Drivers of Competitiveness

Diego Comin

• Publisher: WSPC
• Year: 2016
• ISBN:
  9789814704755
• Topic: Commerce
• Subtopic: Commerce international

In this day and age, technology has become ever more prominent and omnipresent in our lives. As technological developments emerge and become more ubiquitous, it becomes vital to understand and analyze the impact of technology on society.

Drivers of Competitiveness focuses on technology and seeks to analyze its causes and consequences on productivity and competitiveness and to examine the dynamic relationships between the different factors in various contexts. Building on state-of-the-art research, the book illustrates the global, institutional and technological factors that shape the performance of business and countries.

Unlike most existing books in the field, Drivers of Competitiveness is a self-contained case book ideal for classroom use. The cases in the book are brand new. All of them are written in the context of the global financial crisis, providing a new perspective on the crisis that sheds light on its effect on competitiveness and on the diversity of responses by companies and countries. The cases and the analytical framework that emerges from the book constitute an essential kit for current and future managers, policy-makers and observers of global dynamics.

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In this day and age, technology has become ever more prominent and omnipresent in our lives. As technological developments emerge and become more ubiquitous, it becomes vital to understand and analyze the impact of technology on society.

Drivers of Competitiveness focuses on technology and seeks to analyze its causes and consequences on productivity and competitiveness and to examine the dynamic relationships between the different factors in various contexts. Building on state-of-the-art research, the book illustrates the global, institutional and technological factors that shape the performance of business and countries.

Unlike most existing books in the field, Drivers of Competitiveness is a self-contained case book ideal for classroom use. The cases in the book are brand new. All of them are written in the context of the global financial crisis, providing a new perspective on the crisis that sheds light on its effect on competitiveness and on the diversity of responses by companies and countries. The cases and the analytical framework that emerges from the book constitute an essential kit for current and future managers, policy-makers and observers of global dynamics.

Request Inspection Copy

Readership: International business; current and future managers, policy-makers and observers of global dynamics.
Key Features:

• Presents a new and original conceptual framework to explore the drivers of competitiveness and productivity
• Incorporates state-of-the-art research on the drivers and consequences of technology
• Based on new case studies, all written in the context of the recent global recession, providing a new perspective on the crisis and new managerial insights

III

Technology and Innovation

Introduction

Technology is a way to produce something. This is a very broad definition which includes most activities that lead to value creation by corporations. A new product that is developed is a technology if it provides the consumer better health, higher caloric intake or enhanced welfare. A new service is also a technology if it reduces the anxiety of the consumers over the risk they face, if they give them the pleasure of enjoying a vacation or a smoother way to process a payment. Of course technology is also something that makes companies more productive because they can use more advance machines and software or because they can organize more efficiently their productive processes.

Given its centrality to productivity and competitiveness, the central question is “why do (most) companies not develop or have access to the best possible technologies?” One possible answer is that the institutional rules that shape the environment in which companies operate do not make it possible/profitable. This is the type of answer studied in the previous module.

An alternative (or complementary) answer is that the problem is in the capacity of companies to implement and develop the technologies that would make them more productive. In this alternative view, companies lack an essential factor to implement technologies, technological knowledge. Knowledge is not something companies can buy in the market. And therefore, they have to stick with the inefficient technologies they can implement and operate. The cases discussed in this module provide examples of companies and activities where this narrative is relevant.

Once one accepts that the scarcity of knowledge is critical and that the market cannot provide this missing factor, a natural question is “what role should the government play?” Traditionally, we have tended to think that innovation is something that governments should leave to private companies. However, in reality, many of the most significant innovations have the government’ stamp on them. This is the case of GPS, the internet, computers, and many of the pharmaceutical advances of the last century.

This observation raises at least a couple of important questions. First, should the government be directly involved in the development of technologies (in addition to its more wide-spread role as a financier of R&D)? Second, what role should it play when it comes to facilitating the diffusion of technologies? That is, when technologies have been already invented but despite that companies do not have the ability to implement them in their production processes?^a

It is important to emphasize that, the cases in the module also enable participants to discuss the consequences for a company’s strategy of the frictions that impede a proper allocation of knowledge in society. For example, the ABB case discusses the risk of imitation of ABB technologies in China; ABB, CoET and Malaysia discuss the commercialization of technologies; Inkaterra emphasizes the possibility of using foreign knowledge to implement a domestically crafted innovation.

