CEPAL Review, No
121
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KEYWORDS
Economic development Technological dynamism Technological innovations Industrial development and social inclusion Export-oriented industries Natural resources Competitiveness in Latin America: Information technology Communication technology a resource-based production Industrial organization Latin America development strategy
Carlota Pérez
T his paper sets out a strategy for invigorating development in Latin America by taking advantage of specific opportunities in the current
context and the advantages offered by the region. It briefly analyses the
characteristics of globalization and the techno-economic paradigm of the
information and communications technology revolution in order to identify
new opportunities in terms of markets, positioning in global networks Carlota Pérez and technological options. From this perspective, it argues that natural Visiting Senior Research Fellow,
Centre for Financial Analysis and resource-based process industries can complement the specialization Policy/Cambridge Endowment for of Asia in assembly industries. Given the low rate of employment in the Research in Finance (CFAP/CERF),
Judge Business School, Cambridge former, it proposes a dual strategy that includes promoting “bottom-up”
University, U.K. Professor of wealth creation by taking advantage of the new flexibility in technological Technology and Socio-economic
Development, Technological diversity, transport and trade. The idea is to stimulate policy debate and
University of Tallinn, Estonia experimentation and signpost some avenues of research. Honorary Research Fellow, Science
and Technology Policy Research
(SPRU), University of Sussex, U.K.
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I Introduction
This essay looks at current trends in globalization and in the technologies that are likely to be part of in the diffusion of the information and communication the next technological revolution: biotechnology, technology (ICT) revolution and of its paradigm in nanotechnology, bioelectronics and new materials. order to propose a vision of a successful and socially A focused effort will be needed, however, to ensure equitable future for Latin America, based on the such preparation takes place. common features of its countries while encompassing Process industries are usually non-labour-intensive all their variety. The hope is thereby to provide the and tend to need a high proportion of skilled and basis for intensive research and for a serious and highly skilled personnel. This means that although wide-ranging debate on the matter. such industries can contribute to economic growth The proposal is rooted in the author’s work and the enrichment of human and technical capital on the diffusion of technological revolutions, the (both crucial for catching up), they cannot do enough way technology and technological capabilities to reduce the gulf between rich and poor, eliminate determine growth potential and the effect of the unemployment and overcome poverty. Neither is it world technological context in creating and modifying possible to rely on the “trickle-down” effect, which windows of opportunity for the development of historical experience has shown to be so questionable. countries and regions. This suggests the need for a two-pronged approach to Rising raw material prices in the mid-2000s development: top-down and bottom-up. Accordingly, unquestionably fuelled a resumption of higher growth, the present proposal involves what could be called a but technological capabilities did not expand to match “dual integrated model”. and profound social inequalities persist; indeed, The aim of the top-down part of the strategy they are deeper in many cases than in the 1970s. The would be to achieve competitiveness in world markets, region is becoming aware of the need to create a solid reaching the technological frontier in certain areas and foundation for a more stable source of economic processes and even forging ahead of it, sometimes in growth and social development potential. alliance with global companies. In turn, the bottom-up Given the strong Asian bias of the current half of the strategy would act directly at the municipal globalization process, it is very important to identify and local level in every corner of the territory by areas of technological potential where Latin America identifying, promoting, facilitating and supporting has a comparative advantage vis-à-vis Asia. In highly wealth-creating activities geared to whatever market simplified terms, one can say that Asia is a very was most suitable: local or regional, national or global. densely populated continent with a relatively low These would tend to be specialized “clusters” targeting natural resource endowment, while Latin America is niche markets based on local advantages. very rich in natural resources but has a much lower As we shall discuss below, both halves of the dual population density. These conditions give Asia the strategy are enabled by the new global conditions. The advantage in labour-intensive fabricating (assembly) bottom-up half would be aimed at reducing poverty and industries, while in Latin America they favour the the top-down half at activating and strengthening the resource-based processing industries. Since the region engines of growth in the economy, thereby providing is extremely varied in resource endowment, this the resources to make both halves viable. general direction should allow and in fact demand This dual strategy cannot be achieved by the differentiated specializations. market alone, but neither can it effectively be imposed Acquiring capabilities in the resource-based by government, particularly in the current paradigm, industries associated with biology and materials which requires constant innovation and flexibility in has the added advantage of positioning the region the face of changing contexts. Such a model can only function properly as a socially shared vision, with the various agents of change acting autonomously in the agreed directions under the coordination of an This paper is based on a study prepared for the ECLAC Programme on Technology Policy and Development in Latin America. active government with an appropriate and effective
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institutional framework. Its implementation would meaning of the various concepts and terminology. It require a process of consensus-building involving is hoped that the succinct explanations provided will business, government, universities, the media and be sufficient for current purposes.2 Furthermore, it society in general, followed by the appropriate policy is useful to advise the reader that this is mainly an measures to induce and facilitate market behaviour essay rather than a research article, a proposal argued in the agreed directions. from a particular world view rather than an empirical The premise of this interpretation and indeed analysis of context or viability. It is meant to open, of this article as a whole is that, other than for rather than close, a necessary debate. countries competing in the very front ranks, all The following section will examine globalization successful development strategies are positive-sum. as an intrinsic element in the ICT paradigm and will The technological and economic changes taking place single out three processes of hyper-segmentation that in the core countries of the global system and the are powerfully shaping the field of opportunities. leading corporations of the main industries determine It will then present an overview of the dual model, the context in which catching up takes place. Only identifying the general directions of specialization through a clear understanding of their changing for resource-based processing industries in the light interests and needs, and of one’s own advantages of both the urgent need to combat poverty and the and assets, can opportunities be identified and rise of Asia. The next three sections analyse the development ladders constructed and climbed. The three key hyper-segmentations (of markets, value cases of the four “Asian tigers” and now of China chains and technologies) in detail, considering how and India show that belonging to the periphery is no each of them defines opportunity spaces in both the longer a situation of static “dependency” but rather directions of the proposed strategy. The succeeding a potentially dynamic one.1 section shows how resource-based specialization can Even at best, of course, catching up takes time, also prepare the ground effectively for successful persistence and effort and demands active learning to participation in what looks like being the next make it possible to relate to the most powerful on a technological revolution (probably based on life basis of genuine mutual advantage. These processes and materials sciences). After this comes a brief are also difficult, unequal and often unfair, but no discussion of resource-based development theories good short cuts have as yet been found (Bell, 2006; and the reasons for thinking that current conditions Pérez, 2001, pp. 126-128). might offer a window of opportunity for embarking While this discussion is based on the author’s work upon this development path. The final section argues on patterns that recur in the spread of technological for the need to revitalize the role of government in revolutions, it is not possible in this brief paper to building consensus and proactively facilitating both present a summary of those patterns or to review the components of the strategy.
