CHRISTINA SHELEY: Welcome to our virtual Chats in this Stacks talk, featuring Innovation from Emerging markets, From Copycats to Leaders. My name is Christina Sheley, and I'm the Director of the Management Library and the Business, Engineering, and Entrepreneurship Department at the Cornell University Library. It is my pleasure to introduce our speakers today, Lourdes Casanova and Anne Miroux.
Lourdes is a senior lecturer of Management at the Johnson Graduate School of Management and the Gail and Roberto Cañizares, director of the Emerging Markets Institute. She was named one of the 50 most influential Ibero-American intellectuals and one of the 30 most influential Ibero-American women intellectuals by the digital news service, Esglobal.
Formerly of INSEAD, Lourdes is the author or co-author of The Era of Chinese Multinationals; Entrepreneurship and Finance of Innovation in Emerging Markets; The Political Economy of an Emerging Global Power; Global Latinas-- Latin America's Emerging Multinationals; and the Emerging Market Multinationals Report 2016, '17, '18, '19, and '20. These reports are available in Cornell University Library's eCommons. Lourdes has a master's degree from the University of Southern California and a PhD from the University of Barcelona and is a Fulbright scholar.
Anne is a faculty fellow at the Emerging Markets Institute at the Johnson Graduate School of Management. She is a former director of the Division on Technology and Logistics at the United Nations Conference on Trade and Development and the former head of the secretariat of the United Nations Commission on Science and Technology for Development.
She has over 30 years of experience in international trade, finance, and technology and innovation policies, and has published extensively and co-authored The Era of Chinese Multinationals and the Emerging Market Multinationals Reports with Lourdes. She has an MBA from HEC Paris and a diploma from the Institut d'Etudes Politiques in Paris, and she holds a PhD in economics from the University of Paris-- Sorbonne.
Lourdes and Anne will be speaking about their latest collaboration, Innovation from Emerging Markets-- From Copycats to Leaders. As emerging markets amass the largest share of global GDP, corporations in these economies have risen to drive innovation, global development, and global competition. Building upon research conducted by the Emerging Multinationals Research Network, this collection includes studies of innovation in regions that have not previously received focused analysis, as well as a re-examination of dominant theories of innovation and capability creation based on a broad range of case studies and research insights.
A question and answer period will follow their talk. Please submit your questions in chat, and we will address them at the end of the presentation. And with that, I will now turn things over to Lourdes and Anne. Thank you.
LOURDES CASANOVA: Thank you very much, Christina thank you very much, the Chats in the Stacks team. It's a pleasure to be back for Anne and I to present this book. That actually was edited by Fernanda Cahen-- I'm just checking-- yeah, Fernanda Cahen and myself, that we're authors of various chapters. And it's a project that was global-- we had 18 contributors from three continents and eight different countries-- and also the result of the work done at the Emerging Markets Institute at the Cornell SC Johnson College of Business.
So the Institute was born 11 years ago and has three pillars. One is education. We have this program of the EMI Fellows. That is kind of a second-year concentration. And about 10% of the class follows a concentration in emerging markets. Then outreach-- we have the EMI conference that we launch. We had it on November 5 at Cornell Tech in New York City. And next year will be November 4.
Part of the conference is to establish a dialogue around a theme that is the general theme of the year for EMI. And this year, very timely, the overall theme is ESG-- Environmental Sustainability and Governance-- issues in relation with emerging market multinationals.
Part of the conference is also the case competition. This year was the fifth case competition with a case study about Africa going global-- Africa for African firm, a technology firm, an e-commerce firm, going global, or the challenges. The case competition is now founded by Corning International.
And we launched the second pitch competition that is now funded by Mark Mobius, a very well-known investor in emerging markets. With both Corning International, we have signed a three-year agreement that covers different aspects, and with Mark Mobius, a four-year agreement. Also, 10 different business schools from emerging markets participate in the pitch competition.
And then knowledge, as you mention in the introduction, every year, we publish a report. Last year, was 10 years that changed emerging markets. And this year, the report was pre-launched on November 5 and will be launched, the final one, in a webinar that we have scheduled February 4 with eCommon.
So here is the report that we have done. And as you said, they are available in the library. It's eCommons in the library. And we published, as a result of these reports, I always tell my students, when you are about to start writing a book, actually, part of the content has already been researched previously. So Anne and I explore in the reports different issues related to emerging markets.
One was the rise of Chinese multinational. And we published this book on The Era of Chinese Multinationals that we presented in our previous Chats in the Stacks. And this year, we had covered innovation in emerging markets in some of the reports.
