regimes. which concerns “the elements and relationships which interact in the production. taking advantage of OECD Innovation Policy Reviews carried out for each of these countries. sustained policies aimed at fostering science.. meanwhile. The NIS approach encourages us to think about innovation in a more complex framework. . technology and innovation and a series of other elements. The concept of the national innovation system (NIS).). illustrated with examples from the region. First. and organisations is central. knowledge . 196). Second. pointing to the need to strengthen policies to support innovation. diffusion and use of new. The chapter draws upon evidence from the 2010 InnovaLatino Survey to examine how the global context has affected the innovation profiles of manufacturing firms. shifting attention to interdependencies among the various agents. In Latin America. patterns of trade and foreign direct investment. access to finance. As such. Brazil and Argentina’s innovation performances match or exceed that of Chile and Mexico on some dimensions. Markus Balzat and Horst Hanusch (2004. and are either located within or rooted inside the borders of a nation state”. etc. Indeed. A third element has to do with the density of interactions and linkages between different actors in the public and private sectors. (ii) scant coordination between research institutions and the private sector. p.

it must assume a leadership role. And seventh.2 The Inter-American Development Bank (2001) summarises the responsibilities of government in leading a national innovation strategy as follows: Where there are national innovation systems whose backbone is a myriad of competing private firms that use decentralised decision-making and respond to market signals. it cannot escape undertaking productive functions within an otherwise predominantly private innovation system. 4 Rosenwurcel (2008). Sixth. a physical and ICT infrastructure that facilitates the location and development of knowledge and innovation investment platforms. A number of evaluations and analyses of national innovation systems have been carried out in the region by individual countries and by international organisations such as the UN-ECLAC. technology and innovation policy in Latin America from its origins to the present. and to provide strategic guidance in the catching-up process. innovation policy in Latin America and the Caribbean needs to gain credibility – a goal that monetary and fiscal policy makers in the region have attempted to meet in recent years. modest public policy relevance”. Fourth. low synergy levels. Innovation policy challenges are different in developed and emerging economies: the former need to create incentives to maintain established competitiveness and growth levels.e. and as such generate fewer technological change and growth-enhancing spillovers (as discussed in further detail in Chapter 4). competition and intellectual property regimes).3 Notwithstanding important strides in improving framework conditions (i. it must be responsible for promotion functions. 2 OECD (2009a) provides some detail on current innovation policies. Innovation in Latin America: Evidence from the Region 29 • • • • • • political recognition of the importance of knowledge-related investments. in the exercise of which it must create a general policy environment conducive to private investment in technological innovation.g. More advanced economies such as Israel have benefited from government leadership in the national innovation effort. a policy mix that takes account of the challenges inherent to the innovation system and the need for institutional flexibility to allow a tailored policy response. macroeconomic stability. given the high share of state financing of innovation activities. Third. progress on human capital accumulation). two of which are based on OECD innovation policy reviews of the countries in question. the role of government should ideally combine the ability to leverage private financing.4 This is partly a reflection of their reliance on commodity exports. it has to discharge a regulatory function. access to capital. which tend to be less intensive in R&D. a well-educated workforce and sustained efforts to develop skilled human capital. For many Latin American emerging economies. while the latter need to put in place mechanisms and incentives for “catching up” and investing in capabilities that allow new frontiers to be discovered. First. . Second. and the OECD. it has a rule-setting function. the government has a multiple role. Fifth. Latin American countries’ weaker capacity to articulate policy orientations and co-ordinate priorities across various national stakeholders has resulted in innovation systems characterised by a “focus on technology adoption rather than innovation. along with appropriate budgetary allocations. IADB. scant public R&D institution–business linkages. it has a fundamental role to play in human resource development.2. sound governance arrangements that involve stakeholders in the definition of policy orientations. The following section looks at four examples. Sagasti (2010) provides a detailed overview of science. priorities and management of implemented policies. Generally. favourable framework conditions in the business environment that foster firms’ incentives and capacity to innovate (e. limited inter-institutional interaction. it must perform a planning function. 3 IDB (2001).

and an economy dominated by sectors low in innovation intensity. Both constraints call for stronger public-private co-ordination. Other funding agencies are the Millennium Scientific Initiative (Ministry of Planning) and the Foundation for Agricultural Innovation (FIA) (Ministry of Agriculture). Additionally. While it is too early to undertake a comprehensive review of these reforms and their impact. have thwarted initiatives – and the authorities are considering reforms to reduce red tape and simplify administrative requirements. These include Innovachile. 6 InnovaChile focuses on supporting business innovation and entrepreneurship. an innovation policy framework that had historically favoured basic public research over business innovation had led to a business sector lacking an entrepreneurial culture and innovation initiative. but institutional challenges persist.1). 8 See also Benavente (2006). That said.5 In the mid-2000s. Moreover. 7 Implementing an effective mechanism to ensure that different stakeholders are aligned in their implementation of the strategy could resolve this weakness. suggesting that the need to promote learning about the opportunities of innovation among companies is equally important. as in the case of Fundación Chile (box 2.8 To foster interaction. innovation became a critical element on the Chilean government’s development policy agenda after years of lagging economic competitiveness. in line with international best practices. The Becas Chile Programme is. 5 This section also draws upon OECD (2007b). a presentation made by Carlos Alvarez at the OECD Development Centre on 18 June 2010 (Alvarez 2010). Its efforts can be enhanced by matching the programme with demands for skilled personnel at the cluster level. mainly in terms of co-ordination across funding institutions. (iv) R&D tax incentives. (iii) an increase in resources to implement the strategy through the introduction of a tax on royalties from mining activities directed to the creation of a Fund for Innovation and Competitiveness (FIC). However.2 per cent). a shortage of specialised human resources hampers both public and private efforts. aimed at strengthening different segments of Chile’s national innovation system. a body responsible for long-term national innovation strategy.9 Further efforts in this direction are crucial. and CONICYT (the National Commission for Scientific and Technological Research) in the Ministry of Education. with a view to creating a sustainable source of financing for innovation. CORFO and FIA. and (iv) a reform of competition policy. and runs the Fund for the Promotion of Scientific and Technological Development (FONDEF) that requires matching public grants with private funds for applied research projects. extremely valuable. This resulted in a low rate of innovation among firms and an over-concentration of activities with low innovation potential (Table 2. low R&D expenditure (0. several risks and weaknesses that continue to undermine the success of the strategy can be highlighted. (ii) the elaboration of a strategy for 2006-2010 by the CNIC. The creation of the CNIC has separated policy design and implementation. government funding schemes favour technological consortia that rely upon co-ordination between private enterprises and research institutes.1). 9 Technological Consortia Programme of CONICYT. Innovachile also runs similar programmes. for example. OECD-IDB (2010). and “Innovation Policy in a country in transition to development: challenges in design and implementation”.7 per cent of GDP in Chile vs. dependence on the exploitation of natural resources. advances in areas like incubation and the establishment of seed capital and venture capital funds have been significant. 7 CONICYT focuses on public support for scientific and technological research and the development of specialised human capital. Co-operation with universities and public research institutes is the least valued form of co-operation (after co-operation with competitors): innovation surveys reveal that only 10 per cent of innovative firms co-operate with public research institutes or universities in the innovation domain. OECD average of 2.6 a part of CORFO (the Foundation for Development Promotion) in the Ministry of Economy. in this respect. The Chilean Government has recently introduced a series of measures to improve policy effectiveness. These include (i) the creation of a National Council for Innovation and Competitiveness (CNIC).InnovaLatino: Fostering Innovation in Latin America 30 Chile. . entrepreneurial efforts continue to be hindered by restrictive regulations – entry and exit regulations. It is important to note that the initial response of the private sector to the new measures has been muted. Small and medium sized enterprises (SMEs) are often resource-constrained in their innovation activities. supporting innovation in the agricultural sector.

11 The Mexican national innovation system has benefited from renewed government efforts since 2000 (Table 2. Threats • Long-term trends in long-distance transport costs of low value-added exports • International specialisation lock-in of products with lowincome elasticity in world demand • Marginalisation as a source and destination of international flows of high-skilled human capital • Increasing regional disparities • Shortage of specialised human resources needed for innovation • Loss of human and social capital if the current level of inequalities is not reduced • Deterioration of misused capabilities. STrenGTh-WeAkneSS-oPPorTunITy-ThreAT (SWoT) AnALySIS oF The ChILeAn nATIonAL InnovATIon SySTeM Strengths • Stable macroeconomic framework and well-functioning product markets • International openness • Reliable regulatory and legal frameworks • Political commitment to increased support for innovation • Trustful relationship between government. from lowskilled jobs to knowledge-intensive business services • Exploitation of Chile’s environmental advantages to capture a larger share of the high-end tourism market • Turn logistic constraints into innovation challenges • Advance as a regional leader in selected niches in the industrial and services sectors • Derive unexpected benefits from serendipity in science and technology through sustained investment in quality basic research Source: OCDE (2007b). Innovation in Latin America: Evidence from the Region 31 Table 2. public servants and the private sector • Strong export-oriented and resource-based industries • Significant core of dynamic firms and entrepreneurs with innovative business models • Accumulated learning and a proven model for upgrading resource-based industries through knowledge and technology • Pockets of excellence in scientific research Weaknesses • Rents from the exploitation of natural resources exceed those that can be expected from most innovations • Logistic challenges due to geography • Basic research-centred innovation system • Very low level of business R&D and innovation. Legislative and regulatory initiatives implemented between 1999 and 2006 have helped to shape the current institutional setting and governance of Mexico’s science and technology system. . and weak regional actors • Fragmented. creating a com- 10 OECD/IDB (2010).2). while reducing the downside risk.2. with a lack of a high-level overall strategy.10 Mexico. R&D-centred. notably in engineering sciences Proposed legislation to ease bankruptcy procedure promises to boost the incentive for entrepreneurs to establish start-ups. A raft of measures to prioritise innovation started with the adoption of the CONACYT Law and the Special Programme for Science and Technology (PECiTI) from 2001-06.1. followed more recently by the PECiTI for 2008-2011. project-based public support system with duplication of effort and blind spots • Very narrow market for knowledge • Underdeveloped and partly outdated infrastructure for technology diffusion • Low supply of seed and risk capital • Severe bottlenecks in the supply and mobility of Human Resources for Science and Technology opportunities • Greater exploitation of value-added innovation in resource-based industries • Build innovative clusters around existing dynamic export-oriented industries • Important potential of the service sector. including in foreign-owned firms • Weak innovation governance. 11 This section draws mainly upon OECD (2009c).

FunDACIón ChILe Founded in 1976 by the Chilean government and the ITT Corporation (United States). Its activities in the areas of skills upgrading focus on lifelong learning. emphasis has shifted to other instruments. high-quality wine production. Fundación Chile has been increasingly active in the field of biotechnology (forestry genetics and DNA vaccines for aquaculture. An insufficient skills supply constrains the innovation capacity of the productive sector. such as grants and loans. distance education. as well as sustained spending on R&D through better designed programmes. introduction of new berry species and varieties in Chile. Accordingly.InnovaLatino: Fostering Innovation in Latin America 32 box 2. the existing incentive system must be reviewed in order to move from one centred on public research institutions to one based on firms. the core mission of Fundación Chile is to transfer state-of-the-art technology.1. tax incentives are a larger proportion of the total support in Mexico compared to other countries with similar schemes. Source: www. In recent years. the authorities fell short of the objective to increase R&D funding to the level of one per cent of GDP by 2006. carries out R&D. Despite progress on several fronts as a result of these measures. The development of Produce Foundations (PFs) in Mexico demonstrates the possibility of turning a traditionally low-tech sector – agriculture – into a more knowledge-intensive economic activity (box 2. leaving Mexico behind other OECD countries. . to stimulate innovation efforts among SMEs. development of the technological concept of vacuum-packed meat and other innovations.cl. In Mexico. Fundación Chile has been quite successful in incubating new ventures through entrepreneurship and technological innovation. which led to the implementation of new forestry management models. In the long term. and OECD (2007b). among others). whose performance is now evaluated on the basis of the social relevance of their research activities and the degree of business co-operation. among other criteria. and scientific production and quality have improved substantially. In terms of policy instruments to promote innovation. as elsewhere. Despite this increase. plex set of rules and decision-making processes that influence the interactions among the different actors in the system. adapts foreign technology for product and process innovation for client companies in the public and private sectors. Research is nevertheless highly centralised and knowledge diffusion is limited. management techniques and human skills to natural resource-intensive sectors in alliance with local and global knowledge networks. Reforms have tackled the governance structure of public research centres. But such incentives fail to benefit most firms. and the use of ICT in education and management education. Demand also lags behind as firms have been reticent to hire highly skilled people. financial engineering and information (venture capital). Examples where the foundation’s achievements can be seen today include the creation of pioneering salmon firms and provision of technological services that were fundamental for the take-off of the industry in Chile. and fosters the creation of technological consortia and the diffusion of technology to SMEs. and furniture for export. the two tend to be complementary. Fundación Chile has developed an original and effective model for transferring technologies and developing innovative responses to economic opportunities. quality control and certification of fruit for export. Short-term challenges include the ongoing improvement of governance to ensure more effective leadership and coherence in policy formulation and implementation. overall R&D resources are still limited and the decline of public financing (as a percentage of GDP) needs to be addressed as private initiative is unlikely to compensate for reduced public funding. Expenditure in 2007 was 0. Federal investment in scientific and technological infrastructure has also risen but structural weaknesses remain. The strengthening of the national system of research has bolstered the scientific community. limiting knowledge diffusion and the capacity to absorb new innovations.2).38%. given that smaller firms tend not to engage in R&D activities. and management.fundacionchile. Business investment in innovation has nevertheless increased both in absolute terms and as a share of total R&D resources. associative development in the forestry industry. It creates new companies and joint ventures. abalone and turbot farming.

Argentina created a new Ministry of Science. low qualification of the labour force • Insufficient technological infrastructure • Low technological absorptive capacity of the vast majority of SMEs • Weak Intellectual Property Rights culture • Little competition in some sectors. the production system. A recent budget increase in the domain of innovation and efforts to strengthen measures to support business innovation demonstrate its importance for the current government.12 In 2007. low mobility of human resources in Science and Technology • Poor performance of the education system. and public institutions such as research councils and research associations). and a shortage of private sector participation in innovation financing. a promising institutional innovation to promote more coherent policy making and address the features of the country’s innovation system. including the limited interaction between the actors concerned (the education system. Several issues need to be addressed. underscored by various assessments. Innovation in Latin America: Evidence from the Region 33 Table 2.2. Rozenwurcel et al. Technology and Productive Innovation. 12 This section draws on Lopez. Argentina. . barriers to enterprise creation.2. internationally competitive firms • Regional and sectoral clusters of excellence • Attractiveness for FDI inflows into specific sectors • The accumulated experience of some public agencies for the promotion of STI and economic development • Well endowed with natural resources • Cultural diversity as a source of creativity Weaknesses • Inefficient governance of the NIS • Unbalanced policy mix • Low budget allocation and weak political commitment to STI policy • Bureaucratic management of support programmes • A very low level of public/private co-operation. and Chudnovsky (1999). deficient corporate governance in the publicly owned industrial sector • Premium on imported technology • Financial markets ill-adapted to innovation-related investment opportunities • • • • • • • • A young population Geographical proximity to the United States Incipient development of a significant pool of engineers Growing demand for knowledge-intensive social goods Insertion in global knowledge networks and technological platforms Diversification of production and trade towards goods and services with higher knowledge content Engagement of SMEs in more innovation-driven strategies Technology diffusion around multinational enterprises in line with the development of innovation-based global value chains Biodiversity as a potential economic asset Threats • Growing competition from emerging economies • Accelerated expansion of the scientific and technological frontier • Intensifying global competition for talent • High economic and technological dependence on low growth economies • Poor linkages with dynamic emerging regions experiencing rapid economic. (2008). scientific and technological development • Regional concentration of innovation capabilities • Source: OCDE (2009c). scarce public R&D resources and resulting lack of credit financing for SMEs’ innovation activities. A (2007). the absence of knowledge-intensive sectors in the economy. SWoT AnALySIS oF The MexICAn nATIonAL InnovATIon SySTeM Strengths • A set of top-quality universities (both public and private) and public research centres • A sizeable pool of qualified scientists • A relatively large domestic market • A set of globalised.

PFs are civil society organisations involving a diverse range of actors. While scarce budget resources play a part. technology and innovation in sustainable development. has also been envisaged as an instrument for technological development. The Plan of Action for Science. Human capital. Brazil. its R&D expenditure is still low by OECD standards. PFs emerged in response to the process of economic liberalisation. researchers. Limitations in the skills supply (especially in technical fields) and the quality of education also hinder innovation performance. University-business co-operation is still embryonic. including farmers. private companies. is still a major constraint on innovation performance and limits both innovation output and absorption. they were established to manage public funds for agricultural research. extension officers. the PFs have become major stakeholders in Mexico’s innovation system. 14 Lei de Inovacao y Lei do Bem. Patenting scores are low. It envisages an investment of almost $23 billion. The limited linkages between research institutions and the private sector explain to some extent why technological performance is not commensurate with scientific production. As a result. and provide new information and communication technologies. with only a small number of scientists employed in the private sector. though not yet regulated. PFs provide an innovative mechanism to bring farmers and researchers together. . grant financing was non-existent. half 13 This section draws on Lopez. Human capital shortfalls are exacerbated by the limited share of students specialising in science. to increase private innovation investment (box 2. research institutions see no advantage in pursuing long-term objectives. entrepreneurs and nongovernmental agencies.2. MexICAn ProDuCe FounDATIonS Produce Foundations (PFs) in Mexico are regarded as a major institutional innovation in terms of the collaboration between producers and agricultural research institutions. innovation financing began to target co-operation between research institutions and the private sector. Innovation surveys reveal that process innovation is the most prevalent form of innovation. (2008) and Brito Cruz and Mello (2006). University and research institutions are perceived by businesses as the least relevant sources of technological knowledge. sometimes combining both federal. and a lack of incentives and policy instability negatively affect co-operation. While public money has historically been used to fund public universities. more recently it has been selectively directed towards strategic sectors such as energy and biotechnology. particularly tertiary education attainment. Rozenwurcel et al. Traditional indicators of innovation outputs like scientific production also point to underperformance when the size of the economy is taken into account. as the limitations of the domestic national innovation system in fostering sectoral competitiveness became evident. at about one per cent of GDP. influencing the design and implementation of agricultural policies. provide education about and access to new and improved crop varieties. most of which is public spending directed to universities and research centres.InnovaLatino: Fostering Innovation in Latin America 34 box 2. it was introduced in 2000 under the Innovation Law. Technology and Innovation 2007-2010 aims to strengthen the role of science. as well as the transformation of public research institutions. Source: IFPRI (2009) and OECD (2009c). while the low knowledge-intensive nature of most national enterprises makes them less keen to co-operate with researchers. Until recently. it is also the case that many institutions function poorly and that the mismatch between skill supply and skill demand is growing. policy makers. biotechnology).g. operating through the FINEP.and state-level resources (as in the state of São Paulo). science. state governments play an important role in the process. technology and innovation policies. math and engineering.13 Though Brazil boasts excellence in some niches (e. mainly to reduce costs by turning to enhanced technologies.14 Public procurement.3). Basic research is the main output. Though most expenditure is centrally financed. A (2007). In the 1990s. Since their creation.

3. Adapting in the moment. an important part of the innovation process is continuously making sense of changing needs. it created INOVAR. 2. the purchase and installation of machinery. For them. the licensing or purchase of technology. the Brazilian federal innovation financing agency. . The plan has four strategic priorities: (i) to expand and consolidate the National System of Science. Education. as well as technological. offers an integral support credit line that finances all aspects of a technological innovation business plan. Agriculture. In their accounts of how they 15 This practice-based framework is based on Fonstad (2003). In 1999. particularly biotechnology. INOVAR was instrumental in founding the Brazilian venture capital/private equity association ABVCAP. environmental and product quality management. Recommendations from various evaluations include: (i) reducing the tax burden and import tariffs on capital goods in order to facilitate productivity-enhancing machinery use.1): 1. opportunities and threats in the environment.2. and the National Bank of Economic and Social Development (BNDES). Another main objective is to develop an ecosystem for venture capital (VC) investments. (ii) to promote innovation in the industrial sector. Arthur (2009) theorises technology in a way that is consistent with our framework as well. from the Ministry of Science and Technology and half from the ministries of Mines and Energy. equipment and technical instruments. (iii) strengthening institutional co-ordination among actors in the innovation system. problem solving and real-time application. and (iv) giving continuous support to innovation and industrial policy. technical assistance and the provision of initial working capital. it aims to promote innovation. (ii) continuing to enhance higher education and vocational training. (iii) to support research and innovation in strategic areas. Despite challenges in the Brazilian national innovation system. Innovation in Latin America: Evidence from the Region 35 box 2.15 Assessing the situation. technological and social development. a technology incubator co-founded with the Multilateral Investment Fund (MIF). with several instruments designed to foster private research and development. Successful innovators are adept at developing and maintaining a deep understanding of the situation in which they are working. Technology and Innovation by increasing human resources in scientific research and improving the research and educational infrastructure. Assessing the situation. If Brazil is to extend its innovative capabilities beyond these areas it will need to target and prepare specific sectors for increased competition and tackle broader structural problems with its economic and educational policies. training. FINEP also offers a pre-investment credit line to finance engineering consulting services. automobile engines and agriculture. Firms basically face three steps when assessing challenges and opportunities for innovation (Figure 2. biofuels and biodiversity. FIneP FINEP. which has profoundly changed the venture capital landscape in Brazil. economic. 2. Health.2 Examples of Innovation in the Business Sector This section looks at innovation dynamics from the point of view of the entrepreneur. notably aeronautics. venture capital and entrepreneurship. which partners with a range of institutions to promote capital market development. 3. Brazilian firms have been able to achieve worldclass innovation in several sectors. A public institution under Brazil’s Ministry of Science and Technology. and (iv) to foster science popularisation and education. Creating resourcefully. Tamm (2004) likewise conceives of the innovation process in a similarly tripartite way: idea formulation. and in this way forge institutional relationships between local and international investors. including project formulation. Source: Authors based on interviews and public online sources.

an innovator develops a new way to use existing technology). such as new customers. R&D enhances the set of resources available to fuel resourcefulness by businesses. new roles (e. Adapting in the moment refers to changing extemporaneously either the emerging innovation. Sometimes. The importance of resourceful creativity also illustrates the contribution of R&D: by increasing the supply of useful technical knowledge. adapting in the moment becomes more challenging.. In other cases it emerges when an innovator identifies an opportunity for creatively re-using what is already there. In the case of small to medium-sized enterprises..... As the innovating organisation grows.1. but successful ones learn from their failures. changing their emerging solutions in response to the situation at hand. • Product • Business process • Marketing and branding • Social innovation • Large firms (e. unable to access financial resources to purchase a new technology.e..g. Executives at large firms typically express envy at the nimbleness of small and medium sized enterprises to adapt in the moment. the process of creating the innovation (including the design of the innovating organisation).. Innovators often fail. SMEs typically innovate in the way they are organised – i. new 16 Loosens (2009). The fundamental paradox to being agile is having a set of routines and structures that remains constant. Adapting in the moment is a distinguishing feature of successful high-growth SMEs.16 During a period of rapid growth. or both.. and strive to redesign their organisations to become more agile. . Large firms often include details of how they developed close relations with their customers. Global Latinas) • Small and medium-sized enterprises • Customers and users • Corporate social responsability efforts • Social entrepreneurs • Public institutions Assesing the situation Adapting in the moment Creating resourcefully developed an innovation.. this resourcefulness arises from necessity (e. they adapt or introduce new organisational elements.. Creating resourcefully. the initial assessment is often made by the founder or by the team of founders. This includes access to finance. assigning an area of responsibility to a new employee). ...g. they often remark that their efforts were triggered by identifying an opportunity or need in their environment. Three PhASeS oF InnovATIon DeCISIon-MAkInG: A FrAMeWork Different types of innovators. Adapting in the moment. g.engage in a process of innovation. but also a ready supply of people with the necessary skills to introduce novel products and production processes. ... that results in different types of innovations. Latin American businesses that compete for the region’s large number of customers with low levels of disposable income have to be especially resourceful to be profitable.InnovaLatino: Fostering Innovation in Latin America 36 Figure 2. Public policy can enhance firms’ capacity to create resourcefully by expanding the set of resources available to them at critical junctures. Successful innovators must be able to make do with whatever is at hand.

000 employees in 50 countries. and discussion forums. grew to 20. which are of interest to small and large firms alike. A second exception has to do with innovations by private firms in the area of corporate social responsibility (CSR). and new sources of funding. including Forbes. Chilean wine-maker Viña Concha y Toro (box 2. MIT Tech Review and Expansión. CSR in itself is box 2.6) pioneered a completely new industry in Chile. Chile Solidario in Chile. as described in Casanova (2009). Source: Authors based on interviews and public online sources.2. and business-university partnerships. has a unique multicultural model which enables it to span the world and draw from a worldwide talent base to create super-effective multinational teams. Latin American multinationals have developed important innovations in their business models. which covers everything from the milling of the flour to the delivery of its products. the wave of anti-poverty programmes developed in Latin America in recent decades (Bolsa Família and Fome Zero in Brazil. Canadian-based Bombardier (box 2. It enables employees to upload and share their profiles. CEMEX has become one of the world’s three largest building materials companies with 50. exchange ideas and best practices through blogs. voice. The company has long been a pioneer in the application of technology to generate value and improve the way its employees perform their work. Brazilian cosmetics manufacturer Natura Cosméticos and Mexican beer manufacturer Grupo Modelo are both included for their successful model of taking a local brand global. What started with a small investment and only 1. Policy makers can help firms adapt in the moment by promoting networks to increase the information available to decision makers in a complex environment. and keeps growing.4). Shift is the platform that has revolutionized the way CEMEX works. . In the area of strong branding. which have an impact on poverty and well-being in the countries where the firms operate. In early 2010. particularly relevant to SMEs which lack the benefits of economies of scale. Usually decisions to innovate are taken within firms. Cemex has developed a unique and powerful globalizing model based on three pillars: the use of technology.500 at the end of the year. Examples can be found among the “multilatinas”. and interact live. a devastatingly effective approach to acquisitions. With more than a year in operation. A broader view of innovation and development must systematically address these different types of innovation. For example. They involve innovations in processes. Computerworld. Innovation in Latin America: Evidence from the Region 37 organisational processes (e. the global Argentinean firm that makes sophisticated high-tech seamless steel pipes for the oil and gas sector. organisation and “marketing” in a non-profit sense. testing and research have decreased through real time interaction in Shift. and videoconference. through chat. The three phases of innovation decision making are evident in the experiences of successful Latin American firms.000 users in January. although there are notable exceptions such as non-business actors in the public sector.. These might include co-operative ventures among firms. Tenaris. The most successful have been able to adapt to and change the rules of the game set out by the multinational corporations from developed countries. Progresa/Oportunidades in Mexico) can legitimately be interpreted as novel ways for governments to fight poverty. management processes and marketing of products and services. and a smart marketing and branding strategy that has particular appeal in low-income markets such as Mexico (box 2. becoming one of the world’s top exporters of high-quality wine in the process. wikis. CeMex Since its foundation in Mexico in 1906. Shift was recognized with a prestigious Forrester Groundswell Award (Collaboration category) in 2010 and featured in numerous publications around the world.4. Mexican bakery firm Grupo Bimbo has built its extraordinary global scale upon an integrated model of production and delivery.g. CEMEX aimed to improve the collaboration practices of its workforce to generate innovation on a global scale. These users have created communities and contributed to numerous discussions with their peers around the world that have yielded impressive results so far. a governance board). This control over a complex supply chain has given the company a significant competitive edge over its rivals.5). Product development is now considerably faster while costs for travel. introducing quality control processes. Latin American multinationals. The Brazilian aircraft manufacturer Embraer has built a “reverse outsourcing” model which has given it great flexibility in production and delivers lower labour costs than its main rival.

this gives Embraer a significant cost advantage. Twice in a row. Source: Authors based on interviews and public online sources. 2. the wines are of extremely good quality. . The combination of reverse outsourcing and customer focus has proved a winning one for Embraer. eMbrAer’S reverSe ouTSourCInG MoDeL Instead of making components for big firms in the advanced economies of the United States. As wages are typically much lower than those in the developed world. and the economic and development impacts of innovations in CSR are secondary compared with innovation in the core business of firms. he created five profit centres based on region and geography. Owing to the company’s past obsession with technological prowess over commercial viability. however. in this case among elite wine tasters. The company also finds that the reverse outsourcing model helps it to respond more flexibly to peaks and troughs in demand. vIñA ConChA y Toro Chilean winery Viña Concha y Toro was founded in 1875 by Melchor Concha y Toro. developing and promoting volume sales of mass brands alongside smaller sales of very high-premium elite brands – the silver bullets – at the same time.3 Latin American Innovation in Times of Economic Crisis What is the outlook for businesses in the recovery phase from the global economic crisis and how will innovation fare in this context? According to the OECD’s Latin American Economic Outlook 2011. based on what is known as the “silver-bullet” approach. one of 50 most influential wine personalities in the world’. light aircraft and government sales to embed a more market-focused approach. The company has grown to become one of Chile’s biggest exporters of wine and is one of the top ten wine companies in the world. which involves neither businesses nor government. a fitting testament to the company’s successful operating and branding approach.6. However. This in turn helps to lift the volume brands to a relatively high price level and maintain in consumers’ minds the perception that. The purpose is to gain an excellent reputation. Eduardo Guilisasti. not an innovation. Embraer draws on the best component suppliers in the developed nations to meet its own needs: reverse outsourcing. This means the company commits to a dual-pronged branding strategy.17 where individuals seek new ways to improve the well-being of disadvantaged households and communities. One other key element of the business model that was developed with great success by former Embraer CEO Mauricio Botelho was to create a more customer-focused organisation. the UK’s Decanter magazine has named the company’s CEO. To make sure that the company would not lose sight of its customers’ needs.5. To the extent that some social entrepreneurs are also part of profit-seeking businesses. a lawyer and entrepreneur who bought an estate in the Maipo Valley near Santiago to plant vines imported from Bordeaux. the analysis in this chapter is relevant to their situation. is in the realm of social entrepreneurship. Latin America has in 17 Casanova and Hoeber(2008). Source: Authors based on interviews and public online sources. Concha y Toro’s successful branding strategy has made the company one of the top world players in a very difficult market. Europe and Japan.InnovaLatino: Fostering Innovation in Latin America 38 box 2. often in the heterogeneous sector of non-governmental organisations (NGOs). An entrepreneur was put in charge of each division and given full responsibility to develop and improve customer relations. non profit NGOs fall outside the domain of this study. At the heart of its success is its branding strategy. as the public policy responses required to harness the energies of social entrepreneurs and scale up their innovations are qualitatively different from those considered here. box 2. for the market. A third exception. its engineers can design new planes from scratch.

