In­no­va­tion

Stabroek News Sunday - - BUSINESS PAGE -

Economists think of tech­nol­ogy as knowl­edge of the pro­duc­tion process of a firm or in­dus­try. As men­tioned in my pre­vi­ous col­umn, a ma­chine like the com­puter, iPhone or drone is not the tech­nol­ogy. In­stead, these are ex­am­ples of phys­i­cal cap­i­tal that must be dis­tin­guished from fi­nan­cial cap­i­tal of the ac­coun­tant. The knowl­edge or ideas of how to trans­form phys­i­cal cap­i­tal, land, work­ers, etc, into use­ful goods and ser­vices for so­ci­ety is the tech­nol­ogy.

I would go as far as to make a con­tro­ver­sial point, which is nowhere in the schol­arly lit­er­a­ture, that a Guyanese con­sti­tu­tional over­haul can be seen as a cru­cial so­cial tech­nol­ogy. An en­light­ened con­sti­tu­tion that de­crees (i) co-op­er­a­tion and (ii) cred­i­ble elec­toral threats from in­de­pen­dents can be seen as em­body­ing a set of ideas that pro­duce a so­cial good: the min­i­miza­tion of the harm­ful ef­fects of strate­gic pro-eth­nic vot­ing. Strate­gic vot­ing means that about 85% of Guyanese vote not be­cause they par­tic­u­larly love their re­spec­tive po­lit­i­cal party or leader, but to keep the other side out from power be­cause they per­ceive an eco­nomic se­cu­rity dilemma. This is the source of the pris­on­ers’ dilemma trap I wrote about a few years ago.

Many economists might not agree with my ag­gre­gate or so­cial tech­nol­ogy as the con­cept is mainly seen as a mi­cro or firm-level is­sue. I main­tain that the abil­ity to in­no­vate on ex­ist­ing tech­nolo­gies or im­i­tate and even in­vent new ones is hin­dered by the present macro po­lit­i­cal struc­tures in Guyana. There­fore, why can’t we view en­light­ened con­sti­tu­tional en­gi­neer­ing as a so­cio-eco­nomic tech­nol­ogy?

In­no­va­tion, there­fore, is the abil­ity of the man­agers and en­trepreneurs of the firm to tweak ex­ist­ing tech­nolo­gies. The en­trepreneur or CEO may in­vest in re­search and de­vel­op­ment so as to come up with new ways of im­prov­ing on ex­ist­ing pro­duc­tion knowl­edge. Tech­nol­ogy and the in­no­va­tion process are re­ally knowl­edge-based.

To em­pha­size this point fur­ther, con­sider two firms with the same ma­chines. In spite of the sim­i­lar­ity of ma­chines, one firm has a greater pro­duc­tiv­ity. This is a clear case of one firm be­ing in­ef­fi­cient rel­a­tive to the other. The ob­vi­ous cul­prit here is the man­ager or en­trepreneur of the in­ef­fi­cient firm lacks the knowl­edge of how to com­bine the work­ers and ma­chines op­ti­mally. This sce­nario played out be­tween Gen­eral Mo­tors and Toy­ota. GM tried emu­lat­ing Toy­ota’s man­u­fac­tur­ing tech­nol­ogy, but just could not achieve the same pro­duc­tiv­ity. This sce­nario can be ex­trap­o­lated to the en­tire na­tion, and prob­a­bly rel­e­vant to my par­al­lel so­cio-eco­nomic tech­nol­ogy.

When the his­tory of GuySuCo is writ­ten it will be clear that the rea­son for the demise of the in­dus­try was not re­ally the loss of pref­er­en­tial prices, but the de­pre­ci­a­tion of the stock of knowl­edge em­bod­ied in the in­dus­try’s re­search labs, field man­age­ment and gen­eral knowl­edge of the fac­tory and field pro­cesses. This stock of knowl­edge is vi­tal if the in­dus­try is to in­no­vate by tran­si­tion­ing to other out­puts such as bulk al­co­hol, pub­lic drainage, mo­lasses, ethanol and bagasse power; all while main­tain­ing the most ver­sa­tile feed­stock su­gar­cane. No po­lit­i­cal leader in Guyana since the 1980s asked the kind of ques­tions nec­es­sary to keep the stock of knowl­edge in­tact. The newer bright ones re­turn­ing with a proper master’s get this, how­ever.

The Global In­no­va­tion In­dex (GII) is pub­lished by INSEAD, a busi­ness school based in France, Abu Dhabi and Sin­ga­pore. It mea­sures in­no­va­tion us­ing in­put and out­put fac­tors of in­no­va­tion. This in­dex rec­og­nizes that firm-level in­no­va­tion is de­pen­dent on many fac­tors at the macro level as well as the mi­cro.

