1. Entrepreneurship, Innovation, and Competitiveness Professor Michael J. Enright Enright, Scott & Associates University of Hong Kong Hong Kong Institute for Economics and Business Strategy Astana Economic Forum, 2015 2015-05© Copyright Michael Enright, 20151 © Copyright Michael J. Enright, 2015 This presentation is incomplete without the spoken commentary. Please do not duplicate, store, or transmit in any form without the permission of the author.

2. ESA and Competitiveness Professor Michael Enright helped design and then managed the Competitive Advantage of Nations Project at Harvard Business School in the 1980s ESA undertook the first competitiveness project in a developing country based on the CAON methodology (1992-94) ESA has undertaken detailed national, regional, and local competitiveness assessments in 20 countries all around the world ESA has made major methodological enhancements over the years to focus on the practical aspects of improving competitiveness 2015-05© Copyright Michael Enright, 20152

3. The Competitiveness Imperative The global economy is a tough environment and it promises to become only tougher in the future. Many of today’s problems have arisen because individuals, companies, and nations have tried to borrow, rather than earn their prosperity. More and more countries are entering international competition in more and more industries. Globalization and the rise of the “Flat World” are making enhanced competitiveness vital for all nations. The simple fact is that individuals, companies, and nations have to improve their competitiveness if they are to achieve a prosperity that is sustainable. 2015-05© Copyright Michael Enright, 20153

4. Our Approach to Competitiveness 1.Generate a proper overall competitiveness index 2.Use data and benchmarks creatively 3.Bring business into the frame 4.Organize the pieces into a useful framework 5.Develop strategies and policies appropriately The steps can be used individually or together 2015-05© Copyright Michael Enright, 20154

5. What is Competitiveness About? “Competitiveness equals productivity. Productivity should be the central goal of economic policy.” - Michael Porter “Productivity isn’t everything, but in the long run it is almost everything.” - Paul Krugman “Competitiveness is the set of institutions, policies, and factors that determine the level of productivity of a country.” – WEF A New Competitiveness Index, The ESA Productivity Competitiveness Index (EPCI) TM –GNI / Pop(15-64) with highest value scaled to 100 –One year snapshot and 3 year rolling average –Coverage 172 countries 1990-2014 –Simple, performance only, measures productivity 2015-05© Copyright Michael Enright, 20155

6. ESA Competitiveness Index, EPCI1, 2014 CountryRankIndexCountryRankIndex Norway1 100.00Singapore13 46.71 Switzerland2 80.37Austria14 46.40 Luxembourg3 65.90Netherlands15 46.01 Qatar4 65.77Germany16 45.07 Australia5 63.30Belgium17 44.58 Macao6 62.48Iceland18 42.32 Denmark7 60.69France19 42.21 Sweden8 60.11Ireland20 41.45 Kuwait9 55.11Japan21 41.24 United States10 51.91United Kingdom22 38.30 Canada11 47.89Israel23 36.87 Finland12 47.09New Zealand24 36.03 2015-05© Copyright Michael Enright, 20156 Source: Enright, Scott & Associates

7. ESA Competitiveness Index, EPCI1, 2014 CountryRankIndexCountryRankIndex Estonia36 17.29Montenegro70 6.82 Czech Republic38 16.46Belarus73 6.58 Slovak Republic41 15.35Azerbaijan74 6.54 Latvia42 14.73Macedonia96 4.27 Lithuania46 13.86Ukraine104 3.61 Russia47 12.63Armenia110 3.38 Croatia48 12.62Georgia111 3.34 Poland52 11.66Moldova122 2.20 Kazakhstan54 11.05Uzbekistan128 1.85 Romania63 8.44Kyrgyz Republic142 1.18 Turkmenistan69 6.99Tajikistan145 1.08 2015-05© Copyright Michael Enright, 20157 Source: Enright, Scott & Associates

8. ESA EPCI1, Kazakhstan Rank 2015-05© Copyright Michael Enright, 20158 Source: Enright, Scott & Associates

9. Comparison EPCI1 and WEF Values, 2014 The WEF index does not come close to matching actual productivity measures 2015-05© Copyright Michael Enright, 20159 WEF = EPCI1 line Source: Enright, Scott & Associates

10. Comparison EPCI1 and WEF Ranks, 2014 The WEF ranks differ from the productivity- based ranks by an average of 17 positions out of 135 2015-05© Copyright Michael Enright, 201510 Source: Enright, Scott & Associates WEF Rank “Too Low” WEF Rank “Too High”

11. Using Data and Benchmarks Creatively Competitiveness reports are extremely useful as sources of data –WEF, IMD, CASS, IFC, WB KEI, HF, FI, UBS, Mercer, GEM, etc. But one must use the right comparisons and benchmarks –Versus the “world’s best” is relevant for only a few countries –Need to use the right benchmarks and sequencing ESA benchmarks –Past performance /Comparators / Competitors / Customers –What countries can we learn the most from? ESA takes the benchmarks and compares across a huge range of variables to find the gaps, opportunities, advantages, disadvantages ESA then prepares a detailed, country-specific, step-by-step roadmap to achieve improvement 2015-05© Copyright Michael Enright, 201511