And we decided with the network, with Emerging Multinationals Research Network-- this is a group of researchers who meet once a month, where we discuss different issues about our research, collaborate in different conferences, and also advance in our research by looking at how to publish, in different instances, our research. And we published this. We had the idea of this book.
For the reports, we collaborate with all OECD Development Center, with EMnet, the OECD Emerging Markets Network, with IFC of the World Bank, and also with UNCTAD of the United Nations that was home to Anne before. And also, we have worked with Wuhan University, Universidad de los Andes, Tec de Monterrey, Barcelona University, Copenhagen Business School, UT Dallas, CASTED from China, USP, and, as I said, in general, this network. And as a result of all these conversations, we started this project of the book. And we worked on this project more than a year.
And again, this is not a compilation of different work but an effort of all of us to work together to advance the main messages of the book that are-- again, these are the collaborations in the book that were the same as the report but some more. We reached out to a specialist in innovation in emerging markets. And here, you see Ram Mudambi.
Also, I wanted to mention the EMI Team that was very active. Daniel dos Anjos, that is the leading researcher-- excellent person in data analytics-- and also Jennifer Lehmann, Eudes Lopes, that helped us with the book and have helped us with the report. And not only them but the team-- Veneta, Moacir, and others, have helped us a lot with the report and with the books that we have published.
So let me just go to the book. And OK, sorry. Yeah, here the book. Yeah, so here in red are the countries that we. We covered all the continents. So in Africa, we covered Nigeria and Kenya. We also covered the Balkans. We had a specialist within the team, the dean of the business school, [INAUDIBLE], a specialist in Eastern Europe. So we covered what was happening in terms of innovation in the Balkans.
In Asia, we covered China and India. And in Latin America, Argentina, Brazil, Colombia, and Mexico. And we wanted to answer these three questions. First, what is driving innovation in emerging markets? Second, what types of innovation are being undertaken by emerging market leaders?
And third, a question that we tried to answer-- not easy. So all emerging markets have many social challenges-- poverty and others. How does innovation overall contribute to the improvement of the societies in these countries? You cannot innovate without also including the society and improving. And we'll talk about it. We tried to measure how the countries are improving.
So we had three parts. So the first is drivers of innovation. And you have here the list of chapters that we cover. Second, types of innovation. And we looked also at the political economy of China's R&D.
China is a country that has been very active supporting internationalization of R&D-- pharmaceutical companies, privacy innovation, innovation based in value creation, frugal innovation. Also very interesting piece from our colleagues at University at los Andes, Colombia has signed a peace process that has been complex in how innovation has also come from the outcome of this war and peace in Colombia.
And then the third part, outcomes of innovation. And we evaluated the outcomes. We are going to present today the chapters that both of us were involved. So first, the framework. And I'll pass the work to Anne, who will present the framework that we elaborated based on the work that we did in the report and tries to capture how innovation is different in emerging markets.
ANNE MIROUX: Thank you, Lourdes. And good afternoon to everybody. So as Lourdes said, this work somehow, it sparked off of the overall exploration, I would say, of emerging market economies. And the idea that triggered all the questions about innovation in emerging markets was actually triggered by the phenomenon, we could say, growth of these type of economies since the turn of the century.
So the framework of the chapter is organized about these three key questions that Lourdes mentioned, which is basically, what is driving, what types of innovation are we talking about, and what are the outcome? And each of these questions, you can see then, is a big, big circle in this slide.
And to do this exercise-- the book is also a combination of a bridge between practice and theory. Because we looked at a large number of emerging markets' economies, from Africa, China, Latin America, as already Lourdes has showed in a map, and she detailed those countries.
But we also looked at a couple of more-- actually, more than a couple, several-- company case studies. So as I said, it's a combination of theory and practice. We put the two together to go deeper into each of the issues. And as I said, each of these questions, what drives, what forms, and what is the outcome, it's basically the thread, the line, of the book.
And here, we have represented some of the questions are illustrated or explored in detail in specific chapters. For instance, we refer, if you want, to this concept of national system of innovation. And there is a chapter specifically touching on this issue through the example of India and the development, for instance, of the pharmaceutical industry of the wind turbine industry. It has been written by Ram Mudambi.
So we also consider, in terms of the type of innovation, we have the traditional product, process, and business model innovation, if you want. But to that, we had also concept, which are perhaps more recent, which have been added over the year, like organizational innovation of frugal or reverse innovation. And we have specific chapters on this one, for instance, such as coming, in particular, from Brazilian academics.
