VII CONGRESS OF INTERNATIONAL BUSINESS UPC “META TRENDS IN BUSINESS”

Impact of Technological Innovation in International Business

Technological Ecosystems: The Spirit of the new company

Academic research presented by:

LEAH

August 2014

I

ÍNDEX

I. Executive Summary

II. Introduction

III. Objectives

IV. Hypothesis

V. Development of the subject

1. Chapter I: Review of the impact of innovations in time

1.1. Wave productive 1785-1842: The Age of coal, iron and the steam

1.2. Wave productive 1896-1947: The Age of Electricity

2. Chapter II: Technological Ecosystem engine of international business

2.1. Ecosystems in the United States and Israel

2.2. Ecosystem in Peru

VI. Conclusion

VII. Recommendations

VIII. Bibliography

IX. Annexes

II

EXECUTIVE SUMMARY

This work presents the impact of technological innovations in international business.

The objective will be to demonstrate that technological ecosystems are promoters of

international business and its application in Peru will bring amazing benefits for the

entire state: government, business, society.

Chapter I explains how technological innovations have been around since the dawn of

time and have evolved along with humans providing opportunities for commercial and

business development internationally. Then, as the second chapter discusses two

countries have been developing successful technological ecosystems, international

engine companies we know today as HP, Apple, and others. And like innovation model

for emerging countries like Peru. To end the situation in Peru is evaluated with respect

to the creation of structures for the development of technological innovations.

Finally, we conclude with a positive attitude towards the initiatives of the Peruvian

government in including steps to encourage innovation measures, which added to the

change of mentality of Peruvian companies and international support in education and

investment, will be able to generate a substantial change in Peruvian exports.

INTRODUCTION

III

It´s said that man's best friend is the dog, canine who is always there for you, you get

every day as if did not see it in years. And that's true, but we leave out the other man's

best friend, who has always been with us from the puns of time to help us meet our

needs: technology. Technology has always been indisputably linked to all the needs

of humanity. It happened with the need to communicate despite the borders with the

telegraph, telephone, radio, television and the internet. The same is true in the

business world, the emergence of new ways to generate revenue through the internet

such as ecommerce, once the traditional sector was constrained.

The TICs revolution has changed every aspect of society and presents challenges for

the government and private companies being impossible don´t take it into account in

future projects. This study is an incentive for the reader to become familiar with the

world of TICs gradually and stimulate innovative and entrepreneurial spirit in him. Once

finished reading the research document the reader will have the tools to make the

decision to join the technological wave.

The research provides explanations to issues such as innovation, ecosystems,

startups, revolution, international business, social, economic, political, funding models,

among others.

OBJETIVES

IV

General objective

Demonstrate the importance of technological ecosystems in the growth of international

business

Specific Objectives

Analyze the impact of technological innovation in business over time.

Expose the role of technological ecosystems in international business development.

HYPOTHESIS

The development of technological ecosystems in Peru can achieve new international

business opportunities for the country.

5

CHAPTER I Innovation is a word we hear a lot nowadays everywhere, mainly, I must say, the

students of the UPC, Universidad Peruana de Ciencias Aplicadas, which is

characterized by its slogan "Push yourself, innovate." But what is mean innovating.

What is the signification of innovate for students in International Business from the

UPC. The RAE says that innovation "is the creation or modification of a product, and

its introduction into the market." The human sciences qualify as "creative exploration

of new ways or alternative solution assuming the search for new knowledge in an area

of curiosity and pleasure of renewal." And the economist Joseph Schumpeter, posed

by the "theory of innovation" that is the key to economic growth disruptively

transforming economy and society combined in a creative and innovative line of attack

the old production processes emerging new production technologies.

By the definitions given above, we can see that innovations are finding new ways to

improve the existing current model in the process of generating social and economic

development. This can be clearly seen from the beginnings of humanity, where

innovation played an important role in the generation gap of Homo Habilis to Homo

Erectus. Homo Habilis is known to produce stone tools that served for defense and

hunting, the use of stone became widespread and was in common use until appeared

Homo Erectus who discovered the fire, thus changing the model life known before.

There was an innovation that emerged as an alternative for progress and social and

economic development, breaking down the foundations of the system.

In the same way throughout human history, entrepreneurs have bets ideas which

materialized in technological innovations like a hurricane that have been down columns

of the existing economic, political and social system. Each technological revolution

marked change in people, organizations, and finance policy raised by the government

and especially in international business. And this chapter talks about this impact of

technological innovations over time. To do this I will draw on two of the cycles or

"waves" defined by economist Kondratieff1 as a tool to illustrate the impact.

