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Networks for ProsperityAchieving Development Goals through Knowledge Sharing

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Networks for Prosperity

Achieving Development Goals through Knowledge Sharing

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2 Networks for Prosperity 3Networks for Prosperity

Networks for Prosperity: Achieving Development Goals through Knowledge Sharingis published by the United Nations Industrial Development Organization (UNIDO)Vienna International Centre,P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0,Fax: (+43-1) 26926-69E-mail: [email protected]

Copyright © 2011 by the United Nations Industrial Development OrganizationNo part of this publication can be used or reproduced without prior permission from UNIDO.

ISBN 978-3-200-02426-7

The designations employed and the presentation of the material in this publication do not imply the expressionof any opinion whatsoever on the part of the Secretariat of the United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, orconcerning the delimitation of its frontiers or boundaries, or its economic system or degree of development.Designations such as “developed”, “industrialized” and “developing” are intended for statistical convenienceand do not necessarily express a judgment about the stage reached by a particular country or area in thedevelopment process. Mention of firm names or commercial products does not constitute an endorsement byUNIDO. The opinions, statistical data and estimates contained in signed articles are the responsibility of theauthor(s), including those who are UNIDO members of staff, and should not be considered as reflecting theviews or bearing the endorsement of UNIDO. Although great care has been taken to maintain the accuracy ofinformation herein, UNIDO does not assume any responsibility for consequences, which may arise from theuse of the material. This document has been produced without formal United Nations editing.

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About the Authors

sciences from the University of Leuven. His researchinterests include non-state market governance andregulation, regulatory cooperation, globalgovernance, political economy and comparative casemethods. His international peer-reviewed papers haveappeared inter alia in Regulation and Governance,International Journal of Multiple ResearchApproaches, Methodological Innovations, Journal ofSocio-Economics, Journal of Business Research,Environmental Impact Assessment Review,Innovation, European Journal of Social Sciences andEuropean Environmental Law Review. In addition hehas published more than 10 commissioned policyreports on a wide range of topics for inter aliaEuropean Commission, European Parliament, BelgianGovernment, Flemish Government and privateorganizations. He can be reached [email protected].

CORMAC O’REILLY is strategic planning officer at UNIDO, responsiblefor framing the strategic approaches, policies andpriorities of the Organization, as well as thepositioning of UNIDO in the multilateral context,including within the United Nations system. Hepreviously practised as a barrister-at-law and servedas a diplomatic officer with the Department ofForeign Affairs of Ireland. A member of the Inn ofCourt of Northern Ireland, he read Common andCivil Law at the Queen’s University of Belfast and theUniversité de Bourgogne, Dijon. He holds a Masterof Laws from Trinity College, Dublin, where hisresearch focus was on duties in common law andequity for the provision of public goods by privateorganizations. He can be reached [email protected].

JADIR SOARES is a member of the Leuven Centre for GlobalGovernance Studies at the University of Leuven. Heworks on statistical analysis and development ofindicators on country level data, and manages a largeinterdisciplinary database on political, legal andeconomic development. He holds a Master ofAccounting degree from Fucape Business School(Brazil) and is currently following a Master inStatistics at the University of Leuven. He can bereached at [email protected].

KAZUKI KITAOKA manages the programme for the establishment of aknowledge management system in private sectordevelopment policy at UNIDO. He joined theOrganization in 2003 for the implementation ofprivate sector development and corporate socialresponsibility programmes in various countries,including China, Indonesia, Nigeria and the UnitedRepublic of Tanzania. In his subsequent roles asstrategic planning officer and programme manager,he worked on organizational policies related tosustainability, growth, poverty reduction and genderequality. He has also coauthored variouspublications, including the UNIDO entry to the MaxPlanck Encyclopedia of Public International Law. Hestudied economics and international relations inBasel, Geneva and Bath, holding a Master of Sciencedegree from the University of Bath. He can bereached at [email protected].

ALEX MACGILLIVRAY is a policy expert in sustainable economicdevelopment and institutional capacity building. Hehas worked with senior policy makers¸ businessleaders, NGOs and international agencies onnational, sectoral and institutional strategy in variouscountries. He was previously a Managing Director ofthe non-profit research and advocacy groupAccountability, where he led the ResponsibleCompetitiveness Unit (2003-2010). He is nowDirector of the Climate Business network. He is theauthor or co-author of many studies, including ABrief History of Globalization (Constable Robinson,2006) and Responsible Trade and Market Access(UNIDO, 2006). He holds a Master of Arts degreefrom Oxford and a Master of Science from ImperialCollege, where he is a regular lecturer. He can bereached at [email protected].

AXEL MARX is Research Manager of the Leuven Centre for GlobalGovernance Studies at the University of Leuven(Belgium). The Leuven Centre for Global GovernanceStudies, founded in 2007, is an interdisciplinaryresearch centre of the group of humanities and socialsciences of the University of Leuven. In 2010, theCentre was recognized as a University of LeuvenCentre of Excellence. Axel Marx studied sociologyand political science at the Universities of Leuven,Hull and Cambridge and holds a PhD in social


5Networks for ProsperityAcknowledgements

4 Networks for ProsperityAcknowledgements

Acknowledgements

BOLIVIA (PLURINATIONAL STATE OF)

Calle Rojas, Oscar Alberto Presidente de la Cámara Nacional de ComercioCuentas, Delfín MDG-F JP CoordinatorFernández, Marco Antonio Universidad Católica Boliviana, MaestríasGuanca, Néstor VmyGE, Ministerio de Desarrollo Productivo y Economía PluralJáuregui de Villegas, Beatriz Presidente en Ejercicio de la Cámara Nacional de ComercioMariscal Ayaviri, Mildred A. Directora General Ejecutiva. Unidad de Productividad y

CompetitividadMorales, Camilo Asesor de la Ministra del Ministerio de Desarrollo Productivo y

Economía Plural (MDPyEP)Requena, Juan Carlos Presidente Consejo Empresarial para el Desarrollo Sostenible

(CEDES)Rocabado, Rocío Instituto Nacional de Estadística (INE)Sevilla, César UNIDO Head of OperationsYucra Rojas, Miguel Director UMSA-Instituto de Investigacion Industrial

COSTA RICA

Conejo, Lucy Banco Popular y de Desarrollo ComunalLanger, Michael Friedrich Ebert StiftungMadrazo Hegewisch, Helena Embajadora de España en Costa Rica

The first drafts of this report were discussed duringinformal dialogues in Vienna and Brussels withMember State delegations from Bolivia (PlurinationalState of), Costa Rica, Cuba, Dominican Republic,Egypt, El Salvador, Ethiopia, Panama, Peru, Spain,Serbia, Turkey and Viet Nam, European Unionofficials as well as UNIDO experts. Comments wereused to revise the manuscript, adding specific topicspertinent to knowledge networking and private sectordevelopment. The authors would like to thank theparticipants of the informal dialogues for theirfeedback on the report.

This project would not have been realizable withoutthe generous financial support from the SpanishGovernment through the MDG Achievement Fund(MDG-F). Special thanks are also extended to theentire team at the MDG-F Secretariat for theirthoughtful guidance, kind encouragement and activesupport, in particular to Paula Pelaez and NuritBodemann-Ostow.

The authors would also like to convey their gratitudeto the Government of Panama for hosting the firstglobal meeting of Joint Programme Coordinators inMarch 2011 in Panama City. This meeting and thevarious follow-up activities would not have beenpossible without the invaluable support from LuisMartínez Cruz, Chargé d’Affaires of Panama toUNIDO, to whom the authors would like to extendtheir special thanks.

Each chapter is illustrated by specific country casestudies, primarily inspired by institutions in thetwelve countries currently implementing programmesunder the MDG-F, namely Bolivia (Plurinational Stateof), Costa Rica, Cuba, Dominican Republic, Egypt,El Salvador, Ethiopia, Panama, Peru, Serbia, Turkeyand Viet Nam. The authors would like to thank thefollowing persons for their kind hospitality duringour visits, their openness in the various interviews,their ideas and inspirations, also through personalstories, as well as literature contributions to thevarious case studies:

Mojarro Vega, Irene PROCOMERMongeFernández, Guido A. Cámara de Industrias de Costa RicaMonge, Rosa Directora Gral. para la Pequeña y Mediana Empresa, Ministerio de

Economía, Industria y Comercio Mora, Jorge Director Facultad Latinoamericana de Ciencias Sociales (FLACSO)Ocampo, Fernando Viceministro de Comercio ExteriorRivas Ríos, Beatriz Asociación para la Promoción de Nuevas Alternativas de DesarrolloSeas, Flor MDG-F JP Coordinator

CUBA

Marsán Aguilera, Juan Carlos Embajada de Cuba en VienaGoicoechea Estenoz, Norma Miguelina Embajada de Cuba en VienaFernandez Rondón, Manuel Counsellor, Embajada de Cuba en VienaCabeiro Quintana, Salvador Economic Counsellor, Embajada de Cuba en VienaAlvarez Rosell, Silvia UNIDO Focal Point in Cuba

DOMINICAN REPUBLIC

Burgos, Issaachart Presidente de la Confederación Dominicana de Pequeñas yMedianas Empresas

Cano, Carlo Coord. de la Cooperación Cancillería de la Embajada de España enRD

Despradel, Roberto Asesor de Comercio Exterior AIRD (Dominican Republic IndustrialAssociation)

Fernández, Antonio Ministro Consejero, Cancillería de la Embajada de España en RDHanke, Stefanie Representante, Friedrich Ebert StiftungMalamud, William M. Vicepresidente Ejecutivo de la Cámara Americana de Comercio de

la República DominicanaNaud, Katrina Ministerio de Industria y Comercio Puig, Fernando Director Ejecutivo de la Federación Dominicana de Cámaras de

ComercioRodríguez, Manuel Coord. Técnico. Ministerio de Industria y Comercio Rodríguez Álvarez, Carlos Director de Proyectos AIRD (Dominican Republic Industrial

Association)Rodríguez Minier, Hernán Encargado de Monitoreo y Evaluación, Programa Conjunto para el

Fortalecimiento de la Cadena de Valor del Banano, mediante elCrecimiento de Mercados Inclusivos

Van der Horst Álvarez, Daniel Director Ejecutivo del Consejo Nacional de la CompetitividadVázquez, Mónica Consejera Económica y Comercial de la Cancillería de la Embajada

de España en RD

EGYPT

Abdel-Latif, Abla Adviser, Industrial AffairsAfya, Mamdouh Almanar ConsultingAmany, Yousef Social Fund for DevelopmentCeglie, Giovanna UNIDO RepresentativeEl Baz, Tarek ConsultantEl Hakim, Nadine World Food ProgrammeEl Mehy, Tamer UNIDO consultantKhallaf, Cherine Mamdouh Senior economic expertLofti, Ingi USAID




Morin, Steve USAIDReil, Florian GIZSamy, Ahmed Industrial Council for Technology & Innovation

EL SALVADOR

Arriaza, Jorge Asociación Salvadoreña IndustrialCabrales, Antonio Presidente de la Fundación Salvadoreña para el Desarrollo

Económico y Social Figueroa, Ingrid Directora Ejecutiva, Centro para la Promoción de la Micro y

Pequeña Empresa en Centroamérica (CENPROMYPE) Gallardo, Sergio Dirección General de Cooperación para el Desarrollo, Ministerio de

Relaciones ExterioresGoitia, Alfonso Secretario técnico de la PresidenciaGómez-Llera y García Nava, José Javier Ambassador, Embajada de EspañaLlinares, Remy Delegación de la Unión EuropeaRamos, Carlos Director Facultad Latinoamericana de Ciencias Sociales (FLACSO)

Delegación de la Unión EuropeaSiman, Roberto F. GRUPO AGRISAL

Delegación de la Unión Europea

ETHIOPIA

Abdella, Amin Ethiopian Economic AssociationAlemu, Tekie Dept. Of Economics, Addis Ababa UniversityAsfaw, Ato Teferi PSD Hub, AACCSABeyene, Teshome Addis Ababa Chamber of Commerce & Sectoral Associations

(AACCSA)Bucyana, Kawira UNIDO OfficerChemena, Dandena Director for Agro-industry, Ministry of IndustryCho, Sam-Gwong UNECAGetahun, Tigabu Degu Ethiopian Development Research InstituteGirmay, Abebe Director, Ethiopian Competitiveness FacilityIbrahim, Gamal UNECALiqu, Hailemikael PSD HubMaguire, Sile Ambassador, Embassy of IrelandMegratu, Asegid Adana UNIDORojo Losada, Alejandra Spanish Technical CooperationSmout, Theresa Senior Advisor, Office of the UN Resident CoordinatorWagner, Christophe European Union DelegationWhelan, Jennifer Deputy Head of Mission, Embassy of IrelandMuluneh Woldekidan MDG-F JP Coordinator

PANAMA

Aguilar, Miroslava Viceministra de Comercio ExteriorArdito Barletta, Nicolás Centro Nacional de la CompetitividadCalderón, Alexis Programa Conjunto de las Naciones Unidas en PanamáCandanedo, Amael Oficial de Programas de Naciones UnidasFernández, Manuel Presidente de la Asociación Panameña de ExportadoresFernández de la Mata, José Manuel Consejero de Economía y Comercio, Embajada de EspañaGirau Espinoza, Eusebio Encargado de la Oficina de la Unión Europea en Panamá

Humbert, Fernando A. Presidente de la Cámara de Comercio, Industrias y AgriculturaHutchinson, René Srio. General. Autoridad de la Micro, Pequeña y Mediana EmpresaLópez, Bernardo Ministro Consejero de la Embajada de España en PanamáRivas Ríos, Francisco Asociación para la Promoción de Nuevas Alternativas de Desarrollo

PERU

Alemán Urteaga, Luis Ministro Consejero, Ministro de Relaciones ExterioresBurns Vidaurrázaga, Madeleine Directora Nacional de Artesanía, Ministerio de Comercio Exterior y

TurismoContreras, Adalid Secretario General de la Comunidad AndinaDurand, Eduardo Director General del Cambio Climático. Ministerio del AmbienteDurand Chaud, Carlos Presidente de la Cámara de Comercio de LimaFuentes Candau, Rafael Consejero Económico y Comercial. Embajada de España en PerúKuramoto, Juana Investigadora Grupo de Análisis para el Desarrollo (GRADE)Marquina, Percy Director de Programas, CENTRUM Pontifical Universidad Católica

de PerúMujica, María Eugenia Coord. Interagencial de los Programas Conjuntos de NUNoda, Carlos Ramón Director Ejecutivo. PERU COMPITE. Consejo Nacional de la

Competitividad Rodríguez, Hugo Viceministro de MyPE e IndustriaSandoval, Gina Perú 21Schialer Salcedo, Elmer Ministro Consejero. Director de Negociaciones Económicas

Internacionales, Ministerio de Relaciones ExterioresTrebucq, Didier Representante Adjunto del PNUDVan Steen, Marianne Encargada de Negocios, Delegación de la Unión Europea en PerúZavala, Juan Carlos Dirección General, Viceministerio de Industrias y MyPE

SERBIA

Arandarenko, Mihail Foundation for the Advancement of Economics (FREN)Beljan, Srdjan National Agency for Regional DevelopmentBogunovic, Aleksandar Senior Advisor, Ministry of Agriculture, Trade, Forestry and Water

ManagementBojic, Katarina Foundation for the Advancement of Economics (FREN)Crnobrnja, Mihailo Dean, Faculty for Economy, Finance and Administration (FEFA)Dzagic, Vidosava Vice President, Serbian Chamber of CommerceGomez Gomez, José Antonio First Counsellor, EU DelegationInfante, William UN Resident CoordinatorInumaru, Mateja Milenkovic FDI Advisor, Serbian Investment and Export Promotion AgencyLazic, Lazar Director, Department of Geography and Tourism, University of

Novi SadMiletic, Milivoje Director, Serbian Chamber of CommercePetkovic, Goran State Secretary, Ministry of Economy and Regional DevelopmentPiskovic, Lilijana Senior Advisor, Serbian Chamber of CommercePlamenac, Gordana Director, National Tourism OrganizationPrica,Sladjana H.E. Ambassador Assistant Deputy Minister, Ministry of Foreign

Affairs (Directorate for Multilateral Cooperation)Puskarica, Karlo MDG-F JP CoordinatorRadosavljevic, Goran State Secretary, Ministry of FinanceRadovanov, Tatjana Assistant Director for Export Promotion, Serbian Investment and

Export Promotion Agency




Regodic, Stojan Economic Development Adviser, National Competitiveness Councilof Serbia

Savic, Branislav EU DelegationSuvakov, Dejan M. EU DelegationTadic,Boris Minister-Counsellor Ministry of Foreign Affairs (Directorate for

Multilateral Cooperation)Zegarac, Ana National Agency for Regional Development

TURKEY

Bakir, Zuhtu Deputy Director General, Ministry of Trade and IndustryCele, Melda Türk Sanayicileri ve İşadamları Derneği (TUSIAD)Cevik, Murat UNIDODelikanli, Duygu Türkiye Odalar ve Borsalar Birliği (TOBB)Ersan, Alper Osman Istanbul Chamber of CommerceIsin, N. Pinar Small and Medium Enterprises Development Organization(KOSGEB)Kocaturk, Osman Necip Deputy Director General, Ministry of Trade and IndustryOk, Selcuk Tayfun Istanbul Chamber of CommerceTarim, Sule Türkiye Odalar ve Borsalar Birliği (TOBB)Taskin, Damla UNIDOToksoy, Ali Can Ministry of Trade and IndustryToksoy, Berna Türk Sanayicileri ve İşadamları Derneği (TUSIAD)Toksoz, Fikret Turkish Economic and Social Studies Foundation (TESEV)Yalcin, Deniz Türkiye Odalar ve Borsalar Birliği (TOBB)Yardimci, Aylin Turkish Economic and Social Studies Foundation (TESEV)Yavan, Zater Ali Secretary general, Türk Sanayicileri ve İşadamları Derneği (TUSIAD)Yokus, Ummuhan Ministry of Trade and Industry

VIET NAM

Anh, Nguyen Thi Tue Director, Department for Business Environment andCompetitiveness, Central Institute for Economic Management(CIEM)

Anh, Hoang Mai Van National Programme Coordinator, UNIDOBergstermann, Joerg Resident Representative, Friedrich Ebert StiftungChevalier, Alain Senior Trade Promotion Adviser, Office for Asia and the Pacific,

International Trade Centre (UNCTAD/WTO)Dong, Hoang Sy Director, Department for Productive Sectors, Development Strategy

InstituteFarnhammer, Johann First Secretary, Economic Co-operation, European Union

DelegationGalbe Lopez, Jordi Spanish EmbassyGilabert, Patrick UNIDO RepresentativeHoang, Nguyen My National Programme Officer on Environment and Energy, UNIDOKhuong, Le Van Deputy Director, SME Development Division, Agency for Enterprise

Development (AED), Ministry of Planning and InvestmentLang, Do Kim Deputy Director General, VIETRADEMonden, Alexander Officer, Friedrich Ebert StiftungMy, Nguyen Cong Director, Department of Information and International Relation,

Development Strategy InstituteNguyet, Nguyen ThiNhu Resident Coordinator’s Office

Oosterom, Koen MDG-F Programme Management UnitPhong, Hoang Ngoc Vice President, Development Strategy InstitutePhuc, Le Huu Deputy Director, International Cooperation Department, Ministry

of Industry and Trade (MoIT)Reybet-Degat, François Head of the Resident Coordinator’s OfficeSon, Pham Thai Officer, International Cooperation Division, Agency for Enterprise

Development (AED), Ministry of Planning and InvestmentTam, Tran Thi Thanh Manager, Small and Medium Enterprise Promotion Centre, Vietnam

Chamber of Commerce and Industry (VCCI)Thas, Chu Minh Researcher, Institute for Foreign Policy and Strategic StudiesThu, To Minh Researcher, Institute for Foreign Policy and Strategic StudiesTien, Pham Hoang Deputy Director, Small and Medium Enterprise Promotion Centre,

Vietnam Chamber of Commerce and Industry (VCCI)Trinh, Nguyen Le Officer, International Cooperation Department, Ministry of

Industry and Trade (MoIT)

Special thanks also to the following persons who contributed greatly to the country and regional case studies:

GUATEMALA

García, José Carlos Director de la Dirección de Integración Económica y Comercio de laSecretaría de Integración Económica Centroamericana (SIECA)

Rivera, Carlos Secretario General Federación de Cámaras y AsociacionesIndustriales Centroamericanas (FECAICA)

Sagastume, Ricardo Federación de Cámaras y Asociaciones IndustrialesCentroamericanas (FECAICA)

INDONESIA

Farooque,Imran UNIDO RepresentativeKasugahara, Daiki General Manager, Economic Research Institute for ASEAN (ERIA)Lesmana, Chandra Technical Officer, Competition, Consumer Protection and IPR

Division, ASEANManawanitkul, Penchan Senior Officer for Enterprise Development, Competition, Consumer

Protection and IPR Division, ASEANMatsumoto, Mitsuo Managing Director for Research Affairs, Economic Research

Institute for ASEAN (ERIA)Nishimura, Hidetoshi Executive Director, Economic Research Institute for ASEAN (ERIA)Pushpanathan, Sundram Deputy Secretary-General for ASEAN Economic CommunityWattanapruttipaisan, Thitapha Head, Competition, Consumer Protection and IPR Division,

ASEAN

URUGUAY

Alemany, Cecilia Coordinadora Red Mercosur de Investigaciones Económicas,MERCOSUR

Colombo Sierra, Agustín Director Ejecutivo de la Secretaría, MERCOSURDi Liscia, Alberto UNIDO RepresentativeQuina, Oscar Secretario General de la Asociación Latinoamericana de la

Integración (ALADI)Shaw, Eduardo Director Ejecutivo. DERES, Responsabilidad Social Empresarial


11Networks for Prosperity10 Networks for ProsperityAcknowledgements

Thanks are furthermore extended to the entire team at the Leuven Centre for Global Governance Studies andthe University of Leuven, and in particular Professor Dr. Bart Kerremans, Sven Van Kerckhoven, JohanAdriaensen, and Professor Dr. Jan Wouters, the Director of the Centre. Special thanks to Rik Hansen for hisresearch assistance, hard work and feedback on draft versions. Chapter 3 would not have been possiblewithout the data-input from the Hercules project, funded by the HERCULES-foundation, of the Leuven Centrefor Global Governance Studies.

Also, special thanks to UNIDO’s Wilfried Lütkenhorst, Managing Director, for his trust, guidance and supportthroughout the project.

The authors would also like to thank all UNIDO colleagues for their overall support, invaluable inputs,substantive guidance and text reviews: Manuel Albaladejo, Augusto Alcorta, Smail Alhilali, Romana Benisch,Amadou Boly, Michele Clara, Bashir Conde, Mahammed Dionne, Mikhail Evstafyev, Smeeta Fokeer, NobuyaHaraguchi, Victor Hinohosa Barragan, Florian Iwinjak, Stefan Kratzsch, Matteo Landi, Heinz Leuenberger,Sergio Miranda da Cruz, Pilar Murillo, Matilda Muweme, Philipp Neuerburg, Toshiaki Ono, KatrinSchomaker, Sabine Stroh, Natascha Weisert, René van Berkel, Christophe Yvetot, and Claudia Ziniel.A particularly big thanks for all the support, commitment and help during the country visits, Panama meetingand drafting process to the following UNIDO colleagues: Kai Bethke and his entire team at the Regional Officein Mexico, Joaquin Fuentes Cardona, Angela Heitzeneder, Paul Hesp, Annemarie Heuls, Sarwar Hobohm, andVeronica Juárez.

A very special thanks to Maribel Olegario-Polimeni for her understanding, trust and hard work without whichthis project would not have been possible.

Table of Contents

82 PART 2: International, Inter-organizationaland Intra-organizationalNetworks in practice

83 Chapter 3: Knowledge without Frontiers:International Networks

100 Chapter 4: From Dialogue to Collaboration:Inter-organizational Networks

126 Chapter 5: The Knowledge Organization: Intra-organizational Networks

142 PART 3: Networks forProsperity: Findingsand Recommendations

148 Annexes

156 References

169 Endnotes

4-10 Acknowledgements

13 Acronyms

14-17 Forewords

19-27 Executive summary

29-31 Introduction

32 PART 1: Concepts andEmpirical Analysis

33 Chapter 1: Private Sector Development,Knowledge Management andNetworks

57 Chapter 2: Measuring Networks acrossCountries: an Empirical Exploration


13Networks for ProsperityAcronyms

12 Networks for Prosperity

Acronyms Index of boxes, tables, figures and graphs

ILPES Latin American and CaribbeanInstitute for Economic and SocialPlanning

ICT Information and communicationtechnology

INCAE Instituto Centroamericano deAdministración de Empresas

IT Information TechnologyJPC Joint programme coordinationKM Knowledge managementKM4Dev Knowledge Management for

DevelopmentKOF Swiss Economic InstituteMDG Millennium Development GoalsMDG-F MDG Achievement FundMOIT Ministry of Industry and TradeMPI Ministry of Planning and InvestmentNCPC National Cleaner Production CentreNGO Non-governmental organizationPPP Purchasing power parityPROCOMER Promotora del Comercio Exterior de

Costa RicaPSD Private sector developmentR&D Research and developmentRIKS Regional Integration Knowledge

SystemSEM Multinational enterprise headquartersSICA Sistema de la Integración

CentroamericanaSIECA Secretaria de Integración Económica

CentroamericanaSOEs State-owned enterprisesSSA Sub-Saharan AfricaTT-SSC Team on South-South CooperationUN United NationsUNCTAD United Nations Conference on Trade

and DevelopmentUNDP United Nations Development

ProgrammeUNECA United Nations Economic

Commission for AfricaUNEP United Nations Environment

ProgrammeUNIDO United Nations Industrial and

Development OrganizationUNU-CRIS United Nations University

Comparative Regional IntegrationStudies

USA United States of AmericaWAITRO World Association of Industrial and

Technological Research OrganizationsWB-ES World Bank Enterprise SurveysWEF World Economic ForumWTO World Trade Organization

AACCSA Addis Ababa Chamber of Commerceand Sectoral Associations

ADB Asian Development BankAECID Agency for International Development

CooperationAFRIMETS Intra-Africa Metrology SystemAfrIPAnet Africa Investment Promotion Agency

NetworkALADI Associação Latino-Americana de

IntegraçãoASEAN ssociation of Southeast Asian NationsAU African UnionCAMI Conference of African Ministers of

IndustryCAN Andean CommunityCARICOM Caribbean CommunityCEO Chief executive officerCEPAL Comisión Económica para América

LatinaCINDE Costa Rican Investment Promotion

AgencyCIP Competitive Industrial PerformanceCODOPYME Dominican Confederation for SMEsDAC Development Assistance CommitteeDANIDA Danish International Development

AgencyDCED Donor Committee for Enterprise

DevelopmentDFID Department for International

DevelopmentENLACE Enhancing Scientific Cooperation

between the European Union andCentral America

ERIA Economic Research Institute forASEAN and East Asia

EU European UnionFAO Food and Agriculture OrganizationFDI Foreign direct investmentFIA Foreign investment agencyFLACSO Latin American School of Social

SciencesFMLN Frente Farabundo Martí para la

Liberación NacionalFTA Free trade agreementGARNET Network of Excellence on Global

Governance, Regionalisation andRegulation

GCR Global Competitiveness ReportGDP Gross domestic productGIZ German International Cooperation GVA Gross value addedILO International Labour Organization

BOXESBox 1: The Panama workshop and its findingsBox 1.1: Knowledge Management Strategies and MethodologiesBox 1.2: The UNIDO-UNEP National Cleaner Production Centres

TABLESTable 1: The MDG-F PSD Joint ProgrammesTable 1.1: Elements and Levels in Private Sector Development Table 1.2 Comparison of different characteristics between arm-length and embedded networksTable 2.1: Components of connectednessTable 2.2: International Networks Sub-indexTable 2.3: Inter-organizational Networks IndexTable 2.4: Intra-organizational Networks IndexTable 2.5: Connectedness IndexTable 2.6: Correlation matrixTable 3.1: Key regional integration arrangements for the group of countries studiedTable 3.2: FDI stocks as % of GDPTable 4.1: Serbia: key characteristics of the private sectorTable 4.2: Estimated SME density in study group countriesTable 5.1: Turkey: some key enterprise characteristics in international comparison

FIGURESFigure 1.1: Focus of the reportFigure 1.2: The private sector development ecosystemFigure 2.1: Concept Formation for Connectedness: Tasks and LevelsFigure 2.2: Connectedness IndexFigure 3.1: IPA performance from the perspective of registered vs. non-registered investors Figure 4.1: Global Competitivenes IndexFigure 4.2: Trust in Business AssociationsFigure 4.3: Exports in electrical/electronic and precision/medical devices sectors, 1998-2010Figure 4.4: Sugar production in Bolivia (tonnes)Figure 5.1: Bureaucratic capacity 2004-2008Figure 5.2: Number of scientific publications in the top six African countries (excluding South Africa)

GRAPHSGraph 2.1: Relationship between International vs Inter-organizational NetworksGraph 2.2: Relationship between International vs Intra-organizational NetworksGraph 2.3: Relationship between Inter-organizational vs Intra-organizational NetworksGraph 2.4: Government Effectiveness vs Connectedness Index Graph 2.5: Regulatory Quality vs Connectedness IndexGraph 2.6: Competitive Industrial Performance and Connectedness Index Graph 2.7: GDP per capita PPP vs Connectedness IndexAnnex 3, graph 1:

GDP per capita PPP vs International Networks IndexAnnex 3, graph 3:

GDP per capita PPP vs Inter-organizational Networks Index


On 18 December 2006, the United Nations and the Spanish Agencyfor International Cooperation signed a landmark agreement toprogramme €528 million towards key development goals and relateddevelopment goals in selected sectors and countries.

through MDG-F joint programme implementationwhich can then be used for future initiatives.Global, regional and local knowledge managementsystems for private sector development will supportdeveloping countries in acquiring and adapting PSD-relevant knowledge to their specific context and development needs.We believe that this willconsiderably enhance the effectiveness of develop -ment activities and support developing countries intheir endeavour towards reaching their individualdevelopment objectives and aspirations.

Soraya Rodriguez RamosSecretary of State for International DevelopmentCooperationSpain

With this support, the Government of Spain isdemonstrating its commitment to internationaldevelopment and to a strengthened multilateralsystem, and The United Nations, in particular.

The Spanish Master Plan for InternationalCooperation (2009-2012) outlines Spain’s policy,advocacy and financial priorities in support of theachievement of the Millenium Development Goals. Inline with these priorities, the establishment of theSpain-UNDP MDG Achievement Fund was alandmark in this expanding institutional partnership.

The private sector plays an essential role in povertyreduction in areas such as the creation of jobs, thesupply of goods and services that the poor need, theengagement in policy dialogue and ensuring thatbusiness activities are aligned with key sustainabilityprinciples. In this regard, knowledge managementand knowledge networks are crucial elements inorder to exchange information and experiences that consolidate good practices that are generated

Foreword Soraya Rodriguez RamosSecretary of State for InternationalDevelopment Cooperation

This report, Networks for Prosperity, is an outcome of a programmefor the establishment of a knowledge management system for privatesector development, funded by the Government of Spain through theMDG Achievement Fund.

Foreword Sophie de CaenDirectorMDG Achievement Fund

fruits of studies carried out in the twelve participatingcountries in the Funding Window: Bolivia(Plurinational State of), Costa Rica, Cuba,Dominican Republic, Egypt, El Salvador, Ethiopia,Panama, Peru, Serbia, Turkey and Viet Nam. Theseare varied countries, each following its own path todevelopment. Nevertheless, the report uncovers acertain commonality in the range and types of formaland informal knowledge networks that affectnational private sector development policies, in turnimpacting broader economic and development goals.

New and innovative solutions will be needed toovercome development challenges as we approach2015. Networks for Prosperity provides solidrecommendations for such solutions in the area ofDevelopment and the Private Sector. I look forwardto the implementation of these proposals in the nextphase of the programme, and to the furtherstrengthening of our global partnership fordevelopment.

Sophie de CaenDirectorMDG Achievement Fund

Coordinated by UNIDO, the programme bringstogether a range of United Nations agencies,intensifying the system’s capacity to deliver as oneglobally and at the country level, while embeddingknowledge gained in each of the twelve JointProgrammes of the MDG-F funding window,Development and the Private Sector.

The knowledge management system envisaged in theprogramme follows two tracks. On the one hand, itaims to strengthen the capacity and effectiveness ofJoint Programme Teams through increasednetworking, knowledge sharing and mainstreamingof lessons learned. On the other, it seeks to createknowledge by establishing a more effective means ofpolicymaking through moving beyond informalsharing of expertise residing in governmentinstitutions, the private sector, and civil societyorganizations.

Networks for Prosperity builds on the outcome of theGlobal Meeting of the Development and the PrivateSector Joint Programme Coordinators held inPanama City in March 2011. It also contains the

15Networks for ProsperityForeword

14 Networks for ProsperityForeword


We live in an interdependent world, with the forces of globalizationbringing us closer together day by day. At times this leads to gravechallenges which much be confronted even in the absence of existinggovernance frameworks – a case in point is the global financial andeconomic crisis that is still felt throughout the world.

institutionalized networks for knowledge sharing,positively impacting policies for private sectordevelopment. It uncovers how networks of this typeare emerging as a distinct form of governance to meetever-changing policy challenges in internationaldevelopment. Moreover, it establishes for the firsttime a Connectedness Index covering a wide range ofcountries and correlating strongly with indicators ongovernment effectiveness, regulatory quality,industrial development and economic development.The report provides solid recommendations on thenext steps to be taken in deepening this index, and inleveraging the role of networks for private sectordevelopment.

Networks for Prosperity was prepared on behalf ofthe United Nations system by UNIDO together withthe University of Leuven. It is one component in aninitiative generously supported by the Government ofSpain through the Development and the PrivateSector funding window of the MillenniumDevelopment Goals Achievement Fund. I amconvinced that this ground-breaking report will formthe cornerstone of a new approach in private sectordevelopment policy, using dynamic multi-actornetworks to meet development goals through to 2015and beyond.

Kandeh K. YumkellaDirector-GeneralUNIDO

Regrettably, it sometimes appears that we act in ourcommon interest only after the fact. In the sphere of international development cooperation, however, the need for a common approach has long beenrecognized. Over the past decade or more, greaterthought has been given to interrelated concepts suchas coherence in the elaboration by partners ofdevelopment strategies and actions, and of efficiencyand effectiveness of aid. Development actorsgenerally have sought to better align their activitieswith national objectives. The United Nations system,in part spurred on by the drive to achieve theMillennium Development Goals by 2015, hasintensified its cooperation globally and at the country level.

This willingness to enter into partnership provideshope for the future. Throughout my tenure asDirector-General of UNIDO, I have made externalcollaboration a key theme of our organizationalethos. Our programmes and campaigns in areas suchas access to energy, cleaner production, investmentpromotion, trade capacity-building and agri-businessdevelopment are evidence of the benefits of broad-based coalitions for action.

Networks for Prosperity takes this concept further.The report moves beyond traditional mechanisms ofcooperation to consider how what were onceregarded as informal relationships between publicand private organizations can become embedded,

Foreword Kandeh K. YumkellaDirector-GeneralUNIDO

Networks, formal and informal, local and global, are increasinglyimportant channels for pursuing policy goals in a globalizing world.

Foreword Jan WoutersDirectorLeuven Centre for Global GovernanceStudies

development. The report also stresses the importanceof different levels of governance and of forgingnetworks within and across levels. This multi-levelquality ranges from networks within organizationswhich are crucial to forge knowledge creation anddiffusion, to networks on a regional and global scalewhich connect organizations with counterparts acrossstate boundaries. In between, on the state level, thereport goes into detail on different types of inter-organizational and state-society networks whichgreatly contribute to the further development of theprivate sector.

Networks for Prosperity will not only be of interestto academic researchers; it is at least as useful forglobal governance and development practitioners.The Global Academic Partnership Agreement withUNIDO enabled our Centre to work closely withUNIDO and its dedicated staff. It was a veryenriching experience and we hope the end result willmake a genuine contribution to the objectives ofUNIDO and to global governance. We look forwardto further cooperation in the future.

Jan Wouters

Jean Monnet Chair Ad Personam EU and GlobalGovernanceProfessor of International Law and InternationalOrganizationsDirector, Leuven Centre for Global GovernanceStudies - Institute for International LawUniversity of Leuven

President, Flemish Foreign Affairs CouncilHonorary President, United Nations AssociationFlanders – Belgium

One of these goals, as identified by MillenniumDevelopment Goal 8, is the establishment of a globalpartnership for development. The private sector canplay a key role in such a partnership. In fact, privatesector development, as a spur to enterprise andeconomic growth, is now widely accepted as a tool tohelp achieve a range of development goals.

Networks for Prosperity maps this world of networksand captures their variety and diversity across a widerange of issues relevant to private sectordevelopment. It makes a significant contribution tothe growing literature on the emergence of networkgovernance as a distinct way of governing, which isbased on information and knowledge exchange andlearning by doing.

Networks for Prosperity approaches networks from amulti-actor and multi-level perspective. Such acomprehensive approach is crucial in order to graspthe complexity of current-day governancearrangements and their effect on private sectordevelopment and development in general. Thismulti-actor and multi-level approach concurs withthe general approach taken by our Leuven Centre forGlobal Governance Studies, an interdisciplinaryresearch centre of excellence of the University ofLeuven.

Private sector development is clearly a result of arange of multi-actor initiatives. This report presentsthe private sector development ‘ecosystem’, whichconsists of many different types of actors, such asministries, business associations and confederations,investors, enterprise support agencies, civil societygroups, research and technology centres anduniversities. All play an important role in thegovernance arrangements for private sector

17Networks for ProsperityForeword

16 Networks for ProsperityForeword


19Networks for ProsperityExecutive summary

Knowledge management and knowledge networking can play a keyrole in achieving development goals. It is therefore an importanttopic for change agents and policymakers in the fields ofdevelopment policy and policy effectiveness.

The report is the outcome of a request to UNIDO,the technical convenor agency of the funding window“Development and the Private Sector” of the SpanishMDG Achievement Fund (MDG-F), to create aknowledge management concept that would supportdeveloping countries in acquiring and adaptingprivate sector development (PSD)-relevant knowledgeto their specific contexts and needs, and enhance theknowledge capabilities of the United Nations systemand its national counterparts and partners in the fieldof PSD policy.

This report intends to provide decision-makers with abasis for including knowledge management andknowledge networking in policy considerations relatedto development strategy, effectiveness andgovernance. It is not intended as a full, in-depth studyof all the links between knowledge networking,network governance and private sector development,but it gives an overview of the various concepts,provides new findings on correlations between themand illustrates these concepts with country casestudies.

Executive summaryIntroduction



20 Networks for ProsperityExecutive summary

The rise of what might be termed “networkgovernance” takes place in a context of a shift fromgovernment to governance which has been redefiningthe role of national authorities in market regulationsince the 1980s. Major characteristics of this shiftinclude:

Increased participation of non-governmentalactors in policymaking, including the elaborationof policy norms and goals.

Regulatory regimes that take account of thedifferent values and interests of actors involved inthe policy-making process and regulatorycoordination to facilitate communication betweenpublic and private actors.

Decentralization of policy competences withintegration of policy domains by collaborationacross functional divisions of government.

Non-coercive (‘soft’) policy instruments replacing‘command and control’.

Adaptability and constant learning.

Whether networks enable or constrain private sectordevelopment and PSD policies depends on the natureand governance of the network. A key conceptualdistinction is the difference between embeddednetworks and autonomous or arm-length networks.The differences are elaborated in the report.Large networks tend to be mainly constructed ofarm-length ties, while small networks are more likelyto consist of embedded ties.

The first part of the study discusses, in general terms,the importance of information and knowledgenetworks for development and then outlines amethod for demonstrating the links betweennetworking and development through empiricalanalysis.

CHAPTER 1: PRIVATE SECTOR DEVELOPMENT,KNOWLEDGE MANAGEMENT AND NETWORKSPrivate sector development (PSD) is fundamental tosustainable economic development. In order tofurther develop the private sector a wide variety ofpolicy initiatives is taken. Governments areincreasingly interested in sharing knowledge withregard to these policy initiatives and the lessonslearned. Hence the importance of networks andknowledge management in these networks. The latter,which can take many forms (such as databasecreation, knowledge fairs and peer assisted learning)is the process through which organizations transforminformation into knowledge which helps them toachieve their goals.

Part 1: Concepts andempirical analysis

Embedded and arm-length networks performdifferent functions in the context of knowledgemanagement. An optimal network is an embeddednetwork which is sufficiently open to arm-length ties.The aim should therefore be to develop institutiona -lized and embedded networks that are neverthelesssufficiently fluid and flexible. Within and parallel toinstitutionalized networks, informal or personalnetworks can play an important role in thisconnection.

CHAPTER 2: MEASURING NETWORKS ACCROSSCOUNTRIES: AN EMPIRICAL EXPLORATIONUp to now, there has been no overall network indexto compare countries and substantiate the importanceof networks for development. This chapter exploresthe possibilities for constructing such an index. Giventhe restricted scope of the study, it relies on existingdatabases. More than 70 of these which contain datafor a large number of countries were screened forindicators which can be related to international,inter-organizational and intra-organizationalnetworks. The average of the results for these threesub-indices constitutes the overall network orconnectedness index.