12. Use Data and Benchmarks Creatively A Sequenced Approach to Development 2015-05© Copyright Michael Enright, 201512 Change to match P2 Change to match P3 Change to match P4 Change to match P5 Source: Enright, Scott & Associates

13. 2015-05© Copyright Michael Enright, 2015 Bring Business and Industry Into the Frame Importance-Performance Competitiveness Analysis TM 2 Good performance, but not so beneficial 1 Leverage, market, exploit, further develop 3 Poor performance, but does not matter much 4 Fix, mitigate, overcome Importance Performance Low High 13 “Importance-Performance Competitiveness Analysis” and “IPCA” are both trademarks of Enright, Scott & Associates, Ltd. Source: Enright, Scott & Associates

14. IPCA TM Australia Architectural Services 2015-05© Copyright Michael Enright, 2015 Importance Performance 14

15. Organize the Pieces into a Useful Framework 2015-05© Copyright Michael Enright, 201515 Competitive Industries/ Activities Potential Industries/ Activities Supranational ClusterFirmNational Industry Source: Michael Enright Competitiveness is not additive. No single level can make a nation, region, or city competitive, any single level can make it uncompetitive. This is what the standard approaches miss.

16. So how do we improve productivity? Get more people employed in carrying out existing activities Carry out existing economic activities more efficiently (learning, better methods, better equipment, better organization, etc.) Add more value in existing goods and services (higher quality, more knowledge embedded, better branding, better logistics, etc.) Develop new goods and services that meet customer needs Etc. For many countries improving productivity means leveraging the knowledge-innovation-creative economy 2015-05© Copyright Michael Enright, 201516

17. The Knowledge-Innovation-Creative Economy Generates value through developing and leveraging knowledge, IP, and intangible assets The K-I-C economy includes –Science and technology-based business –Innovative service sectors / Creative and cultural industries –Use of advanced technology in “low-tech” and “mid-tech” industries –Brand development –Improved processes –New business models / marketing, distribution, management systems Any industry can be knowledge-intensive, innovative, creative Those that leverage the K-I-C economy benefit from the “Flat World,” those that don’t face difficult price competition 172015-05© Copyright Michael Enright, 2015

18. Entrepreneurship and the K-I-C Economy Entrepreneurs (and intrapreneurs) do the work of the K-I-C economy They combine new products, or new services, or new ways of doing things with productive resources and market demand Entrepreneurship involves the epitome of the K-I-C economy Entrepreneurial activities are the most knowledge-intensive, innovative, and creative activities carried out by the firm This is why the factors that influence entrepreneurship are so crucial to developing a K-I-C economy, enhancing productivity, and improving competitiveness 2015-05© Copyright Michael Enright, 201518

19. The GEM Report An extremely valuable perspective on competitiveness Related to the original Competitive Advantage of Nations Study at Harvard Business School (1990) –Focus on attitudes towards entrepreneurship and innovation –Use of factor-driven, efficiency-driven, innovation-driven, (wealth- driven) stages of development Related to IFC Ease of Doing Business, WB Knowledge Economy –Basic requirements /Efficiency enhancers –Knowledge and innovation economy Adds variables specifically related to entrepreneurship obtained through extensive surveys –Early-state entrepreneurial activity –Entrepreneurial employee activity –Social entrepreneurial activity 2015-05© Copyright Michael Enright, 201519

20. Question: Do GEM indices match productivity measures? A composite GEM Framework Conditions Index does not match productivity measures 2015-05© Copyright Michael Enright, 201520 GEM = EPCI1 line Source: Enright, Scott & Associates

21. A composite GEM Framework Conditions Index based rank differs from a productivity based rank by an average of 16 positions out of 69 2015-05© Copyright Michael Enright, 201521 Source: Enright, Scott & Associates Question: Do GEM indices match productivity measures?

22. Question: Is the “stages of development” model useful to separate countries? 2015-05© Copyright Michael Enright, 201522

23. Question: Is the “stages of development” model useful to separate countries? 2015-05© Copyright Michael Enright, 201523

24. Question: Is the “stages of development” model useful to separate countries? 2015-05© Copyright Michael Enright, 201524

25. Question: Is the “stages of development” model useful to separate countries? 2015-05© Copyright Michael Enright, 201525

26. Question: Is all entrepreneurial activity a good thing? 2015-05© Copyright Michael Enright, 201526 GEM = EPCI1 line Source: Enright, Scott & Associates

27. Conclusions Competitiveness is crucial to national economic development Competitiveness means being more productive, so competitiveness should be measured by productivity The knowledge-innovation-creative economy is all about improving productivity Entrepreneurs (and intrapreneurs) do the work of the knowledge- innovation-creative economy The GEM report provides a unique and valuable source on a critical contributor to competitiveness There are opportunities to re-organize GEM data for better effect We like our own overall approach to competitiveness 272015-05© Copyright Michael Enright, 2015

28. For more information contact © Copyright Michael J. Enright, 2015 This presentation is incomplete without the spoken commentary. Please do not duplicate, store, or transmit in any form without the permission of the author. Michael Enright Enright, Scott & Associates Phone: 852-3101-8650 Fax: 852-3101-9635 michaelenright@enrightscott.com 2015-05© Copyright Michael Enright, 201528