II Globalization and its determinants The ICT paradigm and the global corporation
Every technological revolution offers enormous effectiveness and productivity, not just because of potential for wealth creation and social well-being. the new technologies involved, but also because Each is clearly superior to earlier ones in terms of of the new “techno-economic and organizational paradigm” which is its accompanying best practice. Each successive wave brings with it distinctly new 1 In the author’s view, dependency theory was a valid explanation for the conditions that prevailed throughout the mass production era, especially during the 1950s, 1960s and 1970s. The context has changed radically since the information technology revolution and 2 Interested readers are invited to consult the author’s web page consequent globalization, and now requires analysing anew. (www.carlotaperez.org) and the publications cited in the text.
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principles, methods and organizational forms and There is a profound difference between the criteria. Entrepreneurs, companies, governments old multinationals (MNCs) and the current global and societies benefit more or less from that potential corporations (GCs). The former were the final phase of depending on their capacity to adopt and adapt the the mass production paradigm and a way of dealing paradigm to their specific purposes. with maturity and market saturation; the current GCs Many of the practices involved in the ICT paradigm are the organizations that use the new ICT paradigm are gradually becoming accepted and commonplace to to best advantage. the point of being regarded as obvious organizational The name “global corporation” is self-explanatory. “common sense”. Decentralized networks with A corporation of this kind is no longer structured as a a guiding centre are replacing closed, centralized parent company with affiliates in multiple markets, nor control pyramids; continuous improvement and does it aim merely to take advantage of lower production innovation are replacing the previous practice of costs in various countries. It has a different structure stable routines and planned change; the notions of and works to a different logic. It is the optimum form human capital and of the value-creating powers of of the new planet-wide network organization driven knowledge and expertise are displacing the view of and facilitated by the ICT revolution. This affects the personnel as “human resources”. Although there is company itself profoundly. still resistance to some of those shifts, none has been Reaching for global markets is a direct consequence more subject to debate and extreme positions than of the effort to apply and take full advantage of the the shift towards globalization. potential and characteristics of ICTs. A new higher Globalization is an intrinsic feature of the ICT level of productivity can now be achieved through paradigm; complete liberalization is not (Pérez, 2009). networked organizations spanning the globe. It is true that the characteristics of ICTs make national The Internet infrastructure, with its satellites and boundaries permeable and expand the potential scale transoceanic fibre optic cables, provides smooth and of production, thus enabling and requiring markets of instant communication across the world and allows planetary scale. But “free market” policies understood the whole planet to be assessed for comparative as letting all markets run loose —unregulated, advantages. Thus, firms can gauge the conditions for unguided and unrestricted, both within countries outsourcing, offshoring, insourcing, joint-sourcing and and globally— are no longer effective. other options and estimate the qualities and costs of Globalization is not about the disappearance engineering, production, transport and transaction of the nation State or of national governments, “as if” the economic space were open and unlimited, though it is likely that these will eventually yield some whilst taking full account, however, of the political powers to supranational institutions and devolve and policy conditions in each country. others to local governments. Globalization is about The coordination capabilities provided by ICTs making the most of regional, national and local enable levels of organizational complexity and size differentiation, both in production and in markets. that go well beyond the maximum achievable by the Perhaps the motto of the environmentalists, “think old multinational or transnational corporations with global, act local”, best captures the meaning of the their pyramidal structures and slow information whole globalization process.3 systems. Not only is it now possible to guide, monitor Identifying likely windows of opportunity requires and control a truly giant organization, but territorial an understanding of the nature not only of the ICT coverage and structural complexity are relatively easy paradigm, but also of the new global corporations. They to handle with ICTs and are likely to become much are the real agents of globalization and their interests more so with further adaptive innovation. are the key to designing positive-sum strategies. The process of globalization has brought with it the hyper-segmentation of three key areas: value chains, global markets and technological capabilities. 3 If there is a case in the world where the State maintains control Each of these areas becomes a complex network of foreign investment through all sorts of limits, restrictions, with differentiated components. The result could be regulations and negotiations, it is today’s China. Not only does termed “integrated decentralization” or “systemic it drive a hard bargain over its markets and low-cost advantages, but it dictates where in its territory and in which sectors foreign componentization”, where each component has a very companies are to operate and lays down conditions for local high degree of autonomy within an inter-functional participation and local learning. This was also the case in South and interactive structure. Korea and many other successful countries.
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In the structure of each corporation, there is a allowing a highly diversified product profile and great segmentation of its value network (including suppliers adaptability to a wide variety of specific and even and clients) into components and subcomponents ultra-specialized demand. which can connect in a variety of different types Once the value network has been segmented of relationship—as part of the core structure, as into its simplest subcomponents and markets stable independent contractors or allies, or indeed splintered into innumerable niches, technological as temporary suppliers tapped only when the need capabilities can be singled out and very deep and arises. In turn, each of these components is supported innovative specialization can allow small knowledge- by its own network of relationships on the basis of a intensive units or companies to thrive inside or high degree of autonomy, which in these structures outside global corporations. At the other extreme, is considered indispensable to ensure flexibility and some traditional artisan methods can also occupy competitiveness. The components may be territorially premium niches. scattered in multiple countries, yet they form a single These characteristics of the globalization process “global value network” leveraged and coordinated open specific windows of opportunity for the companies by the global corporation.4 and countries of Latin America. These opportunities This same capacity for handling complex networks will be analysed following discussion of the overall also facilitates the hyper-segmentation of markets, strategy proposed, and in relation to it.
III The global context and the advantages of possessing natural resources A dual approach for a dual reality
There are two realities that must be confronted by Latin America has had increasing difficulty whatever strategy for development is adopted by Latin competing in fabrication, especially in the areas America. One is the nature of the competition with of high-volume, low-cost products. It is far less China and other Asian countries in global markets. densely populated than Asia and what is, in fact, The other is the continent’s highly polarized income very low-cost labour is still far more expensive than distribution and the unacceptably high proportion its Asian counterpart. Yet its rich endowment of of Latin Americans living in poverty. natural resources and energy provides a window of The direction taken by the current process of opportunity for specializing in the “process industries”.5 globalization seems to have given Asia the role of The traditional problem of mono-export of raw “workshop of the world” as far as the “fabrication materials could be turned into a high-growth future industries” are concerned (electronics, electrical of complex technologies and a varied export profile appliances, clothing, etc.). The advantages upon which by taking intelligent advantage of the possession of this global specialization is built are massive amounts natural resources. of low-cost labour and an abundance of engineers and highly educated personnel in the population. The continent’s scarcity of raw materials in relation to its 5 The concept of a “fabrication industry” is used here to refer to growth needs has allowed Latin America and Africa manufacturing in which products are assembled from distinct parts to export growing amounts of minerals, energy and (automobiles, mechanical, electrical and electronic equipment, clothing and so on), usually by human labour in workshops and agricultural produce at higher and higher prices. on assembly lines. A “processing industry” is one specializing in the direct transformation of raw materials by chemical, electrical, heating or other methods (steel, paper, tomato sauce, petrol, plastics) and services such as telecommunications. The main distinction is that 4 An array of online resources for the literature on global value the production process occurs “inside” the system of equipment chains seen from the perspective of developing countries can be and the personnel involved oversee and support the process rather found at http://www.globalvaluechains.org/. than performing it, as in fabrication. See Woodward (1965).
