May 4, 2009 11:59:11 pm
The world over,a search is underway for authentic,effective and accountable mechanisms for generating jobs and stimulating the economy. Much of the thrust is on improving the working of the corporations which led the world into the current mess. The destiny of millions of workers and others involved in the supply chain may be so deeply intertwined with the viability of these corporations that there is no alternative but to help them to survive; but equally,an opportunity may lie ahead of us to reshape the global economy in a manner that is much more polycentric,participative,meritocratic and emancipatory.
How? Use the fact that there are lots of technological innovations taking place around the world. Many,many more are possible and can be harnessed.
Consider first that a large number of bright students in the decade of derivatives were lured by the financial markets and investment banks. In fact business schools had become schools of investment bankers instead of management in general. Science suffered; the best students went to technology. The cream of those went on to management. And within b-schools,the top young minds neglected manufacturing and other real sectors. Bill Clark at Harvards Kennedy School pointed out in a discussion few weeks ago that this year,there was only a 2 per cent rise in applications for management at Harvard compared to an almost 40 per cent raise in the applications for science and public policy. In India,the total number may not come down but technology,and more importantly science,may get more attention. Some corrections have begun. But a lot more remain.
Paradoxically,as so much wealth was being invented in the last decade,new products being introduced,millions of cellphones being sold,the capital supply for small ventures became more and more difficult. It was easier to get a larger loan,but not a small investment without collateral and a solid backup even in developed countries. Big business grew mergers and consolidations took place,but new drugs,for instance,declined in the delivery pipe,as if the model of big business-led transformation had run its course. Innovations did not take place more in big corporations than elsewhere; and where they did take place,they did not get enough support.
Venture capitalists are investing mainly in listed companies in India; angel funds specialising in start-ups have evaporated almost completely. When I studied about 2500 patents every two to three years (to select about 50-60 individuals for four Inventor of India workshops) over ten years,not one had been approached by any public or private investor. I could discover them from the patent database; why couldnt investors? What was in short supply was not ideas or innovations; It was the early stage funding with a mentoring support with low transaction costs. When start-ups struggle,society limps and staggers. The time has come to make a new beginning,to bring back the spirit of start-ups hope,faith,adventure and bit of gambling.
Worldwide,hundreds of billions of dollars are being invested in stimulus fund to revive economy. This is the time for reinventing globalisation. What is needed,as a genuinely effective use of stimulus funding,is an independent initiative from the G-20 nations to create a global innovation fund that invests in start-ups anywhere,so long as they generate opportunities for entrepreneurship and return on investment. Ideas will flow in the direction of investment. If a doctor in India develops a technology for healing spinal injuries with a needle costing Rs. 200,one-day hospitalisation and a total cost of Rs. 5000,as against five days in the US costing 5000 dollars,than accessibility to this technology is in the interest of investors in the US as well. Remember,we must distinguish between ideas and ideators. Not all innovators want to become entrepreneurs. So,innovations in the formal and informal sectors in developing countries should be able to link up with investment and entrepreneurs in developed countries.
A globalsed world with polycentric development has to rely on distributed spurs of growth. Indias youth can be a driver of this development if international and national efforts can focus on empowering ideas,innovations and knowledge of individuals at the grassroots level in the informal as well as formal sectors.
The writer is at IIM,Ahmedabad email@example.com
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