The resulting connectedness index showed strongvariations in the degree to which countries arenetworked, both internally as well as internationally.Some countries achieve a consistently high score onthe various network indicators and hence on theconnectedness index, whereas the scores of others areconsistently low. Similar scores on the connectednessindex were often reached by very distinct paths. The next step in the analysis was to explore therelationship between connectedness and governmenteffectiveness, regulatory quality, competitiveindustrial performance and GDP (gross domesticproduct) per capita PPP (purchasing power parity).The result was a strong positive linear relationshipbetween connectedness and these four performanceindicators. Networks, in short, do play a role.However, more conceptual work and empiricalresearch is needed to explain the variations,disentangle causal relationships and determine precise effects.

KnowledgeManagement Networks

Policy Effectiveness

Private Sector Development

Economic Development

Figure 1.1: Focus of the report




The second part of the study discusses the governanceof international, inter-organizational and intra-organizational networks. The individual chapters areillustrated with detailed examples from a wide rangeof developing countries and transition economies.

CHAPTER 3: KNOWLEDGE WITHOUTFRONTIERS: INTERNATIONAL NETWORKSInternational knowledge networks can have abilateral, regional and multilateral character and canemerge not only between government actors but alsobetween non-government actors (as in internationaltrade and foreign investment). Well-known examplesinclude the information and knowledge exchanges atvarious policy-related levels between the EU and theUSA (bilateral networking), within the AfricanUnion, ASEAN, and SICA, CAN, ALADI andMercosur in Latin America (regional networking),and in the context of the United Nations system(multilateral networking).

The complexity of international networks is,following Slaughter (2004), increasing as aconsequence of two related developments:

There is a tendency for governments todisaggregate into their components, which are nolonger solely interacting within the governmenthierarchy but also outside their boundaries withforeign counterparts;

As a result, government networks emerge whichexist alongside, and sometimes within, moretraditional international organizations.

A distinction can be made between horizontalnetworks, such as networks among governmentofficials or business leaders from different countries,and vertical networks between supranational officialsand their country-level counterparts. Of course, bothaspects may be represented in networks.

Issues which are central to the functioning of allnetworks, but multilateral networks in particular are:

Trust: without trust joint network management ishighly unlikely;

Leadership: who should take the lead - a neworganization or any of the existingorganizations?;

Flexibility: the governance of networks mustevolve as they develop.

CHAPTER 4: CHAPTER 4: FROM DIALOGUE TOCOLLABORATION: INTER-ORGANIZATIONALNETWORKSInter-organizational networks can emerge in at leastthree spaces:

Within the public sector

These aim to achieve specific policy objectives thatcut across the functional departmental borders ofgovernment. The report makes clear that PSD isinfluenced by many policy areas such as labour,education, enterprise and finance. Integrating PSDgoals into each of these policy areas can support thefurther development of PSD. This type ofcollaboration can take many forms, ranging from adhoc meetings to joint strategic plans and permanentworking groups.

Between public and private sector actors

These networks can take many forms. Governments,for example, can set up government-owned ordominated firms in specific economic sectors toinitiate innovation and change. A similar initiatingrole with strong spillovers can also be observed inkey areas such as research and development support.Public-private joint ventures in emerging sectorswhich then further develop and diffuse constituteanother example. Finally, an increasing number ofpublic-private partnerships have developed to providedifferent kinds of services and infrastructuresupporting private sector development, such asinvestment promotion. A particularly importantfactor in the creation of public-private sector networkis the building of mutual trust. There is empiricalevidence in many countries that good government-business relations make a strong contribution togrowth.

Among private sector actors only

These can take many forms, including businessassociations, industry-university collaborations, andprivate regulatory initiatives. Clusters, geographicconcentrations of interconnected companies,specialized suppliers, service providers and associatedinstitutions in a particular field are also importantmanifestations. Their development is supported bycluster development initiatives where public-privatesector networks come into play. If businessassociations wish to influence economic policy theywill need to assure themselves of the trust of thegeneral public as well as policy-makers to gaininfluence.

CHAPTER 5: THE KNOWLEDGEORGANIZATION: INTRA-ORGANIZATIONALNETWORKSWithin organizations knowledge creation andinformation exchange primarily occurs betweenpersons, notwithstanding the exponential growth oftechnical knowledge management tools such asdatabases and the intranet. Research has consistentlyshown that internal interconnectedness – not least atthe informal level - is crucial for organizationalperformance. Following a paradigm shift ineconomics towards more emphasis on endogenousgrowth models since the 1990s, more attention hasbeen given to the effects of organizational structureon economic performance. In the public sector,research shows that a meritocratic, accountable,performance-based bureaucratic system canstrengthen intra-organizational networks and haveprofound effects on the quality of policy-making andeconomic performance.

While knowledge sharing is growing in governmentbodies involved in economic development (forexample between ministries and national agencies),the corporate sector is more experienced in thisrespect. Empirical evidence shows that, for privatesector development, knowing someone who hasstarted a business is a key indicator of entrepreneurialpotential. Policy-makers increasingly recognize thepotential of secondments, study tours, mentoring andsocial networking mechanisms to engage with theprivate sector and the general public.

Part 2: International, inter-organizational andintra-organizationalnetworks in practice




In view of the relevance of these interrelationships fordomestic policymaking and international relationsalike, it is all the more surprising how under-researched they have remained in the past and howunappreciated they seem to be among policymakersand development specialists. This report has thereforemade a first attempt to improve the overall under -standing of these complex interrelations and haspresented cases from around the world that illustratethe numerous approaches governments are currentlytaking in responding to their domestic, regional andglobal challenges through knowledge networking.

Networks are a distinct form ofgovernance with importantpotential for knowledge creationand development performance.

In this context, it can be observed that networks areincreasingly emerging as a distinct form ofgovernance, which includes different types of publicand private actors within and across organizationaland national boundaries. Different types of networksexist, whether for learning, information exchange orknowledge creation. There could be significantbenefits from ensuring that networks are successfullyembedded. However, vibrant knowledge networking

Knowledge networking and network governance inthe field of economic policy is certainly not a newphenomenon; neither is the realization that thedevelopment of a strong private sector is necessaryfor achieving economic, social and environmentalobjectives. With the rapid globalization in all spheresof our societies over the past decades, however,achieving economic success, social cohesion andenvironmental sustainability in one country dependsmore than ever on the performance and behavioursof its neighbours, regional leaders and globaleconomic powers. Accordingly, both the scope ofknowledge networking and the nature of the privatesector have altered dramatically. This requires acloser look at the interrelationships between theknowledge networking capacities of a country, itsprivate sector development policies and its economic,social and environmental performance.

Networks are still highly under-researched and under-appreciatedamong policymakers anddevelopment specialists.

Part 3: Networks forprosperity:conclusions andrecommendations

cannot only depend on existing networks but requiresa living “institutional ecosystem”, with neworganisms providing new knowledge andopportunities. Thus successful networking implies thedevelopment of solid networks which continue overtime and are built on trust, as well as constantmovement between relevant networks to capture new information.

Significant benefit can be gainedfrom networking strategies toinstitutionalize or “embed”networks.

To achieve this, more empirical evidence will benecessary on knowledge networking and there is aneed for more conceptual thinking on how tomeasure knowledge networks and ConnectednessIndex. With these caveats, the Connectedness Indexconstructed in this report shows a strong positivecorrelation with government effectiveness, industrialdevelopment and economic development. Indeed, akey conclusion from the literature, from the bestavailable international metrics, and from the 16 casestudies from countries of all shapes, sizes and levelsof development, is that knowledge networks could bethe missing ingredient in strategies for sustainabledevelopment and prosperity.

Initial findings through theConnectedness Index are clear:networks matter for developmenteffectiveness.

Policymakers’ interest in knowledge networksappears thus to be justified, despite limited evidenceon causalities. They find intergovernmentalknowledge networks particularly useful to better

understand and freely choose from the various policyoptions, to coordinate policies with other members ofthe network and to implement policies requiringconcerted action. Knowledge networks can facilitatethe exchange of policy-relevant knowledge amongtheir members and the production of new knowledgeand solutions. In some cases, this is being scaled upand leads to policy coordination (or evenharmonization) and mutual learning. With theirinformal, flexible and trust-building nature,knowledge networks can lead to global/regionalagenda and norm setting and help in harmonizationprocesses, particularly when rapid decision-making isrequired during crisis periods. Knowledge networkscan thus be particularly useful in processes ofregional and/or inter-regional integration, where aprior harmonization process can ease, support andspeed up policy implementation and operations.

Knowledge networking is notabout ICT as the ‘knowledgeeconomy’ but about buildingtrust, dialogue and collaborationacross sectors and borders.

The role of intergovernmental knowledge networksin norm and standard setting/diffusion deservesparticular attention, especially because of theincreasing rise of private standards ruling theinternational private sector, influencing the economicperformance of countries indirectly. This mirrors thegradual move away from the traditional

Knowledge networking can becrucial in norm-setting anddiffusion through peer-to-peerinteraction and learning.

“Networks are rarely effective on their own – they need to form asymbiotic relationship with international organizations. Theemerging world order is one in which networks, rather thanoperating alone, come to incorporate and work hand in hand withinternational organizations.”

Leonardo Martinez-Díaz and Ngaire Woods i




model, in which international organizations wereestablished with the primary function of developingstandards and then Persuading Member States toadopt them. Standard-setting knowledge networksusually work out of lean structures, are driven bypolicy priorities and interest of its public and/orprivate members, and work through a combinationof policy-relevant knowledge exchange and peerpressure. In fact, through their peers, policymakersmight be exposed to new practices and policyoptions, or even discover entirely new models orparadigms for policymaking in a specific field. This isparticularly relevant for peer-to-peer networks amongdeveloping countries and might provide a betterunderstanding of how “South-South cooperation”could be better operationalized in the future.

Successful knowledge sharingdepends less on IT platformsthan on interests and incentives.

However, as networks have the tendency toproliferate and as it is costly to participate innetworks, individuals, organizations and countriesneed to develop clear networking strategies. Also,despite the growing discourse on the importance ofknowledge networks for development, experience oneffective networking strategies and managingeffective and efficient networks is limited. There isstrong demand among policy-makers to learn frombest practices on network management and thedevelopment of network strategies, especially in thecontext of private sector development. This can beachieved via study visits, workshops, mentoring, casestudies and social networking. These activities cancontribute to identifying success factors for networkmanagement and international organizations cansupport such effort as catalysts and facilitators wherenetwork structures and human and financialresources are limited.

Further research is needed toidentify success factors fornetwork management andinternational organizationsshould support this effort.

A final consideration regarding the need for increasedcross-border knowledge exchange and policycoordination is the recently-revived call for “regionalintegration”. Again, the nature and shortcomings inthe current international system of governance has

led to the concept of a ‘multi-level’ form ofgovernance, extending from the local to the globallevel and thus speeding up problem solving for issuesof cross-border dimension. This concept is, again,closely linked to the thinking that emphasises thenetworked aspects of governance in order to dealwith interdependencies across policy levels (local toglobal) and policy domains (economic, social,environmental). In many regions can be observed theparallel processes of ‘regionalization’ of policy andthe progressive upgrading of the micro-regional levelin policy processes. Indeed, there is now a wideconsensus that governance is not limited to the levelof the state alone but requires a system ofparticipatory policymaking, involving those parts ofsociety that are affected by the policies.

It can thus be argued that (1) regional governance isnot incompatible with and does not negate globalgovernance – on the contrary, it has the potential tostrengthen global governance; and (2) we are todaywitnessing a new current in multilateral governancethat gives a prominent role to regions but stillmaintains a series of problematic issues to be settledat the global level. To return to the knowledgenetwork aspects above, ‘good’ global governancemay well imply not exclusive policy jurisdiction butrather an optimal partnership between the national,regional and global levels of actors, and betweenstate, intergovernmental and non-governmentalcategories of actors.

‘Triangular’ regional networksoffer real potential for timelyknowledge sharing and solutionfinding.

Central to this will be the intensified and betterexchange of knowledge between global and regionalmultilateral institutions as well as their interactionand collaboration with non-state actors. Again,knowledge networks can be seen as a solution forclosing the knowledge gaps and advancing necessarypolicy coordination in order to ensure that countriescan reap the fruits from regional economic inte -gration efforts. Central to this consideration is theestablishment of a common understanding across alllevels of the embedding of the knowledge gatheredfrom multilateral networks into the actualimplementation of policies and programmes. Existing international organizations can and shouldplay a crucial role in these knowledge managementprocesses.

The international community should activelypromote knowledge networking and networkgovernance structures for achieving local,regional and global development objectives.This may include, inter alia, to fosterinternational and national knowledgenetworking approaches in all capacitydevelopment activities; to improve nationalownership through multi-stakeholdernetworking arrangements in the policymakingprocesses at all levels; to make theinternational system more inclusive throughengagement of more countries and institutionsin solution-finding processes; and to supportnetworking arrangements with the goal ofenhancing innovation and private sectordevelopment.

Member States should encourage andfacilitate the international knowledgenetworking capacities of their public andprivate institutions. This may include, interalia, formulating networking strategies inrelation to the achievement of developmentobjectives and reforms; to actively supportregional policy and research networkparticipation; to invest in institutionalinfrastructure and innovation networksdomestically and internationally; to activelyupgrade the knowledge networking capacitiesand capabilities of domestic institutions; andto provide suitable incentives for theformation of new networks in specific fields ofstrategic interest.

International organizations should improvetheir inter-institutional information andknowledge exchange systems and facilitatebetter knowledge networking among theirmembers. This may include, inter alia,improving thematic information exchange incommunities of practice, to provide more user-friendly platforms for knowledge sharingamong members; to actively seek theinvolvement of non-state actors inconsultation processes; and to actively supportknowledge network development in relevantfields.

An international and cross-sectoralconsultation network should be established tofurther develop the initial findings onconnectedness and knowledge networking forthe achievement of development goals, andrecommend measures and programmes fordevelopment effectiveness through increasedknowledge networking, in particular in thefield of private sector development policy.

Recommendations

Based on these findings and conclusions, the followingrecommendations have been formulated for consideration byMember States:


29Networks for ProsperityIntroduction


programme coordinators in March 2011 in PanamaCity (see Box 1 for details). This, among other inputs,inspired the first draft of this report, which wasdiscussed during informal dialogues in Vienna andBrussels with Member State delegations as well asUNIDO and EU experts in May and September 2011.Comments were used to revise the manuscript,adding specific topics pertinent to knowledgenetworking and private sector development.

This report is issued under the funding window“Development and the Private Sector” of the SpanishMDG Achievement Fund (MDG-F). Through thiswindow, the Spanish Government together with theUnited Nations addresses the urgent need forsupporting a vibrant and responsible private sector indevelopment processes in order to achieve agreeddevelopment objectives, including the MillenniumDevelopment Goals (MDGs). In this context,UNIDO, as the technical convenor agency of thefunding window, was requested to establish aknowledge management concept that would supportdeveloping countries in acquiring and adaptingprivate sector development (PSD)-relevant knowledgeto their specific contexts and development needs, andenhance the knowledge capabilities of the UnitedNations system and its national counterparts andpartners in the field of PSD policy. Initial discussions on the issue of knowledgemanagement in development activities took placeduring a global workshop among MDG-F

IntroductionKazuki Kitaoka, Alex MacGillivray, Axel Marx and Cormac O’Reilly

“The world possesses the resources and knowledge to ensure that even the poorest countries, and others held back by disease,geographic isolation or civil strife, can be empowered to achieve the MDGs.”

Ban Ki-moon, Secretary-General, United Nations (2010)


31Networks for ProsperityIntroduction

30 Networks for ProsperityIntroduction

Box 1 The Panama workshop and its findings

The first meeting of the Spanish MDG AchievementFund (MDG-F) Private Sector and DevelopmentJoint Programme Coordinators (JPCs) was organizedby the United Nations Industrial DevelopmentOrganization (UNIDO) in its capacity as lead agencyfor the MDG-F Private Sector Development windowknowledge management facility. The meeting tookplace in Panama City on March 1st -3rd 2011 andcounted 31 participants, including headquarters andregional representatives of the MDG-F Secretariat,UNIDO, the United Nations Conference on Tradeand Development (UNCTAD), the United NationsDevelopment Programme (UNDP), the InternationalLabour Organization (ILO) and UN Women, as wellas JPCs and programme representatives from 11 ofthe 12 programme countries: Bolivia, Costa Rica,Cuba, Dominican Republic, Egypt, El Salvador,Ethiopia, Panama, Peru, Serbia and Vietnam. Themeeting was chaired by the Coordinator of theDonor Committee for Enterprise Development(DCED). The key objectives and expected outcomesfor the meeting were threefold, namely:

To strengthen the capacity and effectivenessof Joint Programme Teams through increasednetworking and knowledge sharing;

To identify programme level needs, inanticipation of a planned needs assessment

regional policy dialogue and discourse. The existingmechanisms, platforms and networks need to becomemore dynamic, inclusive and accessible fordeveloping countries. Effective support is needed tobetter facilitate the exchange of knowledge, conceptsand ideas among practitioners and policymakers, atboth the regional and global levels. Existingknowledge platforms and institutions need to bestrengthened in this regard.

exercise - conducted under the auspices of theUNIDO Knowledge Management Team - andseparate mid-term evaluation exerciseorganized by the MDG-F Secretariat; and

To identify critical next steps and actionsaimed at addressing immediate programmelevel problems and issues.

In order to further underline the crucial subject ofKM as a certain discipline to be followed in jointprogrammes, with multiple agencies implementingone project, the organization team of the Panamameeting applied KM sessions for the sharing ofinformation, lessons learned and recommendationsfor future action. This has been performed inter aliaby creating a “Marketplace Scenario”, during whichthe participants presented their Joint Programmes ina lively and interactive manner.

The Panama workshop concluded with the PanamaPlan of Action which is currently being implementedby the various project partners. The plan calls forincreased inter-organizational collaboration andmore frequent opportunities for cross-borderknowledge exchange and peer learning amongpractitioners. It is expected that such activities willhave a positive impact on overall programme qualityand innovation across the UN system.

This report addresses how knowledge managementand knowledge networking for private sectordevelopment policy can achieve development goals inan economy operating in a globalized world. Thereport targets change agents and policymakers in thefields of development policy and effectiveness, andaims to serve as a basis for policy considerationsrelated to development strategy, effectiveness andgovernance. While it is not intended to be a holisticaccount of all existing literature and thinking in thenexus of knowledge networking, network governanceand private sector development, it gives the interestedreader a sound overview of the various concepts,provides new findings on correlations between thesediverse concepts and illustrates these with countrycase studies.

The report was written in light of the globaleconomic and financial crisis and tighteninginternational cooperation budgets, which brought tothe forefront a plethora of issues concerningeconomic policy and aid effectiveness (or, moreproperly, development effectiveness). In this context,

there is a growing global understanding that a moreproductive public-private dialogue and an effective,yet balanced, involvement of the private sector indevelopment activities is crucial for achieving themultitude of development goals and economicaspirations in developing countries. PSD, seen in thislight, is therefore not merely a means for improvingthe overall production of goods and services, andthus the economic performance of a country.Conscious PSD policies can also spur activities thatdevelop the necessary implementation capacities foraddressing complex social and environmentalchallenges that, so far, have been primarily left tonational authorities. This can not only free publiccapacities for re-orientation to more strategic fields ofgovernment work, but can also increase efficienciesand effectiveness in the implementation processes andopen new financing channels and human resources ina guided manner.

Knowledge systems have long been recognized ascentral to development effectiveness and policyquality, but they remain underappreciated, under-

supported and underused in addressing the centralchallenges of our globalized era. While traditionalindustrialized countries are highly networked, withgovernment officials and business leaders increasinglyexchanging information and coordinating activitiesand policies to address common problems on aninternational scale, the situation in developingcountries is in many cases still characterized by a lackof free access to the latest findings in global and

The report is divided into three parts:

Part 1 focuses on clarifying the basic concepts ofPSD, knowledge management and networkgovernance. It also discusses the issue of networkembeddedness and provides the necessarydefinitions for further analysis. It then movesfrom the conceptual definition to a suggestedframework for analysing the nexus between theseconcepts, and examines specific correlationsbetween network capabilities, connectedness andeconomic performance of countries. This partalso provides the overall rationale for why afocus on multi-sector network capabilities, andparticularly international knowledge exchange, iscrucial for countries’ economic aspirations. Italso examines the growing consensus on the needto involve both public and private sector actorsin development policy processes.

Part 2 focuses on different types of knowledgenetworks, their governance and impact ondevelopment results. Starting with the most

common approach to knowledge management, an initialchapter focuses on international networks,supranational networks, and related governance issueson bilateral, regional and global levels. It then moves tointer-organizational networks, including public-public,public-private as well as private networks. A finalchapter examines intra-organizational networks andexamines links between the existence of performance-based, networked bureaucracies and economic successof a country. Each chapter is illustrated by specificcountry case studies, primarily inspired by institutions inthe twelve countries currently implementingprogrammes under the MDG-F, namely Bolivia(Plurinational State of), Costa Rica, Cuba, DominicanRepublic, Egypt, El Salvador, Ethiopia, Panama, Peru,Serbia, Turkey and Viet Nam (see Table 1 for anoverview).

Part 3 provides conclusions and recommendations forchange agents and policymakers in the fields ofdevelopment policy and effectiveness.

Bolivia (Plurinational State of), National and international value chains UNDP, UNICEF, WFP, FAO, UNIDO, ILO

Costa Rica Competitive tourism and agro industry UNDP, UN-HABITAT, FAO, ILO, IOM

Cuba Decentralization and higher production UNDP, UNESCO, FAO

Dominican Republic Banana value chains UNDP, WFP, UNAIDS, WHO, FAO, ILO

Egypt Horticulture value chains UNDP, UNIFEM, UNIDO, ILO

El Salvador Productive urban settlements UNDP, UN-HABITAT, UNIDO

Ethiopia Edible oil value chain enhancement UNDP, FAO, UNIDO, ILO

Panama Entrepreneurial opportunities network UNDP, UNCTAD, FAO, UNIDO, UNWTO

Peru Creative industries UNDP, UNESCO, FAO, UNIDO, ILO, UNWTO

Serbia Sustainable tourism UNDP, UNICEF, FAO, UNEP, UNWTO

Turkey Sustainable Linkages for SMEs UNDP, UNIDO, ILO

Viet Nam Green production & trade UNCTAD, FAO, UNIDO, ILO

Table 1: The MDG-F PSD Joint Programmes


32 Networks for ProsperityPART 1: Concepts and Empirical Analysis

33Networks for ProsperityPART 1, Chapter 1: Private Sector Development, Knowledge Management and Networks

Provan and Kenis, 2007; Torfing, 2012) and theinternational level (Slaughter, 2004; Martinez andDias, 2009).

The emphasis on networks resonates with the workof many political economists who focus on theimportance of embeddedness for economic andindustrial development, and the role of the privatesector therein. Networks are regarded as crucialinstruments for learning (knowledge diffusion andcreation) and hence for economic development. Theimportance of learning is best illustrated by thephenomenal economic development in recent decadesof what Alice Amsden labels ‘the Rest’ (i.e.Argentina, Brazil, Chile, China, India, Indonesia, theRepublic of Korea, Malaysia, Mexico, Taiwan,Thailand and Turkey). Amsden (2001, p. 2) arguedthat:

“For the first time in history, backward countriesindustrialized without proprietary innovations. Theycaught up in industries requiring large amounts oftechnological capabilities without initially havingadvanced technological capabilities of their own.Late industrialization was a case of pure learning,meaning a total initial dependence on other countries’commercialized technology to establish modernindustries. This dependence lent catching up itsdistinctive norms.”

Networks facilitate learning within and acrossorganizational boundaries. Figure 1.1 presents ageneral approach to the study of knowledgemanagement for private sector development. Theunderlying assumptions are that economicdevelopment is partially a result of private sector

1.1 INTRODUCTIONPrivate sector development (PSD) is fundamental tosustainable economic development. In order tofurther develop the private sector a plethora of policyinitiatives can be taken. Governments are increasinglyinterested in sharing knowledge with regard to thesepolicy initiatives and the lessons learned.Consequently, many governments findintergovernmental knowledge networks useful tobetter understand the various policy options, tocoordinate policies with other members of thenetwork and to implement policies requiringconcerted action. Knowledge networks can facilitatethe exchange of policy-relevant knowledge amongtheir members and the production of knowledgethrough synthesis of information in new ways (thismeans new solutions to policy problems, previouslynot available to any of the individual networkmembers). This may be scaled up and lead to policycoordination (or even harmonization) and mutuallearning (see also Slaughter, 2004).

The current report examines how knowledge onprivate sector development and private sectordevelopment policies is managed with a specific focuson the role of networks. This study does not aim toanalyse and assess PSD or PSD policies as such in theselected countries but rather how networks cancontribute to a better understanding and exchange ofPSD policies. Since the 1990’s, several leadingauthors have analysed the emergence of the networksociety (Castells, 1996). Consequently, significantattention has recently been paid to networkgovernance on the level of organizations (Rauch &Cassela, 2001; Powell, 1990; Powell, W. & L. Smith-Doerr, 1994), the level of the state (Rhodes, 2012;

“Basically we know what works to create jobs and grow prosperityis networking and co-operation.”

Bill Clinton, Former President of the United States of America ii

PART 1: Concepts and Empirical Analysis:

Chapter 1: Private SectorDevelopment, KnowledgeManagement and Networks Axel Marx, Kazuki Kitaoka and Alex MacGillivray



34 Networks for ProsperityPART 1, Chapter 1: Private Sector Development, Knowledge Management and Networks

development, which in turn is partially a result ofgovernment effectiveness across different policyareas, which in turn is partially a function ofnetworks which are an important component ofknowledge management.

The key focus of the report, therefore, is networksand network governance and the aim is to proposemore effective forms of governance on PSD policythrough the use of networks.

It is important to stress that networks are crucial toknowledge creation and diffusion but are not limitedto that. As Slaughter (2004, pp. 52-61) argues,several types of networks do exist, includinginformation exchange and knowledge networks,enforcement networks and harmonization networks(see also chapter 6.1). In the context of this report,we focus on information and knowledge networkssince they are the most relevant in the context ofknowledge management.

- Free and rulegovernedinternational trade

- Access tointernationalmarkets

- Debt reduction- Donor policies and

practices (includingcoordination)

- Membership ininternationaleconomic, social orenvironmentalgovernance bodies

Macroeconomicpolicies- Trade policies- Privatization- Exchange rate and

monetary policies- Public budgets- Labour market

policy- Observance of

labour standards- Fiscal policy (tax)- Inflation reduction- Financial institutions- BoP regulation

Physical infrastructureand human capital- Education and skill

training- Health- Roads, railways,

harbours, electricity,telecommunication,etc.

- Intellectual capital- E-readiness- Social security and

pension schemes

Good governance- Fight against

corruption- Transparency- Legal system- Effective governance- Administrative

reform

Institutionalinfrastructure- Chamber of

commerce- Employers

organizations- Labour unions- Intermediary

financial institutions- R&D institutions- Training institutions- Sector-level market

institutions- Standard agencies- Information agencies

- Access totechnology, expertise and capital

- Manpower- Management and

entrepreneurship- Market access and

information- CSR uptake

Level Enabling environmentInternational/regional Macro Meso MicroCountries State Branch Company

Table 1.1: Elements and Levels in Private Sector Development

Elem

ents

Source: Adapted from Schulpen and Gibbon (2002, p. 3)

1.2 The role of policyinterventions inprivate sectordevelopment

The next section provides some conceptualclarification on the role of policy in private sectordevelopment and knowledge management.Subsequently the chapter will focus on networks andtheir role in information exchange and knowledgecreation. For this purpose, the report makes aconceptual distinction between arm-length networksand embedded networks. There are two reasons for this:

First, the difference is crucial in understanding thepotential of networks in the context of knowledgemanagement. Networks differ significantly indesign and their capability to manage and createknowledge.

Second, the concept of embeddedness goes to theheart of current research on economicinstitutional development and the importance ofdeveloping strong institutionalized relationswithout falling prey to corporate capture.

approach by government to economic policy meansthat rather than focusing on the divide betweenliberal and interventionist states, the appropriatecontemporary distinction is between the differentkinds of governmental involvement in the market andits contribution to private sector development.However, Rodrik (2007, p. 99) notes that “fewpeople seriously believe any more that state planningand public investment can act as the driving force ofeconomic development” and that instead,governments should focus on creating – throughpublic action – a business environment that isconducive to privately initiated restructuring,diversification and technological dynamism.

So, which role can national authorities play, andwhich instruments are at their disposal to fosterprivate sector development? According to the OECD(2007, p. 22), there is broad consensus that, whilegovernment has a clear role in promoting economicgrowth, development and, ultimately, povertyreduction, its main focus in doing so must be oncreating suitable conditions that enable theemergence of a strong private sector, which is

regarded as the main engine behind economicgrowth.

“Nowadays the development of the private sector indeveloping countries is regarded as essential. Thelogic behind this statement is simple: povertyreduction is the main objective of development co-operation and a target of development policies.Economic growth is essential for development, andgrowth is best achieved through the private sector,which in turn needs to be adequately promoted. Thus

policies to foster private sector development (PSD)deserve most attention”. (OECD, 2007, p. 22)

A number of policy options are open to governmentsto facilitate the development of the private sector.Lau Schulpen and Peter Gibbon (2002) provide anoverview of the different elements and levels relevantfor private sector development and which can beinfluenced by government policies. Table 1.1summarizes their findings.

Recent academic research has given significantattention to the role of government and public-private relations in economic development (Rodrik,2007; Evans, 1995; Amsden, 2001; Chang& Grabel,2004-2005; Lin & Chang, 2009; Altenburg; 2011).“This transformative role”, as it is called by Evans(1995, p. 6), places greater demands on the states’capacities and involvement in economic development.In turn, this increased acceptance of a strategic

KnowledgeManagement Networks

Policy Effectiveness

Private Sector Development

Economic Development

Figure 1.1: Focus of the report




However, table 1.1 can help us identify the multitudeof actors involved in private sector development, bymaking it clear that PSD is interlinked with manydifferent policy areas. The table was instrumental inpreparing the study visits and interviews for the casestudies undertaken for this report. These study visitsrevealed that a wide range of actors is involved inprivate sector development in public institutions,private entities and civil society organizations. Thisprivate sector development ecosystem is mapped infigure 1.2.

It should be noted that the intention of table 1.1 is tolist a whole set of factors influencing private sectordevelopment. It does not causally disentangle therelationships or order them according to importance.Not all elements are of equal relevance andimportance, nor is the list exhaustive. The same holdsfor several more specific policy interventions whichcan be designed by governments to promote privatesector development. These can be of a financialnature or a more technical nature. The formerincludes loans and equity financing for local privateenterprises, providing risk capital and guarantees,providing concession and export credits or micro-loan programmes. The latter includes the provision ofbusiness development services such as exporttraining, vocational training, investment advice,grants to conduct feasibility studies, managementprovision (finding and recruiting capablemanagement) and information provision on markets,regulations, etc. (Schulpen & Gibbon, 2002, p. 5; seealso Brainard, 2006; Parhizkar et al.; 2010; Andriesse& van Helvoirt; 2010; McKenzie; 2009).

With regard to intra-organizational networks,scholars have focused on three types of learningprocesses: knowledge creation, knowledge retentionand knowledge transfer (Argote and Ophir, 2002).Knowledge creation is the emergence of newknowledge within an organization. Knowledgeretention is the capture of knowledge within anorganization (Argote et al., 1990). Knowledgetransfer occurs when knowledge present in one partof an organization affects the performance of anotherpart. (see Carley 1992; Devadas and Argote; 1995;Baum and Berta 1999). The literature on inter-organizational learning contains studies on dyadicnetworks, triadic networks, an organization set or anorganization field (Baker and Faulkner, 2002). Ingeneral inter-organizational learning will occur“when one organization causes a change in thecapacities of another, either through experiencesharing, or by somehow stimulating innovation”.(Ingram, 2002; see also Bruneel et al., 2010)

This literature on organizational learning andknowledge management is of interest forstrengthening the capacities of single organizations orprojects. In this context several practical guides andconsultancy services are available which focus onknowledge management and learning strategies ingeneral or on specific aspects of it including inter aliaknowledge mapping, putting in place knowledgesharing systems and supportive informationtechnology, updating intranet pages and staff contactinformation, strengthening communities of practice(teams or networks), using stories to communicateeffectively, investing in new organizational processes,and encouraging cultural change within theorganization. (Hovland, 2003, p. 2). Box 1.1provides an overview of KM tools andmethodologies.

Knowledge management is the process through whichorganizations transform information into knowledgewhich is instrumental to achieving their goals. Theyrealize this by constructing knowledge managementstrategies. In the academic literature, knowledgemanagement strategies are mostly discussed in thecontext of organizational learning (for earlycontributions see Argyris, 1993; Argyris and Schön,1978; Levitt and March, 1988 ). There are severalstreams of literature on organizational learning. First,some focus on individuals as key agents of learningwithin organizations (Argyris and Schön, 1978). Asecond stream of literature focuses on howorganizations themselves learn through sets of rulesand procedures. The latter is very much related to thework of James March (Levitt and March, 1988;March, 1999). A third stream of literature does notsee information and knowledge residing in singleindividuals or in organizations as such but innetworked ties within and between organizations.

1.3 Knowledgemanagement andprivate sectordevelopment

Private sector

development 'ecosystem'

Ministriesof finance/ economy/ industry/ commerce/ planning Business

associations: confederations, chambers (sectoral, geographic), trade unions, entrepreneur clubs

Investors: stock exchanges, investment agencies, banks, international cooperation

Micro & small enterprise support/training agencies/supply chain initiatives

Business infrastructure: quality, standards & certification / ICT, logistics &customs / statistics agencies

Citizen & consumer lobbies: ombudsmen, supreme audit, NGOs

Policy initiatives: one stop shops, development plans, competitiveness & productivity councils

Research collaborators: universities / business schools / research & technological orgs(RTOs)/cleaner production centres / consultancies

Figure 1.2: The private sector development ecosystem




Box 1.1: Knowledge Management Strategies andMethodologies

After Action Review: An After Action Review(AAR) is a process developed by the United StatesArmy. It is a simple process used by a team tocapture the lessons learned from past successesand failures, with the goal of improving futureperformance. It is an opportunity for a team toreflect on a project, activity, event or task so thatthey can do better the next time.

Database: Information stored in a computer forsubsequent retrieval. Databases are structured tosupport data architectures, and may be “flat”,relational, or object-oriented. Modern databasesare relational.

Knowledge Base: An organized structure ofknowledge that facilitates the storage of data,information, and knowledge to be retrieved insupport of a KM process.

Knowledge Fair: Knowledge fairs (KFs) are face-to-face events in which participants set updisplays to share their undertakings. KFs can beinternal to an organization or open to partnersand the public. They are "free-flowing, open,flexible, and non-hierarchical. People can seewhat is happening, can interact with each other,and can see what others are doing.

Knowledge Management Audit: A KM audit is asystematic identification and analysis of anorganization’s knowledge needs, resources, flows,gaps, uses, and users. It usually includes a reviewof people-based knowledge, capability, and skillsas well as information. It also examines, from acritical perspective, the values, vision, culture, andskills of an organization, from the perspective ofits knowledge needs.

Knowledge Map: A knowledge map characterizeslinks between used knowledge concepts and theirspecific grammar, so they can be easily searchedor browsed by users.

Knowledge Mapping: This is a process todetermine where knowledge assets reside in anorganization, and how knowledge flows operatein the organization.

Activity-based Knowledge Mapping is a toolwhich can link knowledge inputs and outputs toongoing organizational activities and processes(ranging from office mail to strategic reviews). Ithelps to understand, in a visual manner, howactivities are ordered and why and who performsthe activity, what inputs are required and howknowledge and information flows can support thetask in question. This results in a series ofdiagrams to visually display how knowledge iscurrently used within a given process, as well asthe source of the knowledge. Furthermore, itpoints to where/ how improvements can beachieved.

Knowledge Repository: A place where knowledgeis gathered and stored and can be accessed andused by other people. It may be a physical placelike a library, a “virtual” place like an interactivewebsite or an online discussion board, or a placewhere people gather such as a café or an informalmeeting room or discussion area created toencourage knowledge sharing.

Mind Maps: Mind maps are a powerful graphiclearning technique that can be applied in allaspects of life where clearer thinking will enhancework performance and effectiveness. They are anon-linear way of organizing information and atechnique that enables capturing the natural flowof ideas.

Online Collaboration Platform: This is a general"catch all" term to describe a range of Internet-based tools that allow people to collaborateonline. This may include online conversations inforums and email lists, co-creation of documentson wikis, file sharing and storing, creation of usergroups based on thematic topics, etc.

Peer Assist: Peer assist is a method of cooperation,based on dialogue and mutual respect andlearning, which seeks to share knowledge, elicitfeedback on a problem, project, or activity, anddraw lessons learned for people in similarsituations. This tool encourages participatorylearning through asking those with experience incertain activities (or situations) to assist thosewishing to benefit from their knowledge.

members of a group and within or betweenorganizations or nations. It explores bothdirectional and bidirectional exchanges, includingsharing of Information or business relationships.

Storytelling: This is the use of stories as a way ofsharing knowledge and assisting learning in anorganization. Stories can describe complicatedissues, explain events, communicate lessons,and/or bring about cultural change.

World Café: World Café is a system of exchangebased on social café conversation whereby agroup of people is enabled to explore a chosentopic. The aim is to tap directly into the socialnature of much of our learning. It is based on aset of integrated design principles.

Peer Coaching: Peer coaching is a method ofprofessional development whereby colleaguesagree to formally learn from each other. It is aconfidential process through which professionalsshare their expertise and provide one another withfeedback, support, and assistance for the purposeof refining present skills, learning new skills, and /or solving task related problems.

Scenario Learning/Scenario Testing: This involvesmodelling several likely scenarios for the future(instead of just one) so that decisions can be madebased on a wide range of possible futures.

Social Network Analysis: Social Network Analysis(SNA) is a research technique that focuses onrelationships among social entities, such as

Notwithstanding the prominence of literature onorganizational learning and knowledge managementrelatively little attention has been paid thus far to thecontribution it makes to specific policy areas ineconomic development and PSD. As Hovland (2003,p. vi) notes in a literature review:

“A very large proportion of the literature on KM andorganizational learning is developed by, and aimed at,the corporate sector. Therefore, business rationales oforganisational efficiency and financial profit stronglycharacterise the underlying motivation for much ofthe KM literature and recommendations.Development agencies can benefit from this in so faras they also need to continually improveorganisational efficiency. However, the overarchinggoal of poverty reduction and the MDGs that manydevelopment agencies work towards require that KMand learning in the development sector should notonly contribute to internal efficiency but also toissues such as improved.”




Relatively little consolidated information can befound in the academic literature on the nexusbetween private sector development and knowledgemanagement. A literature search for papers whichfocus on the interaction between knowledgemanagement and private sector development showsthat papers deal with many different topics includinghuman resources (Sakalas & Vienazindiene (2010);Debrah & Mmieh (2009); Redpath, Hurst & Devine(2009); Simard & Doucet (2005); Francis & Sinclair(2003); Rubery et al. (2002), etc.), education andtraining (Kroukamp, 2010); Bester & Boshoff (2009);Hjort (2008), etc.), ICT (Predl (2010); Zelenka(2009); Butler et al. (2009); etc.), science andresearch (e.g. Hemphill & Vonortas (2003) and manyorganizational-level aspects such as the design of ITsystems for KM, the development of systems forstoring knowledge in databases or the use of storedknowledge within organizations. (Goodman, sd;Butler et al., 2008; Hazlett et al. 2008; Badamas,2007; Jain, 2007).

This broadness is also illustrated by a workshopreport by GiZ. In 2007, GiZ organized, jointly withFAO, a workshop on knowledge management inrural development. The workshop demonstrated thatknowledge management in relation to an assessmentof policy outcomes in the context of developmentremains difficult to define.

Notwithstanding the breadth of the concept,knowledge management can be approached fromseveral distinct perspectives. As argued in theintroduction, this report takes a specific networkperspective. This choice is not only based on theincreasing academic relevance of networks forknowledge management (Newig et al. 2010), but alsoon the fact that it enables us to explore thepossibilities of network governance as an emergingmeans to effectively meet shared challenges.Networks and the importance of networks arefurther introduced in the following sections.

The importance of networks, and the social capitalwhich emerges out of networks, has been recognizedby policy-makers and academics from many differentdisciplines (Ostrom, 1990, Woolcock, 1998;Bourdieu, 1984, 1988; Coleman, 1990; Podolny &Rauch, 2007; Putnam, 2000; Barabassi, 2002;Buchanan, 2002; Sabel and Zeitling, 2012; Torfing,2012; Lobel; 2012; Rhodes, 2012; Gilardi andRadaelli, 2012; Uzzi et al., 2007). Social networksconstitute structures of opportunity and constraintfor individuals as well as corporate actors. Networkshave proven to be crucial for several policy outcomesincluding learning, reduction of uncertainty, increasedquality of decisions and performance. In a recentleading publications Slaughter (2004) and Martínez-Diaz and Woods (2009) focused on networks as a keyconcept in order to understand current developmentprocesses in a global order. Martínez-Diaz andWoods (2009) identify five functions of networks,namely agenda-setting, consensus building, policycoordination, knowledge production and exchange,and norm-setting and diffusion. The third and fourthfunctions (policy coordination and knowledgeproduction and exchange) are of especially crucialimportance in linking knowledge management andprivate sector development.

