Conferencia “Innovación: Lecciones de MIT y el Mundo” Scott Stern (EEUU), Profesor Distinguido de Innovación Tecnológica y Emprendedorismo, MIT

1. Building Bridges:
Universities and the
Peruvian Innovation System
Professor Scott Stern
MIT Sloan School and NBER
This presentation draws on collaboration between Scott Stern, Michael Porter, Mercedes Delgado, Christian Ketels, Fiona Murray, and work
conducted at the MIT E-Center and the Harvard Institute for Strategy and Competitiveness. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the
permission of Scott Stern.

2. Inca Rope Suspension Bridge
2 www.rutahsa.com

3. A New Agenda for Peruvian Universities
• Building an Innovator Workforce
• Catalyzing Innovation-Based Entrepreneurship
• Convening the Public and Private Sector to Build a
Peruvian Innovation Economy
3

4. Over the past decade, Peru has experienced exceptional
economic performance
GDP per Capita
(in 1990 PPP US$)
CAGR: CAGR: CAGR:
$6,000
+2.07% 0.73% +4.81%
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
–Note: PPP using Geary Khamis calculation methodology. Source: Groningen Growth and Development Centre, Total Economy Database (June 2009)
4

5. Significant export growth linked to natural resources and endowments
2.5%
Change In Peru’s Overall
World Export Share: +0.09%
Jewelry and Precious Metals
2.0%
Peru’s world export market share, 2009
1.5%
Metal, Mining
and Manufacturing
1.0%
Fishing and
Agricultural Fishing
Products Products
0.5%
Financial Apparel
Peru’s Average World
Services Hospitality and Tourism Export Share: 0.22%
Communications Publishing and Printing
Services
0.0%
-0.5% 0.0% 0.5% 1.0% 1.5%
Change in Peru’s world export market share, 1997 to 2009 Exports of US$2 Billion =
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;
Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.
5 Copyright 2010 © Professor Michael E. Porter

6. Significant reductions in poverty but still much work remains…
60%
50%
40%
% of Population
Under the
30%
Poverty Line
20%
10%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
–Source: Informacion Socio Demografica, from El Instituto Nacional de Estadistica e6Informatica (INEI), 2010

7. Peru has not yet established itself as a global innovator
Average U.S. patents
per million population,
2005 – 2009
3.5
Croatia
3.0
Estonia
2.5
South Africa
2.0 Greece
Lithuania
1.5 Russia United Arab Emirates
Portugal
Costa Rica
1.0 Poland Argentin Chile
Saudi Latvia China
a
Arabia Uruguay
Mexico
Brazil India
0.5
Ukraine Venezuela
Kazakhstan Philippines
Peru Colombia Thailand Turkey
Egypt Kenya Ecuador
0.0
-30% -20% -10% 0% 10% 20% 30% 40%
CAGR of US-registered patents, 2005 – 2009 170 patents =
Source: USPTO, World Bank 7

8. The Peruvian Innovation Challenge
• Peru has experienced exceptional economic performance
over the past decade
– Grounded in a shift towards sound macroeconomic
policy, openness to international markets and
partners, and the establishment of a higher level of basic
security
– Leveraging natural resources and endowments
• But Peru has not yet established the foundations for an
innovation-driven economy
• Resource-led or cost-based growth has natural limits.
• Peru must start setting the foundations – today -- for an
innovation-driven, knowledge-based economy.
8

9. BUT…
WHAT IS THE ROLE OF PERUVIAN
UNIVERSITIES AND OTHER
KNOWLEDGE INSTITUTIONS IN THIS
NEXT STAGE OF PERUVIAN ECONOMIC
DEVELOPMENT?
9

10. A New Agenda for Peruvian Universities
• Building an Innovator Workforce
• Catalyzing Innovation-Based Entrepreneurship
• Convening the Public and Private Sector to Build a
Peruvian Innovation Economy
10

11. Priority #1:
Building an Innovator Workforce
11

12. Peru lags neighbors in investments and resources
towards basic education at the primary, secondary and
tertiary level
–Source: UNCTAD Science, Technology and Innovation Policy Review, 2011 12

13. And Supports a Lower Level of Innovation Effort*
* As far as we can tell from incomplete data!
13

14. But…
Higher Education
remains focused on
education training, law,
and administration…
Key STEM areas such
as computer science,
biotechnology, and
nanotechnology
register at very low
levels.
14

