Improving Competitiveness and Innovation in the Caribbean

Roberto de Groote

In a recent visit to Barbados, I stayed at a hotel that has catered to foreign tourists for over 25 years. The infrastructure of the hotel has deteriorated over time, the furniture is outdated, and above all, it has a deficient customer service, as it does not offer food or tourism services. Its owners know that they need to deliver better service to become more competitive by incorporating quality standards, associating themselves with other tourism providers, creating new touristic routes, and showing visitors valuable local experiences. But they do not know how to do it, nor who to ask to make the changes that they intuitively know they need. They also do not know how to incorporate new management models that will make them more competitive.

This happens to many other businesses in different sectors, especially to small and medium enterprises (SMEs) that offer their products to the domestic or export market. What can Caribbean SMEs do to become more competitive? How can they incorporate new technologies and management models at costs that are accessible to them? How can governments stimulate improvements in competitiveness?
An interesting and underutilized alternative which could contribute to improving the situation of small and medium enterprises such as the hotel in Barbados is the implementation of public policies to support technology extension services (TES) directed to businesses, especially to small and medium ones.
Technology extension services (TES) consist of technical and financial support to local enterprises, in an individual or collective manner, so that they can adopt already existing technology and management models and narrow their technology and management gaps with respect to similar businesses in other parts of the world.

There are few public policy experiences of TES in Latin America and the Caribbean. Notwithstanding, more developed countries have already been implementing TES for decades to drive competitiveness in agricultural, manufacturing and service sectors.
Caribbean countries underperform in indicators of competitiveness and innovation. The implementation of TES could help to diminish the existing gaps, given that stimulating innovation based on the adoption of existing technology and management models is cheaper – and therefore potentially easier to do on a massive scale – than the innovation instruments geared to stimulate R&D in firms, which take a longer time and more human and financial resources to implement.
How to implement TES to improve competitiveness and innovation in the Caribbean
In a recent study funded by Compete Caribbean (and its partners IDB, DFID, and CDB), I analyzed the situation of the Caribbean in relation to Technological Extension Services (TES). I found that to advance in the design and implementation of TES in the region, the focus should be on the following relevant aspects:

  1. Strengthen the institutions and support mechanisms to improve competitiveness, incorporating a vision that is shared by the public, private and academic sectors, and which is conducive to a national strategy to improve competitiveness.
  2. Develop a market of individual and business consultants that have an expertise in preparing and evaluating technological projects, which is an essential aspect to successfully implement projects and programs to support enterprises.
  3. Provide incentives to universities and vocational education centers to incorporate research and innovation as a possible line of business and to participate in the marketplace as suppliers of technological services.
  4. Address from a regional standpoint the high costs required to coordinate public policy to support business development, mainly due to the small size of Caribbean economies, the high specialization required to supply these services, and the relatively scarce demand for these services from the private sector.

To carry out the work required to develop TES in the Caribbean, I suggest progress on two fronts: at the national level, and at a regional, collective level.
AT the national level, I suggest establishing National Competitiveness Councils (NCCs) with the participation of the public, private and academic sectors, with the objective of analyzing and proposing improvements in public policy geared towards private sector development. The CNCs first activities could be focused on establishing the principles and criteria that are going to be used to support the private sector, and on the prioritization of policy reforms that can improve the business climate. Then, the CNCs could focus their efforts on strengthening institutions and developing instruments to support business activity, establish mechanisms to support technological skills formation, and prioritize value chains that can be supported through TES.
Parallelly, and at the regional level, I recommend the creation of a collective governance structure with the capacity to evaluate and provide advice to TES projects across the region, and that can strengthen the market for consultants and technological services.
These suggestions should contribute to generating better conditions in which the Caribbean countries could develop public TES policies and achieve enhanced management and technological adoption within Caribbean enterprises, which in turn will make them more competitive.
TES allows public policymakers to support a greater number of firms and at lower costs than other strategies to support innovation, which translates into the potential of a more massive adoption and greater impact. Thus, TES policies are ideal to efficiently improve the productivity and competitiveness of the Caribbean, especially of SMEs, opening the doors to increased innovation throughout the region.
Click here for more information on TES in the Caribbean.