Since networks are based on non-hierarchicalcoordination and horizontal embedded relationsbetween actors, many authors consider them asdistinct type of governance besides hierarchies(governmental bodies) and market. (Börzel, 2011; see also Williamson 1979; Powell, 1990; JacobTorfing; 2012; Scharpf, 1993). As Renate Mayntzstates: “instead of emanating from a centralauthority, be this government or the legislature,policy today is in fact made in a process involving aplurality of both public and private organizations”.Hence, “the notion of ‘policy networks’ does not so much represent a new analytical perspective butrather signals a real change in the structure of thepolity. (Mayntz, 1993, p. 5; quoted in Börzel, 2011, p. 52)

1.4 The importance of networks and networkgovernance

In general, inter-organizational learningwill occur when oneorganization causes achange in the capacitiesof another, eitherthrough experiencesharing, or by somehowstimulating innovation.

Social networks can be defined “as a set of nodes or actors (personsor organizations) linked by social relationships or ties of a specifiedtype. A tie or relation between two actors has both strength andcontent.”

(Castilla et. al., 2000, p. 219)




Although embryonic forms of network governancehave existed in different times and places over theyears, it could be argued that during the 20th centurymarkets and hierarchies became the most prominentgovernance form (Perrow, 2002). At the turn of thepresent century however – and especially followingthe development gains in many Asian countries – thenetwork form has again become a credible type ofgovernance structure. The rise of network governancetakes place in a context of a more general andprofound shift from government to governance whichis redefining the role of states in market regulation.Many observers have argued that a partial andprogressive shift has been occurring since the 1980sfrom public to private or public-private governanceon certain issues. Tatenhove et al. (2000, p. 48)identified the following major evolutions: (a) thetraditional divides between state, market and civilsociety are disappearing, while (b) the interrelationsbetween these spheres increasingly exceed the nationstate, (c) resulting in new coalitions between stateagencies, market actors and civic parties both onlocal and global levels (see also Abbott and Snidal,2009; Marx, 2011). A similar shift is described inLobel’s (2004; see also 2012; Rhodes, 2012) TheRenew Deal: The Fall of Regulation and the Rise ofGovernance. He identifies eight major characteristicswhich describe the governance paradigm:

Increased participation of non-state actors inpublic policy making and provision due to theirknowledge and expert capabilities and efficiency.The ‘ecosystem’ of actors involved in privatesector development (see figure 1.2) illustratesnicely the multitude of persons and entitiesinvolved in private sector development.

Public/private collaboration and interaction in thedevelopment of policy norms and goals.Traditionally, private actors were solely objects ofregulation and subjected to norms of behaviour.In the new forms of governance, they areincreasingly involved in norm-generating anddeveloping and changing the norms of behaviour.

Diversity and competition within the market. Thisrefers to the idea that a regulatory regime musttake into account a diversity of values andinterests of actors involved in the policy-makingprocess, and recognize the legitimacy of privateeconomic interests, without falling victim tocorporate capture or jeopardizing the provision ofpublic goods.

Decentralization of policy competences, bothvertically (multi-level government) andhorizontally (multi-actor governance).

Integration of policy domains by collaborationacross functional divisions of government. Policyintegration recognizes that functional dividesbetween policy areas has limiting effects on policydevelopment. Multi-faceted policy areas such asprivate sector development are influenced bymany different policy areas as is illustrated insection 1.2.

A move to non-coerciveness (‘soft law’) policyinstruments instead of hard law ‘command andcontrol’ policy instruments. Policy-making isincreasingly characterized by policy interventionswhich rely on provision of information,benchmarking, monitoring and others toimplement policies.

Adaptability and constant learning. Given thenature of a highly dynamic policy environmentwith increasingly new complex policy challengesgovernance requires adaptability and constantlearning, recognizing the ongoing requirement toadapt to change. Systems to facilitate this form oflearning are increasingly developed.

Regulatory coordination which aims to facilitatethe communication between public and privateproviders in the policy making process.

Taken together, these dimensions point to an overallmodel of network governance which is more flexiblethan existing forms of governance and takes intoaccount the many different private actors involved inthe policy-making process. The rise of networkgovernance is not only limited to new policy fields ordeveloped countries but omnipresent in severalexisting policy fields and across the globe. As TilmanAltenburg (2011) notes “Industrial policy (like manyother policy areas) is increasingly shaped by network-like forms of governance based on self-organisationand voluntary horizontal coordination.” For thisreason the present report focuses on several examplesof different types of networks, specifically intra-organizational networks, inter-organizationalnetworks and international networks.

An interesting example of how networks facilitatelearning by doing and how they are instrumental inachieving policy goals related to industrial devel -opment, both on a global and international scale, asseen in the National Cleaner Production Centres(NCPCs) initiated by a joint effort of UNIDO andUNEP. Box 1.2 presents these NCPCs as networks.

GENERAL CONTEXTAn interesting example of intra-country inter-organizational knowledge networks pooledtogether in regional and global platforms concernsthe UNDIO-UNEP National Cleaner ProductionCentres (NCPCs). Cleaner production is thecontinuous application of an integrated preventiveenvironmental strategy to processes, products andservices to increase resource efficiency andproductivity and reduce risks to humans andenvironment. Changing consumption andproduction patterns towards more sustainableones is singled out as one of the key-objectives forindustrial policy. Cleaner production (CP) is alsostrongly embedded in international environmentaland sustainable development policies andstrategies such as the Millennium DevelopmentGoals (MDG), in particular MDG 7 (ensuringenvironmental sustainability). Moreover, manyleading publications of multilateral organizationsstressed the importance of cleaner production.The recent UNEP report on Green Economyhighlighted the importance of cleaner productionin achieving sustainable consumption andproduction.

However, the implementation of cleanerproduction and the transfer of cleanertechnologies is not straightforward, especially indeveloping countries, due to several barriersincluding a lack of knowledge. Firms and localentrepreneurs are usually not aware of the scopeand potential of CP. In order to address thisknowledge deficit UNIDO and UNEP establishedNCPCs, which have begun to play a major role indeveloping a “culture” for cleaner production inlocal communities and country-wide bycoordinating cleaner production programmes,acting as a facilitator between industry,government, universities and non-governmentalorganizations (NGOs), and building the humancapacities required to acquire and manage cleanerproduction and technologies.

Since 1994, more than 47 NCPCs have beenestablished which have catalyzed theimplementation of CP methods, policies, practicesand technologies in their respective homecountries and beyond. The countries includeAlbania, Armenia, the Plurinational State of

Bolivia, Brazil, Bulgaria, Cambodia, Cape Verde,China, Colombia, Costa Rica, Croatia, Cuba,Czech Republic, Ecuador, Egypt, El Salvador,Ethiopia, Guatemala, Honduras, Hungary, India,Kenya, Republic of Korea, Lao People’sDemocratic Republic, Lebanon, Macedonia,Mexico, Moldova, Montenegro, Morocco,Mozambique, Nicaragua, Peru, Romania, RussianFederation, Rwanda, Serbia, Slovakia, SouthAfrica, Sri Lanka, Tunisia, Uganda, Ukraine,United Republic of Tanzania, Uzbekistan, VietNam, and Zimbabwe. The establishment ofNCPC’s is achieved through multiple projectagreements mainly involving a donor(institutional donors for country-specific projectson the one side and project-based donors formulti-country projects on the other side) and ahost country (or hosts countries for multi-countryprojects) for a period of initially 3 years.

MAIN ACTIVITIES OF NCPCSNCPCs provide mainly four types of CP services.Awareness-raising is a first activity for a NCPC.Awareness-raising targets to explain what CP is,what benefits it can bring and what roles peoplecan play to implement it. NCPCs disseminateinformation on CP concepts, methods andbenefits to raise awareness and commitment forCP. NCPCs also have an important role indisseminating best practices and best technicalcase studies of CP techniques that emerge as aresult of local demonstration projects. SecondlyNCPCs work with individual enterprises toidentify, evaluate and help implement CP optionsthat are appropriate to the enterprise’s processes,products or services, technologies andmanagement systems. Thirdly, NCPCs train acadre of national experts that can assistenterprises and other organizations with theimplementation of CP, through training of trainersor assessors. It is an essential activity of NCPCs tobuild up local expertise and capacity to spread CP.NCPCs can offer technical assistance to individualenterprises that request it. Fourthly NCPC’s liaisewith government and other key stakeholders toidentify ways to create a policy environment moreconducive to CP.

MULTI-LEVEL NETWORKING ACTIVITIESIn order to strengthen the network effect,

Box 1.2: The UNIDO-UNEP National CleanerProduction Centres




Regional Roundtables for SustainableConsumption and Production were established inEurope (since 1994), Asia Pacific (since 1998),Africa (since 2001) and Latin America (ad hoconly). Concerning regional networking, UNIDOorganizes activities to achieve exchange of know-how and experience between staff of the NCPCsin different countries. Several examples existwhere networking and cooperation betweenindividual NCPCs have happened, in some casesmature NCPCs have helped new ones to build uptheir capacity. The UNIDO-UNEP Programme haslaunched several regional networking initiatives.The regional network support activities such as aknowledge management system, training and CPawards, supports NCPCs to cooperate in thedesign and joint implementation of regionalprojects and it is a mechanism of regional expertsexchange.

The most important networking initiative at theglobal level is the UNIDO-UNEP global networkwhich is organized in the context of the ‘annualDirectors’ meetings’. These meetings of the NCPCdirectors and a number of CP experts were themost important global networking activities of theProgramme. They were designed to facilitate thesharing of information; the dissemination of bestpractices among NCPCs and the participation ofsupported the establishment of a regional networkof NCPCs. The global and regional networkscomplement each other. The regional network hasa number of interesting features that go beyondthe services currently offered by the globalnetwork. More importantly, the regional networkis open to such institutions that have never beenpart of the UNIDO-UNEP global network andwho have not received any assistance throughthese agencies.

Several of the countries featured in this reporthave established NCPC’s. Some interestingexamples include:

VIET NAM NATIONAL CLEANERPRODUCTION CENTRE. The Viet Nam NCPC (VNCPC) was established in1998. It is part of the Hanoi University ofTechnology. The Advisory Board members comefrom inter alia different ministries, the Viet NamChamber of Commerce and Industry, UNIDOoffice in Hanoi, Swiss State Secretariat forEconomic Affairs (SECO) in Hanoi and the HanoiUniversity of Technology (HUT). Concerning itsresults, the Cleaner Production Energy Efficiency

program ran from 2002 to 2004, during thisperiod, 16 companies belonging to differentindustrial sectors have joined forces with VNCPCto introduce energy efficient techniques that canbe applied widely throughout the Vietnameseindustry. 191 specific measures for material anenergy savings were implemented across the 16case studies.

ETHIOPIA CLEANER PRODUCTION CENTRE(ECPC). The ECPC was established in April 2000 througha project agreement signed between theGovernment of Federal Democratic Republic ofEthiopia and UNIDO with the financial assistanceof the Italian Government through CooperazioneItaliana. ECPC is assisting local enterprises todevelop and implement Environmentalmanagement System based on ISO 14000. ECPChas already started the delivery of ISO 14001-EMS services in some selected enterprises inpriority sectors such as leather, textile, food andbeverage industry sectors. This is being done inpartnership with STENNUM (consulting firmfrom Austria), Quality and Standards Authorityof Ethiopia (QSAE), Ethiopian Society for CleanerProduction and Environment (ESCPE) andEnvironmental Protection Authority of Ethiopia(EPA).

EGYPT NATIONAL CLEANER PRODUCTIONCENTRE (ENCPC). ENCPC was established in 2005 by the Ministryof Trade and Industry in close cooperation withUNIDO as a service provider for the EgyptianIndustry. The ENCPC is part of the EgyptTechnology Transfer and Innovation Centers(TTICs). Among other projects, the ENCPC isproviding technical assistance for the Egyptiancompanies on energy efficiency and industrialapplication of renewable energy.

CLEANER PRODUCTION CENTRE OF SERBIA. Cleaner Production Centre of Serbia, launched in2007, works with support of the Government ofSerbia and its members of Advisory Board arehigh representatives of various ministries, theOffice of the Deputy Prime-Minister of theGovernment, OEBS Mission in Serbia, Universityof Belgrade and the Serbian Chamber ofCommerce. The Cleaner Production Centre ofSerbia offers to companies consultancy inassessing the situation of their sites and improvingoperations in terms of raw material usage, energyefficiency, waste management and other aspects ofbusiness.

CENTRO NACIONAL DE PRODUCCION MASLIMPIA- EL SALVADOR (CNPML).The CNPML was created in early 1999 andbecame an independent foundation in December2005. It has close ties with private sectororganizations and particularly with the Agro-Industrial Chamber (CAMAGRO). CNPML hasconducted several CP audits including 90 in-plantassessments and 200 quick scans. In addition,about 2000 people were trained. Finallyconcerning policy advice the Centre contributedto the Government’s CP policy by participating inthe advisory committees on environmentalstandards for enterprises and contributing to thespecific standard setting and sector manualpreparation.

NCPCs are an interesting example of a knowledgenetworks since they create networks withincountries and across countries on a regional andglobal level. By institutionalizing andembeddeding network ties the NCPCs aim tocreate new knowledge with regard to cleanerproduction, diffuse existing knowledge andfacilitate learning across networks and initiatives.Notwithstanding the network nature of theNCPCs approach a recent evaluation highlightedthe importance of further developing a clearnetworking strategy. This recommendationunderlines another issue which is of importance innetwork governance. Networks are indeedbecoming more and more important, howeverknowledge on how to effectively run and managenetworks is more sparse. In order to furtheroptimize network outcomes, network integrationshould be pursued with a clear networkcoordinator. NCPCs might experiment in order toachieve this optimization.

Cleaner production is the continuous application of an integrated preventive environmental strategy to processes, productsand services to increase resource efficiency and productivity and reduce risks to humans and the environment.




Altenburg (2011, p. 20) adds to this that “public-private policy networks are needed to ensure frequentmeetings on particular policy issues, and repeatedmutual exposure serves to build trust”. Theimportance of embeddedness is also stressed byleading political economists such as Dani Rodrik(2004, p. 17) who argues that “the critical insti -tutional challenge therefore is to find an inter mediateposition between full autonomy and fullembeddedness.” Recent public administrationliterature equally gives significant attention to theimportance of embeddedness for public administrationperformance (Isett et al. 2011; Provan & Kenis, 2007).

This section further develops the concept of anddistinction between embedded and arm-lengthnetworks. This focus is chosen since the distinctionbetween the two types of networks means they differin terms of the type of information/knowledge theyprovide, which is key in the context of knowledgemanagement.

In other words, not all networks are equivalent in thefunctions they perform (Martínez-Diaz and Woods,2009) and it is important to understand thedifferences between them. A key conceptualdistinction here is the difference between embeddednetworks and autonomous or arm-length networks.The ‘embeddedness approach’, which will bediscussed in some detail below, is key tounderstanding industrial development policies, therole of government and public-private relationstherein (Altenburg, 2011). As Peter Evans (1995)argued in his acclaimed Embedded Autonomy,governments must have a good understanding of thedevelopments in the private sector in order to developeffective and efficient policies. As a result, statesshould be “embedded in a concrete set of social tiesthat binds the state to society and providesinstitutionalized channels for the continualnegotiation and renegotiation of goals and policies”(Evans 1995, 12; see also Rodrik 2004; 2007).Consequently, “variations in internal stateorganization and state-society relations createdifferential degrees of developmental capacity.”(Evans 1995, p. 73; see also Bates, 1989) Thecomplexity and stability of the interrelatednessbetween government and market players ishypothesised to increase government effectiveness(Samuels, 1987).

1.5 Networks andeconomicdevelopment

The concept of networks - deepening the approach of Martínez-Diazand Woods (2009) and Slaughter (2004) – needs to be developedfurther to gain a more in-depth insight into what networks do (whyare they relevant) and how they vary in nature depending on the typeof network. Whether networks will be enabling or constraining forprivate sector development and PSD policies depends on the natureof the network and the governance of the network.

When Clifford Geertz visited amarket, he noticed that certainbuyers would repeatedly go to thesame sellers without browsing thewhole market and hence, manyeconomic transactions had arecurring pattern.

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collaboration comes from an empirical observationthat many organizations work and experiment withmany different forms of co-operation andcollaboration (Powell, 1990; Scott; 2000; Helper et.al., 2000; Knoke, 2001).

The further development of embeddedness theory forempirical research was undertaken by Brian Uzzi,who elaborated the difference between arm-lengthnetworks and embedded networks for economicaction:

Arm-length networks are characterized by leanand sporadic transactions and function withoutany prolonged human or social contact betweenparties who need not enter into recurrent orcontinuing relations (Uzzi, 1996, 1997, 1999). Inother words, these networks are characterized byminimal information exchange (Williamson,1985).

Embedded networks are characterized by theirstrength, repetitiveness, transmission of tacit,thick and additional information and theirgrounding in norms of trust and reciprocity (Uzzi& Gillespie, 2002; Perrow, 2002, p. 25).

Embedded networks can be identified or measured inthree distinct ways (Uzzi & Gillespie, 2002). A firstindicator for embeddedness is duration. The longer anetwork tie lasts, the greater the possibility that closebonds of trust and reciprocity are developed. Asecond indicator is multiplexity, which refers to thediversity of relationships involved between twoactors/organizations. The more diverse therelationships are, the more embedded network tiesbecome. A third indicator of embeddedness is thedispersion or concentration of an actor’s network. Aproxy for this indicator is the size of a network.Large networks tend to be mainly constructed ofarm-length network ties, while small networks aremore related to embedded network ties. Throughoutthe network literature the distinction between arm-length and embedded networks is conceptualized inorder to capture their different performance withregard to knowledge and information exchange.

In order to understand economic transactions andinteractions, Granovetter (1985) argued, one mustanalyze the underlying structural and culturalproperties of social networks. Structural propertiesinclude the number of exchange relations and thestrength of relations between actors andorganizations. The cultural properties include thefoundations of exchange such as trust, reciprocity,and instrumentalism. These properties, which can bevery diverse, define the network as a social structure.An important difference in these properties concernsthe strength, or embeddedness, of the ties in anetwork.

The importance of embedded transactions andinteractions is best illustrated by the boomingliterature on network forms of organizations and thebroader market-network discussion (see Rauch &Casella, 2001; White, 2002). The network form oforganization can be seen as a group of agents whopursue repeated, enduring and reciprocal exchangerelations with one another across organizationalboundaries and, at the same time, lack a legitimatesingle organizational authority to arbitrate andresolve the disputes that may arise during theexchange (Podolny and Page, 1998; Powell 1990;Knoke, 2001). The stress on co-operation and

He argued that the embeddedness of economic actionin pre-industrial societies was supplanted in modernlife by the logic of efficient markets, which resulted inatomistic relations between the transacting parties.However, when Clifford Geertz (1979; see also 1993;1995) visited the Bazaar of Sefrou in Morocco henoticed that certain buyers would repeatedly go tothe same sellers without browsing the whole marketand hence, many economic transactions had arecurring pattern.

In these cases, repeated interactions (social structures- networks) without authority structures governedmarket transactions and organized economic activity.Hence, underlying the economic transaction was asocial structure (and culture) which 'guided' thesetransactions. Granovetter (1985) developed this ideafurther and argued that all economic transactions areembedded in social relations. Moving away from an'oversocialized' and 'undersocialized' view ofeconomic transactions towards an embedded view, heargued that the social structure underlying thetransactions is crucial in understanding economicaction and development.

1.5.1 The importance ofembeddedness

The importance of embeddedness has been mostly developed in themanagement and organizational studies literature. Karl Polanyi((1944) 1957, pp. 43-68) famously analysed the emergence of theseparation of social and economic relations.

The social structure underlying thetransactions is crucial in understandingeconomic action and development.




“The knowledge needed to compete in worldmarkets, as distinct from factual information,comprises unique skills, sui generis capabilities, novelproduct concepts and idiosyncratic productionsystems. [… Knowledge] is the key to economicdevelopment, which involves a transformation fromwealth-creation centered on primary product-basedassets to wealth-creation centered on knowledge-based assets.” (Amsden, 2001, p. v)

The locus of the knowledge creation is inter alia inthe network. This can be the result of both formaland informal modes of collaboration. This type ofinformation generation was analysed by Powell andcollaborators. Powell et al. (1996, p. 118) argue that“knowledge creation occurs in the context of acommunity, one that is fluid and evolving rather thantightly bound or static. ... Sources of innovation donot reside exclusively inside firms; instead, they arecommonly found in the interstices between firms,universities, research laboratories, suppliers, andcustomers” (Powell, 1990).

Thirdly, the distinction between arm-length networksand embedded networks in relation to information isalso important in the debate on informationimperfections and asymmetries. Building on the path-breaking work by Nobel laureates Akerlof (1970)and Stiglitz (2001) on the role of (imperfect)

First of all, networks transfer self-contained pieces ofinformation (i.e. facts). In this way, networks arechannels or transmitters of information (Podolny &Page, 1998). This transmission of information canoccur in both arm-length networks as well asembedded networks. In the case of arm-lengthnetworks, the information is very limited. Inembedded networks, the information is 'thicker' andmore tacit (Uzzi, 1996). Hence, embedded tiespromote the transfer of more fine-grainedinformation. Susan Helper (1991) for examplereported that ‘thicker information’ on strategy andproduction know-how is transferred throughembedded ties, thereby promoting learning.

Secondly, networks may foster learning byencouraging novel syntheses of information that arequalitatively distinct from the information thatpreviously resided within the distinct nodes. In thiscase, networks do not only facilitate the transmissionof information, but also foster the creation ofknowledge. The difference between informationtransmission and knowledge is subtle but important.In contrast to information, which is defined as self-contained facts, knowledge is conceptual, a uniquecombination of facts that interact in intangible ways(Amsden, 2001, p. 3). According to Amsden (2001),knowledge is the single most important asset for bothmicro- as well as macroeconomic development:

1.5.2 Informationtransmission andthe creation ofknowledge

The main resources which go through networks are information (indifferent forms) and knowledge. Besides information and knowledge,tangible assets such as people and skills are transmitted over networkties. A first crucial difference in the functioning of different networksis related to the nature and amount of information exchanged innetworks.

Knowledge is the single mostimportant asset for both micro- andmacro-economic development.Recent research in sociology andeconomics has shown howknowledge networks contribute tothe reduction of informationasymmetries.

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(Burt, 1992, p. 18). The latter will occur mainlyin networks dominated by arm lengthrelationships, because in these types of networksone can manage many more network ties (cfr. lowco-ordination costs). According to Burt (1992),the essence of network benefits does notnecessarily lie in the presence of network ties butin the absence of ties and the possibilities ofagents to exploit this absence (structural hole) byforming a bridge between two previouslyunconnected nodes.

The nature of information which is transmitted.Arm-length networks are characterised byminimal or very thin information exchange. Inembedded ties, information exchange is ‘thick’. Itshould be noted that the difference between ‘thin’and ‘thick’ information is difficult toconceptualize and operationalize.

Information transmission versus knowledgecreation. Information transmission occurs both inarm-length and in embedded networks, butknowledge creation occurs almost exclusively inembedded ties. This makes them extremelyvaluable because in this way new products andmarket-opportunities can be developed.

Table 1.2 summarizes the main differences betweenarm-length and embedded networks.

information for economic development, manyeconomists have explored the implications ofasymmetric information, i.e. the fact that differentpeople and organizations know different thingswhich are valuable for the other party. There aremany mechanisms for the elimination or reduction ofinformation asymmetries. Most of them are discussedby Stiglitz (2001) in his Nobel Prize Lecture onInformation and the Change in the Paradigm ofEconomics. Stiglitz only marginally focuses on theimportance of networks. However, more recentresearch in sociology and economics has shown hownetworks contribute to the reduction of informationasymmetries.

In other words, there are three important differencesbetween arm-length networks and embeddednetworks in relation to information transmission andknowledge creation:

The amount of information which can beprocessed within a network which goes into anetwork. This is a function of the number of tiesand the diversification of network ties. A highnumber of ties and a high degree of diversificationof ties (non-redundancy) increase the probabilityto gain more and new information. This ispartially a result from the fact that morestructural holes are bridged in these conditions

Table 1.2 Comparison of different characteristics between arm-length and embedded networks.

Information characteristics Arm-length Networks Embedded Networks

Information vs. knowledge Information-transfer Knowledge creationNature of information Thin Thick & TacitAmount of new information Extensive LimitedDirection of information creating one-sided advantages One-way Two-way / collaborativeInformation asymmetries High LowExchange of key-information Limited / Non-existence High

The power of embedded autonomy arises from thefusion of what seem at first to be contradictorycharacteristics. Embeddedness provides sources ofintelligence and channels of implementation thatenhance the competence of the state. Autonomycomplements embeddedness, protecting the statefrom piecemeal capture, which would destroy thecohesiveness of the state itself and eventuallyundermine the coherence of its social interlocutors.The state’s corporate coherence enhances thecohesiveness of external networks and helps groupsthat share its vision overcome their collective actionproblems.

As a result, network formation for private sectordevelopment should strive to develop networks whichinstitutionalize and embed networks that aresufficiently fluid and flexible. These types ofnetworks will facilitate the exchange of informationand the creation of new knowledge. The subsequentchapters will illustrate, via case studies, the manydifferent ways in which countries areinstitutionalizing networks within organizations,across organizations and internationally.

The discussion demonstrates that embedded and arm-length networks clearly perform different functions inthe context of knowledge management. As aconsequence, an optimal network is an embeddednetwork which is sufficiently open to arm-length tiesor networks. Information benefits, as Ron Burtargues, “are maximized in a large, diverse network oftrusted contacts.” (Burt, 1992, p. 47)

This type of network balances the liabilities of under-and over-embeddedness (Uzzi 1996, 1997, 1999, Uzzi& Gillespie, 2002; Uzzi & Lancaster, 2006) andcorresponds to the idea of Peter Evans (1995, see alsRodrik, 2007) with regard to embedded autonomy.Uzzi argues that embedded networks are morefunctional than arm-length networks. However, healso posits that an inverted U-relationship betweenembeddedness and performance exists. That is, whileembedded transactions are superior to unembeddedones, it nonetheless remains possible for anorganization to depend too much on embeddednetworks and hence become trapped in embeddednetworks. Hence, according to Uzzi a theoreticaloptimum exists between the countervailing effects ofunder- and over-embeddedness when a network iscomposed of a mixture of arm-length and embeddednetworks (Uzzi, 1996, p. 684; see also Helper, 1991).

The balancing of over-connectedness and under-connectedness is also stressed by Evans and otherpolitical economists. Evans argues, “it is worthunderlining that either autonomy or embeddednessmay produce perverse results without the other.”(Evans, 1995, p 59) In case of full embeddedness therisk of state capture by private interests is very high.Pure autonomy will not lead to institutionalizednetwork ties which build trust, exchangeinformation, create knowledge and develop mutualdependence which are all necessary for economicdevelopment. As a result both autonomy (arm-lengthrelations) and embedded relations are jointlynecessary conditions for the promotion of privatesector development and economic development. AsPeter Evans (1993, p. 248; see also Rodrik, 2004, p.17; Altenburg, 2011, p. 20) argues:




Networks are proliferating. Given the increasingchoice of networks, the importance of seriouslyinvesting in some networks and institutionalizingnetwork ties within them (high administrative co-ordination cost) and the importance of balancingarm-length ties with embedded ties, it is becomingimportant to develop clear networking strategieswith specific objectives.

Knowledge on networking strategies andmanaging effective and efficient networks is morelimited. Efforts to generate knowledge and bestpractices on network management and thedevelopment of network strategies, especially inthe context of private sector development, wouldbe welcomed. The latter can be achieved via studyvisits, workshops or illustrative case studies.These activities can contribute to identifyingsuccess factors for network management.

Networks are crucial for information exchangeand knowledge creation and diffusion, andcontribute significantly to knowledgemanagement.

Networks are increasingly emerging as a distinctform of governance which includes different typesof public and private actors within and acrossorganizational and national boundaries.

Not all networks are equivalent, and they differ in nature. Different types of networks exist, andsome are more instrumental in the context oflearning, information exchange and knowledgecreation.

There is a significant benefit to be gained frominstitutionalizing or embedding networks andhence investing in networks. The creation of trustand social capital which follows from this isbeneficial for organizations and the economy as awhole.

It is crucial not only to embed networks but alsoto be active in new or existing networks whichwill provide new information, knowledge andopportunities.

From an actor’s or organization’s perspective,successful networking implies the development ofsolid networks which continue over time and arebuilt on trust, as well as and constant movementbetween relevant networks to capture newinformation.

Knowledge management for private sectordevelopment is a wide topic. Private sectordevelopment is a result of many interacting initiativesand policies pursued across different levels ofgovernance by multiple actors. The private sectordevelopment ‘ecosystem’ (see figure 1.2) consists ofmany different actors. Knowledge management forprivate sector development should take this multi-level and multi-actor complexity into account. Inorder to provide an actionable means of addressingthis complexity, the present report focuses onnetworks. Networks play a key role in diffusing

information and generating knowledge and hencecontribute directly to economic development, asargued by many leading scholars. Moreover networkgovernance is becoming increasingly important on alocal, national, regional and global scale.Consequently the current chapter introduced networkgovernance as a distinct means of governing. Mostimportantly, the chapter presented a conceptualdifference in types of networks in order to make clearthat networks differ in nature and that this differenceis relevant in the context of knowledge managementand information provision.

1.6 Conclusions

The key pointsstressed in thischapter are:


56 Networks for ProsperityPART 1, Chapter 2: Measuring Networks across Countries: an Empirical Exploration

Chapter 2: Measuring Networksacross Countries: an EmpiricalExploration Axel Marx and Jadir Soares

“A world in which horizontal and vertical government networkscomprise different types of government institutions (regulatory,judicial, legislative), perform different functions (informationexchange, enforcement cooperation, technical assistance andtraining), have different members, have different degrees of formalityand coexists in different ways with international organizations is amessy world indeed. It may seem impossibly complex.”

Anne-Marie Slaughteriii

For the purpose of this report, we explore thepossibilities for constructing such an index. Given thelimited scope of the study, in terms of both durationand budget, we were able to collect little new data onthe basis of surveys, expert interviews, data-mining inraw datasets of existing databases, etc. Figure 2.1,based on the work of Adcock and Collier (2001)presents the ideal-typical process of constructing andvalidating new concepts and indicators. Starting fromthe distinction between intra-organizationalnetworks, inter-organizational networks andinternational networks, we therefore used aninductive approach to construct an index ofconnectedness and hence to work our way from level4 to level 1 in the concept development process. As aresult, more than 70 databases (see Annex 1)containing country level data for a significant numberof countries were screened for indicators which canbe related to international, inter-organizational andintra-organizational networks. In total more than7000 existing indicators were considered (Annex 2contains more information on the variable selectionprocess). Some indicators were identified as beingpotentially relevant, i.e. proxies for indicators on thelevels identified in the report, intra-organizational,inter organizational and international.

2.1 INTRODUCTIONNotwithstanding the importance of networks in theacademic literature, little solid empirical data isavailable to measure networks on the country leveland the effect on relevant outcome parameters suchas government effectiveness, industrial developmentand/or GDP/per capita on country level. There aremany excellent network studies available whichquantitatively analyse network effects onorganizational level, and case studies which describethe importance of networks. However, few studiesare available which aim to capture the degree towhich a country is ‘networked’ or connected takinginto account that networks develop and areinfluential on distinct levels (intra-organizationalnetworks, inter-organizational networks andinternational networks) (for an exception see Maoz,2010). No overall network index currently existswhich enables a comparison between countries andwhich substantiates the importance of networks forrelevant outcomes. So, is it “impossibly complex” tomeasure these networks?

57Networks for ProsperityPART 1, Chapter 2: Measuring Networks across Countries: an Empirical Exploration


The economic networks indicator measures the actualeconomic and financial flows between countries(trade, FDI, portfolio investments). Several othereconomic indicators capture economic flows, but theKOF is the most comprehensive and suitable one forthe purpose of this report.

Three variables were selected to capture the degree ofinter-organizational interconnectedness within acountry, namely university-industry collaboration,networks and supporting industries and the degree towhich individuals are members of professionalorganizations which are often established fornetworking purposes. The first two indicators aredrawn from the Global Competitiveness Report.University industry collaboration measures the extentto which business and research collaborate onresearch and development. It captures the networksbetween business and universities, when workingtogether pursuing innovations. Networks andsupporting industries captures the number andquality of local suppliers and the extent of theirinteraction (i.e. clusters, or the concentration ofinterconnected businesses). Both are in the literatureon inter-organizational networks and economicgeography recognized as important indicators tocapture the degree of connectedness between theseorganizations. (Podolny & Page, 1998; Powell &Smith-Doerr, 1994; Saxenian et al. 2001; EuropeanCommission, 2008) The third indicator is drawnfrom the World Values Survey and aims to capturenetworks of professionals that collaborate each otherfor specific purposes. Networking in the context ofprofessional association can be regarded as a relevantnetworking strategy in the context of informationexchange (see Burt, 1995; Baker, 2000; Putnam, 2000for a more general argument on the importance ofassociation).

This approach has several disadvantages. First, wehave to work with available data. The reportdevelops new indicators on the basis of existing datawhich is not the same as gathering new data on thebasis of the concept development framework outlinedin figure 2.1. Chapter 1 stressed the importance ofinstitutionalized/embedded ties for knowledgemanagement and knowledge creation. Such a fine-grained assessment is not possible if data is notspecifically collected from that theoreticalperspective. Working with existing data makes itdifficult to differentiate between arm-length andembedded networks. Chapter 1 also argued that the‘ecosystem’ of private sector development consists ofmany different actors, potentially creating a widediversity of networks which in all likelihood is notcaptured in existing datasets. Secondly, while manyexisting variables were screened there are likely to bemany more relevant databases. Future work couldfocus on identifying these. Nevertheless, the presentreport does succeed in developing an initial indicatorfor connectedness. Its use will shed some light on thefruitfulness of continuing the effort to develop morefine-grained measures of connectedness. Insubsequent chapters, several proposals for thedevelopment of new indicators are made.

What is the result of screening more than 7000variables with the purpose of identifying networkindicators? Surprisingly few indicators are available.Figure 2.2 presents the seven variables which wereselected for the purpose of the connectedness index.For international networks we aimed to identifyindicators that capture the flows of information andpolicy diffusion between public authorities, as well asthe information flows between economic actors(Slaughter, 2004; Martínez-Diaz &Woods, 2009).Two indicators were selected to capture this degree ofinternational connectedness, namely the KOF (SwissEconomic Institute) political globalization indicatorand the KOF economic networks indicator. Thepolitical globalization index captures inter alia themembership in international inter-governmentalorganizations and the number of internationaltreaties which are signed and ratified by a country.

Source: adapted from Adcock and Collier

STARTLevel 1: Background Concept

Broad constellation of meanings and analytic frames associates with concept of connectedness

Level 2: Systematized Concept

A specific formulation of a concept; commonly involves an explicit definition

Level 3: Indicators (measures)

Includes concrete procedures for classification

Level 4: Scores for Observatations/Matching Indicators and Data

On the basis of exisiting datasets

TASK 1: Concept FormationFormulating systematized concept byreasoning about background concept

TASK 2:OperationalisationDeveloping one or more indicators that measure the systamized concept

TASK 3:Scoring ObservationsApplying these indicators to produce scores for the observations

Apply concept in data analysis and analysis and analyse the relationship with outcomes

TASK 5:Systemized ConceptRevisiting systemized soncepts in light of insights about indicators.

TASK 4:Refining indicatorsModyifying or creating new indicators in light of observed observations

ENDTASK 6: Anylising and Comparing Connectedness.

Figure 2.1: Concept Formation Process for Connectedness: Tasks and Levels

Source: adapted from Adcock and Collier (2001)




Competitiveness report and focuses on-the-jobtraining which is in turn based on the localavailability of specialized research and trainingservices in a country and the extent to whichcompanies in a country invest in training andemployee development.

The indicators will be discussed more extensively in the following sections. Figure 2.2 presents thedifferent components of the connectedness index.

Intra-organizational networks are hard to capture. Tomeasure intra-organizational networks we identifiedtwo proxies based on the degree to which firms offertraining (Cross & Parker, 2004). The idea is thattraining enhances internal networks and learningresulting from increased interaction between peoplewithin an organization. One measure comes from theWorld Bank Enterprise Surveys and measures thepercentages of firms offering formal training. Asecond measure is based on the Global

Connectedness Index

Intra-organizational networks

Networks and Supporting Industries (GCR)

Professional Association (WVS)

Firms Offering Training (WB-ES)

On the Job Training (GCR)

University Industry Collaboration (GCR)

Economic Globalization (KOF)

Political Globalization (KOF)

International Networks

Inter-organizational networks

formulate and implement sound policies andregulations that permit and promote private sectordevelopment (Kaufman et al. 2009). The UNIDOCompetitive Industrial Performance (CIP) Indexbenchmarks competitive industrial activity at thecountry level and is an indicator for industrialdevelopment. GDP per capita from the WorldDevelopment Indicators is included as a secondgeneral measure for economic development.

The analysis will focus on the one hand on analysingthe variation in the connectedness index and its sub-indices, and on the other hand on the relationshipwith other relevant parameters such as policyeffectiveness, industrial development and economicdevelopment, without implying any causalrelationship. Data on the latter indicators is drawnfrom the World Bank governance indicators, theUNIDO Competitive Industrial Performance Indexand World Bank development indicators on GDP percapita PPP. Table 2.1 presents the variables which areused to compose the connectedness index, the sourcesfrom which they are drawn and the name of thevariable in the source database.

To analyse the relationship with relevant outcomevariables, the report focuses on four variables,namely two policy-related variables (governmenteffectiveness and regulatory quality) and twoeconomy-related variables (industrial developmentand GDP per capita). Government effectiveness andregulatory quality are chosen since networks areassumed to contribute to better policy formulationand implementation (see discussion in Part 1).Government effectiveness and regulatory quality inturn are important for better private sectordevelopment and economic development, theultimate parameters in which we are interested (seealso Altenburg (2011, pp. 35-36)). Governmenteffectiveness, from the World Bank governanceindicators series, captures different aspects ofpolicymaking and implementation, including thequality of the civil service and the degree of itsindependence from political pressures, the quality ofpolicy formulation and implementation, and thecredibility of the government’s commitment to suchpolicies. The link with private sector development isspecifically made in the concept of regulatory quality,from the World Bank governance indicators series,which refers to the ability of governments to

Table 2.1: Variables and Sources of the Connextedness Index

Variable Source Source variablePolitical Networks KOF Index of Globalization Political GlobalizationEconomic Networks KOF Index of Globalization Actual flows in economic terms

University-Firm Networks Global Competitiveness Report University-industry collaboration inR&D

Inter-firm Networks Global Competitiveness Report Networks and supporting industries

Personal Networks World Values Survey A072: Member of professionalassociations orA104: Active/inactive membershipof professional organization

Formal Training Enterprise Surveys L.10: Over fiscal year … [lastcomplete fiscal year], did thisestablishment have formal trainingprograms for its permanent, full-time employees?

On-the-job Training Global Competitiveness Report On-the-job trainingGovernment Effectiveness Worldwide Governance Indicators Government effectivenessRegulatory Quality Worldwide Governance Indicators Regulatory qualityCompetitive Industrial Industrial Development Report Competitive industrial performancePerformance (CIP)

GDP per capita World Development Indicators GDP per capita, PPP (current international $)(NY.GDP.PCAP.PP.CD)

Figure 2.2: Connectedness Index




organizational networks nor on the intra-organizational level (for example number ofbureaucrats with significant private sectorexperience).

The following sections discuss the different sub-indices, the connectedness index and the relationshipwith relevant other variables, governmenteffectiveness, CIP and GDP/per capita.

The discussion of the available indicators makes clearthat several potential relevant networks are currentlynot captured in the datasets which were screened inthe context of this report. The private sectordevelopment ecosystem is such that many types ofactors can form relevant knowledge networks. Mostimportantly no indicators are available, to ourknowledge, which capture the degree to whichgovernmental structures are connected to the ‘private’sector in a country, neither on the level of inter-

portfolio of investments of a country, and the incomepayments to foreign nationals.

After the selection of the indicators, the InternationalNetworks Sub-index was created based on thearithmetic mean of political and economic networks,transformed on a scale from 0-1.The sub-index ofInternational Networks covering 121 countries ispresented in table 2.2.

This indicator is based on the number of embassies ina country, the number of international organizationsof which the country is a member, the number of UNpeace missions in which a country participated, andthe number of international treaties a country signed(Dreher, 2006). The proxy for economic globalization(networks) is based on the flows of goods andservices (KOF actual flows). This indicator takes intoaccount the exports and imports of goods andservices, foreign direct investments (FDI stocks), the

2.2 The internationalnetworks sub-index

The International Networks sub-index is based on two indicatorsfrom the KOF Index of Globalization, political and economicglobalization. Political globalization is a proxy for the degree towhich states are networked on an international level.

