Leveraging National S T and Business Talent Abroad Redes

Leveraging National S&T and Business Talent Abroad Redes de Talentos en el Exterior para Desarrollo Tecnológico Nacional Yevgeny Kuznetsov Senior Economist Knowledge for Development Program Buenos Aires, April 26, 2005 ©Knowledge for Development, WBI

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 ©Knowledge for Development, WBI

1. Context: What is at Stake? Challenge for our countries (middleincome economies) Transition to a knowledge-based economy Leveraging the Diaspora of highly skilled as an entry point into knowledge-based economy ©Knowledge for Development, WBI

1. Context: What is at Stake? Argentina ©Knowledge for Development, WBI

1. Context: What is at Stake? ©Knowledge for Development, WBI

1. Context: What is at Stake? People are crossing borders in record numbers: Each year between 2 million and 3 million people emigrate Affects both developed and developing countries The majority are going to just four host countries: USA, Germany, Canada and Australia Remittances (the money migrants send to their home countries): more than $75 billion a year At least 50% more than total official development assistance ©Knowledge for Development, WBI

1. Context: What is at Stake? Market for the highly skilled Will 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 ©Knowledge for Development, WBI

1. Context: What is at Stake? Two dimensions of international migration: Economic perspective: migrants as a source of capital and knowledge Focus on external incentives Psychological/ Human perspective Every migrant is a unique story Unusual circumstances which foster entrepreneurship Strong intrinsic motivation to succeed and get involved with the home country ©Knowledge for Development, WBI

1. Context: What is at Stake? 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 ©Knowledge for Development, WBI

2. Towards a new generation of international technology alliances Economic context in our countries Economic stability and growth generates complacency Many 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 years Countries which achieved that: Asian high performers Countries which have made substantial progress: China, India, Hungary ©Knowledge for Development, WBI

2. Towards a new generation of international technology alliances Fostering a new generation of technology alliances between our countries and OECD economies A big change is underway: Two new trends: v dramatic restructuring of how corporate R&D are performed (from in-house to elaborate outsourcing) v 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? ©Knowledge for Development, WBI

2. Moving towards critical mass: 3. Network of innovation initiatives 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: v. Indian experience Expatriates as sources of knowledge and influence v. Chinese approach to attract back high level migrants Specialized technology parks ©Knowledge for Development, WBI

3. Emerging models of mobilizing Diasporas of highly skilled Lessons v. Most government initiatives to establish ‘brain gain’ networks have failed v. Return of talent has largely failed (save few exception), hence the focus on brain circulation v. A lot of initial enthusiasm which dissipates. E. g. : Red Caldas of Colombia v. Major lesson: Expatriate networks need to generate transactions (demonstration projects): people get tired of discussions and conferences v. New sources of promising experience: Scotland (Global. Scot), South Africa, Armenia ©Knowledge for Development, WBI

3. Emerging models of mobilizing Diasporas of highly skilled Mayor types of talent and ‘brain circulation’ network 1. Scientific talent Network 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 ©Knowledge for Development, WBI

3. Roles of prominent members of the Diasporas/ Emerging models of Diaspora mobilization 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. ©Knowledge for Development, WBI

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 Mc. Kinsey) 5. Return of talent model – China, Korea Incentives (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 ©Knowledge for Development, WBI

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 Mc. Kinsey 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. ©Knowledge for Development, WBI

3. Example of Greater China: Transnational Investor Networks v. Networks bring together Silicon Valley and high tech industries of the world and Greater China v. New immigrant entrepreneurs build professional and social networks v. From brain drain to brain circulation v. 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. v. 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. ©Knowledge for Development, WBI

4. Pragmatic Diaspora Initiatives Paradox of Diaspora Initiatives v Individual champions (‘padrinos’) are indispensable to initiate Diaspora initiatives v. Capable organizations in home countries are critical to sustain it (e. g. Global. Scot a network of 800 influential Scots all over the world is successful thanks to Scottish Enterprises) v. A paradox: to utilize Diasporas one needs capable institutions at home v. Pragmatic initiatives: relying on individual champions to develop institutions ©Knowledge for Development, WBI

4. Pragmatic Diaspora Initiatives v. Informal Diaspora networks already exist in all our countries v. Objective, as always, is a ‘critical mass’: getting from spectacular exceptions to an institutionalized procedure of reaching to influential abroad. v. 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. v. India has done it, Armenia is doing it right now and Mexico and Argentina could set an example for the whole of Latin America. ©Knowledge for Development, WBI

4. Pragmatic Diaspora Initiatives The challenge is to nourish the following agents: v A small group of dedicated ‘overachievers’ is the key: these champions act as a springboard for tangible projects v A small secretariat of paid professional staff serves a system integrator to transform ideas into projects v Broader network of professionals abroad who participate with ideas Decision-making power and (less important) funding. ©Knowledge for Development, WBI

4. Pragmatic Diaspora initiatives : two models to explore 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 ©Knowledge for Development, WBI

4. Pragmatic Initiatives : Some ideas Mexico as an example 1. Identify 5 -8 high profile champions (‘padrinos’) – executives and hightech 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’. ©Knowledge for Development, WBI

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. ©Knowledge for Development, WBI

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 ©Knowledge for Development, WBI