What role did BNDES play? Following the unexpected collapse in the value of the Brazilian currency in October 2008. both via its effect on internal cash flows and by reducing access to external funds. BNDES also supported with USD760 million the merger between JBS and Friboi in what was the second largest private equity investment in the past three years in Brazil. Many surveyed firms had introduced new products and processes during the crisis and felt confident about a rapid improvement in their country’s economic performance. Although more than 50% of BNDES investments are concentrated in energy. and 4% of Petrobras.4 billion. for example. but growth nevertheless slowed significantly compared to pre-crisis rates. constrained access to financing. in sectors as diverse as aeronautics (Embraer). its reach extends across all sectors and sizes of business. The crisis has. As a result.S. there are nevertheless positive signs for innovation. Public financing thus served as a stabiliser of firms’ ongoing innovation projects.2. With the subsequent acquisition of the U. public banks (Banco do Brasil and Caixa Federal mainly) as well as BNDES took action to address the crisis. Amidst this somewhat bad news for reported innovation. and of Fibria with USD 2. 19 OECD (2009f). food (Brazil JBS-Friboi Foods). Copel and JBS-Friboi.7. BNDES. brAzIL’S nATIonAL DeveLoPMenT bAnk The Brazilian government has had an important role in the rapid recovery of the crisis through its national development bank. while young firms – which tend to suffer more from limited access to credit than older firms – were more likely to do so.7). banking (Itaú-Unibanco). . If we look at the private sector in Brazil. firms with access to public financing were less likely to discontinue their projects. mining (Vale). the recovery after the crisis has been very fast due to the financial support provided by BNDES (box 2. resulting from the merger of Aracruz Cellulose and Votorantim Celulose e Papel. BNDES is one of the largest shareholders of the biggest corporation in Brazil. Pilgrim’s Pride. The first is to underscore that in any country “innovation” consists of a rich diversity of or- 18 OECD (2010e). BNDES Participaçoes (BNDESPAR) contributed to the creation of Brasil Foods. Source: Casanova and Dumas (2010). The productive sector was hit hard. Vale.4 Country Profiles Eight country profiles provide information regarding national innovation systems. BNDES also helped create the tenth biggest bank in the world by market capitalisation from the merger of Banco Itaú and Unibanco. paper (Fibria) and oil (Petrobras). and is thus likely to have played a major part in the slowdown in reported innovation. the company became the largest beef producer in the world.19 that is. 2. These profiles have three principal objectives.6% in 2009. furthermore. R&D expenditure and other forms of innovation activity rise during economic good times and decline during recessions. Notably. Several Brazilian companies positioned themselves in 2009 among the ten largest in the world. 9% of Brasiliana Eletrobras. particularly in terms of the appetite for investment: fixed investments in Latin America fell by 13. accounting for 73% of the loans to business in 2009. a result of the merger of Sadia and Perdigão. Such evidence is economically unsurprising given that investment in innovation projects tends to be pro-cyclical. many ways weathered the storm much better than other regions. with almost 17% of its shares if the holding company includes Valepar.18 Businesses interviewed for the 2010 InnovaLatino Survey revealed that some investments in innovation were dropped due to the impact of the crisis. Analysis of the survey data confirms that more vulnerable firms were more likely to discontinue innovation projects than their less vulnerable counterparts. the largest development bank in the world and Brazil’s largest lender. 6% of Telemar. Innovation in Latin America: Evidence from the Region 39 box 2.

but falling in Latin America overall. The bold portion of the bar on the right (in terms of length and the number inside) represents the average value of the index for OECD countries. as well as insights regarding how these strategies have been affected by the 2008-9 economic crisis. such as where it is located in Latin America.. the summary statistics reported in this report will not necessarily correspond to statistics published by national authorities based on their own innovation surveys. Indicators that represent the potential effects of innovations. The InnovaLatino Survey provides evidence on innovation strategies used by manufacturing firms in eight Latin American countries. Innovation looks quite different depending on what perspective is taken – i. Country-level Indicators What existing indicators can help us assess innovation at the country level? This section consists of three types of indicators (16 in total) related to innovation: 1. The dotted middle section of the bar depicts the average value of the index for all Latin American and Caribbean countries. 3. and OECD countries. GDP per capita. We have included indicators that represent various aspects of innovating in emerging economies. the arrows indicate whether the variable is currently rising or falling for Argentina. a country-level or a firm-level perspective. World Bank. Sources: OECD. For example. 2. using key innovation data from the perspective of the eight countries included in the 2010 InnovaLatino Survey (although these profiles do not necessarily constitute a comprehensive collection of the data included in the report nor a complete profile of innovation in each country). design and methodology of the Survey differs from that of innovation surveys periodically undertaken by national statistical authorities. in the index of political stability from the country profile for Argentina depicted below. the length of the striped portion of the bar on the left (and the number inside that portion) represents the value of that index for Argentina. Latin American (LAC). Firm-level view of innovation: Excerpts of data from the2010 InnovaLatino Survey What does innovation look like from the point of view of a firm? This section consists of data in response to 12 questions from the 2010 InnovaLatino Survey. Thus the example indicates that political stability is rising in Argentina and OECD countries. Atop the bar. World Bank. Each country profile consists of four sections: 1. and key sectors. and World Trade Organization. As such. Source: World Development Indicators. population. The country-level information is interpreted as follows.e. Source: 2010 InnovaLatino Survey. The objectives. The second objective is to bring together much of the data included in this report from a country perspective. . see Annex 1 in Chapter 1. Key Facts This section presents basic facts about the country.InnovaLatino: Fostering Innovation in Latin America 40 ganisations producing different types of innovations for different purposes under a variety of conditions. For a more detailed description of the 2010 InnovaLatino Survey. Indicators that represent different types of innovations 3. Indicators that represent country-level factors that enable innovation 2. the numbers atop the bar show the rate of change of the index. such as the use of information and communication technologies and innovations related to the creative arts. A third objective is to encourage those who strive to strengthen innovation in Latin America to consider the richness of innovation from both country-level and firmlevel perspectives and foster stronger links between these levels.

in pursuit of either profits for owners and/or of social benefits (the full set of vignettes is included in an appendix to this report). Innovative Organisations What do different kinds of organisations innovate? This section briefly summarises InnovaLatino’s work on developing over 55 vignettes of innovations occurring across Latin America.innovalatino. The InnovaLatino Survey provides evidence on innovation strategies used by manufacturing firms in eight Latin American countries. A figure mapping five types of innovators based on two dimensions (size of organisation and primary benefit sought by innovators – profit or social benefit). It consists of two parts: 1. like the data they draw on. within both large and small firms.org. will change with time. These country profiles. For the latest.2. as well as insights regarding how these strategies have been affected by the 2008-9 economic crisis. A vignette of an exemplary organisation to further illustrate the kind of innovation engaged in. visit www. design and methodology of the Survey differs from that of innovation surveys periodically undertaken by national statistical authorities. more detailed versions of the country profiles. . and the name of an organisation within the country that represents that type of innovator. The objectives. Innovation in Latin America: Evidence from the Region 41 4. As such. 2. the summary statistics reported in this report will not necessarily correspond to statistics published by national authorities based on their own innovation surveys.

33 4215.InnovaLatino: Fostering Innovation in Latin America 42 Innovation in Argentina from a variety of perspectives InnovaLatino Profile of Argentina COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources. and those in green to represent effects of innovations.97 42% 4. which looked for connect the Argentinean scientist living abroad and support their return.08 0.00 Peru Mexico Gross expenditure on research and development per capita Uruguay Argentina Colombia Chile Brazil Costa Rica LATAM 39.72 138.10 0. We consider those indicators in blue to represent factors that enable innovation.03 44.06 7315.32 39.42 Average last 5 years .06 0.79 LATAM OCDE 75.62 16% 8812.90 0.00 170.00 370. LATAM average and the OECD average.00 –30.62 6% 9093.47 High technology exports as % of manufacturating exports International quality certifications –5% 6.14 0.10 –7% 0% 27.31 33481.50 524.20 47.8 In the middle of a recovery period after the financial crisis. –10% 0.00 LATAM 8% OECD Average 583. Thanks to the investment in programs as “R@ICES”.11 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% 0.04 0.15 681. LATAM average or OECD average.29 and development per capita 9% 1% Number of patents 19. 0. Argentina Political stability Start a business time Graduates in tertiary school per 100 people 42.38 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads 13% 41% 7.29 70. Technology and productive innovation started in 2003 a series of policies to strengthen the R&D sector in Argentina. those in red to represent innovations.40 9% 22% Royalties receipts in US$ per capita 2.16 Growth rate last 5 years 0.11 111.15 17% 2455.88 48. the dynamic of GERD per capita of Argentina (13% ) is only exceeded by Uruguay (15%).00 470.37 116.80 Gross Domestic Product per capita 8% 14332.12 n.d. the Argentinean Secretary of Science.40 8% 27% 8% 25.10 3% –3% –1% 35.02 0.81 Gross expenditure on research 67.98 3% 9.40 79.03 –8% 4.90 17920.00 13% 4. Arrows indicate the annual rate growth in the last 5 years for the country.00 570. or “INNOVAR” a national innovation competition.54 25% 84.12 0. Bars indicate the last value available for the country.00 –8% 13.00 270.07 6% 12% Total researchers per million labor force 979.46 0% 29.46 9.44 23.

Innovation in Latin America: Evidence from the Region 43 This country profile was developed in November 2010.1% 38. For each country.. Cost reductions 76. the primary type of benefit sought. Grupo Arcor) Public institutions (e..18 • Primary: 16. and 2.innovalatino. Job savings 59.3% 79..6% 15. Prosper-AR) Guerra Creativa Guerra Creativa provides design services by leveraging crowd sourcing in ways not previously seen in concept-to-design processes. Guerra Creativa also enables designers to interact and learn from each other.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 41.400 designers who had uploaded more than 11. Responde) profits for owners Primary type of benefit sought social benefits .7% c.2.0% % of firms earning more than 30 percent from innovation 29.4% 90.8% % of firms reporting awareness of leading public support programs 51.9% 49.org/argentina.81 Main 4 exports as % of Total Exports • Processed agricultural products: 38.000 designs with a total membership of 6. Size of organization small to medium Large firms (e.27 GINI index: 48.2% 15. The most complete and updated InnovaLatino Profile of Argentina (including sources) is available at: http://www.51 • Fuel and energy: 10. exhibit their work online and provide feedback on the designs of others.g. Los Grobo) SMEs and entrepreneurs individual Social entrepreneurs (e.7% 13.4% % of firms finding innovation efforts led to: a.. flash or 3D designs. 21 days). their community included 3.9% 58.g. If a client wants a new logo or webpage Guerra Creativa will host a design contest for a fixed period of days (e.g.8% 66. the size of the organization.8% b.000 clients. There is a section that allows all users to get exclusive tutorials. By 2010. with step-to-step instructions of different techniques.4% % of firms considering gain of market share and/or new markets as very important effect of innovation 61. please visit: http://www.3% % of firms with access to foreign machinery 75.7% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Argentina. PPP (Millions. Guerra Creativa uses this process to design logos.innovalatino.5% 27. to select a winner. depending on two dimensions: 1.org/argentina. websites.28 GDP. stationery.57 % of firms conducting projects with foreigners % of firms that introduced product innovations 40.. total (Millions): 40.4% % of firms planning to innovate more 72.g. constant 2005 international $): 531.4% 75. Job creation 62.3% Population.g. InnovaLatino has developed vignettes of different types of innovators.88 • Manufactures: 34.html large Corporate social responsibility (e. For additional examples. then will enable the client to evaluate entries (often over 100). Here we highlight one innovative organization.4% % of firms who applied for intellectual property rights protection 78.5% % of firms receiving external financial resources and considering financial support as important 22. net inflows (% of GDP): 1.6% 24.3% 49.7% 12.72 Foreign direct investment.

50 Gross expenditure on research and development per capita 8% 25.03 17920.50 6% 9093.62 16.00 50.79 120.75 Costa Rica OECD Average LATAM –7.11 0% –8% 13.20 21% 16. to acquire a quality equipment.30 –1% 35.00 20.80 Gross Domestic Product per capita 5% 10296.00 Average last 5 years .06 7315.6% 10.10 4% 9% 12% Total researchers per million labor force 628.07 –7% 44.44 –8% 4.88 48.38 19% 14539. and those in green to represent effects of innovations. Arrows indicate the annual rate growth in the last 5 years for the country.03 –5% –10% 0.40 Personal computers per 100 people Mobile phone subscribers per 100 people –10% Percentage of paved roads 5.15 17% 2455.10 0.02 –0.42 9.14 39.17 0. The “Computers for All” project is part of the Brazilian federal government's “Program of Digital Inclusion”.27 Growth rate last 5 years 0. Brazil Political stability Start a business time Graduates in tertiary school per 100 people –3% 38.00 40.00 30. initiated in 2003.90 President Da Silva implemented the program “Computers for All” a program which has as main objective to make possible the population that does not have access to the computer.70 47. LATAM average and the OECD average. Bars indicate the last value available for the country.15 681. the program was launched in parallel a package of reduction of taxes for computers through “Lei do Bem”.03 0.37 17% 84.38 Internet subscribers per 100 people 25% 5.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% 0.31 0% 12. We consider those indicators in blue to represent factors that enable innovation.29 6% 1% Number of patents 358. with operational system and applicatory in free software.33 4215.00 LATAM OCDE 75.54 25% 111.07 0. those in red to represent innovations.22 0.00 33481. LATAM average or OECD average.09 77.00 Peru Brazil Personal computers per 100 people Mexico Chile Uruguay Argentina LATAM 6.81 79.47 High technology exports as % of manufacturating exports International quality certifications 31% 22% Royalties receipts in US$ per capita 2.11 –13% 4.12 Colombia 0.56 42% 4. 0.70 524.97 6% 8% 92.72 138.InnovaLatino: Fostering Innovation in Latin America 44 Innovation in Brazil from a variety of perspectives InnovaLatino Profile of Brazil COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.40 23.

73 Foreign direct investment.3% % of firms who applied for intellectual property rights protection 69. Currently. founded the Center for Digital Inclusion (CDI) based on the concept of helping people to help themselves. Rodrigo Baggio. Cost reductions 84. InnovaLatino has developed vignettes of different types of innovators.1% 14.02 • Metallurgical products: 40.1% 79.5% % of firms receiving external financial resources and considering financial support as important 22. a former Intel executive.7% 78.html large Corporate social responsibility (e. self-sustainable. and they implement the CDI pedagogy. This unique pedagogy requires that by the end of each 4 months course.g. Job creation 68.innovalatino.1% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Brazil. Stefanini) profits for owners Social entrepreneurs social benefits Primary type of benefit sought .1% 34.) In 1995.8% 82. there are CDI franchises in 753 schools in Brazil and 100 abroad with 1. depending on two dimensions: 1.0% % of firms reporting awareness of leading public support programs 89.6% 88. Petrobas) Public institutions (e.8% b..4% % of firms conducting projects with foreigners 30.65 GINI index: 55.000 people from low-income communities certified. total (Millions): 193. The most complete and updated InnovaLatino Profile of Brazil (including sources) is available at: http://www.3% 82. 1726 educators and 600. CDI Community Centers are based on three principal objectives: they are self-managed. Job savings 86.036 volunteers.50 • Soybeans.1% 26. meal & oils: 13.org/brazil.4% 42. plan.4% % of firms considering gain of market share and/or new markets as very important effect of innovation 37.6% % of firms with access to foreign machinery Population.2% 81.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 18.innovalatino. the size of the organization. For each country. Here we highlight one innovative organization.02 Main 4 exports as % of Total Exports • Transport equipment & parts: 44.5% 29..6% c.g.40 • Chemical products: 2..2.7% % of firms earning more than 30 percent from innovation 34.4% 31.org/brazil.08 % of firms that introduced product innovations % of firms planning to innovate more 87.4% 21. students will have used technology as the main tool to initiate.7% 79.g. Marcopolo) individual SMEs and entrepreneurs (e. PPP (Millions.. Size of organization small to medium Large firms (e. the primary type of benefit sought. Innovation in Latin America: Evidence from the Region 45 This country profile was developed in November 2010. and 2. FINEP) Center for Digital Inclusion (C.5% 88. implement and complete a “social advocacy project” aimed at changing an aspect of their realities.g.D.5% % of firms finding innovation efforts led to: a. For additional examples. net inflows (% of GDP): 1. please visit: http://www.73 GDP.I. constant 2005 international $): 1831. CDI mobilized 5 internal working groups from different disciplines to innovate new solutions for efficient growth.

00 11950.47 11% 6.33 4215.10 OCDE 75.00 13950.00 Average last 5 years .837 Colombia Mexico Argentina Brasil LATAM 17% OECD Average –50.81 88.60 High technology exports as % of manufacturating exports International quality certifications 5% 22% Royalties receipts in US$ per capita 3. Chilean government has developed the aid to initatives impacting quality and productivity and which results can lead to certification by recognized normes (as ISO and HACCP).97 23.02 –0.11 16.56 524.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% –10% 0.03 17920.37 Growth rate last 5 years 0.62 111.29 1% 47.15 23% 8. LATAM average or OECD average.00 1950.11 15% 12% Total researchers per million labor force 832.03 LATAM 1.00 15950.21 39.80 9.00 9950.40 138.06 26% Number of patents 22.09 0% 11% LATAM –1% 35.11 42% 4.27 Peru International quality certifications Chile 0. Bars indicate the last value available for the country.90 The validation of quality system requirement by the local firms could be seen as one measure of competitiveness in the country.22 Uruguay Costa Rica 0.88 48.50 6% 9093. those in red to represent innovations. and those in green to represent effects of innovations.InnovaLatino: Fostering Innovation in Latin America 46 Innovation in Chile from a variety of perspectives InnovaLatino Profile of Chile COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.15 681.00 17950.03 –7% 0% –8% 13.20 8% 76. 0.00 0.37 9% 8% 25. We consider those indicators in blue to represent factors that enable innovation.17 0.07 0.00 2455.31 33481.44 –8% 4. Chile is the most dynamic country on International Quality Certifications in the region for the period 2004-2008.00 27. Conscious about the importance of quality guarantees for the international exchanges of the SMEs. LATAM average and the OECD average. As result.00 3950.32 0.00 5950.80 Gross Domestic Product per capita 5% 14464. Arrows indicate the annual rate growth in the last 5 years for the country.68 35% 17% 4103.54 25% 84.49 6% 14. Chile Political stability Start a business time Graduates in tertiary school per 100 people –3% 66.06 7315.72 –13% 4.40 79.79 44.00 7950.07 0.12 0.38 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads Gross expenditure on research and development per capita 9% 3% 20.

The idea is to offer them jobs to avoid them to become repeat offenders..5% Population. Established in 2003.3% 72. In 2009.97 GDP. For additional examples. Recycla Chile CEO. depending on two dimensions: 1.1% % of firms finding innovation efforts led to: a. Job creation c. the size of the organization.00 Main 4 exports as % of Total Exports • Copper: 50..html large Corporate social responsibility (e.2% 67. For each country. Minera Los Pelambres) Public institutions (e.2% 33. Elemental) profits for owners Social entrepreneurs social benefits Primary type of benefit sought .76 GINI index: 52. InnovaLatino has developed vignettes of different types of innovators.g.6% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Chile. Innovation in Latin America: Evidence from the Region 47 This country profile was developed in November 2010. Recycla Chile’s recycling process disarms electronic appliances by extracting and separating the raw materials to be later transformed and reused.2. PPP (Millions. the World Economic Forum selected Fernando Nilo.2% % of firms who applied for intellectual property rights protection 76. The remaining scraps are treated using specialized machines.g.58 Foreign direct investment.6% 78.1% 22.org/chile..80 % of firms that introduced product innovations % of firms planning to innovate more 94.2% % of firms with access to foreign machinery 69. At the same time.2% 56.org/chile. The most complete and updated InnovaLatino Profile of Chile (including sources) is available at: http://www.90 • Salmon & Trout: 3.. please visit: http://www.innovalatino.A.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 28.9% 47. as a Tech Pioneer.3% 48. Recycla Chile was internationally recognized with the Energy Globe Award and the Dubai International Award for Best Practices. The company employees are men and women with a criminal record and/or former prisoners. Recycla Chile is the first and only electronic waste recycling company in Chile.1% 93.0% 56.4% 84. Cost reductions 81. Job savings 54. Here we highlight one innovative organization. and 2.10 • Fresh fruit: 5.4% b.4% 52.g.1% % of firms earning more than 30 percent from innovation 27. constant 2005 international $): 221. Size of organization small to medium Large firms (e. total (Millions): 16.2% 20.0% 33. In 2008.g.1% 45. net inflows (% of GDP): 7.innovalatino.9% % of firms reporting awareness of leading public support programs 69. Falabella) individual SMEs and entrepreneurs (e.2% % of firms conducting projects with foreigners 59. ForoInnovación) Recycla Chile S. this entity provides environmental sustainability consultancies in Chile and other Latin American countries.3% % of firms considering gain of market share and/or new markets as very important effect of innovation 42.6% % of firms receiving external financial resources and considering financial support as important 29.60 • Cellulose: 4. the primary type of benefit sought.

15 9% 14.colombiaplantic.00 Costa Rica Peru Colombia Internet subscribers per 100 people Uruguay LATAM 0.33 4215. Colombia has been increasing its number of Internet subscribers remarkably. The guidelines are collected in the “ICT’s National Plan 2008-2019” (www.20 0. We consider those indicators in blue to represent factors that enable innovation.00 –1% LATAM OCDE 75.06 7315.38 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads 70% 4.42 OECD Average Mexico Brazil Argentina Chile LATAM 4. Colombian rate of growth of internet subscribers is the highest in LATAM.70 0.07 23.90 During the last five years.37 88.44 5.44 –8% 4.88 1% 47.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% 5% 0.00 10.50 111.47 13% 7696. LATAM average and the OECD average.03 –10% 0.00 Average last 5 years 15.40 30% 22% Royalties receipts in US$ per capita 0.00 .80 Growth rate last 5 years 0.00 17920.00 20. 0.11 9% 12% Total researchers per million labor force 151.10 Start a business time Graduates in tertiary school per 100 people Colombia 35.07 15% 7.03 44.88 48.62 6% 9093.17 39. those in red to represent innovations.61 42% 4.03 17% 2455.11 –13% 4.67 9.org) led by the Ministry of Communications. Bars indicate the last value available for the country.72 138.40 0.40 0.27 524.83 High technology exports as % of manufacturating exports International quality certifications –15% 2. and those in green to represent effects of innovations.15 16.81 79.97 681.60 0.29 –6% Number of patents 14.79 –14% 20.40 10% 8% Gross expenditure on research and development per capita 12.00 0.51 33481. LATAM average or OECD average.80 Gross Domestic Product per capita 6% 8884. The Colombian government has set as a target total coverage and efficient use of ICT technologies by the whole population in the country in 2019. 16% Political stability 8.50 0.31 25% 84. Arrows indicate the annual rate growth in the last 5 years for the country.10 0.30 0.InnovaLatino: Fostering Innovation in Latin America 48 Innovation in Colombia from a variety of perspectives InnovaLatino Profile of Colombia COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.10 –7% 0% –8% 13.54 31% 8% 25.

For additional examples.10 GINI index: 58.8% % of firms who applied for intellectual property rights protection 79. Today the network includes twelve technology centres in Colombia and Parquesoft firms provide services to 42 countries.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 52.21 % of firms receiving external financial resources and considering financial support as important 37.0% c.47 Foreign direct investment.org/colombia.9% 62. In 1999. InnovaLatino has developed vignettes of different types of innovators. The incubator promotes indigenous IT entrepreneurial activity and targets young people and those from socially marginalized groups. total (Millions): 45. Federación (e.g. The most complete and updated InnovaLatino Profile of Colombia (including sources) is available at: http://www. Colciencias) Nacional de Cafeteros de Colombia) SMEs and entrepreneurs (e. The network is designed to allow continuous exchange of ideas between the companies and as opposed to traditional incubators the companies do not leave Parquesoft when they have reached a certain size.g.html large Corporate social responsibility (e.g.2% % of firms earning more than 30 percent from innovation 32. PPP (Millions.0% 60.3% 35.1% % of firms with access to foreign machinery 86.innovalatino. depending on two dimensions: 1.2. please visit: http://www. net inflows (% of GDP): 3. Innovation in Latin America: Evidence from the Region 49 This country profile was developed in November 2010.org/colombia.. Empresas Públicas de Medellín) Large firms Public institutions (e. Colombia. Here we highlight one innovative organization.8% 17.innovalatino.2% 46. Job savings 75.0% % of firms reporting awareness of leading public support programs 31.25 • Coal: 16.2% 82. Job creation 75.4% % of firms finding innovation efforts led to: a. the size of the organization. constant 2005 international $): 371.0% 74.3% 33.2% Population.1% 26.66 GDP. Orlando Rinc Bonilla founded Parquesoft in Cali.2% b. For each country. and 2.9% % of firms that introduced product innovations 100% % of firms planning to innovate more 86.g.7% 89.70 • Nickel: 2. Cost reductions 85.6% 34.1% % of firms conducting projects with foreigners 17.1% % of firms considering gain of market share and/or new markets as very important effect of innovation 59.49 • Coffee: 4. Size of organization small to medium individual Social entrepreneurs social benefits .1% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Colombia..49 Main 4 exports as % of Total Exports • Petroleum & petroleum products: 31.. the primary type of benefit sought. but stay on and continue to grow within the network.2% 55.6% 66. Datatraffic) profits for owners Primary type of benefit sought Parquesoft Colombian Parquesoft is a non-profit innovation incubator that supports the creation and sustaining of micro enterprises in the field of software and technology..

