Innovation can be defined as the invention or changing of some idea, product or method. However, Peter Senge asserts that it is only when invention can be replicated reliably on a meaningful scale and at a practical cost can it be considered an innovation. As such, innovation flows from invention where utility, feasibility, entrepreneurship and leadership converge. At a national level, innovation involves the entire ecosystem with drivers being culture, institutions and government policy. These drivers impact each other systemically at the industry, business and individual levels which determine national competitiveness. This article examines these drivers locally in the context of the National Development Strategy (NDS) Vision 2030, along with further suggestions for improving innovation.
Current Position and Lessons from Developing Countries
An excerpt from the NDS vision statement projects an economy “conducive to entrepreneurship and innovation”. To understand this link between innovation and entrepreneurship, the scatter plot in Figure 1 provides us with a starting point, i.e. the 2019 ranking of countries on two disparate indices: (1) World Bank Ease of Doing Business (EODB) and (2) Cornell University and INSEAD Global Innovation Index (GII). There is a significant correlation between EODB and GII; a notable relationship between income and innovation and more importantly, Trinidad and Tobago (TT) being the least innovative among high income countries. TT ranked 105/190 countries for EODB in 2019, and according to the 2019 GII report, TT’s innovation ranking (91/129) is lower than expected for its income level.
To provide more context, consider the GII rankings of China (14), India (52) and Rwanda (94) who are categorised as upper middle, lower middle and low income respectively. According to the Organisation for Economic Co-operation and Development (OECD), China’s investment in Research and Development played a key role in the take-off of its economy. Assisted by its Department of Science and Technology, the Government of India established a National Innovation Foundation in 2000 aimed at extending institutions and policies to support grassroots technological innovation. Rwanda, in 2018, implemented an Innovation Fund, through which the government aimed to support 150 companies/small medium enterprises (SMEs) at various stages of growth. Rwanda also established a National Commission of Science and Technology that incorporated members of academia and civil society. These moves signal a cultural shift, noting that Rwanda’s GDP per capita has more than doubled in the last 15 years. Perhaps TT’s underperformance in comparison can be attributed to the ‘resource curse’, a phenomenon where countries suffer sub-par welfare despite being mineral rich. This “paradox of plenty” has been observed in various countries to typically encompass its own unique social, political and economic challenges, including crowding-out of the non-booming sectors and underdevelopment of institutions.
The Link between Institutions, Policy and Innovation
The underdevelopment of institutions has a negative effect on innovation via the impact on EODB. EODB indicators are based on research on the role of institutions in economic development, burdensome regulations and market efficiency and freedom. Figure 2 illustrates TT’s ranking on the 2020 EODB index. TT ranks poorly in paying taxes, trading across borders and enforcing contracts.
Acemoglu and Robinson in their book Why Nations Fail simplify institutions into binary categories of ‘extractive’ vs ‘inclusive’. Extractive institutions bar the majority from economic and political opportunity and tend to favour a small elite minority. Whereas, inclusive institutions facilitate and encourage the majority of people to participate and benefit from the countries' resources via secure private property, an unbiased system of law and a provision of public services that provide a level playing field. The latter exposes all the potential talent, creativity and skills available to the economic ecosystem, allowing for free market optimisation. From this, one can surmise that inclusive institutions are key drivers for pluralism, innovation and competitive markets. The NDS acknowledges weak institutions and includes initiatives for strengthening state institutions that play a role in developing SMEs, as well as, strengthening the oversight, accountability and the autonomy of the independent institutions.
The ghost in the machine
Institutions are described as structures or mechanisms of social order, which govern the behaviour of a set of individuals within a given community and are purposeful systems that transcend individuals. Informal institutions embody customs and behaviours and formal institutions are those created by entities such as governments to enact policies behind public systems and services. In the case of institutions, the invisible blueprint that permeates everything is culture. Culture bridges the informal and formal institutions and encapsulates values and shared vision. Recommendations for culture transformation in the NDS include the creation of a national innovation policy as well as the integration of concepts of innovation and entrepreneurship in the education system. However, to offer further insight, consider the findings of Handoyo’s 2018 research using Hofstede’s cultural dimensions. Individualism, Longterm Orientation and Indulgence were positively associated with innovation; while Power Distance and Uncertainty Avoidance cultures were negatively associated with innovation. Figure 3 compares TT to the top 10 GII performers.
Individualistic cultures tend to focus on selfresponsibility and individual accomplishment as opposed to collectivist decisions and group identity, and are associated with competitiveness. TT falls short in comparison. Long-term oriented societies focus on future rewards, diligence and thriftiness while short-term orientation focuses on past and present concerns. TT also scores poorly in comparison. The one positive association with innovation that TT seems to have an edge in is Indulgence; which describes societies that seek to “gratify basic and human drives related to enjoyment and having fun”. This perhaps speaks to the passion which manifests in TT’s festive art forms which could be channelled toward greater innovation. High Power Distance societies accept differences in privilege and status, i.e. subservience to elite groups; while low Power Distance societies demand equality against discrimination. TT seems to have higher Power Distance than the other Western countries, perhaps a driver for extractive institutions. TT also has moderately prominent Uncertainty Avoidance, which is reflected in our low 2019 Global Competitiveness rankings out of 141 for Venture Capital Availability (119), Financing of SMEs (110) and Attitudes towards Entrepreneurial Risk (123).
Next Steps for TT
Figure 4 summarises the ecosystem for national innovation, noting that the NDS Vision 2030 plan has cited a number of initiatives within this frame to boost innovation. Layered on this, the author recommends that institutions be reformed with the objective of removing burdensome regulations and improving the EODB, including improvement of pertinent legislation and policies surrounding trade, labour and taxes. Moreover, a culture of Long-term Orientation should