And then, of course, at the end of the day, one asks, so what is the outcome? The bottom line is, what is the relationship between growth and development and innovation? And this has been a question for academics for decades. We touch upon that.
But as Lourdes mentioned, quantitatively assessing what is the actual impact of innovation on growth and development is very challenging. Because they have a number of other parameters that enter, if you want, into the process. But we illustrate what has been happening at some country levels.
And the first thing is, of course, we have to distinguish between innovation at the country level, at the macro level, but also what is happening at the level of the firms and what innovation does in terms of competitive advantage. And then we come back to that at the end of this presentation, the whole issue of beyond economics and things to which, at least, you can attach some figures.
How do you measure the impact of innovation on social development? And this is very important in the context of emerging market economies. Because very often, this is linked to the type of innovation that is not necessarily very heavily hard-end oriented, if you want, but where you are more innovation in terms of organization or the distribution channels and so on. So that's what we try to illustrate in the last part of the book with the chapters that are mentioned in this slide.
So the next one, Lourdes. So as was already mentioned, we are focusing on the chapter in which we were directly involved. We obviously encourage you to read some of the chapters. I mentioned the one on national system of innovation. But the one on frugal and reverse innovation also are very interesting from an emerging market point of view. Next slide.
LOURDES CASANOVA: OK. I just wanted to add that if we can see about the drivers of innovation, what is very important is the role of government in emerging markets. If we look at how innovation is in this country, or even in Europe, the very important role that firms are having in driving innovation. So what we see in the slide here, what we want to capture, is that both society, also-- sometimes the problems in society, and I mentioned, again, war and peace, we'll see later on how the lack of bankerization and the lack of credit card penetration-- has also driven a number of innovations in emerging markets.
So here, we see, number one, a big difference-- and I'll go into that right now-- a big difference. Because governments have a much more important role-- probably around 60-40, so 60 government, 40 firms-- compared to what happens in this country with most of the innovation. Maybe 60 is driven by firms and 40 by government and also, society. That is the same as, in this country-- society. As for innovation, society wants change.
So then I'm going to now look at the, as I said, very important role of the governments in the innovation. And this is translated in different ways. But one way is the presence of government-owned, or state-owned, enterprises in emerging markets.
Just to give you a data point, if we look at the hundred biggest companies in the US and the 100 biggest companies in China, in the US, you only have one that is a state-owned. That is the US Postal Service, still state-owned. There is discussions about privatization but has not happened.
In China, you have between 40 and 60, so 40 state-owned and 60 in total a mixture of state-owned and public in the stock markets. For instance, ICBC, the biggest bank in the world by assets, a Chinese bank, is state-owned but also is a public company. You have this form of ownership also in Europe, where the government still keeps what is called a golden share in what was before the natural monopolies of electricity, telecoms, and others.
And we are now in a very interesting point in which KKR is trying to buy Telecom Italia, so a private equity firm buying what was before monopoly, a telecom company in Italy-- let's see what is going to happen-- where the government has had, also, a golden share and has also helped the company during the crisis.
So a government, as we said before, very important in emerging markets. And in one of the chapters we compare two different, completely different, situations, two different, completely different, companies and how both of them were also a source of innovation. One is the biggest utility company in the world, by far, a state grid corporation of China, SGCC.
The company was an instrument, a tool, of the government to be able to electrify China in record time. Also, they have a very particular innovation. That is, they use high voltage in transmission in a way that the transmission of electricity loses less electricity than usual. This is not an innovation from China. It's a German innovation.
But SGCC, a state grid corporation of China, has used it extensively in a country as big of China. So that's why China is changing the way that we look at electricity transmission and also the way they look at electricity networks. And what they want is to connect all electricity networks of the world.
And they have started with Mongolia, Russia, and other countries in Southeast Asia with the idea to be able to feed the electricity grid with electricity of different origins-- solar, wind, hydroelectrical, nuclear, or even coal plants. That is still quite important in China, with all the environmental damage that they cause.
The idea is to piggyback in different sources of energy. And as I said, the project they have is to create this worldwide electricity network with a project called [INAUDIBLE], a very innovative company.
And then we compare it with another company from Argentina, a completely different country network. And in that, what they do is export technology for defense industry, also for construction of nuclear reactors for electricity. And the company is very, very independent from the government, while state grid is very much controlled by the government because electricity is such an important industry.
And in both cases, we saw that the fact that the government was involved, evidently, the type of research that is conducive to outcomes in nuclear plants or in defense industry materials is very expensive. And the government helps.