15. Fi
n
10.0
12.0
14.0
16.0
18.0
0.0
2.0
4.0
6.0
8.0
Ta lan
i d
Ic wa
N e n Employees
ew J lan
Ze apad
Researchers /1,000
U Swala n
ni D ed n d
te
d en e
St N ma n
at o r k
es r w
2009. Data 2007 except where noted.
(2 ay
0
Fr A Ko 06)
an us r e
ce t r a
C a
an B (20 lia
ad elg 06
a iu )
(2 m
A 005
G us )
er t r
m ia
R an
Sw L u y
itz ux Slo ss
er e m v e i a
l n
Ir e and bo ia
la (2 urg
nd 0
(2 04)
0
U Sl S p 06)
ni o a
te E va in
d s ki
C K to a
ze ing nia
ch Po do
r m
N Re tug
et p a
he ub l
r l
H lan ic
un d
g s
G ar
re y
Ita Po ece
ly la
( 2 nd
Tu 006
)
PeSou C rke
progress in enhancing research intensity
ru th hi y
Starting at a low level, Peru can make great
(e Af na
st ri
i m ca
at
e)
Source: National Science Council, R.O.C., Indicators of Science and Technology, Taiwan, 2008; OECD Science, Technology, and Industry Scoreboard

16. HOW CAN PERUVIAN UNIVERSITIES
ENHANCE THE INNOVATOR
WORKFORCE?
Taiwan Competitiveness 20100408 16 Copyright © 2010 Professor Michael E. Porter

17. Agenda Items for Peruvian Universities
Establishing a much higher level of commitment to all
levels of education

18. “Mens et Manus”
Mind and Hand….
18

19. The MIT Inca Bridge Project
Research: John Ochsendorf and colleagues
Teaching: Heather Lechtman, Linn Hobbs and MIT
Undergrads!
19

20. Agenda Items for Peruvian Universities
• Establishing a much higher level of commitment to all
levels of education.
• Prioritizing investments in areas of
science, engineering, and technology education that are
complementary to Peruvian clusters and comparative
advantage
• Ensuring “Mens et Manus” – higher education must be
positioned towards the development of an innovator
workforce that meets the needs of an innovation-
oriented Peru
20

21. Priority #2:
Catalyzing Innovation-Based
Entrepreneurship
21

22. Peru has an important tradition and strength in a number
of universities (though more are needed)…
22

23. HOW CAN UNIVERSITIES CATALYZE
INNOVATION-BASED
ENTREPRENEURSHIP?
23

24. MIT serves as the fulcrum for the
Cambridge biosciences cluster…
24

25. M.I.T. Issued U.S. Patents by Fiscal Year, 1999-2008
160
140
160 159
150
Issued U.S. Patents
120 152 149
143 133
134
100
121 122
80
60
40
20
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Fiscal Year
–7/17/2008
25

26. MIT Entrepreneurial Impact
Estimated
Percent of Median Median Sales Total Estimated Total
Jobs Companies Employees ($Millions) Employees Sales ($Millions)
More than
10,000 0.3% 15,000 1,523 1,339,361 1,389,075
1,000-
10,000 1.8% 1,927 308 1,043,932 235,532
Less than 97.9% 39 <1 900,001 226,671
1,000
Total
100.0% 155 <1 3,283,294 1,851,278
University alumni impact reflects the growing leverage
over time of numbers, and has great potential.
°Roberts and Eesley, based on ~25,800 active companies. All data are
in “Entrepreneurial Impact: The Role of MIT”
–26

27. Bob Langer has published more than 1100
articles and been granted more than 760
patents…
27

28. Prof Yet-Ming Chiang
28

29. But how does MIT create this environment?
29

30. Agenda Items for Peruvian Universities
• Establishing specific institutions and programs – tailored
to the strengths of each univeristy – to enhance the
potential for an innovator workforce and commercializing
new technologies and business processes
– Classes combining practitioner and faculty focusing
on opportunity identification and business plan
development
– Business plan competitions that engage across
disciplines, faculties and universities
– Removing roadblocks to commercialization (tech
transfer, etc)
– Celebrating achievement and giving back through
mentoring and the nurturing of the next generation
30

31. Priority #3:
Convening the Public and Private
Sector to Lay the Foundations for the
Peruvian Innovation Economy
31

32. The Peru Cluster Environment
Piura
Agricultural Products:
Mangoes, Lemons, Brown Sugar
Syrup
Cajamarca (Bambamarca)
Dairy, Processed Foods
La Libertad (El Porvenir, Trujillo)
Leather, Footwear
Ancash (Chimbote)
Fishing and Fish Products
Lima (Infantas, Los Olivos)
Metal Manufacturing, Metal
Furniture
Lima (La Victoria)
Apparel
Ica
Wine
Cuzco
Tourism
Puno and Arequipa
Apparel from Alpaca
32

33. Peruvian Clusters and Peruvian Universities
• Peru’s current clusters are based heavily on natural endowments, and
have much room for further upgrading
• Even in areas with significant clusters – such as Cajamarca, Arequipa, and
Moquegua in mining – there have historically been significant
technological bottlenecks
• Though there are some strong universities universities have historically
played a limited role in supporting the development of entrepreneurial firms
that catalyze local clusters.
• There is a limited tradition of collaboration among actors for regional
development
• There is a weak institutional capacity – which could be addressed by
leading Peruvian universities -- hampering the development of clusters.
33

