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Mobile Financial Sectoral System of Innovation
Abstract
With the increase of economic growth in Latin America, the mobile finance (m-finance) sectoral system of innovation model is applied as an analytical framework in order to focus in on the technological infrastructure and regulatory structure. The SSI approach links innovation to the interactions of the different actors in the system. Innovation is either the process of creating or the recombining of knowledge for some new use to become an outcome of that process. Innovation does not sit within the boundaries of an organization nor does it sit neatly at one level, but instead it is a multifaceted construct. Therefore, this chapter presents aspects of the sectoral system of innovation (SSI) of mobile finances within the Latin America region.
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Over the last half-decade, corporate interest in Bottom of the Pyramid (BOP) - strategies for profitably serving the world's lowest income consumers-has dropped precipitously or migrated to the CSR (i.e., philanthropic) side of the business. We contend that these trends stem from a fundamental misalignment generated when BOP is framed and managed as a market-based solution to poverty alleviation rather than an internally competitive investment opportunity. Examining macro, meso, and micro dimensions of a company's core operations, we argue that if corporations are to make BOP part of their investment portfolios, there needs to be four changes to management practice which ensure business fundamentals guide decision-making. First, proponents need to drop the development infused term "Bottom of the Pyramid" and communicate in terms familiar to and used by the majority of business managers in emerging market country offices. Second, in framing the business case, managers need to leave behind exaggerated, emotionally-tinged claims in favor of concrete, bounded opportunities that address the objectives and investment parameters of a specific unit in the company. Third, at the field level, managers need to reorient their focus from co-creation and community engagement strategies to the business economic drivers of business unit profitability. Finally, to evaluate projects and investments, managers need to measure outputs that link directly to business performance and curtail the growing overemphasis on "impact assessments."
This paper explores the extent to which formal, regulated financial institutions such as banks have been able to partner with "correspondents," commercial entities whose primary objective and business is other than the provision of financial services. The paper illustrates the case of Brazil, where banks have recently developed extensive networks of such correspondents. It shows that such arrangements result in lower costs and shared risks for participating financial institutions, making these arrangements an attractive vehicle for outreach to the underserved especially for certain financial services such as payments and transactions. Correspondent banking required a supporting enabling environment to emerge, and poses some regulatory challenges and some increase in risk. The example from Brazil may be replicable elsewhere if appropriate regulatory adjustments are undertaken.
Financial inclusion can be defined as the access to formal financial services at an affordable cost for all members of an economy, favoring mainly low-income groups. It has been recognized as a critical element in policies for poverty reduction and economic growth. Some successful experiences with financial inclusion reported in developing countries are associated with the use of information and communication technology (ICT)-based branchless banking. One of these experiences is the Brazilian correspondent model, an ICT-based network responsible for delivering financial services to tens of millions of poor Brazilians, most of them having no other way to access banking services. This article presents a case study of financial inclusion in Autazes, a county in the Amazon region not served by banks until 2002, when a correspondent started its operations there. Since then, Autazes has experienced economic and social changes, due in part to government social benefits and other banking services delivered at the local level. The results of our field study in Autazes suggest that financial inclusion through the correspondents’ process positively contributes to local socio-economic development but, at the same time, presents clear negative signs such as low-income population over-indebtedness, reproduction of social exclusion practices and reinforcement of power asymmetries. We conclude that although access to financial resources is a fundamental way to promote local development to low-income population, such access should be accompanied by other inclusive mechanisms like financial education in order to be effective.
In this article, we build a conceptual framework that models the influence of social capital as a multidimensional concept on strategic resource acquisition through interorganizational networks. Interorganizational networks are considered as effective when they allow for the acquisition of strategicresources. Our conceptual framework reflects that network effectiveness is dependent on the structural and the relational dimension of social capital. The main focus is on how the relational dimension of social capital – in this article conceptualized as trust – in interorganizational networks can directly and indirectly influence the acquisition of strategic resources through those networks. Based on the network literature, social capital literature and the literature on trust, we seek to develop propositions that detail the relationships among trust, interorganizational network characteristics, strategic resource acquisition/network effectiveness and performance. Basically, we argue 1) that different types of trust will have a different impact on network effectiveness, 2) that the level of trust will influence network effectiveness, and 3) that the interaction between trust and other variables, such as structural dimension variables, are fundamental for analyzing network effectiveness.
In parts of Africa, only one in five people have access to traditional banking services. In Latin America only one in three do. Claire Alexandre, Ignacio Mas, and Daniel Radcliffe of the Bill and Melinda Gates Foundation say this need not be the case. The technology exists to make banking available at traditional retail outlets and thus spread access dramatically. For this to happen, regulations need changing. They tell us what they would do.
In this paper we assess developments in the mobile payments in light of new technologies (e.g., NFC) and solution frameworks (e.g., Android). With the recent announcements of Google and other players to enter the mobile payment markets the already dynamic arena of mobile payments is getting more complex and competitive. Everyone is jockeying to new positions by announcing novel payment solutions based e.g. on NFC systems. We argue, however, that significant and recurrent social, institutional, and business challenges remain to be solved for successful mobile payment platforms to emerge. In order to get these multi-sided platforms to diffuse multiple stakeholders have to be simultaneously convinced for related value propositions and more workable economic arrangements need to be forged.