And also, both companies have access to other state-owned research labs. And that helps them in maintaining the innovation. And both of them are, of course, very profitable and doing extremely well.
So yes, state-owned companies were seen for very long in business schools as an anomaly. And they are not because very pervasive in many emerging markets, whether Brazil, the national oil companies in many countries. Petrobras, Ecopetrol, Pemex, are fully state-owned or public and state-owned. And all of them have a very important role in driving innovation in their countries. So that's one thing that we discuss. Anne.
ANNE MIROUX: Yes. So the question on, basically, what drives innovation? And one can look at the traditional factors, the capabilities of the firms, the competition, the level of competition, which pushes firms to get a competitive edge through innovation, the role of governments, and as mentioned, the chapters in which we describe these situations.
But there is also the case where, basically, companies innovate, so to speak, out of necessity. And to illustrate that point, we look, in particular, at digital companies and especially in the e-commerce area. And to do that, we examine the case of Alibaba in China, Flipkart in India, at least till it was bought, Jumia, which is a company whose headquarter is in Nigeria, and Mercado Libre from Argentina.
What's interesting is in these companies, especially Alibaba, Jumia, and Mercado Libre, on which we really focus, is that this market will rise, basically, in less than a decade, we could say. They are very different situation. Alibaba is a mammoth in the group, if you want. Jumia is definitely much smaller in size. But they have a lot of commonalities. And I will talk to them about it.
The one very important point is that this affirms that they really have been pioneering e-commerce in their respective region. And we also show that, basically, they are leaders globally. That is, they have developed business model which is the head of what you can find in advanced economies for the region which is, basically, they had to innovate in some aspects of their value chain.
And what they did, they had to adapt to the situation in emerging economy to the special needs of the weak infrastructure, the need of the consumers. And for that, if we take two example, the payment aspect and the delivery method, in each of the cases, which is very interesting because those companies had to really adapt and, by themselves, take care, for instance, up to the end of the delivery process. And that's in particular of the case in Africa. Or they had to set payment systems because their consumers did not have access, or did not have banking account or credit card and so on. Next, Lourdes.
So what they had to do-- for instance, I was mentioning the delivery in Africa. They have, in a number of countries, the postal system is not efficient. Or very often, there are simply problems, or issue, with postal addresses.
For instance, Jumia, when it was launching its activity, developed, at the beginning, the fleet of, basically, [INAUDIBLE], or people on motorcycles, which were delivering the goods. Because they knew the surrounding. Now, of course, it's a little bit different. Because, by necessity and by growing, they have been developing more points where the customer comes and picks up its goods. But that was a very important development in the growth process of Jumia.
If we take payments, it's even more obvious. Because in Africa, most of the countries-- how do you say-- the percentage of the population who has access to a bank account is around 40%. So it's very, very low. In Latin America, it's higher. But in Asia, for instance, 50%, more or less, is the average.
So the issue is how do you do to pay when in an e-commerce system? And all these companies had to set up their own e-commerce, their whole payment system. In Alibaba-- everybody knows it nowadays-- it's Alipay. Jumia, it's JumiaPay. And Mercado Libre, the Argentinian, It's Mercado Pago.
So there is the infrastructure that it's not there. They have to answer the needs of the customers. So basically, they set up whatever is missing. As we say, they innovate out of necessity. And they transform, if you want, the challenges into opportunity. That's a first step.
And the additional step has been to add other services to what was the core at the beginning. And especially in the financial services-- for instance, Alipay has developed a lot of additional activity, including lending or insurance or credit score assessment, which did not exist in China.
And we know, actually, perhaps that because of the extension of this activity, that partly explain what also has been happening in the case of Alibaba and its financial services arms in the past year. Because definitely, the expansion into a very significant area in the financial sectors has been tremendous.
In the case of Mercado Pago, it's the same thing. The payment system had to be set up by the company. And then the company added additional services. And for instance, you can use Mercado Pago even to pay in brick and mortar stores or send money to your friends and so on.
And Jumia Pay, same pattern. And in that particular case, they began adding cell recharging. Because in many countries in Africa, and actually in a number of developing and emerging economies, subscriptions are very expensive. And people actually buy very small amount of telephone time. So they have set up a system for cell recharges with very small payments.
And this is, if you want, this process has been developed and originated-- this pattern, this business model-- has been originated in emerging markets. And that's why we can say they have been the real leaders in this area.