1 Kondratieff 1995

6

1.1. Wave productive 1785-1842: the Age of coal, iron and steam

Think of the 1600 takes us back undoubtedly to identify celebrities of human history,

such as: Galileo, Newton and Descartes. We can imagine Galileo in his time as

professor of geometry, mechanics, and astronomy at the University of Padua in Italy,

or Newton toughing courses at the University of Cambridge as Lucasian Professor.

However, the role of this section is to give a look to the years 1600's with a different

view, emphasizing the important work of middle class entrepreneurs, much less known

than the figures mentioned above, in the phenomenon that was the Industrial

Revolution in the status quo and political, social and economic standards known until

that time.

First, we discuss the third son of an English middle class family, Hugh Plat. Plat was

an inventor who got to make a new alternative for coke when he noted that the

bituminous coal burned in the same manner as wood when it is produced charcoal2.

This new approach was used in roasted malt and later in the industry thanks to the

contributions of other entrepreneurs like Abraham Darby. Darby was a member of a

family of English Quakers3, which had similarity to Plat entrepreneurial spirit and great

talent experimenting with making cast iron foundry to develop a method of high quality

high powered coke oven.

This venture enabled a new source of supply of iron better quality and greater volume,

delegating its use in the manufacture of cookware and kitchenware establishing

opportunities for creation of new goods such as building railways, bridges and the

famous machine steam. This is where the blacksmith and English inventor, Thomas

Newcomen, in 1712 dazzles with first steam engine. This machine was replicated in to

100 copies for then be modified by James Watt, engineer and inventor Scottish, in

partnership with Matthew Boulton, english entrepreneur, creating Boulton & Watt

signature with that would be commercialized and expanded internationally. The

reforms that generated this machine in transport are surprising because replaced the

2 Cfr Platt 1594:80 3 The Quakers were a religious community founded in England by George Fox. They have been

known like Quakers because they were following instructions to shake in the name of the Lord.

7

rudimentary forms of transport such as the use of animals or human power in favor of

complex technologies. In the same way it did in the industrial sector, changing small

family workshops for larger factories that housed large numbers of employees

providing labor and specialization in the use of these new technologies. The labor of

workers in factories and opportunities in improving the transport of goods from one

country to another increased cross-border trade and international business in a

different social and economic system: capitalism led by the big business.

This first wave of the years: 1785-1842, years more years less, pretty much sums up

the process of irruption, frenzy, synergy and maturity presented in the book of Carlorta

Perez4, Technological Revolutions and Financial Capital: The Dynamics of Bubbles

and Financial good times which proves the hypothesis of this essay.

The big bang as Charlotte mentioned to the emergence of an innovative idea, is the

beginning of the wave, where the world is in crisis and companies are stagnant or in a

mature period therefore becomes important to look for opportunities to solve this

economic jam. This at times of Plat and Darby happened when the economic model

had reached its highest point standing firm but without growth. Can´t identify if the

goverment, dynasties or existing bourgeoisie were looking out of this impasse or were

aware of the stagnation of the system, but the truth is that there visionaries people in

an uncertain environment proposed an innovative change, through innovation in raw

material or a different method of foundry. Entrepreneurs seek capital to develop their

projects and with luck got to attract risky investors to launch the product to market.

Consumers realize the benefits of the new proposal and choose to change their style

of consumption gradually causing the breakdown of the foundations of the previous

model. Very similar to what happened with James Watt and the steam engine. In their

search for funding met the businessman Boulton who filled of money to the company

that together created to commercialize the invention. Quickly, it welcomed famous in

the industry leaving obsolete the products used before and marking the difference

between the old and the new5.

4 Venezuelan scientific experts on technology and socio-economic development. Specialist neo-

Schumpeterian court. 5 Cfr Perez 1891:81

8

Suddenly we are in the stage of frenzy where all possible options that carry the

revolution are explored. Now it is sought new markets to mimic the process of

revolution, an take place the "hobby of built railroads, bridges" as in the industrial

revolution which generates overinvestment. Wealth has increased and was held by a

group of people, bringing the rich at the top of the pyramid and the poor in deplorable

conditions producing the phenomenon of migration of rural people to cities. Therefore

movements of the proletariat against the bourgeoisie, words created and used in the

eighteenth century after the Industrial Revolution. In the words of Carlota, frenzy is the

time for speculation, corruption and unashamed passion-even celebrated- for wealth.

