HCST Seminar on Business Pioneering and its Role in Development

01 Dec 2002

His Highness, Prince Hassan bin Talal, presided over the 8th Jordanian Scientific Week of the Higher Council for Science and Technology (HCST) held at the Royal Cultural Center, in Amman. The Seminar, entitled “Business Pioneering and its Role in Development”, included a number of lectures and fora on the role of the private sector in economic development. One seminar, “The Role of Ancillary Services in the Motivation and Encouragement of Creativity and Leadership”, held on December 16, covered IP related topics. The Arab and foreign speakers covered a wide range of topics such as (Business Development Services). Prince Hassan said that the problem facing creativity is that “When we think creatively, we don’t think commercially.” The seminar also emphasized the role IP laws will play in the continuing globalization of the world economy and the importance of IP protection in the 21st century. 

 

Dr. Abdul-Raouf Al-Taher gave a general overview of IP by defining IP terms, such as copyright. He also pointed out the benefits of conforming to IP laws, like the greater ability to attract international trade and direct foreign investment, and the provisions of legal protection for those bringing any of the above.

 

Georgetown University’s Dr. Michael Ryan, an e-commerce and international political economy specialist, talked about the role of IP rights in economic development. He spoke about historically proven relationship between technological innovation and economic growth, but indicated that we must focus on the intersection between present and future. For example, the nature of the entrepreneur in the 21st century has changed, for most businessmen today are university graduates, while a generation or two ago businessmen were mostly of non-academic background. This merger of higher education with technological innovation will radically change the business world. Add the factor of globalization, e.g. the WTO’s increasing membership, and we shall view a future unrecognizable to businessmen of the past. The main element in all of this is knowledge, which is divided into: “explicit knowledge”, quantifiable and adaptable to a textbook or manual, and “tacit knowledge”, shaped by individualistic talents, such as personal managerial skills. “Tacit knowledge” can be learnt through personal interaction between individuals working in a conducive environment. This environment can be a business-oriented think-tank, or a research department within a firm, and it forms an “intellectual cluster” that finds business solutions and develops long-term strategies. Firms use this cluster to exploit “social capital”, people who interact and exchange ideas, and “intellectual capital”, individual skills of each member of this social circle.

 

The question is: Where is the real capital to support all this people capital, and what profit comes out of this investment? As Dr. Ryan explained, without money, all these futuristic ideas will go nowhere, and this is the innovators’ dilemma. Investment capital comes from banks; conservative institutions are not fond of taking risks because statistically 80% of all ventures fail. So an innovator can “max-out the card”, or borrow the maximum sum allowed using his credit cards, or rely on a so-called “Angel”, a rich friend or relative willing to lend a spare sum without expecting it back. Without any of these solutions, an innovator can rely on High-Risk Venture (HRV) bankers, who invest in an innovation, if they know how the innovator plans to take an idea from research and development, through manufacturing, to market distribution. We see “tacit knowledge” here again, where the HRV banker must find an innovator with marketable ideas and business savvy. HRV bankers play a major role in technological advancement and economic growth by allowing many innovations a chance in the market. While most will fail, they hope that one or two will succeed resoundingly and recoup their losses in the other ventures.  

 

Dr. Ryan asserted that the key is IP protection, which solves the “Appropriability Problem (AP)”, or how to appropriate the investment in the market, and attempt to guarantee the returns on this investment. The AP solution includes functional courts with enforcement powers and specialized IP lawyers, and maintains the competitive edge where the free-market rewards successful products/services and weeds out the failures. Without IP protection, however, everyone loses.

 

With IP laws in place, though, an economy fares better, if it takes the following steps:

 

1-Creating “technology hubs” worldwide, like Silicone Valley in California, where innovators, bankers and businessmen meet. This is the declared objective of some Arab governments, such as that of His Majesty King Abdullah II, and the Government of Dubai.
 

2-Allowing “labor market mobility”, or the freedom to locate and hire flexible, talented and mobile labor force to encourage the free movement of “social capital”.
 

3-Focusing on “institution building”, particularly an efficient and knowledgeable court system, to instill confidence in the market.

 

Patrick Crehan, a lawyer and a European e-commerce expert, gave a presentation entitled, “Entrepreneurs, Incubators, and Finance” where he dealt with the “Incubator” concept. Incubators offer an IP business service that provides a middle ground where creativity and business meet.

 

The Incubators sector could become one of the major players in the IP field in the near future. Incubators, which are mostly legal firms, provide certain services such as:

 

1-Professional business services: This includes “prepping” IP properties with potential for official registration, and developing marketing plans for them. At this stage, the incubator must establish rules for the protection of an innovator, like reconditioning the way he/she deals with information from the public domain nature of academia to the more secretive practices of business.
 

2-Access to Finance: Once the processes of mental reorientation, the application and registration of an IP property, and the formation of a marketing strategy, are complete, it is time to find the financial backing for the innovation. Crehan here mentioned the financial sources mentioned previously, such as “angels”, but added that the Incubator’s role is to advise the innovator on which source or sources to use, among other details.
 

By Ghaith Lawzi



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