And definitely, these company, we could even go beyond that. Their impact on innovation and digitalization development and expansion in these emerging market has been tremendous. Because they have, to some extent, familiarized the population with e-commerce and anything relating with digital services.
And as an example, for instance, Jumia, at the beginning, had set up shops of boutiques where people could go and use tablets to put their orders just to get familiarized with the process. And we have indicated at the bottom of this slide some information about the revenues. And as I said a moment ago, yes, you have a mammoth with Alibaba and a much smaller one, which is Jumia. But Jumia, on the African continent, is still the leader. Next slide.
Now, so we have the chapter on the e-commerce firm as a very flagrant example of the innovative power of emerging markets. We want now to perhaps highlight the case of fintech. We do not dwell, or we do not go very, very deep, on this specific issue in the book. But we felt it was very important to draw your attention to that. Because it's definitely a topic which is a topic of much interest for the [INAUDIBLE].
And the same situation as in e-commerce, the development of fintech startups in emerging markets is due to the fact that there is no infrastructure. And you have, again, to invent out of necessity. And the remarkable expansion of fintech in Latin America, in Asia, and in Africa has basically three reasons.
The first one is that there is no legacy of a banking system. And that relates to what I said a moment ago. Many of these countries are, in a way, the population is underserved in terms of banking services. There are also collaboration and what's called fintech bridges, which have been developing between emerging markets and fintech [INAUDIBLE] agreements to ensure cooperation between countries in terms of digital financial services.
And a key factor is obviously the demographic factors. Because the potential number of consumers in Nigeria or in Indonesia or Malaysia is huge. And this large part of the population is still underserved. So the environment is conducive from that point of view.
And in this case, fintech [INAUDIBLE] dominates. I won't dwell on it because I'm sure you are reading a lot about it in the papers. But I would like to highlight Latin America and, also, even more, I would say Africa.
Latin America, in terms of fintech startups, definitely come second in terms of number. Just to give you a couple of them, I just want, first, just to highlight the fact that in Brazil, Nubank is the largest online bank in the world. And it is through Latin America, especially Brazil, Mexico, a little less Argentina, but still have been very much ahead of the others on the continent.
The role of regulation, by the way, has been relatively important in Mexico, in particular, with this fintech law and also projects to open banking in Brazil. And this, how do you say, the emergence of the fintech sector in emerging markets also can be illustrated by the amount of funds which is flowing into these sectors. According to a specialized press, it's $98 billion in the first half of 2021, which I found surprising and a very, very high amount. But that is what the Business Wire has estimated.
Now I am coming to Africa because Africa is often considered basically-- well, yes, it is true, it's the poorest of the continent-- but somehow really behind the others. But in terms of fintech, the growth in the continent has been really remarkable. They have more than 300 startup. And again, it's a sector which is attracting a lot of investment on the continent.
And just as an illustration, among the top one 100 cities for the fintech ecosystem, you find a Nairobi, and you find, for instance, Lagos, and you find Johannesburg-- Lagos and Nairobi, Johannesburg, and I should also mention Cape Town. So that's very, very interesting.
The environment is conducive. There is a Nigeria fintech week every year. So that's quite telling in terms of how dynamic the industry is in this country. And again, because there is a need and needs which are not taken care of by more traditional way of operating in the financial industry.
And lastly, as in Latin America, the regulation also has been conducive, or at least trying to help and foster the development of this industry. I just mentioned a few example in South Africa and in Nigeria. And Lourdes, I will leave you for the next one.
LOURDES CASANOVA: I just wanted to mention-- and this is, again, beyond the book-- that because of everything that Anne has just mentioned, it's not a coincidence that the first central bank digital currencies have been launched in emerging markets. And then again, China is leading this space. Because the mobile payments were so pervasive.
And also, as she mentioned, the latest regulation on, well, and the stopping of the Ant IPO, the idea is that the government wants to recover the power on this space, in part with the launch of the CBDC, the Central Bank Digital Currency. Also, in Nigeria, from other places, the central bank has also said it is launching their own eNaira. So that's very interesting.
And then again, cryptos as legal tender in El Salvador. El Salvador was a country that was dollarized for 20 years. And the dollarization was difficult for the country because the currency was moving, according to, of course, the challenges and the opportunities in the US and was not helping the economy in El Salvador.
And they launched that, although at first, the press covered how many demonstrations there were, there is a mobile tool that is now being used by 46% of the population. So already, more population has access to the digital wallet in crypto than the percentage of the population that is bankerized. And this is, of course, a major, major trial and see what will happen. But definitely interesting to see.
