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©Knowledge for Development, WBI©Knowledge for Development, WBI

Leveraging National S&T and Business Talent Abroad

Redes de Talentos en el Exterior para Desarrollo

Tecnológico NacionalYevgeny KuznetsovSenior Economist

Knowledge for Development Program

Buenos Aires, April 26, 2005


Structure of Presentation

1. Context: what is at stake?2. Objective: towards a new

generation of international technology alliances

3. Emerging models of mobilizing Diasporas of highly skilled: lessons from India, China and other countries

4. Pragmatic Diaspora Initiatives for our countries

5. Conclusions


1. Context: What is at Stake?

Challenge for our countries (middle-income economies)

Transition to a knowledge-based economy

Leveraging the Diaspora of highly skilled as an entry point into knowledge-based economy


1. Context: What is at Stake?Argentina

Difícil Punto de Partida

Gastos de I&D en el sistema productivo son muy reducidos (como % del PBI) ~ Corea/10

Vinculaciones entre la producción académica y científica y el sistema productivo es muy débil

Perfil de producción esta centrado en bienes intensivos en recursos naturales y con escaso peso del conocimiento

Variacion del Producto per Capita: Corea vs Argentina

0

2

4

6

8

10

12

14

1965 1970 1975 1980 1985 1990 1995 2000

El Conocimiento Explica las Diferencias entrePobreza y Riqueza...

Argentina

Miles de Dolares (al valor constante de 1955)

Diferenciaatribuitda al conocimiento

Diferenciaasociada al capital fisico y humano

© Knowledge for Development, WBI© Knowledge for Development, WBI

Rep of Corea


1. Context: What is at Stake?Chile: Real GDP Per Capita - Alternative Projections 2004-2020

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1995 2000 2005 2010 2015 2020Year

1995 US$

Actual

Projection 1: 1.09 % TFP Growth

Projection 2: 2.37% TFP Growth (Finland)

Projection 3: 3.95% TFP Growth (Ireland)


People are crossing borders in record numbers: Each year between 2 million and 3 million people emigrateAffects both developed and developing countries The majority are going to just four host countries: USA, Germany, Canada and AustraliaRemittances (the money migrants send to their home countries): more than $75 billion a yearAt least 50% more than total official development assistance



Market for the highly skilledWill become even more globally integrated Increasing returns to skills will continue to favor spatial concentration: clustering phenomenon The brain drain will increase, both from developed and developing countries Expansion of far-flung Diasporas – networks of expatriates abroad




Two dimensions of international migration:Economic perspective: migrants as a source of capital and knowledge

Focus on external incentives

Psychological/ Human perspectiveEvery migrant is a unique storyUnusual circumstances which foster entrepreneurshipStrong intrinsic motivation to succeed and get involved with the home country



Why Diasporas of highly skilled?Two major features of knowledge based economies:

Knowledge workers with intrinsic motivation as a foundation Networks as a predominant form of social organization

Diasporas of highly skilled as a ‘litmus test’ for knowledge economy: strong intrinsic motivation; networks


2. Towards a new generation of international technology alliances

Economic context in our countriesEconomic stability and growth generates complacencyMany good firms (‘first movers’) Many promising/ successful initiatives and programs ‘Critical mass’ is slow to emerge: frustration (the promise is there but it is very elusive)

The problem: how to achieve critical mass in 5-8 yearsCountries which achieved that: Asian high performers Countries which have made substantial progress: China, India, Hungary

Fostering a new generation of technology alliances between our countries and OECD economies

A big change is underway: Two new trends:

dramatic restructuring of how corporate R&D are performed (from in-house to elaborate outsourcing)

newly industrialized countries emerging as a preferred location for outsourcing India, China, Russia and EU accession countries as new

locations to outsource corporate R&D

Can we (Argentina, Mexico, South Africa, Mexico) capture this new opportunity?

2. Towards a new generation of international technology alliances


How to take advantage of the talent abroad?

In many countries, Diasporas played a critical role in knowledge-based growth: China, India, Ireland

Brain circulation networks: Indian experience Expatriates as sources of knowledge and influence

Chinese approach to attract back high level migrants Specialized technology parks

2. Moving towards critical mass: Network of innovation initiatives



3. Emerging models of mobilizing Diasporas of highly skilled

Lessons Most government initiatives to establish ‘brain gain’ networks have failedReturn of talent has largely failed (save few exception), hence the focus on brain circulation A lot of initial enthusiasm which dissipates. E.g.: Red Caldas of Colombia Major lesson: Expatriate networks need to generate transactions (demonstration projects): people get tired of discussions and conferences New sources of promising experience: Scotland

(GlobalScot), South Africa, Armenia



3. Emerging models of mobilizing Diasporas of highly skilled

Mayor types of talent and ‘brain circulation’ network

1. Scientific talentNetwork of scientists are easy to initiate but very difficult to sustain (e.g. SANSA in South Africa, CALDAS in Colombia)

2. Entrepreneurs and managers of technology start-ups

These are most vibrant brain circulation networks

3. Professionals in multinationals Leveraging decision-making power of executives


1. Top executives model – India, Scotland Indian executives in major multinationals influenced investment decisions to outsource knowledge-intensive operations to India: Technology and R&D outsourcing networks

2. Mentoring/ Venture capital model – South Africa, Korea, Taiwan, Israel, Scotland Managers and owners of European start-up firms of South-African origin work South African start-up to develop and finance commercially viable projects: Venture capital networks

3. Diaspora members as investors – greater China (‘Bamboo network’)

Diaspora members know reality of home countries well and have access to risk-mitigation strategies. Personal trust between members of cross-border investor networks reduces transaction costs.