30 The 2009 edition of the World Development Indicators of the World Bank placed Costa Rica as the fourth high technology exporter.90 –36% 22% Royalties receipts in US$ per capita 0.38 42% 4.00 20.11 3% 19% 19% 5% 6% 0% 7% 3% 7315.00 47. LATAM average and the OECD average.37 84.00 Average last 5 years . and those in green to represent effects of innovations.71 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads 14% 41.97 –5% –8% 13.88 48. The success of the high technology exports sector is the result after diversification of exports developed 20 years ago. 0.72 17920.10 –2% LATAM –1% 35.29 –11% 1% Number of patents 3.15 681.03 5% 9% 4% 18% 17% International quality certifications 236.62 6% 9093.00 10.81 79.33 4215.00 Colombia LATAM 7.00 –0.11 6% –8% 4.31 33481.54 25% 111.15 Chile Uruguay Peru High technology exports as % of manufacturating exports Brazil Argentina OECD Average Mexico Costa Rica LATAM –13% 30.22 12% 524.15 2% 8% Gross expenditure on research and development per capita 31.33 39. Arrows indicate the annual rate growth in the last 5 years for the country.40 138.40 8% 25.88 65.47 High technology exports as % of manufacturating exports 0% 16.06 OCDE 75.20 Growth rate last 5 years 0.15 0.InnovaLatino: Fostering Innovation in Latin America 50 Innovation in Costa Rica from a variety of perspectives InnovaLatino Profile of Costa Rica COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.44 23.03 –7% 0% 60.20 43% 3. those in red to represent innovations. LATAM average or OECD average.02 9.00 2455.29 –0.05 –0.90 0. This evolution has encouraged the installation of foreign companies and the demand for qualified workers.07 23.10 19% –10% 0.61 3% 25.00 50. Bars indicate the last value available for the country.20 0. We consider those indicators in blue to represent factors that enable innovation.11 44.79 44. Costa Rica Political stability Start a business time Graduates in tertiary school per 100 people –1% Total researchers per million labor force 121.10 0.00 0.00 40.S. a series of incentives to non-traditional exports and a frame of a tariff advantages in the trade with U.A and Europe.66 4% –13% 4.80 Gross Domestic Product per capita 6% 11241.10 –0.05 0.

1% 33. please visit: http://www. the size of the organization. Grupo Monge) Large firms Public institutions (e.9 million.3% 94.g.61 GINI index: 48..61 % of firms considering gain of market share and/or new markets as very important effect of innovation 49. Hotel Punta Islita) profits for owners Social entrepreneurs (e. total (Millions): 4. and 2.g. Innovation in Latin America: Evidence from the Region 51 This country profile was developed in November 2010.9% % of firms planning to innovate more 77. net inflows (% of GDP): 4. Café Britt was ranked a top business leader in Central America by regional business publication Summa Magazine. Cost reductions 83.60 • Bananas: 6. Café Britt is a gourmet coffee roaster and high end chocolate manufacturer in Costa Rica.9% 62.99 • Coffee: 2. Job creation 71. By 2010.org/costarica. revenues were US$ 40.6% % of firms earning more than 30 percent from innovation 61. For each country. PPP (Millions.1% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Costa Rica. It pays fair prices to local farmers who produce consistently high quality coffee.58 GDP. operated more than 50 stores in five countries. constant 2005 international $): 46.7% c. for a second consecutive year.1% 33. the primary type of benefit sought.7% 43.g.1% % of firms reporting awareness of leading public support programs 44.innovalatino.2% % of firms conducting projects with foreigners 58. depending on two dimensions: 1. In 2009.. The company’s core value as a countryof-origin producer with strong local identity remains a guiding principle as it continues to expand in the region.g.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 22. Laura Lang) social benefits Primary type of benefit sought . For additional examples. InnovaLatino has developed vignettes of different types of innovators. Size of organization small to medium individual SMEs and entrepreneurs (e.8% 66. Job savings 77.7% 82.9% % of firms who applied for intellectual property rights protection 75.2% b.0% 21. and had coffee and chocolate production facilities in Costa Rica and in Peru.org/costarica. In 2009..91 Main 4 exports as % of Total Exports • Manufactured goods: Excluding maquila and free-trade zone output: 21.4% 47. Café Brit is a patron of the arts and a partner in community development.5% % of firms finding innovation efforts led to: a.9% 31.html large Corporate social responsibility (e.5% 79.4% % of firms with access to foreign machinery Population.2% 84.8% 45.1% % of firms receiving external financial resources and considering financial support as important 38.. the company employed 850 people.18 Foreign direct investment.6% 64.2.innovalatino. The most complete and updated InnovaLatino Profile of Costa Rica (including sources) is available at: http://www.41 • Non-traditional agricultural: 11. Here we highlight one innovative organization. Conicit) Café Britt Established in 1985 by Steve Aronson.4% % of firms that introduced product innovations 77.

10 –7% 0% –26% 13.07 7% 12% Total researchers per million labor force 459.54 25% 111.15 17920.60 Growth rate last 5 years 0.00 90.62 16.40 8% 8% 25.15 681.89 dollars per capita to 4.97 23.11 7315.20 0.33 4215.72 –4% –13% 4.88 48.40 –0.00 Royalties receipts in US$ per capita Brazil Colombia Mexico Peru Argentina Uruguay Chile OECD Average 10.85 50.1 dollars per capita.09 17% 2455. LATAM average and the OECD average.85 42% 4.11 14% 69.29 4% 1% Number of patents 133. 0.20 –0.00 110. Bars indicate the last value available for the country. Mexico Political stability Start a business time Graduates in tertiary school per 100 people –12% 24.00 30.00 50.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% 0.81 79.06 –8% 13.00 47. We consider those indicators in blue to represent factors that enable innovation.00 –0.40 0.05 11% 13.03 Royalties receipts in US$ per capita 4. Arrows indicate the annual rate growth in the last 5 years for the country. since recently there has been more trade in intellectual property. could be measured by royalties and license fees (receipts for this case) for the which Mexico has historically lead this indicator and increased it in a positive direction during the period 2004-2008.90 Trade of intangibles has been increasingly his importance for economic activity and international competitiveness.38 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads 48% 7.80 4% 14495.00 9% 8% Gross expenditure on research and development per capita 56. and those in green to represent effects of innovations.03 44.44 –8% 4. LATAM average or OECD average.19 39.31 17.00 Average last 5 years .05 0% –10% 0. passing from 0.00 0.13 Gross Domestic Product per capita 36% 33481.40 138. those in red to represent innovations.37 84. Trade in intellectual property.00 Costa Rica –10.30 6% 9093.00 22% 9.00 70.79 LATAM OCDE 75.47 High technology exports as % of manufacturating exports International quality certifications 8% 4990.52 524.60 –30.InnovaLatino: Fostering Innovation in Latin America 52 Innovation in Mexico from a variety of perspectives InnovaLatino Profile of Mexico COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.40 –1% 35.

4% 40.8% 23.g. Size of organization small to medium individual Social entrepreneurs (e. Pineda Covalin) profits for owners Primary type of benefit sought Public institutions (e.5% 72. Cost reductions 88. The program is one of the pioneers of social innovation in Latin America. The project has benefited more than 300.7% 60. CEMEX is one of the world’s three largest building materials companies with 50.8% c. constant 2005 international $): 1335.7% 41. PPP (Millions. CONACYT) CEMEX – Patrimonio Hoy Patrimonio Hoy is an innovative Corporate Social Responsibility (CSR) program developed and supported by CEMEX.org/mexico.g. 180. US$ 14..26 Foreign direct investment.6% % of firms who applied for intellectual property rights protection 85. For additional examples. contributing to the development of the region.60 GINI index: 51. The most complete and updated InnovaLatino Profile of Mexico (including sources) is available at: http://www.8% % of firms considering gain of market share and/or new markets as very important effect of innovation 56.3% Population. the size of the organization.61 Main 4 exports as % of Total Exports • Manufactured goods: 82.innovalatino.3% % of firms finding innovation efforts led to: a.1% 74. the primary type of benefit sought.43 GDP.4% 48. depending on two dimensions: 1. with a loan repayment rate of 99%. please visit: http://www.org) social benefits .. and presence in more than 50 countries across five continents.g. Job creation 57. Causas.2% % of firms reporting awareness of leading public support programs 55. CEMEX provides the assistance and resources to build and improve houses with a low cost and efficient micro-credit system.52 • Oil: 13. Innovation in Latin America: Evidence from the Region 53 This country profile was developed in November 2010. Here we highlight one innovative organization.org/mexico.html large Corporate social responsibility Large firms (e.2% 96. In 1998.000 employees.000 families in five different countries.. InnovaLatino has developed vignettes of different types of innovators.3% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Mexico.0% % of firms with access to foreign machinery 72. net inflows (% of GDP): 1.8% 30.7 billion of net sales in 2009.innovalatino.0% % of firms earning more than 30 percent from innovation 41.Cinépolis) SMEs and entrepreneurs (e. Founded in Mexico in 1906.2% % of firms that introduced product innovations % of firms planning to innovate more 79. total (Millions): 107.9% b. CEMEX introduced Patrimonio Hoy to provide shelter to people of low income.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 42.2.39 • Mining products: 0.2% 51.1% 63. and 2.45 • Agricultural products: 3.5% 16.3% % of firms receiving external financial resources and considering financial support as important 31..2% 20.63 62. Job savings 68. For each country.5% % of firms conducting projects with foreigners 53.000 of them received more than US$ 67 million in loans.g.

–10% Graduates in tertiary school per 100 people n.06 –13% 4.00 LATAM 54.d.62 27% 17% International quality certifications 688. has encouraged the impressive increasing in the number of mobile phone subscribers in Peru. Bars indicate the last value available for the country.d. –3% 19.06 9.00 0. LATAM average and the OECD average.44 –8% 4.40 138.88 48.04 6% 9093.d.97 10% 8% Gross expenditure on research and development per capita 8. LATAM average or OECD average.72 25% 22% Royalties receipts in US$ per capita 0.33 4215.00 Mobile phone subscribers per 100 people Peru Uruguay Colombia Argentina LATAM 25% Growth rate last 5 years Costa Rica Mexico 40.35 0.80 Gross Domestic Product per capita 8% 8507.69 39.InnovaLatino: Fostering Innovation in Latin America 54 Innovation in Peru from a variety of perspectives InnovaLatino Profile of Peru COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.24 8% 25. Arrows indicate the annual rate growth in the last 5 years for the country.54 84.15 16.45 0.15 681.00 Average last 5 years .8 60.11 7315.88 38% 74.37 Mobile phone subscribers per 100 people Percentage of paved roads –1% 13. 12% Total researchers per million labor force n.00 2455.57 Personal computers per 100 people 16% 10.d.00 20.29 –6% 1% Number of patents 1.00 Brazil Chile OECD Average 100. We consider those indicators in blue to represent factors that enable innovation.47 High technology exports as % of manufacturating exports 3% 2.15 0.10 0. 0.03 44.30 0. 0.00 80.79 –1% LATAM OCDE 75.40 25% 111.90 Competition among three main operators wit the reduction in the cost of lines and of mobile equipments.07 23.00 120.10 41. The annual growth rate for the period 2004-2008 allows to see with optimism the accomplishment of the objective fixed by the Peruvian Ministry of Transport and Communications to expand the mobile service to 80 over 100 people in 2011. 524. those in red to represent innovations.50 0.20 0.81 79.11 –7% 0% –17% –8% 13.03 17920.31 33481. and those in green to represent effects of innovations.00 Peru Political stability Start a business time 35.05 0.25 0.06 n.38 26% Internet subscribers per 100 people 2.10 0.40 0.01 42% 4.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% n.50 47.

.org/peru.2. Recognizing that street vendors are an important way to reach clients.2% c.56 % of firms that introduced product innovations % of firms planning to innovate more 92. the firm will have sale of US$1.0% b. and water.. Astrid y Gastón) profits for owners Social entrepreneurs (e.5% 85. Grupo Arcor) Large firms Public institutions (e.54 Foreign direct investment. please visit: http://www.3% % of firms finding innovation efforts led to: a.4% % of firms conducting projects with foreigners 84. InnovaLatino has developed vignettes of different types of innovators.8% 47.6% % of firms considering gain of market share and/or new markets as very important effect of innovation 55. The firm credits its success in part to its ability to create a distribution system that works with the specific conditions of emerging markets. For each country. By 2010.8% % of firms earning more than 30 percent from innovation 18.g.7% % of firms receiving external financial resources and considering financial support as important 63.1% 96. Vietnam and Indonesia. Here we highlight one innovative organization. beer.07 • Fishmeal: 6.3bn from selling 17 trademarks across 16 countries and had experienced five consecutive years of persistent growth of 30 per cent.innovalatino.g. total (Millions): 29.g.. constant 2005 international $): 228.8% 36.html large Corporate social responsibility (e.innovalatino. CONCYTEC) Ajegroup Ajegroup is a Peruvian-based family-owned company that manufactures.org/peru. Innovation in Latin America: Evidence from the Region 55 This country profile was developed in November 2010.. the Añaños brothers founded the company with US$ 20.9% 75.30 • Copper: 22.4% 65.6% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Peru.1% 73. Size of organization small to medium individual SMEs and entrepreneurs (e.. such as Brazil. For additional examples. This type of business process innovation has enabled to Ajegroup to continue entering new and especially competitive emerging markets. Big Cola and Cola Real). the size of the organization.2% 22.16 GDP.52 Main 4 exports as % of Total Exports • Gold: 25. Ajegroup has developed a distribution system that ensures their products reach street vendors.26 • Zinc: 4. and 2. net inflows (% of GDP): 3.3% % of firms reporting awareness of leading public support programs 52.000.g. Job savings 85.7% 25.3% 42.65 GINI index: 50.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 18.8% 100% Population. Ciudad Saludable) social benefits Primary type of benefit sought . distributes and sells soft drinks (e. fruit juices.2% 23. the primary type of benefit sought.5% 72.2% % of firms who applied for intellectual property rights protection 73.g.7% 23.3% % of firms with access to foreign machinery 51. PPP (Millions. Job creation 89. depending on two dimensions: 1. In 1990. The most complete and updated InnovaLatino Profile of Peru (including sources) is available at: http://www. Cost reductions 89.

Even if Uruguay is not in the first position at the average investments level.00 –0.15 Chile Total researchers per million labor force OECD Average LATAM 12% Mexico Brazil Argentina Costa Rica 940.40 138.11 16.00 LATAM 371.54 25% 84.67 39.88 48. the efforts developed the last century expressed by the dynamics of the indicator.00 0. and those in green to represent effects of innovations.00 Average last 5 years .00 3940.00 4940.90 3% 19% 19% 5% 6% 0% 7% 3% 0% 5% 9% 4% Total researchers per million labor force 373.20 Uruguay 0.38 Internet subscribers per 100 people Personal computers per 100 people Mobile phone subscribers per 100 people Percentage of paved roads 15% 8% Gross expenditure on research and development per capita 36.InnovaLatino: Fostering Innovation in Latin America 56 Innovation in Uruguay from a variety of perspectives InnovaLatino Profile of Uruguay COUNTRY-LEVEL INDICATORS Examples of macro-level indicators collected from a variety of sources.62 111.5 1940.24 524. LATAM average or OECD average.05 –60.08 –13% 4.33 4215. Uruguay Political stability Start a business time Graduates in tertiary school per 100 people 11% 75.44 –8% 4. Technology and Productive innovation (SecyT) the investment between 2001 and 2005 raised a 115%.59 3% 12.80 Gross Domestic Product per capita 8% 12734.10 0. 0.03 –7% 44.07 –8% 13.08 12% 1% 5% LATAM –1% 35.03 17920. reflect the interest of governments to boosting the innovation in the region.72 International quality certifications 999.29 –19% 1% Number of patents 1.97 681.15 90.15 61% 8.02 9.06 7315.70 43% 1% 23.90 The investment in science and technology underwent a continuous growth after the last socioeconomic crisis of the country.79 OCDE 75.10 Colombia 0.31 33481.25 Growth rate last 5 years 0.05 0.11 0% 8% –10% 0. those in red to represent innovations.00 25% 17% 2455.37 104.00 0. Arrows indicate the annual rate growth in the last 5 years for the country.81 79.99 42% 4.40 8% 25. Bars indicate the last value available for the country. We consider those indicators in blue to represent factors that enable innovation.00 47.00 2940.10 65.20 6% 9093. LATAM average and the OECD average. According to the Secretary of Science.00 5% 22% Royalties receipts in US$ per capita 0.47 High technology exports as % of manufacturating exports 8% 3.

4% % of firms conducting projects with foreigners 100% 70.2. Walk.. PPP (Millions.1% 35. Job creation c. and 2.9% % of firms with access to foreign machinery 86. Take the bus.7% 39.2% % of firms reporting awareness of leading public support programs 83.6% 71. Currently. EFICE S.9% 45.innovalatino. But don’t return with a drunk driver.15 % of firms that introduced product innovations % of firms planning to innovate more 100% % of firms considering gain of market share and/or new markets as very important effect of innovation 35. the hour and the composition of the message broadcasted. synchronized and controlled by software that enables the client to choose the place. Bolivia. the primary type of benefit sought.6% 17. please visit: http://www.innovalatino. For additional examples.4% Population. Job savings 51. the size of the organization.34 GDP.1% % of firms who applied for intellectual property rights protection 62. UruguayINNOVA) Telemáforo In 1997.g.g.g.org/uruguay.7% 77. constant 2005 international $): 40. The most complete and updated InnovaLatino Profile of Uruguay (including sources) is available at: http://www.06 Main 4 exports as % of Total Exports • Meat & products: 20.org/uruguay. Rosario García y Santos y Asociación de Mujeres Rurales del Uruguay) social benefits profits for owners Primary type of benefit sought .g.3% 35.18 • Wool & products: 2. The screen consists of red light emitting diods (LEDs).A.1% 25. Some of the messages are “Please don’t drink and drive.html FIRM-LEVEL VIEW OF INNOVATION Excerpts of data from the InnovaLatino 2010 Survey Average value of participating large firms Average value of participating small firms % of firms with more than 50 percent of employees holding technical education 35. The firm’s clients are mainly municipalities that use this new system to broadcast security messages to drivers and pedestrians.7% 60. Innovation in Latin America: Evidence from the Region 57 This country profile was developed in November 2010.. InnovaLatino has developed vignettes of different types of innovators..2% % of firms earning more than 30 percent from innovation 64.00 GINI index: 47.9% 42.3% % of firms receiving external financial resources and considering financial support as important 43. Peru and Spain are in the process of installing Telemáforo in their municipalities.54 • Hides & skins: 3. Cost reductions 51.80 • Processed rice: 8. Memory) SMEs and entrepreneurs Social entrepreneurs (e. This new concept improves the impact of the red light in a traffic light by adding a luminous panel that diffuses messages and images. Alberto Amorim and Martín Palomeque created a new concept of traffic ights and with it a firm named Telemáforo.06 Foreign direct investment.3% 45..3% 27.html large Corporate social responsibility (e.” Telemáforo’s system provides 160.5% INNOVATIVE ORGANIZATIONS Examples of innovative organizations in Uruguay.9% 19.000 visual impacts a month in Uruguay. other cities in Argentina. For each country.8% % of firms finding innovation efforts led to: a. Here we highlight one innovative organization. total (Millions): 3. net inflows (% of GDP): 4.) Public institutions (e.2% 34.3% b. depending on two dimensions: 1. Take a cab. Size of organization small to medium individual Large firms (e.

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Chapter 3 Innovation in Latin America: mobile applications adoption and socio-economic development .

Due to the strong competition among telecom companies. particularly in rural areas with limited access to other means of communication. almost five times the number of fixed lines. and cost savings from the substitution of transportation. Operators have also introduced offers with reduced up front hand-set prices. . Panama. Competition has spurred growth by making services more affordable to people with lower incomes or usage of mobile services. such as number portability. such as Argentina.1 Mobile Penetration in Latin America Since the market liberalization of the 1990s. In 2009. mainly focused on mobile telecommunication. A new telephone infrastructure has been built. Colombia and Chile are very close to full coverage. Evidence also points to a positive correlation between teledensity and quality of life indicators – controlling for Gross Domestic Product (GDP) per capita – such as longer life expectancy. in return for long term contracts and higher usage charges.1 The Socio-Economic Impact of Mobile Telephony There is considerable evidence to show that the spread of mobile telecommunications improves economic growth and consumer well-being in poor countries. Besides the direct benefit of mobile devices. Colombia. in developed and developing countries. representing a penetration of approximately 85%. Ecuador. along with pro-competitive regulation. in Latin America as elsewhere. Guatemala and Uruguay. the average mobile penetration in Latin America is higher than in emerging markets in Africa and Asia. lower infant mortality and lower illiteracy. which enable communication between people. Latin America has witnessed explosive growth in mobile phone penetration over recent years. and Peru (Figures 3. Venezuela. The economic and social benefits of mobile telephony are greater in low-income communities. Paraguay. that make joining a network more accessible for low income users. While such levels are not uncommon around the world. 75% of mobile subscribers in Latin America were prepaid. pre-paid services have provided a very effective business model for operators and are particularly popular among low income users that would otherwise face barriers to the availability of credit. Operators have also developed new initiatives to assist with affordability. well above the global average of 58%. by offering schemes for people living abroad to pay for mobile services. Bolivia. which benefit some users. Consumers increasingly favor mobile phones over fixed lines. mostly due to reduced prices and greater incentives to service all market segments. 3. communities and entities. Mobile phones and adoption of mobile services have become more feasible for consumers.1 and 3.Chapter 3 Innovation in Latin America: mobile applications adoption and socio-economic development 3. and mobile adoption has been extended to areas that previously lagged in terms of telecom penetration – particularly the Andean region in countries such as Venezuela. Like many emerging markets around the world. many new telecoms operators have entered the region and increased competition has led to reduced prices and better service levels. have played a key role in empowering consumers relative to the costs they incur for service. El Salvador. such as in the case of relatives or friends. The number of mobile subscribers reached 462 million in 2009.1.2 present mobile and Internet penetration in Latin America at the end of 2009). In some countries. the reduction of information asymmetries and market inefficiencies. penetration surpassed the 100% threshold. The introduction of “per-second billing” and pre-paid cards. accrued indirect benefits include the facilitation of entrepreneurship and job search. high average per capita income and a higher level of urbanization (75% of Latin America’s population live in cities) among other factors.

000 77% 68% 61% 55% 10.400$ 33% 33% 33% 33% 33% 33% 4.900$ 2.5 0.000 29% 3.800$ 43% 33% 33% 33% 33% 33% 40% 5.000 11.000 8.3 0.3. small and medium enterprises (SMEs) owners utilize mobiles as an important sales tool.200$ 10.4 0.000 7.150$ 4% 48% 6.000 4. The increased contact with clients and suppliers allows SMEs to close purchase and sales transactions at fairer prices.4 1. they make better use of their time as phones can reduce the need to commute. MobILe AnD InTerneT PeneTrATIon In LATIn AMerICA 2010 (ForeCASTeD) In reLATIon To GroSS DoMeSTIC ProDuCT (GDP) Per CAPITA (%) 1.000 57% 8. often to sell their services and products. assess distribution channels. or provide post-sales support and follow-up.500$ 43% 1.100$ 9.200$ 6.000 6. Often part of the informal economy.000 101% 104% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 97% 94% 96% 93% 92% 12.000 109% 15.000 16% 17% 18% 2.200$ 5.1 0 38% 40% 45% 103% 104% 16.000 0 Source: Authors based on data from Pyramid research.300$ 65% 8. Ko r ne ea zu e M la ex ico Ch Ur ile u Ar gua ge y nt in a Br a Pa zil na Co m st a Do a m Co Ric in ica lom a n Re bia pu bl ic Pe Ec ru u El ad Sa or l Gu vad at or em Pa ala ra g Ho ua nd y ur a Bo s liv Ni ca ia ra gu a So Ve ut h Internet Users (2010) Mobile Subscribers (2010) Mobile Subscribers Latin America (2010) Internet Users Latin America (2010) GDP per Capita GDP per Capita (USD) 10.550$ 87% 84% 11.000 13. Mobile phones have proved to be an extremely helpful device for low-income users in their daily business activities.9 0.000 13% 12% 1.1.3 1. Innovation in Latin America: mobile applications adoption and socio-economic development 61 Figure 3.450$ 1.500$ 118% 135% 137% 129% 129% 18.000 9. In addition. Similarly.700$ .150$ 3.2 1.000 17.7 0.1 1 Subscribers (% of population) 0.200$ 3.2 0.6 0.800$ 10% 12% 1.000 16.8 0.500$ 3. contact customers.000 14.950$ 33% 33% 33% 33% 33% 33% 33% 33% 4. such users particularly value the mobility that phones provide.

including over 74 million (about 13. 3 Source: Economic Commission for Latin America and the Caribbean (ECLAC) with the Spanish acronym. such as tax filing and school registration.388.org/cgi-bin/getProd.000 inhabitants living in 149.1 The strong economic growth in Latin America since 2002 has been highly beneficial to the poor.00 per day. . Mobile telephony Internet users With a population of 572.2. MobILe AnD InTerneT uSerS (AS % oF PoPuLATIon) In LATIn AMerICA 120% 100% 80% 60% 40% 20% 0% 17% 15% 2006 19% 18% 2007 24% 18% 2008 28% 18% 2009 33% 18% 2010 (F) 69% 56% 44% 38% 18% 2011 (F) 18% 2012 (F) 81% 103% 89% 97% 108% 112% 50% 18% 2013 (F) Fixed telephone nota: F = forecast. CEPAL. Mobile services not only can increase citizen’s access to government services. Accessed on 15 December 2010.worldbank.3% of the total population) living in extreme poverty. but can also improve the flow of information between the government and its citizens.680. Latin America is a middle-income region.InnovaLatino: Fostering Innovation in Latin America 62 Figure 3.xsl.25 per day as poor and extreme poverty refers to those living with less than US$1.3 Mobile telephony provides an important channel to increase their socio-economic development and mobility. the size of the middle class in the region has increased in every country.xml&xsl=/prensa/tpl-i/p6f.936 in 2009. 33. Source: Authors based on data from Pyramid research. the poverty rate2 decreased by 12 percentage points and extreme poverty decreased by 9. Nevertheless. and offers a tool to reduce poverty in these under-privileged segments of the population. and increase society’s engagement in governmental decisions in general. 2 The World Bank considers those living with less than US$1.1% of the total population.xsl&base=/tpl-i/top-bottom. with average nominal GDP per capita of US$6.1 percentage points. Between 1990 and 2007.eclac.asp?xml=/ prensa/noticias/comunicados/4/41804/P41804.000 households and a GDP of US$4 trillion. GroWTh oF FIxeD. Accessed on 15 December 2010.org/region/latin-america-and-caribbean. Several governments are actively using mobile technology to help drive development. http://www. in 2009 the region was still home to 183 million poor people. 1 Source: World Bank Latin America http://data. In particular. they are turning to mobile applications as a way to give low-income groups access to services which will help them improve their lives.