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It is also likely that globalization will tend to chemicals, food processing), and could advance along raise prices for natural resources generally (although the new technological trajectories being opened up without eliminating volatility). The prospect of by materials science and the life sciences. The goals favourable average prices for these commodities opens would be to migrate gradually towards higher and up a possible means of funding the development of higher value-added products with more and more technologies and human capital related to them. The specialized and customized features and to establish region could become the supplier of material inputs, strong networks of innovation (with the participation food and other agricultural goods (from the most of local, continental and international firms and standard to the most tailored and sophisticated) to universities) to sustain the effort over time. Figure 1 the rest of the world. represents the idea in diagram form. The strategy would involve constant technological Some innovation networks could enlist the active upgrading of resource-based activities and gradual participation of extractive or agricultural GCs, be improvement of the export profile through continuous they foreign or local. Or they could be constructed by innovation in products, processes and auxiliary local companies joining forces in formal or informal activities, primarily with a view to creating high-value clusters (such as winemakers, flower growers, cocoa niches differentiated from traditional commodity producers, organic farmers, tourist inns and guides, markets. This implies a gradual transformation textile designers and so on). of the whole economy. The idea is to engage in a The idea would be for each country to strengthen concentrated effort to master the technologies of the know-how already incorporated into its current processing industries, from large-scale commodities export products and to then move technologically (steel, aluminium, paper, refining, beer, petrochemicals up, down and sideways within the value networks and certain types of food) through medium-scale concerned.6 Depending on the resource endowment specialities (chemicals, biotechnology, nanotechnology) to small-scale customized materials and special chemicals or other niche products. This effort can be 6 In their argument for a resource-based strategy in Africa, Walker grounded in the capabilities already acquired by each and Jourdan (2003) insist on the importance of what they call lateral innovations that originate, for example, in mining but are country in its specific area of resource endowment suitable for subsequent use in other industries because of their and in other processing industries (metallurgy, generic nature.
FIGURE 1 Technological development and upgrading of the natural resource export mix
Current export markets New (additional) high-growth specialized markets
Local and foreign natural resource producing and processing firms Foreign high-technology service, research and production firms and institutions
Local high-technology service, research and production clusters and institutions Source: prepared by the author.
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of each country and the capabilities it has already — Using research and development (R&D) and built up, efforts would be directed towards a specific education to reinforce progress in the desired set of goals. These might include the following: directions. — Endowing materials currently exported with The specific resource endowment of each special qualities in order to target niche markets, country and the levels of knowledge and expertise examples being anti-termite (or highly elastic) accumulated there would indicate the preferred areas wood, fully customized or biodegradable materials, of specialization to pursue and the appropriate links or special alloys and composites. and alliances to form within the region and beyond. — Developing further capabilities for tailored and The new knowledge and expertise required to follow niche products in the major processing industries the suggested paths will necessarily involve global (metallurgy, petrochemicals, paper, glass, etc.). networks and alliances both with the academic and — Increasing the technological capabilities of the research communities and with GCs at the forefront drinks and food processing industries (both of these new industries. They are also likely to require product and process technologies). foreign investment, as well as strategic alliances and — Increasing the technological capabilities of joint ventures between GCs and locals and between industries associated with export agriculture, companies in the region. animal products, fisheries, forestry, etc., and The mixed technological legacies of Latin further developing the industries that produce American countries must be taken into account when inputs for them. judging the potential to pursue a strategy like the one — Exploiting the endless range of indigenous proposed. Nonetheless, there are common features in fruits and vegetables, with their superb flavours the region’s history that provide the basis for a broad and textures, and developing the technologies stylized overview of this group of countries: needed to export them in perfect condition to — While the assembly plants established under the high-priced “gourmet” niche markets. import substitution model restricted innovation — Designating areas to be set aside for “organic” (often by contractual obligation), export activities, production and establishing a certification of usually in the hands of multinationals, were up origin system. to date technologically, employed local personnel — Developing health-related biotechnologies for in a managerial and technical capacity and often human, animal or plant needs identified locally engaged in adaptive innovation.7 as well as improving export-related products. — Complementary industries developed to replace — Developing environmental protection capabilities assembly plants (glass, paper, cardboard, plastics, involving alternative energies, recycling, pollution packaging, printing, cement, paint, ceramics, capture, etc. etc.) and basic agroindustries (beer, milk, juice, — Exploiting the varied types of modern tourism coffee, pasta, etc.) are all mainly process industries by taking full advantage of the variety of natural using local raw materials, and they consequently and historical conditions in the countries and needed adaptation and improvements even if using imaginative business models. they were based on foreign technologies and — Learning to custom-design the additives, catalysts equipment.8 and other specialized chemicals that may be — Most service infrastructure networks, usually set required by process industries (local or global). up by governments, such as telephone, electricity, — Developing a specialized capital goods industry water and sewage systems, were manned by local capable of responding to both simple and exacting personnel, and they therefore needed to have full requirements from process industries, be they operational and maintenance capabilities as well large, medium-sized or small. as the ability to make minor improvements and — Developing or enhancing complementary adaptations. Once they were privatized, foreign computer software, systems and services and electronic instrument industries that are likewise 7 capable of meeting user specifications. Given the local specificity of raw materials production (or extraction), important innovations were sometimes made in situ. — Promoting a dense network of small knowledge- Lake Maracaibo in Venezuela was the site of pioneering innovations intensive enterprises (SKIEs) to serve each area in underwater drilling. 8 of specialization. See, for instance, Vera-Cruz (2006) and Dutrénit (2006) for beer and bottle-making in Mexico.