Table 2.2: International Networks Sub-index

ISO Country International International code Network Index Network Rank


BEL Belgium 1.000 1NLD Netherlands 0.963 2HUN Hungary 0.940 3IRL Ireland 0.935 4CHE Switzerland 0.934 5AUT Austria 0.929 6SWE Sweden 0.920 7LUX Luxembourg 0.906 8DNK Denmark 0.904 9PRT Portugal 0.862 10CZE Czech Republic 0.852 11FIN Finland 0.851 12SGP Singapore 0.849 13MYS Malaysia 0.844 14FRA France 0.840 15DEU Germany 0.837 16

CYP Cyprus 0.837 17CHL Chile 0.833 18NOR Norway 0.831 19ESP Spain 0.829 20BGR Bulgaria 0.820 21ETH Ethiopia 0.812 22SVK Slovakia 0.788 23CAN Canada 0.787 24EST Estonia 0.787 25ITA Italy 0.787 26SVN Slovenia 0.775 27ISL Iceland 0.768 28TUN Tunisia 0.757 29JOR Jordan 0.753 30AUS Australia 0.736 31HRV Croatia 0.735 32






countries. It should be noted that a score of zero doesnot imply that a country is totally unconnected, butthat - taken the variation between countries intoaccount and due to the re-scaling of the variables,which is necessary for index-creation (see annex 2) -a country has a score of zero, indicating that incomparison to other countries the internationalconnectedness is very low.

The international sub-index shows significantvariation in the degree to which countries are linkedto each other on the international level, bothpolitically as well as economically. The comparisonwith the median indicates that a significantproportion (more than 50 per cent) of the countriesachieve relatively high scores on the sub index.However, several countries also receive lower scoresand are outside the international dynamics between

degree to which individuals are involved inprofessional associations, was taken from the WorldValues Survey.

The Inter-organizational Networks Sub-index wascreated by the arithmetic mean the three indicators,transformed on a scale from 0-1. The Inter-organizational Networks sub-index, covering 81countries, is presented in table 2.3.

This indicator is based on an Executive OpinionSurvey, and takes into account the quality andquantity of local suppliers, and the state of clusterdevelopment. The University-Industry Collaborationindicator is also taken from the Global Compe -titiveness Report that measures to what extentbusiness and universities collaborate on research and development (R&D) in a country. Finally, theprofessional association indicator, which captures the

2.3 The inter-organizationalnetworks sub-index

The Inter-organizational Networks Sub-index was created based on thefollowing three indicators. First, the indicator on networks and supportingindustries is taken from the Global Competitiveness Report 2008.

Table 2.3: Inter-organizational Networks Index



USA United States 1.000 1CHE Switzerland 0.976 2SWE Sweden 0.874 3DEU Germany 0.865 4FIN Finland 0.845 5CAN Canada 0.823 6

TWN Taiwan, 0.817 7Province of China

JPN Japan 0.807 8

NOR Norway 0.798 9IND India 0.795 10NLD Netherlands 0.784 11GBR United Kingdom 0.781 12SGP Singapore 0.760 13AUS Australia 0.749 14KOR Korea, Republic of 0.730 15MYS Malaysia 0.688 16HKG Hong Kong SAR, China 0.658 17



POL Poland 0.730 33ZAF South Africa 0.730 34GRC Greece 0.728 35NZL New Zealand 0.726 36PAN Panama 0.725 37THA Thailand 0.719 38ISR Israel 0.718 39NGA Nigeria 0.714 40GBR United Kingdom 0.696 41MLT Malta 0.690 42ZMB Zambia 0.687 43JAM Jamaica 0.686 44KAZ Kazakhstan 0.681 45LTU Lithuania 0.675 46USA United States 0.673 47PER Peru 0.666 48ZWE Zimbabwe 0.657 49URY Uruguay 0.654 50BHR Bahrain 0.651 51ROU Romania 0.647 52UKR Ukraine 0.646 53

KOR Korea, 0.639 54Republic of

NAM Namibia 0.626 55MAR Morocco 0.610 56RUS Russian Federation 0.604 57ARG Argentina 0.602 58

BOL Bolivia, 0.590 59Plurinational State of

BRA Brazil 0.583 60PHL Philippines 0.580 61MRT Mauritania 0.577 62BLZ Belize 0.566 63SLV El Salvador 0.565 64EGY Egypt 0.563 65ECU Ecuador 0.560 66IDN Indonesia 0.556 67COL Colombia 0.554 68KHM Cambodia 0.552 69CIV Côte d'Ivoire 0.551 70MUS Mauritius 0.549 71HND Honduras 0.539 72DZA Algeria 0.539 73LVA Latvia 0.538 74

TTO Trinidad 0.538 75and Tobago

SRB Serbia 0.530 76MOZ Mozambique 0.529 77GUY Guyana 0.528 78

PNG Papua New Guinea 0.520 79

BIH Bosnia 0.519 80and Herzegovina

TUR Turkey 0.514 81SEN Senegal 0.508 82KGZ Kyrgyzstan 0.506 83IND India 0.498 84JPN Japan 0.498 85GTM Guatemala 0.493 86MEX Mexico 0.487 87AZE Azerbaijan 0.485 88CRI Costa Rica 0.475 89MDA Moldova 0.472 90PRY Paraguay 0.468 91ALB Albania 0.464 92CHN China 0.460 93BWA Botswana 0.454 94BRB Barbados 0.446 95MDG Madagascar 0.446 96MKD Macedonia 0.445 97PAK Pakistan 0.445 98GEO Georgia 0.443 99MLI Mali 0.442 100TCD Chad 0.425 101

DOM Dominican 0.420 102Republic

OMN Oman 0.418 103LKA Sri Lanka 0.408 104KWT Kuwait 0.400 105CMR Cameroon 0.392 106NIC Nicaragua 0.384 107

VEN Venezuela, 0.377 108Bolivarian Republic of

LSO Lesotho 0.358 109KEN Kenya 0.352 110UGA Uganda 0.339 111BGD Bangladesh 0.305 112ARM Armenia 0.281 113BEN Benin 0.278 114MWI Malawi 0.277 115CAF Central 0.262 116

African Republic

SYR Syrian Arab Republic 0.260 117BFA Burkina Faso 0.255 118BDI Burundi 0.119 119

TZA Tanzania 0.091 120United Republic of

HTI Haiti 0.000 121Median: 0.580




stressed that this is only a very partialoperationalization on the basis of available data,which does not take into account several otherelements which could be important in terms of inter-organizational networks, most importantly the linksbetween other actors of the private sectordevelopment eco-system which are not included inthe sub-index. Again, the zero score does not indicatea complete absence of inter-organizational networks,but is a result of the re-scaling method, indicating acomparatively low level of inter-organizationalconnectedness.

The inter-organizational sub-index also variessignificantly between countries. Inter-firm networks(clusters), firm-university networks and personalnetworks are very highly developed in some countriesbut underdeveloped in a large number of countries.The median indicates that overall the degree of inter-organizational interconnectedness is below 0.5,indicating that a significant number of countries haveless developed inter-organizational networks asoperationalized in the inter-organizational networksub-index. In our sample, it is partly a consequenceof the low level of personal networks measures by theprofessional association indicator. It should be

The Intra-organizational Networks sub-index wascreated by the arithmetic mean of the two trainingindicators. The index, covering 163 countries, ispresented in table 2.4.

The On-the-job Training indicator from the GlobalCompetitiveness Report 2008-2009 is based on thelocal availability of specialized research and trainingservices and the extent to which companies invest intraining and employee development.

2.4 The intra-organizationalnetwork sub-index

The Intra-organizational Networks Sub-index was created based ontwo indicators. The Percentage of Firms Offering Formal Trainingcomes from the World Bank Enterprise Surveys, most specifically fromthe question L10 which assessed whether an establishment offeredformal training programs for its permanent, full-time employees.

Table 2.4: Intra-organizational Networks Index


CHE Switzerland 1.000 1DNK Denmark 0.975 2USA United States 0.972 3SWE Sweden 0.940 4NLD Netherlands 0.908 5SGP Singapore 0.893 6WSM Samoa 0.890 7FIN Finland 0.886 8JPN Japan 0.880 9BEL Belgium 0.833 10CAN Canada 0.817 11GBR United Kingdom 0.817 12FRA France 0.804 13NOR Norway 0.801 14ISL Iceland 0.789 15AUS Australia 0.766 16IRL Ireland 0.759 17AUT Austria 0.757 18


CHN China 0.751 19LBN Lebanon 0.747 20SVK Slovakia 0.736 21

TWN Taiwan, 0.725 22Province of China

ISR Israel 0.716 23SVN Slovenia 0.700 24NZL New Zealand 0.678 25EST Estonia 0.666 26CZE Czech Republic 0.662 27FJI Fiji 0.660 28LUX Luxembourg 0.656 29HKG Hong Kong SAR, China 0.646 30PRI Puerto Rico 0.646 31TUN Tunisia 0.646 32THA Thailand 0.640 33

FSM Micronesia, 0.626 34Federated States of



ARG Argentina 0.335 51POL Poland 0.323 52UGA Uganda 0.322 53NGA Nigeria 0.313 54MLI Mali 0.312 55RUS Russian Federation 0.306 56EGY Egypt 0.297 57PER Peru 0.295 58AZE Azerbaijan 0.294 59ROU Romania 0.279 60MAR Morocco 0.276 61


LVA Latvia 0.257 63PAK Pakistan 0.255 64SRB Serbia 0.247 65BGR Bulgaria 0.241 66BFA Burkina Faso 0.236 67URY Uruguay 0.221 68BGD Bangladesh 0.215 69GHA Ghana 0.209 70ETH Ethiopia 0.207 71MKD Macedonia 0.201 72SLV El Salvador 0.198 73


ZWE Zimbabwe 0.113 75DZA Algeria 0.075 76KGZ Kyrgyzstan 0.069 77GEO Georgia 0.064 78

BIH Bosnia and 0.062 79Herzegovina

ALB Albania 0.026 80MDA Moldova 0.000 81

Median: 0.396

NZL New Zealand 0.629 18FRA France 0.616 19ZAF South Africa 0.607 20CHN China 0.601 21CZE Czech Republic 0.593 22PRI Puerto Rico 0.585 23ISR Israel 0.584 24THA Thailand 0.577 25ARM Armenia 0.567 26IDN Indonesia 0.550 27ITA Italy 0.534 28SVN Slovenia 0.513 29BRA Brazil 0.508 30CHL Chile 0.500 31ESP Spain 0.494 32HUN Hungary 0.464 33EST Estonia 0.457 34CYP Cyprus 0.452 35SAU Saudi Arabia 0.436 36COL Colombia 0.413 37

DOM Dominican 0.408 38Republic

LTU Lithuania 0.403 39SVK Slovakia 0.401 40MEX Mexico 0.396 41GTM Guatemala 0.388 42JOR Jordan 0.385 43VNM Viet Nam 0.383 44TUR Turkey 0.381 45


HRV Croatia 0.364 47ZMB Zambia 0.356 48PHL Philippines 0.344 49UKR Ukraine 0.344 50




MYS Malaysia 0.608 35DEU Germany 0.608 36KOR Korea, Republic of 0.573 37BRA Brazil 0.572 38QAT Qatar 0.552 39ARE United Arab Emirates 0.542 40CRI Costa Rica 0.540 41LTU Lithuania 0.536 42SWZ Swaziland 0.533 43KEN Kenya 0.523 44ZAF South Africa 0.517 45ESP Spain 0.506 46POL Poland 0.503 47VUT Vanuatu 0.489 48SAU Saudi Arabia 0.489 49BRB Barbados 0.485 50CHL Chile 0.485 51GRD Grenada 0.473 52JAM Jamaica 0.464 53LVA Latvia 0.458 54CYP Cyprus 0.451 55ARG Argentina 0.450 56BLR Belarus 0.450 57PER Peru 0.449 58DOM Dominican Republic 0.433 59SLV El Salvador 0.430 60CPV Cape Verde 0.426 61PAN Panama 0.422 62PHL Philippines 0.407 63KWT Kuwait 0.403 64MWI Malawi 0.403 65ITA Italy 0.394 66ECU Ecuador 0.394 67VNM Viet Nam 0.393 68LKA Sri Lanka 0.388 69PRT Portugal 0.387 70BHR Bahrain 0.378 71IDN Indonesia 0.378 72MLT Malta 0.366 73ROU Romania 0.364 74COL Colombia 0.364 75HUN Hungary 0.362 76

COD Congo, Democratic 0.362 77Republic of the

BHS Bahamas 0.357 78MKD Macedonia 0.354 79SRB Serbia 0.354 80GTM Guatemala 0.348 81IND India 0.345 82

The intra-organizational sub-index variessignificantly between countries. The low medianscore indicates that these instruments to strengtheninternal networks are less widespread amongcountries. A limited number of countries achieve highscores, while a large group of countries receive lowerscores, as is indicated by the median. Again, the zeroscore does not indicate a complete absence of intra-organizational networks, but is a result of the re-scaling method, indicating a comparatively low levelof intra-organizational connectedness.




NAM Namibia 0.342 83RUS Russian Federation 0.340 84HRV Croatia 0.338 85LSO Lesotho 0.334 86KHM Cambodia 0.329 87CMR Cameroon 0.325 88



NER Niger 0.323 91JOR Jordan 0.322 92MUS Mauritius 0.321 93UGA Uganda 0.321 94MNG Mongolia 0.320 95

BOL Bolivia, 0.316 96Plurinational State of

HND Honduras 0.315 97BWA Botswana 0.313 98BFA Burkina Faso 0.306 99MNE Montenegro 0.297 100KGZ Kyrgyzstan 0.293 101KAZ Kazakhstan 0.293 102NGA Nigeria 0.292 103BGR Bulgaria 0.291 104TUR Turkey 0.286 105TLS Timor-Leste 0.283 106MEX Mexico 0.282 107

BIH Bosnia and 0.280 108Herzegovina

TGO Togo 0.279 109GMB Gambia 0.279 110GAB Gabon 0.278 111OMN Oman 0.276 112


MAR Morocco 0.268 114AZE Azerbaijan 0.265 115BEN Benin 0.255 116UKR Ukraine 0.255 117GHA Ghana 0.253 118SEN Senegal 0.250 119

LAO Lao People's 0.243 120Democratic Republic

PRY Paraguay 0.243 121URY Uruguay 0.241 122RWA Rwanda 0.236 123CIV Côte d'Ivoire 0.234 124MDG Madagascar 0.228 125

ARM Armenia 0.224 126GRC Greece 0.224 127ETH Ethiopia 0.223 128

WBG West Bank 0.222 129and Gaza Strip

ERI Eritrea 0.217 130ZMB Zambia 0.215 131EGY Egypt 0.208 132MDA Moldova 0.208 133ZWE Zimbabwe 0.208 134TCD Chad 0.204 135NIC Nicaragua 0.203 136KOS Kosovo 0.198 137GUY Guyana 0.195 138MOZ Mozambique 0.195 139SYR Syrian Arab Republic 0.182 140BTN Bhutan 0.182 141MLI Mali 0.169 142

LBY Libyan 0.167 143Arab Jamahiriya

ALB Albania 0.165 144GIN Guinea 0.154 145GEO Georgia 0.142 146AGO Angola 0.132 147TJK Tajikistan 0.124 148SLE Sierra Leone 0.122 149SUR Suriname 0.119 150BDI Burundi 0.108 151MRT Mauritania 0.106 152BGD Bangladesh 0.104 153LBR Liberia 0.101 154DZA Algeria 0.093 155AFG Afghanistan 0.071 156PAK Pakistan 0.056 157YEM Yemen 0.050 158GNB Guinea-Bissau 0.044 159COG Congo 0.031 160TON Tonga 0.027 161UZB Uzbekistan 0.008 162NPL Nepal 0.000 163

Median: 0.345


2.5The ConnectednessIndex

The Connectedness Index is the average of three sub-indices(International, Inter-organizational, and Intra-organizationalNetworks). It is presented in table 2.5.

Table 2.5: Connectedness Index

ISO code Country International Inter-org Intra-org Connectedness ConnectednessNetwork Index Network Index Network Index Index Rank

CHE Switzerland 0.934 0.976 1.000 0.970 1SWE Sweden 0.920 0.874 0.940 0.911 2NLD Netherlands 0.963 0.784 0.908 0.885 3USA United States 0.673 1.000 0.972 0.881 4FIN Finland 0.851 0.845 0.886 0.861 5SGP Singapore 0.849 0.760 0.893 0.834 6NOR Norway 0.831 0.798 0.801 0.810 7CAN Canada 0.787 0.823 0.817 0.809 8DEU Germany 0.837 0.865 0.608 0.770 9GBR United Kingdom 0.696 0.781 0.817 0.765 10FRA France 0.840 0.616 0.804 0.754 11AUS Australia 0.736 0.749 0.766 0.750 12JPN Japan 0.498 0.807 0.880 0.728 13MYS Malaysia 0.844 0.688 0.608 0.713 14CZE Czech Republic 0.852 0.593 0.662 0.702 15NZL New Zealand 0.726 0.629 0.678 0.678 16ISR Israel 0.718 0.584 0.716 0.673 17SVN Slovenia 0.775 0.513 0.700 0.662 18KOR Korea, Republic of 0.639 0.730 0.573 0.648 19THA Thailand 0.719 0.577 0.640 0.646 20SVK Slovakia 0.788 0.401 0.736 0.642 21EST Estonia 0.787 0.457 0.666 0.637 22ZAF South Africa 0.730 0.607 0.517 0.618 23ESP Spain 0.829 0.494 0.506 0.610 24CHL Chile 0.833 0.500 0.485 0.606 25

CHN China 0.460 0.601 0.751 0.604 26HUN Hungary 0.940 0.464 0.362 0.589 27CYP Cyprus 0.837 0.452 0.451 0.580 28ITA Italy 0.787 0.534 0.394 0.572 29BRA Brazil 0.583 0.508 0.572 0.554 30IND India 0.498 0.795 0.345 0.546 31LTU Lithuania 0.675 0.403 0.536 0.538 32POL Poland 0.730 0.323 0.503 0.519 33IDN Indonesia 0.556 0.550 0.378 0.494 34JOR Jordan 0.753 0.385 0.322 0.487 35HRV Croatia 0.735 0.364 0.338 0.479 36PER Peru 0.666 0.295 0.449 0.470 37ARG Argentina 0.602 0.335 0.450 0.463 38BGR Bulgaria 0.820 0.241 0.291 0.451 39COL Colombia 0.554 0.413 0.364 0.444 40PHL Philippines 0.580 0.344 0.407 0.444 41NGA Nigeria 0.714 0.313 0.292 0.440 42ROU Romania 0.647 0.279 0.364 0.430 43DOM Dominican Republic 0.420 0.408 0.433 0.420 44ZMB Zambia 0.687 0.356 0.215 0.419 45LVA Latvia 0.538 0.257 0.458 0.417 46RUS Russian Federation 0.604 0.306 0.340 0.417 47UKR Ukraine 0.646 0.344 0.255 0.415 48ETH Ethiopia 0.812 0.207 0.223 0.414 49TTO Trinidad and Tobago 0.538 0.374 0.324 0.412 50GTM Guatemala 0.493 0.388 0.348 0.410 51SLV El Salvador 0.565 0.198 0.430 0.398 52TUR Turkey 0.514 0.381 0.286 0.394 53MEX Mexico 0.487 0.396 0.282 0.388 54MAR Morocco 0.610 0.276 0.268 0.385 55SRB Serbia 0.530 0.247 0.354 0.377 56URY Uruguay 0.654 0.221 0.241 0.372 57ARM Armenia 0.281 0.567 0.224 0.357 58EGY Egypt 0.563 0.297 0.208 0.356 59AZE Azerbaijan 0.485 0.294 0.265 0.348 60MKD Macedonia 0.445 0.201 0.354 0.333 61UGA Uganda 0.339 0.322 0.321 0.327 62ZWE Zimbabwe 0.657 0.113 0.208 0.326 63MLI Mali 0.442 0.312 0.169 0.308 64KGZ Kyrgyzstan 0.506 0.069 0.293 0.289 65BIH Bosnia and Herzegovina 0.519 0.062 0.280 0.287 66VEN Venezuela, Bolivarian Republic of 0.377 0.152 0.325 0.285 67BFA Burkina Faso 0.255 0.236 0.306 0.266 68PAK Pakistan 0.445 0.255 0.056 0.252 69DZA Algeria 0.539 0.075 0.093 0.236 70MDA Moldova 0.472 0.000 0.208 0.227 71ALB Albania 0.464 0.026 0.165 0.218 72GEO Georgia 0.443 0.064 0.142 0.216 73TZA United Republic of Tanzania 0.091 0.273 0.275 0.213 74BGD Bangladesh 0.305 0.215 0.104 0.208 75

Median: 0.463




such as Japan and China, score below median oninternational networks but (very) highly on inter-organizational and intra-organizational networks.Others, including some European countries such asPoland and Hungary, score highly on internationalnetworks but show only median scores on inter-organizational and intra-organizational networks. Stillothers, such as India, score very highly on oneindicator, in casu inter-organizational networks, butbelow median on the other two indices. Thisvariation, both across countries and within countries,and across types of networks, reveals that verydifferent dynamics are unfolding with regard to thedevelopment of networks.

Graphs 2.1-2.3 present the scatter plots between thethree sub-indices: international, inter-organization andintra-organization networks. The X and Y-axispresent the median scores. The graphs help us tovisualize the different scores of countries and betweencountries on the different network subindices. Forexample, on the top left of graph 2.2 one can observethat Bulgaria scores very highly in the internationalsub-index but below the median in the intra-organizational networks sub-index. Another exampleof the disparity between the sub-indices is the case ofIndia (top of graph 2.3), whose score is very high oninter-organizational networks, but only median onintra-organizational networks.

The connectedness index clearly shows the overallvariation in the degree to which countries arenetworked, both internally as well as internationally(for a discussion on using the median for comparisonpurposes see annex 1). Some countries obtainconsistently high scores across the various networkindicators and hence on the connectedness index,whereas other receive consistently lower scores. Also,it is interesting to note that similar connectednessscores were reached following very distinct paths. Forexample, Hungary (0.589) and Brazil (0.554) occupythe 27th and 30th ranking positions, respectively.However, while Brazil is very consistent in the threecomponents of connectedness (0.583 for InternationalNetworks, 0.508 for Inter-organizational Networks,and 0.572 for Intra-organizational Networks), thescores of Hungary vary significantly: a very high scoreis achieved (0.940) in the International Networks Sub-index, a mean score in the case of the Inter-organi -zational Networks Sub-index, and a low score (0.362)in the Intra-organizational Networks Sub-index. Thesimilar result in the Connectedness index is, in part, aconsequence of our choice of the aggre gation proce -dure (equal weighting) that uses a full compensabilitysystem, i.e., a low score in one indicator is equallycompensated by a high score in other.

More generally, the differences on country levelbetween indices are interesting. Some Asian countries,

Inte

rnat

iona

l Net

wor

k In

dex

Inter-organizational Network Index

Graph 2.1: Relationship between International and Inter-organizational Networks

Inte

rnat

iona

l Net

wor

k In

dex

Intra-organizational Network Index

Graph 2.2: Relationship between International and Intra-organizational Networks

Inte

r-or

gani

zati

onal

Net

wor

k In

dex

Intra-organizational Network Index

Graph 2.3: Relationship between Inter-organizational and Intra-organizational Networks




The correlations are presented in table 2.6.Given the linear relationship between the variables(see graphs 2.4-2.7) the Pearson Product-MomentCorrelation Coefficient was used to calculate thecorrelation between the different indicators (see annex 2).

2.6 The relationshipbetween connectednessand government,industrial andeconomic performance

In order to analyse the relationship between connectedness andgovernment effectiveness, regulatory quality, competitive industrialperformance, and GDP per capita PPP a correlation matrix wasconstructed. The graphs clearly show a strong positive linearrelationship between on the one hand connectedness and on the otherhand different performance indicators.

Reg

ulat

ory

Qua

lity

Connectedness Index

Graph 2.5: Regulatory Quality x Connectedness Index

Gov

ernm

ent

Eff

ecti

vene

ss

Connectedness Index

Graph 2.4: Government Effectiveness x Connectedness Index




GD

P pe

r ca

pita

PPP

Connectedness Index

Graph 2.7: GDP per capita PPP x Connectedness Index

Com

peti

tive

Ind

ustr

ial P

erfo

rman

ce

Connectedness Index

Graph 2.6: Competitive Industrial Performance x Connectedness Index

Table 2.6: Correlation matrix

Con

nect

edne

ss I

ndex

Polit

ical

Net

wor

ks

Eco

nom

ic N

etw

orks

Inte

rnat

iona

l Net

wor

ks I

ndex

Inte

r-Fi

rm N

etw

orks

Uni

vers

ity-

Firm

Net

wor

ks

Pers

onal

Net

wor

ks

Inte

r-or

g N

etw

orks

Ind

ex

Form

al T

rain

ing

On-

the-

Job

Tra

inin

g

Intr

a-or

g N

etw

orks

Ind

ex

Gov

ernm

ent

Eff

ect

Reg

ulat

ory

Qua

lity

CIP

GD

P pe

r ca

pita

Connectedness 1Index

Political .541** 1Networks

Economic .646** .102 1Networks

International .766** .610** .851** 1Net Index

Inter-Firm .895** .544** .404** .609** 1Networks

University-Firm .916** .445** .474** .606** .841** 1Network

Personal .118 -.158 -.119 -.171 .042 .031 1Network

Inter-org .919** .457** .394** .525** .922** .920** .325** 1Net Index

Formal .561** .121 .298** .314** .218** .298** -.07 .277* 1Training

On-the-Job .932** .456** .504** .632** .898** .935** .030 .908** .267** 1Training

Intra-org .940** .420** .491** .629** .808** .881** .035 .848** .870** .914* 1Net Index

Gov Effect .902** .377** .586** .709** .769** .836** .104 .819** .374** .859** .771** 1

Regulatory .391** .250** .373** .402 .377** .431** .039 .321** .143 .424** .411** .603** 1Quality

CIP .767** .439** .395** .533** .775** .780** .047 .779** .450** .759** .750** .742** .352** 1

GDP per .845** .448** .577** .694** .707** .768** -.013 .754** .386** .767** .729** .859** .471** .719** 1capita

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).




play an important role. However, the highcorrelations also show that much more work isnecessary to further understand the concept ofnetworks and assess the impact of networks. Thecorrelations are simply too high to draw manydefinite conclusions. Several methodological andsubstantial points are at stake.

First of all, we have to ask ourselves whether theresults are spurious, i.e. whether there are any latentvariables that drive connectedness and/or its sub-indices as well as the other variables. With regard toconnectedness (especially intra-organizationalnetworks as measured by training) and economicdevelopment, it might for example be the case thatboth are influenced by the development of humancapital. Other theoretical reasons might probably beidentified which could hypothesize why highcorrelations occur. Further theoretical development isnecessary in this respect.

Secondly, the results might indicate that several of theindicators used are correlated proxies for the samephenomenon and that they are influenced by a sameunderlying dynamic. The latter can be explored a bitfurther by a closer inspection of the ranking of the

There are two interesting exceptions. First, regulatoryquality, an indicator which is directly related toprivate sector development, is still highly andstatistically significantly correlated with connectednessbut the correlation is much less strong than in case ofgovernment effectiveness (also compare graphs 2.4and 2.5). This is an interesting finding which needs tobe analysed more in depth, especially since regulatoryquality and government effectiveness are highlycorrelated. An in-depth comparison of countrieswhich score very differently on regulatory quality andgovernment effectiveness in its relationship withconnectedness should be further pursued. Secondly, onthe level of personal networks measured asmembership in professional associations, the tableindicates that this network measure is not significantlycorrelated to any of the performance measures. Thiscan be the result of different methodological andsubstantial reasons which need to be further explored.

On the one hand, this high correlation is of course aninteresting and relevant finding. No correlation wouldindicate that networks are ‘much ado about nothing’and that we would not be able to find empiricalevidence to support the increased attention fornetworks. This is clearly not the case. Networks do

another element in the international political networksindicator. Similarly, the degree of university-industryinteractions is affected by the presence of anelaborated tertiary educational tier, which in turn ispartially a result of the development level of acountry.

Although these arguments might reverse causality itshould also be noted that the analysis on the sub-index level shows that there are several cases wherethe level of economic development (as measured byCIP or GDP per capita) or policy effectiveness (asmeasured by government effectiveness and regulatoryquality) is the same but the variation in networks verysubstantial (see graphs in annex 3), indicating that if areverse causal argument would hold other factorscontribute to network development. Taking it a stepfurther, it might be the case that network dynamicsemerge which further in time have an effect on theother variables. Much more theoretically informedempirical research is needed to figure out hownetworks causally play out in the dynamics ofincreased policy effectiveness, private sectordevelopment and economic development. In addition,we need more refined data and time-series to get gripon the issue of causality.

connectedness index. The top 30 consists mostly ofOECD Member States with the exception of Brazil,China, Cyprus, Malaysia, Singapore, South Africa andThailand. Some of these exceptions score (very) highlyon indicators such as the Human Development Index(UNDP) or economic development indicators. Hence,connectedness is very high in highly developed orrapidly developing countries. This indicates thatnetworks are highly correlated to the developmentlevel. Whether they are a cause, consequence or bothcannot be disentangled on the basis of the presentanalysis.

The latter is related to a third and obvious point thatcorrelation is not causation since we do not know thedirection of the cause; a third variable might beinvolved which is responsible for the covariancebetween X and Y. Hence the correlations andidentified relationships should definitely not beconsidered causally relevant. International politicalnetworks for example can be a consequence ofeconomic development as highly developed economiesare more likely to have more embassies because theycan afford it. The presence of such a large and highlyeducated diplomatic corps is also likely to affect thenumber of agreements a country can initiate, which is

2.7 Discussion

The analysis clearly shows the strong relationship betweenconnectedness and government effectiveness, regulatory quality,industrial competitiveness and economic development. This is furthersupported by the high correlations which are all highly significant (seetable 2.6). Both the overall connectedness index as well as the sub-indices on international networks, inter-organizational networks andintra-organizational networks are highly and significantly correlated tothe performance indicators.

It was possible to create aconnectedness index to furthersubstantiate the relevance ofexamining networks. The resultsshow that there is significantvariation in networks acrosscountries and also within countriesacross levels of networks.




Finally, the available data only allows for anindirect link to the nexus of networks andknowledge management. Data on knowledgenetworks is limited and more conceptualization isneeded to guide empirical research in this area.

Notwithstanding the limitations of the data,especially from a theoretical and conceptualperspective, it was possible to create a connectednessindex to further substantiate the relevance ofexamining networks. The results show that there issignificant variation in networks across countries andalso within countries across levels of networks. Thisis an interesting finding which triggers manyquestions on how to explain this variation. Thevariation correlates highly with other outcomevariables such as government effectiveness, industrialdevelopment and economic development. As suchthis finding is highly interesting, but not definitecausal arguments can be drawn from this link at thisstage. Networks are probably cause and consequenceand influence other parameters in causality loops. Ingeneral, concept development with the aim ofdeveloping indicators which capture the ‘networkeffect’ would best follow the process outlined infigure 2.1. More conceptual and empirical refinementis required. Given the rise of the importance ofnetworks this might be further explored by bringingtogether experts on international relations, oneconomic clusters and inter-organizational networks,intra-organizational networks, international andnational datasets and social network analysis in orderto explore further existing datasets, identifyopportunities to create more data and furtherconceptualize the concept of connectedness as ameasurable indicator to capture the degree ofnetwork formation.

The exploration was carried out on the basis of aninductive, data-searching approach. Many datasetsand variables were screened. Very few contain dataon networks. In addition, the data displayslimitations:

Insufficient time series are available for a bettercausal analysis.

The connectedness index could only be calculatedfor 75 countries because data is lacking.

The data only very partially captures the idea ofnetworks, both in terms of their structures (themany potential networks which might arise out ofthe eco-system of private sector development) andof their nature (embedded versus arm-lengthnetworks).

The remaining indicators which are included inthe index and which are considered as a proxy fornetworks, such as the intra-organizational oneson training, also capture other aspects such ashuman capabilities development.

So far, general indicators capturing networkeffects were considered. One good way forwardto capture more precise networks and networkeffects, especially on the international level,would begin by making use of social networkanalysis tools and develop indicators on the basisof dyadic relations between countries. Zeev Maoz(2010) in a very recent publication explored thisfurther and makes convincing arguments for abetter exploitation of network tools in the contextof international relations and internationalpolitical economy research.

2.8 Conclusions

This chapter explored the possibility of constructing an index tocapture the degree to which a country is networked on different levels.


Connectedness is very high inhighly developed or rapidlydeveloping countries. This indicatesthat networks are highly correlatedto the development level.

▲


PART 2:International, Inter-organizationaland Intra-organizational networksin Practice

horizontal networks. This approach corresponds verymuch to the idea forwarded by Peter Haas (1992) onepistemic communities.

These horizontal and vertical networks can differ innature as a function of their main purpose. Slaughteridentifies three purposes, namely informationexchange, enforcement and harmonization. As aresult, information networks, enforcement networksand harmonization networks emerge (Slaughter,2004, pp. 52-61). Information networks primarilyfocus on the exchange of information andknowledge. Enforcement networks focus ‘primarilyon enhancing cooperation among national regulatorsto enforce existing national law and rules’. (Slaughter,2004, p. 55). Harmonization networks, oftenresulting from trade agreements, focus primarily onharmonizing regulatory standards such as product-safety standards with the aim of abolishing technicalbarriers to trade. Besides international networksinitiated by governments, international networks canof course also develop between non-state actors(AccountAbility, 2008). At the international level,information and knowledge networks may emergebilaterally, regionally or multilaterally.

3.1 INTRODUCTIONKnowledge networks are increasingly relevant at theinternational level. The most extensive treatment ofnetwork governance at the international level wasconducted by Anne-Marie Slaughter in her book ANew Global Order (for a further elaboration seeSlaughter and Zaring 2006). Slaughter (2004 p. 18)starts from five premises of which two are cruciallylinked to network governance. The first is that thestate is not disappearing but is disaggregating into itscomponents, which are no longer solely interactingwithin the hierarchical state but also outside theirboundaries with foreign counterparts. As a result,secondly, government networks emerge which existalongside, and sometimes within, more traditionalinternational organizations.

Slaughter distinguishes horizontal and verticalnetworks. Horizontal networks are networksbetween government officials which can operatebetween high-level officials responsive to the nationalpolitical process as well as lower level regulators andpolicy-makers (Slaughter, 2004, p. 19). Verticalnetworks emerge between supranational officials andtheir state-level counterparts (Slaughter, 2004, p. 21).Of course networks may consist of both vertical and

“If we accept that (informal) networks are indispensable to addressthe problems posed by the process of globalization, we have toattempt to mitigate some of their negative features. Turning to newformal institutions might not be necessary if we ensure that thenetworks of today and tomorrow are transparent, inclusive, andresponsive”.

Jan Wouters & Dylan Geraets, Leuven Centre for Global Governance Studies,University of Leuven, Belgiumiv

Chapter 3: Knowledge withoutFrontiers: International Networks Kazuki Kitaoka, Alex MacGillivray, Axel Marx andCormac O’Reilly

83Networks for ProsperityPART 2, Chapter 3: Knowledge without Frontiers


funded research collaboration and data-sharingresulting from monitoring efforts. In addition, theypropose to systematically share best practices on thedevelopment of chemical and product life-cycleassessment tools and building an appropriateinformation technology (IT) infrastructure for accessto information in product ingredients, chemical useand hazards.

In a recent published edited volume by Vogel andSwinnen (2011) several authors map the manydifferent ways in which regulators are currentlycollaborating across the Atlantic and howcollaboration, i.e. network formation, could befurther enhanced (for an overview see the concludingchapter by Marx and Wouters, 2011). For example inthe case of chemical regulation, Schwarzmann andWilson (2011) propose to further share informationvia inter-agency memoranda of understanding, jointly

3.2 Bilateral networks

Information networks often emerge out of bilateral or trilateralcooperation. David Vogel notes that the formal and informaldiscussions between regulatory officials in Washington and Brusselshave expanded over the last years.

knowledge exchange, as reflected in the recent G20Consensus on Development, the 2010 Bogotá Statementand the 2009 Nairobi Outcome Document”, reports theTask Team on South-South Cooperation (TT-SSC), aSouthern-led platform formed in 2009 and hosted at theOECD-DAC Working Party on Aid Effectiveness.“There is a window of opportunity to make knowledgeexchange a strong pillar in global and regionaldevelopment policies, and to generate much moreattention and support to this type of horizontalpartnerships. However, there is still a great gap in theunderstanding how South-South learning works, whereit doesn’t work and why.”vi A number of regionalresearch networks are beginning to answer this question,as the case study of ERIA and Red Mercosur (see section3.6) illustrates.

International networks have a habit of generatingregional offshoots, such as Producción Mas Limpia,Latin America’s network of 16 Cleaner ProductionCentres and associated organizations, supported byUNIDO and Swiss and Austrian developmentcooperation, and providing solutions focused on thecontinent’s challengesvii. AFRIMETS is the Inter-AfricanMetrology System established in 2007 to support its 46member countries to develop accurate measurement,build new facilities and gain international acceptance forall the key export-related measurements. In February2011 it held a 10-day metrology school for Africanmetrologists in Nairobi, organized by UNIDO andsupported by Norad, the Norwegian developmentcooperation agency.

The European Union has established several informationagencies, such as the European Environmental Agencyand the European Energy Agency, in the last twodecades. They collect and disseminate relevantinformation for policy makers, often building hugedatabases which are very interesting from a knowledgemanagement perspective. They do not have anydecision-making power (Slaughter, 2004, p. 158), but infact exercise attributes of governance via informationexchange, which some consider to be a flexible,responsive, effective and efficient governance method(Sabel and Zeitlin, 2012).

The Regional Integration Knowledge System (RIKS), ajoint initiative taken by UNU-CRIS in the framework ofthe GARNET Network of Excellence with variouspartner institutes and organizations, gives a usefulpicture of the number of regional integration agreementsin which countries participate. Among the twelvecountries in which study visits took place for the presentreport, it is clear that Egypt, Peru and Turkey are mostactive in regional networks; Serbia and Viet Nam less so(see table 3.1). The Asian Development Bank’s AsiaRegional Integration Centre provides detailed statusreports on Free Trade Agreements for 48 countriesv.While useful, such databases do not indicate the depthof national engagement in each arrangement or theoverall quality of the institution managing theagreement. Nor is it necessarily the case that a plethoraof overlapping arrangements adds to knowledge sharingfor participants. “Global and regional policy-makersare taking a great interest in South-South and triangular

3.3 Regional networks

Regional organizations such as the European Union, the African Union,Association of Southeast Asian Nations (ASEAN), Central AmericanIntegration System (SICA), Andean Community (CAN), Mercosur and LatinAmerican Integration Association (ALADI) and others often act asinformation and knowledge networks. Especially interesting as an exampleof integrated vertical and horizontal networks is the emergence of so-calledinformation agencies.


84 Networks for ProsperityPART 2, Chapter 3: Knowledge without Frontiers


Table 3.1: Key regional integration arrangements for the group of countries studied

Country Number of regional List of regional arrangementsarrangements

Bolivia, Plurinational State of 5 Andean Community Latin America Integration Association Latin American Economic SystemOrganization of American States Permanent Mechanism of Political Consultation and Coordination

Costa Rica 5 Association of Caribbean States Central American Integration System Latin American Economic SystemOrganization of American States Permanent Mechanism of Political Consultation and Coordination

Cuba 5 African, Caribbean and Pacific Group of States Association of Caribbean States Latin America Integration Association Latin American Economic System Organization of American States

Dominican Republic 5 African, Caribbean and Pacific Group of States Association of Caribbean States Latin American Economic System Organization of American States Permanent Mechanism of Political Consultation and Coordination

Egypt 9 African Union Arab Organisation for Agricultural Development Common Market for Eastern and Southern AfricaCommunity of Sahel-Saharan States Intergovernmental Group of 24 on International Monetary Affairs League of Arab States Organisation of Arab Petroleum Exporting Countries Organisation of Islamic Conference Council of Arab Economic Unity

El Salvador 5 Association of Caribbean States Central American Integration System Latin American Economic System Organization of American States Permanent Mechanism of Political Consultation and Coordination

Ethiopia 5 African Union African, Caribbean and Pacific Group of States Common Market for Eastern and Southern Africa Intergovernmental Authority on Development Organisation of Arab Petroleum Exporting Countries

Panama 5 Association of Caribbean States Central American Integration System Latin American Economic System Organization of American States Permanent Mechanism of Political Consultation and Coordination

Peru 7 Andean Community Asia-Pacific Economic Co-operation Intergovernmental Group of 24 on International Monetary AffairsLatin America Integration Association Latin American Economic System Organization of American States Permanent Mechanism of Political Consultation and Coordination

Serbia 2 Central European Free Trade Agreement South East European Co-operation Process

Turkey 6 Black Sea Economic Cooperation Council of Europe Economic Co-operation Organisation Organisation of Islamic Conference Stability Pact for South Eastern Europe South East European Co-operation Process

Viet Nam 3 Asia-Pacific Economic Co-operation Association of Southeast Asian NationsMekong River Commissionxxix

Source: RIKS databaseviii

The issue of improved network management,explored by Rayner, refers to managing ‘networks of networks’ (Slaughter, 2004, p. 135) and buildingtrust between currently sometimes antagonisticexisting networks. Without trust joint networkmanagement is highly unlikely. A more operationalquestion in this context is who should take the leadin these problem-focused learning platform net -works: a new organization or one of the existingorganizations?