2 The Mobile Applications Ecosystem The Mobile Applications Adoption Framework (MAAF) was created to understand the ecosystem that is conducive to the proliferation of mobile applications in order to explain the dynamics of mobile application growth (Figure 3. user Adoption Levers: What are the user-centric factors driving the demand for mobile applications? 1.3. MobILe APPLICATIonS ADoPTIon FrAMeWork (MAAF)4 Socio-economic development User adoption levers Mobile applications Mobile ecosystem evolution Source: Booz & Co and INSEAD. ranging from macro-level factors to user-centric dynamics. Specifically. to the development of the framework MAAF and to this chapter is gratefully acknowledged. it addresses key questions across three areas:4 Socio-economic Development: What are the macro-level factors driving the overall growth in mobile penetration? 2. Innovation in Latin America: mobile applications adoption and socio-economic development 63 Figure 3. 3. Barbara Martín’s comments were also very helpful.3. The framework revolves around interrelated dimensions. 4 The contribution of Christos Mastoras and Juan José de la Torre from Booz & Co.3). Mobile ecosystem evolution: What are the industry-level factors driving the supply of mobile applications? 3. . We use the above framework to understand the adoption and impact of mobile applications in Latin America.

exists related to mobile services.4. For example.4). Education & Learning and Market Liberalization5 & Competition (see Figure 3. 5 Market liberalization in this sense concerns the overall regulatory framework for mobile operators. despite low per capita incomes. SoCIo-eConoMIC DynAMICS: key FACTorS Education & learning Economic development Mobile applications Markets liberalization Source: Booz & Co.InnovaLatino: Fostering Innovation in Latin America 64 Figure 3. and INSEAD. regulation. Although these factors are not exhaustive. Chile has passed legislation to this effect. There used to be a strong correlation between fixed line phone penetration and Gross Domestic Product/capita. or regulatory oversight. Nevertheless.2. 3. measures in favor of transparency. specifically at the low end of the Gross Domestic Product per capita range. among other possible examples. this correlation no longer holds true for mobile phone penetration.1 Socio-economic Development The three key factors for socio-economic development are Economic Development. 3.2. including applications: non discrimination.1 Economic Development Past research has claimed that Information and Communications Technology (ICT) penetration is associated with income levels and correlated with Gross Domestic Product (GDP) per capita. limitations on unreasonable blocking.1. they include the most relevant aspects. Eight of 18 countries analyzed in the figure achieved over 90% population coverage.1 shows the perceived correlation is contradicted by a range of countries. and macro-level aspects such as investment environment and cultural considerations are embedded within Economic Development and Education respectively. mobile licensing. these aspects are considered as part of the socio-economic dynamics affecting overall mobile penetration. As Figure 3. To the extent that much of the regulatory framework in Latin American countries is not specifically targeted at mobile applications. privatization and effective and efficient regulation that promotes both competition and investment in the sector are captured by the Market Liberalization factor. . pricing strategies and customer service are associated with the market-facing activities of mobile operators and are therefore inherently embedded in Competition. However.

The second is that natural barriers such as lack of education or electricity prevent mobile take-up.3% 89% 95% 87% 74% 100% 80% 68% 60% 55% 40% 22% 20% 0% Source: Authors based on data from ECLAC and SEGIB (2008). high proportions of population speaking foreign languages.2. economic development and associated higher incomes are inevitably enablers. According to the World Bank.3.2 Education & Learning The expanding reach of education in Latin America aids the adoption of mobile applications. diminishing the benefits of mobile applications. 3. it is fair to say that we shall continue to see high adoption of mobile telephony all over Latin America. LITerACy rATe 15-24 yeArS oLD 1990 AnD 2007 120% 99% 99% 98% 100% 96% 95% 97% 98% 98% 98%98% 98% 97% 96% 95% 93% 93% 92% 95% 85% 84% 73% 98% 98% 98% 99% 98% 96% 95% 95% 99% 94% 96% 96% 90. the quality of education and the subsequent functional illiteracy pose a major problem. Still.e. School attendance and literacy rates have increased and the United Nations’s Millennium Development Goals are within reach. Innovation in Latin America: mobile applications adoption and socio-economic development 65 Figure 3. The first is that the rural poor are not able or not willing to pay for mobile telecommunication services.1.5). and primary school attendance is close to 100%. provide a positive context for the drivers of adoption and usage of mobile applications. In Latin America. and the introduction of e-learning are natural enablers for mobile applications. the weak correlation between GDP per capita and mobile penetration is indicative of two other declining myths. increasing literacy rates (see Figure 3. i. Specifically. However. the education gap mirrors the income gap between rich Am Ar eri ge ca nt in a Bo liv ia Br az i Ch l Co il lo e m Co bi st a a Ri ca Cu Ec ba u El ad Sa or l Gu vad at or em al a Ha Ho it nd i ur M as e Ni xic ca o ra g Pa ua na Pa ma Do ra gu m in ay ica n Per Re u pu b Ur lic ug Ve ua ne y zu el a Literacy rate of 15-24 years old 1990 Literacy rate of 15-24 years old 2007 La tin . The literacy rate has risen from 92% in 1990 to over 96% in 2007. Given these dynamics.5.

htm Accessed by 15 December 2010. 3. or loans. driven by technological trends. et al. . Typically. América Móvil or Telecom Italia. there can be barriers to the introduction of new services such as financial services over mobile networks. 6 Pro-competitive regulation has been important to the development of mobile applications in many markets. an extension of traditional payment methods such as the Internet or a bankcard. and for accessing bank accounts.1. cash. local loops. Figure 3.InnovaLatino: Fostering Innovation in Latin America 66 and poor.6 presents the six key elements of a robust mobile ecosystem: • • • • • • Vibrant developer community. clearing and settling the payment through normal banking channels. G. Latin America currently – with the exception of Mexico – has a highly competitive environment for mobile operators.can have significant market power in areas such as backbone facilities.2.6 Converging boundaries across sectors have also spurred deregulation and market liberalization to aid the adoption of mobile applications. Within this context. It is a way of increasing school attendance and encouraging students to fulfill their goals.gsmworld.2 Evolution of the Mobile Ecosystem The mobile ecosystem. According to GSM Association7 in 2010 there were 49 live deployments of mobile payment services and an additional 70 in development in the world. Defined business models. the telecom operator typically acts as an intermediary. four to five operators serve each market. whether checking.whether old or new -. teachers can support ill or disabled students through mobile phones as a permanent way of learning. which defines the supply of mobile applications. bank account information and authentication processes among others. Around 50 million people cannot read or write and are unable to compete in today’s economy. When mobile payment services are not based on an underlying bank or payment card account. consumer demands. international roaming services and so forth. extends far beyond telecom providers. savings. Mobile applications can help alleviate this situation. authorizing. (2009) states that mobile phones can transform learning environments in interactive environments. from monopolistic to liberalized telecom markets which has driven mobile adoption. Camner. Because of the technological nature of telecommunications. For example. User interface. operators -. Mobility is a resource that adds value to traditional education and supports personal and individual development. and to pro-competitive regulation. A case in point is m-financial services where the boundaries between traditional banks and telecom operators have blurred. thus performing mobile banking functions or m-banking. Traditional mobile payment services simply use the phone as an access device to initiate and authenticate transactions from existing bank accounts or payment cards.com/our-work/mobile_planet/mobile_money_for_the_unbanked/index. cards and other modes of payment will be replaced by mobile phone applications that will allow remote payments. mobile termination. 3. deregulation has provided an increasingly favorable legal and regulatory environment. In the future. When there is insufficient or ineffective regulation.3 Market Liberalization and Competition Market liberalization and the resulting intensifying competition has enabled emerging markets to undergo a significant transition. 7 Source: http://www. Thanks to these factors. Customer sophistication and readiness. Technological readiness. Several such initiatives are also underway in Latin America. which includes local operators and international companies like Telefónica. Mobile phones are increasingly utilized as platforms for operations with financial institutions.2. deregulation and market liberalization. Competitive intensity.

However. evoLuTIon oF MobILe eCoSySTeM: key eLeMenTS User interface Developer community Competitive intensity Mobile applications Business model Technological readiness Customer sophistication and readiness Source: Booz & Co. the development of new business models based on converging technologies and open standards is enabling new players to step in. fostering the development and launch of innovative mobile applications. Traditional business models featured the operator as the gatekeeper between providers and the end-user. For example. The profit obtained by coffee sales is deposited by the Federation in the Identification Card along with the benefits given by the national government (e.2 Business Models Business models bring together the different stakeholders of the mobile applications ecosystem setting the rules of engagement and commercial interplay between parties. especially from countries with a strong engineering tradition such as Mexico. Most of these communities include programmers from Latin America. which base their applications on a common set of tools such as Application Programming Interfaces provided by operators.000 coffee farmers closer to financial services. Brazil and Colombia. Microsoft has established the Windows Mobile community.g. This joint venture with Telefónica MoviStar and Banco de Bogotá is a mobile banking project in which the Intelligent Coffee card works as a cash-in and cash-out tool. crops renovation and protec- . and INSEAD.2. Handset and software manufacturers have typically grouped their development tools around specific operating systems or platforms. Business models also define how the “providers” engage the end-user to capture the upside of opportunities in this space.1 Developer Community Most mobile applications are developed by developer communities. 3.2. Apple the iPhone platform and Nokia the Symbian-OVI community.2.3. Innovation in Latin America: mobile applications adoption and socio-economic development 67 Figure 3. handset manufacturers and vendors. Google has launched the Android operating system. Consider the following example: the National Federation of Coffee Growers created the Intelligent Coffee Identification Card in order to bring more than 300. For example Orange – France Telecom has developed the Signature Community and Telefónica established the Movilforum community in 2001 in 14 countries in Europe and Latin America.6. Mobile operators have also made efforts to launch their own developer communities.2. 3.

which was cut off from the world due to lack of infrastructure.08 including taxes. Santarém and Aveiroand. code or account number. Special efforts are being made to increase coverage to the remote parts of Latin America. a very poor region in Brazil and with a low population density. it is cheaper.2. about 8% of the population across Latin America had access to 3G services in 2009 with this proportion expected to rise to nearly 50% by 2013. As a country’s Gross Domestic Product increases and its citizens have greater disposable income. According to data from Pyramid Research. for instance. the opportunity for the government to start providing innovative m-government services has increased considerably. the biggest telco in Mexico). Note that the Intelligent Coffee card is different from a bank account. the two essential ingredients to access the mobile network. Consider the case of Legal Amazon. as of 2009.2. farmers are able to check coffee prices and the last five operations in their Intelligent Cards via their mobile phones.in this case Banco de Bogotá . information technology providers and teller machines). According to the company in 2009. have grown tremendously in Latin America. With this service. The government of the Federal District in Mexico (DF) has implemented a number of projects that benefit its citizens. Even though it has similar functions to those of a debit card. Also. Also. The challenge was to access more than 30. Citizens can obtain information about payments on automobile and property taxes via cell phones. Vivo – the largest mobile operator in Brazil with more than 55 million subscribers – and Ericsson inaugurated the first communication’s tower to allow wireless and mobile access in Legal Amazon. In Brazil. which is an average of 0. Telephone operators participating in this project are Telcel (part of América Móvil. The Intelligent Coffee card is therefore 1) an identification card for the coffee grower members of the Federation.3 Customer Sophistication There are many factors which affect customer sophistication but economic income. Once the money has been credited. assuming that economic progress in the region is maintained. mobile technology has just been added as an extra feature. Iusacell (part of the Grupo Salinas) and Movistar (part of the Spanish Telefónica)l.000 people from the Amazon living in 143 villages in Belterra. works in remote areas and the bank . Telefónica managed to facilitate the use of the Coffee card as a mobile information resource.InnovaLatino: Fostering Innovation in Latin America 68 tion). Because of the high mobile penetration in the country at almost 92% in 2009. The government also plays an important role both as a leader and facilitator in determining customer sophistication. buy goods from authorized points of sale and recharge prepaid mobile phones. and 4) a user-friendly approach to develop mobile banking. an average of 43 operations per day. consumer expectations from and willingness to spend money on mobile application services increase. level of education and the overall maturity of the telecoms sector are key determinants. Coverage across Latin America exceeds 90%. in only one month 127 coffee growers of four municipalities made more than 1. 2) a practical and efficient way of receiving payments of coffee crops sales. The cost per message is about US$ 0. 3.300 transactions using Short Message Service (SMS). over 500 million mobile devices were available.2. The introduction of 3G is also expected to ramp up significantly over the next years.4 Technological Readiness Area coverage and the number of mobile devices. with all towns and municipalities having mobile coverage thanks to the rules attached to the new 3G licenses.9 mobile phones per inhabitant. where the tax filing system is almost entirely handled electronically. Users must send a text message to the number 98888 with the name of the request. This ecosystem of public and private sector partners in Colombia provides an example of how to create a sustainable and innovative business model for mobile application deployment.only provides the equipment to make the system work (e. the farmer can use the card to withdraw cash or buy at selected stores.g. They can also access information about payments and request codes to process payments via SMS. This trend can be expected to continue in Latin America over the years to come.2. The project lead by the Non-Governmental Organization . a means to automatically communicate via SMS that tax reimbursement has been deposited in the taxpayer’s bank account. 3. In late November 2009. 3) an innovative solution to withdraw money from teller machines and Terpel gas stations.

Three levers – relevance.2. Most of the handsets in the Latin American market are what can be called basic features handsets.3. fuelled by the industry standardization. Mobile information technology is used to improve primary health care service delivery in Special Indigenous Health Districts that serve indigenous communities throughout Brazil.2.7) – are the building blocks that service providers use to synthesize the value proposition to the user in order to foster take-up. Keeping mobile applications relevant to the end-user implies generating strong value propositions and delivering these value propositions to the customer through a compelling implementation of the mobile application. pushing the boundaries of mobile applications.5 Competitive Intensity The intensity of competition affects the overall dynamics of the mobile applications market. demand growth entails the use and application of all three levers. access to healthcare and access to education. Mobile devices are used by a professional staff in multidisciplinary health teams that provide services to these communities. As competition mounts in Latin America. The more developed the interface. 3. mobile operators are now seeking further growth opportunities in mobile applications. It seeks to improve public policies as well as health and education public services.2. doctors and educators who go by boat along the Amazon’s rivers to provide services to poor social communities can now have access to mobile phones to get in touch with the community and hospitals with advanced expertise. convergence of technologies and overall deregulation. accessibility and affordability (see Figure 3. innovation in applications development will also increase. . the more likely the end user is to adopt mobile applications.2. The industry is in the middle of a transition from mobile phones as simple devices with black and white screens to smart “computational” devices. local journals and Internet blogs. they create community reports that are reproduced in radio programs. 3. Innovation in Latin America: mobile applications adoption and socio-economic development 69 (NGO) Saúde e Alegria aims to connect the communities that are members of the NGO. As the price of smart phones comes down. which provide basic mobile applications based on SMS. Having reached nearly 100% penetration in many markets. capable of tasks similar to a full fledged computer such as an Apple iPhone.2. This program trains young people in the field of telecommunications. as it stimulates innovation. many of which are located in remote areas. The Department of Indigenous People’s Health maintains a register of individuals living in indigenous communities. the availability of these phones to the general population in Latin America will multiply. However competition is mounting from value chain players like handset manufacturers as well as from non-telecom players. Demand is driven by the development and commercialization of mobile applications that fulfill a core customer needs in everyday life – essential functions that the user would seek to perform on a regular basis such as access to information. management/transfer of money. For a remote region. The increased mobile coverage also provides support to the communication learning network of the Rede Mocoronga de Comunicação Popular. While the levers can individually drive take-up as standalone factors. an initiative of Saúde e Alegria.2.6 User Interface The User Interface is a key driver of mobile applications adoption as it represents the vehicle via which users can access and use applications. 3. These features of the user interface create the perfect platform to unleash the creativity of developers for innovative mobile applications. Consider the example of m-health services.3. 3. videos.3 User Adoption Levers User adoption levers are the factors nearest to the end-customer driving mobile application adoption. For example. increased technological readiness brings the local population access to benefits in health and education which were previously nonexistent or difficult to obtain.1 Relevance Relevance is a key customer-centric driver of adoption.

are the main causes of sickness and high mortality rates. where the use of mobile technologies can be compared to the current paper form-based system. as well as the increasingly wide availability of low-cost affordable phones.InnovaLatino: Fostering Innovation in Latin America 70 Figure 3. enhancing access to mobile applications in remote parts of Latin America frequently requires innovative models of partnerships across different stakeholder groups. In the program. However. there must be awareness around the application and an effective distribution mechanism to the customer.2 Accessibility For an end-user to purchase and use a mobile application. With the goal of improving health care access and quality to nearby inhabitants. the increasing reach of formal and informal sales and distribution networks. oral health. both mobile operators and handset manufacturers have contributed to expanding accessibility. uSer ADoPTIon LeverS Relevance Accesibility Mobile applications Affordability Source: Booz & Co. dirty and covered with mud. the not-for-profit Kausay Wasi . 3. The project is being implemented in 18 of 34 Special Indigenous Health Districts. Poor living conditions. to be followed by the creation of modules for nutrition. data entry modules are created for use with mobile devices and replace paper forms and manual data entry. and maternal and child health over the next three years of the project. As such.7. and INSEAD. Consider the case of Peru’s Kausay Wasi Clinic.2. in the surrounding territory of Cusco and Machu Picchu. the magnificence of the landscape makes for a stark contrast with the omnipresent poverty. it must be accessible. along with harsh climate conditions that makes houses humid. depending of Fundação Nacional de Saúde (FUNASA) will be implementing the program with the technical assistance of the Pan American Health Organization (PAHO). The Department of Indigenous People’s Health. In addition to technical expertise. PAHO will support training activities and facilitate the grant. The first module was for immunizations services. Namely. Accessibility has been aided by the expansion of the coverage and quality of mobile networks. a lack of running water and electricity.3. Information about health services is linked to this population registry to monitor vaccination coverage and health indicators. In the “Sacred Valley” of the Incas.

regularly visit the clinic and provide medical services free of charge to the poorest mountain villagers in need. Medical Teams International of Portland. Convergence in Enabling Platforms. camera and video mobile phones.3. Affordability needs to be reflected all across the mobile application value chain. As a result. 4. In the same way. IT equipment and connectivity fees. Extend Data Network Coverage while Reducing Entry Barriers. when compared to fixed line Internet. prices have declined thereby helping to extend mobile applications to larger parts of the population in Latin America. data cards. By some estimates this corresponds to as much as 20% of all the foreign direct investments (FDI) made in the region in the last 20 years. 3. through the data access cost to the application itself. Thus.S. making patient care very precarious. 3. the clinic was completely isolated and had no connectivity of any kind. Encourage Mobile Application Development Ecosystems. Fixed line telephony installation was attempted without success due to geographical difficulties. to further develop the mobile application ecosystem and help to realize the vast economic potential of mobile applications – and ensure that even the poorest members of society can attain its benefits – stakeholders need to focus on six initial areas: 1. Together with FACES Foundation – which provides expertise in the surgical treatment of children with facial deformities – the clinic has improved the lives of children in numerous cases related to cleft lip and palate. elderly people have benefited from general medical care as well as orthopedic. Between 12 and 15 volunteer doctors from the U. As discussed before. the deployment of mobile phones across developing communities has a multi-dimensional positive impact on sustainable poverty reduction. entrepreneurs and women in particular has not been fully tapped. Thus. and its potential to foster the development of communities through the empowerment of SMEs. Spread of ‘Mobile Applications Capable’ Handsets. Partnering with Qualcomm’s wireless telecommunications research and development department. At first.3 The future of mobile applications in Latin America In recent years. It also provided funding for laptops. information either arrived late or in some cases not at all. Qualcomm installed wireless technology in the clinic. going forward. 1. it remains important to make the mobile phone as cheaply and widely accessible as possible. Recommendations in this concluding section of the chapter can be drawn across the three dimensions of the Mobile Applications Framework (Figure 3. The clinic is based on an idea and funded by the Americans Gido del Prado and his wife Sandy.3 Affordability We have seen that one barrier to mobile adoption in emerging markets is low disposable income. Innovation in Latin America: mobile applications adoption and socio-economic development 71 Health Clinic was founded in 2005 in the rural village of Coya. As the supply of mobile applications has increased exponentially. .8). gynecological and dental care.3. 2. the Kausay Wasi Health Clinic found a way to improve its services through the wireless reach initiative. The number of jobs directly or indirectly related to the mobile industry in the region amounts to over 2. while developing and creating an environment that fosters the development of mobile applications centered on the end-user. prompting operators to make heavy investments in infrastructure networks. which makes it possible to provide applications. Therefore.5 hours from Cusco. from the handset. 3. It was founded together with the help of 200 local residents. Oregon. the evolution of the telecommunications market and information technologies in Latin America have experienced strong expansion mainly driven by demand as mobile telephony became more affordable. connecting it to the world. the overall monetary cost of accessing and utilizing the mobile application is critical in developing markets.2. The greater accessibility to Internet provided by mobile technology. burns and accidents.3 million.

Only by following this approach can they guarantee that end-users will have a full opportunity to take-up mobile applications. Without a systematic approach. Some are enablers of mobile applications directly on the demand side. with specifically designed terminals and service propositions designed for shared access in the home. Therefore. therefore affecting the supply side. others have a fostering or empowering role for the mobile application ecosystem. However.InnovaLatino: Fostering Innovation in Latin America 72 Figure 3. Develop Cross-industry Agreements. stakeholders need to focus on getting “Mobile Application Capable” devices to the end-users. . handsets are the first and the direct interface between mobile applications and end-users. they enable the demand from the end-users. 6. 3.1 Spread of Mobile Applications Capable Handsets As indicated throughout the chapter. It is not enough to offer affordable handsets to the end-users. The time is right for a systematic. efforts to date have been largely ad hoc and are not driven by operators or service providers themselves. with an affordable portable phone. These six elements are closely interrelated. Technological readiness 5. They are also the device on which users run and execute the mobile applications. Foster Public Private Partnerships. One illustration is Brazil’s New Baby Phone initiative. the office and via public access pay phones. This leads to a limited global impact and hence a limited potential for job creation as well as the expansion of the communication benefits.3. the vast potential of the market will not be realized. Mobile ApplicAtion Adoption FrAMework (MAAF): Full view Education & learning User interface Developer community Economic development Relevance Competitive intensity Accesibility Business model Mobile applications Affordability Customer sophistication and readiness Markets liberalization Source: Booz & Co. “productized” approach to shared access.8. whereby the government supplements the aid basket provided to low-income and under-privileged mothers with a newborn baby. and INSEAD.

mobile phones are set to become the most easily accessible and ubiquitous communications devices in rural areas. Innovations such as micro-prepay (which allows the purchase of very small amounts of airtime) and low-cost pricing strategies for data services can help low-income users access the mobile applications ecosystem. stakeholders need to work together to define standards and ways to allow the interoperability of mobile applications. This promotes an even more rapid adoption by low-income end-users and allows mobile applications to start spreading through the communities. several operators continue to utilize CDMA networks due to economic and internal competences issues. allowing the seamless integration of different development ecosystems through common interface layers. as most mobile applications developed for a particular platform either cannot be used or require major adaptation to be used in another environment. but also from other developing markets such as Africa where shared Internet phones have started as a trend to provide low-income users with their first access to the Internet. extending the data coverage beyond cities to rural areas. mobile application stakeholders need to aim for and foster the development of open standards. micro prepayments or top-up cards. the mobile ecosystem has developed into a scattered landscape regarding technological approaches for access technologies. data access is critical. innovative modes of mobile phone access allow phone sharing through SIM cards and to pay for airtime through micro-prepayment. As explained in previous sections. . is becoming the de-facto standard for mobile networks. which communicate with each other. The consequence of this lack of interoperability is an increase in the cost of development (more development is required to reach more users). each of them with its own set of developing tools. Thus. At the same time. making mobile phones affordable to all while generating a broad reachable market. the new technology of Radio Access Network (RAN) sharing would allow competitors to share their mobile towers. Examples include but are not limited to cheap handsets. the existence of several different access technologies jeopardizes the possibility for operators to benefit from new trends in access technologies. developers can “adhere” to one or many “development communities”. In addition. which is transferred to the end-user. where thousands of potential users await.3. that is. Finally.3 Convergence in Enabling Platforms Contrary to the Internet world. Thus. Also. developer communities and handset operational systems. Thus.3. becomes a priority. as this uses the Symbian OS and therefore the Symbian toolkit. a higher cost of the mobile application. there are interoperability problems on the “developers platforms”. To achieve these.3. stakeholders also need to focus on providing end-users with affordable access rates to data networks. which in turn allows and fosters the development of mobile applications. even for very low-income customers. On the one side GSM. while maintaining the benefits of separate environments. On the other. Innovation in Latin America: mobile applications adoption and socio-economic development 73 In conclusion. This generates inefficiencies. For example. achieving interoperability between access technologies remains a challenge. bring them within reach of even the poorest of the poor. For example. To achieve this goal. One way to encourage this is by offering flexible pricing models and plans that offer affordability and choice. the market leader with a growing influence. where standardization and common platforms have prevailed. Thus stakeholders need to focus on lowering the cost of ownership of mobile application capable handsets. whose prices are even lower. 3. Late homogenization and standardization in the developed world has not yet reached Latin America’s poor. 3. Easy availability of low priced new handsets with basic features and the emergence of secondary markets for used devices. a developer creating an iPhone application based on the iPhone toolkit needs to redo the whole application to have it run on a Nokia phone. Examples can be taken not only from Latin America.2 Extend Data Network Coverage while Reducing Entry Barriers Stakeholders need to continue to foster overall socio-economic development with particular emphasis on mobile and Internet technologies. which would reduce their capital expenditure and operational expenses and thus allow more affordable prices to the end-user.

. which implies underserved areas not getting the value that mobile applications can add. it will require willingness and openness to succeed in the long term. organizations and government entities that belong to different industries but that. which encourages developers and start-ups to jump into the mobile applications space and develop mobile applications relevant to the market. 3. But this new interaction requires a combination of skills.3. enabling low-income people to benefit from technology-enabled financial access will require work at many levels from different stakeholders. However. An understanding of the local context and the creation of local content are important for successful mobile application development in the region.3. By sharing the risk and the rewards with third-party public entities. while creating the means to materialize and unleash the mobile applications potential in Latin America. such as local stores. soaring penetration. Easy participation. governments are increasingly seeing the convergence of banking and technology as an opportunity to expand access to finance for low-income groups. the mobile phone is now much more than a simple voice communication device. can generate further value for them and the telecoms industry. regulatory and political issues. Moreover. most applications are developed for mature markets and later “translated” for the Latin market. relevant and affordable mobile applications for the Latin American market. along with the convergence of Internet and media. Thus public policy initiatives like public private partnership (PPP) funding schemes could be introduced to make this happen. stakeholders in the mobile ecosystem need to be aware that these new possibilities will require the contribution of “telecom outsiders” – companies. In such a situation. has generated a new set of possibilities and uses for the mobile phone. Developing competition policies that encourage innovation but protect against customer-unfriendly monopolies. There is strong evidence that telecoms roll-out is linked to higher levels of foreign direct investment and economic development. For example. it is a tool that can offer a number of applications across industries. It also offers a way for government to speed up the development of infrastructure and intellectual property. For example. tools and strategies from a dispersed number of stakeholders who will need to address operational. Examples vary from parking payment to health control issues.5 Develop Cross-industry Agreements The evolution of mobile technologies. many countries now allow agents to perform customer screening. and irresistible economics have already ensured that these interations add value to all the elements involved. fostering the development of the mobile ecosystem through public private partnerships can be beneficial for the private and public sectors alike.6 Foster Public Private Partnerships Access to mobile networks. which in this case can benefit the mobile applications supply. services and mobile applications is still far from universal. due to cultural conditions that make the adoption of these applications difficult.InnovaLatino: Fostering Innovation in Latin America 74 3. Using m-finance as an example. 3. applications may not reflect the needs or desires of the Latin American market. Adopting a risk-based approach to anti money-laundering actions and countering terrorist financing rules. Only by combining forces can entities from different industries help to solve issues and requirements such as: • • • Allowing nonbank agents. Hence. Hence stakeholders need to work to develop an innovation ecosystem in Latin America. and advances are needed to reach the poorest people. to offer “cash-in/cash-out” services to customers.4 Encourage Mobile Application Development Ecosystems Another element that needs to be considered is the availability of wide-ranging. Currently. government can attract a number of potential investors willing to take the required risk with the goal of achieving specific forecasted revenues. This does not always work as anticipated.3. by interacting with the telecom ecosystem. As described throughout the chapter.

Chapter 4 Ways Forward for Innovation Policy in Latin America .