34. HOW CAN UNIVERSITIES HELP
NURTURE PERUVIAN CLUSTERS AND
THEIR ROLE IN THE PERUVIAN
INNOVATION SYSTEM
34

35. Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 35

36. The Australian Wine Cluster
Locations
Northern
Territory
Queensland
Western
Australia
South
Australia
New South
Wales
Victoria
Tasmania
Note: Colored areas indicate wine growing regions
Source: Australian Wine & Brandy Corporation
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 36

37. The Australian Wine Cluster
Recently founded Institutions for Collaboration
Winemakers’ Federation of Australia Cooperative Centre for Viticulture
 Established in 1990  Established in 1991
 Focus: Public policy representation of companies  Focus: Coordination of research and education
in the wine cluster policy in viticulture
 Funding: Member companies  Funding: other cluster organizations
Australian Wine Export Council Grape and Wine R&D Corporation
 Established in 1992  Established in 1991 as statutory body
 Focus: Wine export promotion through  Focus: Funding of research and development
international offices in London and San Francisco activities
 Funding: Government; cluster organizations  Funding: Government; statutory levy
Wine Industry National
Wine Industry Information Service Education and Training Council
 Established in 1998  Established in 1995
 Focus: Information collection, organization, and  Focus: Coordination, integration, and standard
dissemination maintenance for vocational training and education
 Funding: Cluster organizations  Funding: Government; other cluster organizations
Source: Michael E. Porter and Örjan Sölvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 37

38. The Emergence of the Australian Wine Industry is Rooted in the
Evolution of Australian Competitive Advantage
Gold
Mining and Travel and Tourism
Natural Iron / Aluminum Bauxite
Resources
Logistics / Trade
Wool
Beef Wine
Produce Information Technology
Abundant Grains
Productive
Land Ag Research
Centers
Education and
Knowledge Creation
Medical Devices
Bioscience Biotech / Pharmaceuticals
Research
Centers
1980 1990 2002 +
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 38

39. The Australian Wine Cluster
Trade Performance
Australian Wine Australian Wine
Exports in million US Dollars World Export Market Share
$1,000 8%
$900 7%
$800
6%
$700
$600 5%
Value
$500 4%
Market Share
$400 3%
$300
2%
$200
$100 1%
$0 0%
1995 1996 1997 1998 1999 2000
Source: UN Trade Statistics
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 39

40. Over the 1990s, growth in Australian exports was
driven by improvement in Australia’s wine cluster
Share of Australian Exports,
2000
35%
Materials/Metals
30%
25%
20% Food/Beverages*
15%
10%
Transportation
5% Textiles/Apparel Oil/Chemicals Equipment
Multiple
0% Business Health Care
-8% -6% -4% -2% 0% 2% 4%
Change in Share of Australian
Exports, 1995-2000
Note: Wine export growth accounts for >45% of the increase in the export share of food/beverages
Source: UN Trade Statistics
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41. And has continued to grow…
Source: UN Trade StatisticsCisco Systems, Inc. All rights reserved.
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42. CITEvid – Enhancing the Pisco Industry
Source: Juana Koromoto, GRADE
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43. Facilitating a rapid rise in production
and exports….
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44. What are Cluster Initiatives?
Cluster initiatives are collaborative activities by a group of companies, public sector
entities, and other related institutions with the objective to improve the competitiveness of a
group of interlinked economic activities in a specific geographic region
• Upgrading of • Upgrading of cluster-
company operations specific business
and strategies across environment
a group of companies conditions
• Strengthening of
networks to enhance
spill-overs and other
economic benefits of
clusters
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 44

45. What is Different about Cluster-Based
Economic Policy?
Cluster vs.
Narrow
Industries
Public-Private Regional
Collaboration Perspective
Focus on
upgrading
productivity
Demand-
Build on
driven
Regional
Policy
Strengths
Priorities
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 45

46. Agenda Items for Peruvian Universities
 Peruvian universities are the natural home for the
institutions of collaboration that are are at the heart of a
cluster-led economic strategy
 While Peruvian universities have only recently become
engaged with joint colalborations with Peruvian
companies (and multinationals), the Peruvian university
system should strive to serve as the hub for activities that
are focused on upgrading productivity and enhancing the
environment for innovation and entrepreneurship.
 Peru has an enormous cultural legacy and vast natural
and human resources....but these must be mobilized for
action and Peruvian universities must be at the vanguard
of this effort
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 46

47. A New Agenda for Peruvian Universities
 Building an Innovator Workforce
 Catalyzing Innovation-Based Entrepreneurship
 Convening the Public and Private Sector to Build a
Peruvian Innovation Economy
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 47

48. How Can We Build Bridges to a Peru Innovation Nation?
Presentation_ID © 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential 48