As Anna said, this is all the results of the legacy of the fintech innovation and the low bankerization, the low penetration of credit cards, and here, in this case, currency volatility. Currency volatility triggers tremendous crisis.
I mentioned Argentina. Argentina is a case in point that still, they cannot recover from a currency that keeps falling and falling. Brazil real is also in freefall, the Turkish lira. And then the population is also ready to experiment and see what happens.
So crypto's legal tender is El Salvador. Also, there are talks that it's going to be launched in Panama, another dollarized economy. Cuba also is exploring, and Venezuela has also launched a central bank digital currency. Again, we are at the beginning of that, and we'll see what will happen. But as a surprise, the innovation has come from emerging markets. And then I'll pass the work to Anne to finish with the outcomes from the innovation.
ANNE MIROUX: Thank you, Lourdes. And on that, I will go very fast. Because I will be, I suppose, interesting to have a question. As I said, we examine in the chapters issues related to the evaluation of assessing the outcome of innovation in emerging markets.
And there are basically three level of outcome. There is concrete performance. There is, at the company level, competitive advantage. And also, there is a special issue of social development.
To consider the country level, we looked at innovation indexes and especially the Global Innovation Index ranking. And these were, in a nutshell, we observed that more than a decade ago, you had hardly any visibility of emerging market in the GII. And now, in the top 50, you have, depending upon the years, around seven or eight emerging markets. So that's, I would say, a progress. And there are also other data who show that firm emerging markets have come up the innovation ladder.
At the firm level, there is a clearly increased presence of emerging markets-- firms-- among the largest spender in research and development. And this is shown as that is compiled by the European Union. But basically, out of the, if I remember well, the 2,000 largest spenders in 2020, about 20% were from emerging markets in 2019, while at the turn of the century, it was about 3% or 4%. So it shows, also, at the firm level what has been happening.
But the point, as I mentioned at the beginning of this presentation, is that the type of innovation which deals more with aspects related to organization or the social innovation or even the frugal innovation where, in dollar terms, the expenses are not very big, they often go and report, and they're reporting. But we highlight that they must not been overlooked. Because in the case of the emerging market, they play a very important role.
And the last concrete example of situation is in the book. So at the end of the day, the message was that emerging markets have come from copycat to leaders-- that's the title-- and that the innovation goes two way, between a mature economy and emerging one. And there is possibly a conceptualization between the two. So that's the overall message of the book. And I will stop there.
LOURDES CASANOVA: OK, and we wanted to thank you for being here, just a day before the Thanksgiving break at Cornell, when almost everybody is traveling. So thank you, all. And we are open to questions.
CHRISTINA SHELEY: Thank you, Lourdes. Thank you, Anne. We are open for questions. If you'd like to put them in the chat, please feel free. While we're waiting for those, I wanted to read-- there was one comment, Lourdes, while you were talking about the launch of CBDCs and cryptos as legal tender. We did have a comment that said, "It was excellent for El Salvador, and they are powering Bitcoin mining with volcanic energy."
LOURDES CASANOVA: Yeah. OK, yes, so as Michael is saying-- thank you, Michael, for your comment, a Cornell alum. And also, another thing that happened is that when China launched the central bank digital currency, at the same time, all bitcoins were forbidden. And not only that but all the mining of bitcoins that was done in China-- I think it was 50% or more-- was also forbidden. China has tried previously to ban bitcoins, not very successfully. Maybe this time-- let's see what will happen-- but definitely, mining of bitcoins in China is not possible anymore. And it's moving to everywhere else, in many other places. So then, definitely, that's a very important situation. And we have to monitor how it goes.
CHRISTINA SHELEY: Great. We do have a question from Evan Buchanan. "As far as innovation, is there a national model that stands out in emerging economies and why?"
LOURDES CASANOVA: I'll start answering, and maybe Anne can-- because it's a very complex issue. As we say in the framework, the difference in emerging markets is that the government has a very important role. It has a very important role because you don't have-- well, except for the case of China, but in the rest of emerging markets-- you don't have very powerful companies that can do the innovation. And definitely, the government has to step in, which is the model that has worked.
It worked in Korea. Korea is not anymore an emerging market with 30,000-plus GDP per capita, it's now a developed country. But definitely, in Korea, it worked. In one of the last DMI reports, we explored how, in Korea but also in China, the government supports innovation at all levels. That has happened-- also happened-- in Brazil, less now but still. So in emerging markets, there is no choice but close participation of the government.