A gradual learning process will therefore be necessary. Agriculture and industry weigh relatively more in Latin America compared to the world average.1).1. Ocampo and Parra (2003). wood and basic metals1 – is more important to the region’s economies. This pattern of specialisation is closely linked to the relative abundance of natural resources (though some OECD countries share this characteristic. 4. and raises some open questions about that agenda with a specific focus on the post-crisis period. The most extreme instances of industrial predominance are Chile (47 per cent 1 This is the definition of “basic goods” developed by the UN Economic Commission for Latin America and the Caribbean (ECLAC). Finally. New Zealand and Norway). five aspects of Latin American economies – some particular to the region. innovation strategies must be coherent with this pattern of specialisation – though they may take many forms. the central elements for the innovation policy agenda are discussed. One important aspect needs to be highlighted: given the current state of development of Latin American countries. In moving forward. The education system and institutions linked to the development of skilled human resources must be marshalled to better serve innovation. others universal – are particularly relevant in guiding this learning process. an overwhelming majority of its companies lack the endogenous technological capacities to develop innovative activities or the absorptive capacity to access external knowledge. To foster the contribution of innovation to the region’s development this concluding chapter looks at an innovation policy agenda for Latin America in the wake of the global financial crisis. See for example. the production and export of basic goods – natural resources but also primary industrialised goods such as food and beverages. as well as a case study in the interaction between public and private players (Chapter 3).1 Innovation in a Natural-Resource-Abundant Economy Taken as a whole Latin America has a different production structure from that of most OECD economies. i) ii) iii) iv) v) As most Latin American economies rely heavily on the exploitation of natural resources. Adequate information systems are needed in order to monitor and assess innovation policies. institutional support designed to foster access to and diffusion of knowledge and technology) and of a structure that incentivises investment in innovative activities.1 Five challenges to innovation in Latin America 4. opportunities abound for future innovation linked to green growth. . including Australia. requiring the strengthening of critical components of national systems of innovation (in particular. The diffusion of mobile telephony applications provides a concrete illustration of the successes and the setbacks associated with innovation in Latin America. In general. while services accordingly account for a slightly smaller share of GDP (Figure 4. recent developments both at the level of public institutions and private businesses are encouraging (Chapter 2). As in other parts of the world.Chapter Ways Forward for Innovation Policy in Latin America 4 While Latin America suffers from an innovation gap (Chapter 1). Collaborative arrangements are needed between public and private institutions in the development of innovative and technology transfer activities and of cluster policies.

if it had the same productive structure as the German economy. . depending ultimately upon the technologies chosen by firms. If the appropriate rate of R&D expenditure. with copper in Chile and petroleum in Venezuela. 4 Maloney and Rodríguez Clare (2007) measure innovation shortfalls. then. and weight each of the Chilean sectoral R&D rates by the proportional contribution of that sector to output in Germany. In this study. Ways Forward for Innovation Policy in Latin America 77 Figure 4. given their specialisation in natural-resource intensive basic goods. and low-tech firms in high-tech sectors. or of innovation more generally. etc. The resulting number measures what Chile’s R&D investment rate would be. taking into account the productive structure of the economy. An abundance of natural resources may equally divert investors’ attention to sectors in search of rents with potentially fewer resources for more innovation-intensive sectors. for Latin American economies is to define how to promote innovation in the natural resource sectors that currently dominate the economy and the measures required to further develop other sec2 World Bank (2009).4 The challenge. 2009 (data from last available year). varies with the economy’s production structure. the importance of extractive industries to the industrial figures is evident. As such. breAkDoWn oF GDP by reGIon AnD by SeCTor (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6% 3% 28% 2% 27% 29% 14% 32% 32% 18% 62% 69% 71% 53% 54% Latin America World Services EU Area Industry South Asia Agriculture Sub-Saharan Africa Source: “Key Development Data & Statistics”. 3 See ECLAC (2008) and ECLAC (2005). technology levels depend more on the individual firm than on the sector.3 However. R&D in services. This is only an approximate exercise: R&D rates surely differ from one sector to another. but rather to consider whether the mix of economic activities is the most appropriate to meet longterm development objectives. R&D in mining. policy advice should not be to raise the R&D intensity of the economy. then it may be that Latin American economies are not “under-investing” in innovation. Then. even if one adjusts for the difference in production structures.1. In both. of GDP) and Venezuela (58 per cent).4. Germany was used as the benchmark.2 This specialisation in basic goods production and exports implies a lower level of R&D expenditure and of technologically-based innovation than in countries with a different production structure – though the example of Norway is an exception to the rule. finds that even in Germany. take data on the sectoral composition of output for Germany. but might also vary substantially within a sector. for example. but correcting for industry structure can be done more generally. as referenced in Figure 4. Kirner et al (2009). one can meaningfully speak of an innovation shortfall in Chile.1. If the weighted number is lower than Germany’s R&D investment rate. Latin American economies still have an innovation shortfall. The basic idea is to take the R&D investment rate in various sectors of a country like Chile: R&D in agriculture. there are high-tech firms in low-tech sectors. as described in this paragraph. World Bank. that is.

This requires consistent and long-term investment in specialised capacities as well as the development of innovation agendas aligned with emerging market opportunities. accordingly. most Latin American countries saw no need to choose between these two options. Only lately have strategies been developed with a clear sectoral focus. Discussion about skills for innovation often focuses on tertiary education. 4. Until recent years. the importance of other disciplines. This resulted in a high concentration of funds in natural resources sectors. as well as to simultaneously encourage the development of emerging sectors. so that public resources were directed to those sectors where demand was uncovered (either by companies or universities and technology centres). for example.Fondo Tecnológico Argentino) to execute both individual and associative innovation projects. of the agricultural machinery cluster.InnovaLatino: Fostering Innovation in Latin America 78 tors which offer higher productivity gains. all the way up to doctoral-level university studies – but also extends to the context in which educational institutions interact with the business sector and the way that information flows among them in the innovation system. This has been the case. in Argentina the development of dynamic clusters linked to natural-resource-intensive sectors has received public funding (from FONTAR . Successful innovation policy must. such as EMBRAPA. where schooling achievement rates lag behind those in OECD economies. channelling funds through open contests. skills shortages could be limiting innovation. are rising to the challenge of boosting innovation in natural-resource-intensive sectors. But if innovation is broader than science and technology. some firms/sectors.1.1. This underlines the importance of strengthening pro-innovation institutions capable of formulating and implementing long-term strategies underpinned by solid public-private agreements. 5 According to information from the InnovaLatino survey.2. In this context. as argued in Chapter 1. notably management. It also focuses on the availability of technicians. Chile´s Development Agency (CORFO) has launched focused programmes to promote process innovations in the mining sector and to introduce new species of fish in the aquaculture sector. overcoming the aforementioned short-termism and rent-seeking behaviour. 2005b) for evidence on skills and innovation in OECD economies. which furnishes the skills for much of the innovation observed in science and technology sectors. is highlighted. This begins with formal schooling – starting from early-childhood interventions. In the field of policy initiatives. then the skills required for an innovative economy are likewise broader. In Latin America. it is equally true that highly trained staff will not innovate in the absence of sufficient opportunities to make use of their abilities in the local context. see also Jaumotte and Pain. This state of affairs may lead to emigration – or ‘brain drain’ – which means the benefits of 5 Brito Cruz and de Mello (2006) conclude that human capital constraints are a main constraint on innovation in Brazil. in particular on university education in the natural sciences and engineering. building on existing competitive advantages to develop new advantages based on the region’s unique knowledge. and the choice of sectors has been pragmatic: to support the strengthening of competitive clusters around natural resources. 75% of the firms interviewed considered that skilled personnel were essential for their innovation activities. Innovation policies were neutral. the Brazilian Agricultural Research Corporation. . while only 20% reported that at least one in two employees had a university or technical education. Similarly. While a lack of sufficiently skilled personnel can clearly be an obstacle to innovation. as has been suggested by an OECD study on Brazil.2 Human Resources. Over the next few years Latin American innovation policies are expected to continue focusing on strengthening the competitiveness of natural resource-based sectors. By embracing a wider definition of innovation that emphasises organisational and marketing innovations. hence the importance of professional or vocational colleges and schools. be grounded in measures to help people acquire (or upgrade) and deploy the skills and creativity they need to innovate. Education and the University-Business Link 4.1 Schooling and the Supply of Innovators Human resources are vital to innovation.

c) because of data availability the oeCD average excludes Australia. but high by international standards. It shows that the test scores of the six Latin American countries surveyed are behind the OECD averages in all fields including mathematics and science (Figure 4.2). Peru and uruguay.poorly employed but highly educated. but self-sustained industrialisation would wait until 1880 or so. PubLIC exPenDITure on eDuCATIon (ALL LeveLS oF eDuCATIon) 30% 25% 20% 15% 10% 5% 0% 4. The OECD’s PISA survey is particularly useful in this respect as it provides internationally comparable results on test scores in science. though expenditure per pupil lags considerably (Figure 4.6% 14. Sweden had created an exceptional primary education system by 1760.2. . Though the lag was shorter in the East Asian economies of the 20th century. Colombia. Panama. Mexico. Canada. True. While Latin American countries have made notable improvements in education in recent years. bolivia. Latin American countries fall below the average performance according to education expenditure levels. The gap in the availability of researchers between the Latin American and OECD average is striking. Source: OECD Latin American Economic Outlook 2009. Germany. they are not the entire explanation. The quality of the education provided matters as much or more as the quantity.9% 13% 14. b) The Latin American average includes Argentina. Chile.7% % of total government expenditure % of GDP OECD % of GDP per head Latin America notes: a) The graph shows un-weighted averages for each region and takes into account only those countries for which 2003-05 data are available. they too knew decades of impoverished sophisticates. Ways Forward for Innovation Policy in Latin America 79 Figure 4.3% 5.6 Alternatively. education do not feed into the host economy directly. uneSCo’s Institute of Statistics database. significant shortcomings persist.4. Argentina and Brazil are the three best performers of the region (Figure 4.4). education expenditure in Latin America compares favourably with those in OECD countries. Paraguay. Overall educational expenditure is lower in Latin America than the OECD average. Sweden was home to what Sandberg (1979) called the “impoverished sophisticate”. oeCD Development Centre calculations based on oeCD and uneSCo World educational Indicators. Costa rica. While lower scores can be partly explained by lower expenditure per pupil.3). the capacities of highly-skilled staff will be under-exploited. There is a specific deficit in tertiary education in Latin America – a factor that may limit the availability of researchers. As a share of government spending.5% 24. Chile. Luxembourg and Turkey. but other 6 Historical examples demonstrate that the lag between the upgrading of people’s education levels and the onset of an industrialisation that might absorb them as workers can be quite long. In the meantime. mathematics and reading for over 50 countries.

InnovaLatino: Fostering Innovation in Latin America 80
Figure 4.3. ReseaRcheRs (in 2007 oR latest available yeaR, peR thousand labouR FoRce, Full-time equivalent)

Guatemala El Salvador (2000) Panama (2004) Paraguay (2004) Ecuador Nicaragua (1997) Colombia Bolivia (2002) Costa Rica (2005) Venezuela Uruguay (2002) Mexico Brazil Chile (2004) Argentina Latin America OECD Average Turkey Poland Hungary Greece Portugal Spain United Kingdom South Korea

0.09 0.12 0.14 0.15 0.16 0.20 0.26 0.27 0.28 0.36

0.83 0.86 1.27

0.63

2.03 2.41 2.15 6.87 3.63 4.10 4.23

5.02 5.53 5 6 7 8

8.22 9

9.17 10

0

1

2

3

4

note: *the oecd average is obtained using oecd statistics for all 31 oecd countries in 2007 or the latest available year including mexico and excluding switzerland and slovenia. the average for latin america is computed for the latin american countries in the graph including mexico and chile and uses Ricyt statistics, except for mexico. Source: OECD Main Science and Technology Indicators 2009 (OECD), Network on Science and Technology Indicators (RICYT).

emerging economies in the study spend similar amounts per pupil and yet 15-year olds in Lithuania, Poland, or Macau, China substantially outperform their Latin American counterparts.7 Do Latin American 15-year-olds aspire to careers in science and technology? A recent report based on the OECD’s PISA survey concludes that the quality of science education is only one way of developing such an interest – other incentives are required that complement the educational system, such as better content on the Internet on science or entrepreneurship, prizes for student projects, as well as cultural events that kindle such an interest.8 The presence (or absence) of such incentives is likely to derive from more general social attitudes toward both innovation and entrepreneurship.

4.1.2.2 Policies to link universities and the business sector in Latin America and beyond

Poorly functioning links between public research institutions and industry are among the most critical failures of national innovation systems in Latin America. Relationships among the various actors in the innovation system – firms, universities, public agencies – are of central importance not only to facilitate and increase the flow of information, but also to find the right mix of skills and knowledge for economic progress. Research institu-

7 OECD (2007c) provides further detail on that question. 8 OECD (2009e).

4. Ways Forward for Innovation Policy in Latin America 81
Figure 4.4. 15-yeAr oLDS’ PerForMAnCe on PISA SCIenCe exAMS, SeLeCTeD CounTrIeS

Colombia Brazil Argentina Mexico Uruguay Chile Latin America Other emerging Average OECD 0 100 200 Science 300 Mathemathics

381

402 413

405 386 412 401 388 398 416 419 425 427 427 426 421 405 393 408 440 437 432 501 496 493 400 Reading 500 600 447 449

note: regional averages are simple averages of countries in PISA sample. Mexico is included in oeCD and Latin America average. The average science score for all oeCD countries is 500. Source: OECD (2010) “PISA 2009 Results: What Students Know and Can Do: Student Performance in Reading, Mathematics and Science (Volume I)”.

tions bring the knowledge and research skills, while businesses ensure that the research focus is on developing new products and/or processes for national and international markets. It is the latter aspect that ensures innovation has economic benefits for the firm as well as for the economy at large. Where this kind of co-operation takes place, there is more successful innovation, particularly when small firms are involved.9 But co-operation is not easy: the objectives of researchers and private business are not always aligned. Low levels of co-operation between the private and public sectors is one of the main challenges in Latin America. Understanding these dynamics is crucial for improving policy design.10 In OECD countries, attempts to combine university and enterprise incentives for a closer relationship have included the creation of science parks, an extension of research joint ventures, and a host of incentives for univer9 Jaumotte and Pain (2005→letter?). 10 An analysis of collaboration and innovation patterns in Latin America based on innovation survey is available in the forthcoming study by the UN Economic Commission for Latin America and the Caribbean (ECLAC) and IDRC.

InnovaLatino: Fostering Innovation in Latin America 82

box 4.1. InveSTInG In eDuCATIon AnD huMAn CAPITAL: PoLICy exAMPLeS FroM The reGIon
Education and innovation are fundamental elements of Chile’s development strategy. To this end, the government launched the Becas Chile Programme (BCP) in October 2008, seeking to catalyse a significant leap forward in the quantity and quality of human capital in Chile through an out-of-country investment in technical, professional and graduate education. When the programme reaches a steady state of 3,300 students approved per year, projected participation will represent around 20% of Chile’s overall graduate degree enrolments. The programme also offers an extensive range of professional and technician development opportunities. Significantly, the BCP involves a doubling of Chile’s PhD enrolments as a step to strengthening tertiary education among the workforce and the research capacity of the Chilean economy. As a complement to in-country measures the BCP offers value by: • drawing on resources of other countries to fill gaps in local capacity for human capital formation; • injecting a demand-side stimulus to reform an insular system of higher education supply • stimulating productivity improvements by further opening up Chilean thinking to international best practices, internationalising the Chilean workforce, and connecting the next generation of Chilean leaders to international networks. The BCP is innovative in several ways and is more wide ranging than previous programmes. For the first time, technicians and educators are included and there is parity of treatment of employees from the private and public sectors. Deliberate efforts have been made to expand the participation of people from less advantaged backgrounds, including women, indigenous Chileans, people with a disability, people outside the metropolitan region, and people who have not had the opportunity to learn a foreign language. Steps have been taken to provide an integrated framework for participants, including through a one-stop-shop approach. A concerted communications campaign alerts and informs potential participants to the new range of opportunities, including through regional information fairs and promotional visits, a single Becas Chile website and a call centre. Several international agreements with governments or tertiary institutions have been struck to reduce the cost of the programme (by subsidizing tuition costs) and to increase students’ access to foreign institutions (through free language courses abroad covered by the recipient foreign institutions). A recent review of the National Policies for Education of Chile undertaken by the World Bank and the OECD commended the Chilean authorities for the Becas Chile initiative and its successes. It also put forward recommendations for improving the programme, specifically in the following areas: the strategic integration with national priorities; the attraction and reinsertion of BCP graduates to Chile; the operational integrity and efficiency of the programme as a whole; and the policy changes and institutional restructuring that best further the development of advanced human capital in Chile.
Source: OECD and World Bank (2009).

box 4.2. CrITICAL FACTorS For The SuCCeSS oF PubLIC/PrIvATe PArTnerShIPS In InnovATIon: LeSSonS FroM oeCD CounTrIeS
• Long-term commitment from both government and industry, based on a shared vision. • Critical mass but also depth of the national and regional innovation systems. PPPs should not create “high-technology islands” but be embedded in local and regional innovative clusters, and benefit innovative SMEs as well as large firms. Programmes to promote large PPPs can be complemented by measures to support smaller P/P research teams (e.g. Austria’s CDL programme, Australia’s ARC Linkage Grants and Fellowships programme). • Building on existing networks without neglecting areas in which potential actors are still dispersed (e.g. multidisciplinary research) and/or inexperienced in accessing government support. • Efficient steering mechanisms that ensure a sustainable balance between public and private interests, especially: (i) competitive selection of projects and participants; (ii) optimal financing; (iii) efficient organisation and management; and (iv) rigorous evaluation.
Source: OECD (2005b).

sity and public institutions to collaborate with business, such as funding to commercialise public-sector technology; ownership over publicly-funded research to promote patenting and licensing of innovation, improved governance of universities to establish an interactive mechanism for priority settings and funding from the

particularly in areas where innovation is deeply rooted in science. Private-public partnerships. A potential for a public/private partnership (PPP)11 arises if and when public and private sectors have complementary interests and cannot be as efficient when acting alone. the Instituto Tecnológico de Monterrey – “Tec de Monterrey” – now has 32 campuses and 24 corporate universities for over 100.3) – can play an important role in this area. Mexico.3. Ways Forward for Innovation Policy in Latin America 83 box 4. 12 This section draws heavily on OECD (2007a). for example. a network of 63 business incubators and 14 technology parks has emerged. 4.4. Pietrobelli and Rabellotti (2004). By 2010.3 Partnering and Cluster Policies12 Given the complexity and high cost of many forms of innovation. expertise and have access to technologies. faculty and community members is a main interest for the Tec de Monterrey. though the private funding commitment is relatively lower than public and varies across countries. The OECD Innovation Strategy emphasises the key role of collaboration in innovation. Among Mexican universities.000 on line across the country. hosting about 8. Such collaboration can be relatively formalised (foreign direct investment. In the majority of countries analysed as part of the OECD Innovation Microdata Project. Universities in Latin America – like Tec de Monterrey (box 4. OECD (2010d). collaboration with foreign partners was found to be at least as important as domestic co-operation.2). international co-operation among businesses is becoming more relevant. The InnovaLatino survey highlights that cooperation with institutions and firms more generally is increasingly recognised as important. mobility of researchers between public and private sectors. . or to jointly benefit from spillovers of new knowledge and other outputs that the individual parties could not appropriate if acting alone. Chile performed similarly to other OECD countries. The university is credited with having an impact on building an entrepreneurial and innovative culture in the region. Collaboration allows them to share costs. As a result of these entrepreneurship programs. In 1978. OECD (2009b). franchising) or informal and ad hoc. In these and other situations. businesses increasingly recognise the benefits of partnering. For more than two in five firms (44%) cooperation is very important for the development of their innovation activities. Such partnerships might. licensing. and 22 international offices around the world. TeC De MonTerrey Founded in 1943 by a group of local businessmen with the aim of providing highly skilled personnel to the thriving corporations in Monterrey. have also been implemented. like joint research centres. allow parties to share risks more acceptably. the programme had evolved into ‘Training for Leadership in Entrepreneurship Development’. Technology transfer and the creation of competitive businesses with the participation of students. It is ranked as one of the best universities in Latin America. Notably. Source: Authors based on interviews and public online sources. university professors and local business jointly created a business programme to foster entrepreneurs. private sector.000 students and another 87. a PPP can have a longer-term benefit by building trust and personal networks that facilitate further formal and informal co-operation (box 4. In the wake of trade liberalisation in Latin America and elsewhere. results have been disappointing in Latin America. Innovation surveys reveal poor interaction and this negatively affects innovation activity. They are particularly well suited to building innovative networks in new multidisciplinary research fields. and ECLAC in ENG(2009). Microdata analysis supports the importance of co-operation with knowledge-creating institutions in promoting firms’ investment in innovation. and about the same proportion (41%) actually engage in some form of cooperation. PPPs are powerful tools to promote collaborative research. alumni.1. . While enhanced collaboration across research institutions and enterprises maximises the return on public funding of R&D. equity shares. it is a leader in patent applications.900 students per year. which may be thanks to the high degree of international col- 11 OECD (2005b).

2% 18.6).3% note: The industries included are: Mining and quarrying. The importance of partnership at a macro level has been emphasised by the literature on clusters. an d C Cz S hil ec w e h ed R e Ne ep n So th ubl ut er ic h la Af ric A nds a us (2 tr 00 ia 2Be 04 lg ) i No um rw Es ay Ne t De oni w Ze Lu nm a al xe a a m r Ice nd bo k la (20 ur g n Un d ( 06Ca na ite 200 07 da d 2.7% 22. South African Innovation Survey 2005. Computer and related activities.2% 9.6% 19.4% 10. 2004 – 06 60% 50% 40% 30% 33. Iceland (2002-04).1% 6% 4.2% 17. but also suggests that Latin American countries are capable of reaching the benchmarks established in high-income countries.6% 9.3% 23% 19. Financial intermediation.3% 13. m (19 la h Ko an 99 nd re uf -20 a ac 0 (2 A tu 1) 00 us rin 5.6% 20% 17. South korea (2005-07.13 The presence of a dynamic cluster increases the competitiveness of the host region or country. Clusters tend to be concentrated in regions and sometimes in a single town”. Wholesale trade. j-nIS 2003.2% 19% 4.pa So 04 n Ire m ut .7% 16. CoMPAnIeS WITh ForeIGn AnD nATIonAL CoLLAborATIon In InnovATIon ACTIvITIeS. business Characteristics Survey 2006-07.3% 25.9% 7.3% 12.3% 18. South Africa (2002-04).4% 16.5% 19. gas and water. new zealand (2006-07). m (2 Ch ) in an 00 a uf 6ac 07 tu ) r Po ing rt ) ug a S l Ge pa rm in an y Ita ly National collaboration only International collaboration 22. Survey of Innovation 2005. Manufacturing.9% 0% Fi nl .8% 3.7% 16. as the figure says was less frequently cited. clients and other firms. Source: OECD (2010f). Information from private consultancies and universities. Architectural and engineering activities.1% 15.5% 16. manufacturing).tra g 07 lia .3% 15. electricity.6% 26.6% 8. 13 Porter (2003). South korean Innovation Survey 2008.) Ki 0 (2 ng 4) 00 Ja do 2.8% 22. CIS-4. They usually exist within a geographic area where ease of communication.3% 19.1% 14. are “geographically close groups of interconnected companies and associated institutions in a particular field.9% 14.1).1% 9.2% 14% 13% 16. Canada (2002-04. according to an oft-cited definition. linked by common technologies and skills.3% 2.5.3% 9. Clusters. japan (1999-2001). A large share of firms interviewed as part of the InnovaLatino survey drew upon varied information sources: in addition to information resources internal to the firm.8% 19. Communications. For Australia (2006-07). logistics and personal interaction is possible. laboration pursued by Fundación Chile (box 2.2% 11.3% 5.1% 1. manufacturing). business operations Survey 2007.7% 3. and Technical testing and analysis.InnovaLatino: Fostering Innovation in Latin America 84 Figure 4.3% 10% 24. information was received from providers.3% 25.2% 16. Percentages were lower for smaller firms (figure 4. Transport and storage.8% 0.

Operating under the Ministry of Employment and the Economy. Other firms Small Private Institutes and Consultancies Large Universities Source: 2010 InnovaLatino Survey. Clients. In 2008. is the main government financing and expert organisation for research and technological development. and enable partners to carry out ambitious research and development initiatives by providing a gateway to collaborating with the best research groups and innovative companies in Finland. Finland’s Technology Development Agency. SourCeS oF InForMATIon uSeD For InnovATIon 90 80 70 60 50 40 30 20 10 0 66 83 75 81 45 29 20 33 Internal Sources Providers. universities and research institutes. training and international visits. about half of the total envelope is allocated through programmes that target strategic research and development areas identified in collaboration with the business sector and researchers. International companies that operate in Finland can also apply for funding.4. products and services related to biorefineries.fi . every year businesses participate in about 3. The programmes are forums for the exchange of information and networking between businesses and research groups. • Sapuska: to improve the international competitiveness of the Finnish food industry. Tekes’ input to the programmes is not just financial: although about half of the cost is borne by Tekes. box 4. • Sustainable communities: to develop sustainable and energy efficient areas and buildings. Many programmes place special emphasis on participation by small businesses and promote cooperation with major companies and research institutes. Ways Forward for Innovation Policy in Latin America 85 Figure 4.4. Tekes invested a total of €579 million in projects with businesses. The programmes increase exchange of information and skills by providing professionals with networking opportunities and the very latest information on new innovations in their fields.800 projects and research-intensive universities in about 1. Within the Tekes programmes. Currently. the programmes also include services such as models for defining shared visions. Some examples of on-going programmes are: • BioRefine: to generate new and unique expertise in the processing of biomass and apply it to the creation of processes.6. FInLAnD: SuPPorTInG PArTnerShIPS In InnovATIon Tekes. its mission is to boost the development of Finnish industry and the service sector through technology and innovation. seminars. Source: www. • Digital Product Process: to boost the competitiveness of companies with better use of information technology in product processes.500 projects.tekes.