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companies came in with new technologies and had already pointed out that while Asian and South retrained existing personnel on the basis of their European growth in the 1970s had reduced inequalities, previous experience. the majority of the Latin American countries had — Some countries succeeded in making the grown with very unequal income distribution patterns.10 move upstream in import substitution to steel, It is interesting to note that, during their catching- petrochemicals and capital goods with the resulting up process, the four “Asian tigers” all established accumulation of know-how and engineering universal intensive education programmes with a capabilities, as well as a degree of innovation strong technical bias, and progressively developed a capacity. more even income distribution. Both have continued — Later, with the opening of their economies and to prevail as they have moved up the growth and the arrival of the information revolution, most development rankings.11 countries developed indigenous companies to In the course of the analysis that follows we shall design hardware and software products and to argue that it is precisely because of the opportunities provide systems integration, maintenance and offered by the current paradigm that the twofold other services. objective of lifting the bottom of the pyramid while Taken all together, this indicates that the common generating growth in the front ranks of the economy history of industrialization efforts in Latin America is now achievable. has bequeathed a degree of bias towards processing This means creating a dual strategy or “dual industries and enough ICT capabilities to serve as integrated model”. One part of it would be to achieve a minimum platform of technological expertise technological mastery (deep specialization) in resource- for this strategy. Nonetheless, the whole proposal based industries with a view to establishing strong hinges on a gigantic effort in education, training positions in the global marketplace, while the other and technological capability enhancement across the would be to develop the wealth-creating capacity of whole of this range. each part of the territory and thereby improve local Unfortunately, with the exception of tourism people’s quality of life by leveraging local advantages and some agricultural sectors, most process industries to target local, national or global niche markets. In are not labour-intensive, but rather skill- and capital- the first part of the strategy competitiveness is the intensive. Furthermore, the reorientation proposed goal, in the second it becomes a means to well-being would make them even more knowledge-intensive. for the population concerned. The first is oriented Hence, the strategy demands a complementary effort towards top-down, the second towards bottom-up to promote the growth of high-employment industries growth. The sectors promoted in the first would be the (construction, health, personal services). But that engines of growth in the economy; those developed would not be enough. in the second would be its poverty fighters. The issues of income distribution and poverty In the last section it will be argued that the have been highlighted by the social polarization that two prongs of the dual model need to be socially China and India, the successful emerging countries, accepted and ideologically integrated, but clearly have been experiencing. Latin America, of course, distinguished institutionally. Let us now discuss how has a tradition of polarized income distribution the three hyper-segmentations that characterize the and of marginalization in the countryside and in the globalization process open up opportunities for each shanty towns surrounding the main cities, and this side of this dual strategy. worsened during the “lost decade”, giving rise to social discontent, resentment and an ardent desire for change. Any strategy for growth that does not recognize this appalling reality will be socially unacceptable and politically unstable. The development goal must be the one promoted by Fernando Fajnzylber in the 1990 ECLAC publication 10 Fajnzylber (1990), figure 1, p. 12. The subject is still on the Changing Production Patterns with Social Equity.9 He ECLAC agenda, with special reference to structural heterogeneity as a reason for the scale and persistence of inequality. See, for example, Infante and Sunkel (2009). 11 The Republic of Korea, Singapore and Hong Kong Special Administrative Region are among the top 28 countries (score above 9 ECLAC (1990). See also ECLAC (2008). 0.9) in the human development index ranking (UNDP, 2007).
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IV The hyper-segmentation of markets Opportunities at both ends of the dual model
The ICT revolution has led to a refined fragmentation aspire to global markets next to high-technology of all markets, not only in manufacturing but also ones. This means that proper market targeting is as in raw materials and services, in such a way that much a prerequisite, and offers just as great a wealth many fabricated products, from mobile phones and of opportunities, for bottom-up sectors as for top- desktop computers to T-shirts and refrigerators, down ones. are now treated as commodities, while the idea of As a result of this hyper-segmentation, a “speciality” niche is now frequently associated furthermore, the approach normally used to group with raw material segments such as certain types of industries in the mass production era is becoming premium coffee and special steels. inadequate. Rather than being classified by product In each case, the commodity segment is simply type or production process, industries are now often the very high-volume, no-frills, lowest-cost version of grouped by destination markets. A producer of each product, once it has reached a certain degree of specially woven and treated cloth for making sails maturity. Profit margins for industrial commodities is no longer in the textile industry but rather in the are very thin, and comparative production advantages sports and leisure industry. A company specializing are absolutely indispensable for success. On the other in shoes for diabetics would be classed as being in hand, many raw materials markets have upper layers the health industry, and so on. Sports and leisure, with special qualities that command a premium in entertainment, environmental protection, health and the market and can turn into semi-monopolies with creative industries are being recognized as increasingly relatively stable high prices (Kaplinsky, 2005). Much important categories. Typically, these new industries the same can be said, naturally, of services and offer more lucrative and protected opportunities industrial products that are customized, branded for specialized producers as well as better-targeted or organized in creative business models. Figure 2 distribution channels. presents a map of market segmentation, indicating A particularly useful aspect of this variety the two main directions of differentiation, the relative in markets is that it opens up opportunities for proportion of profit margins in each and how these much smaller scales of production. With the mass are obtained and protected. Figure 3 gives some production paradigm, production had to amount illustrative examples and indicates the directions to to several container-loads or several tons per month follow for improved market positioning. in order for exports even to be considered. Neither One of the consequences of this complex transportation nor distribution systems were geared to structure in all markets is the need to switch from handling small quantities of anything. Today there are regarding “industrialization” as the last word in innumerable specialist stores that stock global “niche” development to perhaps having to coin a term such as products, supermarkets and department stores make “technologization” to refer to the more advantageous it their business to offer an extremely wide-ranging positions on the world market maps (e.g., the shift from choice, and global courier services have developed “basic” products or services towards the “special”, very efficient systems of transport and delivery of “unique” or “custom” corners of the map in figure 3). any quantity at any frequency at relatively decreasing This, together with the rise in raw materials prices prices. Innovation in this direction is happening and driven by the advance of globalization, can help to is meeting a growing demand. eliminate or significantly diminish the traditional In this new world of proliferating niche markets, disadvantages of raw materials. the range is extremely wide, running from the most Another consequence of this kaleidoscopic traditional to the highest-technology and most structure is that there is plenty of space for small knowledge-intensive products. There are niches for and medium-sized enterprises (SMEs) to coexist with artisan ceramics and for biotechnology diagnostic kits. giant corporations and for traditional products to Long-distance services can range from straightforward
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FIGURE 2 Hyper-segmentation of markets in the information and communication technologies paradigm
High profitability due to special qualities. Increasingly numerous speciality niches Markets protected by differentiation, innovation, technology, brands and patents
Profitability attained through volume. Commodity Custom Markets protected through low-cost standard adapted and reliable basic qualities and delivery
Competition on price. Competition on Advantages in cost adaptability. and in process technologies Advantages in access to clients, quality, flexibility and responsiveness
Source: prepared by the author.
FIGURE 3 Some examples of positioning
Organic food Design of airports and “Boutique” steel landmark buildings Clean(ed) fuels Major information systems Starbucks coffee Special Specialized niche Unique R&D services and Canvas for sails markets special instruments Footwear for diabetics Viagra (initially) “Gourmet” fruit Tourism in Chichén Itzá Termite-proof wood or the Amazon Oil-digesting bacteria Adventure tourism
Dell computers Wheat; meat E-government software Car parts Basic Customized Distance ordering of Standard software ready-made salads Hard drives Standardized markets Personal services Mobile phones Technical support Desktop computers Health tourism: Beach tourism hip operations
Source: prepared by the author.
