The Urgent Imperative for SMEs

to contribute to

The National Growth and Development Agenda

By
Growing the GDP
&
Improving the Current Account Deficit
Silburn Clarke, FRICS
Chairman, Jamaica Business Development Corporation

PRESENTATION OUTLINE

a. Macroeconomic Challenges and the SMEs Role in Export and Economic Stability
b. Nature of Global Knowledge Economy

c. The Innovation Productivity Competitiveness Connexions

e. A Sustainable Competitive Advantage Model
f.

Findings on Motivation from US High-Tech firms

f.

Case Study: Born Globals / International New Ventures

g. Case study: Jamaicas first Global Enterprise

h. Take Home Messages

The world is betting that Jamaica

will fail !!
Jamaica is in a high-risk programme, a lastditch effort to avoid a massive adjustment,
even a collapse.
Financial Times, May 2013

The Urgent National Export Imperative

Radical Reversal of Persistent Unsustainable Trade & Services Deficits

Current Account Deficit is Staggering

Avg 5yr CA deficit : US$1.8bln

Output must grow by 6% minimum to

maintain economic stability
Planned Primary Surplus for 2012/2013
New Taxes
NHT Contributions

5.2% of GDP
1.3%
0.8%

Planned Primary Surplus (post-implementation)

Interest Cost on Debt
NDX Interest Savings
Cost of Principal Repayment

7.3%
-8.2%
1.3%
-6.5%

Net Primary Surplus

-6.1%

Minimum GDP Growth Required

6.1%
Source: Caribbean Association of Actuaries

Economic Stability Model

In stable economies;
Debt
approximates to
GDP

Primary Surplus
________
Long Term Interest Rate

The higher the tendency to a level of equality is the more stable the economy is.

but in unstable economies ;

Debt
is not equal to
GDP

Primary Surplus
__________
Long Term Interest Rate

Source: Caribbean Association of Actuaries

Economic Stability Model

The higher the level of disequilibrium is the
higher the tendency to instability
In Jamaicas case: Our Debt to GDP ratio is
severely out of alignment with our ratio of
Primary Surplus to LT Interest Rates

The numbers:

140%

to 67%
Source: Caribbean Association of Actuaries

Innovation drives Productivity

JPC: 2001-2010 period

Contribution of Industrial Sectors to Overall Performance

GDP Performance 2002-2011

Growth Drivers and Firm Types

Small

Replicative Firms

Innovating
Firms

Efficiency Factors

Businesses
Henrekson, Stockholm School of Economics

SMEs are VITAL to Countrys Survival

Imagine 1000 SMEs exporting US$1million in goods and services:
Thats US$1.0billion contributing to our Current Account
Now imagine 2000 SMEs exporting US$1million in goods and
services:

SMEs combined would add US$2.0billion and so

CLOSE OUR CURRENT ACCOUNT DEFICIT

GROW OUR GDP

STABILISE OUR ECONOMY

The Global Knowledge Economy

Umemoto 2006

The models of the last 2 eras (agricultural and industrial ) rested on Land,
Labour (low-cost) and Capital (LLC) as key factors of economic production
In the current period Knowledge is the main resource

THE NEW KNOWLEDGE ECONOMY

Global economy has been in transition since the 1980s to what is variously termed a
New Economy, Digital Economy or a Knowledge Economy

Global Shift to the Knowledge Economy

(variance in GDP explained by KEI in model)

The Shift to Knowledge and Innovation

Stage I

Transition
I to II

Stage II

Transition
II to III

Stage III

Honduras
Nicaragua

Jamaica
Guyana

Dom Rep
Panama
Costa Rica

Trinidad
Barbados

???

RESOURCE-BASED ECONOMIES

EFFICIENCY-BASED ECONOMIES

Countries compete based on their factor

endowments: primarily unskilled labour
and natural resources.

Countries begin to develop more efficient

production processes and increase product
quality.

Compete on the basis of price and sell

basic products or commodities, with
their low productivity reflected in low
wages.

Competitiveness is increasingly driven by higher

education and training.
Wages have risen and they cannot increase
prices

INNOVATION ECONOMIES

Companies must compete by producing new

and different goods using the most
sophisticated production processes and
through innovation.
Wages will have risen by so much that they
are only able to sustain those higher wages
and the associated standard of living by
higher value production

Thoughts on Innovation
Pronounced uniform regional group inflexion

Mission: To create new Innovation

Outcomes for Firms

What is Innovation

Innovation....

