Vision

1

Reality

2

Innovation and the Global Economy:The role of bridge networks

Jean-Louis Racine, The World Bank

with support from the MacArthur Foundation

March 30, 2011

4

Key messages Silicon Valley is unique, do not try to replicate

it. And do not expect a massive return of talent

back home from Silicon Valley. This is neither realistic nor necessary.

Instead, leverage Silicon Valley for your homegrown talent by building bridges.

This relies on cross-border mentoring and brokering (and a homegrown deal flow).

Diaspora networks can play a key role.

5

Silicon Valley, the star sibling

Source: McKinsey

VC is regionally concentrated

6Sourc: Nature, Swollen with Success, Vol 455, 18 September 2008

Venture capital disbursed in 2006 (thousands of US$)

7

The US is still more attractive to VC

What matters for VC? Entrepreneurial

culture and deal opportunities

Economic activity Depth of capital

market Taxation Investor

protection and corporate governance

Human and social environment66. Argentina

41. Russia

30. India

10. Germany

5. Switzerland

2. United Kingdom

0 20 40 60 80 100 120

2011 Venture Capital & Public Equity Country Attrac-tiveness Index

Source: Groh, A., Liechtenstein , H. and Lieser, K., The Global Venture Capital and Private Equity Country Attractiveness Index – 2011, IESE.

8

The right people matter too

Angel investors X ( industry expertise + interaction with portfolio ) = higher returns

Source: Wiltbank, R and Boeker, R., Returns to Angel Investors in Groups, Kauffman Foundation for Entrepreneurship, November 2007

<1X 1X to 5X

5X to 10X

10X to 30X

>30X0

10

20

30

40

50

60

70

Low industry expertise

High industry expertise

Exit multiples

Perc

ent

of

exit

s

<1X 1X to 5X

5X to 10X

10X to 30X

>30X0

10

20

30

40

50

60

Low interaction

High interaction

Exit multiples

Perc

ent

of

exit

s

9

Skilled Emigration Stock of tertiary-educated foreign-born residents in

OECD (2000)

©Skills and Innovation Policy Practice, WBI

1 ? 1,051,885

2 INDIA 996,813

3 PHILIPPINES 886,653

4 GERMANY 855,815

5 CHINA 799,834

6 MEXICO 473,923

7 S. KOREA 425,152

14 TAIWAN 263,086

15 IRAN 260,270

16 USSR-RUS 256,229

27 COLOMBIA 171,579

40 ARGENTINA 105,211

67 CHILE 62,072

Return migration: not automatic

10 Source: NSF (2009) http://www.nsf.gov/statistics/nsf10309/start.cfm

Thailand

Brazil

Japan

Canada

Germany

Argentina

India

0 10 20 30 40 50 60 70 80 90 100

% PhD recipients staying in the US

11

Leveraging Silicon Valley: the case of Taiwan

Massive foreign education and brain drain in the 60’s and 70’s

Industry and financial sector dominated by large firms. Culture of risk-taking and experimentation virtually non-existing

Silicon Valley as a role model: successful entrepreneurs from the diaspora and the government decide to promote the venture capital industry

First venture capital fund is established. Government contributes to equity. Expatriates reallocate to Taiwan to manage the Fund.

Demonstration effect of the success triggers establishment of other funds

©Skills and Innovation Policy Practice, WBI

12

How to build bridges?

Create opportunities in home country Cultivate bridges with in Silicon Valley through people The rest will follow

Diaspora

MentorsBrokers

13

What do mentors do?

Educate

Validate

ConnectDiaspora

MentorsBrokers

To act as antennas in

global markets mentors need to be globalized :

e.g. techBA , Larta Institute

14

What do innovation brokers do?

Diaspora

MentorsBrokers

Identify supply & demand

Manage

deals

Mentor

15

G8 Global Partnership Program

Research teams

Valodia: Technology prospecting,

advising, business planning, deal

facilitation

Valodia: Demand

prospecting, deal

facilitation

16

India Innovation Growth Program

Innovators

IC2: technology selection

panelists + business

prospecting

FICCI: technology screening, technology selection, business

prospecting, training and

advising

Can we foster diaspora search networks?

17

18

32

17

16

0 5 10 15 20 25 30 35

Intention to return

Interest to support Russian entrepreneurs

Business contacts with the government

Business contracts in Russia

% of respondents

Russian high-skilled diaspora survey

Source: Freinkman, L., Gonchar K., and Kuznetsov, Y. (2010) How Can Talent Abroad Help Reform Institutions at Home: A study of Russian, technological diaspora

18

Yes, but careful: brain circulation is a tricky business

The majority of governmental initiatives to create brain circulation networks have been disappointing

Success requires leveraging burgeoning diaspora networks with champions, sound supportive institutions, and a deal flow.

Initial enthusiasm

No quick & visible gains

Loss of diaspora enthusias

m

19

GlobalScot Seeks to develop and expand Scotland's

standing in the global business community . Utilizes the talents of leading Scots, and of

people with an affinity for Scotland, to establish a worldwide network of individuals who are outstanding in their field.

Scottish companies draw on this network for advice, contacts, assistance and support.

20

Conclusions

Do not try to emulate Silicon Valley top-down, but learn from it, as entrepreneurs.

Building bridges to a global innovation hub is critical to techno-entrepreneurship abroad.