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Publication(Washington, DC: World Bank, 2019) Grover Goswami, Arti ; Medvedev, Denis ; Olafsen, EllenRemarkably, a small fraction of firms account for most of the job and output creation in high-income and developing countries alike. Does this imply that the path to enabling more economic dynamism lies in selectively targeting high-potential firms? Or would pursuing broad-based reforms that minimize distortions be more effective? Inspired by these questions, this book presents new evidence on the incidence, characteristics, and drivers of high-growth firms based on in-depth studies of firm dynamics in Brazil, Côte d’Ivoire, Ethiopia, Hungary, India, Indonesia, Mexico, South Africa, Thailand, Tunisia, and Turkey. Its findings reveal that high-growth firms are not only powerful engines of job and output growth but also create positive spillovers for other businesses along the value chain. At the same time, the book debunks several myths about policies to support firm dynamism that focus on outward characteristics, such as firm size, sector, location, or past performance. Its findings show that most firms struggle to sustain rapid rates of expansion and that the relationship between high growth and productivity is often weak. Consequently, the book calls for a shift toward policies that improve the quality of firm growth by supporting innovation, managerial skills, and firms’ ability to leverage global linkages and agglomeration. To help policy makers structure policies that support firm growth, the book proposes a new ABC framework of growth entrepreneurship: improving Allocative efficiency, encouraging Business-tobusiness spillovers, and strengthening firm Capabilities. This book is the third volume of the World Bank Productivity Project, which seeks to bring frontier thinking on the measurement and determinants of productivity to global policy makers.
Publication(Washington, DC: World Bank, 2018-10-25) Cusolito, Ana Paula ; Maloney, William F.The stagnation of productivity in the developing world, and indeed, across the globe, over the last two decades dictates a rethinking of productivity measurement, analysis, and policy. This volume presents a 'second wave' of thinking in three key areas of productivity analysis and its implications for productivity policies. It calls into question the measurement and relevance of distortions as the primary barrier to productivity growth; urges a broader concept of firm performance that goes beyond efficiency to quality upgrading and demand expansion; and explores what it takes to generate an experimental and innovative society where entrepreneurs have the personal characteristics to identify new technologies and manage risk within an entrepreneurial ecosystem that facilitates them doing so. It also reviews arguments surrounding industrial policies. The authors argue for an integrated approach to productivity analysis that incorporates both the need to reduce economic distortions and generate the human capital capable of identifying the opportunities offered to follower countries and upgrade firm capabilities. Finally, it offers guidance on prioritizing policies when there is uncertainty around diagnostics and limited government capability.
The Innovation Paradox: Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up(Washington, DC: World Bank, 2017-10-03) Cirera, Xavier ; Maloney, William F.Since Schumpeter, economists have argued that vast productivity gains can be achieved by investing in innovation and technological catch-up. Yet, as this volume documents, developing country firms and governments invest little to realize this potential, which dwarfs international aid flows. Using new data and original analytics, the authors uncover the key to this innovation paradox in the lack of complementary physical and human capital factors, particularly firm managerial capabilities, that are needed to reap the returns to innovation investments. Hence, countries need to rebalance policy away from R&D-centered initiatives – which are likely to fail in the absence of sophisticated private sector partners – toward building firm capabilities, and embrace an expanded concept of the National Innovation System that incorporates a broader range of market and systemic failures. The authors offer guidance on how to navigate the resulting innovation policy dilemma: as the need to redress these additional failures increases with distance from the frontier, government capabilities to formulate and implement the policy mix become weaker. This book is the first volume of the World Bank Productivity Project, which seeks to bring frontier thinking on the measurement and determinants of productivity to global policy makers.