3. Roles of prominent members of the Diasporas/ Emerging models of Diaspora mobilization


4. Setting new strategic direction/ identification of new opportunities – Israel, Armenia, India Diaspora members identify niches: translate global opportunities into business projects: scanning networks (e.g. ‘Armenia 2025’: four detailed scenarios of Armenia’ development, study by McKinsey)

5. Return of talent model – China, KoreaIncentives (like special technology parks in China) for the talent to come back: brain circulation networks

6. A model of basic outsourcing – Armenia Successful Diaspora members who ‘made it’ send back outsourcing contracts to firms back home: outsourcing networks

3. Roles of prominent members of the Diasporas/ Emerging models of Diaspora mobilization


3. Ejemplos de éxito: ejemplo Hindú

•En los últimos 20 años el número de inmigrantes hindúes a EE.UU. de muy elevada calificación ha sido muy significativo.

•Muchos de ellos se convirtieron en ejecutivos seniors en las mayores corporaciones de EE.UU. Estas posiciones les permitieron estimular en la India la industria de software y de servicios informáticos. Por ejemplo:

•Kanwal Rekhi de Novell fue uno de los primeros que generó desde su puesto en EE.UU. contratos a Infosys y a otras empresas emergentes hindúes de software.

•Alok Aggarwal de IBM convenció a su compañía para que establezcan un centro de investigación en la India y para que lo trasladaran ahí para que se encargue del desarrollo del proyecto.

•Rajat Gupta de McKinsey convenció a su compañía para que se transforme en una de las pioneras en establecer subcontratos en el mercado de servicios de investigación en la India y se constituyó en un líder para el desarrollo de una escuela hindú de negocios en Hyderabad.

•Ash Gupta de American Express tuvo una influencia clave en la decisión de establecer en la India un centro de servicios a los clientes que actualmente ocupa 5000 personas.



3. Example of Greater China: Transnational Investor Networks

Networks bring together Silicon Valley and high tech industries of the world and Greater China

New immigrant entrepreneurs build professional and social networks

From brain drain to brain circulation

Taiwan has been very successful in tapping into the market and technical knowledge of Chinese Diaspora. Has also set up very strong incentives to repatriate many.

China is also beginning to do this. Is attracting many to high tech centers set up throughout China. Is even attracting Taiwanese- born Diaspora to set up and manage high tech industry in China.


4. Pragmatic Diaspora Initiatives

Paradox of Diaspora Initiatives Individual champions (‘padrinos’) are indispensable to initiate Diaspora initiatives

Capable organizations in home countries are critical to sustain it (e.g. GlobalScot a network of 800 influential Scots all over the world is successful thanks to Scottish Enterprises)

A paradox: to utilize Diasporas one needs capable institutions at home

Pragmatic initiatives: relying on individual champions to develop institutions



Informal Diaspora networks already exist in all our countries

Objective, as always, is a ‘critical mass’: getting from spectacular exceptions to an institutionalized procedure of reaching to influential abroad.

Building such a critical mass means creating an exclusive club of ‘overachievers’ and defining specific commitments from them. A spirit of exclusivity is the key here.

India has done it, Armenia is doing it right now and Mexico. Mexico and Argentina could set an example for the whole of Latin America.

The challenge is to nourish the following agents:

A small group of dedicated ‘overachievers’ is the key: these champions act as a springboard for tangible projects

A small secretariat of paid professional staff serves a system integrator to transform ideas into projects

Broader network of professionals abroad who participate with ideas

Decision-making power and (less important) funding. ©Knowledge for Development, WBI

©Knowledge for Development, WBI


1. Fostering transnational venture capital networks – a combination of mentor/ investor model

2. Fostering strategic technology alliances – a combination of ‘top executives’/ ‘setting strategic directions’ models

4. Pragmatic Diaspora initiatives : two models to explore



4. Pragmatic Initiatives : Some ideasMexico as an example

1. Identify 5-8 high profile champions (‘padrinos’) – executives and high-tech owners in the US to drive the effort. This is critical.

2. High-level leadership conference. A unique opportunity: a lot of preparation is required. A consultancy study to prepare a list of options of mutual interest is advisable

3. Move to design 3-4 tangible projects (e.g. new subcontracting to Mexico; establishment of R&D center in Mexico by major multinationals, etc.) This is a litmus test and the most important stage. Demonstration projects and tangible results are the key. Government support is very important, however,

government is in a supporting role, not in a ‘driver seat’.


4. Pragmatic Initiatives : Some ideas

Mexico as an example (continued)

4. Articulation mechanism: a small organization, both in Mexico and US as a ‘system integrator’ of the Diaspora networks.

4. Create a diffusion mechanism to scale-up first success stories (Nucleación de éxitos).

4. Mainstreaming Diaspora initiatives into FDI, SME and technology promotion.


5. Conclusions

1. Diasporas can be very useful for home countries but to develop their potential, concerted effort is required. This concerted effort takes time.

2. In the short term, individual champions and tangible success stories (demonstration effects) are the key

3. In the longer-term, institutions of the home countries are the key (Diasporas are now panacea)

4. Focus on pragmatism: relying on individual champions to develop institutions

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