Precision is made complicated by the involvement of a mix of policy levels in their design and of administrative levels in their implementation. But collaboration is not confined to firms. the objectives and targets of cluster policies and programmes must be clearly defined. 2005). for example. In terms of continuity. Lack of adequate access to finance is a recurring limitation on the spread of innovation. Colombia. leading or lagging regions. Direct (e.InnovaLatino: Fostering Innovation in Latin America 86 By creating productive interdependencies among firms. and offering tax incentives for funds invested in innovation projects in defined clusters. the fact that many countries in the world have implemented cluster policies is not surprising. User-led or customer-led innovation is critical to getting complex and sophisticated products and processes right. the private sector is best equipped to react rapidly to changes in national or international markets – in this sense. Storper and Venables (2004). with the largest effects for firms located in clusters that were strong in their own specialisation. policies should not be linked to political cycles but should ensure that adequate and explicit exit strategies for public-sector involvement are established as private investment and entrepreneurship grows in these clusters (this does not mean that public enterprises established as part of the cluster will be shut down). (2004). Without clearly defined goals. Innovations driven by users are often widely distrib- 14 OECD (2009b). like the Arranjo Productivo Local programme carried out by SEBRAE in Brazil. for example by including venture capital in cluster programmes.1). as not only investment in R&D but also the results of such activities are shared and spread over a geographical area. as well as of education and training centres lead to greater circulation of people and knowledge. tax credits) public financing for innovation projects themselves – not mediated by private actors in the financial market – can likewise ease financing constraints.14 In this context. and the pooling of skilled workers. clusters provide an enabling environment for innovation. At the design stage it is therefore essential to clearly establish co-ordination and roles of these different levels and sectors of government. Similarly. as in the case of the Technology Consortia Programme implemented by Corfo in Chile. the targets and recipients of support also vary: e. This bottleneck can be eased by encouraging private investment.g. or looking for innovative solutions to challenges faced by a sector or group of companies. Aharonson et al. especially in emerging economies. The possibility of replicating the success of groups of dynamic companies with a potential to generate highquality jobs as well as innovative behaviour and the massive involvement of SMEs is certainly attractive. a number of Latin American governments implemented policies to promote clusters for different purposes: fostering SMEs. the strategy of “picking winners” for support by the public sector must be accompanied by sufficient flexibility and monitoring systems to provide room for policy making and informed policy and programme re-orientations. As a starting point. This flow of knowledge and ideas is seen as one of the major benefits of clustering. such as universities or SMEs.g. If new ideas are not circulated widely their potential impact on growth is curtailed. grants) and indirect (e. found that clustered firms were eight times more likely to innovate than geographically remote firms. promoting regional development as in the case of the cluster programme of Antioquia. During the last decade. . as in Chile. or specific actors or groups of actors. providing assistance to SMEs in their search for funds. a wide variety of instruments are used to promote clusters (Table 4. it is difficult to monitor and evaluate policies and their achievements. There is a clear link between the evaluation of programme success and targets and a successful exit strategy for the public sector – what triggers are considered signals for the timely disengagement of public support? The sustainability of programmes – once public participation is phased out – also depends on early inclusion of the private sector in their implementation. Often. Various authors have cited the increasing importance of collaboration between firms and their customers (von Hippel. strategic sectors. thus undermining the return on the initial (often public) investment.g. Just as there are various policy dimensions to the promotion of clusters. An empirical study of biotechnology firms. geographical proximity. Some important lessons have emerged from the first wave of cluster policies that are of relevance to all Latin American economies. Perhaps most importantly. where funds are secured from a mining tax channelled through the National Innovation Council for Competitiveness.

like innovation generally. InSTruMenTS ProMoTInG reGIonAL SPeCIALISATIon AnD CLuSTerS engage actors Identify clusters Support networks/clusters • Conduct mapping studies of clusters (quantitative and qualitative) • Use facilitators and other brokers to identify firms that could work together • • • • • Host awareness raising events (conferences. Guerra Creativa.4. cluster education) Offer financial incentives for firm networking organisations Sponsor firm networking activities Benchmark performance Map cluster relationships Collective services and business linkages Improve capacity. universities and research institutions Co-locate different actors to facilitate interaction (i.000 designs. As Chapter 2’s case studies of Latin American innovators illustrate. uted rather than concentrated. Ways Forward for Innovation Policy in Latin America 87 Table 4. websites. incubators) University outreach programmes Technical observatories Commercialisation of research • Ensure appropriate intellectual property framework laws • Overcome barriers to public sector incentives in commercialisation • Technology transfer support services • Advisory services for non-ordinary financial operations • Public guarantee programmes and venture capital • Framework conditions supporting private venture capital Access to finance for spin-offs Source: OCDE (2007a). Furthermore..e.400 “creatives” – customers and other members of its user-to-user network who have so far uploaded more than 11. science parks. users help each other to solve problems and innovate. Products include logos.1. scale and skills of suppliers (mainly SMEs) • • • • • • • • • • • • • • • SME business development support Brokering services and platforms between suppliers and purchasers Compile general market intelligence Co-ordinate purchasing Establish technical standards Labels and marketing of clusters and regions Assistance to inward investors in the cluster Market information for international purposes Partner searches Supply chain linkage support Export networks Collect and disseminate labour market information Specialised vocational and university training Support partnerships between groups of firms and educational institutions Education opportunities to attract promising students to region Increase external linkages (FDI and exports) Skilled labour force in strategic industries Collaborative r&D and commercialisation Increase links between research and firm needs • • • • Support joint projects among firms. part of the Argentinian creative agency Connaxis. In these informal user-to-user co-operation networks. goes beyond high tech. provides a Latin American example of a “crowdsourcing” community for design services. Guerra Creativa offers opportunities for interaction and learning for its 3. innovation in co-operation with customers. stationery and 3D and Flash designs. with the result that innovations are combined in so-called ‘innovation communities’. the agility of successful enterprises is often at- .

Innovation and Entrepreneurship (CIIE). nuclear energy. A particularly pressing challenge for the international community such as reducing greenhouse gas emissions is one area where innovation could mean the difference between optimistic and pessimistic climate change scenarios in decades to come. levels of financing and the provision of other incentive or reward systems for innovation. As a contribution to meeting these challenges. 2008) simulates a technological trajectory in which a 50 per cent reduction in CO2 emissions is achieved through aggressive innovative activities across a range of areas. Specifically. In its initial phase the project produced a detailed analysis of the features of eco-innovation in manufacturing. . 15 However. Latin America and the Caribbean may have the greatest potential (together with sub-Saharan Africa) in the world for the expansion of biofuels – in part thanks to good climatic conditions and because it has a substantial land area that is currently not used for crop production or could be converted from pasture to sugar-cane production. economic opportunity. and optimum environmental stewardship. and governance frameworks that establish and legitimize policy actions. At the local level. 16 OECD/IEA (2010). In these international co-operative efforts.7).InnovaLatino: Fostering Innovation in Latin America 88 tributed to their close relationships with their customers. though perhaps isolated at present. and end-use efficiency gains (Figure 4. co-operative efforts. 2010c). The most widely touted example is that of biofuels. Innovation is of central importance to combat environmental degradation since it is a key factor in making green growth possible through the development and deployment of environmental technologies. including an overview of existing strategies and policy initiatives for eco-innovation in OECD countries (OECD. The International Energy Agency’s Energy Technology Perspectives (IEA. as: i) no single country can successfully address the problems alone. a member of the World Heritage Alliance for Sustainable Tourism. Brazil dominates the region’s production. renewable energy. leads a group of Costa Rican enterprises with the common goal of promoting responsible tourism practices that foster cultural authenticity. the scenario is based on optimistic assumptions about the progress of key technologies and requires deployment of technologies costing up to USD 200 per tonne of CO2 saved when fully commercialised. evaluation. the costs may be as much as USD 500 per tonne. capacity building to enable countries to absorb innovations and the benefits from them. for example. equity and sharing of benefits.1.15 The need to invest in innovation to combat global challenges like greenhouse gas emissions will require international co-ordination of research needs and priorities. with the aim of accelerating sustainable production by manufacturing industries as a new opportunity for value creation. too. Cemex and other innovators in the region. such as carbon capture and storage (CCS). and iii) individual efforts by multiple countries are likely to be more costly and less successful than co-ordinated. 4. Indeed.4 Innovating and Green Growth The OECD Innovation Strategy draws attention to the need to mobilise innovation to address global challenges such as environmental and social sustainability. Latin American governments and firms can innovate to shift to a more ‘green’ growth model than the current one.16 Examples of green innovation. for example. with Colombia a distant second. extend well beyond biofuels in Latin America. have introduced marketing innovations adapted to the low income levels of their customers. mechanisms to ensure technology transfer. Latin America is the second-largest biofuels-producing region of the world. innovation can help make the shift to energies that emit less greenhouse gasses. If these technologies fail to reach expectations. the OECD Project on Sustainable Manufacturing and Ecoinnovation was launched in 2008 under the auspices of the Committee on Industry. ii) individual countries are unwilling to bear the cost of addressing global challenges alone because they cannot appropriate the benefits. Latin American governments must be willing to play their part. producing ethanol from sugar cane. Grupo Islita. The latter provides potentially very interesting perspectives for Latin American policy makers. Brazil’s capacity to move into “second-generation” biofuels production – with net lifecycle greenhouse gas emission reductions – is probably as great or greater than in any other emerging or developing economy.

adopted policies can only be improved if regular quantitative and qualitative assessments of their impacts are conducted.7. particularly in a setting where public resources face many competing demands. This is a challenging task since policy assessments on innovation need to take into account the uncertainties of the innovation process and the externalties that occur. Indeed they will have greater legitimacy and credibility where a meaningful assessment of their impact has been undertaken and communicated among all actors in the innovation system. Evaluation of policies and practices is essential to verify regularly that objectives are indeed met.1.  Ways Forward for Innovation Policy in Latin America 89 Figure 4.4. .5 Measurement Innovation measurement is critical both for improving evidence of innovative behaviour among agents and to support policy monitoring and follow up. 4. Contribution oF key teChnologies to Climate Change mitigation 70 60 50 40 30 20 10 0 2005 WEO 2007 450 ppm 2010 2015 2020 2025 2030 2035 BLUE Map emissions 16 Gt ETP 2008 analysis 2040 2045 2050 Baseline emissions 62 Gt Emissions GT CO2 Carbon capture and storage (CCS) industry and transformation (9%) Carbon capture and storage (CCS) power generation (10%) Nuclear (6%) Renewables (21%) Power generation efficiency and fuel switching (7%) End use fuel switching (11%) End use electricity efficiency (12%) End use fuel efficiency (24%) Source: IEA (2008). Moreover.

The project has engaged the international community and advanced the measurement agenda. and improve learning outcomes and the quality of the provision of public services via innovation. The current measurement framework fails to measure the social impacts of innovation. and fail to capture non-technological innovations and new-to-market or new-to-firm innovations. measure the efficiency of producing and delivering public policies and services. The oeCD InnovATIon STrATeGy’S MeASureMenT AGenDA A number of policy issues – the role of broader (beyond R&D) innovation. and better assessment of the economic impact of innovation to name but a few – require improved measurement. The development of new and more comprehensive indicators as advocated by the OECD Innovation strategy will help improve innovation measurement and policy assessment. There is a need to account for the use of public funds. Meaningful overall evaluation of the success or failure of policies. New methods of analysis that are interdisciplinary in nature are necessary to understand innovative behaviour. but they do not measure the effectiveness with which those inputs are transformed into innovation: the adoption and implementation of new products. patentable innovations. 4. but work remains to be done in the following areas: 1. people and locations. Among the shortcomings of current innovation indicators. Science. are undoubtedly of great importance. The links between informational value.5). the InnovaLatino website (www. Improve the measurement of broader innovation and its link to macroeconomic performance. A second shortcoming is that available indicators are better at measuring the inputs of the innovation process than the outcomes of the exercise. as pointed out throughout this report. R&D expenditure. in turn. Linking different data sets and exploiting the potential of administrative records will improve understanding and reduce respondent burden. international compatibility and careful evaluation are spelled out in the measurement agenda of the OECD Innovation Strategy (box 4. . 17 See Chapter 1 for discussion and Country Profiles in Chapter 2 for sets of indicators.5. both quantitative and qualitative. firm and organisation.org) provides country-by-country information on innovation. requires accurate and timely quantitative and qualitative information on the state of innovation in a country in all its dimensions. Invest in a high quality and comprehensive data infrastructure to measure the determinants and impacts of innovation.17 is that existing measures are ill-suited to monitoring the innovation economy of middle-income countries such as the majority in Latin America. For these reasons. Promote the design of new statistical methods and interdisciplinary approaches to data collection. but they focus on technologically-oriented. and in parallel with the OECD Innovation Strategy. Sound policy advice will rely on a comprehensive data infrastructure. systematic data collection.innovalatino. patents and scientists in the population. or their contributions to achieving social goals. Design of policies for innovation needs to take into account the characteristics of technologies. The construction of this database of online indicators will be an ongoing initiative of the InnovaLatino project. including at the sub-national level. Source: OECD (2010b). 3. and others cited in this report provide important information on the mobilisation of resources to foster innovation. the first. as well as linkages and flows among them. processes and business models. its determinants and its impacts at the level of the individual. 5. Promote the measurement of innovation for social goals and of the social impacts of innovation. Measures that assess the impact of innovations on well-being. Frequently cited variables such as R&D expenditure. technology and innovation policies to economic growth.InnovaLatino: Fostering Innovation in Latin America 90 box 4. the growing importance of the public sector in innovation. test scores of secondary school students. need to be promoted. technology and innovation surveys need to be redesigned to take a broader view of innovation and improved measurements are needed to link science. The backbone of such infrastructure is a high quality business register. This includes better measurement of the people dimension of innovation. recognise the role of innovation in the public sector and promote its measurement. 2.

and tailored to countries’ needs. institutions will need to be adapted and upgraded. Innovation in Latin America starts with people – as researchers.2 Towards an Effective Policy Agenda for Innovation There can be no single one-size-fits-all innovation policy. targeted support to micro. Empowering people to innovate calls for more and better education for all. suppliers and customers of firms. judge or punish failure too harshly. Ways Forward for Innovation Policy in Latin America 91 4. Strengthening institutional and infrastructure capacities for scientific research and developing incentives to support the diffusion and application of scientific outcomes to production development are key elements of success in innovation policies.19 However. the next step in addressing the questions raised in this report is to move to the particularities of the national. for example. but also for the provision of basic public services like health 18 This dynamic perspective is spelled out in greater detail by ECLAC (2005). The private sector is responsible for the majority of innovation expenditure in many OECD countries. small and medium-size enterprises is important given their importance for employment generation. Nevertheless. 3. though not all. entrepreneurs. particularly given differing national circumstances and priorities. and the private sector will place a higher priority upon knowledge and innovation and consequently demand a change in public policies. to foreign knowledge (via the use of foreign machinery or relations with foreign companies). given the relatively small size of science programmes in all but the largest Latin American countries and the risks associated with frontier research. . Some Latin American countries have a long tradition of supporting scientific research – an effort that should be maintained and improved. while necessary. as well as their vulnerability to failure in their early lives. including the availability of skilled staff. managers. adapt and generate new ideas and technologies. is not sufficient. High-speed broadband connections in particular promise to provide an important platform for greater and more productive entrepreneurial activity in many countries of the region. they will also equip their economies to become better able to absorb. Policy formulation and implementation involves continuous learning. 2. both with neighbouring countries and with countries outside the region in order to benefit from scale economies and international knowledge flows. Furthermore. services and business models. to a lesser degree.4. adopt. But education per se. governments might want to stimulate international scientific co-operation. and foster actions and instruments suited to the characteristics of the economy. 4. Responses from the InnovaLatino survey indicate that firms are aware of the factors that matter for their innovation performance. As Latin American countries pursue that educational goal. access to information and communication technologies (ICTs) and.18 The policy mix should be pragmatic and problem-solving in nature. It requires investment and the provision of adequate regulatory frameworks. and encourage the generation of positive externalities. levels.b). innovation policy should recognise the diversity of firms in terms of size and sectoral specificities. A cultural environment conducive to innovative behaviour must be established – one that does not. A second group of actors in an innovation system are firms – businesses are the incubators which turn knowledge and ideas into new products. of these orientations coincide with those of the OECD Innovation Strategy (OECD 2010a. In particular. employees. mitigate risks for the private sector. access to external financing resources. individual countries will inevitably pursue different paths to foster innovation. As economies advance towards a more knowledge-intensive composition of production. State’s actions must provide strategic orientation. much of it by large firms. Tangible and intangible infrastructure for innovation is crucial in Latin America as well as in OECD countries. This chapter closes with some general strategic orientations that may be of use to many national governments in the region. 1. Also. and in many cases sub-national. citizens must be persuaded of the potential benefits that science and technology can bring to society. Science is a cornerstone of innovation policy. associated with trial and error. 19 Many.

Dosi. financing mechanisms that have hitherto been key to channelling financial resources to innovation in the experience of the United States. 8.20 Indeed. and leadership by policy makers at the highest level. they have to be designed and implemented in a political context. In addition to coherence among ministries. preferential credit. according to a 5. Policies must not only be coherent and balanced. Colombia and Mexico (among others) have recently established programmes to encourage private equity and venture capital. or dismantle the incentives that. but nowhere more so than in developing countries. The requirement of policy coherence for innovation is urgent in all countries. under the right circumstances. firms. Networks. agencies and levels of government. the financial sector and more – in policy design. and hence arrived at through a democratic and consultative process that can serve to channel knowledge and information from people and firms. standards. innovation policy should seek greater coherence between supply. but the complexities involved are not to be underestimated. for a “whole of government” approach. implementation and evaluation can produce policies that meet development goals more effectively. vertical and selective policies (encouraging co-operation and articulation among universities. Dosi. pricing. actors and policy domains. universities.and demand-side policies. . and it will also need coordinated action between ministries. 20 Collective interaction favours economies of scope in knowledge accumulation and innovation through technological interrelations and complementarities between firms and institutions devoted to science and technology (Arthur. as the example of the Intelligent Coffee Identification Card in Colombia illustrates (Chapter 3). businesses and others. Whether governments reach out to support would-be innovators constrained by their informal status. guarantees and equity provision. the latter include smart regulations. Innovation and other development policies can. requires stable platforms for co-ordinating actions.and long-term perspective.and demand-side policies. This can take many forms according to national circumstances: grants. Roughly one of every two jobs in the region is in the informal sector. who will legitimately lobby to promote their interests. 7. requiring improved means of designing and implementing coherent policies.InnovaLatino: Fostering Innovation in Latin America 92 and education to disadvantaged sectors of the population. This means that policy makers must avoid the threat of “capture” of the policy process by political actors. rather than distinguishing between supply. Chile. Involving stakeholders – citizens. and in some countries a majority of middle-class households work in the informal sector. research centres and firms) and competition policies (promoting domestic agents’ upgrading in global value chains). a new typology might emphasise horizontal policies (fostering human capital formation and supporting diffusion and assimilation of foreign knowledge). public policy must encourage adequate financing to enterprises. foster externalities and increasing returns in production processes and industrial organization (Cimoli and Dosi. Latin America’s share of world-wide venture capital remains tiny. Policy measures to unleash and support entrepreneurial creativity in Latin America cannot be divorced from policies directed toward the informal sector. Public procurement can also be deployed to facilitate the financing of private-sector innovation activities. As innovation is inherently a risky investment. consumer education and tax measures. 1995. a focus on policies with a medium. as well as fiscal incentives. in turn. be mutually reinforcing. 6. a critical platform for businesses. Purely supply-side or demand-side policies are not sufficient to stimulate innovation in economies where production and management are increasingly carried out within complex public/private networks. where innovation policy must be meaningfully embedded within national development strategies. Successful innovation policy requires long-term commitment from credible institutions with clear mandates. The need for policy coherence. The former typically include funding basic research or increasing levels of schooling. furthermore. 1998). The budget process can help to develop a long-term vision for innovation by enhancing co-ordination and helping to secure funds on a multi-annual basis.21 Effective innovation policy cannot occur on the margins of this part of the economy. Broadband is. Governments in Brazil. requiring a long-term financial commitment. 1989. 1998). 21 (OECD 2009e).

hence the importance of the measurement agenda. to improve the capacity of Latin American countries to evaluate policies. In addition. . serve to sustain the large. Investment in the creation of institutions that support the development and implementation of evaluation in the region is of key importance. they must be aware that the tools used to address the informal sector will have an impact upon innovation and vice versa (IDB. Increasing evaluation efforts in the region will also help to raise awareness and enhance policy credibility and legitimacy. low-productivity informal sector. 2010).4. There is a need. finally. Ways Forward for Innovation Policy in Latin America 93 recent IDB study. 9. the evaluation agenda can benefit from an explicit link with policy follow-up.

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communities. other stakeholders and the wider public sphere. but we do not seek to rank them. Social innovation. interviews with company executives and media articles. encompassing both the public and private sectors. which includes: – Corporate social responsibility (CSR) (green banners) – Policies implemented by companies designed to have a positive impact on the environment. employees. they are not intended to provide a forecast of future success. We give priority to organizations that have had an impact beyond their home country. Classification Criteria of Innovators InnovaLatino has classified organizations along three dimensions: • • • Private and public institutions (blue banners). consumers. While we will seek to enlarge the list with new innovators over the lifetime of the project. – Social entrepreneurs (purple banners) – cases ranging from social innovators (entrepreneurs who seek to make a profit as well as an impact on society) to non governmental organizations. Sources of information used to compile the vignettes include company websites. The vignettes describe innovations during 2009 and 2010 – as such. It is often the case that the firm innovates in both dimensions. . annual reports. We define companies from the region as those with headquarters and with majority ownership in a Latin American country.Vignettes Introduction and Disclaimer The following vignettes present a summary of a range of innovations taking place across Latin America within large and small firms. Innovation by any of these organizations can include business model innovation or innovation around a product or service. – small and medium-size firms (pink banners) and entrepreneurs – firms with about 250 employees. industries. company size and innovation types (including a focus on sustainable development) has been our main criteria for making the selection. Our goal was to uncover local success stories to inspire entrepreneurs and business people. Presenting a diversity of countries. which foster innovation in the country Companies classified by size: – big firms (yellow banners) – firms with more than 250 employees. our main concern is to use this opportunity to recognize and celebrate ongoing innovations within Latin America.

org Ciudad Rosario Saludable García . Chile. Mexico. Colombia. Brazil. Peru and Uruguay – are summarized in the table below.InnovaLatino: Fostering Innovation in Latin America 96 Table of organizations described A total of 55 vignettes from eight countries – Argentina. Costa Rica. Costa Rica Conicit Proinnova Argentina Institutions Promoting Innovation Prosper-AR Brazil FINEP Chile ForoInnovación Fundación Chile Colombia Colciencias Mexico CONACYT Tec de Monterrey Cinépolis Oxxo Softtek Peru Concytec uruguay Uruguay Innova Bio Sidus Los Grobo Large Firms Marcopolo Natura Cosméticos Falabella Sonda Federación Nacional de Cafeteros de Colombia Grupo Nacional de Chocolates Café Britt Ajegroup Alicorp Interbank Memory SMes and entrepreneurs CSr Pol-Ka Guerra Creativa Grupo Arcor Stefanini UNICA Petrobras Elemental Datatraffic Hotel Punta Islita Pineda Covalin Astrid y Gastón Kizanaro Telemáforo Efice S.A Minera Los Pelambres Social Innovation Empresas Públicas de MedellínEPM Kangaroo Foundation Grupo Monge CEMEX Buenaventura Social entrepreneurs Responde Center for Digital Inclusion (CDI) (CDI) Recycla Chile ParqueSoft Laura Lang Causas.

development of genetically modified vaccines against bacterial infections. venture capital. proteins for human consumption. Over the years.) and biotechnology plants (varieties resistant to viruses or herbicides. plant (commercialized through Tecnoplant) and animal biotechnology and fine chemicals. The agency is particularly eager to promote the green technology. is a biopharmaceutical company that was founded in Buenos Aires in 1983 as a subsidiary of Sidus S.prosperar. geno-typification of species. financing programs for SMEs) to facilitate access to long-term financing for productive investment and funding for innovation. and 4) the launch of various innovation/entrepreneurship programs to improve and increase Argentina’s entrepreneurial culture and skills. it expanded its portfolio to include biogeneric products (e. use of biotechnology to obtain raw materials for human health. its projects include: development of systems to produce recombinant proteins. ProsperAr is Argentina’s Investment Development Agency. including China. Bio Sidus achieved its first biogenetic product: recombinant human erythropoietin (EPO). estimated to be worth around US$20 billion. 3) identification and elimination of local barriers to investment. With annual investments in R&D of over US$2 million. bio molecules. development of diagnostic systems (methods for qualitative and quantitative determination of a wide range of infectious diseases such as Hepatitis C.Vignettes 97 Argentina ProsperAr Public Institution www. etc.sidus. 2) personalized assistance to international investors in order to facilitate investment projects at all stages of the investment process.A. development of controlled release systems for macromolecules. Bio Sidus had over US$40 million in sales. Since its founding it has embarked on a number of initiatives to promote investment. representing foreign investment of US$8.. India.ar Bio Sidus. . Large Firms/Product Innovation www. In collaboration with the Argentine Dirección Nacional del Antártico.A.ar Founded in 2006. 75% from exports to more than 30 countries primarily in Latin America and Asia. Since 2007. In 1990. Pakistan and Indonesia. ProsperAr provides various funds (seed capital. clinical investigation of genetically modified proteins. etc. The firm controlled over 55% of the Latin American market for EPO and was an important player in the biogenetics market. development of transgenic cattle for obtaining recombinant human proteins for therapeutical use.gov.300 new jobs. renewable energy and infrastructure sectors. Bio Sidus aims to isolate. the first recombinant human protein fully developed and manufactured in Latin America. a public agency within the Ministry of External Relations and International Trade that encourages and promotes foreign direct investment in Argentina. “biosimila”). identify and characterise Antarctic bacterial strains in pursuit of whole genome sequencing. under the direction of Marcelo Luis Argüelles Ugarteburu.com. ProsperAr has assisted 165 projects. Bio Sidus S.g.900 million and creating 13. such as: 1) worldwide promotion efforts to attract investment. By 2009.).

InnovaLatino: Fostering Innovation in Latin America 98
Los Grobo

business Model

www.losgrobo.com

Since 1984, when Adolfo Grobocopatel founded Los Grobo in Carlos Casares, Argentina, the company has grown into one of the largest grain producers and agricultural service providers in the world - yet it owns no land, no tractors nor harvesters. Los Grobo provides logistical and grain storage services to farmers. It produces soy, corn and wheat on a total 300,000 hectares in Argentina, Brazil, Paraguay and Uruguay, and has introduced technical innovations such as no-till farming. Los Grobo’s innovative business model is based on an IT-facilitated network of 3,800 small and medium agricultural suppliers. About 100 people at headquarters provide inputs such as seeds, finance, technical advice, sale and marketing of crops, and the deployment of technologies such as GPS and agricultural simulation models to help the network of farmers manage soil resources and deal with climate risks. In 2009, Los Grobo traded more than 3 million tons and generated US$750 million in revenues. Los Grobo has received significant global recognition: it was featured in the “Best Sustainability Report” developed by Global Reporting Initiative; in 2000 it became the first grain producer in the world to be certified in ISO 9001; it has received the “Leadership in innovative organizational models applied to agriculture” given by Fundece; and was ranked first in a CSR survey conducted by the magazine “Valor Sostenible”. Los Grobo won the Argentine National Prize for Quality in 2010, the first in the sector to receive it, following its 2006 prize for ”Leadership and Innovation in a business model applied to the agricultural sector”.

Pol-Ka

business Model

www.pol-ka.com.ar

Based in Buenos Aires, Pol-Ka is a producer of a number of television series in soap opera format that include action, drama, comedy and suspense. It is part of the Argentine media group Grupo Clarín. The production company was founded in 1994, when Adrian Suar and Fernando Blanco created a pilot TV show called Poliladron. The highly successful show introduced a new way of producing TV series. Pol-Ka employs 350 people working in 7 production teams, developing TV shows from the original idea, through the scriptwriting process to the post production phase. Shows are adjusted to the requirements of each market and audience. Each step is coordinated and managed by Pol-Ka’s International Department working with agents and clients from different parts of the world. In 2005, BVI-Disney selected Pol-Ka to produce “Desperate Housewives” for Argentina and six other Latin American countries. By 2006 it had reached coproduction agreements with Fox Europe and other international companies such as RCN, Televisa, (the largest media company in the Spanish-speaking world) and HBO. Currently, Pol-Ka is one of the largest and most successful television producers in South America and has produced more than 5,000 hours of TV programs.

Vignettes 99
Guerra Creativa

Service Innovation

http://es.guerra-creativa.com/

Guerra Creativa provides design services by leveraging crowd sourcing in ways not previously seen in concept-to-design processes. If a client wants a new logo or webpage, Guerra Creativa will host a design contest for a fixed period (e.g., 21 days), and then help the client to evaluate the entries (often over 100) and select a winner. Guerra Creativa uses this collaborative process to design logos, websites, stationery, flash and 3D designs. It also enables designers to interact and learn from each other, hosts online exhibitions of their work, and provides feedback on the designs of others. One section allows users to have exclusive tutorials, with step-by-step instructions for different techniques and advice from their Interactive Creative Director. Currently this community includes 3,400 designers who have already uploaded more than 11,000 designs, and a total membership of 6,000 clients.

Grupo Arcor

Large Firm/CSr

www.arcor.com

Founded in 1951, Grupo Arcor produces a wide range of food products. Currently, through Bagley Latinoamérica S.A., it is South America’s largest manufacturer of cookies and crackers and the main exporter of sugar confectionery products in Argentina, Brazil, Chile and Peru. In addition, Arcor manufactures paper and corrugated cardboard in sheets and boxes for packaging, dairy products, confectionery, dressings, cleaning and personal hygiene products, and frozen goods. Today, Arcor offers its products in 120 countries worldwide. In 2009, in the top 100 ranking of the U.S. magazine “Candy Industry”, Arcor was ranked 14 and was the first Latin American company, with revenues of US$2.2 billion. The group has built a successful distribution model. In order to guarantee the best product quality at an affordable price it is self-sufficient in its main strategic inputs. To reduce costs and ensure supplies it is vertically integrated in the production of packaging for its products and for agro-industrial inputs with a high impact on its end products. Through Converflex S.A. it has participated in the flexible containers market for 40 years and has an installed capacity of 12,000 tons per year. In November 2010, Arcor was nominated “Best Company” by the Chamber of Commerce of the United States in Argentina in the business-oriented management sustainability category. The award recognizes companies that include management sustainability (environment, social and economical practices) in their corporate government practices. This was part of the vision of its founders and is implemented through the Arcor Foundation, which promotes 1,500 educational projects in Argentina. Working with 8,500 organizations, it has developed 25 programs aimed at over 1 million children in Argentina, and a further 130,000 in Brazil. Its social responsibility actions seek to minimize accidents in the workplace and the environmental impact of its manufacturing plants.