But the chaos cannot last forever so range of reflection and rearrangement try to put

in balance individual interests with collective welfare. Now, cannot pass unnoticed the

social unrest and is installed as a barrier of growth, depending on the ruling political

powers and institutions take action to improve the situation. This in eighteenth century

sparked big fascists movement, nationalists and a parallel cycle of revolution as the

one in 1820 in Spain, and 1830 and 1848 in France. Furthermore, called to reflection

of Pope Leo XIII:

“…If the worker provides to other their forces to the industry. He provides it in order to

meet the necessities of life and sustenance and for all this work acquires true and

perfect right, not only to demand salary, but to do what he wants with it.…”6

In the phase of synergy, the key word is production. Instead of step Frenzy growth is

stable and harmonious with production. The economic benefits dripping all layers of

society which feels a stadium of prosperity and a reign of the middle class. New

thoughts on the spirit of the company are included with the French Enlightenment7,

and the industry expands to USA, Germany, Italy, Switzerland and others causing later

revenge for supremacy among nations.

6 Rerum Novarum Encyclical 1891 7 Although the French Enlightenment date from the late seventeenth, it is prolonged to the early

nineteenth that why it is important to mention it, especially in studies by Adam Smith in The Wealth of Nations (1776).

9

Turning to the last phase, maturity, markets are saturated and productivity gradually

reaches its limits as in 1866, upon exhaustion of cheap carbon sources8. Despite this

the biggest beneficiaries continue to rely on the system and proclaiming eternal

progression, but the scenario gradually becomes suitable for a new big bang and

technological innovation.

1.2. Wave productive 1896-1947: The Age of Electricity

The age of electricity is a particularly notable time for his technological inventions

highlighting the most momentous invention for humanity: electricity. Electricity

revolutionized lifestyles of people and how we do business internationally and foreign

trade. Electricity is the backbone of the revolution of products that appeared later as

radio, television, computers, cell phones, etc. that are part of our life. Just imagine a

typical day of a person nowadays: Since the day begins with the sound of electric alarm

clock, turn on the light in the room, has breakfast with hot water from the electric kettle

while watch their children play with a battery toy that he gave them. Then, he goes

quickly to work because he must mark his entry with proximity card in the electrical

system of the company, turn on the computer and puts to load the cell phone that forgot

connected yesterday. Soon it is 6 or 7 pm. and should go shopping at the supermarket,

where he is receiving with those electric doors that open when you are close. Then he

listens the mall worker says the daily deals, he choose the products that go to buy and

approaches to the cash register in order to pay. The cashier uses a code reader to

register the products he is carrying in her computer while the electrical band bring him

the other goods. And culminating the day goes home and rises the electrical garage,

saving the car and then go to see their children watching television in the living room.

With this we can see that electricity led to the creation of a large number of artifacts

that have become a right for all of us and have become necessary as we cannot

imagine life without them. The impact of electricity has been so great that cannot go

unnoticed in this study, so this section is dedicated to the detailed explanation of how

8 Jevons 1866

10

a technological innovation, electricity, boosted foreign trade satisfying global needs,

being replicable and scalable in time.

The history of electricity takes us to the year 600 BC when the philosopher Thales de

Mileto experimented with amber rod and a piece of wool that rub long time get a spark.

However, this event was only the observation of the phenomenon and it was not until

1774 when electricity was used by Alessandro Volta to produce continuous power

through perpetual electrophorus. In 1800, Volta would create the electric battery, which

would be used as the basis for manufacturing the first electric motor by Joshep Henry

in 1831. The same year, Michael Faraday show that could generate electricity without

chemicals, elements of which it was made the battery, by experimenting with magnet

and wire. Soon appear the dynamo and transformer´s Faraday, the last one leads to

an alternating current voltage.

Then, the use of electricity is presented systematically throughout the eighteenth

century. Morse's telegraph (1836), the large-scale generator of Gramme (1870), Bell's

telephone (1876), the microphone of Hughes (1878) and Edison incandescent electric

lamp (1879) are the most prominent examples of the application of electricity in

telecommunications, lighting and industry.

However, only when the widespread use of electricity spread around the world can say

that revolutionized the world. They were new businesses distributing new technologies

and services related to them. For example, Atlantic Telegraph Company was a

company incorporated with the ideal of building the first transatlantic telegraph cable

linking Europe to America. Due to the failure of the first would enter Telcon, Telegraph

Construction and Maintenance Company to build the second transatlantic telegraph

cable. The New York soon appears with Mississippi Valley Printing Telegraph

Company in 1856, Western Union Telegraph Company9 had an extensive network of

telegraph why offering telegram transmission services and money transfers. Then, The

Bell Telephone Company begin operations under the support of obtaining patents like

the telephone and in 1885 changed its name to American Telephone and Telegraph

Company, AT & T, which would create the first national long distance network of viable

9 Nowadays knows like Western Union

11

costs. In 1892, General Electric Company was formed by the merger of Thomas Alva

Edison Company, Edison General Electric Company and Thomson-Houston Electric

Company offering various services based on electricity including turbochargers used

in World War II.

