Lessons Learned from Chilean Model of Innovation and Development

Lessons Learned from Chilean Model of Innovation and Development

Juan Rock T. (Universidad de Talca, Chile) and Gordana Pesakovic (King University, Knoxville, USA)
DOI: 10.4018/978-1-4666-6224-7.ch020


In this chapter, the focus is on the Chilean economy and its development based on the innovation strategies and policies applied in the country in the last 40 years. The country's performance is compared with others countries in the region and the developed economies. The main lesson learned from the Chilean experience for the small developing countries are that a small economy can use to its benefit, competitive advantages achieved by other countries. In order to do this a country needs an open foreign policy and transparent, safe and fair business policies.
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Chilean Economic Background

Since the Great Depression the early 1930s, Chilean economic policies have adopted a development strategy named import-substitution industrialization (ISI). ISI is based on restricting imports of manufactured products and state-financed domestic industries. The main goal of this strategy was originally to reach higher economic growth while reducing significant reliance on Copper exports (represented 75% of the total export value). In 1973, a very deep institutional and economic crisis ended the ISI strategy. An economic reform began when a team of economists initiated structural reforms that eliminated government interventions, liberalized markets, privatized and deregulated industries, altered the structure of the public sector, liberalized the capital market and the capital account, and opened the economy to foreign trade (Montecinos, 1995).

Key Terms in this Chapter

Globalization: The process of international integration arising from the interchange of world views, products, ideas, and culture and people movement, generating further interdependence among countries activities.

Technological Innovation: It is a process, product, managerial change and creation that improve company´s productivity and quality, adding value to customer.

Open Innovation System: It encompasses company inbound innovation that involves the practice of leveraging inside the inventions of others, outside from the company.

Industrial Cluster: It is a group of firms related in the production and distribution of good and services such as suppliers, research and designer centers, engineering and technological companies, distributors that overcome complex problems and reduce risk inherent to innovations, Porter, M. E. (1990) .

Developmental Network State (DNS): Government set up policies of rapid technological upgrading, in a decentralized way that successfully accelerated the growth of new firms, new industries, and new employment opportunities. DNS is constituted by several learning networks. Government agencies, businesspeople, and technologists interact through strategies such as investment in research and development (R&D), investment in technical education, creating and supporting industry associations, and working directly with firms whose main objective is to foster innovations, Negoita, M. and Block, F. (2012) .

International Competitiveness: The Competitive countries are those possessing a high capacity for growing in the mid-term, taking into account their starting level of income, World Economic Forum (WEF, 2013 AU41: The in-text citation "WEF, 2013" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ). The degree to which a nation can under free and fair market conditions, produce the goods and services that meet the test of international markets, while simultaneously maintaining or expanding the real incomes of its citizens, U.S. Presidential Commission on Industrial Competitiveness (1985) AU42: The in-text citation "Industrial Competitiveness (1985)" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. .

National Innovation Systems (Nis): The network of institutions in the public and private sector, whose activities and interactions initiate, import, modify and diffuse new technologies, Lundvall, B. A. (1999) .

Diamond of National Advantage: Dimensions proposed by Michael Porter (1990) that define national business environment affecting the development of a firm’s competitive advantage. The diamond model identifies four factors that determine national competitiveness: 1. Specialized factors; 2. Demand conditions; 3. Related and supporting industries; and 4. High Rivalry on the markets.

National Comparative Advantages: Those advantages related to home-based factors such as natural resources, labor and capital cost, geographic location, climate, land, and risk perception.

Triple Helix: Universities, government and companies set up a relationship to set up research and technology transference, Etzkowitz and Leydesdorff (1999) .

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