In the context of Colombia, the first two stages of the Public Expenditure Review (PER) of Entrepreneurship, Technology, and Innovation programs were piloted in collaboration with the National Department of Planning in 2015-16, and it assessed 129 policy programs managed by 8 agencies. The analysis of policy practice employed a public management scorecard that relied on assessing performance across 27 dimensions of good practices in design, implementation and governance. The program allowed to inform policy decisions and reduce administrative costs. More than 1000 firms benefit from these 5 programs. The tax credit for innovation, for example, benefitted more than 500 projects in 2016. The program supporting scholarship for PhD students domestically and abroad has more than 3,000 research beneficiaries. The program has been scaled up to countries in different regions and income levels, including IDA beneficiaries (Latin America and the Caribbean, East Europe and Central Asia, South Asia, and South East Asia, and Sub-Saharan Africa).
The potential gains from bringing existing technologies are vast. Differences in technology adoption accounts for about 75% of income gap between across countries. Yet, a recent World Bank report, “The Innovation Paradox,” argues that developing economies are often unable to reap the potentially large gains from innovation and technological catch-up due to institutional failures and missing complementary factors.
The array of available instruments and the quality of implementation of entrepreneurship and innovation policies vary significantly across countries. Entrepreneurship and innovation policies in low and middle-income countries tend to be highly fragmented. Very often, new instruments are introduced to enhance the quantity and quality of innovation activities in the private sector with limited evidence of impact. Often, the responsibility for implementation of the policy mix is spread across several government agencies, resulting in problems of incomplete access and information asymmetry across policy practitioners.
In 2015, policy practitioners of Colombia sought advice from the World Bank Group to improve their policy mix of programs supporting entrepreneurship, technology, and innovation. Together with counterparts from the National Department of Planning (DNP, for its acronym in Spanish) the World Bank implemented a methodology to identify ways to improving the design, implementation, and effectiveness of their Entrepreneurship, SMEs, innovation and technology programs. A similar approach to enhance their policies is now being implemented or considered by several IDA countries, including Ethiopia and Senegal.
The PER for Entrepreneurship, SMEs, Technology, and Innovation methodology in its current version was first envisioned in 2014. It focuses on policy instruments as the unit of analysis (in stark contrast to the aggregate budget headings that represent the focus of a “traditional” PER). The methodology is composed by four stages:
- Mapping and evaluation of the quality of policy mix
- Functional and governance analysis
- Efficiency analysis
- Effectiveness analysis
In the context of Colombia, the first two stages were piloted in collaboration with the National Department of Planning in 2015-16, and it assessed 129 policy programs managed by 8 agencies. The analysis of policy practice employed a public management scorecard that relied on assessing performance across 27 dimensions of good practices in design, implementation and governance. The efficiency analysis was later incorporated and implemented in 2017, enabling policy practitioners to understand how well programs were employing financial and human resources to deliver results. The analytical framework enables policy makers to identify opportunities for improving delivery based on a group of metrics in the following categories: i) Use of inputs; ii) materialization of outputs; iii) achievement of outcomes; and iv) Beneficiary Satisfaction, which incorporates a user-centric perspective on the performance of selection, delivery, and results of the program.
- Policy decisions informed - The insight resulting from the sequence of advisory engagements have informed important policy decisions at the level of the national planning departments. The policy mapping enabled the agencies to realize that some of the programs had significant overlap in goals and beneficiaries, but that little coordination was occurring between them. Following the recommendation to simplify the portfolio or projects and provide further transparency, the Government of Colombia has created the “Innovation portal:” www.innovamos.gov.co.
- Number of beneficiaries: From the 128 programs included in the functional analysis, 5 were selected to participate in a pilot of the efficiency analysis. More than 1000 firms benefit from these 5 programs. The tax credit for innovation, for example, benefitted more than 500 projects in 2016. The program supporting scholarship for PhD students domestically and abroad has more than 3,000 research beneficiaries.
- Administrative costs reduction – reducing the number of instruments allowed agencies to sharpen the focus of the programs and reduce administrative costs. To support the agencies on estimating these costs, the efficiency analysis provided capacity building on how to estimate the economic cost of programs, from the design to the implementation. For example, several instruments were redesigned based on this exercise. For example, INNpulsa, an agency responsible for supporting private sector development has consolidated existent overlapping instruments into one program (ALDEA, https://aldeainnpulsa.com) organized in different stages of firm life cycle. Colciencias, a government agency responsible for many Science, Technology, and Innovation (STI) programs, has established a committee to adopt good practices in the design of instruments. The number of instruments has reduced from approximately 60 in 2010-2014 to around 20 in 2019.
- Scalability. Since the implementation in Colombia, the application has been scaled to countries in different regions and income levels, including IDA beneficiaries (Latin America and the Caribbean, East Europe and Central Asia, South Asia, and South East Asia, and Sub-Saharan Africa), scope of programs (e.g. to focus on evaluating SME support policies), and levels of government (subnational). As countries grow increasingly concerned with leveraging entrepreneurship and innovation as a driver of productivity growth, and as our engagements enable us to build a rich database, we expect that a cross country comparisons will help clients to broaden their perspective of what is possible when it comes to formulating and advancing effective entrepreneurship and innovation policy.
Contribution and Partnerships
The success in the implementation of the PER for entrepreneurship, SMEs, technology, and innovation in Colombia was possible because our counterparts were strongly committed. The partnership included DNP, as well as several other agencies, such as COLCIENCIAS, SENA, INNpulsa and many Ministries. By providing access to information collected to manage the programs, we worked together to figure out how to make better use of this information, by generating systematic monitoring indicators that can be used to enhance the programs.
The rationalization of the policy-mix to support STI and entrepreneurship can lead to a significant amount of direct and indirect beneficiaries. In the case of Colombia, only the program supporting scholarship for PhD students domestically and abroad has more than 3,000 beneficiaries. Thousands of firms benefit from the other 128 programs, but more importantly many other firms and researchers that did not benefit from those programs yet, could become a beneficiary through an improvement of the design, implementation, and governance of these projects.