Criterion of the Month
Ref: COM-2016-Mar


Innovation, values and high-tech trade

Arturo Bris

By Professor Arturo BrisArturo Bris
with José Caballero

The IMD World Competitiveness Center in partnership with Thailand’s Department of Trade Negotiations (Ministry of Commerce) recently organized an event aimed at improving Thailand’s competitiveness. The three-day event included several interrelated activities and culminated in a highly dynamic and interactive workshop – a “Mega Dive.” One of the objectives was to identify key competitiveness challenges and to provide the Ministry with policy ideas to address them. Approximately 300 representatives from both the private and public sectors participated in the event which covered five main themes: Trade, productivity and efficiency, international investment,innovation and high-tech trade, and agricultural policy.

In this Criterion of the Month we take a look at the innovation/high-tech trade interactions. Observers indicate that innovation requires a set of values that enable “creative destruction” processes which in turn depend on attitudes that reward necessary risk-taking. At the same time, those values make it acceptable to “fail” while endeavoring to innovate. In the context of the IMD World Competitiveness Yearbook, we thus should find that countries that adopt values that support competitiveness and that are “participative/inclusive” (e.g., a corporate value system that takes into account the values of employees) score high in the innovative capacity of firms (e.g., capacity to generate new products, processes and/or services). 

Indeed, we observe that most countries with high innovative capacity score relatively high in terms of a conducive-to-competitiveness value system and inclusive corporate values. Ireland, for instance, scores 7.20 (in a scale of 0 to 10, where 10 is highest) in innovative capacity, 7.30 in values supportive of competitiveness and 6.74 in inclusive values. Similarly, the Netherlands scores 7.03, 6.58 and 7.26; and Switzerland, 8.24, 7.51 and 7.17, respectively. Looking at the data for high-tech exports (as percentage of manufactured exports), we find that Ireland, the Netherlands and Switzerland perform extremely well in this indicator.

Critics point out that there are exceptions to this pattern. To be sure, some countries score high in innovative capacity while scoring relatively low in competitiveness-supportive values and relatively high in the corporate values indicator (e.g., France). Other countries score low in innovative capacity while scoring relatively high in both values’ indicators (e.g., the Philippines). It must be added that France and the Philippines perform well in the high-tech exports indicator. This is indicative of the impact that other factors (e.g., management practices and investment in R&D) may have on the innovation/high trade dynamics. It does not, however, diminish the importance of values for achieving a sound innovative capacity and its effect on high-tech trade.    

Innovation, values and high-tech trade
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