InnovaLatino: Fostering Innovation in Latin America 100
Responde

Social Innovation

www.responde.org.ar

In 1999, Marcela Benítez founded Responde as a non-governmental organization with the aim of preserving Argentina’s rural towns from disappearing as a result of community members leaving for larger cities in search of better opportunities. To dissuade community members from leaving (and often ending up in worse economic conditions), Responde developed a series of programs that help people from 600 rural communities to identify economic opportunities, such as tourism using local resources, working with local officials to build cultural centres and community spaces and providing workshops to up-skill these officials. In 2008, Responde introduced REVIVAL, a project adapted from “pay to volunteer” models that are popular with other volunteer organisations, using it as one among many sources of funding. It involves first seeking the host community’s “permission and acceptance” before placing a volunteer, screening for volunteers who will provide a “direct and critical benefit to the community” (rather than simply accepting anyone willing to pay), and keeping the fee low to cover operational and maintenance costs (rather than add markups).

Brazil
Financiadora de Estudos e Projetos (FINEP)
Public Institution www.finep.gov.br

Financiadora de Estudos e Projetos (FINEP), also known as the Brazilian Innovation Agency, is a publicly owned agency linked to the Ministry of Science and Technology, based in Rio de Janeiro. Since its foundation, FINEP has had a dual role: it provides grants to non-profit institutions, such as universities and research centers, and it lends money to companies to promote innovation. In 1999, a Science and Technology Sectorial Fund was created to finance Brazilian research, development and innovation. FINEP is the executive body responsible for the management of these funds. In 2009, FINEP managed US$1.6 billion, benefiting over 2,100 firms. Major business initiatives in partnership with universities are also associated with FINEP funding, such as the development of the Tucano aircraft by Embraer (Empresa Brasileira de Aeronáutica). Recently, FINEP created new instruments to support nascent high-tech firms. Some have been developed within the Inovar Project, supported by the Inter-American Development Bank (IDB). This includes venture capital, provided mainly through risk capital funds. Another instrument is the Programa de Apoio à Pesquisa em Empresas (PAPPE, or Program for Supporting Research in Enterprises) – a program to provide research grants to individuals in small companies, similar to the Small Business Innovation Research Program (SBIR) in the US. In 2010, the G20 chose FINEP as a model of an innovation agency for promoting innovation in emerging markets.

The following year it signed a contract with Dina Autobuses S. This “green bus” is more respectful of the environment: it needs less fuel.Vignettes 101 Marcopolo Product Innovation www.V of Mexico to supply bus bodies and technology. Portugal.e. Natura focuses on a two-pronged strategy. Marcopolo is vertically integrated.200 employers. The first emphasizes ethics. producing about 80% of the components and accessories in Brazil. integrating economic.com. and roof racks.net Natura Cosméticos is a pioneering manufacturer of eco-friendly personal cosmetics. It also had the honour of building the bus of the Brazilian football team for the 2010 World Cup. which allows it to have one of the lowest aerodynamic coefficients ever achieved by a bus (cx 0. The bus is made from a special foam developed at the Technological Aerospace Centre.A. catering to business units and regional units. This coefficient is directly connected to the reduction of fuel consumption. it established its first factory abroad. For the first semester of 2009 total revenues were US$13. Natura developed and implemented the Natura Management System. Natura operates one of the largest direct sales networks.31 billion. throughout South America. Currently. . In May 2010.000 employees. The bus firm operates in Argentina. Unlike its competitors. Natura’s main goal is to create value for society as a whole. and consists of recyclable components. including seats. in Coimbra. By 2010. In 1991. The company has 6. windows. Marcopolo had over 13. Founded in 1969 by Luiz Seabra. Marcopolo received a prize the “Industry Distinction” for “Generation 7”. Natura went public on the São Paulo Stock Exchange in 2004. sells more than 900 products. In 2007.marcopolo. transparency and open communication channels with all stakeholders who interact with the company. an organizational model based on management by process. Mexico and South Africa. comparable to the coefficients achieved by passenger cars. In 2007. mostly women.3 billion. social and environmental dimensions. with over one million sales representatives (called “consultoras”). Natura launched a Carbon Neutral Program in an effort to reduce its greenhouse gas emissions by 33% within five years and fully offset emissions that cannot be avoided. With a vision of “bem estar bem” (i.42). and has revenues of US$2. Colombia. It has since distributed hydrogen-powered buses via its operations in Latin America.A de C. In 2008.br Marcopolo S. Marcopolo created the first Brazilian bus powered by hydrogen.natura. Natura Cosméticos S. Currently. Marcopolo is developing a new line of buses called “Generation 7”.. in Rio Grande do Sul. Today it is one of the largest cosmetic companies in the world.A was founded by Paulo Bellini and six other young mechanics in 1949 in Caxias do Sul. “well-being well”) it has successfully integrated socially responsible practices with satisfying consumer demand for natural products. emits fewer gasses that contribute to the greenhouse effect. business Model/Product www. The second is to create and pursue key performance indicators that promote both profits and sustainable development. The company’s success is a result of its combined innovations in product development and its direct sales business model. Natura’s products are sourced from indigenous communities. panels. fragrance and personal hygiene products.

Unica’s members represent more than 50% of all ethanol produced in Brazil and 60% of overall sugar production. where each manager is both in charge of the commercial area and the quality of the services provided. with the objective of improving the manager-client interaction and. In 2008. According to the Dom Cabral Foundation rankings. Unica is working on the development of large-scale production of bioelectricity for the Brazilian market. the biggest buyer of Brazilian ethanol.4 million litres of ethanol to the United States. The firm works in a decentralized way. As the company sees it. The main objective of the organization is to promote demand for ethanol as a clean and renewable transport fuel. The company is the largest native Brazilian IT consulting company.unica.519.InnovaLatino: Fostering Innovation in Latin America 102 Stefanini business Model/ Product www. Stefanini is a global provider of information technology consulting. Europe.stefanini.br Founded in 1987 in Brazil. In 2009. of which 1. Currently. It is organized as a franchise. since each unit’s business manager is motivated to act like its owner. the International Association of Outsourcing Professionals named Stefanini the best company for outsourcing in Latin America. Currently. In 2010. ethanol and bioelectricity. Ethanol’s success depends largely on the existence of Unica. management and service initiatives and a relationship-based clientele are what make Stefanini innovative. and represents more than 20 producers of sugar. and India.br União da Industria da Cana-de-Açucar (Unica) is the Brazilian Sugarcane Industry Association. Stefanini is currently in North and South America. Unica innovates in the way Brazil’s ethanol is marketed. Belgium and Asia to help promote the exports of ethanol to those countries.com. development and integration services. it is the most internationalized Brazilian IT Company. It was created in 1997. 22% from international clients. as well as to 63 other countries. Stefanini has 8. . exported and branded.700 collaborators. Unica (União da Industria da Cana-de-Açucar) business Model (Cooperative) www.com. following the consolidation of the country’s sugarcane industry. at the same time.500 work abroad. Stefanini‘s gross income was US$400 million. UNICA producers exported 1. Currently. quality and reliability. Unica operates in the US.

This unique pedagogy requires that by the end of each 4-month course. self-sustaining. Petrobras included its entire social project in a single program. former President of the World Bank and the Wolfensohn Institute. In 2009. CDI Community Centers have three principal objectives: they are self-managed.Vignettes 103 Petrobras Large Firm/CSr www.036 volunteers. students will have used technology as the main tool to initiate. The Petrobras Development & Citizenship Program aims to contribute to local.org. Petrobras Zero Hunger. it had 71. Petrobras was the first Brazilian company to sign the Global Compact. with 1. It is also part of the Brazilian Business Council for Sustainable Development (CEBDS) and uses the Ethos Institute indicators (a Brazilian association of companies interested in developing their activities in a socially responsible manner). new services with business plans. The result was the creation of a new multimedia learning environment. a net income of US$118 billion and profits of US$18 billion. implement and complete a “social advocacy project” aimed at changing an aspect of their existence. more than twice the average salary of a teacher in the public school system). and 600. 1. regional. . and an online platform for communication and collaboration. plan.000 employees. there are CDI franchises in 753 schools in Brazil and 100 abroad. which has helped 11 million people. new courses.com. In 2003. founded the Center for Digital Inclusion (CDI) in Rio de Janeiro. helping to rehabilitate people and groups who live in conditions of social risk in Brazil. revised performance indicators. CDI provides training on the use of computers and pays teachers higher-than-average salaries (US$200 per month. Currently. In 2000 Time Magazine named Baggio as one of 50 “Latin American Leaders of the new Millennium”.br In 1995.000 people from low-income communities certified. The program is investing US$710 million from 2007 to 2012. which is part of the Dow Jones Sustainability Initiative. and aims to reach four million people directly. Petrobras has won several awards as the “Company of Dreams of Young People” and “Brand of Trust”.petrobras. Rodrigo Baggio. At the same time.726 educators. and national development. CDI mobilized five internal working groups from different disciplines to innovate new solutions for efficient growth. CDI is in the process of expanding to the Middle East and North Africa. With the support of James Wolfensohn. Center for Digital Inclusion (CDI) Social Innovation www. and they implement the CDI pedagogy. Petrobras is the largest company in Latin America by market capitalization and eighth in oil exploration worldwide. based on the concept of helping people to help themselves. The company’s policy is to “bring social environmental results to society and aggregate social technologies without risking “profitability”. to be followed by India and other parts of Africa.br Based in Rio de Janeiro and founded in 1953. These prizes show that Petrobras is a world leader in implementing social programmes.cdi. a new monitoring process.

cl Founded in 1976. Another major initiative is “Innovacien”. to position Chile as a nearshore hub for global service exports. and fosters the creation of consortia for the diffusion of technology to small and medium enterprises. Examples include the creation of pioneering salmon farms. networking. advice on developing a back-up plan. the use of technology in education. and business education. Fundación Chile is a non-profit organization founded by the Chilean government and the ITT Corporation (the predecessor of AT&T) of the United States with the objective of transferring state-ofthe-art technology. which are piloting Information Technology upported approaches to learning. which led to the implementation of new forestry management models. the main national innovation award that recognizes the innovative capability of Chilean entrepreneurs. Its activities in the areas of skill upgrading focus on lifelong learning. Fundación Chile Public/Private Institution www. ForoInnovación is a non-profit “action tank” aimed at creating in Chile a more entrepreneurial and innovative society.cl In 2005. high-quality wine production. in alliance with local and global knowledge networks. associative development in the forestry industry. carries out R&D. for instance. such as assistance on idea generation. financial engineering and information (venture capital). distance education. Raúl Rivera created ForoInnovación with a group of Chilean universities. think tanks. Fundación Chile has created 76 companies that in total have contributed more than US$2 billion to the country’s economy.fundacionchile. and helping failed entrepreneurs get back on their feet. among others).InnovaLatino: Fostering Innovation in Latin America 104 Chile ForoInnovación Private Institution www. In 2010. introduction of new berry species and varieties in Chile. quality control and certification of fruit for export. Fundación Chile creates new companies and joint ventures. trade and business associations. mentoring. development of the high-tech concept of vacuumpacked meat and other innovations. helping. a network of innovative schools. abalone and turbot farming. One of its main initiatives is “Avonni”. over 500 projects applied for this award. and furniture for export. In recent years Fundación Chile has been increasingly active in the field of biotechnology (forestry genetics and DNA vaccines for aquaculture. provision of technological services. It also supports programs to enhance innovation and growth in Chile on a macro level. . and management.foroinnovacion. adapts foreign technology for product and process innovation for client companies in the public and private sectors. diagnosis of business risks. management techniques and human skills to natural resource-intensive sectors. Most ForoInnovación projects are joint public-private efforts and involve a number of services for entrepreneurs.

com Falabella is a leading Chilean retailer of apparel. Copec.000 clients. In 2009 its total revenue was US$703 million. hypermarkets and shopping centres.g. with 73 department stores. Uruguay. the financial magazine “Euromoney” named Falabella the best-managed company in Chile. Falabella operates in Chile.falabella. electronics.9 billion in 2009. furniture and toys) through hyper and supermarkets. issuance of credit cards. The combination of retailing power and financial services enables the company to capture more value and remain innovative in both industries.cl Founded by Andrés Navarro in Santiago de Chile in 1974 as a venture capital investment between his family and one of the biggest Chilean oil corporations. and through the Falabella Bank offers financial services (e. In 1984. 13 malls. offering products to both middle and working-class customers in Latin America. SONDA is a public company where Navarro´s family holds 55% of the stock. The company had revenues of US$6. In 2011. In 2007. manufactures textiles and fabrics. 43 supermarkets. and is also responsible for securing land and buildings for new stores. an electronic voucher system for health care services. Argentina. and later in Argentina. such as a new identity system for Chileans. Falabella plans to open 40 stores in four Latin American countries. Currently. A broad product portfolio protects the company from demand fluctuations in certain product categories. accessories and household products. SONDA S. Its leading market position in many of its business areas increases its bargaining power to achieve economies of scale and provides significant levels of brand awareness. business Process www.A. Its real estate division develops and manages the supermarkets. 43 million credit card accounts and 67 million employers. Falabella pioneered the integration between the bank and the hyper and supermarkets was in the retail sector in Latin America.Vignettes 105 Falabella business Model www. the firm has contributed to the modernization of diverse government agencies and helped companies to become more competitive. groceries. Colombia and Peru. Brazil and Mexico. Ecuador. with more than 5.000 items of IT equipment under contract. an automated control system for traffic in big cities. . SONDA has pioneered the provision of Information Technology services. It was also awarded a prize for the “Highest Standard of Corporate Governance” in Chile. Colombia. insurance brokerage. homeware. bank and travel agency).000 users and 400. 250. SONDA has created several innovative solutions that have had a major impact on the quality of life of citizens.. Developing and delivering solutions and services both for government and private sector clients in a wide range of areas. and an electronic payment and clearing system for the new public transportation system in Santiago de Chile. systems integration and software development in the region.g. 101 specialty stores. Costa Rica. The company also distributes a diverse set of products (e. thereby becoming one of the main IT service providers in Brazil and one of the largest SAP integrators in Latin America.. SONDA acquired the Brazilian Information Technology company Procwork. In 2010. establishing a subsidiary in Peru. perishables and non-food items such as apparel.sonda. SONDA began expanding internationally.

Elemental has won several awards. With help of different public and private institutions it has developed technical education and training programs for people from rural areas. total sales were US$2.pelambres.600m altitude in the Andes. and a partnership with Copec (a Chilean oil company) and the Universidad Católica. engineers and builders. Having built over 1. Their motto is “safe. with reserves of 2. with the objective of improving the quality of life of the poor. including architects. Located at 3. Portugal.elementalchile. The cost of each unit is about US$7.000. For this achievement the company was awarded the National Prize for Power Efficiency by the Chilean Ministry of Economics. Elemental is currently working on several large-scale projects.A. with Asia and Europe as significant export markets. In 2008. Minera Los Pelambres Large Firm/CSr www.000 units and designed another 2. China and the US.500 for a 40 m2 half house. Mexico. It implements urban development projects such as infrastructure.A. which belongs to the Luksic family. Investors and operators alike pay close attention to efficiency. the company develops projects with the participation of the community. This private Chilean company with 700 employees is dedicated to the production of copper and molybdenum. Fundación Minera los Pelambres was founded as an entity that focuses on three areas: education. In the 1990s it became Antofagasta Holdings. most recently the 2010 Brit Insurance Design Awards in the architecture category. reducing carbon-dioxide output significantly and using electricity efficiently. activities to promote entrepreneurship. Its conveyor belt is the longest and the most efficient of its type in the world. productivity and irrigation systems. Their aim is to build “inclusive” cities and projects have been launched in Brazil.cl The world’s fifth largest copper mine. and they provide the structure and materials for constructing the second half by the owner. public space and housing projects. In 2002. the mine produces 339. With a team of 15 people. and specific projects to improve irrigation for farmers. economic and fast incremental self-construction”.2 billion tonnes of fine copper. business Model/ Product Innovation www. Elemental S.17 billion. For this work Minera los Pelambres has received different awards in Chile such as “Premio Gestión Social y Responsabilidad Social” by Semanario Tiempo and “Premio Universidad Tecnológica INACAP” for human capital development in Choapa province. is a Chilean for-profit company with a social orientation.cl Founded in 1994. The goal is that social housing projects will gain in value over time.InnovaLatino: Fostering Innovation in Latin America 106 ELEMENTAL S. which at the same time help to improve productivity. including public markets. Los Pelambres was founded in the 1920s by William Braden.000 tons of copper concentrate a year. . social housing and public buildings.

Recycla Chile’s recycling process disarms electronic appliances by extracting and separating the raw materials to be transformed and reused. With a US$200 million budget. economic and environmental sustainability. as a “Tech Pioneer”.co Founded in 1995. The company employs men and women with a criminal record and/or former prisoners. The remaining scraps are treated using specialized machines. most of them cofunded by the firms. Recycla Chile was internationally recognized with the “Energy Globe Award” and the “Dubai International Award for Best Practices”. In 2009.161 research groups have received funding from the program.A.gov. Recycla Chile is the first and only electronic waste recycling company in Chile. and 203 companies have received funding for scientific innovation activities. In 2008.cl Established in 2003. technology and innovation activities in Colombia. The goal is to offer them jobs to prevent them becoming repeat offenders. The entity is focused on creating an attractive research environment for scientists in Colombia and has been very active in fostering collaborations with research institutions in Europe and the United States. At the same time. Colombia Instituto Colombiano para el Desarrollo de la Ciencia y la Tecnología (Colciencias) Public Institution www. the entity provides environmental sustainability consultancy services in Chile and other Latin American countries. technological and innovative culture in Colombia. the World Economic Forum selected Fernando Nilo. The challenge for Colciencias is to coordinate the National System of Science.Vignettes 107 Recycla Chile S. 1. Social Innovation www. Since 2006.045 doctoral students have received scholarships. with the goal of fostering a scientific. 1. and the promotion of regional technological projects. scholarships for doctoral students. corporate research activities.recycla.colciencias. 22 technological development centers have been established. Recycla Chile founder and chief financial officer. Technology and Innovation (SNCTI). It incorporates innovation with management strategies based on social. Colciencias is a public entity that promotes science. . the establishment of technical development centers. it funds initiatives such as research groups.

IMAGIX.A. Founded in 1927. a new system of innovation. The national coffee fund (“Fondo Nacional del Café”. They also brand Colombian coffee with the Juan Valdez marketing campaign. the food company was renamed Grupo Nacional de Chocolates S.com The Compañía Nacional de Chocolates Cruz Roja was founded in 1920. with direct operations in 11 Latin America countries and production plants in six. roads. business Model www. In 2008. chocolates. revenues were US$4.grupochocolates.cafedecolombia. It has 37 subsidiaries and its products are sold in more than 70 countries. a nutritional research center.federaciondecafeteros. Grupo Nacional de Chocolates S. The firm focuses its investments and research on nutrition. In 2007. cookies. the Federation sponsors projects that have had a positive impact in the lives of millions of Colombians. health. Grupo Nacional de Chocolates created Vidarium.000 rural families dedicated to coffee growing. was created by company’s employees to promote innovative ideas and make innovation part of the company culture. with the objective of generating knowledge about healthy nutrition in order to improve the quality of the firm’s products. In 2009. housing.org/ www.500 people. It was the first non-European food product to achieve this distinction in this demanding market. and health care centers. In 2006. FNC) has long served as the primary instrument for Colombian coffee policy formulation and implementation. The federation is focused on improving the living conditions of more than 560.com La Federación Nacional de Cafeteros de Colombia (National Federation of Coffee Growers of Colombia) or Fedecafé is one of the largest non-profit agricultural associations in the world. including schools. and the global environ ment. . The company employs 28. electric power supplies. coffee.A. and its latest goal is to open a chain of Juan Valdez coffee houses throughout the world.566 billion. Every day the Federation invests US$1 million in the well-being of Colombian coffee growers. In Colombia. The company specializes in six product lines: cold meat. In 2010.InnovaLatino: Fostering Innovation in Latin America 108 Federación Nacional de Cafeteros de Colombia (Fedecafé) business Model/ Product http://www. ice cream and pasta production and is the largest firm in the Colombian food sector. 94% of coffee producers have less than 12 acres of coffee. Colombian coffee was recognized by the European Union with the Protected Geographical Indication.

Corporate Social Responsibility is key and is based on two programs. Datatraffic has developed mobility algorithms that help to find solutions to the city’s traffic problems. It provides electricity. the company’s revenues were US$95 million. Datatraffic S. In 2009. ethical. which analyzes variables such as economic and financial revenues. creating new solutions for the Colombian market aimed at tackling the problem of petrol consumption among transport and oil and utility companies. natural gas. the company had revenues of US$2. integrating it with historical data collected by the transit official authority. Datatraffic combines hardware technologies which allow a considerable reduction in operating costs for transport companies worldwide. The second is based on environmental management by making many of its processes more sistematic. is a company focused on providing innovative geo-referencing solutions to its clients. . water. Datatraffic won the silver medal in the 2009 “Imagine Cup” hosted by Microsoft Empresas Públicas de Medellín (EPM) Large Firm/CSr www. The goal is to reach US$5 billion in revenues. Thanks to programs like “All With Gas”. 60% of which will come from Colombia and the remaining 40% from abroad. for which petrol represents 40% of their direct costs.Vignettes 109 Datatraffic Product Innovation www. sanitation. including vehicle tracking and location of points of interest on digital maps that are published on the internet. Datatraffic tracks the exact consumption of each vehicle and manages the data in order to avoid internal theft. “Everybody Connected” and “Social Hiring” 42. The firm combines software development with hardware devices.datatraffic. This includes researching clean and renewable energies.epm. and the emergencies reported to the city’s 911 number.3 billion.com. Its growth strategy is based on a MEGA (Meta Grande y Ambiciosa) plan for 2015. In 2009. and expanding Corporate Social Responsibility best practices to the chain of suppliers.000 rural homes in the Antioquia province have electricity and almost all of Medellin’s homes have access to water (from 70% in 2007). and internal reputation. a study by the Spanish firm Justo Villafañe Consultants.3billion and profits of US$1.co Empresas Públicas de Medellín (EPM) is an integrated state-owned utilities company which operates in Colombia. social and environmental responsibility. EPM was recognized as the public service company with the best reputation in Colombia and the eighth most respected in the country by Monitor Empresarial de Reputación Corporativa-Merco (Merco). By gathering real-time information about Bogota’s traffic flow. In 2009. and telecommunications services.A. supporting development in regions where it operates. The first initiative aims at expanding services to underserved populations.cc Established in 2008 by an engineering student at the Universidad de los Andes. In 2009.co.

. Each one is a software company that designs. is the first gift you can give to your baby in the Neonatal Intensivecare units” from Liza Cooper. and competitive in the market. Every two months. reliable. bioinformatics and tools for nanotechnology. and returning home early with their child in the kangaroo position. The kangaroo mother care method is a caring alternative for premature and low-weight babies at birth.000 software entrepreneurs. enterprises are organized in blocks with different teams. The main objective is to encourage mothers to keep their premature babies warm by continuously holding them skin-to-skin. developed the “kangaroo mother care” method in response to high rates of mortality among low-birth weight infants resulting from overcrowding and insufficient resources like shortage of incubators in neonatal intensive care units. nourishing them exclusively with breast milk. It provides support and infrastructure for business development and trains people to become more innovative. including optics. The method has been so successful that UNICEF now promotes it worldwide. develops and sells different types of software. Orlando Rincón founded ParqueSoft to help micro enterprises and entrepreneurs from underprivileged communities in the Valle del Cauca. it provides administrative and business development services to 1. In 2005. ParqueSoft clients do not exit upon maturation.com In 1999. Héctor Martínez Gómez and Edgar Rey Sanabria. Since its foundation.edu. the World Health Organization published a guide with the following statement: “Kangaroo care. ParqueSoft organizes 8-week internships for 150 young people. to me. A policy of “zero bureaucracy” helps them reduce the rental and logistics cost to US$300 per year per person. Within an open space.InnovaLatino: Fostering Innovation in Latin America 110 Kangaroo Foundation CSr http://kangaroo. 300 companies and 500 clients in 42 countries all over the world.javeriana.parquesoft. this organization has created 967 jobs and 339 ventures. ParqueSoft is a non-profit and understands that all entrepreneurs in the network can help each other to grow their creativity and talent. rather they give back by aiding the development of the network. Rincón was nominated by Dinero Magazine in Colombia and the Schwab Foundation from the World Economic Forum as the “Colombian Social Entrepreneur of the Year”. In 2003. both doctors with the Colombian Maternal-Infant Institute. Through its network of 15 science and technology parks. The company is focused on creating social value. Unlike other incubators. ParqueSoft Social Innovation www. artificial intelligence. the national director of a March of Dimes program that supports families in neonatal intensive care units and promotes the practice among healthcare workers.co/ In the late 1970s.

track and analyze lesions along the digestive tracks of patients. . It has contributed to the creation of a National Innovation System in Costa Rica and to the development of strategic alliances between the UCR and Costa Rica’s private companies.ac. PROINNOVA complements the guides with courses on the subject.Vignettes 111 Costa Rica Consejo Nacional para las Investigaciones Científicas y Tecnológicas (CONICIT) Public Institution www. For example. It was created in 2005 to foster a better understanding of innovation processes and improve the management of intellectual property in Costa Rica. intellectual property and innovation management office of the University of Costa Rica (UCR). PROINNOVA is a member of the United States’s Association of University Technology Managers. enabling them to improve the diagnosis of cancer. Its ideas have been adopted by other universities in Central America and Mexico. and public policy mechanisms intended to foster innovation. (Consejo Nacional para la Investigaciones Científicas y Tecnológicas) was established to strengthen Costa Rica’s capacity to foster science and technology. the National Council for Scientific and Technological Research.cr In 1972.cr/ PROINNOVA is the technology transfer. and donates equipment and materials to laboratories and research centers in the public and private sectors.conicit. CONICIT has helped introduce new research practices. PROINNOVA Public Institution http://proinnova. Using video endoscopes. CONICIT provides funding and training for researchers and scientists. grants loans for technological development and scientific research. Today. Both work together on intellectual property topics such as copyright and industrial secrets transfer. CONICIT. identify precancerous lesions in hundreds of patients. doctors can better monitor.ucr. One of the weak points of innovation implementation in Latin America is the lack of integration between universities and the private sector. PROINNOVA participates by publishing two guides: Ideario (Idea Repertoire) and Buscador Inteligente (Intelligent Search Engine). it funded a group of researchers from the School of Biology at the University of Costa Rica who developed an organic method for protecting palm trees from bacteria that attack them and can ruin up to half a plantation. and establish epidemiological patterns and frequency of early and advanced gastric cancer.go. new technologies in a variety of sectors. It has also funded new technology to help improve the detection of pre-cancerous growths. Both guides explain how an innovation can be implemented and nurtured. PROINNOVA is a clear example of what can and should be done.

and an aesthetician technical degree. has helped to create 20 successful micro companies. Café Britt was ranked a top business leader in Central America by regional business publication Summa Magazine.com Tourism has become the second-largest generator of foreign direct investment in Costa Rica. and optimum environmental standards. spa therapist programs. the hotel was the winner of the Virgin Holidays Responsible Tourism award.cafebritt. two guest transport companies. revenues were US$60 million.InnovaLatino: Fostering Innovation in Latin America 112 Café Britt Marketing/branding www. The company’s core value as a country-of-origin producer with strong local identity remains a guiding principle as it continues to expand in the region. Grupo Islita leads a group of Costa Rican enterprises with the common goal of promoting responsible tourism practices that foster cultural authenticity. a motor bike repair shop. It generates US$2. 52% of the money the hotel generates is invested in the local communities. such as workshops in arts development and English as a second language. and five established community arts groups. it employed 850 people. It has coffee and chocolate production facilities in Costa Rica and in Peru. Café Britt is a patron of the arts and a partner in community development and environmental protection. It is well known for the amount and diversity of training that it provides to employees. a souvenir shop. roasts and ships gourmet coffee and is a high-end chocolate manufacturer in Costa Rica.grupoislita. investing in skills as a way to invest in innovation.Central and South America” and included in the top 500 hotels by Travel and Leisure Magazine. and has awarded scholarships for a Bachelor’s Degree in Digital Animation. Hotel Punta Islita has been recognized by travel publications and responsible tourism organizations for its top-level service and commitment to sustainability. Hotel Punta Islita. In 2009. two convenience stores. In 2010. Miami. As a member of the World Heritage Alliance for Sustainable Tourism. Café Britt harvests. Grupo Islita is committed to promoting and preserving World Heritage Sites through sustainable tourism. including two small restaurants. Santiago. economic opportunity. contributes 7.com Established in 1985 by Steve Aronson. it was named “World’s best service . In 2009. . Antigua and Mexico. It has expanded to offer fair trade and gourmet coffee from Peru and Mexico. for a second consecutive year.14 billion per year. Grupo Islita: Hotel Punta Islita Product Innovation http://www. In 2009. operated more than 50 stores in key tourist locations in Costa Rica and in the airports of Lima. a contractor. one of the hotels of the group. It pays fair prices to local farmers who produce consistently high quality coffee. Curaçao. a fish processing plant.com/ www. as well as fine food products and specialty gifts and the company has wholesale and online sales in 20 countries. By 2010.hotelpuntaislita. The Café Britt stores provide a unique opportunity to move up the value chain and to market the Costa Rican coffee to global customers.2% of the country’s Gross Domestic Product and employs almost 15% of the population.

household appliances and furniture in Central America. CCF raised US$40. unorganized. CCF calculates average carbon emissions from everyday activities (i. CCF was set up to promote eco-literacy and environmentally responsible ways of living. and a private company. social entrepreneur and Ashoka Fellow Laura Lang. In September 2009. As a result of this and other programs like Grupo Monge’s. and often more expensive.org/llang In May 2007. along with four institutional partners—a citizen organization. .Vignettes 113 Grupo Monge Large Firm/CSr http://www. serving mainly low and middle-to-low income consumers. founded Climate Change Friendly Program (CCF).e.500 trees. During its first year of operation. Costa Rica has one of highest concentrations of computers in classrooms in Latin America.ashoka. stores.com/ Founded in Costa Rica in 1970.000 and planted 6. such as “A Centroamérica le tengo Fe” and “Apoyo Comunitario”. Within the next five years she envisions CCF as an international initiative channelling financial resources into reforestation.000 families in the region. Lang is exploring opportunities for international replication with environmental organizations in Central America and the Caribbean. The group aims to combat climate change through the reforestation of degraded areas throughout Latin America and the Caribbean. recycling.000 trees were planted. It now has 325 stores in the region. offering individuals a practical option to compensate for their greenhouse gas emissions by making carbon trading accessible to ordinary citizens and small businesses in Costa Rica. The company’s activities include a wholesaling operation in Costa Rica and a consumer finance arm that complements the retailing business by providing customers with financing for in-store purchases. sustainable agriculture and alternative energy sources.000 scholarships and have helped over 10. Grupo Monge launched a new furniture line made from wood and renewable materials to promote environmental best practices in the manufacturing process. Laura Lang’s Climate Change Friendly Program Social Innovation www.imonge. These two programs have granted 1. Currently seven Grupo Monge’s suppliers are implementing these practices and their products are stamped with a green line seal. The entity uses the funds to replant native species in high-priority areas in Costa Rica. Another distinct aspect of Grupo Monge is its strong social responsibility programs. Grupo Monge’s innovative business model consists of applying the latest retailing processes to an underserved market segment traditionally serviced by informal. car travel) and determines the number of trees that must be planted to offset these emissions. introducing information and communication technologies into schools. One year later. two academic institutions. Grupo Monge is a leading family-owned retailer of consumer electronics. Interested individuals and companies can purchase a certificate or sticker that identifies them as carbon neutral. 35. The trees are monitored for three years and replaced if necessary.