An interesting recent example concerns the case offorest governance. In 2011, Rayner, together withsome forty experts, published an expert panel reporton forest governance entitled Embracing Complexity:Meeting the Challenges of International ForestGovernance. The report describes the current state ofthe forest governance regime and its challenges,which are ecological, social and economic in natureand range from the international level through thenational level to the local level. In order to overcomethese challenges, Rayner et al. propose a morecomprehensive strategy for knowledge with a strongemphasis on building and managing networks forbetter governance and learning. A key issue isbridging knowledge generation and knowledge use.This can be achieved via networked learningplatforms defined as an “integrated set of servicesthat provide information, tools and resources tosupport policy learning (Rayner et al., 2011, p.141)”. In forest governance the most successfulexamples of these networked learning platforms arethose with a problem-focused approach.

3.4 Multilateralnetworks

Several multilateral organizations act as information and knowledgeproviders. In this context, an interesting case in point concerns theCleaner Production Centres resulting from collaboration betweenUNIDO and UNEP (see box 1.2). Indeed, in the broaderenvironmental field, one can observe an increasing need for andnumber of learning networks and platforms.






Serbia appears to be heading into the group ofcountries with FDI stocks above 50 per cent of GDP.For the other countries of Central America, as well asTurkey and Egypt, FDI stocks are in the 25-35 percent bracket. Turkey has experienced a particularlyrapid increase, which is discussed in one of the casestudies. Stocks are appreciably lower in Ethiopia andCuba. Needless to say, severe economic conditions inmany economies will likely impact on the trends andlevels of FDI reported for 2011.

Key trends in FDI for the countries studied, based onUNCTAD data for the years 2008-2010, arepresented belowix. Panama and Viet Nam stand out,with FDI stocks accounting for in excess of 65 percent of GDP.

3.5 Foreign investmentand internationalnetworks

There is an extensive literature on foreign direct investment (FDI) as a driver of knowledge and upgrading. As discussed above, ourConnectedness Index includes a composite measure of economicglobalization including data on actual flows between countries (trade,FDI, portfolio investments) and restrictions for trade (import barriers,taxes, etc.).

The Conference of African Ministers of Industry(CAMI) shows how a network copes with the needto evolve.

The work of Viet Nam’s Central Institute forEconomic Management on competitiveness, aclassic example of the ‘triangular’ model of North-South and South-South knowledge sharing, throwslight on international knowledge networking.

Economic Research Institute for ASEAN and EastAsia (ERIA) and Red Mercosur are examples ofregional research networks.

AfrIPAnet is an example of a network set upspecifically to enhance levels of foreign investment

The importance of face-to-face meetings forinternational business is illustrated by Cuba’shighly successful trade fair FIHAV.

3.6 Case studies

The case studies which now follow highlight different aspects ofinternational networks:

Harmonization networks, often resulting from tradeagreements, focus primarily on harmonizingregulatory standards such as product-safetystandards with the aim of abolishing technicalbarriers to trade.

FDI stocks as % of GDP (UNCTAD 2011)

Panama

Vietnam

Serbia

Costa Rica

Bolivia

El Salvador

Egypt, Arab Rep.

Peru

Dominican Rep.

Turkey

Ethiopia

0.0

2008 2009 2010

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Table 3.2




Case: Knowledge integration: ERIA, Red Mercosurand regional research networks

Master Plan on ASEAN Connectivity (MPAC),adopted in Ha Noi in 2010xi. Both plans envisagehuge investments in infrastructure and ERIA hasestablished a Public Private Partnership NetworkTeam to provide policy advice to governmentsxii.

Red Mercosur is another regional research networkthat dates back to the initiative of a small group ofacademics from Argentina, Brazil, Paraguay andUruguay in 1998. The network has since expanded tosome 60 researchers from 10 institutions, supportedalong the way by the International DevelopmentResearch Centre (IDRC). The network focuses onmacroeconomics and trade policy, FDI, regionalintegration, productivity and competitiveness, globalrelations, and climate change and renewables.

Sometimes, networks are absorbed into institutions.NEPAD (the New Partnership for Africa'sDevelopment) is the vision and strategic frameworkadopted by the African Union (AU) in 2001. In 2010a new Planning and Coordination Agency wasestablished to bring NEPAD more fully into the AUxiii.One focus of its policy and implementation work willbe capacity building.

Other regional bodies, such as ALADI, CAN, SICA,CARICOM and the Arab League are also seeing thevalue of this type of fast, flexible, regional researchnetwork for progressing with knowledge integration.Complex, cross-cutting challenges such as climatechange and access to energy are especially well-suitedto such collaborations.

Have the recent rise of Free Trade Agreements, theadvent of the G20 and global financial crisesweakened prospects for regional integration, a fifty-year-old project in many regions? There is no easyanswer to that question, with regional tradesometimes intensifying even as the institutionsdesigned to promote it may be stalled politically,institutionally or on technical obstacles such ascustoms unions (Bouzas, 2010). Given this situation,Woods and Martínez-Diaz have suggested thatdeveloping countries, particularly those outside theG20, need to create or remodel networks to maketheir voices heard and share knowledge in the newglobal economic system. One interesting sign of thisis the growth of regional knowledge networks overthe past decade.

The Economic Research Institute for ASEAN andEast Asia (ERIA) is one example. It is a policy thinktank proposed by Japan but based in Jakarta andarising out of first East Asia Summit. ERIA’s goal isto facilitate ASEAN economic community building,to support ASEAN's role as the driver of widereconomic integration, and to foster a sense ofcommunity. Its energetic team of 45 staff, with anetwork of research institutes in 16 East Asia Summitcountries, produce a wide range of policy briefs anddiscussion papers covering the big picture (aging,trade network fragmentation, energy and climatechange) as well as technical issues (biodieselstandards, SME support). The Institute has publishedwork on knowledge sharing, such as a study of howeasily local firms can obtain knowledge on productinnovation in four Southeast Asian countries(Machikita et al, 2010). ERIA’s major outputsinclude the Comprehensive Asia Development Plan,and, in collaboration with ESCAP and ADB, the

“Capacity-building and knowledge creation are stated objectives of manyintergovernmental networks, and international institutions. Yet often inboth informal networks and formal organizations, powerful states havesimply sought to impose their own ready-made solutions in the name ofcapacity-building or knowledge creation.”

Ngaire Woods and Leonardo Martinez-Díaz (2009)x.

Sources: Interviews with ERIA, Red Mercosur, ALADI, CAN, SIECA

Case: Sharing knowledge on investors across Africathrough AfrIPANet

One fundamental obstacle to the development ofeffective investment promotion strategies consistentlyrecurs: the lack of reliable data on what investors aredoing and what they want. Thus a key benefit ofmembership is access to the regular Investor Surveysundertaken by UNIDO (2001, 2003, 2005, 2010/11).These surveys provide a uniquely detailed insight intothousands of foreign enterprises across the continent.Focusing on the knowledge side of the equation, thefindings showed that while the numbers of stafftrained and the sums spent on training and R&D byforeign enterprises could be rather low in somesectors and countries, the companies did employsignificant numbers of local and expatriate graduates.There are additional knowledge spillovers whenskilled workers leave these companies, either to starttheir own enterprises or to join another businessxiv.

When investors were asked whether the national IPAmeets and exceeds expectations, the results showed amixed picture of performance across the 15 countriesin the 2005 survey (see figure 3.1). In one group ofcountries, non-registered investors were fairlydissatisfied with IPA performance and registeredinvestors are not especially satisfied; indeed someinvestors said they were unaware of the key functionsof the national IPA.

In the other group, registered investors weresignificantly more satisfied and non-registeredinvestors are less dissatisfied. The EthiopiaInvestment Agency (EIA)xv fell into the secondcategory, and along with sister IPAs in Tanzania andUganda was said by investors to be a relatively high-performing IPA. In many countries, investorsatisfaction increased substantially between 2003 and 2005.

The Africa Investment Promotion Agency Network(AfrIPANet) was initiated by UNIDO in 2001 toprovide African Investment Promotion Agencies(IPAs) with a common platform to discuss and designinvestment promotion strategies. The network hasbuilt capacity among IPAs by providing them withregular information on investors and technicalassistance in re-aligning investment promotionstrategies based on investor demands.

The network rapidly expanded from 10 foundingcountries to become a forum of 43 national andregional IPAs across sub-Saharan Africa. AsAfrIPANet grew in size and ambition, it becamenecessary to formalize the initiative beyond aninformal network. In 2008, members agreedunanimously to make it a formal African regionalbody on investment promotion, with a Memorandumof Association and elected Executives and a SteeringCommittee. IPAs say they gain considerable benefitfrom regular face to face meetings, such as theUNIDO-Africa Investor CEO Forum held in Durbanin 2008 and bi-annual Meetings like the AfrIPANet VMeeting in November 2010 in Tripoli, Libya, at theoccasion of the EU-Africa Business Forum orAfrIPANet VI which was organized as a side event ofthe 15th China International Fair for Investment andTrade (CIFIT) in Xiamen, China. The AfrIPANet VImeeting was the occasion for presenting the results ofthe recently conducted UNIDO survey of investors in19 African counties funded through the EuropeanCommission. The Web based application designed tooffer an easy to use platform for analysing the databy government agencies, IPAs and investors who tookpart in the survey was launched on that occasion.

“The new and emerging forms of business alliances and the complexitiesin the structures of the transactions in a fast-globalizing economy requirethat intermediary organizations of African countries understand andreach out on a constant and sustained basis to the private sector entitiesand ascertain their concerns, their challenges and expectations.”

UNIDO, 2011




end, UNIDO has pioneered the development of aninvestment-related information and managementplatform, the Investment Monitoring Platform,http://www.afripanet.org, which offers participatinggovernment authorities, companies, financialinstitutions, development organizations and civilsociety NGOs access to an array of primary data andanalysis that is not available anywhere else. Thesupporting software allows users to interrogateexisting reports on business activity and carry outprimary research using firm-level data available onthe platform. The platform enables nationalauthorities to carry out systematic analysis of theactivities and performance of enterprises operating intheir countries.

The results of the latest survey were published in2011. Approximately 6,500 companies from 19African countries, both domestic and foreign, wereinterviewed and a large set of variables aboutinvestor characteristics, investor performance,investor impact on the host economy as well as theirperceptions has been collected. The objective is toprovide Investment Promotion Agencies with factualinformation at the enterprise-level which was hithertonot available to assist them to revisit and designevidence-based investment promotion and targetingstrategies and to carry out their policy advocacy rolemore effectively. The scope of UNIDO´s technical assistance withregard to IPA capacity building goes beyond theexecution of the Investor Survey and the publicationof the biannual Survey Reports. The objective is tomake the aggregated Survey data available to a large,diversified user group to mainstream the findings ofthe data into the day-to-day routine operations ofInvestment Promotion Agencies in Africa. To this Sources: UNIDO (2011) Africa Investor Survey Report, Vienna.

Case: The Conference of African Ministers ofIndustry (CAMI)

The importance of knowledge management is stressedthroughout the strategy, for example in the HR cluster,by accessing the know-how of the African diaspora, orbuilding up a knowledge-bank on renewable energyxviii.

AIDA’s strategy was endorsed by AU heads of state inAddis Ababa and by CAMI in Durban during 2008.Three specific governance mechanisms - a steeringcommittee, monitoring and evaluation framework anda financing and resource mobilization strategy – weresubsequently approved in June 2010.

To maintain momentum, efforts were made in 2010 tointegrate agribusiness and agro-industries into AIDA.Given the massive scope of the Action Plan, it was feltimportant to identify some priorities for rapidprogress. Thus in March 2011, the CAMI hosted byAlgeria was themed “Enhancing Competitiveness ofthe African Industries through Increased and ImprovedValue Addition.” The key focus of the conference wasknowledge exchange on improving value added infood and agribusiness, mineral processing(‘beneficiation’), and local pharmaceuticalsxix.

In addition to the high-level segment of the conferencefor African industry ministers, the Algiers CAMIbrought together 300 delegates from 35 Africancountries: high officials and experts of industry,African Economic Community (AEC), the regionaleconomic communities (REC), UNIDO and other UNagencies including FAO and IFAD, African partnerorganizations, chambers of commerce, IPAs anddevelopment banksxx.

The ministerial network is clearly seen as a usefulmodel: a biannual Conference of the Ministers forIndustry of the Union for the Mediterranean began in1996xxi. More recently, the first meeting of industryministers of the ‘D8’ (Iran, Turkey, Malaysia, Pakistan,Nigeria, Egypt, Bangladesh and Indonesia, thedeveloping eight Islamic countries) was held in Tehranin 2010, and it has become an annual event with thesecond meeting in Istanbul in October 2011xxii.

The Conference of African Ministers of Industry(CAMI) is a biannual conference established in 1975as a pan-African network “to promote accelerated andsustainable industrial development”. CAMI has servedas a statutory forum for industry ministers and keystakeholders to share knowledge on Africanindustrialization. It has a revolving presidency.

For the first three decades, UNIDO and UNECAmanaged the conference. At the Cairo meeting in2006, the African Union (AU) took over the formalgovernance of CAMI, while the initiative is stillsupported technically and financially by UNIDOxvii.

During 2007/08, the conference was closely engaged indeveloping the ambitious AU Action Plan for theAccelerated Industrial Development of Africa (AIDA).The implementation strategy, supported by UNIDOand a wide range of stakeholders, envisages over 50projects across seven clusters:

Industrial policy and institutional direction

Upgrading production and trade capacities

Promote infrastructure and energy for industrialdevelopment

Human resources development for industry

Industrial innovation systems, R&D andtechnology development

Financing and resource mobilization

Sustainable development

“Thanks to the latest teachings, we realize now how ineffectual aredevelopment policies that are led in isolation and how relevant are thosewhich constantly seek complementarity between economies.”

Mohamed BenmeradiAlgerian Minister of Small and Medium Enterprises and of the Promotion of Investment xvi

Source: UNIDO.

IPA performace from the perspective of registered vs. non-registered investors

Non- registeredTanzania

Uganda

Ethopia

Ghana

Madagascar

Senegal

Guinea

Ivory Coast

Mali

Mozambique

Burkina Faso

Cameroon

Malawi

Nigeria

Kenya

Score according toreasons for non-registering

Score according to assessment of registered investors

-0.5 -0.4 -0.3 -0.2 -0.1 -0.0 0.1 0.2 0.3

Registered0.263

0.262

0.250

0.240

0.223

0.218

0.193

0.169

0.146

0.131

0.121

0.087

0.069

0.069

0.057

-0.068

-0.052

-0.016

-0.090

-0.155

-0.150

-0.061

-0.277-0.277

-0.268-0.268

-0.228-0.228

-0.250-0.250

-0.405-0.405

-0.431-0.431

-0.368-0.368

-0.446-0.446

figure 3.1




Case: Promoting exports in Cuba’s changing economy

THE NEW ECONOMIC AND SOCIAL POLICYCuba has recently undertaken a major economicmodernization initiative, the “Proyecto deLineamientos de la Política Económica y Social” or“Guidelines for Economic and Social Policy” and thelaw of October 2010 on Employment andMicroenterprise, which stresses efficiency andproductivity.

A notable feature of the guidelines was the change ofapproach towards small businesses. There would be amodest increase in the range of permitted activities;some relaxation of regulations and changes in tax;and a significant liberalization of licensing. Overall, itwould amount to a reversal of the traditional stigmaattached to non-state economic activities, and withpositive encouragement for the formation ofcooperatives in sectors like taxis and beauty care.These economic and social policy measures weresubsequently approved at the 6th Party Congress inJune 2011, and Adel Izquierdo became Minister ofthe Economy and Planning.

The question now is what types of institutionalsupport might be needed to help the new economicand social policy deliver the scale of employmentrequired over the next few years (500,000-1.2 millionjobs). As part of that debate, it is worth reviewingthe roles of three key institutions that could beexpected to play an active role in knowledge sharingin support of the expected growth in smallenterprises.

Cuba’s 11.2 million people have a high level ofhuman development. Cuba achieved 0.706 on theUnited Nation’s Development Programme’s (UNDP)Human Development Index in 2010, well ahead ofthe regional average in Latin America and theCaribbeanxxiii. The country performs well on mosthealth, education and income equality measures,although there is lack of agreement about itsmethodology for calculating GDP per capita. Itreports that it is on track to achieve many of theMillennium Development Goals by 2015(Government of Cuba, 2010).

There are few studies on Cuba’s overall economiccompetitiveness. However, there have been numerousstudies on traditional sectors such as agriculturalcommodities (especially the decline in sugarproduction after 1992), and minerals (notablynickel). There has also been a focus on successfulnon-traditional sectors like tourism, biotechnologyxxiv

and musicxxv. This changing economic structuremeans that the country’s carbon emissions per unit ofGDP have fallen substantially in the past decade(IEA, 2011). Despite the lack of global benchmarkingstudies, competitiveness is on the domestic policyagenda. For example, UNIDO has supported themulti-project Integrated Programme to Support theNational Strategy on Industrial Competitiveness. Intotal some 25 projects have been undertaken.UNIDO also supported the strengthening of theNetwork of Industrial Information(DP/CUB/01/019)xxvi.

CEPEC: PROMOTING THE EXPORT OF SERVICESThe Integrated Programme for the Promotion ofExports of Services (PIPES or Programa Integral parala Promoción de las Exportaciones de Servicios) is ledby the Centro para la Promoción del ComercioExterior de Cuba (CEPEC), which is part of theMinistry of Foreign Trade and Investment(MINCEX). The programme promotes and developsSME export capabilities. To achieve this goal it usesCEPEC’s know-how and the support of thecompanies as well as the existing structures in thecountry. The Programme has different stages, amongthem the assessment of export potential, theimplementation of quality certification, marketresearch focused on the specific interests of acompany, provision of information, provision ofaccess to training courses related to the thematicservices areas at the Instituto de Comercio Exterioror at the University Economics Department, theinclusion of companies in the prioritized marketsdefined by CEPEC according to specific companyinterests and, finally, a joint analysis with relevantagencies of the support that can be provided tocompanies. http://www.cepec.cu/carpeta/servicios/pipes.pdf

THE CUBAN CHAMBER OF COMMERCEThe Chamber is a tool for the reintegration of theCuban economy in the world economy. The coremission of the Chamber is to promote thedevelopment of the associated Cuban companies andcommercial activities in general. In permanentcontact with business world, it helps the state todraw up policies, it offers services to national andinternational businessmen and represents Cubanbusiness abroad. The Chamber of Commercesupports knowledge and information exchangeabout global business opportunities.http://www.camaracuba.cu/

THE FERIA HAVANA TRADE FAIRThe Feria Havana Trade Fair (FIHAV) has become animportant exhibition meeting for companies andbusiness people worldwide. The 2010 Fair wasattended by over 1,000 Cuban exhibitors and 2,500international exhibitors from 58 countries. The Fairessentially displays products of the different branchesof the economy such as food and beverage, healthcare services, capital and consumer goods, textilesand other essential goods and products. Decision-makers and purchasers from industrial andcommercial state entities and importers use the fair tonegotiate contracts with foreign suppliers, learnabout new technologies and products, meet newexporters and strengthen their relationship withestablished suppliers. FIHAV 2010 evidenced thedesire of entrepreneurs to promote bilateral projects,especially related to pharmaceutical industry.http://www.feriahavana.com/Memorias

"These realities compel us to speed up the improvement of the agenciesmanaging our work and the performance of companies and otherinstitutions, and intensify the re-classification of leaders at every level inorder to realize the content of the Guidelines approved by the Party’sCongress, particularly in reference to promoting the role of accountingand internal control as irreplaceable tools of business management…,crucial factors in the interrelationships of the different actors of theeconomic life of our nation.”

Raul CastroPresidente de los Consejos de Estado y de Ministros, August 2011.

Sources: MINCEX, FIHAV, CEPEC, Cámara de Cuba.

Cuba has recently undertaken a major economicmodernization initiative which stresses efficiencyand productivity.




Case: Viet Nam CIEM/ NUS Singapore partnership

Viet Nam opened up economically following thebeginning of liberalization in 1986 (Doi Moi), andenterprise reforms (2000-2005), with foreign directinvestment really taking off from 2005, and thenaccession to the WTO in 2007. While manychallenges remain for the country to meet its 2020goal, international openness is a strong advantage.“In my discussions with Vietnamese leaders”, saysMichael Porter of Harvard Business School and theChair of the International Advisory Panel at the AsiaCompetitiveness Institute, “I have always been struckby their willingness to learn from outsideperspectives” (CIEM & NUS, 2010).

How is Viet Nam’s international knowledgenetworking manifested? The country participates inthree regional integration arrangementsxxix: Asia-Pacific Economic Co-operation, the Association ofSouth Eastern Asian Nations (ASEAN) and theMekong River Commission. ASEAN has free tradeagreements with China, the Republic of Korea, India,Japan, and Australia-New Zealand. While chairingASEAN in 2010, Viet Nam proved its commitment tothe ASEAN Economic Community (AEC) roadmapand the Ministry of Industry and Trade has beenworking to raise business interest in AECxxx. As notedabove, levels of FDI have increased significantly overthe past decade, and Viet Nam has a similar level ofFDI stocks to Panama in the study group. MOIT hasan International Cooperation Department; and offersa searchable online directory of “reliable exporters”across 28 sectors. The Viet Nam Chamber ofCommerce and Industry (VCCI) is well networkedoverseas, notably the Confederation of Asia PacificChambers of Commerce and Industry (CACCI), theInternational Chamber of Commerce (ICC), and hasstrong linkages with several foreign chambers in VietNam, including the Japanese Chamber of Commerceand Industry (JCCI) and the US Chamber of

Viet Nam’s 89 million people saw rapidimprovements in human development between 1990and 2000, closing the gap to the world average.Despite rapid economic growth in recent years,income still remains below the regional average.Rising spending on education should increase schoolenrolment ratios and accelerate the growth of humandevelopment over the last decade. The country hasbeen notably active in providing modern energy inrural areasxxviii.

Viet Nam’s ambitious national goal is to be a modernindustrialized country by 2020. There is a livelydebate among Viet Nam’s economists about targeteconomic growth rates and which industrialstrategies will best meet the goal. Some internationalresearchers question the degree to which Viet Namowes its economic success to industrial policy(Altenburg, 2009; UNDP 2010). In terms ofcompetitiveness, the trend over the past few years hasbeen mixed, with recognition that spillovers fromFDI have been limited. Exports are still ‘factor-driven’ (WEF, 2011). Public administration reform(PAR) and infrastructure investment are nationalpriorities, as is higher education and workforce skills.Inflation and access to finance are the major concernsof business executives. Yet in industrial performance,Viet Nam did improve its competitivenesssignificantly between 2005 and 2009, although itscarbon emissions per unit of GDP also increasedsubstantially over this period (UNIDO, 2011; IEA,2011). While still trailing neighbours like Indonesia,the Philippines and Thailand, Viet Nam isaccelerating towards them, suggesting that thecountry is now on its way to becoming an ‘efficiencydriven’ economy.

(NUS) and the Institute for Strategy andCompetitiveness at Harvard Business School toproduce the Vietnam Competitiveness Report 2010(CIEM & NUS, 2010). This level of collaboration oncompetitiveness is remarkable. Back in 2003, fieldtrips were undertaken in Eastern Europe and Russiato learn the pros and cons of privatization processes.The Ministry of Planning and Investment’sDevelopment Strategy Institute and UNDPcommissioned the Centre for Development Policy andResearch, School of Oriental and African Studies,University of London to research the competitivenessof state corporations, state enterprises and privateenterprises (UNDP 2010). CIEM also worked withthe University of Copenhagen on a comparativecompetitiveness study between Viet Nam andMozambique on the competitiveness.

But the Vietnam Competitiveness Report is different:“the first ever national report which providescomprehensive assessments ... from bothmicroeconomic and macroeconomic optics” and“developed independently and objectively” by CIEMand NUS, according to Deputy Prime MinisterHoang Trung Hai, who supported and guided thecollaboration. The report had a cross-sector advisorypanel (UNIDO’s industrial policy expert ManuelAlbaladejo being the only non-Vietnameseparticipant) and a Partner Focus group made up ofVietnamese and international businessrepresentatives.

Commerce. Vietnamese businesses are becomingmore responsible and sustainable too, byparticipating in programmes such as the Viet NamBusiness Links Initiative and the Viet Nam CleanerProduction Centre (Bekefi, 2006).

Viet Nam’s international knowledge networking isexemplified by the Central Institute for EconomicManagement (CIEM), now considered the leadingnational economic think tank. While operating underthe direct authority of the Ministry of Planning andInvestment, CIEM has its own legal identity and anindependent ethos. Over the past six years, CIEM hasstrengthened its development research and policyanalysis capacity (supported by DANIDA and GIZ).It produces significant amounts of research,forecasting and policy advice on economic laws andregulations, policies, planning and managementmechanisms, business environment and economicrenovation. In addition, its 95 staff members offertraining and consultancyxxxi. It runs the VNEPEconomic Portal, which is becoming an increasinglypopular virtual venue for open debate on economicpolicyxxxii. It produces a series of working papers(supported by Friedrich Ebert Stiftungxxxiii). CIEM’sCenter for Information and Documentation has afull-text database of over 1,000 Vietnamese languageeconomic development reports, and also access tomany leading international economic libraries such asBlackwell Synergy and Eldis. The Department forBusiness Environment and Competitiveness wascreated in 2009.

CIEM recently collaborated with the AsiaCompetitiveness Institute at Lee Kuan Yew School ofPublic Policy at National University of Singapore

“Viet Nam is endeavouring to integrate more deeply and widely into theworld. The country cannot mature if it neither makes contact with theoutside nor competes with other countries.”

Vu Khoan, Former Deputy Prime Ministerxxvii

In industrial performance, Viet Nam didimprove its competitiveness significantlybetween 2005 and 2009. While stilltrailing neighbours like Indonesia, thePhillippines and Thailand, Viet Nam isaccelerating towards them, suggestingthat the country is now on its way tobecoming an ‘efficiency-driven’ economy.




The APMAS Knowledge Network was set up byIFAD and the Asian Institute of Technology underthe Knowledge Sharing & Networking Platformfor Asian Project Management SupportProgramme. APMAS recently provided practicaltraining in Bac Kan on how to undertake theannual IFAD outcome surveyxxxvi.

The Climate and Development KnowledgeNetwork helps countries to deliver climatecompatible development, offering advice,technical assistance, research, knowledge sharingand capacity building. Supported by DFID andthe Netherlands Ministry of Foreign Affairs.CDKN launched a project in mid-2011 on water-related climate change risks and adaptation in theMekong Region, with Asian Management andDevelopment Institute (AMDI), National Institutefor Science and Technology Policy and StrategyStudies and An Giang University, Viet Nam, pluscounterparts in Cambodia and Thailandxxxvii.

“In the coming period,” says the Multilateral TradePolicy Department of MOIT, “Viet Nam has theopportunity to integrate more profoundly into theworld economy via more complicated play grounds.”CIEM and its local and international networksshould be busy for the foreseeable future. Possibleareas for future international networking couldinclude:

Facilitating overseas scholarships and fellowships;

Engaging in joint economic research activities andco-publish research, e.g. on governance of public-private partnerships, FTAs;

Setting up joint policy research with peers inother countries on regional/international issues;and

Attending face-to-face meetings in conferencesand seminars.

As the Vietnam Competitiveness Report 2010 pointsout, trade is like a two-way street. It “exposes localproducers to competition and it also offers access toknowledge in global markets.”

Sources: Interview with Dr. Nguyễn Thị Tuệ Anh, CIEM;http://www.moit.gov.vn/.

Launched at a high level event in November 2010,the report stresses the importance of collaborationand knowledge sharing. One of the keyrecommendations is to build up Viet Nam’s“knowledge and skill infrastructure” for examplethrough cluster mapping and detailed regionalcompetitiveness studies. “The lack of dialoguebetween government agencies and companies is oneof the most critical barriers towards removing thebottlenecks for growth. Pilot initiatives can belaunched in clusters where there is sufficient criticalmass for actions to affect a meaningful number ofcompanies and the willingness of companies andpublic sector agencies to collaborate.” As part of thefollow-up on the country’s competitiveness agenda,UNIDO has worked on an Industrial Competitiveness Report with MOIT and aninvestment survey 2011 with MPI/FIA (both 2011).

VIET NAM PARTICIPATES IN NUMEROUS OTHERKNOWLEDGE NETWORKS. TO IDENTIFY JUST AFEW:

The Institute for Foreign Policy and StrategicStudies (Diplomatic Academy of Viet Nam) is amember of the network of Asian strategic thinktanks ISIS, and works with Washington-basedinstitutions, the China Foreign Affairs University,and Taiwan National University.

The Viet Nam Business Forum (VBF) was createdin 1997 by the Vietnamese government, theprivate sector, and the donor community, led byMinistry of Planning and Investment, the IFC andthe World Bank, and has helped make publicprivate dialogue the norm in the country.

The Viet Nam Development Forum (VDF) is ajoint research project of the National GraduateInstitute for Policy Studies (GRIPS) in Tokyo andthe National Economics University (NEU) inHanoixxxiv.

The Trade Knowledge Network: a global networkof research institutions coordinated by theInternational Institute for SustainableDevelopment (IISD), TKN links members,strengthens research capacity and generatesknowledge on the impacts of trade andinvestment policies on sustainable development. Ithas 20 member institutions located in 8 countriesincluding Viet Nam (Ministry of Fisheries;Ministry of Science, Technology andEnvironment; and IUCNxxxv).

Testing Laboratories in 2010 to give training coursesto technicians in developing countries lacking theirown accredited laboratoriesxxxviii. Vimta had already in2008 collaborated with UNIDO and WAITRO (theWorld Association of Industrial and TechnologicalResearch Organizations, based in Malaysia, withabout 160 members worldwide) in launchingLABNET, a virtual network for testing laboratories indeveloping countries worldwide. The LABNET portalis already attracting many visitors from countries suchas India, Turkey, the Philippines, Mexico and Brazil.

If knowledge sharing has traditionally been bilateraland North-South, the emergence of regional researchnetworks like ERIA and Red Mercosur shows thegrowing interest in building relevant, rapid, responsivenetworks that can produce the knowledge that isneeded close to the target audience. “South-Southcooperation is a visionary idea that is starting to payoff today,” Rene Castro, Minister of Foreign Affairsof Costa Rica has said. “Due to their first-handfamiliarity with the problems on the ground, actors inSouth-South cooperation can be more efficient andeffective in identifying and implementing solutionsxxxix.”

In sum, these cases stress the importance of recruitingthe right participants in the network, and giving themthe mandate to generate and share knowledge.

Among the countries for which data is available, thebest networked are smaller European countries. Fromthe study group, Ethiopia, Panama and Peru areamong the top 50 countries, suggesting thatinternational networking is not solely a function ofincome. Nor are successful networks easily suppressedby geopolitical adversity, as shown by the case of theHavana Trade Fair, which has overcome manyobstacles on its way to success. In the Cuban case, it islikely that new networks will also be needed to meetthe needs of a rapidly-changing economic policy.

The cases illustrate networks for politicians, such asthe horizontal information-sharing Conference ofAfrican Ministers of Industry, and for researchers asin the ‘triangular’ CIEM competitiveness study withNUS and Harvard. They also illustrate the changingfunctions of networking: in the case of AfrIPAnet, thenetwork moving from knowledge sharing toharmonization, via the application of the biannualinvestor benchmarking survey.

Dynamic networks tend to proliferate, producingregional variants (e.g. Latin America’s CleanerProduction network). They also produce content-related offshoots to meet emerging needs. UNIDO’sCentre for South-South Industrial Cooperation(UCSSIC) was established in 2007 in New Delhi. Incooperation with Vimta Labs in Hyderabad, UCSSICin turn set up the South-South Training Facility for

3.7 Conclusions

As discussed above in Chapter Two, key dimensions of internationalnetworking are political (the number of embassies in a country, thenumber of international organizations of which the country is a member,the number of UN peace missions in which a country participated, and thenumber of international treaties a country signed) and economic (exportsand imports of goods and services, foreign direct investments, theportfolio of investments, and the income payments to foreign nationals).


101Networks for ProsperityPART 2, Chapter 4: From Dialogue to Collaboration

100 Networks for ProsperityPART 2, Chapter 4: From Dialogue to Collaboration

actions in the context of achieving sustainabledevelopment (see also Abbott & Snidal, 2009). Thesenetworks can take at least three forms: within thepublic sector, between public-private sector actorsand purely private networks.

4.1 INTRODUCTIONInter-organizational networks or partnerships(including private sector development partnerships),are gaining prominence across the world. In a recentreport, Rochlin, Zadek and Forstater (2008) mappedthe ever-increasing partnerships and collaborative

“Today, any serious industrial policy is one that focuses on how thestate and the private sector can work together to generate jobs.”

Prof. Ernest Aryetey, Vice Chancellor of the University of Ghana, 2011xl

Chapter 4: From Dialogue toCollaboration: Inter-organizationalNetworksKazuki Kitaoka, Alex MacGillivray, Axel Marx andCormac O’Reilly

Clusters offer small and mediumenterprises (SMEs), at the very least,external economic advantages, includingeconomies of scale and of scope.

A major problem for networking in the public sectorcan be the high turnover of staff: “In Panama, Honduras, Nicaragua, Guatemala,Peru, and Ecuador, a mass replacement of officialsoccurs every time the administration changes. Thistype of "revolving door" is a problem because publicpolicies need continuity of resources for follow upand control. If the most capable employees withspecific knowledge are dismissed, then policies will beaffected.” (Zuvanic et al., 2010).

Fortunately the “revolving door” practice isdiminishing in countries such as Peru, as the casestudy shows (see section 4.5 below).

In order to achieve specific policy objectives whichcut across the functional departmental borders of theadministration, policy integration is needed. Themost cited example of the application of the policyintegration principle concerns the integration ofenvironmental policies in other policies such astransport, energy, agriculture, tourism and others.The objectives of stimulating private sectordevelopment can also be integrated into fiscalpolicies, trade policies, industrial policies and relatedpolicy areas such as education (for examplespecialized courses for entrepreneurship). In order tomake this integration successful, cooperation andcollaboration across governmental departments isneeded. This type of collaboration can take manyforms, ranging from ad hoc meetings to jointstrategic plans and permanent working groups.

4.2 Public-publicnetworks

These emerge mostly in the context of initiatives in the context of policy integration. As highlighted in chapter 1, private sectordevelopment, especially in the context of industrial policy, is drivenby many interacting policy areas.


The importance of public-private networks was emphasized in recentadvice to South African policy-makers:

“A government should evaluate its industrial policy framework notby asking questions of the type: which tax breaks or subsidies are weusing? which sectors have we identified? what is the budget we haveallocated for industrial promotion? The relevant questions insteadare: have we set up the institutions that engage the bureaucrats in anongoing conversation of pertinent themes with the private sector, anddo we have the capacity to respond selectively, yet also quickly andusing a variety of updated policies, to the economic opportunitiesthat these conversations are helping identify?”

Hausmann, Rodrik & Sabel 2007



The Charter covers 12 important design features ofeffective dialogue, from mandate and choosingparticipants through to monitoring and evaluationand exit strategies. Possibly reforms to the businessclimate have never been more rapid than during the‘Bulldozer Initiative’ in Bosnia and Herzegovina,where an “an SME outreach effort sponsored byinternational community succeeded in improvingbusiness regulation at a rate of 50 reforms in 150days” (Herzberg &Wright, 2006). But fromArmenia’s Business Support Council to Viet Nam’sBusiness Forum, there is evidence that good qualitydialogues amply repay the investments of time andeffort in running them (Herzberg & Wright, 2006).

In many countries, setting up a relevant, timelyconversation on economic policy between public,private and voluntary sectors is hampered by years oftension and mistrust, with periodic false startsthrough unsatisfactory efforts at consultation. TheCharter of Good Practice in using Public PrivateDialogue for Private Sector Development is oneeffort at overcoming these problems. It wasdeveloped by participants at an internationalworkshop in 2006, revised via feedback to adedicated website (www.publicprivatedialogue.org).

4.3 Public-privatenetworks

are also successful cases in forestry, berries, vacuumpacked meat, abalone and rape seed oil, amongothers. “In our eagerness to move the boundary ofpossibility, we believe in the value of sharing andtransferring knowledge”. How do they supportknowledge networks? Through capacity building(especially internet-based education and training),development of standards, courses and seminars,debates, research reports, corporate ratings andawards, travel bursaries and so on. Fundación Chilehas also developed a strong focus on sustainabledevelopment (notably in water and energy). Chile,like the Republic of Korea and Singapore, has beenan inspiration to several countries in the group ofcountries studied, as the case of Panama (see section4.5) shows.

In a study of 20 African nations, Te Velde (2010)showed that countries with stronger state-businessrelations (SBRs) grew faster. The strength of theserelations was measured across four domains:

Presence and length of existence of an umbrellaorganization linking businesses and associations.

Presence and length of existence of an investmentpromotion agency (IPA) to promote business.

Openness of cooperation through formal existingbodies (or informal ‘suggestive’ bodies with noentrenched power).

Presence, length of existence and effectiveness oflaws protecting business practices andcompetition as measures of avoidance of collusivebehaviour.

The term ‘state-business relations’ somewhatsimplifies the multiple interactions within thecomplex ecosystem of PSD. It does not adequatelyrecognize that relations within the public sector itselfneed to be effective – for example between theministries of economy and industry. Nor does itrecognize that there are also frequent disconnectswithin the private sector, notably between largebusinesses represented by chambers of commerce,and micro, small and medium enterprises represented(if they are formal) by their own associations. Aboveall, with the blurring of ‘state’, ‘regional’ and even‘global’ policy-making competencies (see further Part3 below, Conclusions and Recommendations), analternative term is preferred. We suggest a useful termmight be simply ‘public-private relations’.

Te Velde found an encouraging enhancement ofpublic-private relations in most countries in hissample in the period 1994-2004, including Ethiopia

Public-private networks can take several forms.Governments can, for example, initiate innovationand change. In this model state-owned or dominatedfirms are set up in specific economic sectors. Inanalysing the strong growth in emerging economies,Amsden shows that in manufacturing state-ownedenterprises (SOEs) were concentrated in heavyindustries such as petroleum, metallurgy (iron andsteel) and strongly influential on the development ofother firms through their national leadership. “SOEs[...] undertook exemplary technology transfers,strengthened professional management, invested inR&D, and became a training ground for technicalstaff and entrepreneurs who later entered privateindustry.” (Amsden, 2001, pp. 213-214)

A similar catalytic role with strong spillovers can beobserved in key areas such as research anddevelopment (R&D) support. Peter Evans (1995, p.147) describes that in the case of the Republic ofKorea investments in R&D multiplied in the 1980’sand 1990’s to reach levels higher or equivalent tothose of most advanced countries. This increasedinvestment in R&D continues to this day. Evans(1995, p. 147) argues that the initial investments bygovernment and the interaction between state capitaland private capital was key to achieve this strongincrease.

Another inter-organizational network emerges out ofpublic-private joint ventures in emerging sectorswhich then further develop and diffuse. Again, theRepublic of Korea is often presented as a case in thisrespect. The Republic of Korea’s first oil refinery wasestablished in 1964 as a 50:50 joint venture betweenthe Government and Gulf Oil. This type of jointventure became a model for other sectors whichenhanced the development of the private sector(Amsden, 2001, p 218). Finally, an increasing numberof public-private partnerships have developed toprovide different kinds of services and infrastructurein support of private sector development.

Public-private dialogue is a necessary step, but onlythe first on the journey. Sectors often have to worktogether for years to build up successful collabo -rations, starting on safe ground before getting intothe areas of more controversy. Fundación Chile is a well-known example: a non-profit privatecorporation established in 1976 by the Governmentof Chile and BHP-Billiton – Minera Escondida. Itsmission is to develop high impact innovations andhuman capital to increase Chile’s competitiveness “by promoting and developing the economy, throughtechnology transfer and in alliance with local andglobal knowledge networks”. Its best known inter -ventions have been in aquaculture (salmon), but there




Partly in response to the prominence ofcompetitiveness benchmarks, many countries haveestablished competitiveness councils of some formator other. Some are dominated by ministries andothers by business associations; a few have genuinepublic-private balance. Irrespective of theirgovernance arrangements, many competitivenessbodies are beginning to take knowledge seriously. Inthe study group (Cuba is not covered by WEF), thetrend over the past three years has generally been oneof improving competitiveness, with all countries nowacross the threshold score of 3.5 out of a maximumscore of 7. The scores are suggestive of two broadgroupings, with Panama, Costa Rica, Turkey, VietNam and Peru in one group scoring between 4.2-4.4, and Egypt, El Salvador, Serbia, Bolivia, Ethiopia,and Dominican Republic with scores between 3.7-3.9. As noted below, countries’ progress towardscleaner production and ‘green industry’ (evidencedfor example by reducing carbon emissions per unit ofGDP) is mixed.

(see section 4.5). Nonetheless, he acknowledges thatmeasurement remains difficult, and calls for furtherresearch to build an enhanced theoreticalunderpinning of effective public-private relations.This could be achieved by modelling the economicbehaviour of key actors involved, building a set ofempirical studies on successful examples, and evenconstructing a worldwide index of effective public-private relations.