This last company, General Electric, is very clear example of what Schumpeter tells

us. Schumpeter tells us that technological innovations are usually constituted in

clusters of entrepreneurs who open the way to a new technology. In this case Thomas

Alva Edison formed the light bulb and inaugurates Edison General Electric Company

opening the road for imitators of the product, called by Schumpeter as imitation effect

arise. The product is increasingly covet by entrepreneurs and start to appear in the

market flocks of companies that make large profits of the product as Thomson-Houston

Electric Company and Canadian General Electric, Edison competitors, did. Soon the

new technological move the market in their favor and older firms should be molded to

new structures or disappear. Innovations expand in all the markets and go from being

a novelty to become usual. Innovative entrepreneurs become normal heads of

companies who conquer the structure and the situation is normalized, waiting for

another innovation to occur and change the paradigm again, like Thomas Edison did

in his time, going from entrepreneur to the boss of General Electric Corporation witch

not only leads the electricity sector, it is also in transportation sector, Power & Water,

Aviation, Oil & Gas, Health and Capitals.

CHAPTER II The previous chapter explained that technological innovations are like extensions of

the body and can be made by entrepreneurs from all strata of society. However, there

is still skepticism about opportunities of emerging countries in the technological

competition that the global world has today. Some argue that great powers like the

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United States, are uniquely capable of developing quality technology to the market.

But this is false. In recent years, the same technology and globalization that this

brought, has broken down barriers so that the Earth has become flat10 and countries

such as Israel, India, China, fiercely competing to be at the forefront in technology

services.

Thus we should not be surprised if in emerging countries, talk about Latin Americans

as Chile, Mexico, Colombia, and Peru, materialize world-class entrepreneurs. The

news did not stop telling us about a teenager, with a Peruvian mother and Bolivian

father, who at just 13 years had developed a mobile application11 that managed to take

first place among the best-selling apps in Appstore. Now the young age of 17 working

on Facebook and is a benchmark for Latin Americans. On the other hand, the web

portal The Economist published an interactive list of the three largest Internet

companies based in 50 countries according to its market valuation, scale, among

others. Peru is ranked 47 thanks to the achievements of his three startups: Place

Points valued at $ 4 million, CinePapaya $ 3 million and Idakoos at $ 1 million.

These are two examples that break with abundant skepticism even among people and

leads us to reflect on the measures being taken by the government and private

institutions to develop ecosystems to promote the establishment of technological

value. Especially in countries exporting raw material by excellence that should make a

technological leap in the process of not getting behind in the global trend.

This chapter begins by explaining the model that referencing countries are

implementing technology such as the United States and Israel and then analyze some

measures that are being implemented in Peru to increase our competitiveness in

technological innovations.

2.1. Ecosystems in the United States and Israel

Ecosystem is a word that has become fashionable in recent times and is used

frequently to refer to the digital age in which we live.

An ecosystem in an initial definition presented by the RAE is " Community of living

beings whose vital processes are interrelated and develop in terms of physical factors

10 Friedman 2005 11 4Snaps by Michael Sayman. Find it Here

13

in the same ambient" This is a technological field is building a favorable environment

to enhance technology projects in a process of interaction and interdependence among

individuals who share the same spirit of entrepreneurial.

Ecosystems provide to entrepreneurs counseling, continuous feedback and key

resources to shore up their technology projects. They are a source of knowledge and

inspiration, as it is composed of teachers, trainers and subject matter experts. The first

technology ecosystem was introduced in Silicon Valley, Palo Alto, California in 1939

by a professor at Stanford University and two excellent students, then HP founders.

They are Professor Frederick Terman and students David Packard and William

Hewlett. The importance of Silicon Valley is that it marked a model or standard for

developing technology in a collaborative space and it would soon be followed by other

countries such as Israel. This model brings together three important: education,

funding and market.