And second thing that happens sometimes, not always, is that the government needs to monitor the implementation of all these investments in R&D. It needs to monitor and make changes. And that does not always happen.
So one is the government participation. The second that has worked very well is when these programs are long time-- some medium to long-term. What often happens in emerging markets is that the political volatility results in that the new government destroys what the other one has done-- criticizes, changes completely. Innovation requires medium-term, long-term-- five to 10 years. And those governments that have kept the similar innovation policies along five to 10 years are successful.
And third, when you are able to produce these magic clusters, ecosystems, in which there is collaboration between the government, the private sector, and also the academia in societies, in those cases, as well. So you could say definitely, innovation requires not only investments but also collaboration and also stability in the medium term. These five, 10 years that are the ones that you need to see the results. Anne, you want to add something else?
ANNE MIROUX: Well, definitely, I think first thing is there is no model which would stand out for the emerging markets. But there are a couple of striking things, actually. Lourdes mentioned China and Korea.
And definitely, those countries constantly, in the past 20 years, have put innovation almost at the height of their development program. And they have said it very, very clearly. And so there is coherence and continuity. I think that's a key element in terms of development.
The second one is that there is a policy. There is really something that is a body. It's written somewhere, and then it's translated in measure. What I found particularly striking when I was working, for instance, in [INAUDIBLE] on technology innovation, there was a large number of countries which were putting in place what is called technology and innovation policies.
And that is a trend which has appeared in the past 20 years. When I began working with the UN in the '70s and '80s, it was not in the picture. It was beginning. It was in the picture of an advanced economy but, in the emerging market, not.
And this has been a major change, I would say, in the past two decades. So you need somehow a technology innovation policy somewhere that says that this is-- how do you say-- it's part of the development strategy of the country.
What is striking is that very few Latin American countries have one technology innovation policy-- very, very few. And perhaps this is to be put in parallel with the fact that in terms of innovation index, or where Latin American countries situate themselves on innovation ladder, they are really behind what they should be given the size of the economy. So they think that you need the policy.
And then, obviously-- I'll just mention it-- I think innovation. I mean, it's very difficult to focus on only one aspect of innovation. The importance of having a systemic approach-- and that's why you have the innovation system in place-- is very important. Because many of the part of the puzzles play a role. So if you zoom only on one and forget education, for instance-- even primary or secondary innovation-- at the end of the day, it's a short-lived exercise.
CHRISTINA SHELEY: Thank you. We have one other question. "Given the role that we are seeing state-owned firms play in the innovations powering emerging markets, do you anticipate that the policies of the World Bank, the IMF, other types of agencies, may change regarding where they stand on privatization and deregulation?"
LOURDES CASANOVA: Wow. That's a very, very important question. I think we are in a moment in which-- I always say in my classes, governments are back in business. So the pendulum has moved.
So two things. One is some people say this is the end of globalization. Globalization is here to stay. Because there is no country that is self-sufficient. Maybe this one-- they say Russia and maybe Brazil at times. All countries need to buy and sell. So you need to buy. You cannot have all the elements from agriculture to mining to everything to manufacturing goods. We all need to buy and sell.
It's true that these global value chains, those examples that go-- prawns that are fished in Norway that they go to Malaysia to be processed and then go back to another country to do something else and then back to Norway-- definitely, this is excesses of the model that we have follow. So we are going into another model in which countries are going to look-- and, of course, when the pandemic, and we are not completely out of the pandemic yet-- so during the pandemic governments had to step in. Governments had to step in.
They redefining industries that are core to the national security, from having masks that for a while we didn't have to have all the elements that are needed to have some basic medicines that we needed at the beginning of the pandemic. So national security is not only agriculture and being able to feed your population but also many other things that were very clear during the pandemic.
So the governments are back in businesses because a number of things. Number one, globalization as we knew it is not only unsustainable from an environmental point of view but also, as we saw it, if there is a problem in the world of an epidemic or a major problem, we need to make sure that our citizens have what they need in that moment. So these two elements, I think, are very important.
And third, we go back to what has been called, in the literature, natural monopolies. So you have the situation in Brazil that privatized electricity companies are bought by state-owned companies from another country. So you lose the control of your company. And then the company goes and passes to the control of another government.
So there are excesses that have to be controlled also. In Europe, we saw it that countries had given up on their golden share in many key companies. And the governments recovered the golden share during the pandemic. So yes, I believe that governments are going to look-- in this country, CFIUS, the committee that reviews acquisitions and reviews if this company, in particular, is key to the security of the country and can be acquired by another company from another country-- so CFIUS has been reinforced.