The ta­ble shows data from the 2014 re­port. Other re­ports have since emerged, but I chose 2014 be­cause Guyana, as well as sev­eral Caribbean economies, was last in­cluded in that year. The in­dex is made up of in­put and out­put fac­tors of in­no­va­tion. The in­put fac­tors in­clude in­sti­tu­tions such as po­lit­i­cal, reg­u­la­tory and busi­ness con­di­tions. For ex­am­ple, the po­lit­i­cal di­men­sion in­cludes gov­ern­ment ef­fec­tive­ness and safety. How­ever, it says noth­ing about whether the con­sti­tu­tion and elec­toral frame­work of the coun­try are con­sis­tent with po­lit­i­cal sta­bil­ity in an eth­ni­cally bi­com­mu­nal so­ci­ety such as Guyana. The reg­u­la­tory en­vi­ron­ment, bank­ruptcy laws and busi­ness en­vi­ron­ment make up other in­sti­tu­tional fac­tors.

Hu­man cap­i­tal and re­search ca­pac­ity form another in­put pil­lar. This in­cludes grad­u­ates in en­gi­neer­ing and the sci­ences, spend­ing on re­search and de­vel­op­ment, univer­sity rank­ing and others. In­fras­truc­ture forms the third in­put pil­lar. It in­cludes the usual fac­tors such as elec­tric­ity gen­er­a­tion, gross cap­i­tal for­ma­tion and others. More­over, the in­dex places en­vi­ron­men­tal sus­tain­abil­ity as an im­por­tant as­pect of in­fras­truc­ture. Mar­ket so­phis­ti­ca­tion is seen as es­sen­tial for in­no­va­tion and it is the fourth in­no­va­tion in­put pil­lar. This in­cludes credit mar­ket de­vel­op­ment, mar­ket cap­i­tal­i­sa­tion, in­vestor pro­tec­tion, do­mes­tic mar­ket scale, tar­iff and trade mat­ters, and others.

Busi­ness so­phis­ti­ca­tion is the fifth in­put fac­tor for in­no­va­tion. It in­cludes such con­di­tions as the con­sult­ing col­lab­o­ra­tion be­tween busi­nesses and univer­sity, firms of­fer­ing for­mal train­ing, fe­male em­ploy­ment with ad­vanced de­grees, patents, re­search col­lab­o­ra­tion be­tween busi­ness and univer­sity, and other vari­ables. Speak­ing about busi­nes­suni­ver­sity col­lab­o­ra­tion, I was at the re­cently con­cluded con­fer­ence held by UG’s School of En­trepreneur­ship and Busi­ness In­no­va­tion. One thing that was ob­vi­ous to me is the econo­met­ric help the univer­sity could pro­vide to com­mer­cial banks and or­ga­ni­za­tions like IPED. Folks like my good friend Mr Sukr­ish­nalall Pasha can eas­ily come up with prob­a­bil­ity mod­els for more ob­jec­tive risk as­sess­ment of po­ten­tial bor­row­ers.

The in­no­va­tion out­put pil­lars in­clude two broad mea­sures: (i) knowl­edge and tech­nol­ogy out­puts and (ii) cre­ative out­puts. These can in­clude vari­ables such as high-tech ex­ports, ICT ser­vices ex­port, new busi­ness for­ma­tion, peer-re­viewed publi­ca­tions, patents re­ceived, growth rate of per capita GDP, high-tech man­u­fac­tur­ers, com­puter soft­ware spend­ing and others. The GII is there­fore a sim­ple av­er­age of the in­put and out­put in­no­va­tion in­di­ca­tors.

I se­lected the GII score for a group of small coun­tries. They all face the same global shocks like Guyana. In 2014, 143 coun­tries were ranked on the var­i­ous in­put and out­put fac­tors of in­no­va­tion. Switzer­land was ranked high­est on the in­dex with a GII score of

The Lu­cas Stock In­dex (LSI) rose 0.43 per­cent dur­ing the third pe­riod of trad­ing in May 2018. The stocks of two com­pa­nies in the in­dex were traded with 125 shares chang­ing hands. There were two Climbers and no Tum­blers. The stocks of the De­mer­ara To­bacco Com­pany (DTC) rose 4.17 per­cent on the sale of 25 shares, while the stocks of the Guyana Bank for Trade and In­dus­try (BTI) rose 0.16 per­cent on the sale of 100 shares. The LSI closed at 397.14.

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