Regarding education, Silicon Valley had not been made it if were not for the

educational support provided by Stanford University to the ecosystem. Stanford would

be a source of innovation, in terms of advances in research and training of many

companies that have made Silicon Valley one of the most innovative and productive

high-tech regions in the world12. Frederick Terman, one of its first presidents,

generated close links between university students and the technology industry

booming. Create what he called "the secret weapon of Stanford", the Stanford

Industrial Park. This would be leased to technology companies in order to provide

money to hire renowned university professors in exchange for the advantage of being

near the university and as a means of transfer of technology from research labs of the

university to the companies’ park13. Also, for the financing side is important to highlight

the momentum provided by the venture capital in Silicon Valley consolidation. By 1920,

Vannevar Bushm professor of engineering and scientific advisor to the government of

USA enhanced technology centers when he convinced the state to fund R & D activities

aimed at national defense in World War II. This finally also brought increased demand

for electronics opening a market for technologies developed in Palo Alto.

12 Stanford University (2014) (http://www.stanford.edu/about/history/history_ch3.html) 13 Cfr Rogers y Larsen 1984 :30

14

The implementation of these three components exposed to other factors such as the

lack of the industry, the availability of lawyers, managers, talent agents14 and other

factors of the age succeeded in making unique and unrepeatable Silicon Valley. Other

countries have imitated the model, however have failed to overcome the success it has

achieved so far in the United States, which currently has three of the largest

ecosystems15.

However, their case is an important lesson that helps us to establish bases to start with

our story with technology. Just as Israel did at their time, now known as the best

entrepreneurial ecosystem in the world after Silicon Valley.

The Startup Genome consultant join with Telefonica Digital present us the Startup

Ecosystem Report 2012, which provides a quick look at the 20 largest ecosystems in

the world in a ranking prepared based on 8 variables: Output Startup, Funding,

Company Performance, Talent, Support, Mindset, Trendsetter, Differentiation from

SV16.

Tel Aviv, Israel is ranked second in the index and is a special case worth mentioning

because it exemplifies how Israel at its inception as a state was an exporter of

agricultural products, became an exporter of high-tech, getting 50% of its exports come

from the technology industry.

Curiously, Tel Aviv like the Silicon Valley ecosystem collects the three components

mentioned earlier: education, funding and market.

Yigal Erlich, founder of the venture capital industry in Israel and partner of the

investment fund Yozma, remember that thirty years ago, the venture capital funds in

Israel did not exist and today the country is considered the largest market in the world

14 Look for Annex I 15 1°: Silicon Valley, 3°: The Angeles y 4°: New York. Look for Annex II 16 The first variable measures the index of business activity in the region. The second variable assesses the risk capital available in the ecosystem. Company Performance account the potential of new companies in the ecosystem. The fourth variable measures the talent of entrepreneurs in terms of age, education, experience, ability to mitigate risk, etc. The fifth variable measures the support network in the ecosystem for service providers, mentoring and funding sources. Mindset is the mentality of entrepreneurs in terms of vision, risk tolerance, work ethic, etc. Trendsetter measures the speed with which the ecosystem adopts new technologies, process management and business models. And finally, Differentiation from SV measures the difference between the Silicon Valley and the ecosystem under study taking into account demographics and what kind of businesses are started there.

15

capital risk after the United States17. Incubators programs funded by the state have

been able to support over 1,400 Israeli companies seeking capital and provides

mentoring, work space, computer support and direct connection with fund investments.

Additionally, the University of Tel Aviv has a center for entrepreneurs that connects

students with technology companies who see Israel an attractive location for their R &

D centers. Therefore, it should not be surprising that Israel is the country that more

invests in research and development in the world relative to its GDP. These two factors

have allowed the country a tempting market for large technology companies and

develop a fertile and rapidly growing market that in the near future might put in jams to

American companies.

The case of Israel catches our attention about the strategies that companies are taking

in our country. Are we taking the right path? Or are we falling behind the globalization

and technology that is becoming less asymmetric the information and styles change

consumer purchasing? It makes us think if we are going into what Kjell Nordström and

Jonas Ridderstråle said in his book Funky Business: "The 'surplus society' has a

surplus of like companies, Employing people like, With a similar educational

backgrounds, coming Up With Similar ideas, producing things like, With prices like and

like quality “The ‘surplus society’ has a surplus of similar companies, employing similar

people, with similar educational backgrounds, coming up with similar ideas, producing

similar things, with similar prices and similar quality”.

2.2. Ecosystem in Peru

Years ago the European economies led the commercial world, came after United

States with his liberal model. China appeared in the equation and commercial

structures changed, then after little time we´d discussed about the potential of the

BRICS countries. Later period, the statistics would predict that growth would be more

balanced and favorable for emerging countries making the eyes of investors land on

them and the confidence of the private sector, although still fragile, raised.