Creation of added-value from new or Improved products, processes,

methodologies, services, business models, or markets
Schumpeter 1934

The Innovation-Productivity-CompetitivenessExport Link

Competitive Global Marketspaces
Export Entry

Competitiveness Improvement
Increased
Productivity

Innovative Capacity
Begins with
knowledgeable
engaged motivated
human resources

NATIONAL INNOVATION BEGINS WITH INDIVIDUAL INNOVATION

Clarke 2012

Going Global
Typically the most productive local firms are the
earliest to go global:
a. The firm has the confidence that they can play on
the global stage
a. Having maxed out markets domestically, they
need the global marketspace in order to
maintain their growth trajectory

V.R.I.O MODEL
GROWING SUSTAINABLE COMPETITIVE ADVANTAGE
NO

Is the resource or
capability VALUABLE ?

YES

YES

Is it homogeneously
distributed across
all firms ?
Ie RARE

NO
Is resource or capability
IMPERFECTLY mobile ?

Acquired /Imported
Innovations

YES
NO

Indigenous
Innovations
YES

Is the ORGANISATIONAL
model embedded
?

Competitive
disadvantage

Competitive
parity

Temporary
Competitive
Advantage

Sustained
Competitive
Advantage

Mata, Feurst, Barney (1995)

Study of IWB of Employees in

US High-Tech Services Firms

Organisational
Context

Organisational Context

Model explains (Rsq)

Employee
Innovative
Behaviour
in
Workplace

Individual
Motivation

Intrinsic
Motivation

Integrated
Motivation

Identified
Motivation

=0.327

=0.267

=0.195

24%

21%

14%

Employee Innovative Work Behaviour

Autonomous Motivation

Explains 36.1%

Case Study #1
Born Globals / International New Ventures (INV)

T. O. K.
Four 17 year olds straight out of school
(Campion) decided on recording career
Travelling, performing and harvesting
revenues globally within 3 years of start-up
Classic INV firm
SCA based on their unique content and
singing style (VRIO)
Recently completed a multi-year deal for
The Voice / Guiding Light to be on Japan
Air Line (JAL) playlist for inter-continental
and domestic flights

Jamaicas first global enterprise ?

Case Study
The first Jamaican Global Enterprise

The UNIA
At its peak in the 1920 the UNIA had over
Divisions : 1,900
Countries : 40 globally
including : United States, Cuba, Panama, Costa
Rica, Ecuador, Venezuela, Ghana, Sierra Leone,
Liberia, India, Australia, Nigeria, Namibia, Canada,
Nigeria and South Africa.

If you have not confidence in self, you are twice defeated in the race of life.
With confidence, you have won even before you have started.

eCLIPSE
Enhancing Competitiveness through
Leadership, Innovation, Productivity, SelfDeterminism and Entrepreneurship.

Complements business planning, accounting,

budgeting training with,
Global mindset orientation, innovation,
creative problem-solving

HISTORIC SME POLICY SUPPORT FRAMEWORK

GoJ / IMF mandate for JBDC and SMEs and as part of the Growth
Agenda

MSME and Entrepreneurship Policy tabled in May and passed this

week in Parliament

Legislative Agenda: Secured Interests Personal Property , Insolvency ,

Copyright, Trademark, Companies Act, Superform

$63million of Capital Support from MIIC in 2013/2014 for Creative

Industries and Business Incubation and Acceleration

$2billion in loan support to micro-enterprise sector ($700million)

and SME sector ($1.3billion)

MESSAGES TO TAKE HOME

Need to structure economic payoffs to favour innovators and the

innovating firms in order to drive sustainability, resilience, flexibility,
competitiveness, export growth and prosperity

SMEs are vital to increasing exports and stabilising the economy

Jamaica cannot assert any globally distinctive VRIO resources or

capabilities from factors derived from and structurally bounded to
the old agro-industrial era

Your mental models, global mindset, confidence, persistence,

motivation are critical factors for taking your firm global

With confidence you are a winner before you get started (Garvey)

THANK YOU !

Silburn Clarke, FRICS

silburn@spatialvision.com