BRIEF

Innovation & Entrepreneurship

July 8, 2015

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Innovation and entrepreneurship are recognized as key building blocks of competitive and dynamic economies. Countries and regions with vibrant innovation and entrepreneurship ecosystems tend to witness higher productivity rates, leading to increased economic growth and more robust job creation, the main pathways through which the poor can escape poverty. As a key driver for firm growth, innovation fosters shared prosperity by stimulating formal employment and increasing wages.

CONTEXT

At the World Bank Group, we recognize that innovation and entrepreneurship are important to address major developmental challenges, such as inclusion, sustainability, and shared prosperity. Innovative entrepreneurship spurs productivity and economic dynamism. Between 2000 and 2013, the World Bank Group invested in a portfolio of $18.7 billion in Innovation and Entrepreneurship projects; $8.2 billion was lent through the World Bank, $5.7 billion committed by IFC, and $4.8 billion in guarantees issued by MIGA. 

New research shows that that young, growth-oriented companies contribute significantly to net employment growth and help enhance competitiveness and productivity by introducing new products, developing novel business models and opening new markets. Innovation allows firms to specialize, meet international best-practice standards and upgrade quality. Each of these areas is essential for firms to compete and thrive in the global economy. Especially in developing economies, we need innovators that create new or improved products and services accessible to underserved populations.

The growth of a firm depends on how external and internal factors affect the entrepreneur at each stage of enterprise development. Internal constraints include the capabilities of the entrepreneur, the management and organization of the firm, as well as the firm’s capacity to innovate. Investments in research and development, innovation and other types of knowledge capital improve a company’s product quality and reduce production costs. External constraints include the business environment, characteristics of the particular industry, the firm’s access to capital, labor, technology, and markets.

Firms are more likely to succeed within healthy innovation ecosystems. These ecosystems are made up of human capital, research and development institutions, financial capital, the industrial base, the legal and regulatory environment, business and innovation culture and the quality of networks. Comprehensive innovation policy considers all these different elements and the interaction among them.

The Innovation and Entrepreneurship team of the World Bank’s Trade and Competitiveness Global Practice brings global experience, knowledge, research and investments to help client countries develop effective innovation and entrepreneurship ecosystems, such as policies, strategies, regulations and institutions that foster investments and jobs. The range of support is delivered through several instruments, including advisory services and loans. infoDev, a global trust-funded program and an integral part of the Global Practice, supports growth-oriented entrepreneurs through business incubators and innovation hubs. It builds on its global network of innovation and entrepreneurship practitioners to provide first-hand and grassroots knowledge about the key elements for competitive entrepreneurship.


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Strategy

The Innovation & Entrepreneurship program operates uniquely at the levels of the firm/individual, as well as the innovation eco-system and provides a range of support to clients that combines strong empirical and policy research, with on-the-ground experience in innovation projects including:

Entrepreneurial Ecosystem assessment and diagnostics:  

  • Identifying current performance, opportunities for growth and addressing constraints for successful, innovative entrepreneurship

    This includes assessing enterprises’ access to technology, knowledge of markets and management trends, and access to international markets. It also comprises of appraising the business environment, including access to key inputs such as capital, labor, infrastructure and technology.

  • Designing targeted solutions that promote the innovative capabilities, growth and productivity of firms

    The development of innovation financing mechanisms such as seed funding, angel and venture investing is a key component of the ecosystem, as well as facilities and training to support the investment-readiness of entrepreneurs. This encompasses enablers that build capacity and networks for entrepreneurs and SMEs, such as accelerators, incubators, innovation centers and clusters, and governmental interventions such as indirect and direct subsidies to innovation and R&D investments. We codify lessons from past projects and operations and initiate evidence-based pilots to test new approaches.

  • Strengthening policy design and governance for policy effectiveness

    This includes helping governments review their overarching innovation strategies and their public spending on science, technology and innovation (STI), design and implement policy programs for innovation, and establish an effective institutional framework for innovation policy. Furthermore, the World Bank Group supports governments in learning from previous programs and in fostering transparency and dialogue in innovation policymaking. An important tool is the Innovation Policy Platform, a joint knowledge platform of the OECD and the World Bank.

  • Engage globally with key stakeholders

    Innovation and entrepreneurship policies improve the prospects of the poorest in countries. This can include innovation or private sector policies to improve outcomes in health or the environment. To ensure that the World Bank Group brings an edge in knowledge and to advocate for effective policies, the WBG works with  the G20 and B20, UN organizations,  the European Central Bank, the OECD, think tanks, top universities across the world, and international research firms.