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Knowledge Economy


Promoting job creation by powering inclusive tech-driven enterprise growth

OVERVIEW

As the world economy shifts toward becoming more knowledge-based, industrialized countries have been at the forefront of investing in research and development (R&D), spurring innovation-driven enterprises, designing public policy that fosters innovation and entrepreneurship, and pushing the world’s technological frontier. The digital and data revolution has created new economic opportunities for the poor and vulnerable by paving new paths towards social inclusion. By accelerating the pace of change, technology creates opportunities for those disrupting how companies, governments, and labor markets function, offering up innovative solutions for tackling pressing societal problems.

However, in Latin America and the Caribbean, there are a number of barriers impeding countries from fully harnessing the power of knowledge-intensive industries, innovation, and entrepreneurship for economic growth. Private and public investment in R&D and innovation remains low—on average 0.78% of the region’s GDP is spent on R&D, well below the 2.4% spent by OECD countries in 2011. Financial systems are unprepared to meet the needs of tech-based and rapid-growing enterprises, venture capital is still incipient, accelerators and incubators often lack sufficient capacity, links between research and industry are limited, and the inability to find skilled workers has become one of the region’s main obstacles to growth. As a result, the region’s productivity—the main driver of long-term economic growth, is lagging behind most other regions. For example, productivity growth in the typical Latin American and Caribbean economy is 40% of that of the typical East Asian country.

Why it matters

Despite these challenges, this new order brings many opportunities for inclusive economic growth and job creation, as well as for spurring entrepreneurial activity, enhanced productivity, and knowledge spillovers across sectors. For example, in the U.S., research has shown that high-tech jobs have the largest multiplier effect on the local economy: for each direct job created by a high-tech enterprise, five additional jobs were also created. This shifting landscape also opens the door to using technology and new digital platforms to deploy innovative solutions to challenging social and environmental problems in areas such as health, education, housing, and energy. The world is already seeing the transformative power of mobile payments in bringing previously unbanked populations into the financial fold, or of innovative digital classroom technologies in enhancing educational opportunities. Ultimately, by cultivating and supporting innovation ecosystems, enterprises with growth potential, broader SME technology adoption, and a competitive workforce, there is expansive potential to boost inclusive growth and generate employment opportunities in the region.



WHAT THE MIF IS DOING

Our goal is to build the Knowledge Economy and promote job creation by powering inclusive tech-driven enterprise growth. To do so we are working in three mutually reinforcing focus areas:

  • Strengthening the ecosystem for entrepreneurship and innovation, including social entrepreneurship. The MIF works to fortify and connect key ecosystem actors in areas such as impact investing, open innovation, corporate venturing for impact, and enterprise acceleration and incubation.
  • Testing, investing in, and scaling tech-driven enterprises that solve social, economic and environmental problems with particular focus in sectors such as EduTech, HealthTech, and FinTech; and building SME capacity to adopt and deliver technology and knowledge-intensive products and services.
  • Building a competitive and entrepreneurial workforce, by developing tech skills in areas such as coding and design, by up-skilling employees to perform knowledge economy jobs, and by building entrepreneurial skills for the digital economy.
  • Learn more about our projects in the region: KOGA in Paraguay, Laboratoria in Peru, Vox Capital in Brazil and Open Innovation in Mexico.

Programs

Our regional programs go into depth to test models that support private sector development.