A previous version of this article was published as a Harvard KSG working paper Economic Development under Scarcity Conditions. If using the arguments there or developed further here, please cite Srinivas, Smita, and Judith Sutz. "Developing countries and innovation: Searching for a new analytical approach." Technology in Society 30.2 (2008): 129-140.
This article argues that the technological innovation is a contextual process whose relevance should be assessed depending on the socio-economic condition it is embedded in. Without this, technology-led economic policies (of Catch-Up varieties) are unlikely to meet the needs of most people, especially in countries where innovation and poverty reside side by side. We analyse micro-level account of the cognitive and socio-economic context within which innovations arise and argue that a process of real importance is being sidelined: the ability to innovate under ‘scarcity’ conditions. In this process, idiosyncratic innovative paths are followed, which we argue have been least theorized and which may provide solutions for urgent and otherwise unsolved problems. We sketch a scarcity-induced innovation framework to analyse such paths and provide a brief account of institutional aspects of planning and policy in this approach.
Some technology analysts have suggested that developing countries (DCs) might be able to ‘leapfrog’ earlier technological paradigms and catch up in the field of electronics. This paper provides a partial test case of the leapfrogging argument, using evidence from Singapore's electronics industry. It shows that technology was accumulated through a gradual process of learning, rather than by leapfrogging. Indeed, corporate learning was incremental, painstaking, long‐term and cumulative. Also in contrast with the leapfrogging hypothesis, firms tended to enter electronics at the mature phase of the product cycle rather than the early stage. Furthermore, much of the technology accumulated by Singapore's electronics industry was ‘pre‐electronic’ in character, involving crafts, mechanical and precision engineering, electro‐mechanical interfacing and basic manufacturing skills, rather than the software, computer and R&D skills usually associated with electronics. The evidence from Singapore suggests that industrial development in electronics involves a gradual and systematic accumulation of industrial, educational and infrastructural capabilities, many of which are associated with pre‐electronic technological paradigms.
The concept sectoral system of innovation and production provides a multidimensional, integrated and dynamic view of sectors. It is proposed that a sectoral system is a set of products and the set of agents carrying out market and non-market interactions for the creation, production and sale of those products. A sectoral systems has a specific knowledge base, technologies, inputs and demand. Agents are individuals and organizations at various levels of aggregation. They interact through processes of communication, exchange, co-operation, competition and command, and these interactions are shaped by institutions. A sectoral system undergoes change and transformation through the co-evolution of its various elements.
In the last decade ‘sectoral systems of innovation’ have emerged as a new approach in innovation studies. This article makes four contributions to the approach by addressing some open issues. The first contribution is to explicitly incorporate the user side in the analysis. Hence, the unit of analysis is widened from sectoral systems of innovation to socio-technical systems. The second contribution is to suggest an analytical distinction between systems, actors involved in them, and the institutions which guide actor’s perceptions and activities. Thirdly, the article opens up the black box of institutions, making them an integral part of the analysis. Institutions should not just be used to explain inertia and stability. They can also be used to conceptualise the dynamic interplay between actors and structures. The fourth contribution is to address issues of change from one system to another. The article provides a coherent conceptual multi-level perspective, using insights from sociology, institutional theory and innovation studies. The perspective is particularly useful to analyse long-term dynamics, shifts from one socio-technical system to another and the co-evolution of technology and society.
As leading East Asian latecomer firms begin to compete on the basis of new product development and in-house research and development (R&D), they appear to confront a difficult strategic dilemma. Should they compete as R&D and brand leaders on the international stage or should they continue with their tried and tested formula of low cost catch up competitiveness? Most studies of East Asian firms focus on catch up innovation processes. By contrast, this paper focuses on the challenges facing latecomer firms in the transition phase from catch up to leadership status, in order to assess the ‘strategic dilemma’ argument and examine the nature of transition innovation. Based on in-depth interviews with leading Korean firms, the paper contends that the strategic dilemma argument is a misleading oversimplification of the main innovation challenges facing most Korean firms as they become more technologically advanced. Most of the major exporters (or chaebol) offer a portfolio of products, some of which are technologically advanced and others less advanced. Corporate innovation strategies tend to be executed in relation to the needs of specific products (or closely related product families) rather than ‘the firm’ in its entirety. In addition, many firms in many product areas have yet to reach the innovation frontier stage and even the leading chaebol continue to produce large volumes of products under sub-contracting and licensing agreements. Firm strategies tend to embody a mix of leadership, ‘followership’ and latecomer positions according to the product portfolio of the company in question. The study identifies various strategic options and difficulties facing Korean firms during the transition process and points to promising future research on latecomer transition.