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call centres to interpretation of geological survey the middle of a beautiful landscape. Environmental readings. Similarly, local outsourced services can protection activities can cover the gamut from certified range from food catering to data security. Specialized “organic” produce to the use of bacteria specially exports might include anything from an outstanding developed to “digest” oil spills. The range is as wide local marmalade or cheese to services for the detection as the variety of local conditions; the limits are set of faults in sophisticated processing equipment. by the entrepreneurial imagination. Tourism provision can range from a traditional The notion of “glocalization” is particularly Andean village organized into a “local experience” useful here. It refers both to the adaptation of global for travellers or a bird-watching trip in the tropical products to local conditions and to the identification forest to a conference in a high-technology centre in of local products with global potential.
V The hyper-segmentation of value networks Strategies and policies for mutual advantage
There are many types of value networks, from competitors, as in the mass production paradigm, producer-driven ones coordinated by a global producing no longer yield the best results and can endanger corporation such as IBM, Toyota, Telefónica or Zara, a company’s survival. This fact is at the root of the through the buyer-driven supply networks of pure success of clustering and franchising strategies the trading GCs such as Walmart or Tesco, to industrial world over and of the various programmes undertaken districts formed locally to sell globally.12 What they by governments and international agencies to promote all have in common is that they combine autonomy diverse forms of partnership for cost sharing or for for each of the elements with the power to coordinate joint global marketing or training. It also explains the whole network. In the case of GCs, headquarters the formation of stable clusters or consortia, both to determines the goals and degrees of autonomy of the help established industries survive and to generate new individual elements; in the case of clusters formed by sources of activity in impoverished areas. Likewise, it partnerships between independent producers, it is the is behind the attempts of many companies in Latin elements that determine the strategy and powers of America to become suppliers to trading or producing the common core. The latter can sometimes become GCs, with diverse results. part of a GC network. This discussion of market segmentation is It is important to note that in these structures meant to make it clear that the closer a product or the ultimate level of competitiveness belongs to service is to the commodity corner of the market the network rather than to any of its components. map, the stronger will be both the price pressure Consequently, relationships within the network will and the demand for stable, basic, standard qualities be marked by the contribution each component makes with little deviation from specifications and delivery to the whole. The link between this contribution and times. The more special the product or service, or the the relative distribution of benefits across the network more knowledge value it incorporates, the greater the is, of course, strongly mediated by relative power and bargaining power of the supplier. by the information each participant has about the While certain countries in the region may network and markets (Schmitz, 2004). possess some unique capabilities or traditions that Isolated firms do not fare well in the ICT paradigm. can represent a valuable speciality, or be home to Arm’s length relationships with suppliers, clients and some highly knowledgeable specialists or innovators who can command a premium for their work, the majority are likely to have to begin the learning process at the bottom and aim at repositioning from there 12 For producer- and buyer-driven networks, see Gereffi (1994) and Gereffi and Kaplinsky (2001). For local networks, see by innovating upward or sideways into more niche Schmitz (2004). products or services. Appropriate support for enabling
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such improvement could —or should— be designed that elicit loyalty and allegiance. Even the so-called and made available, especially for the bottom-up part “maquilas”, such as those in northern Mexico, no of the strategy. longer follow the minimum training routine work But perhaps the discussion about the conditions model. They need to involve workers in learning for joining production networks is most relevant to the for quality control, continuous improvement and top-down part of the strategy relating to engines of flexibility.15 Moreover, growth in the proportion growth, which in the end is the one that will fund the of jobs of this type as a result of further foreign other half. The management literature has thoroughly investment in the same region may end up setting studied the behaviour of global corporations, analysing the pace for pay increases and education and training how they are changing their structures and spreading levels expected in the area. across the world, how they take decisions and how On the other hand, the more GC units there are in a they compete; the development literature, meanwhile, particular country or locality, the greater the demand for has been examining how the companies and regions services and the greater the outsourcing opportunities that do the outsourced work fare in the process.13 will be in that same locality, depending of course on This essay can only touch on some of the aspects the type of units and on local conditions. most relevant to the proposal being discussed. Resource-based industries have to go offshore The extended geographical network of a GC is for obvious reasons. In fact, they have decades of composed of an enormous variety of relationships experience with a particular way of working. They with local companies and local labour forces across typically keep control of core activities and employ the many countries involved. The corporation itself as many local personnel at each level as possible. is spread across the globe. Not only are regional They tend to outsource any high-technology work managers sited abroad, but so are some of the to global service corporations that may also employ global managers, so that they can take advantage local people. For this reason, in most Latin American of specific local conditions. Many production units countries with energy or mineral resources there is are geographically situated where they can operate a pool of high-level engineering and management to best advantage and, increasingly, certain staff professionals who have experience in that industry units are also being spread around various countries, and are able to take over some activities as outsource including sections of R&D departments. This and the contractors. Resistance to using local companies has greater autonomy and incentives to innovate given to traditionally been high, though this could be attributed local subsidiaries create opportunities for mutually partly to the legacy of the import substitution model beneficial negotiations with host governments, with and its lax attitude to productivity and technological a view to raising the quality of jobs and of the mastery (Pérez, 1996). activities performed locally.14 There are two different Policies to enable componentization16 of value types of global workers in GC networks: offshore networks in agreement with the GCs present locally and outsourced personnel. The latter work for local could well function as a positive-sum strategy under the companies belonging to the network through some new conditions. The increase in demand generated by sort of alliance or contract; the former are “inside” globalization is already calling forth greater and greater the GC and on its payroll. investment in raw materials and generating growing Salaries for “inside” personnel may be the same demand for service companies (Gurlit, Mencarini and as (or somewhat lower than) those paid in the country Montealto, 2007). This will put pressure on global of origin but generally higher than is usual in the host service companies to move experienced personnel to country. They may also benefit from levels of security the new zones of operation and open up opportunities for competent local companies. The new outsourcing relationships, be they in raw material GCs or in the downstream fabricating or 13 On management see, for example, Berger (2006) and Garten (2000); on the development side see Gereffi and Kaplinsky (2001), process industries, are not necessarily the arm’s length, Giuliani, Pietrobelli and Rabellotti (2005) and Humphrey and Schmitz (2004). For systems integration, see Prencipe, Davies and Hobday (2003) and Hobday, Davies and Prencipe (2006). For the notion of global production networks and the way not 15 See Dutrénit and Vera-Cruz (2007) on the Mexican maquilas. only production but also innovation is being outsourced, see Ernst 16 This term is being used rather than “disaggregation” because (2000) and Ernst and Kim (2002). the process goes further, with separation not just into “parts” but 14 See Marin (2007). into the “components” of parts.