In September each year, economic policy-makers inmost countries await the launch of the WorldEconomic Forum’s Global Competitiveness Index.WEF’s index has become one of the most influentialeconomic policy benchmarks, alongside rival surveysfrom the World Bank and IFC (Doing Business) andthe Institute of Management and Development(World Competitiveness Scoreboard). As notedabove, WEF includes in its annual survey of businessexecutives a number of questions that touch onknowledge sharing, such as the extent of university-business collaboration and the degree of clustering.The Index also looks at ICT connectivity as a proxyof technological capabilities. However, knowledgesharing is not seen as a key pillar of competiveness bythe main benchmarking studies. Directorate General for Enterprise and Industry to

further develop clusters (see European Commission,2008a). The importance of clusters is also apparentin developing countries. Early work of Khalid Nadvi(1995 p. 4; see also Humphrey and Schmitz, 1995)notes that:

“The conclusion that emerges is that industrialclustering and networking can be of great importanceto small firms in the South operating in environmentsthat are industrially and infra-structurallyunderdeveloped. Clusters offer SMEs, at the veryleast, external economic advantages, includingeconomies of scale and of scope. Co-operationbetween agents within clusters and networks, throughthe sharing of information, resources, knowledge andtechnical expertise, and other forms of joint actionreduce transaction costs and further enhancecompetitiveness as well as accelerate learning andtechnical innovation. Finally, while there is evidencethat inter-firm relations, set in motion by clusteringand networking, offer a potential growth path thattakes SMEs beyond a survival strategy to one of real,competitive and sustainable growth; it is also clearthat structures and forms of organization associatedwith clustering and networking are themselves in astate of flux, continuously undergoing change.”

Leading examples include financial services (the Cityof London, New York), film (Hollywood and“Bollywood”), cars (Detroit, Modena, Toyota City,Wolfsburg, Stuttgart, etc.), watches (Switzerland andJapan), optical equipment (Tokyo), flowers (theNetherlands and Colombia), computer software(Silicon Valley, Bangalore), marine technology(Southwest Norway), mobile telecommunications(Stockholm and Helsinki), wine (Barossa Valley,Rioja, Bordeaux, Southern Chile and parts ofCalifornia), or biotech, life sciences and medicalinstruments (Boston’s Route 128, BioValley 21,Medicon Valley 22, and more recently Costa Rica)(European Commission, 2008).

Clusters can be found in many economies around theworld, each following its own trajectory and history(European Commission, 2008). Cluster developmentinitiatives are, as Porter et al. (Porter, 1998, 2000;Delgado et al., 2011) argue, an important newdirection in economic policy, building on earlierefforts in macroeconomic stabilization, privatization,market opening, and reducing the costs of doingbusiness. A prominent example concerns recentefforts undertaken by the European Commission’s

4.4 Private networks

These can take many forms: business associations, industry-university collaboration, private regulatory initiatives, etc. A keyfocus in the current literature is on economic clusters which aregeographic concentrations of interconnected companies, specializedsuppliers, service providers, and associated institutions in a particularfield.

Global Competitiveness Index (WEF, 2011)

Panama

Vietnam

Serbia

Costa Rica

Bolivia

El Salvador

Egypt, Arab Rep.

Peru

Dominican Rep.

Turkey

Ethiopia

Cuba

2009-10 2010-11 2011-12

3.2

3.0

3.4

3.6

38.

4.0

4.2

4.4

Figure 4.1




Cowan and Jonard (2004), who modelled knowledgediffusion in various structures of network, challengethe assumption that KM is optimized in networksthat are highly local or clustered. Indeed, theydemonstrate that networks work better with up to 10per cent of the linkages between distant participants.Their conclusion: “it is possible to have too muchclustering. It is very important to maintain or evenbuild strong links outside the cluster”.

While most business surveys and opinion pollscanvass entrepreneurs for their views on thecompetence of government, we know less about howpolicy-makers and the public view businesses andtheir associations. Latinobarómetro did ask abouttrust in business associations in 2005 (see figure 4.1),a question unfortunately not repeated by sisterinitiatives Asian Barometer and AfroBarometerxli. Onaverage across the region, three times as many peoplehad no trust in them (28 per cent) as had a lot oftrust in them (8 per cent). This may indicate abroader problem of declining trust across institutions,both public and private, in Latin America. Given theambition of business associations to be influentialactors in the making of economic policy, rebuildingtrust between government, business associations andthe general public is an urgent priority.

Panama provides a good illustration of how asmall developing country tackles the challenge ofcreating knowledge networks.

In Peru, the Ministry of Production is drawing onthe long experience of the network ofTehnological Innovation Centres to makeGovernment networks more stable and effectivein general.

The case of República Dominicana shows howthe SME confederation CODOPYME works tosecure a level playing field for SMEs in winninggovernment contracts.

Serbia provides an example of a country that isworking hard to build a much-neededconversation between government and privatesector.

Ethiopia has seen progress in strengtheningpublic-private relations in recent years. How hasthis been achieved?

The Bolivian case study shows how new forms ofcollaboration among stakeholders are built usingthe potential for information technology to createtransparency and trust in the contentious valuechain of sugar.

4.5 Case studies

The first case study looks at governance and knowledge transfer intwo sectors in Costa Rica. Is the theory on ideal network designsupported in practice?

The objectives of stimulating private sectordevelopment can also be integrated into fiscal policies,trade policies, industrial policies and related policyareas such as education. In order to make thisintegration successful, cooperation and collaborationacross governmental departments is needed.

Trust in Business Associations (Latinobarómetro 2005)

A lot

Republica Dominicana

Costa Rica

Panama

Average for LAC

Peru

Bolivia

El Salvador

Some little All values as %None

14 35 28 23

12 33 33 22

7 32 31 30

8 28 36 28

11 15 39 35

4 27 40 30

3 23 38 37

Figure 4.2




Case: The Electronics and medical devices / life sciencesvalue chains in Costa Rica

bananas, pineapples, coffee, juice) and eco-tourismsectors are well known examples. In August 2011,the Financial Times rated it the “Best Country of theFuture for Foreign Direct Investment in CentralAmerica and the Caribbeanxliv”.

The business ecosystem performs well by globalstandards on most measures of technologicalreadiness, business sophistication and R&D. CostaRica is engaged in five global value chains:electronics, medical devices/life sciences, automotive,aeronautic/aerospace and film/broadcasting devices.Of these, electronics is the most significant, with 10firms accounting for 26 per cent of the country’sexports in 2009 (Monge-Ariño, 2011). Intel’skeystone investment has been evaluated positively bythe World Bank after nine years: “Beyond its obviousdirect effects on the country’s economy in terms ofgross domestic product (GDP), foreign directinvestment (FDI), and trade growth, Intel’sinvestment decision was the catalyst for arealignment of Costa Rica’s competitive platform asan investment location. Costa Rica workedresourcefully and with a novel sense of urgency toenhance the country’s technical education, incentiveslaw, regulation, and infrastructure. Over time theeffects could be seen in an improved investmentclimate, a more focused, strategic approach toinvestment promotion, a developing technologycluster, and newly secured FDI projects in othertargeted sectors. The Intel investment also reachedfar into the local community, affecting education andthe country’s knowledge base, workplace standardsand business culture” (MIGA, 2006)xlv. Researchersnote that by no means all local firms have yetgraduated from product distribution to productinnovations. The most successful had strongnetworks internationally (Ciravegna and Seldin,2008).

Costa Rica’s population of 4.6 million people hasgenerally high levels of human development, rankingit number 62 of 169 countries and consistently aheadof the regional averagexliii. With a life expectancy of79 years, the population enjoys an exceptional recordon health. Costa Rica is unusual in that its level ofeconomic competitiveness is closely comparable to itshuman development. It is ranked 61 in the 2011-12Global Competitiveness Index. Its macroeconomicenvironment, say executives, holds the country backfrom still higher performance.

In terms of industrial development, Costa Rica ismaking the transition from low / medium technologymanufacturing, and now has an industrialperformance ranked ahead of Brazil, India, Russiaand South Africa (on UNIDO’s CIP Index for 2009).The country is committed to progressing free tradeagreements, and also to building a low-carboneconomy. It has managed to contain its emissionsintensity at the same level over the past decade (IEA,2011).

By law, the Ministry of Foreign Trade (Ministerio deComercio Exterior or COMEX) is responsible fordefining and managing trade policy and foreigninvestment in Costa Rica. To implement policy,COMEX is supported by CINDE (a private, non-political and non-profit entity responsible forpromoting inward investment) and PROCOMER (anon-state public body responsible for Costa Ricanexport promotion). Costa Rica has a good trackrecord in growing exports and attracting foreigninvestment: the success of agriculture (notably

Recognizing the potential to grow thesecontributions, COMEX in mid-2011 announced thatit would look to adopt additional incentives to attractresearch-intensive businesses.xlvii What are the chiefmechanisms for sharing knowledge across the CostaRican end of the global supply chains? Medical firmshave collaborations with a wide range of researchinstitutions. “Costa Rica has a wide network ofprograms, supported by law, to strengthen thedevelopment of science, technology and innovation”,says the recent EU ENLACE report Guidelines on theCA innovation systemxlviii, noting some 176 researchinstitutions, including the Centro Nacional deInnovaciones Biotecnológicas. The Instituto DeExcelencia Empresarial of the Cámara de Industriasde Costa Rica has also worked to develop linkageswith life sciences multinationals, as has the teamCosta Rica Provee (Costa Rica Supplies) which runsan online directory of 450 accredited domesticsuppliers and undertakes active matchmaking.xlix

Interestingly, while the ICT sector has its own CostaRican business chamber, the life sciences sector doesnot. It will be interesting to follow the trends inCosta Rica’s key export sectors over time, andunderstand which networks do most to increase thedomestic component of exports.

Sources: COMEX ; CINDE ; PROCOMER ; Monge-Ariño, F.(2011) Costa Rica: Trade Opening, FDI Attraction and Global

Production Sharing, World Trade Organization EconomicResearch and Statistics Division Staff Working Paper

ERSD-2011-09.

The medical devices / life sciences sector, while lesswell-studied, is equally dynamic. The first investmentwas back in 1987, when Baxter Healthcareestablished a manufacturing operation. Progress sincethen has been dramatic, first in medical devices andthen in biotechnology. By 2011 the life sciences sectoremployed 12,000 people working in 41 foreigncompanies and their local supply base. With annualexports passing US$1 billion in 2009, it nowaccounts for 15 per cent of national exports (seefigure 4.3).

“We have seen a positive evolution not only in thenumber of companies settled, but in thesophistication and the upgrade of processes carriedout in our country”, says Gabriela Llobet, DirectorGeneral of CINDE. “Companies here are undergoinghighly innovative manufacturing processes in areasrelated to the industry such as cardiovascular,neurovascular, orthopaedics, injection systems,nutrition, and women’s health, among others. Alongthis line, the country offers a wide array of materialand service providers in order for companies toencompass the complete production chain,positioning the country as a true export platform.”

A recent analysis of Costa Rican production sharingfocuses on the indicator of Domestic Component ofExports (DCE)xlvi. For the five global sectorsmentioned above, this analysis shows that medicaldevices / life sciences performs well (59 per centDCE), ahead of the average (36 per cent) and theelectronics sector (around 20 per cent) (Monge-Ariño, 2011). Across all firms in global value chains,over one third of the value of exports is produced inCosta Rica, and a quarter of this is provided by otherfirms operating in Costa Rica (60 per cent services;40 per cent goods).

“In Costa Rica foreign direct investment has contributed in asignificant way to growth in Gross Domestic Product (GDP) , leadingto increases in production and exports, the creation of more andbetter jobs, the transfer of technology and knowledge, the generationof productive linkages with locally based businesses, andimprovements in competitiveness.”

Anabel González, Ministra de Comercio Exteriorxlii

Exports in electrical/electronic and precision/medical devices sectors, 1998-2010, $000

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Case: Better dialogue between enterprises andgovernment in Serbia

Industry’s share of value added has fallen from 25per cent in 2001 to 21 per cent in 2010 (accompaniedby a fall in carbon emissions per unit of GDP), andthere has been slow growth in manufacturing overthis period.liii 51 per cent of GVA in industry is classedat low-tech, and a further 25 per cent as mediumlow-tech. Serbia was ranked behind Romania inUNIDO’s 2005 Competitive Industrial PerformanceIndex. The micro and small enterprise sector isrelatively undeveloped (and the medium and largesized enterprise sectors are relatively overdeveloped)in Serbia compared to the EU-27 average (see table4.1). Serbian SMEs could generate significantly moreemployment and value added, if they can tackle theknowledge deficit. Meanwhile, medium sizedenterprises probably merit special support due totheir disproportionate importance.

Serbian policy-makers are aligning national andregional policy to the EU’s flagship Small BusinessAct (SBA). The SBA policy initiative covers tenprinciples to guide SME policies in Member States;skills and innovation is one of the principles.However, there is currently little informationavailable about the level of knowledge networkingamong Serbia’s SMEs.liv Indeed, there is an absence ofrelevant information at the European level on thisissue, and thus in the national performance review.But anecdotal evidence suggests low levels ofnetworking. Few enterprises of any size network withresearch organizations to create innovations. TheSupport to Enterprise Investments in Innovationgrant scheme, run by the Ministry of Economy andRegional Development, aims to unleash a culture ofinnovation in SMEs, but the current funding islimited to approximately Euro 480,000.

Serbia’s human development has been rising steadilysince 2005, and is above the average for Europe andCentral Asia, with a good record in health andeducationli. However, income growth for thecountry’s nearly 10 million people has been laggingbehind some of its neighbours, so that Serbian policy-makers face high expectations despite the currentglobal economic crisis.

Competitiveness is on a modest upward trend,according to the World Economic Forum (see Graph4.1), but as other countries are also improving, thecountry’s rank is fairly static. Indeed, Serbia’seconomic and industrial performance could besignificantly enhanced. Key challenges, according toexecutives surveyed by the Foundation for theAdvancement of Economics (FREN), are upgradinginstitutions (particularly in the private sector);promoting more efficiency in local goods markets;and in building more sophistication in businesses(such as R&D investment and clustering).

International isolation during the 1990s and anongoing ‘brain drain’ of skilled workers have led tosignificant knowledge and skills gaps for privatesector development. There is a widely recognizedneed for knowledge upgrading, “starting fromeducation, through all forms of transferringknowledge and technologies from the scientific-research sector to the economy,” according to the2008 Human Development Report for Serbia.lii

and functioning of the European Union areinsufficiently known to businesses.” The first EPEwas held in 2008 and the second in 2010. ThreeSerbian entrepreneurs participated in the 2010 EPE,among 750 entrepreneurs from 31 countries.

Building on constructive inputs from business,Serbia’s New Industrial Policy 2011-20 identifiesfour focal points for intervention: education;technology development and innovation, energyefficiency; and environmental protection. Morespecifically, the Industrial Policy envisages two newnetworks to drive technology and innovation:

The National Technological Platforms of Serbia(NTPS); and

The National Innovation System – a network ofinstitutions from the private and public sectorthat through their interactions initiate, import,modify, and expand innovations.lvi

The key task now is to ensure that these newnetworks are effective and flexible, so that they cantake note of the consensus emerging from futureeditions of the Parliament of Enterprises.

Sources: Serbian Chamber of Commerce www.pks.rs, interviews.

“We all know that all the world economies owe theirsuccess to successful entrepreneurs, the businesspeople”, says Slavica Đukić Dejanović, speaker of theNational Assembly of the Republic of Serbia. “Oureconomy is no exception. However, the extent towhich the energy and creativity of this mostproductive segment … will be able to come into fullswing depends primarily on the social milieu, thesystemic framework for business activities.”

One exciting initiative to build just such a socialmilieu is the Serbian Parliament of Enterprises, heldin the National Assembly in Belgrade in June 2011.Organized by the Serbian Chamber of Commerce andthe National Assembly, 250 entrepreneurs wereinvited on a representative basis by the Serbianchambers system to initiate a solutions-orientedstrategic dialogue with government. The day wasdivided into three sessions on the economic andsystemic framework; finance; and export growth. Inthe closing session delegates were given theopportunity to vote electronically with real-timeresults flashed up on screens. The scale of theexercise, the thoroughness of the representation andthe voting arrangements made the Parliament ofEnterprises an unusually productive dialogue (SerbianChamber of Commerce, 2011).

The Serbian initiative is modelled on the EuropeanParliament of Enterprises (EPE), a successfulinnovation developed by EUROCHAMBRES (TheAssociation of European Chambers of Commerceand Industry which represents over 19 millionenterprises across Europe). EPE is designed to addressa “democratic gap” between EU institutions andentrepreneurs. “EU legislators do not take sufficientlyinto account the entrepreneurs' concerns,” accordingto EUROCHAMBRES. “On the other hand, the role

“Better implementation of knowledge and innovations is necessary in the development of products and introduction of new technologies inthe production and distribution. The realization of that goal requiresthe adaptation of the education system to modern economic trendsand needs.”

Nebojša Ćirić, Minister of Economy and Regional DevelopmentSpeaking at the Serbia-EU Forum, September 2011l

Table 4.1 Serbia: Key characteristics of the private sector

Data refer to the non-financial business economy (NACE C-I, K) and represent estimates for 2008Source Eurostat, elaborated by EIM for EU27 figures, Institute of Economic Sciences, Serbia for country figures

Enterprises Employment Value added Serbia EU-27 Serbia EU-27 Serbia EU-27

Number Share Share Number Share Share Billion 3 Share ShareMicro 69,235 84.9% 91.8% 135,899 13.9% 29.7% 2 11.4% 21.0%Small 9,421 11.6% 6.9% 184,747 18.9% 20.7% 3 18.9% 18.9%Medium-sized 2,350 2.9% 1.1% 240,413 24.5% 17.0% 3 21.1% 18.0%SMEs 81,006 99.4% 99.8% 561,059 57.3% 67.4% 7 51.5% 57.9%Large 523 0.6% 0.2% 418,794 42.7% 32.6% 7 48.5% 42.1%Total 81,529 100.0% 100.0% 979,853 100.0% 100.0% 14 100.0% 100.0%




Case: Ethiopia’s Public Private Consultative Forum andPSD Hub driving accountability and dialogue

(access to finance, inflation, foreign currencyregulations). These are seen as more important thantax or bureaucracy in Ethiopia. The country hassignificantly improved its competitive position inrecent years, and has posted strong growth rates. The 2011 African Economic Outlook Report rankedEthiopia the second fastest growing economy on thecontinent, after Ghana. It enjoys several distinctadvantages over countries at similar levels ofeconomic development, such as a large domesticmarket, endowments of natural resources and arelatively stable macroeconomic position. Economicsuccess is across many sectors, from coffee,horticulture and brewing to leather, textiles andchemicals.lx As a result, Ethiopia’s performance onindustrial competitiveness improved significantlybetween 2005 and 2009, according to UNIDO,overtaking Malawi and approaching Tanzania andGhana. Its carbon emissions per unit of GDP arestable and amongst the lowest in Africa (IEA, 2011).China is now considered the country’s key economicpartner, with trade exceeding US$1.4 billion in 2010lxi.

Most competitiveness and business climate analystsin Ethiopia stress the pressing needs to tackle physical(e.g. roads) and technological (e.g. ICT) networksrather than building up knowledge networks.lxii

However, the importance of institutional capacityand knowledge is in fact firmly on the agenda ofEthiopian policy-makers. Accordingly civil servicereform is a policy priority. The Ministry of Healthand HIV/AIDS Prevention and Control Offices(HAPCOs) are using the Balanced Scorecard as a toolfor performance management, with support fromUNDP.lxiii The Ethiopian Development ResearchInstitute (EDRI), a semi-autonomous research think-tank founded by the government in 1999, undertakes

Ethiopia’s 85 million people in 2010 had a HumanDevelopment Index (HDI) of 0.328, positioning thecountry 157th out of 169 countries with comparabledata. Among the Millennium Development Goals,raising educational attainment and reducing povertyare key challenges; improving health outcomes andbuilding resilience to drought and climate change arealso major priorities, as is providing access to modernenergy (cooking and electricity) for some 83 per centof the population.lviii

Building on the Sustainable Development and PovertyReduction Programme of the early 2000s, theGovernment then launched the Plan for Acceleratedand Sustainable Development to End Poverty(PASDEP, 2005/6-2009/10). Despite a history ofdifferences between private sector and Government,PASDEP did receive policy inputs from the businesscommunity, and recognized the private sector as anengine for growth.lix In 2011, the Growth andTransformation Plan (GTP) established a target todouble GDP within five years, a plan of suchambition as to require still closer cooperationbetween sectors.

Executives surveyed by the African Institute ofManagement, Development and Governance citefinancial issues as paramount for doing business

recent years (see AfrIPAnet case above). UNIDO has supported the Leather and Leather ProductsTechnology Institute (LLPTI), the Ethiopia CleanerProduction Centre (ECPC), the Eastern AfricaBamboo Project, a Food Safety Assurance System(FSAS) and a programme to ‘unleash the potential’ of SMEs in Ethiopia.lxviii The Ethiopia CommodityExchange, launched in 2008, has become an effectivemechanism for levelling the trade playing field forsmall coffee and cereal farmers.

But despite such dynamic developments, policy-makers have recognized since 2005 that there is aneed for more positive dialogue and trust-buildingacross the sectors. In 2010, the Ethiopian PublicPrivate Consultative Forum (EPPCF) was finallyagreed by a Memorandum of Understanding (MoU)between the Ministry of Trade and Industry and theEthiopian Chamber of Commerce and SectoralAssociations (ECCSA). ECCSA was reconstituted in2007, and its member chambers and associationsrepresent 40,000 businesses across the country. Theinaugural Forum was held in February 2011 at theHilton Hotel. Well attended by both sides, thisdialogue was just the beginning of an ambitioussystem of regular forums operating at state, sectoral,regional and local levels (Mihretu & Brew, 2011).

good quality economic research with a range ofglobal partners and its policy analysis is disseminatedwidely.lxiv In 2009, EDRI published a Social AccountingMatrix on the structure of the Ethiopian economy(2005/06), supported by the “Data Systems andEconomy-Wide Modelling to Support Policy Analysisin Ethiopia” project, funded by the EthiopianGovernment along with the Government of theNetherlands and the European Commission throughUNDP.lxv Ethiopia’s National Metrology Institute(NMIE) has recently been reorganized and upgraded.As a result of such reforms, Ethiopia’s institutions arejudged quite positively by business executives (incontrast to many Sub-Saharan African countries).

In terms of industrial development, Ethiopia’sstrategy (dating back to 2002) is a concise documentthat stresses the importance of better knowledge as across-cutting theme.lxvi The strategy’s core principleremains Agricultural Development LedIndustrialization (ADLI), while also recognizing therole of the private sector as an engine of growth,calling for more domestic-foreign investmentpartnerships, active participation from the public,and a government-private sector consultation forum.“The concept of knowledge”, says UNCTAD in its2002 Investment and Innovation Policy Review,“entails more than the results of R&D. It is a conceptthat includes product design, quality control, processengineering, management routines, marketing,information processing, maintenance, investment and change capabilities as well as networking andpartnering skills.”lxvii

The Government, supported by internationalcooperation, has undertaken a range of initiatives to build such knowledge. The Ethiopia InvestmentAgency (EIA) has strengthened its capabilities in

“The forum is important for both the government and the businesscommunity to come to terms and promote a common interest in viewof creating a suitable environment for business and investment in thecountry”.

Eyesuswork Zafu, ECCSA President lvii

Most competitiveness and businessclimate analysts in Ethiopia stress thepressing needs to tackle physicalinfrastructure rather than building upknowledge networks. However, theimportance of institutional capacity andknowledge is in fact firmly.




What was the result of the questionnaires? Theresearch team found a wide range of scores across 43associations and chambers, from 20 per cent to 93per cent, with an average of 36 per cent, leading themto conclude that “the real capacity of business andsectoral associations in Ethiopia to represent theinterests of members in a wholesome way as well asto ... provide them with much needed businessdevelopment services, is nearly non-existent”. This isa little extreme: the main sectoral associations(coffee, tanneries, horticulture etc) and the AACCSAscored highly (from 73-93 per cent), as did theAmhara Women Entrepreneurs Association. Butgiven the pattern of lower scores across the regions,this research certainly sets an ambitious agenda ofinstitutional upgrading and knowledge sharing whichis essential if Ethiopia’s business associations are toplay the effective and accountable role in economicpolicy envisaged by the EPPCF agreed in 2010.

Sources: Interviews with Hailemikael Liqu, PSD Hub; Mihretu &Brew (2011); IEA (2011).

Within the Ethiopian chamber system, a pivotal roleis played by the Private Sector Development Hub.The PSD Hub has become a key actor in the policyspace, issuing a series of influential reports on keybusiness challenges, from road transport and ICT tofemale entrepreneurship and land leasing (supportedby the Swedish Agency for InternationalDevelopment Cooperation SIDA). Naturally, the Hubhas a focus on legal aspects (e.g. commercial codes,tax, competition, registration). But it has also becomea thought-leader, proposing a strategy on privatesector led economic growth (2008) and sharing goodpractice from around the world.lxix

More importantly, the PSD Hub turned theaccountability spotlight on chambers and businessassociations, by publishing in 2009 a SituationAnalysis of Business and Sectoral Associations inEthiopia. Surveying 136 businesses in Addis Ababa,the team found that only 15 per cent were membersof a sectoral association, calling into question thelegitimacy of these institutions to represent a businessvoice. The team developed a Competency Index toreview Ethiopia’s business and sectoral associations,with a questionnaire examining organizationalstrength; governance and accountability; capacity todialogue and provide business development services;and legitimacy.

Ethiopia’s industrial strategy is a concisedocument that stresses the importance ofbetter knowledge as a cross-cuttingtheme.

Case: Transparency in the sugar value chain, Bolivia

The Ministry of Productive Development & PluralEconomy (Ministerio de Desarrollo Productivo yEconomía Plural or MDPyEP) and the Ministry ofWork, Employment and Social Provision recentlyissued a joint Plan Sectorial de Desarrollo Productivocon Empleo Digno.lxxii The Plan deals with a pluralityof economic models: the public, the socialcooperative, the communitarian and the private. ThePlan prioritizes production for local consumptionover exports, particularly in the agribusiness sector,where a strategic group of public enterprises nowexists in food, dairy, cement, paper and cardboardand sugar. In all, the government decided to investUS$1 billion of national reserves into key elements ofthe Plan.

The transition to a plural economy has beencontentious, and nowhere more so than in the sugarsector. Traditionally, Bolivia has been self-sufficient inthis commodity, and even able to generate modestsurpluses (see figure).lxxiii But 2010/2011 saw seriousprice rises and massive queues, with accusations ofproduction inefficiencies, deliberate shortfalls,corruption, hoarding and smuggling.lxxiv As dialoguebroke down between government and private sector,MDPyEP intervened by guaranteeing fixed prices forconsumers, imposing border controls including atemporary ban on exports, nationalizing a refinery,building up a strategic reserve of sugarlxxv andpressing for lengthy prison sentences for foodhoarding.lxxvi

The Plurinational State of Bolivia’s 10 million peoplehave a level of human development slightly above theworld average. Progress stalled in the mid-2000s, andbegan to rise again in 2008, according to UNDP.lxxi

While Bolivians do face challenges in health andeducation, as well as across the other MillenniumDevelopment Goals, it is the low average levels ofincome and extreme inequalities (some 1.2 millionpeople living on less than US$1.25 a day, mainly inrural areas), coupled with a strong indigenousconsciousness, that are of immediate concern topolicy makers. With poor households spending up tohalf their income on food, Bolivians feel vulnerable toglobal and local food prices, which have been asource of tension between public and private sectors.The country is also recognized for its vulnerability toclimate change.

The Morales administration’s national developmentplan is sub-titled “Bolivia Digna, Soberana,Productiva y Democrática para Vivir Bien” (AWorthy, Sovereign, Productive and DemocraticBolivia to Live Well). The focus is on plurality andquality of life, not competitiveness. The Unidad deProductividad y Competitividad (Competitivenessand Productivity Unit) has been trimmed backsignificantly from its heydays in the mid-2000s.Currently, UDAPE (the Unidad de Análisis dePolíticas Sociales y Económicas) has more influenceon economic policy. Bolivia has in fact made steadyprogress on both overall and industrial competitive -ness in the late 2000s. While minerals, natural gas and agro-industry still dominate the economy, its industrial structure is now similar to that of Paraguay - and ahead of Panama (according toUNIDO’s 2009 index).

“We got here by working as a national team, and the Ministry ofTrade and Industries has made a significant input into attractingforeign investors to Panama.”

Ana Teresa Morales Olivera,Ministra de Desarrollo Productivo y Economia Plural, August 2011lxx




SIEXCO is an innovative web-based platform fordaily logging of sugar production and sales data,aiming to provide policy-makers with complete,confidential, real-time visibility across the entiresugar supply chain. Implementing SIEXCO hasrequired close collaboration across the value chain,including sugar cane producers (Unión de CañerosGuabirá, Federación de Cañeros de Santa Cruz,Federación de Cañeros del Norte, Unión de CañerosUnagro y BIBOSI), refineries (IAG, IABSA,UNAGRO, La Bélgica y San Aurelio), the publicenterprise AZUCARBOLlxxviii, the AgriculturalChamber of El Oriente and government foodcompany EMAPA. The software was developed by aBolivian IT company.

At the time of writing, it was too soon to say whetherSIEXCO will work as intended. Early indications arethat sugar prices seem to have stabilized.

Sources: Interviews with MDPyEP; Cámara Nacional deComercio.

This level of state intervention in a sector wouldlikely impact on productivity, unless informationasymmetries could be minimized. So the final piece ofthe sugar sector policy was provided by the recentintroduction by MDPyEP of the Sistema Integral deInformación para las Exportaciones y el ComercioInterno (SIEXCO: or the Integrated InformationSystem for Exports and Domestic Trade)lxxvii.

Sugar production Bolivia 1990 - 2009 (tonnes)

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Figure 4.4 Case: Attracting knowledge investment: Panamá’s SEMOffice and Ciudad de Saber

To address these concerns about inward investment,Law 41 of 2007 set up a range of incentives formultinationals wanting to set up regionalheadquarters in Panama (“Sedes de EmpresasMultinacionales” or SEM). Panamá’s PlanEstrategico de Gobierno 2010-2014 (GovernmentStrategic Plan) noted that the country lacked “a well-coordinated and professional interaction with theinternational business community. Businesses lookingto invest in Panama have to navigate their waythrough an intricate network of government andprivate institutions to get doors opened.” One of thekey priorities was thus to set up an investmentpromotion agency to attract more SEMs.

The SEM Office, located in MICI, provides thisfunction. It was inspired by the models of Chile’sCORFO (InvestChilelxxxii) and Singapore’s EconomicDevelopment Board, which has been established for50 years.lxxxiii It is fair to say that the SEM Office isoperating at a more modest scale than its peers inSingapore and Chile. In mid-2011, it had a staff offive people, and its promotional materials andwebsite provide the essentials, but are not yet world-class. Despite these constraints, the SEM office hasenjoyed some notable successes: to date, the countryhas attracted nearly 60 multinationals, bringing withthem a direct investment of US$350 million andcreating some 860 local jobs.lxxxiv Companies havebeen attracted in all priority sectors: logistics (e.g.Maersk), tourism (e.g. Thunderbird), agriculture (e.g.Nestlé) and financial services (e.g. Safra AssetManagement). The SEM office plans to expand infuture.

In September 2011, the Ministers of Economy andFinance (MEF) and Trade and Industry (MICI),together with the heads of the Economic Secretariatand the Centro Nacional de Competitividad (CNC)celebrated Panama joining the ranks of the 50 mostcompetitive economies globally.lxxx The country of 3.5million people also has seen continuousimprovements in human development, notably interms of health. Panama’s competitiveness dependson its well-developed infrastructure and financialmarkets, according to hard data and executivessurveyed by the Latin American Center forCompetitiveness and Sustainable Development(CLACDS) at INCAE Business School. Theprevalence of banks in the economy and Panama’spivotal location, major infrastructure investmentsand primary asset, the canal, are indeed strongfoundations.

Of course, policy-makers in both the previous andcurrent administrations have recognized ongoingchallenges. In a process called Agenda País, convenedby the Cámara de Comercio, Indústrias y Agriculturaand media group Medcom in the run-up to the 2010elections, a series of opinion polls and debatesidentified priorities in areas such as education,transport and inclusion (particularly amongindigenous groups).lxxxi There has also been concernthat foreign investors have not fully appreciated thebenefits of locating in the country. There is alsodiscussion about the extent to which local businessesgain from the trade passing through the canal, and interms of industrial performance UNIDO’s CIP indexshows that Panama’s industrial sector is relativelyundeveloped.

“We have been guardians of the popular economy, we have workedhard so that prices can be kept affordable for the population and weare “We got here by working as a national team, and the Ministry ofTrade and Industries has made a significant input into attractingforeign investors to Panama.”

Ricardo A. Quijano Jiménez, Ministro de Comercio e Industriaslxxix




But what makes the CDS unique is its stated goal ofbeing a knowledge management network.lxxxv Thethree strands to this network are an interactive onlinedirectory of services; connections to 12 localinstitutions; and affiliations with 25 globalnetworks.lxxxvi There are still gaps in the vision: nowifi cloud, for example. But the ‘third places’ sonecessary for informal knowledge networking – cafés,canteens, concerts etc – are gradually beginning toappear. The ultimate indicator of success will be ifknowledge is recognized as a key sector in the nextGovernment Strategic Plan.

Sources: interviews with SEM Office & MICI, CNC, CCIAP,CDS.

The attraction of world-class firms is particularlyimportant given the patchy track record of localenterprises in providing training. In the World Bank’s2010 Enterprise Survey, just 11 per cent of firms saidthey offered formal training (far lower than any othercountry in the study group). The biggest benefit ofworld-class enterprises may not be the direct jobs butthe knowledge spillovers generated as local staffmove from one employer to another. Such spillovershave not arisen from the Panama Canal Authority,where jobs are so highly prized that there is minimalstaff turnover. There are high expectations for theforeign enterprises now locating in Panama.

Panama’s inward investment strategy is focused notjust on attracting large multinational businesses butalso high-tech companies and internationalorganizations, an approach also used by Singapore’sEDB to good effect. In Panama, the ‘knowledgeeconomy’ is clustered in the Ciudad de Saber (City ofKnowledge or CDS). CDS is a technology park andincubator, an international organization and NGOhub, and an academic campus all rolled into one. It islocated on the attractive former US military base ofClayton. Like other ‘knowledge economy hubs’, ithas a convention centre, hospitality villas, goodinternet provision and the ambition of beingsustainable and a centre of excellence on humandevelopment. It is also run by a non-profitfoundation.

In Panama, the ‘knowledge economy’ isclustered in the City of Knowledge, atechnology park and incubator, aninternational organization and NGOhub, and an academic campus all rolledinto one.

Case: Sharing technology in Peru’s pisco, footwear andgastronomy sectors

In terms of industrial development, the country hasimproved its competitive performance according toUNIDO between 2005 and 2009, but as othercountries in the region have also improved theirperformance, Peru still lags behind Colombia andChile. Entrepreneurs are so negative about levels ofR&D and collaboration between private and publicsectors that they rate Peru’s performance oninnovation the same as Zambia’s, which has aGDP/capita of US$1,221. UNCTAD and OECD havealso made constructive critiques of science policy inPeru. On the positive side, Peru’s carbon emissionsintensity has declined in the past decade (IEA, 2011).

Thus incoming Production Minister Borneo, who ledthe Perú Posible process, has announced the creationof a single entity responsible for coordinating allcompetitiveness activities, the Central Agency forCompetitiveness Policy (Agencia Centralizada dePolíticas de Competitividad). Moreover, PrimeMinister Salomón Lerner Ghitis announced at aScientific Meeting in August 2011 the creation of anew Ministry of Science and Technology and atenfold increase in the national R&D budget, whichshould reach 1 per cent of GDP by 2015.lxxxix

These new institutions will need to draw on theexisting ecosystem of actors, and notably the networkof technological innovation centres (Red de Centrosde Innovación Tecnológica, or Red de CITEs). Thenetwork consists of 17 CITEs located in ninedifferent regions of Peru. The CITEs cover agro-industry, wood, furniture, leather and footwear,textiles and fashion, logistics and software. The Red

Peru has achieved a solid performance incompetitiveness in recent years, approaching the levelof Panama, Costa Rica, Turkey and Vietnam inWEF’s 2011-12 Global Competitiveness Index. Thereis broad consensus on the need to tackle remainingchallenges including infrastructure, institutions,higher education and training, and businessinnovation, according to the survey of executivescoordinated by the Centro de Desarrollo Industrial(CDI) at the Sociedad Nacional de Industrias.

Peru’s nearly 30 million people have a rising level ofhuman development and in the year 2000 pulledsomewhat ahead of the average for Latin Americaand the Caribbean. While Peru has enjoyed rapideconomic growth, policy-makers raise concerns aboutthe model, notably its reliance on natural resourceswhere success has been driven by rising commodityprices. There are significant variations in humandevelopment at regional and provincial levels,according to UNDP. There are also majordiscrepancies in ‘state density’, the overlappingprovision of core services such as identity, health,education, sanitation and electricity.lxxxviii Concernabout income inequality was a dominant theme in the2011 electoral campaigns. Water security is a majorconcern in the face of climate change. The Humalaadministration’s commitment to inclusive growth isevidenced by the creation of a new Ministry ofDevelopment and Social Inclusion (Ministerio deDesarrollo e Inclusión Social).

“Competitiveness is central, if we want to take advantage of theopportunities on offer, for example through free trade agreements,and it’s important for social inclusion that SMEs benefit from thesetrade treaties. So often, policies are developed by different parts ofgovernment, resulting in heterogeneity both of objectives andbeneficiaries. In general, we have a sort of disorder, without a reallevel of coordination among programmes, and this is not an efficientuse of resources.”

Kurt Burneo, Ministro de Producción lxxxvii




processes. Firms are well-networked with universitiesand often belong to business associations.In footwear, firms reported satisfaction with theCITE, though more for help with technicalcompliance than with knowledge or growing marketshare. Firms in the footwear sector across Lima areweakly associated with each other – they cannot besaid to form a cluster. However, roughly half of themare linked to universities and business associations.

A challenge for the CITE network is Kuramoto’sfinding that “as firms grow and begin demandingmore sophisticated technological services, the CITEscannot meet their demands. This has to do withinsufficient funds to upgrade the CITEs’ services andto hire high skill personnel.”

A further dilemma for the Red de CITEs is posed bythe emergence of a dynamic gastronomy sector inPeru over the past decade. Because this is anunconventional sector, statistics are not available onits size, employment or GVA. But by all availablemeasures this is a ‘hot’ sector. Lima now claims morecookery schools than any other city in the world,tourists stay extra days in the capital, not just toenjoy its signature seafood dish ceviche but manyother distinctive products too. There is a Casa deGastronomia and the charismatic celebrity chefGaston Acurio. There are food fairs like Mistura, afast growing chain of Peruvian restaurants (La Mar),and certificates of origin for numerous food items.xcii

High quality food is available from street vendorsand on petrol station forecourts.

“So why, despite all these indicators, don’t we seePeruvian restaurants all over the world?”, asksGastón Acurio. “The answer is more than obvious.We’ve got the resources, we’ve got the produce. Whatwe need are the brands. Peruvian brands for Peruvianculinary products worldwide. That’s the key.”xciii Thegastronomy revolution has succeeded without muchstate support, let alone its own CITE, until now. Sothe question is, what support, if any, is appropriate?As competitiveness policies become more focused andfunding for R&D increases massively, what is thebest format for developing technological standardsand capturing tacit knowledge? This is sure to be alively debate for the new and existing institutions inPeru.

Sources: Interviews with José Padilla, Mincetur; Juana Kuramoto,Grade; Mercedes Inés Carazu, PRODUCE; web sites & PDFs.

de CITEs has as its goal to share knowledge andachieve synergy between these 17 centres. It does sothrough training, technical assistance, laboratoriesand standards, product development, specializedinformation and model plants to enhanceproductivity. Thus, it is an energetic and ambitiousnetwork. What is the performance of the CITEs? TwoCITEs were recently reviewed as part of the LatinAmerican and Caribbean Research Network Project“Innovation, R&D Investment and Productivity inLatin American and Caribbean Firms.” CITEvidsupports the wine-derived spirit Pisco and its valuechain in Ica, which has enjoyed rapid growth inquality and sales over the past 10 years.xc It issponsored by the Ministry and Spanish technicalcooperation. CITEccal has been supporting thefootwear sector in Lima, with its complex valuechain, since 1998, again with Spanish support.xci

Although a mature industry, exports of shoes alsoincreased rapidly in the 2000s. Despite variousinnovations, both are considered low/mediumtechnology sectors.

“Of particular interest is the role of technicalstandards as a means of technological diffusion”,says Juana Kuramoto at the research institute Grade.Pisco has 10 technical norms and the industry is nowseeking World Intellectual Property Organizationdenomination (Chile also makes a pisco but thePeruvian producers consider it inferior). In the leathershoe sector, some 45 technical standards act as acoordination mechanism to enhance productivityalong the value chain, which is relatively fractured(Kuramoto, 2011).