At that point countries like Peru, Chile, Thailand, or perhaps even Israel itself gain

strength and is expected to they be ready to face that challenge. It is where they ought

17 United for Israel (2014) (http://www.unidosxisrael.org/tel-aviv-mejor-ecosistema-emprendedor-del-

mundo-tras-silicon-valley/)

16

to decide to follow the same path or opt for an innovative technology industry. So, it

become important to ask what do they want to be: administrators of the present or

builders of the future?18

At present, the initiatives by the government and some private institutions make us

think that yes, we want to make that change towards technology. However, according

to the Global Innovation Index introduced last July 18 by Jhonson Cornell University,

Business School Insead and the World Intellectual Property Organization shows the

actions are still very weak and we need more entrepreneurs join to the change. The

index assesses innovation programs in 143 countries in which Peru was ranked 73

being below other Latin American countries such as Chile, Colombia and Mexico. The

post is not quite low but allows us to observe the points where we need to improve,

citing some as: Percentage of education spending relative to GDP (115) Percentage

of domestic credit issued to the private sector to GDP (104), Collaboration between

university - industry research (105) and knowledge creation (119)19.

As we see, the Peru´s lowest score in the index curiously are part of the 3 factors of

the ecosystem that we talked about before: education, funding and market. Much so

that, I will disaggregate the three components to identify the initiatives proposed to

date for each one.

Education:

In a globalized world, innovation is the source of economic growth and differentiation

and therefore the takeoff of international business. This poses a strong challenge to

countries as they will have to develop the necessary tools to foster the innovative spirit

in its people through education systems and development of scientific research. Faced

with this situation, last July 28th President Ollanta Humala mentioned in his speech his

concern for the Peruvian educational system. The state gives priority to education in

the National Productive Diversification Plan, for which be increased by 4,000 million

soles in the education budget from 2015 to reach historic increase 0.5% of GDP20.

18 Guillermo Quiroga makes us that question in SemanaEcomomica.com. 19 Look for Annex III to observe the complete qualification of Peru. 20 RPP (2014) (http://www.rpp.com.pe/2014-07-29-los-puntos-claves-de-ollanta-humala-en-su-

mensaje-por-fiestas-patrias-noticia_711986.html)

17

Trained and active human talent to undertake innovative and disruptive ideas with an

international project are source of concern for state and private sector. For this reason

in the country there are about 26 centers of expertise and training in developing digital

initiatives, called incubators and accelerators. Some examples of this programs are:

Startup-Peru from Ministry of Production, Wayra from Telefonica, Lima Valley, Startup

Academy, StartUPC and Emprende UP.

Startup Peru is an initiative of the Ministry of

Production, which since 2012 has been

launching national competitions among

entrepreneurs with the aim of consolidating a

collaborative network of mentoring, training

and experience to provide sufficient information to differentiate, survive, grow and

expand in time. The Minister Gladys Triveño mentions that: "This initiative is supported

by the great skill of the Peruvian to develop creative solutions to complex problems,

and the great entrepreneurial force that is already recognized worldwide"21.

Due to the host of this statewide initiative, the Ministry of Production will pursue this

initiative with the launch of at least two annual competitions in 2014-2016. In 2014 it

will finance 48 projects; in 2015 to 100; while in 2016 to 120. In order to reduce the risk

of mortality business, the ministry will submit a proposal for the creation of strategic

alliances with corporate research centers and will provide continuity and reinforcement

lines of funding for incubators witch offers Start-Up Peru´s program, with a goal of

twenty finance incubators for 201622.

Furthermore, Wayra is a Telefonica venture, that bringing together entrepreneurs

related to TICs with the latest technology to develop innovative ideas and be supported

by an international network of career mentors. Wayra has successfully collaborate with

the creation of 26 Startups, including on them the most famous Peruvians startups:

Cinepapaya, and Plaza Points and Joinnus. Wayra is a global initiative which is display

in several capitals of Latin American countries such as Lima, Bogota, Santiago,

21 START-UP PERU (2014) (http://start-up.pe/noticias/2013-11-29-Inicio-del-programa-Start-Up-

Per%C3%BA.html) 22 Cfr National Productive Diversification Plan 2014: 64

18

Buenos Aires, Caracas and Mexico D.F; and in

capitals of European countries: Madrid, London,

Dublin, among others. The entire organization

formed more than 297 Startups, 20,554 projects, 14 academies, 9.7 million of euros

and 1,600 people on the network. This allows share experiences, find funding, a new

partner or simply expand your number of business contacts. This is what makes Wayra

a significant project for Peru, because makes us part of the macro global technological

ecosystem and gives us great opportunities to learn.