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price-squeezing ones of the past. The relationship environment, is growing and is likely to spread further. with suppliers in the value network varies, of course, It has perhaps been strongest in those industries where potentially moving from old-style arrangements with creativity is the determining factor in competitiveness strong price pressures to high-level, high-quality and staff satisfaction is therefore indispensable; it has interaction as the product or service shifts from also become important in those consumer industries requiring low skills to higher levels of knowledge that are exposed to the transparency of the Internet intensity and innovativeness. At the upper end of and need to maintain a good image. However, even the range, there can be strong technical interaction, in cases such as mining, where geographical distance information sharing, very well-paid contracts and acts as a shield against visibility of behaviour and even co-funding of innovations. The idea of the where the clients are major companies rather than proposed strategy would be to facilitate the process consumers, corporate responsibility has enhanced of moving up to those positions in value networks, productivity and hence is tending to spread as normal while recognizing that reaching those levels may best practice (Warhurst, 2005). This said, it is still require gradual upgrading and that the lower rungs the responsibility of national and local government of the ladder may create more employment and organizations to ensure that the natural and human provide opportunities for building up capabilities. environment is preserved and enhanced. Information The ultimate goal would be to widen and enrich the about the standards of responsible business practice skill profile as well as the export mix. set by the leading companies in these fields can GCs no longer behave as carelessly towards the modify expectations and inform realistic and mutually local society and environment as may often have been beneficial negotiations. Growing competition for the case in the past. The trend towards corporate social raw materials between Asia and the West will also responsibility, in the treatment both of personnel and tend to strengthen the negotiating hand of whoever of surrounding communities, and in relation to the possesses them. VI The hyper-segmentation of technologies High-technology specialization coexisting with traditional methods
Dichotomies are no longer useful for understanding concentrates its technological mastery and innovation the new best practice under the ICT paradigm. In efforts. Other activities will be finely segmented and technology, there has been a combined movement analysed in terms of the technological capabilities towards “componentization” and reintegration. required and will then be outsourced under contract Once each component of the whole has become fully or bought in when needed from carefully chosen differentiated and specialized, they all come together competent suppliers whose core competence is in that and interact in a much more dynamic network. The component. These will therefore be willing and able process has a fractal nature, because each of the to reach for mastery in that aspect and to innovate in specialized segments in turn is componentized into it. By componentizing, outsourcing and constructing all the contributing parts. this complex value network, the GC is also erecting In its restructuring process, a GC determines its an innovative structure across the whole range of “core competencies”, which are those that lie at the activities involved. heart of its position in the market and its strategy In this structure, there are plenty of opportunities going forward.17 It is in these core aspects that the GC for local small knowledge-intensive service enterprises (SKIEs) both in face-to-face supply and in the remote provision of digital services. By its nature, in fact, SKIE 17 Prahalad and Hamel (1990) introduced the concept of core globalization generates markets for s in each competencies. locality as it spreads. In turn, the existence of a
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fabric of competent and reliable knowledge-intensive benefit from Portuguese-language advertising and can services increases the competitiveness of all existing reach the colonies of the old Portuguese empire. The local users and serves to attract further local and Spanish-speaking world has also developed on the foreign investment, which will continue to strengthen web, but it still has a long way to go (its constituency the SKIE network. includes Hispanics in the United States). There is also ample space for competent suppliers Another useful feature of the ICT paradigm is of standard or semi-standard goods and services that the hyper-segmentation of markets results in the with enough mastery of the process technologies coexistence of a much greater variety of technologies involved to be able to continuously improve quality and scales than was ever possible in mass production and productivity. times. This is opening up innumerable opportunities None of these opportunities appears automatically. on the bottom-up side of the dual strategy. Organic They require persistence, time and effort to build the coffee grown in the shade, harvested by hand, toasted capabilities needed for those roles (possibly starting by by traditional methods and benefiting from a guarantee working in less demanding markets) and to develop of origin is sold in gourmet shops at premium prices, the capability of negotiating a favourable position. while machine-harvested coffee will be the commodity Large local exporting companies aiming to low-cost variety in the supermarkets (where the become competitive GCs will also need to develop gourmet types will also be sold). There is no exclusion the capability to componentize and outsource, while or marginalization of one technology by the other, building mastery in core technologies and engaging in nor is there price equalization at the lowest level, but constant improvement and innovation in them. rather a process of differentiation by quality and a Though little mention has been made here of range of prices that reflects the differences. the electronics, software, telecommunications and On the other hand, ICTs create the potential Internet service industries, they actually constitute the for customization extending even to the level of basic platform for the competitiveness of networked the individual user. This sort of “high-technology organizations and for effective participation in the artisan production” or (when done at high volumes) global economy. The success of any strategy under “mass customization” is one of the many instances the logic of the ICT paradigm in the current period where this paradigm does away with old dichotomies requires efficient low-cost telecommunications and the through fusion.18 availability of highly competent software, systems and The range of opportunities for striking off maintenance SKIEs. Most Latin American countries in new directions and test-marketing products in have already advanced a good way along this path. relatively small quantities is immense. That is the Participants should easily be able to agree on policies route being taken by innovation in new energy sources to intensify the process. and systems; that was the manner in which the low- A particular feature of ICTs is the intangible cost airlines entered the industry, and it is the form nature of many of their products and services. This being taken by attempts to create products for the makes it possible to outsource most back-office so-called “bottom of the pyramid” (Prahalad, 2004). data services (including call centres) to any part A particularly striking innovation that breaks with of the planet where a competent and responsible the trajectory followed by the automobile industry entrepreneur sets up the service. The same can be in the last decades is the ultra-simple US$ 2,500 car said of translation services and of the interpretation developed by Tata Motors in India. At the same of complex digitalized data in any field (geology, time, extremely expensive, ultra-advanced electric medicine, biology, finance, climatology, etc.) as long cars built by new start-up companies such as Tesla as the appropriate specialists are available. are being brought to market in California, competing The other aspect of intangible products is that with the majors. ambitious innovations in intangible services can be The time has come for the long-sought “adequate” initiated in any country and become global if successful, or “appropriate” technologies, but the concept had to as in the case of Skype, for instance, where little Estonia has played an important role. Knowledge or language specificities can also generate niches in local or global markets. In Brazil there are dozens of Portuguese- 18 We have been witnessing the proliferation of rather ugly but language equivalents of Web 2.0 English sites, which expressive portmanteau terms reflecting this fusion, such as “glocalization” (referred to earlier) and “coopetition”.