Eight out of 10 Pisco firms interviewed by Kuramotoreported that CITEvid’s services helped increase theirknowledge. Firms were using traditional methodswithout knowing why; CITEvid “helped firms toopen the “black box.” Half of them are nowconfident to build experimentation into their

Case: SMEs accessing government contracts, RepúblicaDominicana

To tackle these competitiveness challenges, theConsejo Nacional de Competitividad (CNC) was set up by decree in 2001, and ratified in 2006. Itsbroad mission is to implement the Plan Nacional deCompetitividad Sistémica (Integrated NationalCompetitiveness Plan, 2010). The plan set anambitious goal for 2020, for RD to be “fullyintegrated into the global economy, with a platformof competitive, sustainable and equitabledevelopment”. It has a particular focus on clusterdevelopment in tourism, agro-industry,manufacturing, construction and ICT.

Over 100 workshops and focus groups fed into thenational competitiveness plan. For example, the 2007Global Entrepreneurship Monitor study was led bythe Pontificia Universidad Católica Madre y Maestra(PUCMM), supported by the Centro de Exportacióne Inversión de la República Dominicana (CEI-RD),the Chamber of Deputies, Gallup Dominicana andGrupo Vicini, as well as the CNC.xcv According toLatinobarómetro, entrepreneurs are significantlymore trusted in the República Dominicana than inmany countries in the region - which explains thehigh level of multi-stakeholder policymaking.Other competitiveness strategies in developingcountries have also set ambitious goals, usedthorough stakeholder engagement, and producedsubstantial reports. As Dr. Andrés Van der Horst,executive director of CNC has said, “now, thechallenge is successful implementation”.

So what is CNC’s implementation capability? It is ahigh-level council compared to some others in theregion, chaired by the President and with six

The República Dominicana is at a critical point in itseconomic policy. The country’s 10.2 million peoplehave an average Human Development Index value of0.663 and a GDP per capita of US$5,200, and thecountry has enjoyed growth rates averaging 4.5 percent in recent years. A key feature of the countryidentified by interviewees is the sheer diversity oftrading opportunities offered by its unique location.The country looks towards both Central America(linguistically, and is part of the DR-CAFTA freetrade agreement) and the Caribbean (geographically).It shares an economically-active border with Haiti,the poorest country in the LAC region, yet also hasexport linkages to a large Caribbean diaspora inNorth America (with the DR-CAFTA free tradeagreement). The country also has strong cultural andeconomic ties with Spain, and the rest of the EU.

Despite these opportunities, the country has struggledto improve its competitiveness in recent years.Indeed, it was overtaken by Bolivia and Ethiopia inWEF’s 2011-12 Global Competitiveness Index. Themajor economic challenges facing the countryidentified in various recent studies and byinterviewees are primarily institutional: tacklingcorruption and crime, improving bureaucraticefficiency, reaching consensus on tax rates, enhancingoverall education and worker skills, providing betterfinance for business, and solving electricity supplyproblems. The country has been steadily reducing thecarbon emissions intensity of the economy in the pastdecade (IEA, 2011).

“Micro, small and medium enterprises are the second generator ofemployment in the economy after agriculture. They are a pillar ofeconomic and social development.”

Lic. Manuel García Arévalo, Ministro de Industria y Comercioxciv




Taking the SME work stream as an importantexample, what mechanisms are in place for successfulimplementation of the plan? Policy-makers focus onsmall enterprise numbers as a key indicator ofperformance (Acs & Szerb, 2010). Much effort isexpended in counting the numbers of SMEs indifferent size and turnover categories, and workingon incentives or regulation to formalize them; andmechanisms to scale up training and credit for them.However, many SMEs remain informal and resistantto credit and growth. Based on the best dataassembled in interviews for this report, Table 4.2shows that different countries have quite differentdensities of SMEs per 1,000 people (the figures doneed to be handled with caution due to differences indata quality and definitions). The RepúblicaDominicana has a reasonably healthy entrepreneurialbase compared to its peers, with an estimated600,000 micro, small and medium enterprises(MSMEs), providing in excess of a million jobs andgenerating a quarter of GDP.xcvi Some 17 per cent ofthe adult population is at the early stages ofenterprise; four in ten entrepreneurs are women (vander Linde et al., 2008). This is a healthy density ofentrepreneurs by regional and internationalstandards.xcvii Bananas, cocoa, beauty products andplastics are all growth clusters.

ministers on board, as well as 11 representatives fromthe private sector. Unusually, the council isconsultative, while the executive director is a statesecretary. The plan dedicates five of its 186 pages toimplementation, setting out the logic forstrengthening the CNC, by setting up a mixedfinancing fund; new implementation, evaluation,follow-up and communication functions; anObservatory of Competitiveness (supported byUNDP); and five Centros Empresariales deArticulación Productiva to support the clusters, andteams to work on regulation and business climate;innovation and technology development; governmentcompetitiveness; and SME competitiveness. The CNChas thus enhanced its implementation responsibilitiessignificantly. Some early successes will help toovercome scepticism among some stakeholders aboutthe effectiveness of this type of initiative.

Do SMEs need more finance and capacity building?For a country of 10 million people, there arenumerous bodies supporting SMEs. To name only themost prominent:

Consejo Nacional de Promoción y Apoyo a laMicro, Pequeña y Mediana Empresa(PROMIPYME)

Corporación de Fomento Industrial (CFI)

Centro de Exportación e Inversión de laRepública Dominicana (CEI-RD)

Instituto Nacional de Formación TécnicoProfesional (INFOTEP)

Instituto de Innovación en Biotecnología eIndustria (IIBI)

Fondo para el Financiamiento de laMicroempresa (FONDOMICRO)

Asociación Dominicana para el Desarrollo de laMujer (ADOPEM)

Fundación Dominicana de Desarrollo (FDD)

Centro de Apoyo a la Micro, Pequeña y Mediana Empresa (CAMPE) and Centro deEmprendedurismo e Innovación (CEIINTEC) at the Universidad INTEC

Red de Cajas de Herramientas MYPYME, a GIZsupported portal / tool kit for Guatemala,Nicaragua, and Dominican Republic;xcix

Programa de Apoyo a las Pequeñas EmpresasPrivadas Dominicanas (PROEMPRESA)

Confederación Dominicana de la Pequeña yMediana Empresa (CODOPYME)

However, a survey in 2005 suggested that only about10 per cent of Dominican businesses were exportingdirectly. These figures were lower than most othercountries in the study group (Enterprise Survey2005). Only 44,600 SMEs are registered (8 per cent).A panel of 36 local experts identified that knowledgeand R&D transfer to new enterprises was one ofthree major obstacles to their growth, in addition topublic policy and finance (van der Linde et al., 2008).To address this challenge, the Competitiveness Planhas been translated into the 2010 strategic plan of theMinistry of Industry and Commerce. The Ministry’sStrategic Plan sets out five actions to support SMEs:

Mechanisms to enable better access toappropriate finance;

Training and assessment to enhance productivityand innovation;

Simplifying legal and tax procedures to increaseformalization;

Promoting entrepreneurial initiatives; and

Securing better access by SMEs to stateprocurement.xcviii

Table 4.2: Estimated SME density in study group countries

Country Micro, Small & Medium Enterprises MSMEs per (MSMEs) (most recent year) 1,000 people

Bolivia (Plurinational State of) 800,000 76.7Costa Rica 100,500 22.0Dominican Republic 600,000 64.0Egypt, Arab Rep. 3,322,476 41.2El Salvador 461,642 74.5Panama 539,000 158.3Peru 2,500,000 84.9Serbia 314,827 43.1Turkey 3,000,000 40.7Vietnam 2,718,000 31.1




In República Dominicana, public procurement is wellworth pursuing, as public contracts are worth Pesos65 billion (approximately US$1 billion) a year. ButSMEs face an uphill battle. Although the SME Lawmandates a share of 15 per cent of publicprocurement, in 2009 they won a modest 7 per centof Ministry of Education spending. Enterprises facedifficulties in obtaining information; lack ofknowledge about tender procedures; the large size ofcontracts; insufficient time and money to preparebids; administrative hurdles; jargon; restrictivequalification requirements; and prohibitive financialguarantees required. On top of this, one in sevencompanies say they have to give a gift to win agovernment contract (2005 Enterprise Survey) andover 40 per cent of government agencies do not fullycomply with public procurement laws, according toresearch by Participación Ciudadana, the localchapter of Transparency International.civ Slowpayment is also a norm.

Consequently, CODOPYME still has a huge task –both high-level networking and basic knowledgesharing - to level the procurement playing field for itsmembers. “We are riding on a lion”, says FranciscoCapellán, President of CODOPYME.

Sources: interviews with Francisco Capellán & Eduardo Martínezof CODOPYME; CNC website, PDFs.

In all, well over a dozen institutionsc are activelyengaged in supporting SMEs. Indeed, as a result someentities are underfunded and others compete witheach other to reach the same SMEs.

CODOPYME (the Dominican Confederation of theSmall and Medium Sized Business Inc.) is unusual infocusing its lobbying efforts on the concreteopportunity of better access by SMEs to stateprocurement. CODOPYME is a non-profitorganization established in 1983-85, with anexecutive committee of 12-13 members, andrepresents some three-dozen affiliated associations(federations, cooperatives, associations, unions),supporting SMEs at the local and sectoral level. Itoffers a range of technical services to members,including representing their interests in numerousnational councils and commissions.ci

SMEs face many obstacles in winning state contracts.This is the case even in the EU, where publicprocurement is one sixth of total GDP, and where2004 directives mandate a level playing field forsmall businesses.cii A recent study found that SMEswon only 34 per cent of European publicprocurement in the period 2006-2008, despite thatfact that they account for 52 per cent of EuropeanGDP.ciii Only in a few European countries, likeGermany and Slovakia, do SMEs win their ‘fairshare’ of public contracts.

According to Latinobarómetro,entrepreneurs are significantly moretrusted in the República Dominicana thanin many countries in the region – whichexlains the high level of multi-stakeholderpolicymaking.

While business associations may enjoy higher levels ofpublic trust than usual in countries like the DominicanRepublic, this does not automatically translate intowinning victories for their members (for example tolevel the playing field for SMEs in governmentprocurement). In the cases of Costa Rica and Panama,the challenge is more about benefiting more fully fromexisting success in attracting foreign investment. ForCosta Rica, the lesson may be that local firms need toconstantly refresh their networks to avoid ‘knowledgelock-ins’ and mature into product and processinnovation. For Panama, the challenge is to nurture amultiplicity of informal networks in the City ofKnowledge. In Peru, an issue for policy-makers iswhether and if so how to intervene in one of thecountry’s fastest growing sectors, gastronomy. Theanswer may be in moving from knowledge exchangeto harmonization by offering technical standards thatsupport the sector. The Costa Rican and Peruviancases also underline the importance of granularity:each sector has its own evolving knowledge needs andspeeds, and the design and governance of knowledgesharing networks must therefore be flexible. Finally, itis noteworthy that while many national strategies arenow discussing the opportunities of ‘green industry’,the range of practical initiatives remains quite limitedand the overall energy intensity of the economy isrising or static in some countries.

While policy-makers now routinely talk about theimportance of knowledge sharing in their industrialpolicies, this chapter underlines the diversity andcomplexity of establishing knowledge networks ineconomic policy. Walking the talk by initiating andcoordinating effective inter-institutional networks is asubstantial task, and will only be undertaken by thosewho are convinced that knowledge networks are thekey to prosperity.

As outlined in Chapter Two, the key measures ofinter-organizational networking available for a largecountry sample include the quality and quantity oflocal suppliers; the state of cluster development; theextent to which business and universities collaborateon research and development (R&D) in a country (allfrom the annual WEF enterprise survey); the degreeto which individuals are involved and active inprofessional associations (from the World ValuesSurvey). It is disappointing that competitivenesssurveys and public opinion polls do not gather moredirectly relevant data on knowledge networking.Ideally, one would like to learn the views ofexecutives, policy-makers, researchers and the generalpublic on the trust-worthiness and willingness toengage of the respective sectors, as well as viewsabout the quality of dialogue between the sectors oneconomic matters. One-off studies have also askedwhat percentage of senior economic policy-makershave private sector experience. Such informationshould be gathered much more systematically.

Countries that perform well on competitivenessindices, such as Japan, the USA, Switzerland, Swedenand Germany, also do well on the measure of inter-organizational networking, which is not surprisinggiven the crossover of indicators. More unexpectedperhaps is the strong performance of countries likeDominican Republic, Viet Nam and Turkey in the top50 for inter-organizational networks. Ethiopia andSouth East European countries come lower down thelist. The recent efforts on building better dialoguebetween public and private sectors in those countries,featured in the cases of the Serbian Parliament ofEnterprises and Ethiopia’s PSD Hub, should over timehelp to improve public-private relations. Bolivia’sexperiment with using a web platform to addtransparency in the contested sugar value chain, isalso worth watching. Trust is the oxygen exhaled bygrowing networks.

4.6 Conclusions


127Networks for ProsperityPART 2, Chapter 5: The Knowledge Organization

126 Networks for ProsperityPART 2, Chapter 5: The Knowledge Organization

databases, the internet, repositories, etc. withinorganizations. Organizational research hasconsistently shown that internal interconnectedness iscrucial for organizational performance, “becauserelationships are critical for obtaining information,solving problems and learning how to do your work”Robert Cross and Andrew Parker (2004) The HiddenPower of Social Networks.

5.1 INTRODUCTIONThe basic premise of a social network approachwithin organizations is that knowledge creation andinformation exchange primarily occurs betweenpersons notwithstanding the exponential growth oftechnical knowledge management tools such as

‘Well managed network connectivity is critical to performance,learning and innovation.”

Cross and Parker cv

Chapter 5: The KnowledgeOrganization: Intra-organizationalNetworksKazuki Kitaoka, Alex MacGillivray, Axel Marx andCormac O’Reilly

There are many possibilities to shareexpertise online through exchange, debateand collaboration.

economic performance (Evans and Rauch, 1999), andlater on the performance of the administration itself(Rauch and Evans, 2000). Their turn towards thistopic, situated at the intersection of sociology,development economics and political economy, wasneither unexpected nor illogical. As they explain inEvans and Rauch, 1999, Weber’s and Polanyi’sinterest in bureaucracy as a policy instrument,respectively from a sociological and an economicangle, although present in the first half of the 20thcentury, was trumped in neo-classical politicaleconomy by what they call the “Smithian” view.According to this view, government involvementwould even actively hinder growth as soon as it wentbeyond protection of property rights (Evans andRauch, 1999, p. 749). Following a paradigm shift ineconomics, away from the stark anti-statism of neo-classical economics and towards more emphasis onendogenous growth models by the 1990s, moreattention was given to the effects of organizationalstructure on economic performance. In a quickoverview, however, Evans and Rauch find that mostof the work so far has been hampered by a lack ofproper data on the organizational setup ofgovernment administrations (Evans and Rauch,1999, p. 750).

The main innovation in their approach lies in thedevelopment of an indicator of the extent to which agiven government organization resembles Weber’sideal-type of a professionally-run administration.They operationalize this ideal-type in terms ofmeritocratic recruitment and the existence of a

The most prominent studies on the importance ofstrong internal networks among governmentalauthorities for economic development have beenconducted by Peter Evans, alone and in collaborationwith James Rauch. Pointing to the case of Japan,Evans (1995, p. 49) argued that all descriptions ofthe Japanese state emphasize the indispensability ofinformal networks for the efficiency and effectivenessof government action:

“Informal networks give the bureaucracy an internalcoherence and corporate identity that meritocracyalone could not provide, but the character andconsequences of these networks dependfundamentally on the strict selection process throughwhich civil servants are chosen. The fact that formalcompetence, rather than clientelistic ties ortraditional loyalties, is the prime requirement forentry into the network makes it much more likelythat effective performance will be a valued attributeamong loyal members of the various batsu.”cvi

Evans further explored this topic in collaborationwith economist James Rauch. In two successivearticles published in 1999 and 2000 they explore theeffects of the way in which a governmentadministration is organized, first on the state’s

5.2 Improvinggovernmentorganization fordevelopment

“Informal networks give the bureaucracy an internal coherence andcorporate identity that meritocracy alone could not provide”.

Peter Evans




Between 1999-2003, government agencies inThailand introduced results-based management(RBM), with its focus on personal performanceindicators and rapid feedback;

Knowledge management practices were found tobe similar in public sector and private sectororganizations in a study of 77 Kuwaitiorganizations (Al-Athari and Zairi, 2001); and

Centro Latinoamericano de Administración parael Desarrollo (CLAD) maintains a database(SIARE) with numerous examples of successfulmodernization and reform initiatives in LatinAmerica.

Most cases focus on ministries such as planning,finance, health and education. There is lessexperience on knowledge sharing in the area ofindustry and trade. Most recent economic strategiesrecognize the importance of the ‘knowledgeeconomy’ as a future driver of economicperformance. In practice, these policy initiatives tendto focus on developing an ICT or creative industriescluster. Economic and trade ministries are only nowbeginning to examine their internal knowledgenetworking arrangements, and address the issue ofhow to share knowledge across the whole ecosystemof other state and private bodies.

One example is Malaysia, where knowledgemanagement has been studied in the Ministry ofEntrepreneur Development (Syed-Ikhsan & Rowland,2004), the Implementation Coordination Unit, andthe Public Works Department (Singh Sandhu et al.,2011). These surveys found high levels of enthusiasmfor knowledge management. However, manyrespondents were uncertain as to whether theirinstitutions actually had knowledge managementstrategies in place or not. In general, the informationtechnology aspects of knowledge management wereseen as less of a challenge than ‘soft factors’ such asbehavioural change and knowledge sharing withexternal networks.

Another example is South Africa, where theIndustrial Development Corporation (IDC) is a goodexample of a well-established institution which hasrecently been reinvigorating its mission of providingfinance for industrial development in South Africaand the rest of Africa with a new focus onknowledge. The February 2011 version of the NewGrowth Path and 2011/12-2013/14 Industrial PolicyAction Plan (IPAP 2) makes repeated reference to thechallenge of managing tacit knowledge in emergingsectors.

predictable career ladder which provides long-termtangible rewards (Evans and Rauch, 1999, p. 751).As theoretical links between these characteristics ofan administrative system and the economic growthrate a state experiences, they propose both direct andindirect effects. Direct effects of meritocraticrecruitment imply that those recruited possess certainminimum capabilities, while direct effects of a stablecareer trajectory reduce incentives for short-termpersonal gain through corruption. These direct effectsalso influence the internal network strength of anadministration since “the stability provided byinternal promotion allows formation of stronger tiesamong them” (Rauch & Evans, 2000, p. 52).Indirectly, a capable and dependable bureaucracy actsas a stimulus for private initiative and investment(Evans and Rauch, 1999, 752).

Their findings are remarkable, in the sense that their‘Weberianness’ indicator is found to be stronglycorrelated to economic growth, even whencontrolling for initial levels of GDP and humancapital (Evans and Rauch, 1999, 756). Furthermore,this indicator is found to significantly increase thepredictive power of existing cross-national growthmodels (Evans and Rauch, 1999, 759). Follow upresearch by Henderson et al. (2007) found an evenlystrong effect on poverty reduction. This evidencesuggests that the setup of a performance-basedbureaucratic system can strengthen intra-organizational networks and can indeed haveprofound effects on the economic performance ofstates.

Despite the growth of interest in knowledge sharingin the government and international organizationsconcerned with development, there is vastly moreexperience in the corporate sector. Governments arenow tapping into this experience. Work on‘intellectual capital’ (e.g. Stewart, 1997) was adaptedby the Danish Ministry of Science, Technology andInnovation in a 1998-2003 programme to encouragecompanies to produce ‘Intellectual CapitalStatements’, although the Ministry did not report onits own intellectual capital. However, the DanishMinistry of Trade and Industry did undergo a processof knowledge transformation in the early 2000s(Kjølby, 2004), as did many development agencies.There are also examples of developing countrygovernments undertaking knowledge sharinginitiatives:

entrepreneurial while the older generation had morelimited networks of existing entrepreneurs (Lafuente& Vaillant, 2008).As noted above, for theConnectedness Index we used data from the WorldValues Survey on membership of professionalassociations, which is capturing a similar type ofconnectivity.

There are many possibilities to share expertise onlinethrough exchange, debate and collaboration. Themost popular sites on knowledge and developmentinclude:

Capacity4Dev an EU-promoted community of3,300 development practitioners, with a topic onprivate sector, trade & regional integration;cvii

Knowledge Management for Development(KM4Dev), an independent online community of2,200 development practitioners primarilyinterested in knowledge management / sharing;cviii

The Donor Committee for EnterpriseDevelopment knowledge portal to various privatesector development resources, databases, blogsand groups in 15 countries, including Egypt,Ethiopia and Viet Nam (interactive functions arerestricted to Donor Committee members).cix

Policy-makers, recognizing the importance of word-of-mouth, are now exploring the potential ofinternet-based social networking to engage with thegeneral public. Ministries are opening up theirintranets and setting up Facebook groups and it isnot unusual for an industry minister to use Twitter.

In 2010, respondents reported that their favouredstrategy, over and above all formal means (radio, TV,reading, internet, meetings, contacting government),was asking friends (52 per cent of all respondents).Reliance on personal networks is particularly markedin Dominican Republic (67 per cent), Bolivia (58 percent) and Panama (55 per cent). For private sectordevelopment, the most important people in personalnetworks may be those run their own business.Knowing someone who has started a business in thepast two years is thus considered a key indicator ofentrepreneurial potential (Acs & Szerb, 2010).

Among the general public, the prevalence of such“enterprise networks” varies from country tocountry, according to Global EntrepreneurshipMonitor data for 41 countries. While four in tenpeople know an entrepreneur in Bolivia (38 per cent)and Egypt (40 per cent), half or more of thoseinterviewed in Peru (50 per cent), Serbia (52 per cent)and Dominican Republic (54 per cent) have thispersonal network. Yet in Turkey, just over one infour people knows a recent entrepreneur (27 percent).

There are gender differences at play in terms ofpersonal knowledge networks. In Peru, more womenthan men know an entrepreneur (61 per cent versus57 per cent) (Serida et al, 2010). There are alsogenerational effects. In a Romanian study, theyounger generation was more likely to be

5.3 Social networks

How do individuals share knowledge? The Latinobarómetro surveyacross Latin America asked respondents about their strategies forfinding information. The answer: they ask friends.




The strong emphasis on implementation,monitoring and coordination mechanisms inTurkey’s ambitious industrial strategy.

Teamworks, the ambitious UNDP-led socialknowledge network.

El Salvador’s strong progress in the mid-2000s inupgrading its bureaucratic capabilities.

The efforts of the Egyptian Ministry of Industry’sTechnology and Innovation Centres to increasetheir collaborative potential.

5.4 Case studies

The following examples illustrate internal reform of organizationalcapacity with a view to strengthening internal network capacity:

Egyptians are scientifically and technologically savvy.Indeed, Egypt has a far higher density of bothresearchers and scientific papers per millioninhabitants than most other countries in Africa.

Case: Bureaucratic reform in El Salvador

To add to these challenges, El Salvador has sufferedfrom a long-standing reputation for inefficientgovernment bureaucracy. Executives tend to criticizegovernment bureaucracy in every country incompetitiveness surveys. But in the case of ElSalvador, these criticisms seem to be valid, accordingto an in-depth 2004 study that ranked El Salvador12th out of 18 Latin American countries inbureaucratic capacities (Echebarría (ed), 2006;Zuvanic et al., 2010).

A comparable study was completed in 2008-09 forseven countries, as part of the Regional Plan forStrengthening and Modernization of the CivilServices and Public Administration in CentralAmerica and the Dominican Republic, supported bySpanish cooperation (AECID, FLACSO & SICA,2010).cxi The 2004 and 2008 studies measuredbureaucratic capacity across the same five sub-indexes assessing efficiency, merit, structuralconsistency (strategic coherence, consistency ofdirection and process), functional capacity(competence, incentives, flexibility) and integratingcapacity. These sub-indexes were assessed acrosseight sub-systems of the civil service, such as humanresources, planning and pay. The methodology,developed originally by Profesor Francisco Longo, isconsistent with the Carta Iberoamericana de laFunción Pública, formally approved by the region’sgovernments in 2003.

How did the 2008/09 study show El Salvador? Thekey finding is that government capacity can besubstantially enhanced in a four-year period. The

Between 1980 and 2010 El Salvador's humandevelopment rose by 1.2 per cent annually. Thisprogress saw the country of just over 6 millionovertake the world average in the mid-1990s,although it still lags behind the regional average in2010, held back by contraction and then sluggishgrowth in 2009 and 2010. Pockets of deprivationexist across the country, according to detailed povertymapping by the El Salvador office of FLACSO. Incommon with other Central American countries, ElSalvador is vulnerable to climate change, suffering inparticular from heavy rainfalls.

The country’s competitiveness has also remainedstatic over this period, impacted significantly bysecurity issues. Executives surveyed by INCAE alsoreport concerns about the quality of the whole‘supply chain’ of mathematics, science andengineering, from primary school right through toresearch institutions and company R&D. A Harvardstudy on economic potential by Ricardo Haussmannand Dani Rodrik recommended focusing strongly oncapacity building so that the country could identifyits own initiatives.

“We have worked very intensively with the country’s industrialsector and with the industrial sector associations. Primarily theMinistry of Economy, but also other key state institutions, in orderto define our industrial policy.”

Dr. Héctor Dada Hirezi, Minister of Economy, May 2011cx




A multi-stakeholder Economic and Social Council(CES), with membership from business, unions,NGOs and academia, meeting as often as 1-2times a month;

Departmental cabinets representing all ministriesat local level, to listen carefully to local concernsand improve accountability;

A new Industrial Policy, building on numerous,voluminous studies and focusing on agricultureand food security, agro-industries, high-techindustry, tourism and logistics; and

A new Sistema Nacional de Planificacion (SNP orNational Planning System, drawing on advicefrom CEPAL and ILPES).

Some 13 per cent of executives still see policyinstability as one of the major problems for ElSalvador. But if the government can build on theprogress made up to 2009, and successfully embednew initiatives such as the SNP, Industrial Policy andCES, then business confidence and prosperity shouldsteadily follow.

Sources: IHDI, WEF, Informe Barómetro, interviews with AlfonsoGoita & Gina Navas, Technical Secretariat & Pedro Antonio

Argumedo, FUSADES.

scale and speed of the reforms is an importantchallenge to those who claim that governance reformtakes decades. In the period between 2004 and 2008,the civil service in El Salvador transformed itself. In2004 it lagged far behind the average for the othercountries in the region, justifying the negative viewsof executives in one competitiveness study afteranother. By 2008/09, the bureaucracy was operatingat a position of near parity with the regional average,ahead of some neighbours and among the best insome sub- indexes.

How has El Salvador managed this transformationfrom worst in region to better-than-average in arelatively short space on time? The study does notask specifically about KM practices withininstitutions, but it does address enabling conditionssuch as planning, training, good management andperformance incentives. These reforms were led bythe Secretaría Técnica (Technical Secretariat) of thePresidency and by the Ministerio de Hacienda. ElSalvador was noted particularly for improvements inits merit and efficiency sub-indexes over this period.

In the aftermath of the economic crisis of 2009, theincoming FMLN administration maintained pressureon state institutions through the process of revisingthe Plan Quincenal de Desarrollo (Five YearDevelopment Plan), which was launched in mid-2011. Among the initiatives were the following:

Case: Egypt’s Industry Council for Technology &Innovation

On the other hand, foreign investors and donors haverenewed their interest in opportunities in Egypt sincethe Revolution. They recognize its strategic location,large internal market and diverse industrial base,which was galvanized by an ambitious 2004 NationalIndustrial Development Strategy.cxiv Indeed, theindustry sector did improve its performancesignificantly between 2005 and 2009, pulling aheadof countries such as Colombia, Pakistan andMauritius in its transition from low to mediumtechnology (UNIDO 2011). This growth has seencarbon emissions rise per unit of GDP over the pastdecade (IEA, 2011). Other big countries in the regionhave become major trading partners: Turkishinvestments for example have increased 20 times overin three years.cxv

Egyptians are scientifically and technologically savvy.Indeed, Egypt has a far higher density of bothresearchers and scientific papers per millioninhabitants than most other countries in Africa,comparable to South Africa and Tunisia (see Figure5.2, taken from Gaillard, 2010). It is an importantconduit for knowledge flows between the Arab Worldand SSA (Royal Society 2011). Egyptian businessesare quite sophisticated and able to adopt technology.So what is preventing further industrial innovation?There are two major impediments to entrepreneurialtake off: a lack of ‘growth mentality’ amongentrepreneurs (Ducker, 2010); and a strong culture ofinformality among Egyptian SMEs. Six in tenEgyptian firms (62 per cent) identify the practices ofcompetitors in the informal sector as a majorconstraint (Enterprise Survey, 2008). This is

Between 1980 and 2010, human development inEgypt improved by 1.5 per cent annually, and todaythe country’s 84.5 million people have a level ofhuman development which is somewhat above theaverage for the Arab World. Of the three componentsof the Human Development Index, it is poverty andeducation that require most attention, and jobcreation has become a pressing demand fromEgyptian youth (nearly 20 million 18-29 year olds).cxiii

GDP per capita, though on an upward path for thedecade to 2010, lags behind the oil-rich nations ofthe Arab World.

There are many studies on competitiveness in Egypt,including a detailed series of annual reports by theEgyptian National Competitiveness Council whichadvocated the concept of a ‘green economy’. Mostlythese studies converge on a view that the country hasnot managed to enhance its competitive position inthe past three years, and has therefore seen itsranking relative to peer nations fall back over thisperiod. According to executives surveyed by theEgyptian Center for Economic Studies, policyinstability and workforce skills are seen as the mostproblematic features of doing business in the countryfollowed by access to finance and bureaucracy (WEF2011).

“The government is keen to support the Egyptian industry andjustify the relation between public interest and competiveness of theindustrial sector.”

Dr. Mahmoud Eisa, Minister for Industry and Foreign Trade (from July 21 2011)cxii

Figure 5.1

Bureaucratic capacity, 2004-2008

El Salvador

Average of remainingCentral America & DR

35

30

25

20

15

10

5

02004 2008




Despite serious efforts at coordination, there hasinevitably been a degree of both duplication andredundancy in these initiatives. Policy-makers arequick to point out that there is no shortage of pilotprojects, but rather a lack of capacity to learn fromthem and share the lessons. Consultants have littleincentive to share tricks of the trade gained inexecuting projects, while a fear of failure has madeinstitutions risk averse to sharing experience offailure. There has also been a simple lack of IT, as a2005 Mapping & Assessment of EgyptianTechnology & Innovation Infrastructure by the IMCfound: “despite the recent advancements ininformation technology, yet several ministries do nothave adequate and reliable databases. In many casesdata collection depends on the attitude of those incharge and on the level of clearance”.

Within this complex ecosystem sit the Technologyand Innovation Centers (TICs). TICs are specializedtechnology resources whose goal is “to reinforceknowledge, experience, capacity, know-how, andtechnology transfer between those who have themand those who need them”.cxix The first TICs wereestablished in the early 2000s by Dr Hany Barakatand colleagues at the Ministry of Industry who werealarmed at the “tremendous deterioration in Egypt inthe past decades [...] in the fields of handicrafts,pottery, jewellery, embroidery and hard textiles. It hasseen no growth, no new interest, no new employmentand no experts taking an interest.”

Egypt can learn from successful models of appliedresearch, such as at Stanford; the FraunhoferInstitute; and Italy’s experience with SME exportconsortia. The Council can also learn more from thesmall group of ‘early adopters’ in Egypt itself.

To do this, the TICs need to continuously refocus oninnovation from the perspective of the entrepreneur.Evans & Rauch (1999) stress the importance ofprivate sector experience for effective civil servants.The Industry Council’s Chairman Ahmed Samy has aprivate-sector background, in EDS and then Hewlett-Packard. In Egypt, there is a need to encourage thistrend of cross-sector experience. An inductionprogramme for senior executives moving fromprivate sector to public sector would improve theability of appointees to hit the ground running andnavigate their way through complex and unfamiliarprocedures.

Sources: Interview with Ahmed Samy, Chairman, Industry Councilfor Technology & Innovation.

There are now over a dozen Technology Centers,located in eight cities across Egypt. Most are focusedon sectors such as Fashion and Design; Marble andQuarries; Plastic; Food; Leather & Tanning;Furniture; Jewellery; Textiles & Clothing;Engineering; and Agriculture & Agro-industries.Other TICs are cross-cutting (Egypt National CleanerProduction Centre; Productivity and QualityImprovement; Packaging; Technology). Donorsincluding UNIDO have been actively engaged. EachTIC has traditionally worked with a European orJapanese partner to provide training, testing,technology transfer agreements and other services. In2007/08, some 7,350 trainees and 2,300 companiesbenefited from the services, with nearly 200technology transfer agreements.cxx Inevitably, someTICs were achieving more than others. Opportunitiesmay also have been missed due to informalgovernance and the scattered TIC network.

In 2010, a new Industry Council for Technology &Innovation was tasked by the Ministry of Industrywith rejuvenating the work of the TICs. The key taskis not to initiate further research but to make betterconnections, notably with universities and NGOs.One example of acting as a catalyst for existingknow-how is work with experts at the AmericanUniversity Cairo on technology for recycling marblewaste at the Shaq Al-Thu`ban marble cluster.cxxi TheIndustry Council also recognizes the need to upgradeor consolidate some TICs, as well as to form newteams to focus on emerging opportunities, such asmedicinal plants, technical fibres or pharmaceuticals.

significantly higher than the average for the studygroup (36 per cent). One well-known example is thecluster of 1,000+ recycling workshops in Mokattam,only able to export plastics to China through formalthird parties that have export licences.cxvi

Numerous programmes seek to address the issues ofinformality and entrepreneurialism, includingprogrammes that are likely to be ongoing from twoinstitutions established under the Mubarak regime,the Industrial Modernization Centre and the SocialFund for Development. For example, IMC developedinitiatives on Industrial Vertical Integration and onlinking university students to businesses, alongside itscapacity building, productivity, marketing and HRsupport for SMEs and clusters.cxvii The Social Fund forDevelopment, established in 1991, has led manyprogrammes on small enterprise and microfinance.cxviii

The Industrial Development Authority has made landavailable. Many other actors have also been active, incomplex permutations of state, NGO, private sectorand donors.

Figure 5.2 Egyptian businesses are quitesophisticated and able to adopttechnology. So what is preventing furtherindustrial innovation?

Number of Scientific Publications in the Top Six African Countries(Excluding South Africa)

Egypt Tunisia Marocco

Algeria Nigeria Kenya

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Years of Experience of % of Firms With % of FirmsCountry the Top Manager Internationally Recognized Offering Formal

Working in the Firm’s Sector Quality Certifification Training

Bolivia, Plurinational State of 21 22 57Costa Rica 20 13 55Dominican Republic - 10 53Egypt, Arab Rep. 10 21 22El Salvador 20 14 61Ethopia 15 4 38Panama 11 23 11Peru 22 14 60Serbia 18 22 37Turkey 24 30 29Viet Nam 15 17 44Average 18 17 42



Case: Capacity building in the Turkish Ministry ofScience, Industry and Trade

The strategy also focuses on eight horizontal policyareas: a state aid system, which is a part of aneffective investment and business environment thatcan direct firms towards increasing their productivity;international trade and investment; skills and humanresources; SME access to finance; technologicalcapacities of firms; infrastructure upgrading to reduceinput costs; improving environmental compliance andreducing climate risk; and regional development.

Turkey’s competitiveness has certainly improved inrecent years. According to WEF, the economy isalready transitioning to become innovation-driven.Turkey’s inward FDI track record has shown rapidgrowth in recent years, with stocks rising fromaround 10 per cent of GDP in 2008 to around 25 percent in 2010. The 2008 enterprise survey by theWorld Bank showed that Turkish managers had moreexperience than their counterparts in the rest of thestudy group, and that nearly a third of firms haveinternationally recognized quality certification. Morecredit is available for entrepreneurs, reaching nearly70,000 SMEs in 2009. Research in Izmir shows thatlocal policy networks are as important as otherwidely recognised factors of competitiveness indriving local economic performance (Eraydin et al.,2008). “Turkey has improved its scientific outputs ata rate almost rivalling that of China ... and nowspends more annually in cash terms than eitherDenmark, Finland or Norway” (Royal Society,2011).

Human development for Turkey’s almost 76 millionpeople has been rising steadily: between 1980 and2010 the Human Development Index rose by 1.2 percent each year (UNDP, 2011). Turkey’s GDP percapita has passed the US$10,000 threshold, with asolid recovery in 2010. The 2008 HumanDevelopment Report urged policy makers tostrengthen the capabilities of the 12 million youngpeople who will be of working age in 2020, “to livelives of freedom and dignity, enlarging considerablytheir knowledge and choices” (UNDP, 2008).Improvements in general expenditure on education(as a percentage of GDP) and particularly an increasein female enrolment rates at secondary and tertiarylevels would be important measures.

The country’s long-term industrial vision is tobecome “the production base of Eurasia in mediumand high tech products.” The 2003 industrial policywas comprehensively revised through multi-stakeholder consultations and a far more ambitious2011-14 strategy was published in 2010 (Republic ofTurkey Ministry of Industry and Trade, 2010). Thecountry has strong industrial foundations to deliveron its vision. Turkey is among the top 35 countriesand at a comparable level to Norway or Poland,according to UNIDO’s Competitive IndustrialPerformance index (UNIDO, 2011). Turkey has moreindustrial breadth than many G20 countries; thestrategy covers seven broad sectors, fromautomotives and machinery to textiles and food.One result of this industrial breadth is that Turkey’scarbon emissions intensity (CO2/unit GDP) hasremained static over the past decade (IEA, 2011).

asking questions of the type: which tax breaks orsubsidies are we using? which sectors have weidentified? what is the budget we have allocated forindustrial promotion?” warn Ricardo Hausmann,Dani Rodrik and Charles Sabel (2007). “The relevantquestions instead are: have we set up the institutionsthat engage the bureaucrats in an ongoingconversation of pertinent themes with the privatesector, and do we have the capacity to respondselectively, yet also quickly and using a variety ofupdated policies, to the economic opportunities thatthese conversations are helping identify?” In otherwords, industrial policy should follow the account -ability principles of relevance, inclusivity andresponsiveness. (AccountAbility, 2009).

Specific challenges remain, of course. Executives areconcerned about tax and currency regulations;worker skills; and labour market rigidities, accordingto the survey by TUSIAD Sabanci UniversityCompetitiveness Forum (WEF, 2011). The percentageof firms offering formal training is below average,and executives admit that they are reluctant todelegate authority (see Table 5.1. from the 2008World Bank Enterprise Survey). In all, the strategyenvisages some 73 actions to address such challenges;sector strategies are also being produced.

The greatest challenge for any industrial strategy,however, is coordination. “A government shouldevaluate its industrial policy framework not by

“Who do not know where to go cannot go anywhere even if all theroads are open. Because if you do not know where to go, there is no[importance] where you arrive. With this [Industrial Strategy]document, we make the road way of industry and the instruments wewill use in this road.”

Nihat Ergün, Minister of Science, Industry and Trade, February 2011cxxii

Turkey has more industrial breadth thanmany G20 countries; the strategy coversseven broad sectors, from automotivesand machinery to textiles and food.

Table 5.1 Turkey: some key characteristics of enterprises in international comparison




Small and Medium Industry DevelopmentOrganisation (KOSGEB)

Turkish Patent Institute (TPE)

Turkish Standards Institution (TSE)

Turkish Accreditation Agency (TURKAK)

The Union of Chambers and CommodityExchanges of Turkey (TOBB)

The Confederation of Turkish Tradesmen andCraftsmen, Turkish Industrialists’ andBusinessmen’s Association (TÜSİAD)

Istanbul, Gaziantep and Kocaeli Chambers ofIndustry

Economic Development Foundation

Economic Policy Research Foundation of Turkey(TEPAV)

It is one thing to solicit a wide range of inputs into anindustrial strategy; quite another to coordinateongoing, timely action from such an array ofinstitutions, each with their own knowledge sharingprocesses. To achieve this, the Ministry of Science,Industry and Trade decided to form a Monitoringand Steering Committee involving key stakeholders.A monitoring and evaluation report is to be preparednot annually but every six months. The Ministry’sEntrepreneur Information System will also be a basictool. The Ministry also recognizes that it is necessaryto improve its own administrative capacities as wellas those of its project partners, and “to establish aneffective dialogue mechanism.” Support from the EUIPA (Instrument for Pre-Accession Assistance, startedin 2007) is envisaged for this ambitious institutionalbuilding task.cxxiii

Sources: Republic of Turkey Ministry of Industry and Trade(2010); interviews with Ministry of Science, Industry and Trade

(May 2011).