So we have to rationalize what has been a number of excesses of the globalization model that we have seen till now. Anne, you want to add something?
ANNE MIROUX: No, I think it's basically, as you said, there is a change of mindset. So I don't think that the dogma of the market is as potent as it used to be. On top of it, on research and development and technology, the government always had a role. But sometimes it was not as obvious as in other areas.
LOURDES CASANOVA: Let me just add the 5G, the 5G networks that are so key for electrical vehicles, internet of things. So we need faster networks, faster mobile networks. And 5G provides that.
So here, we have seen two things. One, the government of this country has said, please, I don't want a Chinese company-- in this case, Huawei-- to be part of this network because of national security. And that's one thing.
But second thing, another phenomenon that has been very interesting, is that the big telecom operators in this country have been asking the government to please help with the development of 5G that is very expensive for every company so that the country doesn't fall behind the development of 5G networks. So we see that at all levels.
Of course, the development of vaccines, and going to health, had tremendous help from governments all over the world. And this country was no exception. And the development of the vaccines was a part of government grants that help the research in the pharmaceutical industry.
CHRISTINA SHELEY: Thank you. And we have time for one last question. And this is also from Michael Coister. "Organizational innovation is especially interesting. Take, for instance, what we see in Norway with its egalitarian and democratic models.
I'm seeing the same in Colombia with the emergence of an interest in collectives that have democratic government structures. Have you seen any other countries that are innovating along this pathway, from the central authoritarian management models, with their power imbalance, wealth distribution models, and gap between the well- and not compensated?"
LOURDES CASANOVA: This is a very, very key question. What often happens in-- so in the framework, we put the importance of society. Societies push much more so in emerging markets, where poverty in most of the emerging markets and extreme poverty are pervasive. And because, of course, social media and today's technology allows us to see these inequalities and differences in incomes in the same country and among different countries are very visible.
So definitely, you give the example of Colombia that we have mentioned, how there is a collaboration between academia and Universidad de los Andes, with whom we have a very interesting partnership, is working with the government as we speak and working with civil society to find ways to advance definitely in peace in a country that was torn by war. And we see that over there.
But you see that in many other places all over the world, whether you talk about India, you talk about Brazil, in other countries. Definitely, models in which you don't take into account inequalities within the country, I think, will not be successful.
So we need to, in every country in the world, we need now to be aware. And that definitely is now discussion everywhere. We have to think of social inclusion in every aspect of society that we consider, whether innovation or others or even growth.
So growth has to be inclusive. We all have to grow. I don't know if I answered your question, but these are very, very broad question. I don't know if you want to say something else, Anne, add something else?
ANNE MIROUX: In terms of model, no. But examples of companies, yes. We have a couple of examples in the book. But can we call it model? I don't really know.
It's more, as you said, is out of necessity or because of scarcity of resources that, basically, company of communities had to work together. But speaking of model, per se, we don't explore that issue in depth in the book.
CHRISTINA SHELEY: Thank you both so much. Lourdes, I think you maybe had one final slide that you wanted to show?
LOURDES CASANOVA: So thank you. This is the book. And this is a flyer from Cambridge, if you want to buy it, that give a little bit of a discount. And we thank you all. And happy Thanksgiving to all. As we are all preparing to celebrate this very important holiday in this country, so we want this moment to be grateful to the EMI Team, to the Emerging Multinationals Research Network, and all of you for organizing this presentation. And enjoy the holiday.
CHRISTINA SHELEY: Thank you all so much for coming. Thank you, Anne and Lourdes, for your presentation. It was very informative. And we wish you all a happy Thanksgiving and a good evening.
LOURDES CASANOVA: Thank you.
ANNE MIROUX: Thank you very much.
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As emerging markets have come to represent the largest share of global GDP, corporations in these economies have taken on a new level of importance in driving innovation, local development, and global competition. In a live, virtual Chats in the Stacks talk, Lourdes Casanova (Gail and Rob Cañizares Director of the Emerging Markets Institute, S. C. Johnson Graduate School of Management) and Anne Miroux (Faculty Fellow, Emerging Market Institute), discuss their new book Innovation from Emerging Markets: From Copycats to Leaders (Cambridge University Press 2021). Building upon research conducted by the Emerging Multinational Research Network (EMRN), this collection includes studies of innovation in regions that have not previously received focused analysis as well as a re-examination of dominant theories of innovation and capability creation based on a broad range of case studies and research insights.