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Innovation for Competitiveness: Promoting Business Innovation in Mexico

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A Strong Focus on Private Sector Research and Development, Scholarships


Overview

A World Bank project sought to bolster Mexico's economic competitiveness by supporting programs through the National Science and Technology Council (CONACYT) to promote business innovation and better prepare Mexican graduates for the private sector. The project led to a significant increase in the links between enterprises and research centers or universities, and drove new venture capital investments and the establishment of commercial high technology projects. It also supported scholarships in high-ranking graduate programs, fostered doctoral graduates in science and technology, generated new patents and published articles. For example, 48 consortia were established that link 173 enterprises with research centers or universities and over 29,000 students received scholarships to study in high-ranking science and technology graduate programs.

Challenge

The competitiveness of the Mexican economy was at risk in 2004. Fostering greater innovation was seen as important to improving conditions and restoring long-term competitiveness. However, the Mexican innovation system performed below par compared to economies of its income level due to a combination of: (i) insufficient private investment in research and development (R&D); (ii) poor business innovation in part due to inadequate linkages between public R&D and the productive sector, and (iii) insufficient innovation capacity due to low science and technology skill base.


Approach

The project was designed to support Mexico's efforts to improve economic competitiveness through strengthening CONACYT's institutional capacity, and supporting CONACYT's grant and scholarship programs that were designed to increase the innovative capacity of the private sector, accelerate advanced human capital formation, and increase the international integration of Mexico's innovation system. The specific interventions supported by the project were fully aligned with the policy recommendations of the various studies of Mexico's innovation system undertaken by the World Bank and the Organization for Economic Cooperation and Development (OECD), and with Mexico's competitiveness agenda as defined by the government.


Results

Under the Project, CONACYT's programs to promote business innovation achieved many of the expected results. Support for the competitive funding lines from 2006 through 2010 resulted in the establishment of 48 consortia linking 173 enterprises with research centers or universities; 34 new venture capital investments; at least 20 projects reaching the commercial stage with support from the Pre-Competitive Fund; and the granting of at least 69 patents. Over US$200 million was leveraged in private investment associated with these funds. Support for the programs to improve the supply of advanced human capital resulted in over 35,000 scholarships for masters- and doctoral-level students to study in high-ranking domestic and foreign graduate programs. Of these scholarships, over 29,000 were for study in science and technology-related fields. CONACYT also significantly strengthened its capacity to monitor and evaluate these programs. Indicators of Mexico's strengthened innovative capacity include a 27 percent real increase in private investment in R&D between 2004 and 2008, and the increase in the number of internationally-published articles from 5,887 in 2004 to 9,488 in 2009.


Bank Contribution

A loan of US$250 million from IBRD financed the following: the scholarship program (US$185.8 million); the program to support the competitive fund lines (US$54.5 million) and the program to support institutional strengthening (US$6.7 million).


Partners

The implementing agency, CONACYT, was the principal interlocutor with the World Bank on the project. Nacional Financiera, the Ministry of Economy and the Ministry of Finance all played a role in contributing to the achievement of the development objectives. The government contributed US$81 million to the project, and the private sector contributed investments worth over US$200 million.


Moving Forward

The programs supported by the project were fully integrated into CONACYT's ongoing operations. The programs, several of which have been adjusted and improved over the last three years, are sustainable since they will continue to be financed by budget allocations. In January 2011, the authorities requested a second phase of the project to help ensure that the steps taken during the first phase are sustainable and continue to be strengthened.


Beneficiaries

Firms that are or have the potential to be innovative; students interested in pursuing higher education in science and technology; researchers; and universities that participate in research consortia with firms. The project directly benefited over 550 firms through a combination of support for researchers, research consortia, venture capital funding, and matching grants to support R&D and technology commercialization. More than 600 additional firms benefited from these programs during the life of the project thanks to complementary financing from the government. Some 161 higher education institutions and research centers participated in research consortia financed by the project, and over 35,000 masters and PhD students benefited from project-financed scholarships.

An example of one of the beneficiaries of the Pre-Competitive Fund is Biograft, a Mexican firm focused on medical implants of human skeletal muscle tissue. Support from the project allowed Biograft to construct prototypes for testing before scaling up to industrial production. Another beneficiary of the Pre-Competitive Fund is Concretos Translúcidos. The World Bank project helped researchers who had developed an innovative translucent concrete formula to develop a business plan, apply for patents, and construct prototypes. Through the venture capital fund, an equity investment was made in International Healthy Snacks, giving the firm additional capital to develop "nutritious and delicious" snacks using innovative formulas that do not require the use of oils. A private equity firm subsequently bought out the government's stake, providing a successful "exit" for the project-supported venture capital fund

.


For more information, please visit the Projects website.

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