This paper is concerned with the changing role of regional innovation systems and regional policies in supporting the transition of indigenous firms in developing countries from competing on low costs towards becoming knowledge providers in global value chains. Special attention is paid to policies supporting the emergence and development of the regional innovation system in this transition process. Regional innovation systems in developing countries have very recently started to be conceptualised as specialized hubs in global innovation and production networks (Asheim, B., Coenen, L., Vang-Lauridsen, J., 2007. Face-to-face, buzz and knowledge bases: socio-spatial implications for learning, innovation and innovation policy. Environment and Planning C: Government and Policy 25 (5), 655–670; Chaminade, C., Vang, J., 2006a. Innovation policy for small and medium size SMEs in Asia: an innovation systems perspective. In: Yeung, H. (Ed.), Handbook of Research on Asian Business. Edward Elgar, Cheltenham; Maggi, C., 2007. The salmon farming and processing cluster in Southern Chile. In: Pietrobello, C., Rabellotti, R. (Eds.), Upgrading and Governance in Clusters and Value Chains in Latin America. Harvard University Press). A specialized hub refers to a node in a global value chain that mainly undertakes one or a few of the activities required for the production and development of a given good or service or serves a particular segment of the global market. In global value chains, firms in developing countries have traditionally been responsible for the lowest added-value activities. However, a few emerging regional innovation systems in developing countries are beginning to challenge this scenario by rapidly upgrading in the value chain. There is, however, still only a poorly developed understanding of how the system of innovation emerges and evolves to support this transition process and what the role of regional innovation policy is in building the regional conditions that support indigenous small and medium size enterprises (SMEs) in this transition process. This paper aims at reducing this omission by analyzing the co-evolution of the strategies of indigenous SMEs and the regional innovation system of Bangalore (India).
The paper addresses disruptive changes that globalization imposes on the geography of innovation systems, and identifies potential benefits that developing countries could reap from international linkages. The analysis is centered on three propositions. First, developing countries need to blend diverse international and domestic sources of knowledge to compensate for initially weak national production and innovation systems. Second, a greater variety of international knowledge linkages is possible, as globalization reduces the spatial stickiness of innovation. Third, globalization has culminated in an important organizational innovation: the spread of global production networks (GPN) combines concentrated dispersion with systemic integration, creating new opportunities for international knowledge diffusion. We argue that GPN provide firms and industrial districts in developing countries with new opportunities for reverse knowledge outsourcing. We explore resultant challenges that define the need for public policy response, define the new agenda for industrial upgrading, and discuss what types of policies and support institutions may help to reap the benefits from network participation.
The author provides a conceptual framework for approaching the promotion of technological innovation and its diffusion in developing countries. Innovation climates in developing countries are, by nature, problematic, characterized by poor business and governance conditions, low educational levels, and mediocre infrastructure. This raises particular challenges for the promotion of innovation. The latter should be understood as the diffusion of technologies-and related practices-which are new to a given context (not in absolute terms). What matters first is to provide the necessary package of support-technical, financial, commercial, legal, and so on-with flexible, autonomous agencies adapting their support and operations to the different types of concerned enterprises. Facilitating and responding to the emergence of grass-root needs at the local level is also essential. Support to entrepreneurs and local communities should be primarily provided in matching grant forms to facilitate the mobilization of local resources and ownership. It is of primary importance to pay the greatest attention to country specificities, not only in terms of development level, size, and specialization, but also in terms of administrative and cultural traditions. At the global level, major issues need also to be considered and dealt with by appropriate incentives and regulations: the role of foreign direct investment in developing countries'technological development, conditions of technologies'patenting and licensing, the North-South research asymmetry, and brain drain trends.
By stimulating commerce and development at the bottom of the economic pyramid, multi-nationals could radically improve the lives of billions of people and help create a more stable, less dangerous world. Achieving this goal does not require MNCs to spearhead global social-development initiatives for charitable purposes. They need only act in their own self-interest. How? The authors lay out the business case for entering the world's poorest markets. Fully 65% of the world's population earns less than $2,000 per year--that's 4 billion people. But despite the vastness of this market, it remains largely untapped. The reluctance to invest is easy to understand, but it is, by and large, based on outdated assumptions of the developing world. While individual incomes may be low, the aggregate buying power of poor communities is actually quite large, representing a substantial market in many countries for what some might consider luxury goods like satellite television and phone services. Prices, and margins, are often much higher in poor neighborhoods than in their middle-class counterparts. And new technologies are already steadily reducing the effects of corruption, illiteracy, inadequate infrastructure, and other such barriers. Because these markets are in the earliest stages of economic development, revenue growth for multi-nationals entering them can be extremely rapid. MNCs can also lower costs, not only through low-cost labor but by transferring operating efficiencies and innovations developed to serve their existing operations. Certainly, succeeding in such markets requires MNCs to think creatively. The biggest change, though, has to come from executives: Unless business leaders confront their own preconceptions--particularly about the value of high-volume, low-margin businesses--companies are unlikely to master the challenges or reap the rewards of these developing markets.
E-finance is defined as "The provision of financial services and markets using electronic communication and computation". In this paper we outline research issues related to e-finance that we believe set the stage for further work in this field. Three areas are focused on. These are the use of electronic payments sys tems, the operations of financial services firms and the operation of financial markets. A number of research issues are raised. For example, is the widespread use of paper-based checks efficient? Will the financial services industry be fundamentally changed by the advent of the internet? Why have there been such large differences in changes to market microstructure across different financial markets?
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