Services and Innovation for the Competitiveness of the Ecuadorian Economy

Abstract

Ecuador is one of the least diversified countries in Latin America and the Caribbean, depending heavily on oil and agriculture. This policy paper examines how services and innovation can play a role in transforming the Ecuadorian economy from one based on natural resources to one based on knowledge and services. The paper assesses the performance of the services sector and its contribution to other sectors. The paper shows that services make a significant contribution to the country's economic growth (albeit below the average for the region). However, the services sector in Ecuador performs poorly in productivity and trade competitiveness. Further, services do not add enough value for export providers and users over time. The deficit in the integration of business services, especially knowledgeintensive business services, is particularly high, affecting the competiveness of all sectors and their value chains. Among the drivers of productivity and competitiveness, innovation is the key quality and differentiation factor (as distinguished from price-related, regulatory, and competition factors). Innovation in Ecuadorian services firms does not significantly affect performance (for example, sales and exports), although innovation in manufacturing does improve the performance of manufacturing firms. Finally, the paper provides some conclusions and meaningful crosscutting policy recommendations for a services-related policy aimed at fostering competitiveness and innovation. Services need action in innovation policy (innovation programs could be better adapted to services innovation specificities), but also in areas such as coordination at the institutional level; internationalization and foreign direct investment; and quality, regulatory, and competition issues affecting the investment climate.

Innovation for Productivity Growth in Ecuador

“…Indeed, the econometric analysis in this report shows that public programs for technological innovation do not have significant impacts on productivity. This result complements previous findings that participating in innovation programs does not have significant effects on sales and exports in service companies (Rubalcaba et al, 2016). However, even in cases where the public program was not successful overall, the positive experiences of some individual cases (such as wood, fish or software) should be identified and analyzed in comparison with the non-successful experiences to build a repository of what worked what did not work in each program.…”

“…94. These differences on impacts on productivity between manufacturing and services complement a previous study for Ecuadorian services (Rubalcaba et al, 2016) showing that participation in innovation programs by Ecuadorian services firms did not significantly affect their performance (measured by sales and exports), although innovation in manufacturing did improve the performance of manufacturing firms. This suggested that existing innovation-related programs do not equally fit the needs of different economic sectors.…”

Measuring the Knowledge Economy: A National and Organizational Perspective

“…Besides, the Arab countries also captured the attention and their progresses towards developing themselves as knowledge economies started to be analyzed (Rouis & Tabor, 2013;Utz & Aubert, 2013). In other words, once most of the developed and developing countries were on the right track in terms of consolidating themselves as knowledge economies, the center of interest of the World Bank switched to Middle East and North Africa (Malouche, Plaza & Salsac, 2016;Rubalcaba, Gago, Ariano & Tripathi, 2016;Tan, Lee, Flynn, Roseth & Nam, 2016).…”