Finance, Competitiveness and Innovation Global Practice
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Innovation and Entrepreneurship
Finance, Competitiveness and Innovation Global Practice
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Last updated August 7, 2023
Xavier Cirera is a senior economist in the Finance, Competitiveness, and Innovation (FCI) Global Practice of the World Bank. His work focuses on innovation and entrepreneurship. He has led the evaluation of innovation policies, including through the development of public expenditure reviews in science, technology, and innovation implemented in Brazil, Colombia, Chile, Ukraine, and Vietnam. He is the coauthor of The Innovation Paradox: Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up and A Practitioner’s Guide to Innovation Policy: Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries. His most recent work focuses on the measurement and impact of technology adoption and diffusion. Before joining the World Bank, he served as a research fellow at the Institute of Development Studies at the University of Sussex. He holds a doctorate in economics from the University of Sussex.
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Publication(World Bank, Washington, DC, 2015-07) Cirera, X. ; Lederman, D. ; Máñez, J.A. ; Rochina, M.E. ; Sanchis, J.A.This paper explores the link between exports and total factor productivity in Brazilian manufacturing firms over the period 2000–08. The Brazilian experience is instructive, as it is a case of an economy that expanded aggregate exports significantly, but with stagnant aggregate growth in total factor productivity. The paper first estimates firm-level total factor productivity under alternative assumptions (exogenous and endogenous law of motion for productivity) following a GMM procedure. In turn, the analysis uses stochastic dominance techniques to assess whether the ex ante most productive firms are those that start exporting (self-selection hypothesis). Finally, the paper tests whether exporting boosts firms’ total factor productivity growth (learning-by-exporting hypothesis) using matching techniques to control for the possibility that selection into exports may not be a random process. The results confirm the self-selection hypothesis and show that starting to export yields additional growth in total factor productivity that emerges since the firm’s first year of exporting but lasts only one year. Further, this extra total factor productivity growth is much higher under the assumption of an endogenous law of motion for productivity, which reinforces the importance of accounting for firm export status to study the evolution of productivity.
Catching Up to the Technological Frontier?: Understanding Firm-level Innovation and Productivity in Kenya(World Bank Group, Washington, DC, 2015-03-06) Cirera, XavierKenya s economy has undergone a significant process of structural transformation over the last decade. Since 2002, the economy has shown an accelerating trend with GDP growth increasing steadily from below 1 percent in 2002 to 7 percent in 2007. After a slowdown in GDP growth to 1.5 percent and 2.7 percent in 2008 and 2009 respectively, economic growth started to rebound in 2010. Amidst this positive growth context, in October 2013, the Kenyan Government launched the Second Medium-Term Plan (MTP-2) of the Vision 2030. The aim of Kenya s Vision 2030 is to create a globally competitive and prosperous country with a high quality of life by 2030 and to shift the country s status to upper-middle income level.
Publication(World Bank, Washington, DC, 2014-09) Cirera, Xavier ; Qasim, QursumIn recent years, support programs for women entrepreneurs have gained traction and prominence as a means to create jobs and boost productivity at the national and regional levels. However, disparities in initial resource endowments of male and female-led firms, sector sorting into low productivity activities, social norms, and institutional arrangements, constrain the growth of female-led enterprises. This note reviews the outcomes of programs supporting female growth entrepreneurs and draws lessons from available evidence to inform the design of more effective programs. The review shows that most programs are primarily geared toward microenterprises, making it difficult to draw conclusions about program design for growth-oriented entrepreneurs, but some early findings point the way forward. Management practices appear to improve as a result of business education, but there is little robust evidence to prove that support programs lead to significant improvements in business performance outcomes. Furthermore, in programs with both male and female participants, firm performance improves in some cases for male-led firms only, not for female-led firms. The note concludes by suggesting the need for more experimentation in the design and delivery of services and a new focus on strengthening the engendering of support programs to more specifically address gender-specific constraints such as social norms, entrepreneurial preferences, and institutional arrangements, changing public discourse, and paying more attention to factors that induce female entrepreneurs to diversify into higher value-added activities. Offering mentoring, networking, and other consulting services, in addition to education on basic business practices and strengthening critical areas such as gender-specific content, can potentially increase the effectiveness of these programs.
Publication(World Bank, Washington, DC, 2016-06) Cirera, Xavier ; Muzi, SilviaLittle is known about innovation in developing countries, partly because of the lack of comparable and reliable data. Collecting data on firm-level innovation is challenging because of the subjective definition of what determines an innovation, a problem that is exacerbated in developing countries where innovation is likely to be more incremental and less radical. This paper contributes to the literature by presenting the results of an experiment aiming to identify the survey instrument that better captures firm-level innovation in developing countries. The paper shows that a small set of questions included in a multi-topic, firm-level survey does not provide an accurate picture of firm-level innovation and tends to overestimate innovation rates. Issues related to framing explain some of the unreliability of innovation responses, while cognitive problems do not appear to play a significant role.