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wait for a technological paradigm capable of handling greatly facilitated, of course, by the ease with which the coexistence of different levels of productivity information technology tools can handle commercial and technological sophistication without having inventory control and other administrative processes, to homogenize prices or markets. This has been regardless of numbers, variety or changes in time. VII The seeds of the future Using current opportunities to prepare for a technological leap
The choice of a resource-based path for the spills, special chemical additives to give particular technologization of production in Latin America qualities to wood or to serve as catalysts in oil refining has an additional advantage that is pregnant with and petrochemicals, natural pest control processes in future possibilities. organic agriculture and so on.20 The ICT revolution is now entering the deployment If historical rhythms are any guide, the transition period, as its power to increase productivity and to that new revolution might occur in about two or facilitate innovation spreads to all other industries.19 three decades. Whatever the time frame, Latin America Meanwhile, the next revolution is in gestation. It can now make a start on enhancing its capabilities in would appear now that the revolutionary industries preparation for the next revolution, using its current of the future are likely to be some combination of resource-based exports as a platform for leading-edge biotechnology, nanotechnology, bioelectronics, new innovation and as a source of funding. materials and new energies, shaped by technological It is important to note that Japan and the “Asian breakthroughs and probably by growing environmental tigers” acquired their initial experience by assembling awareness and concerns. transistors and electronic equipment in the 1950s All these technologies can be roughly ranged and especially the 1960s and early 1970s. At the time, in the category of process industries. During the these were being used in products typical of the mass current gestation period they are likely to develop production revolution: radios, televisions, record in connection with some existing leading industries. players, etc., with the portable versions constituting New materials will find more and more uses in the a market-expanding innovation. This placed those fabrication industries, nanotechnology in surfaces, countries in an advantageous position in terms of electronics, cosmetics, health products and others. experience and capabilities when the microprocessor They may also influence raw materials production inaugurated the ICT revolution. Something similar itself, examples being special bacteria for leaching in could take place in Latin America the next time the mining industry or for removing pollution and around, not however by chance but because of a conscious drive in this direction.
19 This period is the second of two stages in the spread of each technological revolution; it begins following the growth and collapse of a great financial bubble and the consequent institutional adjustments, historically characterized by a return to an active role 20 See Hernández-Cuevas and Valenzuela (2004) and Gutman for the State in the economy. See Pérez (2004, pp. 74-77, 107-112 and others (2006) for strategic thinking on biotechnology in and 175-188) and Pérez (2006). Latin America.
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VIII A temporary window of opportunity And why resource-based development theories are also temporary
The proposal being presented here asserts that natural The notion of “Dutch disease” appeared later to resources can, under current conditions and possibly refer to the way gas (or oil) exports determined the for a few years longer, become the basis for launching exporting country’s exchange rate to the detriment of a self-funded development leap. The implication is manufactured exports. The concept appeared when that these resources can be technologized in order energy prices soared in the 1970s and was first used to improve the quality of the export mix and open in an article in The Economist in 1977. More recently, up opportunities for marginalized sections of the various “resource curse” hypotheses have become population. Yet traditional doubts about the possibility fashionable. Some rode on the back of the African of resource-based development may cause its feasibility experience of violence, wars and corruption in the to be questioned. internal struggle for the control of such sources of It is interesting to note that the idea of the wealth as diamonds, gold and oil; others were based “resource curse” is very recent and was preceded by on the contrast between the rise of the “Asian tigers” other theories employing other arguments which may and the lost decade in Africa and Latin America. sometimes seem contradictory. What is being claimed The contention of the present study is that in the present study is that opportunities change as there are certain specificities in the current context different technological revolutions with different that are different from those which prompted those conditions emerge and propagate. recent theories and that open a temporary window Classical economists (and popular opinion at the of opportunity for resource-based growth. However, time) considered the possession of natural resources an it is only a window and it may be of relatively short advantage for development. The idea was confirmed duration, perhaps a decade.22 This judgment and those – and partly inspired – by the fact that countries such that follow are based on my personal assessment of the as Australia, New Zealand, Canada and Argentina conditions that make the present proposal viable. made huge leaps forward on the basis of their mining, The following are some of the factors that create agricultural, meat and wool exports in the last quarter a favourable context for initiating the strategy now of the nineteenth century, using the proceeds to fund (2010-2012): ports, airports, railways and other infrastructure. — The balance between supply and demand in the Resources also played a positive role in the economic globalization process means that prices for raw history of the Scandinavian countries, as well as in that materials are almost certain to settle at levels of the United Kingdom and the United States. higher than those normal in the past, although Natural resource production began to be seen as volatility will not disappear. The average level will a burden on development once the mass production depend on any financial regulations introduced revolution was fully established and high-productivity (to prevent commodity speculation) and market industry had become insatiable in its need for cheap adjustments. energy and raw materials, and synthetics began replacing — While significant extraordinary profits continue one natural material after another. Both Prebisch and to flow, it should be possible to achieve positive- Singer saw the price scissors between manufactures sum negotiations between users and suppliers and and materials as an obstacle to development at a time when they actually had become so, at the beginning of the deployment period of mass production in the 22 The time available to initiate a strategy with a chance of success mid-1940s (Prebisch, 1951; Singer 1950).21 is different from the time it may take for this strategy to pay off. The Republic of Korea entered the semiconductor industry and became a leader in memory chips at the right moment. Ten years later it would not have been possible, but the benefits of that early 21 See Pérez (2004 and 2009) on the characteristics of periods in which entry and success have been multiplied as that expertise has served successive waves of technology are established and deployed. as a platform for further advances under changing conditions.
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between corporations and governments with a view materials, water and food. This suggests that scarcity to allocating some natural resource profits and taxes will tend to push up the prices of natural resources, to investment in capacity expansion, downstream making their possession an even greater advantage. processing, technologization and improvement These price changes and the resulting rise in freight of externalities. This would boost the top-down costs will penalize the movement of unprocessed raw development strategy (human capital, high- materials across the world. That should favour local technology services, infrastructure, environmental processing. At the same time, higher prices will put protection) as well as potentially providing funding pressure on users to reduce the amount of material for bottom-up development projects. employed per unit of output. That should favour — The 2008 financial crisis has created the conditions more finely specified materials of the kind suggested for acceptance of a more active role for the State in the proposed strategy. in the economy. Because of higher freight costs, the geographic — Changes in environmental awareness, regulation distribution of globalized activities is being reconsidered and corporate behaviour are still incipient but and more factors are being taken into account in the are beginning to intensify. In particular, process choice of local, regional or global sourcing, depending industries and extraction firms have been slow on product characteristics and cost components. to adopt the global ICT paradigm (in terms of This trend is opening up some opportunities and incorporating local capabilities into their networks), closing others. but they can be seen to be moving now. The time frame for these environment-related — Large specialized service companies are trends to become mainstream may be very short, overstretched and will probably welcome the depending on the intensity of global warming effects entry of local allies. In time they will expand to and the regulation that may accompany them. In any meet demand and those that are not “inside” the case, this needs to be a central feature in any resource- network (on an independent or allied basis) will based strategy from the start. find it much harder to enter. Lastly, the whole of this strategy depends on — The potential competitors in this sort of strategy a serious push for active engagement accompanied (Africa, Russia, Kazakhstan and others) are only by a simultaneous strengthening of knowledge and just setting off along a similar route. experience. Learning and the creation of human — Those countries or regions that become early capital take time, as do major investment projects. competitors by riding these trends will have a This implies that only an early and determined head start, and whichever region attracts the most pursuit of these goals will place the Latin American dynamic GCs will acquire decisive advantages. countries on a dynamic growth path in time to follow Another aspect setting resources on a dynamic it successfully. path is the way the current direction of globalization What is clear is that if the increased income from is increasing its environmental impact. Both the natural resource exports ends up becoming a source limits on the availability of natural resources and the of superficial growth and of increased imports for climate change threat are going to become key forces consumption, a very valuable opportunity will have shaping markets and technologies related to energy, been squandered.