The Ministry of Industry and Trade is tasked withdeveloping the implementation, monitoring andcoordination mechanisms to execute the strategy. TheMinistry recognizes the need to coordinate thecontributions of a wide range of institutions. Toname just some of the most important:

Permanent Committee for the Development ofIndustrial Competitiveness

State Planning Organization Undersecretariat

Undersecretariat of Treasury

Undersecretariat for Foreign Trade

Secretariat General for EU Affairs

Ministry of Finance

Revenues Administration

Ministry of National Education

Ministry of Energy and Natural Resources

Ministry of Environment and Forestry

Ministry of Labor and Social Security

Ministry of Transportation

Investment Support and Promotion Agency ofTurkey (ISPAT)

Coordination Council for the Improvement ofInvestment Environment in Turkey (YOIKK)

Scientific and Technological Research Council ofTurkey (TÜBITAK)

Turkish Academy of Sciences (TUBA)

Information and Communication TechnologiesAuthority

Case: Knowledge networks for development: UNDP’sTeamworks

secure online collaboration platform for developmentpractitioners more broadly to share their knowledgeand expertise. For the eight thematic areas and theirindividual Joint Programmes of the MDGAchievement Fund, a dedicated area has been createdon Teamworks, accessible athttps://mdgf.unteamworks.org.

Within the MDG-F Teamworks platform, users can:

Network with colleagues and project partners forspecific trouble-shooting and knowledgeexchange;

Establish more generic or thematic networksacross the UN system and outside it;

Profile one’s work, experience and practices,promote events and improve the outreach andadvocacy of one’s programmes and activities;

Build databases of private sector service providers(consultants, writers, photographers, etc.)

Communities of Practice: create or joinmoderated or free-flowing Communities ofPractice or ad hoc user groups;

Pool knowledge by uploading files, bookmarks,pictures/videos, news articles, meeting minutesand blogs; and conduct research on resourcesprovided by colleagues of different thematic areasand UN agencies; and

Seek solutions or policy advice.

In the five years after 1996, when the World Bankbranded itself as the ‘knowledge bank’, many otherdevelopment agencies followed its lead by launchingknowledge management or knowledge sharingprogrammes, with substantial but incomplete success(King & McGrath, 2004). As much as 80% ofknowledge residing inside institutions is thought tobe tacit and thus hard to share except face to face(Serrat, 2008), and yet most knowledge initiativeswere designed before the launch of Facebook inFebruary 2004.

To fill this gap in 'social knowledge networking', theUNDP Bureau for Development Policy, KnowledgeManagement Group, began developing its ownknowledge management platform, called Teamworksin 2009. By November 2010 it had 7,500 users of itsblogs, multimedia, social networking, community,gallery and other features, with substantialcustomization options. By November 2011, users haddoubled to 14,500, with up to 500 active users onlinein a 24 hour period.cxxv Teamworks is designed toprovide a forum for social networking, in order toshare knowledge assets, create several types ofcollaborative “spaces,” and establish communities ofpractices linking together thousands of staffmembers, experts, consultants, external partners andclients around the world.

Users from three dozen UN agencies are beginning tojoin the platform through dedicated areas, either intheir own domains or under an umbrella(http://one.unteamworks.org).Trusted partners,consultants, alumni, and retirees can also be invitedto join, with the intention that the tool becomes a

“The more the tool is used to store knowledge, experience, andlessons learned, the more useful it becomes. We must all takeresponsibility for doing our bit to make knowledge sharing areality.”

Helen Clark, UNDP Administrator, December, 2010 cxxiv




of users is assured on the Teamworks site. Like manynetworks, however, usage tends to decline when JointProgramme coordinators get drawn back intoactivities in the field where online access may bemore limited. Recent usage statistics for the PSDwindow user spaces shows more traffic from UNIDOand MGD-F head offices in Vienna and New York,and a mixed level of engagement from the 12 countryteams.

UNDP support for the use of Teamworks is nowlargely in place, with a steady growth in total usersand active users. What remains is the promotion ofthe network to other stakeholders inside and outsidethe UN system, and some ‘success stories’ showinghow knowledge is flowing to where it is needed.While the numbers and usability are impressivecompared to other KM and development networks,there is a long way to go when compared to Google+,Facebook or LinkedIn.

Source: Angela Heitzeneder, UNIDO.

The Teamworks platform is being used for the MDG-F Joint Programmes (JP) in the Private Sector andDevelopment window via a general open space forthe thematic window as a whole and individual JointProgramme spaces for each of the 12 countries, withrestricted access. The general space features:professional knowledge, experience and information(reports, links, bookmarks, manuals, guidelines etc.);a virtual “Community of Practice” in PSD;Discussions; Newsletter (Bulletin board); Cross-fertilization with related areas or windows throughcross-posting of uploaded content (to other groupson Teamworks including user spaces or thematicspaces related to the programme (e.g. the YouthEmployment and Migration thematic user space).The 12 specific Joint Programme country level spacesare linked to the PSD thematic space; and in additionhave event spaces; related project and organizationaldocumentation etc.

The online platform has already been a valued toolfor collaboration and interaction between JPcoordinators involved in the MDG-F programmes.This was particularly the case in the run-up to andfollow-up from the March 2011 Panama Meeting forMDG-F JP coordinators in PSD. There is strongsupport of other initiatives or programmes for cross-fertilization of the various thematic user spacesrelated to the general PSD space. For instance, theValue Chain Development Group user space of theUNDP hosted domain links relevant content anduploads to the PSD window space and vice versa, inorder to have outreach to a wider spectrum of users.Unlike some project websites, longer-term continuity,language capabilities, IT support and a critical mass

Teamworks is to provide a forum forsocial networking, in order to shareknowledge assets, create collaborative“spaces”, and establish communities ofpractice linking together thousands ofUN staff, experts and external partnersaround the world.

5.5Conclusions

On the other hand, Egypt, like Turkey, has excellentscientific and technical capabilities, but the informalnetworks originally tasked with transferring thatknowledge to entrepreneurs have been struggling,and need more coordination. There is no one-size-fits-all approach to institutional capacity building ineither public or private sector, as the experience ofthe National Cleaner Production Centres shows (seeChapter 1). In Turkey’s industrial planning process,serious attention is paid to the issue of implemen -tation – the space devoted to implementation instrategy documents is probably a good gauge of howlikely they are to be implemented. Policy-makers alsoneed to ensure that implementation networks havethe resources and sustainability they need to deliveron their expanded remits, given that institutionaltransformation processes can easily take four years(as in the case of El Salvador), or even longer, makingthem vulnerable to cut-backs by incomingadministrations.

Many of the 200+ policy-makers, business peopleand researchers interviewed told us that knowledgesharing is less about technical platforms than aboutculture and incentives. The UN’s Teamworksexperience is that the technology has to be rightbefore the social network gets started.

As discussed, important indicators include thestrength of personal networks (possibly using socialnetwork analysis); the years of experience ofmanagers and staff; their cross-sectoral workexperience; and finally, gauges of the quality ofinstitutional KM systems (knowledge mapping andaudits). To date, there are no large samples ofmeasures looking at public sector knowledge sharingpractices. The Central American exercise cited in theEl Salvador case did not assess KM specifically as agauge of bureaucratic competence. Designingknowledge sharing surveys should be a fruitful areafor discussion with experts on institutional capacitybuilding.

As one might expect, enterprises in countries such asSwitzerland, Denmark, the USA, Sweden and theNetherlands perform well on these self-assessedmeasures of training provision. Only Costa Rica fromthe study group is in the top 50 and several studygroup countries come low down the list. Somecountries present a paradox when it comes to intra-organizational networking. In the case of Turkey,managers are experienced but tend not to providemuch formal training, so policy-makers shouldprobably focus on encouraging informal on-the-jobtraining.

As indicated in Chapter 2, key measures of organizationalnetworking available for a large country sample come from the WEFand World Bank surveys and include the percentage of firms offeringformal training; the local availability of specialized research andtraining services; and the extent to which companies invest intraining and employee development.


143Networks for ProsperityPART 3, Networks for Prosperity: Findings and Recommendations

142 Networks for ProsperityPART 3, Networks for Prosperity: Findings and Recommendations

PART 3:Networks for Prosperity: Findingsand Recommendations

Networks are still highly under-researched and under-appreciatedamong policymakers anddevelopment specialists.

In this context, it can be observed that networks areincreasingly emerging as a distinct form ofgovernance which includes different types of publicand private actors within and across organizationaland national boundaries. Different types of networksexist, whether for learning, information exchange orknowledge creation.

Networks are a distinct form ofgovernance with important potentialfor knowledge creation anddevelopment performance.

There could be significant benefits from ensuring thatnetworks are successfully embedded. However,vibrant knowledge networking cannot only dependon existing networks but requires a living“institutional ecology”, with new organismsproviding new knowledge and opportunities.

Significant benefit can be gained fromnetworking strategies to institutionalizeor “embed” networks.

Knowledge networking and network governance inthe field of economic policy is certainly not a newphenomenon; neither is the realization that thedevelopment of a strong private sector is necessaryfor achieving economic, social and environmentalobjectives. With the rapid globalization in all spheresof our societies over the past decades, however,economic successes and the realization of socialcohesion and environmental sustainability in onecountry depend more than ever on the performanceand behaviours of its neighbours, regional leadersand global economic powers. Accordingly, both thescope of knowledge networking and the nature of theprivate sector have altered dramatically. This requiresa closer look at the interrelationships between theknowledge networking capacities of a country, itsprivate sector development policies and its economic,social and environmental performance.

In view of the relevance of these interrelationships fordomestic policymaking and international relationsalike, it is all the more surprising how under-researched they have remained in the past and howunappreciated they seem to be among policymakersand development specialists. This report has thereforemade a first attempt to improve the overallunderstanding of these complex interrelations andhas presented cases from around the world thatillustrate the numerous approaches governments arecurrently taking in responding to their domestic,regional and global challenges through knowledgenetworking.

“Building the basic capacity to govern in countries that often lacksufficient material and human resources to pass, implement, andapply laws effectively is itself an important and valuable consequenceof government networks.”

Anne-Marie Slaughter cxxvi

Networks for Prosperity: Findingsand Recommendations Kazuki Kitaoka, Alex MacGillivray, Axel Marx andCormac O’Reilly




Knowledge networks can facilitate the exchange ofpolicy-relevant knowledge among their members andthe production of new knowledge and solutions. Insome cases, this is being scaled up and leads to policycoordination (or even harmonization) and mutuallearning. With their informal, flexible and trust-building nature, knowledge networks can lead toglobal/regional agenda- and norm setting and help inharmonization processes, particularly when rapiddecision-making is required during crisis periods.Knowledge networks can thus be particularly usefulin processes of regional and/or inter-regionalintegration, where a prior harmonization process canease, support and speed up policy implementationand operations.

The role of intergovernmental knowledge networksin norm and standard setting/diffusion deserves aparticular attention, in particular due to theincreasing rise of private standards ruling theinternational private sector, thus influencing theeconomic performance of countries indirectly.

Knowledge networking can be crucialin norm-setting and diffusion throughpeer-to-peer interaction and learning.Successful knowledge sharing dependsless on IT platforms than on interestsand incentives.

This mirrors the gradual move away from thetraditional model, in which internationalorganizations were established with the primaryfunction of developing standards and then persuadingMember States to adopt them. Standard-settingknowledge networks usually work out of leanstructures, are driven by policy priorities and interestof its public and/or private members, and workthrough a combination of policy-relevant knowledgeexchange and peer pressure. In fact, through theirpeers, policymakers might be exposed to newpractices and policy options, or even discover entirelynew models or paradigms for policymaking in aspecific field.

This is particularly relevant for peer-to-peer networksamong developing countries and might provide abetter understanding of how “South-SouthCooperation” could be better operationalized in thefuture.

Successful knowledge sharing dependsless on IT platforms than on interestsand incentives.

Networks have a tendency to proliferate, and it iscostly to participate in networks, so individuals,organizations and countries need to develop clearnetworking strategies. Also, despite the growingdiscourse on the importance of knowledge networksfor development, experience on effective networkingstrategies and managing effective and efficientnetworks is limited. There is strong demand amongpolicy-makers to learn from best practices onnetwork management and the development ofnetwork strategies, especially in the context of privatesector development. This can be achieved via studyvisits, workshops, mentoring, case studies and socialnetworking. These activities can contribute toidentifying success factors for network managementand international organizations can support sucheffort as catalysts and facilitators where networkstructures and human and financial resources arelimited.

Further research is needed to identifysuccess factors for networkmanagement and internationalorganizations should support thiseffort.Cross-cutting agendas such as ‘green industry’,energy for all and climate adaptation, where newnetworks are being rapidly proliferated, mayparticularly benefit from such experience.

Effective networks tend to build closeworking relationships with formallygoverned international organizations,and also with other networks.

A final consideration regarding the need for increasedcross-border knowledge exchange and policycoordination is the recently-revived call for “regionalintegration”. Again, the nature and shortcomings inthe current international system of governance hasled to the concept of a ‘multi-level’ form ofgovernance, extending from the local to the globallevel and thus speeding up problem-solving for issuesof cross-border dimension. This concept is, again,closely linked to the thinking that emphasises thenetworked aspects of governance in order to deal

with interdependencies across policy levels (local toglobal) and policy domains (economic, social,environmental). In many regions can be observed theparallel processes of ‘regionalization’ of policy andthe progressive upgrading of the micro-regional levelin policy processes. Indeed, there is now a wideconsensus that governance is not limited to the levelof the state alone but requires a system ofparticipatory policymaking, involving those parts ofsociety that are affected by the policies.

It can thus be argued that (1) regional governance isnot incompatible with and does not negate globalgovernance – on the contrary, it has the potential tostrengthen global governance; and (2) we are todaywitnessing a new current in multilateral governancethat gives a prominent role to regions but stillmaintains a series of problematic issues to be settledat the global level. To return to the knowledgenetwork aspects above, ‘good’ global governancemay well imply not exclusive policy jurisdiction butrather an optimal partnership between the national,regional and global levels of actors, and betweenstate, intergovernmental and non-governmentalcategories of actors.

Central to this will be the intensified and betterexchange of knowledge between global and regionalmultilateral institutions as well as their interactionand collaboration with non-state actors. Again,knowledge networks can be seen as a solution forclosing the knowledge gaps and advancing necessarypolicy coordination in order to ensure that countriescan reap the fruits from regional economicintegration efforts. Central to this consideration is theestablishment of a common understanding across alllevels of the embedment of the knowledge gatheredfrom multilateral networks into the actualimplementation of policies and programmes. Existinginternational organizations can and should play acrucial role in these knowledge managementprocesses.

’Triangular’ regional networks offerreal potential for timely knowledgesharing and solution finding.

Thus successful networking implies the developmentof solid networks which continue over time and arebuilt on trust, as well as a constant movementbetween relevant networks to capture newinformation.

To achieve this, more empirical evidence will benecessary on knowledge networking and there is aneed for more conceptual thinking on how tomeasure knowledge networks and connectedness.With these caveats, a Connectedness Index has beenconstructed in this report for 75 countries, using themost relevant available data from a wide range ofsources.

Initial findings through theConnectedness Index are clear:networks matter for developmenteffectiveness.

The results show a significant variation in networksacross countries and also within countries acrosslevels of networks. There is a strong positivecorrelation between the Connectedness Index andgovernment effectiveness, industrial development andeconomic development. Indeed, a key conclusionfrom the literature, from the best availableinternational metrics, and from the 16 case studiesfrom countries of all shapes, sizes and levels ofdevelopment, is that knowledge networks could bethe missing ingredient in strategies for sustainabledevelopment and prosperity.

Policymakers’ interest in knowledge networksappears thus to be justified, despite the limitedevidence on the causalities. They findintergovernmental knowledge networks particularlyuseful to better understand and freely choose fromthe various policy options, to coordinate policies withother members of the network and to implementpolicies requiring concerted action.

Knowledge networking is not aboutICT as the ‘knowledge economy’ butabout building trust, dialogue andcollaboration across sectors andborders.




Recommendations

International organizations should improve theirinter-institutional information and knowledgeexchange systems and facilitate better knowledgenetworking among their members. This mayinclude, inter alia, improving thematicinformation exchange in communities of practice,to provide more user-friendly platforms forknowledge sharing among members; to activelyseek the involvement of non-state actors inconsultation processes; and to actively supportknowledge network development in relevantfields.

An international and cross-sectoral consultationnetwork should be established to further developthe initial findings on connectedness andknowledge networking for the achievement ofdevelopment goals, and recommend measures andprogrammes for development effectivenessthrough increased knowledge networking, inparticular in the field of private sectordevelopment policy.

The international community should activelypromote knowledge networking and networkgovernance structures for achieving local,regional and global development objectives. Thismay include, inter alia, to foster international andnational knowledge networking approaches in allcapacity development activities; to improvenational ownership through multi-stakeholdernetworking arrangements in the policymakingprocesses at all levels; to make the internationalsystem more inclusive through engagement ofmore countries and institutions in solution-finding processes; and to support networkingarrangements with the goal of enhancinginnovation and private sector development.

Member States should encourage and facilitatethe international knowledge networkingcapacities of their public and private institutions.This may include, inter alia, formulatingnetworking strategies in relation to theachievement of development objectives andreforms; to actively support regional policy andresearch network participation; to invest ininstitutional infrastructure and innovationnetworks domestically and internationally; toactively upgrade the knowledge networkingcapacities and capabilities of domesticinstitutions; and to provide suitable incentives forthe formation of new networks in specific fieldsof strategic interest.

Based on these findings and conclusions, the followingrecommendations have been formulated for consideration byMember States:


Estimated Household Income Inequality Data Set (EHII)http://utip.gov.utexas.edu/data.html

Eurostat Government Finance Statistics http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

Eurostat Structural business statistics (SBS) http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

Failed States Index http://www.fundforpeace.org/web/index.php?option=com_content&task=view&id=452&Itemid=908

Fiscal Decentralization Indicators http://www1.worldbank.org/publicsector/decentralization/fiscalindicators.htm

Foreign Direct Investment database http://unctadstat.unctad.org/

Freedom in the World http://www.freedomhouse.org/template.cfm?page=439

Freedom of the Press http://www.freedomhouse.org/template.cfm?page=274

Geert Hofstede Cultural Dimensions http://www.geert-hofstede.com/hofstede_dimensions.php

Global Competitiveness Report http://www.weforum.org/

Global e-government http://www.insidepolitics.org/policyreports.html

Global E-Government Survey http://www2.unpan.org/egovkb/datacenter/CountryView.aspx?ddl=0

Global Integrity Index http://www.globalintegrity.org/data/downloads.cfm

Hercules Interdisciplinary Database www.globalgovernancestudies.eu

Human Development Reports http://hdr.undp.org/en/statistics/data/

IDEA - Unified Database http://www.idea.int/uid/search-adv.cfm

ILO - ISHIKAWA AND LAWRENCE http://www.ilo.org/integration/resources/papers/lang--en/docName--WCMS_079175/index.htm

Index of Economic Freedom http://www.heritage.org/index/Explore.aspx?view=by-region-country-year

International Crisis Behavior Project http://www.cidcm.umd.edu/icb/data/

International Financial Statistics – IFS http://www.imfstatistics.org/imf/

Johnson and Wallack - Database of Electoral http://dss.ucsd.edu/~jwjohnso/espv.htmSystems and the Personal Vote

Kaufmann – Worldwide Governance Indicators http://info.worldbank.org/governance/wgi/index.asp

KOF Index of Globalization http://globalization.kof.ethz.ch/

Köppen-Geiger Climate zones http://www.cid.harvard.edu/ciddata/geographydata.htm#agricultural

Kucera Freedom of Association and http://www.ilo.org/integration/resources/papers/Collective Bargaining Index lang--en/docName--WCMS_079117/index.htm

Laborsta database on labour statistics http://laborsta.ilo.org/

149Networks for ProsperityAnnex 1: Screened Datasets

148 Networks for ProsperityAnnex 1: Screened Datasets

Annex 1: Screened Datasets

Dataset Source Website

A Cross-Country Database for Sector http://www.cid.harvard.edu/ciddata/ciddata.htmlInvestment and Capital

Afrobarometer - A comparative series of national http://afrobarometer.org/data2.htmlpublic attitude surveys on democracy, markets, and civil society in Africa

Agricultural Measures http://www.cid.harvard.edu/ciddata/geographydata.htm#agricultural

Asian Barometer Survey - A Comparative Survey http://www.asianbarometer.org/of Democracy, Governance and Development

Balance of Payments Statistics – BOP http://www2.imfstatistics.org/BOP/

Banisar - Freedom of Information http://www.freedominfo.org/

Bribe Payers Index http://www.transparency.org/policy_research/surveys_indices/bpi

CEPII-Distance measures http://www.cepii.fr/anglaisgraph/bdd/distances.htm

Commodity Trade Statistics Database http://comtrade.un.org/(COMTRADE)

Corruption Perceptions Index http://www.transparency.org/policy_research/surveys_indices/cpi

Database of Political Institutions http://go.worldbank.org/2EAGGLRZ40

Digital Access Index http://www.itu.int/ITU-D/ict/dai/index.html

Direction of Trade Statistics – DOT http://www2.imfstatistics.org/DOT/

Doing Business http://www.doingbusiness.org/

Easterly and Levine – AFDATA http://go.worldbank.org/K7WYOCA8T0

Economic Freedom of the World http://www.freetheworld.com/release.html

Electoral Democracy http://www.freedomhouse.org/

Enterprise Surveys http://www.enterprisesurveys.org/

E-readiness rankings http://www.eiu.com/site_info.asp?info_name=digitaleconomy_2010&page=noads


151Networks for ProsperityAnnex 2: Methodological Note on the Connectedness Index

150 Networks for ProsperityAnnex 1: Screened Datasets

Latinobarómetro - Opnion Pública Latinoamericana http://www.latinobarometro.org/latino/LATDatos.jsp

LIRGIAD Database http://www.law.kuleuven.be/lirgiad/

LSE Global Civil Society Index http://www.lse.ac.uk/Depts/global/yearbook05.htm#introduction

Minorities at Risk http://www.cidcm.umd.edu/mar/data.asp

OECD Industry and Services Statistics http://oberon.sourceoecd.org/vl=754344/cl=67/nw=1/rpsv/dotstat.htm

OECD International Trade and Balance of Payments http://oberon.sourceoecd.org/vl=1552319/cl=25/nw=1/rpsv/dotstat.htm

Open Budget Index http://internationalbudget.org/what-we-do/open-budget-survey/?fa=Rankings

Penn World Table http://pwt.econ.upenn.edu/php_site/pwt_index.php

Political Finance Disclosure http://www.transparency.org/publications/gcr/gcr_2004#download

Political Instability Task Force - http://globalpolicy.gmu.edu/pitf/pitfpset.htmInternal Wars and Failures of Governance

POLITICAL TERROR SCALE http://www.politicalterrorscale.org/download.php

Polity IV Project: Political Regime http://systemicpeace.org/polity/polity4.htmCharacteristics and Transitions

Preliminary Transparency Index http://go.worldbank.org/HOY0LQW0L0

Press Freedom Index http://en.rsf.org/press-freedom-index-2010,1034.html

Quality of Government Institute -Time Series Dataset http://www.qog.pol.gu.se/

The Cingranelli-Richards (CIRI) http://ciri.binghamton.edu/myciri/my_ciri_login.aspHuman Rights Dataset

The Johns Hopkins Comparative http://www.ccss.jhu.edu/index.php?sectionNonprofit Sector Project (2004) =content&view=9&sub=3

The NGO Sustainability Index http://www.usaid.gov/locations/europe_eurasia/dem_gov/ngoindex/2008/

THE POLITICAL CONSTRAINT INDEX http://www.management.(POLCON) DATASET wharton.upenn.edu/henisz/

Trade Analysis and Information System http://www.unctad.org/Templates/Page.asp?intItemID=1907&lang=1

Vanhanen - Measures of Democracy http://www.fsd.uta.fi/english/data/catalogue/FSD1289/

World Development Indicators http://databank.worldbank.org/

World Governance Assessment http://www.odi.org.uk/projects/00-07-world-governance-assessment/Dataset.html

World Values Survey http://www.worldvaluessurvey.org/

2. RE-SCALING OF VARIABLESAfter the selection of indicators, the first step oncreating the connectedness index and its three sub-indices was to re-scale each of the original indicatorsfrom 0 to 1, in order to normalize all indicatorsaccording to one identical scale. Normalization wasrequired prior to data aggregation because theindicators have different measurement units (Nardoet al, 2005). In other words, as the original indicatorshave different scales - for example, 0-100 in the caseof KOF political globalization, and 1-7 in the case ofUniversity-industry collaboration – we havetransformed all the original indicators to onecommon scale ranging from 0-1, to make themcomparable. We also applied the standardizationmethod (Freudenberg, 2003), also called z-scores,that converts indicators to a scale with a mean ofzero and standard deviation of one. The results ofboth methods were very similar and we opted for there-scaling method, since it produces a small interval(0,1), increasing the effect of each part in thecomposite indicator, more than the z-scorestransformation(Nardo et al, 2005).

1. SELECTION OF VARIABLESThree researches screened the identified datasets andmade a selection of a first group of indicators. Theaim was to identify variables which either directlymeasured a degree of connectedness or of networksor phenomena which are instrumental to strengthennetworks. This initial selection was further refinedconsidering the following criteria. First, we took intoaccount the data coverage, both in terms of numberof countries and years. Some of the selectedindicators contain data only for a few sets ofcountries (typically, for one specific region such asbarometers), and others only for one specific yearthat does not match with other selected indicators. Asa result they were excluded from the indexconstruction. Secondly, we performed an analysis ofthe content of each specific variable in order toidentify indicators containing mixed concepts, i.e.,composite indicators which contain networksmeasures but also capture other concepts that werenot related to networks. If we could not separatethem out we did not include them. Lastly, weperformed an analysis to identify whether two ormore indicators measured the same concept in orderto avoid overload the composite connectedness indexaggregating several times the same concept. Stronglyrelated indicators were not included. For example,several indicators measure the economic flowbetween countries using more or less the same data.Another indicator initially selected for inclusion, as aproxy for inter-organizational networks, was patents.There is a significant body of literature whichidentifies patents as an interesting source foruncovering relations between organizations sinceseveral patents are co-owned between organizations(see Owen-Smith and Powell, 2004). However,patents do overlap with industry-universitycollaboration.

Annex 2: MethodologicalNote on theConnectednessIndex


152 Networks for ProsperityAnnex 2: Methodological Note on the Connectedness Index

153Networks for ProsperityAnnex 2: Methodological Note on the Connectedness Index

The following procedure was used to calculate the indices.

Firstly, for the international networks sub-index:

i. Re-scale Political and Economic Globalization 2008 on 0-1 scale using the formula:

(Country Score – Minimum Country Score)(1) Re-scaled score =

(Maximum Country Score – Minimum Country Score)

The minimum and maximum values of all countries available in the KOF Index of Globalization 2008were considered. ii. Calculate the arithmetic mean of the re-scaled Political and Economic Globalizationiii. Re-scale the average using formula (1)

Secondly, the Inter-organizational networks sub-index:

i. Re-scale Networks and supporting industries using formula (1). The minimum andmaximum values of all countries available in the Global Competitiveness Report 2008-2009 were used.

ii. Re-scale University x Industry Collaboration using formula (1). The minimum andmaximum values of all countries available in the Global Competitiveness Report 2008-2009.

iii. Professional Association is the percentage of interviewees that are member of oneprofessional association. It was created in the following way:

a. For countries for which the question “Belong to professional associations” is available

No. of membersProfessional Association =

No. of interviewees

b. For countries which the question “Active/Inactive membership of professionalorganization” is available

(No. of active + No. of inactive members)Professional Association =

No. of interviewees

iv. Re-scale Professional Association using formula (1). The minimum and maximum valuesconsidering all countries in the selected surveys were used.

v. Calculate the arithmetic mean of the three re-scaled componentsvi. Re-scale the average

Thirdly, the Intra-organizational networks sub-index was created as follows:

i. Re-scale the % of Firms Offering Formal Training using formula (1). The minimum andmaximum values were used, considering the most recent survey for each country.

ii. Re-scale On-the-job training using formula (1). The minimum and maximum valueswere used, considering all countries available in the Global Competitiveness Report2008-2009.

iii. Calculate the arithmetic mean of the two components. When only one component wasavailable, the single value was considered without averaging.

iv. Re-scale the average using formula (1).

Lastly, the connectedness index was calculated asthe arithmetic mean of its three components:

international networks, inter-organizational networksand intra-organizational networks.

For the aggregation of the indicators we choose thearithmetic mean - equal weighting(Nardo et al, 2005,p. 21) -, since this is an exploratory study and we donot intend to give privilege to one specific indicatorover another one, setting distinct weights for eachindicator. Also, the possibility was considered to usegeometric aggregation in order to avoid fullcompensability, i.e. poor performance in oneindicator being compensated by a high performancein other (Nardo et al, 2005, p. 79). However, as wehave natural zeros in the professional associationindicator, applying geometric aggregation wouldimply a loss of variance in our composite indicator.

3. COMPARING THE CONNECTEDNESS-INDEXON THE BASIS OF MEDIANIt could be objected that in theory, through the re-scaling method, the interpretation of the median maybe misleading since there is a theoretical possibilityfor interconnectedness to be low, although themedian is high, because the maximum observation ina dataset (real observations) is far removed from atheoretical maximum. In other words, one could, onthe basis of theory, construct a theoretical maximumfor the sub-indices and compare that with theobserved maximum in the dataset. If there is asignificant gap between the theoretical maximum andthe observed maximum, the median might be high,but the interconnectedness theoretically low. Thisargument could also be reversed with regard to theminimum scores. As a result, we assume that theobserved maximum and minimum correspond to asignificant degree to the theoretical maximum andminimum. We did not find indications that this mightnot be the case. In addition, we use the medianmostly for comparative purposes.

4. USE OF THE PEARSON CORRELATIONCOEFFICIENTGiven the linear relationship between the variables(see graphs 2.4-2.7) the Pearson Product-MomentCorrelation Coefficient was used to calculate thecorrelation between the different indicators. ThePearson correlation(r) measures the degree of linearrelationship between two variables and ranges from -1.0 to +1.0. The closer r is to +1 or -1, the moreclosely the two variables are related. The sign of thecorrelation coefficient (+ , -) defines the direction ofthe relationship, either positive or negative. Apositive correlation coefficient means that as thevalue of one variable increases, the value of the othervariable increases; as one decreases the otherdecreases. A negative correlation coefficient indicatesthat as one variable increases, the other decreases,and vice-versa. The significance (probability) of the correlationcoefficient is determined from the t-statistic. Theprobability of the t-statistic indicates whether theobserved correlation coefficient occurred by chance ifthe true correlation is zero. In other words, it asks ifthe correlation is significantly different than zero.


154 Networks for ProsperityAnnex 3: The Relationship between Gross Domestic Product and International Networks

155Networks for ProsperityAnnex 3: The Relationship between Gross Domestic Product and International Networks

GD

P pe

r C

apit

a

International Network Index

Graph 1: GDP per capita PPP x International Networks Index

GD

P pe

r C

apit

a

Inter-organizational Network Index

Graph 2: GDP per capita PPP x Inter-organizational Networks Index

Annex 3: The Relationshipbetween GrossDomestic Product andInternational Networks


157Networks for ProsperityReferences

156 Networks for ProsperityReferences

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Endnotes


171Networks for ProsperityEndnotes

170 Networks for ProsperityEndnotes

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lxxiii National consumption is around 7.5 million“quintales” (a ton equals 22qunintales).Production averages around 9.5 million quintales.

lxxiv The 2010 quarterly survey of businesses by theNational Institute of Statistics and the NationalChamber of Commerce identified contraband asa major difficulty facing business.“EncuestaTrimestral de Opinión Empresarial y Expectativasde la Actividad Comercial en La Paz”, SegundoTrimestre de 2010, www.boliviacomercio.org.bo.

lxxv http://www.produccion.gob.bo/content/precio-del-az%C3%BAcar-bajar%C3%A1-bs-6-desde-el-23-de-mayo-gracias-un-acuerdo-alcanzado-por-el-gobier, accessed 3/10/2011.

lxxvi http://www.produccion.gob.bo/content/ministerio-de-desarrollo-productivo-plantea-subir-hasta-18-a%C3%B1os-de-c%C3%A1rcel-penas-para-delitos, accessed 3/10/2011.

lxxvii http://www.produccion.gob.bo/siexco/ingenio/,accessed 3/10/2011.

lxxviii Since November 2010 MDPyEP Minister Ana

Teresa Morales has also been the managingdirector of the San Buenaventura sugar company.

lxxix “Hemos venido haciendo un trabajo a nivel deequipo nacional, y el Ministerio de Comercio eIndustrias ha hecho su aporte significativo atrayendo inversionistas extranjeros a Panamá”.http://www.laestrella.com.pa/online/impreso/2011/09/08/corrupcion_le_resta_competitividad_al_pais.asp, accessed30/09/2011.

lxxx http://www.presidencia.gob.pa/noticia-presidente-numero-2784.html, accessed 30/09/2011.Panama moved up from 53rd in 2010-11 to 49thin 2011-12, according to WEF’s GlobalCompetitiveness Index.

lxxxi http://hdrstats.undp.org/en/countries/profiles/PAN.html, accessed 30/09/2011.

lxxxii http://www.investchile.com/a_record_of_success_stories/success_stories, accessed30/09/2011.

lxxxiii http://www.edb.gov.sg/edb/sg/en_uk/index.html,accessed 30/09/2011.

lxxxiv http://www.diariowebcentroamerica.com/economia-y-turismo/panama-le-apuesta-a-la-inversion-de-eeuu/, accessed 30/09/2011.

lxxxv http://www.ciudaddelsaber.org/, accessed30/09/2011.

lxxxvi http://www.ciudaddelsaber.org/fundacion/alianzas, accessed 30/09/2011.

lxxxvii “La competitividad es central, si queremosaprovechar las oportunidades que nos ofrecen,por ejemplo, los TLC, y es parte de la inclusiónsocial que las MYPE se beneficien de estostratados. Muchas veces (las políticas) sondesarrolladas por diferentes instanciasgubernamentales, por lo tanto, existeheterogeneidad en cuanto a los objetivos yheterogeneidad entre los beneficiarios. Engeneral, tenemos una suerte de desorden, sinmayor nivel de coordinación entre los programas,y eso hace poco eficiente el uso de recursos.”http://www.cites.pe/uploads/Boletines/imag_bol65/editorial.pdf, accessed 28/09/2011.

lxxxviii http://hdr.undp.org/en/reports/national/latinamericathecaribbean/peru/idh2009-peru-vol1-anexos.pdf, accessed 28/09/2011.

lxxxix Peru Innova,August 2011,http://www.cites.pe/uploads/Boletines/imag_bol65/editorial.pdf, accessed 28/09/2011.

xc http://www.agroica.gob.pe/citevid.shtml, accessed29/09/2011.

xci http://www.citeccal.com.pe/, accessed29/09/2011.

xcii http://www.gastronomiaperu.com/, accessed28/09/2011.

xciii “¿Por qué a pesar de todos esos indicadores aúnno se crean restaurantes peruanos en todaspartes? La respuesta es más que evidente.

xlvii http://www.costaricanewssite.com/comex-explores-incentives-to-attract-innovative-businesses, accessed 3/10/2011.

xlviii http://download.enlace-project.eu/Guidelines_on_the_CA_Innovation_System.pdf, accessed 3/10/2011.

xlix http://www.procomer.com/contenido/encadenamiento-productivo.html, accessed3/10/2011;http://www.marketplacecostarica.com/index_es.html, accessed 20/10/2011.

l http://serbia-business.com/index.php?option=com_content&view=article&id=1609:the-eu-is-serbias-most-important-foreign-trade-partner&catid=43:market-news-a-opportunities&Itemid=55, accessed 21/09/2011.

li http://hdrstats.undp.org/en/countries/profiles/SRB.html, accessed 27/09/2011.

lii http://hdr.undp.org/en/reports/nationalreports/europethecis/serbia/Serbia_nhdr2008_eng.pdf,accessed 21/09/2011.

liii http://www.pks.rs/Portals/0/eu/IP-RZR%202011-EN.pdf, accessed 27/09/2011.

liv http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/pdf/final/sba_fact_sheet_serbia_en.pdf,accessed 26/09/2011.

lv http://www.parliament-of-enterprises.eu/index.php?cid=01&tid=home,accessed 26/09/2011.

lvi http://www.pks.rs/Portals/0/eu/IP-RZR%202011-EN.pdf, accessed 27/09/2011.

lvii http://www.capitalethiopia.com/index.php?option=com_content&view=article&id=14183:first-dialogue-between-businesses-government-&catid=12:local-news&Itemid=4, accessed5/10/2011.

lviii http://hdrstats.undp.org/en/countries/profiles/ETH.html, accessed 4/10/2011;http://www.iea.org/papers/2011/weo2011_energy_for_all.pdf, accessed20/10/2011.

lix Review of the Recommendations of the BusinessCommunity for Inclusion in the PASDEP, PSDHub Publication 3, AACCSA, Addis Ababa,September 2007.

lx There is however a shortage of up to datestatistics available on the MOTI’s English-language websitehttp://www.ethiopia.gov.et/English/MOTI/Information/Pages/Statistics.aspx, accessed4/10/2011.

lxi http://www.newsdire.com/business/2164-ethiopia-and-china-trade-exchange-hits-over-14b.html,accessed 5/10/2011.

lxii Eg Determinants of Private Sector Growth inEthiopia’s Urban Industry: The Role ofInvestment Climate, Investment Climate


172 Networks for ProsperityEndnotes

Tenemos el recurso, disponemos de los productos.¿Qué nos falta? Las marcas. Las marcas peruanasde productos culinarios peruanos por el mundo.Allí está la clave.”http://www.perupymes.com/modules/soapbox/article.php?articleID=8, accessed 29/09/2011.

xciv http://promipyme.gob.do/Noticias/DetalledelArticulo/tabid/86/smid/405/ArticleID/35/Default.aspx, accessed 20/09/2011.

xcv http://www.gemconsortium.org/download/1316534206245/Observatorio%20de%20Competitivi...pdf.

xcvi http://rsta.pucmm.edu.do/biblioteca/bvds/situacionpymes.pdf, accessed 28/09/2011.

xcvii GEM’s data suggest that enterprise density ishighest at low levels of GDP per capita, falling asincome increases (as medium and large businessesscale up their share of employment), before risingagain in some advanced economies such as theUSA, Scandinavia and Ireland.

xcviii http://www.seic.gov.do/baseConocimiento/Documentos%20de%20Planificacin/PLAN%20ESTRATEGICO%20%20DEL%20%20MIC%20%202010.pdf, accessed 28/09/2011.

xcix www.infomipyme.com, accessed 28/09/2011.c For example, in the period 1997-2001, 34

institutions came together to form REDIMYPE,the Red Interinstitucional de Apoyo a la Micro,Pequeña y Mediana Empresa.

ci http://www.codopyme.org/quien/index.htm,accessed 21/09/2011.

cii http://ec.europa.eu/enterprise/policies/sme/business-environment/public-procurement/,accessed 28/09/2011.

ciii http://ec.europa.eu/enterprise/policies/sme/businessenvironment/files/smes_access_to_public_procurement_final_report_2010_en.pdf, accessed28/09/2011.

civ http://blog.transparency.org/2011/07/28/public-procurement-keeping-government-spending-corruption-free/, accessed 28/09/2011.

cv Cross and Parker 2004, p. 10cvi “Gakubatsu” are ties among classmates at the

elite Japanese universities from which officials ofa corporation or a public bureaucracy arerecruited.

cvii http://capacity4dev.ec.europa.eu/topic/private-sector-trade-regional-integration, accessed10/10/2011.

cviii http://www.km4dev.org/, accessed 10/10/2011.cvix http://www.enterprise-

development.org/page/knowledge-about-psd,accessed 10/10/2011.

cx “Hemos trabajado muy intensamente con elsector industrial del país, con las gremiales quetienen que ver con el sector industrial. si,trabajando el Ministerio de Economía, pero

también otras instituciones del estado, paradefinir una política indutrial”http://www.minec.gob.sv/index.php?option=com_content&view=article&id=1483:sector-bebida-y-alimentos&catid=109:discursos&Itemid=134,accessed 29/09/2011.

cxi http://mercedesiacoviello.com.ar/Informe%20Barometro.pdf, accessed 29/09/2011.

cxii http://www.thedailynewsegypt.com/energy/egypt-mulls-reducing-energy-subsidies.html, accessed28/08/2011.

cxiii http://hdrstats.undp.org/en/countries/profiles/EGY.html, accessed 5/10/2011.

cxiv http://www.mfti.gov.eg/english/index.htm,accessed 5/10/2011.

cxv http://www.ida.gov.eg/egypt_turkey2010_en.html,accessed 5/10/2011.

cxvi http://www.gtz.de/de/dokumente/gtz2008-informal-sector-egypt.pdf, accessed 6/10/2011.

cxvii http://www.imc-egypt.org/initiatives.asp, accessed5/10/2011.

cxviii http://www.sfdegypt.org/, accessed 5/10/2011.cxix http://www.tic.gov.eg/about_us.htm, accessed

6/10/2011.cxx http://www.tic.gov.eg/achievements.htm, accessed

6/10/2011.cxxi http://dar.aucegypt.edu/handle/10526/1545,

accessed 6/10/2011.cxxii http://www.sanayi.gov.tr/NewsDetails.aspx?

newsID=1638&lng=en , accessed 9/10/2011cxxiii Ministry For EU Affairs

http://www.abgs.gov.tr/index.php?p=45627&l=2., accessed 9/10/2011.

cxxiv http://www.undp.org/comtoolkit/inside-undp/inside-teamworks.shtml, accessed10/10/2011.

cxxv https://undp.unteamworks.org/login?destination=node/62330, accessed 10/10/2011.

cxxvi Slaughter 2004 p. 185


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