Risk Analysis Tool Kit for Latin America

Latin America has not failed to try at innovation, but it has tried and failed. Despite its good intentions, Latin America faces specific shortcomings. Market failures, a lack of synchronization between government and businesses, and low levels of education make Latin America fall short. Additionally, universities lose their mission-oriented goal to acquire knowledge in light of funding packages from private corporations. When companies don’t sufficiently bankroll research spending, then it limits the demand for education. Heavy subsidization and the overinvolvement of research and development didn’t pay off in Latin America. Luckily, there are specific ways to improve the aforementioned problems that are addressed in this paper.

Latin America’s primary obstacle to overcome is market failures. Market failures occur when an innovation like new technology could greatly aid a specific area and yet it is not adapted due to a lack of private corporation motivation. It is not in the best interest of the company, and so it fails. This is a major problem because in many cases this technology would benefit everyone, but because private corporations prioritize profit above the social good, society loses as a whole. The tool Latin America must utilize to address market failures is to provide government incentives (such as tax refunds) to motivate private companies to adapt new technology.

Technology innovation may be deterred if there is not a demand for it. Governments don’t operate in a vacuum when they intervene to address market failures. This is also associated with innovation in industrial policy. It is important to spur change by providing incentives to companies. There should be scientific capacity to take advantage of new technologies that entrepreneurs are using. There is synchronization that must be achieved. Korea provides a good example of adapting to new technology in spite of its somewhat passive approach to the acquisition of new technology. Korea knew how to adapt technology. They remodeled their education system, shaped government polices, and created vibrant firms to make it all work together. These are the issues that Latin America needs to overcome. It worked in Korea because of their synchronized approach. Innovation is about coordinating human capital innovation between government, schools, companies and consumers. This synchronization is a prerequisite for technology innovation effectively take place.

Another major issue is a lack of mission-oriented research. Research in and of itself may be overfunded. Many countries utilize two to three percent of their GDP on research without achieving success. The failure is not research but the lack of mission-oriented research. Private industry can corrupt the fundamental mission of the university, which creates isolated ivory towers. Ivory towers become run by political and profit motivators rather than the core nonprofit mission of stimulating knowledge. Universities in Latin America don’t have a long tradition of working productively with the private sector. Universities have failed to be loyal to their mission statement of prioritizing knowledge over capital; which corrupted the advancement of knowledge and their societies suffer as a result. To fix the problem, Latin America needs to direct its attention away from capital despite how counterintuitive this may sound. Universities that prioritize knowledge over capital benefit society by conducting regulated and scientifically sound studies that contain large sample sizes, are completely random, and do not falsify their findings. The advancement of knowledge became corrupted in these universities.

It is important to note that Latin America did not always underperform. The big gaps in technology innovation occurred during or after the 1980s. The gaps that opened up, and are big gaps today, are deeply rooted in the economic crisis that swept the region in the 1980s. Latin America was in the midst of a tremendous crisis, and big gaps opened up in the education and technology systems that are still open today. The fact that Latin America did not always possess these gaps provides hope of improvement should the tools of synchronization, prioritization of human capital, mission-oriented research and addressing market failures be used. It is not an intrinsic problem with Latin America.

Successful innovation requires synchronization between businesses, education, governments, and even consumers to utilize human capital. An example of success in synchronized innovation is Peru. Peru opened up to foreign competition while simultaneously devoting attention to improving education. Peru prioritized human capital. They saw the need to stimulate the business sector so that it could compete with foreign competition to use technology and human capital effectively. Peru may well be the most successful Latin American area in fostering innovation. It accomplished this by prioritizing human capital and synchronizing the efforts to achieve human capital so they are not disjointed. An example of synchronization failure occurred in Chile. They need to emphasize more links between businesses and universities for this to improve, and it seems that it may currently be improving. Synchronization is essential for innovation truly to occur.

The best approach is through innovation clusters (Mazucato). This means that you create new products based upon products that you already have. Innovation clusters tend to generate more innovation, but there is a lot to coordinate and this lack of coordination is what holds back innovation in Brazil. Latin America maintains limited cooperation between businesses. The culture is such that an iPhone app is created and then almost instantaneously becomes incorporated into consumers’ lives. This needs to happen at an accelerated pace within corporations. Being able to access that global stock of knowledge plays an important role in innovation. Countries move out of natural resource spaces by becoming more innovative examples are Australia, Finland and Canada. These places utilize natural resources based as well. Ricardo Hausmann believes that the key to innovation lies in what countries produce and export.

Latin America contains a major shortcoming in that businesses and the government need to work together in innovation technology. The term for this is synchronization, and it is important so that human capital like education technologies. Countries with low levels of growth subsidize research in that country won’t do too much. Latin America needs a more detailed way of looking at innovation. It also needs to address market failure concerns by providing incentives for private corporations to adapt new technology. In short, Latin America needs to prioritize human capital and then it will succeed. The gap between Latin America and more successful countries does not speak to an unchangeable defect in Latin America, but rather to a gap that may be closed using the toolkit outlined above.


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