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IX Implementing the vision Generating consensus and an adequate institutional framework
There are already many Latin American companies Learning will need to involve three complementary participating in GC networks, and some are building layers. First there is learning in the public sector global networks of their own. There are also many itself, given that only a competent, well-functioning government initiatives to promote partnerships government structure can guide a sophisticated among small and medium-sized firms to increase modern economy. Then there are education systems, their competitiveness. Some countries have gone much whose methods and behaviour need updating and further in one or other aspect of the strategies suggested overhauling as much as their technical content. here, as well as in other directions. The question is Lastly, there is the learning to be done in the business whether those scattered efforts are enough, whether sector in whatever measure is necessary in each case they will yield the maximum potential benefits to the to bring about gradual improvements in innovation companies and population of these countries, and capabilities. Collaboration among the three sectors, whether current conditions are bringing forth all the in coordination with their global counterparts when potential that exists for wealth creation and innovation. appropriate, is what will weave a strong national A concentrated effort in an agreed direction would innovation system.23 create increasing externalities for all and is likely to Besides these agents, learning will need to spread bring urgently needed results more rapidly. throughout society both in the form of general public The “State or market” dichotomy is now obsolete opinion, aided by the experience of work and education, and counterproductive. Neither central planning nor and through the media, with proactive support from a “level playing field” will do. The field has to be different NGOs and other organizations. tilted to favour the great majorities and to provide Where policies and instruments are concerned, a strong stimulus for the growth and success of the two prongs of the strategy are very different potentially competitive sectors of the economy by and thus a dual institutional framework will also further reinforcing their advantages. A consensus be required. vision resulting from a richly informed and intensive In the author’s view, the criteria and methods to debate involving businesses, government and society be used on either side of the dual model are different as a whole would bring the maximum cohesion, the enough to require different attitudes, behaviours and most effective guidance and enabling instruments competencies, and even different institutions and policy and the most profitable overall results for local (and instruments. Yet on both levels success will require a global) participants. The goal would be to mobilize sufficient number of highly skilled personnel with the the whole of society so that the different actors take necessary level of capabilities and dedication and the initiatives along lines that, while different, converge power to commit the government, along with a clear upon an agreed general direction. understanding of the new market dynamic and the Among the possible stakeholders to bring to opportunities it presents for favourable positioning the table are governments (from national to local), and linkage. Bold policies and great determination GCs, large local companies, SKIEs, SMEs, universities will be required for success. This means that countries and research institutes, relevant NGOs, consultancy cannot rule out the use of temporary tariff barriers firms, banks and international funding agencies, and special subsidies and taxes to provide a strong diasporas (especially their business and intellectual components), the media and society at large. The aim is to achieve the promise of every positive-sum 23 This wider notion of a “national innovation system” encompassing game: everyone helps to increase the size of the pie all the societal agents involved in the innovation process was and everyone gets more of it. introduced by Freeman (1987) and Lundvall (1988).
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bottom-up impetus with the aim of attaining decent about the potential for resource-based growth and living standards for the poor. about local innovation capabilities. It therefore needs There are obviously major differences between to be ensured that the debates are informed by ample the larger and more powerful countries and the data. The more knowledge is made available about smaller ones, in terms both of resource potential what is happening in other parts of the world (and and of implementation capabilities in the private and indeed in Latin America itself) in terms of innovation public sectors. Some of the regional and multilateral and cooperation and the development of natural organizations could contribute with technical and resource niches, the fewer prejudices will need to be financial support here, and the stronger countries confronted and overcome. could establish mechanisms to serve as dynamic poles In conclusion, the argument of this paper is and help draw the smaller ones in their wake. that a window of opportunity has now opened, one Relative size and levels of previous development that is particularly well-suited to the natural resource aside, there are many other power-related factors that endowment and historical experience of Latin could influence the feasibility of the strategy in general America, and that this should not be wasted. It is a and actually have the effect of heightening differences chance to take advantage of the hyper-segmentation between countries. Production and market conditions of markets, activities and technologies typical of the are very different depending on whether companies ICT paradigm and apply them even more thoroughly are local or foreign, whether the business concerned in resource-based processing industries. This should be deals in minerals and energy or agriculture, livestock facilitated by rising average prices for such resources activities, forestry and fisheries, whether ownership and as a result of globalized growth. By using a portion of control of production are in a few hands or dispersed, the increased revenues to upgrade the technology level and whether international trade and markets are of the export mix and to improve the wealth-creating concentrated or diffuse. Conditions will also differ capabilities of the population, the region can become depending on the proportion of the value chain that highly specialized in custom materials, sophisticated is (or could be) in the territory, the greater or lesser foods and other natural products, while positioning relative weight of knowledge-intensive versus routine itself for the next technological revolution. The strategy activities, and so on. The variety of conditions will can serve both for high-end competition in global define the need for appropriate policies in each case, markets and as a means of lifting the poor out of albeit with the same general goal. poverty by creating clusters for “niche” specialization Yet the crucial issue that could make or break the right across the territory. strategy is the actual or potential power of institutions Innovation in all aspects of business is increasingly to promote consensus, apply bold measures and sustain practised and understood as the way to success. The policies, enforce regulation and taxes and avoid failure time has come for an equivalent wave of rethinking, because of “capture” or corruption or both. reorganizing and innovating in the public sector as There should be no illusions about the likely an agent and facilitator of change for maximum resistance the proposed strategy may arouse from public benefit. Indeed, the success of a strategy such both ends of the ideological and political spectrum. as the one proposed here will very much depend on There will be objections both to the role of the State summoning up determined leadership and wide- and to that of GCs in the process; there will be doubts ranging institutional creativity. (Original: Spanish)
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