The cases in the module are designed and sequenced to explore the contrast and similarities between rich and emerging economies when it comes to technology. To this end, the first five cases focus on emerging economies, while the last four are centered in two rich countries (Germany and the U.S.). From a sectoral perspective, the cases broadly cover all sectors in the economy (e.g. services, agriculture, and manufacturing). Finally, when writing the cases, me and my co-authors have tried to provide a historical perspective that allows the reader to assess the relative importance for current developments of contemporaneous factors versus others that are inherited from the past.

Synopses and Assignment Questions

Inkaterra

The case presents the unique business model of Inkaterra, a leading eco-tourism organization in Peru, and the different strategies the company can pursue to grow. Through the experience of Inkaterra the case studies two general issues. First, it discusses the potential barriers that exist for the development of the tourism sector. Second, it presents the debate of whether governments may want to use tourism as an engine of growth, and if so, what is the best strategy to preserve the environment.

AQ:

1. What is Inkaterra’s business model?

2. How should Inkaterra Grow?

3. What would it take for eco-tourism to take off in Peru?

ABB: “In China, for China”

ABB, a power and automation Swiss engineering company had to decide if they wanted to be even more integrated into the Chinese economy, ABB’s biggest market, or if they should instead increase their presence in other emerging markets such as India and Brazil.

AQ:

1. Evaluate ABB’s strategy in China. How well have they managed their technologies?

2. Were they right to agree to transfer high voltage direct current technology?

3. Is their mid-market strategy a good idea? If it succeeds, what will Winmation mean for ABB?

Low carbon, Indigenous Innovations in China

For the past seven years or so, the Chinese government has been powering ahead with industrial policies to promote low-carbon energy technologies-wind, solar, electric batteries and vehicles, nuclear power, and even carbon capture and sequestration. In 2009, the government focused broadly on “indigenous innovation,” a policy to adopt and then develop technology in dozens of high-tech sectors. As with the earlier focus on renewables, explicit governmental policies and subsidies discriminate against foreign products and foreign companies invested in China. The net effects of these initiatives leave low-carbon energy industries in the United States in the dust.

AQ:

1. Why/How/where is China moving up the value chain?

2. Why is China pursuing indigenous innovations specifically in renewable energies?

3. Is it just China or can other countries do it too?

4. What should the US do with technologies to produce renewable energies?

CoET: Innovation in Africa

Dr. Jamidu Katima, the Principal of the College of Engineering and Technology (CoET) of the University of Dar es Salaam, knew that operating in Tanzania had its challenges. CoET’s mission as a technology center that innovated to solve local problems could be a great way to contribute to the country’s growth while training Tanzania’s top talent. Yet, very few of its technologies developed at CoET had made it to market, and for those that had, the diffusion rate had been quite low.

AQ:

1. How should CoET be organized?

2. Do African firms adopt new technologies? Why?

3. What should be technological priority of African governments?

Malaysia: Standing on a Single Leaf

The case discusses the development of palm oil in Malaysia. This experience provides important insights about when and how government intervention can be successful in developing new sectors in the economy.

AQ:

1. Was the development of the palm oil sector in Malaysia the result of market forces or of government intervention?

2. Is the plantation sector a good sector to specialize?

3. When/how can economic activity shift to a new sector?

Fraunhofer: Innovation in Germany

Fraunhofer: Five Significant Innovations

Fraunhofer is one of the largest applied research organizations in the world. With 17,000 employees and a 1.6 billion euros budget, Fraunhofer has 60 institutes in Germany that cover most fields of science. The case examines the consequences that Fraunhofer has for the competitiveness of the German economy. It also explores whether the organization of R&D is affected by the size distribution of firms as well as by institutions in labor and financial markets.

AQ:

1. Is Fraunhofer an effective organization?

2. Are German companies com...