Publication(World Bank, Washington, DC, 2016-01) Cusolito, Ana ; Cirera, XavierThis technical note implements a firm-level productivity diagnostic using the census of manufacturing firms and a large services survey in Kenya. By using a number of stylized productivity indicators, we aim to identify the ability of Kenyan firms to grow. The information presented in this diagnostic will help to conduct evidence-based policy-making. Specifically, implementing firm-level productivity diagnostics provide the necessary information for (i) improving the targeting of economic policies, (ii) enhancing their effectiveness, (iii) making more accurate predictions of the effects of industry shocks and policy reforms on the economy, and (iv) understanding the behavior of macroeconomic variables by tracking the evolution of variables at the firm-level. This note shows that there is a lot of heterogeneity in firms’ attributes and performance, and this can potentially be attributed to the presence of economic distortions that affect the efficient allocation of resources across firms, with the manufacturing sector showing a lackluster performance compared to the services sector. Overall, the findings highlight the importance of locating productivity at the center of the competitiveness agenda as a key instrument for employment creation and poverty reduction.
Publication(World Bank, Washington, DC, 2016-10) Cirera, Xavier ; Lage, Filipe ; Sabetti, LeonardThis paper examines empirically the links between adoption of information and communications technology (ICT), defined as usage by firms, innovation, and productivity using firm-level data for a sample of six Sub-Saharan African countries: the Democratic Republic of Congo (DRC), Ghana, Kenya, Tanzania, Uganda, and Zambia. Although adoption of information and communications technology in these countries is still lagging behind OECD countries, there is significant heterogeneity on adoption rates across the countries. Kenya has the largest adoption rate of computer, software, and Internet usage. The Democratic Republic of Congo and Tanzania experience lower adoption rates. The degree of internationalization of the firm, use of technology, and extent of competition are important factors explaining firm-level use of ICT. The results of the estimates suggest that ICT use is an important and robust enabler of product, process, and organization innovation across all six countries. However, the final impact on productivity depends on the degree of novelty of the innovation introduced by the firm.
Publication(World Bank, Washington, DC, 2016-08) Cirera, Xavier ; Sabetti, LeonardWhile existing evidence in advanced economies suggests a possible role for technological innovation in job creation, its role in developing countries remains largely undocumented. This paper sheds light on the direct impact of technological as well as organizational innovation on firm level employment growth based on the theoretical model of Harrison, Jaumandreu, Mairesse, and Peters (2014) using a sample of over 15,000 firms in Africa, South Asia, Middle East and North-Africa and Eastern Europe and Central Asia. The results suggest that new sales associated with product innovations tend to be produced with just as much or higher levels of labor intensity. The effect is largest in lower income countries and the African region, where firms are further away from the technological frontier. More importantly, process innovations that involve automation of production do not have a short-term negative impact on firm employment. However, there is some evidence of a negative effect of automation on employment that manifests in increases in efficiency that reduce the elasticity of new sales to employment. Overall, these results are qualitatively similar to previous findings in advanced economies and highlight a positive direct role of innovation on the quantity of employment but at a decreasing rate as firms’ transition to the technological frontier.
The Impact of Export Processing Zones on Employment, Wages and Labour Conditions in Developing Countries: Systematic Review(Taylor and Francis, 2017-04-10) Cirera, Xavier ; Lakshman, Rajith W.D.One of the most common instruments of industrial policy is Export Processing Zones (EPZs). This paper shows the results of a systematic review of the impact of EPZs on employment, wages and labour conditions in developing countries. The results of synthesising 59 studies suggest that there is no robust evidence that the employment created in the zones is additional. Also, in most cases, EPZs pay higher wages and do not contribute to increase the gender wage gap. The results regarding labour conditions such as health and safety, unionisation or hours worked are mixed when comparing with firms outside the EPZ.
Publication(World Bank, Washington, DC, 2019-06) Cirera, Xavier ; Cusolito, Ana P.This paper describes and benchmarks innovation activities for a sample of countries in the South Asia region, as well as the impact of these activities on firm-level productivity. The evidence gathered suggests that countries in the South Asia region can be divided into two groups, in terms of the magnitude and composition of the innovation activities: leaders (Bangladesh and India) and laggards (Nepal and Pakistan). Leaders present higher rates of innovation activities than laggards and focus more on process innovation than product innovation. Differences across firms within all countries tend to present similar patterns when considering leaders and laggards, with the acquisition of knowledge capital (for example, research and development investments in equipment, and training) highly concentrated in a few firms, and mature, exporter, and foreign-owned firms as the most innovative of the region. The evidence also suggests a positive impact of innovation on productivity, primarily via incremental innovation, especially in India.
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.