StartUPC is a center for Startups acceleration of university of

UPC, Universidad Peruana de Ciencias Aplicadas. This program

has the support of the University of Tel Aviv, Israel, which lets to

promote entrepreneurship through knowledge transfer.

Furthermore, StartUPC is an important opportunity for the

incubated companies as access to counseling at low cost and be

more likely to get funding. An example of this is Vip Soul, one of

the UPC accelerated startups, which got 150 thousand nuevos soles from FIDECOM

competition launched to startups. On the other hand, university students have the

option to participate in those ventures and learn from them, which fosters

entrepreneurial spirit than previously spoke. Percy Augustin de Loayza, Head of Unit

Entrepreneurship mentioned that the objective of the program is to foster creativity and

sustainability startups and entrepreneurs get passionate about their projects.

"If something distinguishes the Peruvian ecosystem from Silicon Valley, the area of

California where they reside and have gestated various global technology brands, is

that in Peru there is still the idea that we must be jealous with our project business.

There aren´t shared and only speaks enough in its development stage, while Silicon

Valley operates under a collaborative scheme. The ideas are discussed, feed and

improve in different areas.

“This has to be lose slowly, "says Augustin. ”If anything we are learning is that more

important than the idea is that you put passion to be concrete, and that cannot be

copied, Percy said.

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In summary, there are several programs in Peru supporting technological ventures to

get enough resources to operate in the market and to become profitable.

Funding:

Once modeled the business idea and obtain a sustainable project is time to seek for

funding. This part is crucial for entrepreneurs because it divided the profitable projects

than the ones are not. Xavi Sanchez, founder of Emprenderalia says that ideas are

free, but what really matters is how you run them. Survive during the first months of a

startup is a real juggling exercise, so get to know the different options we have to fund

our project is fundamental.

For this reason here we are some ways of financing in Peru.

The best known and most widespread in Peru is the Seed Capital financing, provided

by state agencies, Angels investors, venture capital entities, among others.

The State provides capital through:

Startup Perú: Up to S/.150, 000 for capital projects.

Research and Development Fund for Competitiveness - Innovate: S/. 200

million to research and product innovation projects.

Fund for innovation, science and technology (Fincyt): finances counseling,

missions, internships, research and strengthening of incubators. Since its

inception it has funded more than 1000 R & D projects.

In addition, promises to include COFIDE´s participation in promoting this type of

financing as well as design a system of incentives for the formation of networks of

angel investors, according to the National Productive Diversification Plan23.

Angel investors are another source of seed funding that seeks to fund investment

projects developed by entrepreneurs who need funding and cannot resort to the

financial system or risk capital. One of the initiatives in this type of financing is Business

Angels Club of Peru by José Carlos Sánchez Bartra and Albert Colomer i Espine. Also,

Guillermo Vivanco, director of Angel Ventures Peru bets on Peruvian entrepreneurship

offering an alternative funding.

23 Cfr National Productive Diversification Plan 2014: 64

20

On the other hand, a different alternative funding has caused a sensation among

entrepreneurs, allowing get money from several people and at the same time expose

their projects and make it known quickly. This alternative is called Crowdfunding.

Websites like Kickstarter24, Fundly25 or Indiegogo26 are the most popular.

Finally there is the traditional bank financing that is no stopped to be an attractive

option but can be limited for entrepreneurs who are not creditworthy because they have

no economic support. And borrowing from family and friends is one of the most used

routes between Peruvian startups.

In this respect, Percy Augustine of StartUPC mentions that investors in Peru "still prefer

to go to traditional sectors. When in reality instead of putting a million dollars in a real

estate project could put the same amount in 20 business ‘startups’ and in that way

minimize your risk”27

Market:

The Peruvian market in general terms had recorded an increase in technology buying.

However, the majority of technology products is concentrated in the capital and the

coastal area. We need more investment in infrastructure and wiring to allow rural areas

to intercommunicate with the world. In measure that can we reduce this gap, Peru will

able to improve competitiveness indicators and of course provide welfare to these

people.

However, the figures predict a 9% increase in sales of technological equipment such

as smartphones, tablets, laptops and televisions, according to the Chamber of

Commerce of Lima. This due to the measures taken in foreign trade on FTAs, such as

TPP, allowing the entry of low-cost cell from countries like China, Korea and Vietnam

in exchange for duty-free access for Peruvian products these markets.28

On the other hand, a study by the consulting Millward Brown shows that Peruvians

spend more time in front of a smartphone than any other citizen in Latin America.

