Call to arms for Jamaican SME's to drive growth and development agenda

1. The Urgent Imperative for SME’s
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

2. a. Macroeconomic Challenges and the SME’s 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: Jamaica’s first Global Enterprise
h. Take Home Messages
PRESENTATION OUTLINE

3. The world is betting that Jamaica
will fail !!
“Jamaica is in a high-risk programme, a last-ditch
effort to avoid a massive adjustment,
even a collapse.”
Financial Times, May 2013

4. The Urgent National Export Imperative
Radical Reversal of Persistent Unsustainable Trade & Services Deficits

5. Current Account Deficit is Staggering
Avg 5yr CA deficit : US$1.8bln

6. Output must grow by 6% minimum to
maintain economic stability
Planned Primary Surplus for 2012/2013 5.2% of GDP
New Taxes 1.3%
NHT Contributions 0.8%
Planned Primary Surplus (post-implementation) 7.3%
Interest Cost on Debt -8.2%
NDX Interest Savings 1.3%
Cost of Principal Repayment -6.5%
Net Primary Surplus -6.1%
Minimum GDP Growth Required 6.1%
Source: Caribbean Association of Actuaries

7. Economic Stability Model
In stable economies;
Debt Primary Surplus
approximates to ________
GDP 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 Primary Surplus
is not equal to __________
GDP Long Term Interest Rate
Source: Caribbean Association of Actuaries

8. Economic Stability Model
The higher the level of disequilibrium is the
higher the tendency to instability
In Jamaica’s 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

9. Innovation drives Productivity
JPC: 2001-2010 period

10. Contribution of Industrial Sectors to Overall Performance
GDP Performance 2002-2011

11. Growth Drivers and Firm Types
Henrekson, Stockholm School of Economics
Small
Replicative Firms
Efficiency Factors
Innovating
Firms
Businesses

12. SME’s are VITAL to Country’s Survival
Imagine 1000 SME’s exporting US$1million in goods and services:
That’s US$1.0billion contributing to our Current Account
Now imagine 2000 SME’s exporting US$1million in goods and
services:
SME’s combined would add US$2.0billion and so
CLOSE OUR CURRENT ACCOUNT DEFICIT
GROW OUR GDP
STABILISE OUR ECONOMY

13. The Global Knowledge Economy
•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
Umemoto 2006

14. THE NEW KNOWLEDGE ECONOMY
Global economy has been in transition since the 1980’s to what is variously termed a
New Economy, Digital Economy or a Knowledge Economy

15. Global Shift to the Knowledge Economy
(variance in GDP explained by KEI in model)

16. The Shift to Knowledge and Innovation
Transition
I to II
Jamaica
Guyana
Transition
II to III
Trinidad
Barbados
Stage II
Dom Rep
Panama
Costa Rica
Stage III
???
Stage I
Honduras
Nicaragua
RESOURCE-BASED ECONOMIES EFFICIENCY-BASED ECONOMIES INNOVATION ECONOMIES
Countries compete based on their factor
endowments: primarily unskilled labour
and natural resources.
Compete on the basis of price and sell
basic products or commodities, with
their low productivity reflected in low
wages.
Countries begin to develop more efficient
production processes and increase product
quality.
Competitiveness is increasingly driven by higher
education and training.
Wages have risen and they cannot increase
prices
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

17. Thoughts on Innovation
Pronounced uniform regional group inflexion

18. Mission: To create new Innovation
Outcomes for Firms

19. What is Innovation
Innovation....
Creation of added-value from new or Improved products, processes,
methodologies, services, business models, or markets
Schumpeter 1934

20. The Innovation-Productivity-Competitiveness-
Export Link
Competitive Global Marketspaces
Competitiveness Improvement
Innovative Capacity
Export Entry
Increased
Productivity
Begins with
knowledgeable
engaged motivated
human resources

21. NATIONAL INNOVATION BEGINS WITH INDIVIDUAL INNOVATION
Clarke 2012

22. 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

23. GROWING SUSTAINABLE COMPETITIVE ADVANTAGE
Is the resource or
capability VALUABLE ?
Is it homogeneously
distributed across
all firms ?
Ie RARE
Is resource or capability
IMPERFECTLY mobile ?
Competitive
disadvantage
Competitive
parity
Sustained
Competitive
Advantage
Temporary
Competitive
Advantage
YES
NO
YES
NO
YES
NO
Mata, Feurst, Barney (1995)
Acquired /Imported
Innovations
Indigenous
Innovations
Is the ORGANISATIONAL
model embedded
?
YES
V.R.I.O MODEL

24. Study of IWB of Employees in
US High-Tech Services Firms
Organisational
Context
Individual
Motivation
Employee
Innovative
Behaviour
in
Workplace
Intrinsic
Motivation
Integrated
Motivation
Identified
Motivation
Organisational Context β=0.327 β=0.267 β=0.195
Model explains (Rsq) 24% 21% 14%
Employee InnovativeWork Behaviour
Autonomous Motivation Explains 36.1%

25. 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

26. Jamaica’s first global enterprise ?

27. 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.

29. eCLIPSE
• Enhancing Competitiveness through
Leadership, Innovation, Productivity, Self-
Determinism and Entrepreneurship.
• Complements business planning, accounting,
budgeting training with,
• Global mindset orientation, innovation,
creative problem-solving

30. HISTORIC SME POLICY SUPPORT FRAMEWORK
• GoJ / IMF mandate for JBDC and SME’s 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)

31. 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
• SME’s 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)

32. THANK YOU !
Silburn Clarke, FRICS
silburn@spatialvision.com