Tec de Monterrey has 64 campuses throughout the country. was established in 1970 to increase quality. alumni. Its goal is to consolidate a national system of science and technology that corresponds to the country’s priority demands.900 students per year. and contribute to higher standard of living and social inclusion. Mexico. faculty and community members is a main interest for the Tec de Monterrey. a fiscal stimulus package was amended to enable Research & Development intensive firms to deduct 30% of their income tax. CONACYT created a fund to help finance AH1N1 virus research that included 41 projects and US$8 million in funding. Among Mexican Universities. 22 international offices around the world. In 2009. CONACYT’s goal is for Mexico to invest 2% of the country’s gross domestic product in research and development.000 in 2005. By 2025. It is ranked as one of the best universities in Latin America. Technology transfer and the creation of competitive businesses with the participation of students. especially in the areas of information and communication technology.edu Founded in 1943 by a group of local businessmen with the aim of providing highly-skilled personnel to the thriving corporations in Monterrey.itesm. 24 corporate universities for 136. . As a result of these entrepreneurship programs. The university encourages and has had a significant impact on building an entrepreneurial and innovative culture in the region. The Tec encourages research through 135 research centers. In 1978.366 registered in on-line programs. the number of those firms increased from 252 in 2001 to 2. after the swine flu scare. the program had evolved into the Training for Leadership in Entrepreneurship Development and now hosts about 8. university professors and local businessmen jointly created a program to foster entrepreneurship. It is also responsible for the elaboration of science and technology policies in the country. In 2001.170 scholarships to Mexican students in higher education and approved 209 scientific and research projects worth US$16 million. to provide solutions to specific needs. competitiveness and innovation. Due to this fiscal stimulus.conacyt. the Tec de Monterrey is one of the leaders in patent applications. and advanced materials in Mexico. Tecnológico de Monterrey university/education/PPP http://www.307 students and an additional 87.InnovaLatino: Fostering Innovation in Latin America 114 Mexico Consejo Nacional de Ciencia y Tecnología (CONACYT) Public Institution www. At the same time. CONACYT initiatives and programs include the funding of scholarships for doctoral students inside and outside Mexico. biotechnology. a network of 63 business incubators and 14 technology parks has been promoted. and the establishment of research centers.mx El Consejo Nacional de Ciencia y Tecnología (CONACYT) or the National Council of Science and Technology. tax reductions for R&D-intensive firms. it granted 16. By 2010.

the system is able to identify specifically what customers want to find in each OXXO. .oxxo. Its success lies in the development of a computerized operating system that tracks merchandising. Guatemala.Vignettes 115 Cinépolis Large firm/business model www. In 2009.com After opening its first cinema in Mexico in 1993. Cinépolis reached an agreement with FIFA for exclusive rights to broadcast the football World Cup matches in its cinemas. At the same time. its revenues were US$3. OXXO opened 800 additional stores. Colombia. OXXO has delivered double. This was its main competitive advantage when entering India. with 7. one of the biggest film markets in the world. Cinépolis has introduced the concept of multiplexes that includes stadium-sized cinemas equipped with digital sound systems and enormous screens. In 2009. In Latin America. Peru and El Salvador. such as payment for public services. Panama. with revenues of US$675 million in 2009. Oxxo business Model www. Costa Rica. Cinépolis today owns 2. and plans to enter the Chilean and Argentinean markets next. with personalized services for high-end clients. OXXO provides services to facilitate everyday life. assortment planning and pricing. and track customer preferences and expectations. Cinépolis entered India.digit sales growth during the last five years through a combination of rapid expansion and growth.190 people and has a presence in Mexico. The company is wholly owned by the beverage company FEMSA which initially conceived OXXO as an outlet for its beer and soft drinks products. warehouse operations. making it the fourth movie distributor in the world and the largest film distributor and theatre chain in Latin America. OXXO is the largest chain of convenience stores in Latin America. the firm created the concept of cinema luxury with “Cinépolis VIP”.85 billion.cinepolis. In 2010. This international firm employs 15. Recently.500 stores in 350 cities. In June 2010. Additionally.320 screens worldwide.com Established in 1977 in Monterrey. Other services include the satellite transmission of international events like concerts or sports events in its cinemas with digital 3D quality.

handbags. to finance their own fashion projects. Pineda Covalín has become a global fashion brand and its products can be found in museum shops and select boutiques in North America. Softtek was the first Latin American firm to earn Capability Maturity Model Integration (CMMi) Level 5. the Bellas Artes and the Museum of Modern Art. the firm has 6. Pineda Covalín Marketing/ branding www. Initially.mx In 1982.A. the socalled “near shore”. and in 2006 it served as a representative of Mexican fashion at the United Nations. Brazil. Europe and Latin America. Marriott. Revenues in 2008 were US$220 million. In 2005. Since then.com. China. In 2007. Employees are encouraged to pursue new ideas and start new projects with their compensation being linked to the success of their efforts. and Sheraton. products were sold in the Museum of Anthropology and History. a software that gives customers the possibility to work offshore with the comfort of offering services in the same time zone. the company represented Mexico at the Global Fashion Show in Europe. and operates in North and Latin America. Currently. Pineda Covalín was founded by Cristina Pineda and Ricardo Covalin in association with the Mexican National Institute of Anthropology and History.softtek. It has eight global delivery centers in Mexico. Softtek S. the highest level that a company can acquire. . Argentina and Spain. the company has focused on promoting Mexican culture through the production and distribution of design pieces (silk ties. Softtek created Nearshore Goes Global (Nearshore 2. Nikko. business Process www. Its growth has been sustained by a unique system of incentivizing entrepreneurship among employees.pinedacovalin. The company is a software integrator of Enterprise Resource Planning packages such as the German SAP. Europe and Asia. In the last ten years. but due to their success new channels were opened in hotels such as the Four Seasons. cushions and other fine products) inspired by pre-Hispanic influences such as the Huichol.A. In 2002.000 associates. For much of the company’s history the majority of employees have had compensation packages that are 100% variable. including 55% from clients in the United States. was founded as the first Latin American firm specialized in providing information technology services. Mayan and Zapotec cultures.0).InnovaLatino: Fostering Innovation in Latin America 116 Softtek S. Fashion Group Mexico awarded Pineda Covalín the “Estrella de Plata” for its work in Mexican design.com In 1995. scarves. The company started in Mexico City by making cuff-links and ties for companies such as Volkswagen and Coca Cola.

the Interamerican Development Bank (IDB) and the World Bank. 180. Cinepolis. The program is one of the pioneers of social innovation in Latin America.org Social Innovation www. It aims to strengthen Mexican civil society by introducing the use of information technology for the development and professionalization of the NGO sector. In 2009. In 2009.000 social action opportunities for their employees. Causas.org is a non governmental organization (NGO) created in 2005 by Arturo Franco.Vignettes 117 CEMEX – Patrimonio Hoy Large firm/CSr www. and. most importantly.org Causas. Vidal Cantu and Adolfo Franco.650 Non Governmental Organizations (NGOs). Coca-Cola.causas.org provides a place on the web where people looking to volunteer can search and compare various NGOs.000 of them have received more than US$67 million in loans. registering and classifying 9. Causas. CEMEX is one of the world’s three largest building materials companies.org Corporate Volunteering Program.org has developed a comprehensive online directory of Mexican civil society. In 1998. The project has benefited more than 300. Causas. It has won recognition from the Organization of American States (OAS). CEMEX introduced Patrimonio Hoy. Participating organizations can also administer their own websites. In the first stage of the program Causas.cemexmexico. and a presence in more than 50 countries across five continents. which generated more than 3. Patrimonio Hoy has become a case study taught in major universities.000 families in five countries.com Patrimonio Hoy is an innovative corporate social responsibility (CSR) program developed and supported by CEMEX. CEMEX provides the assistance and resources to build and improve houses with a low cost and efficient micro-credit system. Causas. with 50. . Cemex won the United Nation’s Habitat Business Award for Patrimonio Hoy as an outstanding innovative business model that promotes social development. solicit volunteers. social action. It gives each civil organization in Mexico a free domain and hosts a simple website where a Non Governmental Organization can communicate its mission and vision. By verifying. US$14.7 billion in net sales in 2009. Founded in Mexico in 1906. and Scotiabank. FEMSA. These companies also participated in Causas. post videos and photographs. contributing to the development of the region.org was one of the winners of the National Solidarity and Volunteering Awards presented by the Mexican government. as well as blogs. with a loan repayment rate of 99%.000 employees.org received financial support from companies like AXTEL.

throughout Latin America by offering similar beverages at lower prices than those world leaders. 15% in Peru and 16% in Thailand. fruit juices. has an annual production of 3. The organization supports the social policies of the Peruvian government focused on reducing poverty and improving the quality of life of marginalized people. Ajegroup has developed a distribution network that ensures their products reach them. Tecnología e Innovación Tecnológica –CONCYTEC– Public Institution http://portal. and [there is an] entrepreneurial spirit. of which Mexico alone accounts for 2. By 2010. By the end of 2010. .3 billion from selling 17 trademarks across 16 countries and had experienced five consecutive years of growth of 30 per cent. The company has 22 production plants worldwide and a 7% share of the Mexican market. In 1990.ajegroup.. 7% in Colombia. CONCYTEC sponsors an annual “INNOTEC Peru” innovation competition. and water. According to Jorge Lopez Doriga.gob. Having decided to expand into other Latin American countries because of the difficult social conditions in Peru during the early 90s. CONCYTEC launched an initiative to provide financial support to more than 1.5 billion.000 researchers over the next five years. In 2009. It also promotes economic development through science and technology programs and projects within public institutions. This type of business process innovation has enabled Ajegroup to continue entering new and compete in other emerging markets.concytec. 17% in Venezuela. the distribution channels and philosophies often are similar. Their most popular brand. technology and innovation. Technology and Technological Innovation coordinates and evaluates government actions in the area of science. the Consejo Nacional de Ciencia.pe/ Founded in 2005. where firms. businesses and social organizations.” The company is diversifying into beer in Peru. 12% in Guatemala. Tecnología e Innovación Tecnológica (CONCYTEC) or National Council of Science. NGOs and inventors are encouraged to present their scientific results and innovative ideas. academia. Recognizing that street vendors are an important way to reach clients.com Ajegroup is a Peruvian-based family-owned company that manufactures.InnovaLatino: Fostering Innovation in Latin America 118 Peru Consejo Nacional de Ciencia. corporate director of Ajegroup: “We started in an emerging nation and we go to emerging countries.. 18% in Ecuador. The firm credits its success in part to its ability to create a distribution system that works in the specific conditions of emerging markets. in only 20 years Ajegroup has challenged the power of global players such as Coca-Cola and Pepsico Inc. the Añaños brothers founded the company with US$20. beer. Ajegroup had already invested US$3 million in a new plant in Brazil and US$10 million in a plant in India.1 billion liters. distributes and sells soft drinks. Big Cola and Cola Real.000. Ajegroup Product Innovation www. researchers. the firm had sales of US$1.

imports and exports food for humans and animals. Colombia and Ecuador.A. the center also seeks to track changes in the consumption habits of Peruvians. Interbank’s employees supported “Hospital del Niño”.314 employees and total revenues of US$3. Haiti. With 2. the firm was renamed Alicorp S. Interbank has signed agreements with cities for the upkeep of parks and gardens. and it has operations in Argentina. The firm produces. whose main objective is to develop and create new products with the help of customers.France 2012”. Interbank’s support totals US$20 million per year. Since 2002. Interbank sponsored a national competition which offers to the 24 winning works an exhibition in the Torre Interbank gallery. . Peru’s artisan bakers compete internationally. In January of 2010. In the cultural arena. Panama and the United States. It offers 200 full scholarships to college students. the company is also one of the biggest donors. Conscious of its environmental and ecological impact. Product Innovation www. Interbank is a top contender in the retail segment. Alicorp is the largest consumer goods company in Peru.A.2% by assets. it has been ranked by business magazines among the top ten best companies to work for in Peru and the best bank to work for in Peru. donating 150 blood units to young patients in the burns unit. In the process. Currently. serving 1. Its products are exported to 14 countries that include Chile.000 clients. presenting their best-baked goods in international contests such as “Pan’s World Cup .” The involvement of the bakers in the contest is sponsored by Alicorp and the Peruvian Association of Employers of Baking and Pastry. which managed to qualify Peru as the country with “The Best Bread in the World. in 1997.pe Founded in 1928 as “Grupo Romero”.interbank. and promotes entrepreneurship and leadership. which seeks to enhance the value and quality of various breads in the country. Interbank is a medium-size Peruvian financial institution. Alicorp created a Bakery and Gastronomy Innovation Centre. boasts the country’s largest Automated Teller Machines (ATMs) network. Interbank business Model/ Social Innovation www.com. and also sells insurance.alicorp. Colombia. the company is working on a project whereby it transfers know-how to Peruvian bakers.pe Owned by Intergroup Financial Services. cleaning products and products derived from cotton oil.Vignettes 119 Alicorp S. Its social responsibility efforts are focused on providing education and health care services and sponsoring environmental and cultural initiatives.com. with a market share of 11.7 billion in 2010.400. In the area of public health.

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Astrid y Gastón

Product Innovation

www.astridygaston.com

Founded in 1994, Astrid y Gastón is a medium-size for-profit firm but equally dedicated to improving social well-being. What started as “Astrid y Gastón”, a French restaurant in Lima, has now become a Latin American restaurant chain with a global presence. Representing the “new Peruvian cuisine”, their restaurants are in Quito, Santiago de Chile, Bogotá, Caracas, Mexico, Madrid and Panama. In 2003, they launched the cellarstyle restaurant “T’anta” followed by “La Mar” with the traditional Peruvian marinated fish “cebiche” and “Los Hermanos Pascuale” for barbecue. Astrid and Gastón, the restaurant’s owners, have become ambassadors for Peruvian cuisine. They transform 1,500 traditional recipes a year and reinvent them as haute cuisine. They promote indigenous agricultural products by using traditional and locally sourced ingredients, training street vendors to meet required health standards, and contributing to Peru’s youth with a Chef School. They believe their success derives from taking advantage of what they call “a treasure that belongs to all Peruvians”, referring to the variety and quality of local agricultural products and the rich cuisine with roots in the indigenous population. In 2009, Gaston Acurio’s achieved revenues of US$100 million and plans to invest US$12 million in 2010.

Buenaventura
Large firm/CSr www.buenaventura.com

Founded in 1953, Compañía de Minas Buenaventura is Peru’s largest publicly traded precious metals company and a major holder of mining rights in Peru. The company is engaged in the mining, processing, development and exploration of gold, silver and other metals via wholly owned mines, as well as through its participation in joint exploration projects. Buenaventura currently operates several mines in Peru. In 2009, Buenaventura reported operating revenues of US$881.5 million. In order to raise awareness among the workforce and reduce accidents and injuries, Buenaventura trains workers to detect, identify and record all of the hazards related to each of their tasks, makes safety tours to demonstrate active leadership through the example of each mine’s general manager, and provides on-site theoretical and practical training. In 2009, its fatal accident frequency rate (FAFR) fell by 50% compared to 2008. By improving living standards it is an ally in the quest to achieve the integrated development of the surrounding communities. One of its social goals is to improve access to and management of the watershed system surrounding its operations by promoting the construction of dams, canals and irrigation systems. For example, in Uchucchacua, under an agreement with PRONAMACHS and the Community of Oyón, Buenaventura created a program to recover 20 hectares of degraded pasturelands, which benefited 600 members of the local community. It also offers electric power transmission and engineering consulting services. Currently, Buenaventura complies with the highest environmental standards and is committed to corporate governance best practices. In 2009, Germanischer Lloyd renewed the ISO certification for Buenaventura’s Julcani, Orcopampa, Uchucchacua and Antapite mining units, and granted certification to Shila-Paula mine for the first time. In 2010, Buenaventura implemented an Environmental Management System based on the ISO 14001 standard.

Vignettes 121
Ciudad Saludable
Social Innovation www.ciudadsaludable.org

Founded in 1989, Ciudad Saludable works in partnership with municipalities to improve the health and living conditions of people living in Peru’s poorest areas by turning waste collection in urban slums into a profitable enterprise. Solid waste management is a serious problem in Peru. The organization has created employment and organized over 1,500 waste collectors. In upscale suburbs, where the city government collects the trash, waste collection payment rates are below 40%, whereas in the districts where Ciudad Saludable’s microenterprises work, payment rates are over 80%. The services are more dependable and less expensive than those provided by municipal governments. Through the use of incentives, women and children are targeted and encouraged to pay a modest monthly fee for trash collection. With health promotion messages, the organization emphasizes that waste collection will improve their family’s health at a cost equivalent to just one bottle of beer each month. Ciudad Saludable regularly rewards its customers: either with gifts, such as kitchen baskets, upon receipt of early payment, or by planting trees in front of their houses. This entity has collaborated in the development of the first laws to regulate the activities of waste recyclers in Peru, as well as Latin America. It has established two other organizations: Peru Waste Innovation, a consulting firm specializing in solid waste management, and Healthy Cities International (New York), which is in charge of replicating Ciudad Saludable’s model worldwide. In 2008, Albina Ruíz, Executive Director of Ciudad Saludable, received the Energy Globe Award trophy in the Earth category.

Uruguay
UruguayINNOVA
Public Institution www.uruguayinnova.org.uy

UruguayINNOVA is a cooperative program founded in 2009 between the European Union and the Uruguayan government to strengthen the generation and transfer of technology to Uruguay and adjust technological knowledge to the country by building alliances between the private sector, academia and scientific communities. UruguayINNOVA focuses on four main lines of action: supporting the implementation of research programs in the national biotechnology research center, supporting the process of internationalization of software centres, improving the existing national science park, and promoting Research & Development clusters. The program is expected to have a significant impact on the technological sector in Uruguay in the years to come. One of the initiatives is the financial support of the Institute Pasteur Montevideo, which will receive US$100,000 per year for the next five years. This financial aid will be used to support technology projects in genomics, protein biochemistry and cell and molecular biology. The initiative has just been evaluated positively by the European Union, emphasizing its satisfaction with relevance, efficiency, impact, and sustainability.

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Memory

Product Innovation

www.memorycomputacion.com

Memory develops accounting and managerial software for small and medium enterprises. Memory Computación’s innovative business model involves focusing on and servicing the needs of administrative staff in small and medium size companies with low levels of software literacy. One of their products, “Memory Conty”, delivers basic accounting reports, solving accounting issues, as well as being a key tool for information to help the company’s management. Currently, Memory is the primary accounting and management software solutions provider to 40,000 small and medium enterprises in Uruguay and over 50,000 users in Latin America. Memory has won several prizes, such as the “Guia Award” for the “most innovative Uruguayan company”. In 2009, Endeavour Foundation selected Memory as one of the best entrepreneurial companies in Latin America, and its international development and expansion was highlighted by CNN news.

Kizanaro

Product Innovation

www.kizanaro.com

Kizanaro is a small Uruguayan sports information technology company. With 17 employees, it commercializes products and services for football teams as well as for media and entertainment. Through videos and specialized platforms, Kizanaro offers sports analysis software as a tool to evaluate the performance of a team and its rivals on the field. The company offers an innovative portfolio including: K-Studio Professional, a software that analyses team and individual football tactics; K-Real Time, a system that allows the Head Coach to receive real time and objective data about the match; K-Scouting, a product that keeps track of individual players throughout the season and compiles a report on their performance in images and video; and Playmaker, a football moves editor that replaces the paper boards used to plan game tactics. Currently, Kizanaro’s products are used by the Uruguayan national football team and by some Uruguayan professional first division clubs. In 2009, Red Innova chose Kizanaro to participate in the “First Encounter of Innovation, Technology and Internet” for Spanish and Portuguese-speaking markets as one of the 15 most innovative companies in Latin America. It also won first place in the Imagine Cup Uruguay worldwide innovation prize run by Microsoft.

Telemáforo

Product innovation

www.telemaforo.deuruguay.net

In 1997, Alberto Amorim and Martín Palomeque created a new concept in traffic lights and with it a firm named Telemáforo. This new concept improves the impact of the red light in a traffic light by adding a luminous panel that diffuses messages and images. The screen consists of red light emitting diodes (LEDs), synchronized and controlled by an electronic circuit. The centrally-controlled software enables the client to choose the place, the time and the composition of the message broadcast via the screen. The firm’s clients are mainly municipalities that use the system to broadcast security messages to drivers and pedestrians. Some of the messages are “Please don’t drink and drive. Walk. Take the bus. Take a cab. But don’t return with a drunk driver. Your destiny is yours.” Telemáforo’s system has 160,000 visual impacts per month in Uruguay. Other cities in Argentina, Bolivia, Peru and Spain are in the process of installing Telemáforo in their municipalities. In 2011, Telemáforo’s main goal is to enter the Brazilian market.

which include 2.000 beneficiaries. they live in the countryside. has demonstrated the excellence of its processes and products by achieving ISO 9001 certification. AMRU) in order to provide families in the countryside with the opportunity to live and work by trying to end gender-based discrimination.000 women and 10. epidemics such as typhus and cholera have finally been banished with EFICE’s chlorine. caustic soda and derivatives through the electrolysis of salt.3% of the population lives in rural areas). among others.amru. and whose aim is to sell their products in domestic and foreign markets. EFICE’s technology development and know-how are a source of national pride and its products are of value because they improve people’s quality of life. The food products are natural. . AMRU has contributed to the development of public policies for the rural sector. signalling their desire to comply with the highest standards of quality in order to avoid accidents among employees and not harm the environment. Despite the fact that the majority of women grouped in AMRU live in different regions of Uruguay. their main strategy is to reduce electricity use.efice. is a company which manufactures chlorine. Rosario García y Santos founded the non-governmental organization “Asociación de Mujeres Rurales del Uruguay” (Uruguayan Rural Women’s Association. In 1994. For each type of product the association helps the producer with a specific business plan and social marketing strategy. and they are small farmers or rural workers.A.A. (only 6. Rosario’s Cooperative created “Delicias Criollas” (Creole Delights). they have much in common: they are women. Creole Delights currently groups 200 rural producers of 60 different products sold in the domestic market.deliciascriollas. She has helped to enhance quality of life among rural households in Uruguay. The Association was created with 64 rural women’s groups. In Uruguay. Rosario García y Santos Social Innovation www. Efice S. all from different regions. the World Health Organization (WHO) estimates that three million people die annually from drinking water that has not been treated with chlorine. As the firm is the largest private consumer of electricity in Uruguay. In a country which is predominantly urban. health and housing. with home-made ingredients of excellent quality and representative of the national heritage.A. The cooperative is a financial tool which allows rural families to generate income for the economic empowerment of women. In 1998 Efice subscribed to the program “Responsible Care”.Vignettes 123 EFICE S.uy EFICE S.com. a common brand for women’s products from different rural areas. Currently there are 200 clusters.org Social entrepreneur Rosario García y Santos was nominated an Ashoka Fellow for her work towards the empowerment of rural women and helping them improve their contribution to the economy. Large firm/CSr www. Some of the groups that belong to AMRU develop social activities with the goal of improving education.org www. For example.

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Acronyms and Abbreviations BCP BNDES CEO CNIC CONACYT CONICYT CORFO CSR ECLAC EMBRAPA FDI FONTAR GDP GII ICT IEA IDB LAC MAAF NGO NIS OECD PISA PPP R&D RICYT SME SMS SWOT TFP UNESCO Becas Chile-Programme National Bank of Economic and Social Development (Brazil) Chief Executive Officer Council for Innovation and Competitiveness (Chile) National Council for Science and Technology (Mexico) National Commission for Scientific and Technological Research (Chile) Foundation for Development Promotion (Chile) Corporate Social Responsibility United Nations Economic Commission for Latin America and the Caribbean Brazilian Agricultural Research Corporation Foreign Direct Investment Argentine Technological Fund Gross Domestic Product INSEAD’s Global Innovation Index Information and Communications Technologies Internal Energy Agency Inter-American Development Bank Latin America and the Caribbean Mobile Applications Adoption Framework Non-Governmental Organisation National Innovation System Organisation for Economic Co-operation and Development Programme for International Student Assessment Public-Private Partnership Research and Development Ibero-American Network of Science and Technology Small and Medium-sized Enterprises Short Message Service Strength Weakness Opportunity Threat-analysis Total Factor Productivity United Nations Educational. Scientific and Cultural Organization .

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