24 KICKSTARTER 2014 (www.kickstarter.com) 25 FUNDLY 2014 (https://fundly.com) 26 INDIEGOGO 2014 (www.indiegogo.com) 27 Journal El Comercio 2014 (http://elcomercio.pe/economia/peru/peru-tendra-startups-crecimiento-global-antes-2019-noticia-1724863) 28 Journal Gestión 2014 (http://gestion.pe/economia/peru-importo-smartphones-us-2951-millones-

primeros-cuatro-meses-2014-2100262)

21

Approximately they spend more than 170 minutes per day using smartphone, 141

minutes on notebook, 137 minutes on television and 66 minutes with a tablet29. This

may also indicate that there is a large potential market for mobile applications in Peru.

In conclusion, yes we can talk about a Peruvian ecosystem, since various stakeholders

are collaborating in the formation of a network of tech entrepreneurs. Although it is in

an initial stage, I think there are desire of the state to include in its management as

important for the development of the country. Furthermore, the contribution of

universities, UPC, UP, UNTEC are revolutionizing the thinking of their students who

increasingly are more excited about this wave of TICs.

Additionally, it should be mentioned as part of the National Innovation Week30, the

activities to be undertaken to promote the innovative spirit, attracting international

experts of technology and encourage innovation in traditional companies.

18 -21 August Advanced Seminar on Integrated Model of Management Innovation.

19 – 20 August National Congress of Innovation.

20 August Ceremony recognizing the winners of SINACYT National Innovation Award.

21 August Meeting of Young Innovators.

29 Journal La Prensa 2014 (http://laprensa.pe/tecnologia-ciencia/noticia-peru-usan-smartphones-mas-

que-otros-paises-america-latina-29815) 30 INNOTECPERU 2014 (http://www.innotecperu.org)

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CONCLUSION

This research defines innovation as a process of creative disruption that requires

ingenuity and curiosity for the continuous renewal and its importance lies in the ability

to break social, political and economic paradigms and become the key driver once

again of the international business.

We rode over time and we conclude that technological innovations were appearing in

order to satisfy the needs of man. The man has been evolving over time and with this

his needs and technology, reaching this latest to become part of the body as an

extension of he. Now because the technology is part of being human, we conclude that

anyone no matter where they come from and what their social, economic and physical

condition can be a technology entrepreneur just needs the right environment to start

discovering their innovative spirit.

Also, the second chapter concludes to boost the entrepreneurial and innovative spirit

in the population should create appropriate structures for this. In that sense the United

States has been a pioneer, and making the Silicon Valley ecosystem becomes the

number 1 worldwide and model for other economies that are attracted by technology

and comprehensive benefits. The world is living a technological revolution again and

countries like Israel have used to ride the wave. Peru is waking up and everything

indicates that they are taking the right steps to develop a technology industry. However,

there is still a long way networks include more support and greater integration between

the actors.

XXIII

RECOMMENDATIONS

The present research has had the trajectory of analyze some facts that have given rise

to most of humanity in order to show our main hypothesis that is the importance of

technological innovation in the international business world internationally. That's why

I resorted to the bibliography of experts in the field, as were Schumpeter and Perez,

who advocate the promotion of entrepreneurial spirit. The text also says roughly

success of Silicon Valley to promote the innovative spirit than speaks Schumpeter ,

and creating a different concept called ecosystem of which other economies could

extract the best practices for tropicalize its reality as a country.

That is important to note that although the technology is as old as humanity, very little

has been said about it in the bibliography available. However, nowadays ever more

literature has been passionate about the revolution caused by technology in the field

of international business, and books as Lean Startup, Startup Nation, among others

are examples of them. An Additional research is needed so as to encompass the

complex system that is generates about ICT's and even more is a challenging to build

stable structures for implementation in developing countries like Peru. To complete is

listed the recommendations by the World Bank for developing countries in improving

the technology degree.

Improve affordability to reach people who do not yet have access to ICT

networks.

Expand access to more advanced and accessible ICT and broadband for high-

speed Internet.

Expand the new ICT infrastructure to improve service delivery and use it as an

economic resource.

Develop and harmonize the skills of the people who are needed in the service

industry based on information technology and knowledge economy.

XXIV

BIBLIOGRAPHY

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PLATT, Hugh (1594) The Jewell House of Art and Nature. London: Short.

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JEVONS, W. Stanley (1866) The Coal Question, The coal question; an inquiry

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XXV

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LA PRENSA (2014) (http://laprensa.pe) Site web of Peruvian newspaper "La Prensa"

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ANNEX I

ANNEX II

ANNEX III