Creating Innovation Winners for the Philippines 109.0
In designing innovation policy, Lundvall proposes an alternative to picking industry winners in a working paper submitted to the Swedish Institute for Growth Policy Studies in 2007. He suggests creating winners instead!
For Lundvall, winners in a small country like the Philippines could well be in the diffusion end than in the invention end of the innovation process . Thus, competence-building technologies and building a learning economy is more important.
An Important Note: The Innovation Process is Not Strictly Linear. The Sidebar at right for elements of the innovation process is given in a line only for convenience in presentation. As discussed in our Post #103, this process is not strictly linear but is iterative and interactive. In a much earlier Post #10 on paradigm shifts (Kuhn, 1959) and scientific tools (Galison, 1997), we also discussed the virtuous loop between ideas and material science that results into continuous discovery.
There is an S-curve of innovation over time but predicting the trajectory for a specific innovation has proven difficult.
Addenda, 9.27.09. Freeman (1988) in Technical Change and Economic Theory noted the idea antecedents of this S-curve as the ‘techno-economic paradigm’ first advanced by Carlota Perez” which “corresponds most closely to Nelson and Winter’s concept of a ‘generalized natural trajectory; or ‘technological regime’ which dominates … for several decades.”
Rather than picking winners based on “path dependence and systemic factors,” i.e. because they are already the biggest or politically influential, Lundvall suggested looking for key competences in the Swedish industrial structure.
His winners are created around these competences that yield learning benefits for the national innovation system. Finding similarities in the culture and in institutional structures in Sweden with his native Denmark, he makes a sound case for his proposed approach.
I have been reading up on NIS literature from the Aalborg school of Lundvall up to the latest in the Learning Economy. The school does not advocate standard economics or a specific ideology. It accepts that different countries may end up with different, nuanced policies depending on each country’s starting point.
Upon reading these papers, I tried to visualize similar opportunities for the Philippines even as Lundvall cautions about such direct benchmarking and emulating.
I would add to Lundvall, we should create winners in sectors where the leaders are willing to learn and compete continuously. So for the Philippines, I see possibilities for creating innovators winners around the following sectors:
- Mobile banking in microfinance
- Seaweed farming and processing – E407a
- Franchising – Jollibee
- Human care – Doctors, nurses, caregivers
- Ship crewing – one out of three ship crews are Filipnos
- IT-enabled services, i.e. animation
These have emerged from the private sector without much support from the government (whose 2009 Investment Priorities Plan (IPP) I could not find anywhere in the internet (the BOI site was down – Internal Server Error).
Just for reference, the government’s ‘picked winners’ from the 2008 IPP is in the table below. They looked more like a political potpourri – actually perfect examples of winners, per Lundvall, picked from path dependence and other systemic factors – than an economic development plan.
My ‘created winners’ list above is very different from the preferred areas of the IPP in the table. Offhand, I chose them because they represent the best opportunities for competence building in a linked, learning economy. In most cases, they also prove that Filipino innovators can thrive even without protectionism in a competitive environment.
Mobile banking in microfinance is a convergence between new technology, e-wallets, and traditional micro-lending at the bottom of the pyramid. This segment probably represents a big chunk of daily financial transactions in the country. The constant change in mobile technologies is driving adaptation while the liberalization in this sector, President Fidel Ramos’s enduring legacy, drives competition and eventually continuous improvement. Opening up hitherto unreachable parts of the economy and bringing bottom-of-the-pyramid transactions out of the informal market creates potential benefits of growth via credit-multipliers.
Seaweed farming and processing, specifically food ingredient e407a and Benson Dakay and the Wee’s – is an entrepreneur-driven innovation sector. There was some support in research on farming and in getting USFDA / EFSA registration. It success created a global category of ingredients and contributed to peace and order in the southern extremity of the country. There are more opportunities from extensive cultivation of new sea crops in the future given the availability of the supply and processing chain.
Franchising, exemplified by Jollibee and its continuously learning CEO, Tony Tancaktiong, is a tribute to Filipino innovative entrepreneurship. There is a vibrant sector built around its success with some international presence already in Jollibee, Chowking and also Yellow Cab.
Human care is at the moment driven by cost reduction in client countries. We must learn to differentiate, improve service based on our nurturing culture, and capture more of the value chain for the Philippines. In the next few years, if we make the Philippines hospitable to investment by, say, stabilizing the value of the peso, we can see a repatriation of savings by Filipinos overseas for domestic investment in retirement hospices, hospitals, medical training and the like. We must also strive within this window of opportunity to raise per capita GDP (PPP) to US$5,000 to prime this repatriation of Filipinos and savings.
Ship crewing is a leadership sector for the Philippines with one Filipino out of three crews globally. Like human care, the driver at the moment is cost reduction for client companies. By innovation, given the need to drive costs down and new enabling technologies like ICT and robotics, we must learn to add more value to our service and hopefully grab a bigger share of this value chain to reside in the Philippines.
IT-enabled services like animation and business process outsourcing are going through technology-driven changes. Like human care and ship crewing, it is still mainly driven by labor cost arbitrage. We must learn to increase added value and take more of the value chain,
Interestingly, all of the above potential created winners may achieve so by purely learning and competence-building activities (which, unfortunately, is not the focus of government development policy – we do not seem to have a focused innovation policy).
Each winner-in-creation has its own driver and innovation leader. I will do my small best to help enhance competence –building and learning so that these islands of innovation can drive Philippine progress forward.
