The Magic Happens When You Focus on People (Innovations Case Commentary: Start-Up Chile)

Abstract

focusing on infrastructure and industry. They follow the prescriptions of management consultants who tout Michael Porter’s cluster theory. They act on the belief that if you build a magnificent technology park next to a research university, provide incentives for chosen businesses to locate there, and bring in some venture capital, then innovation will happen. These efforts inevitably fail, because entrepreneurial ecosystems simply can’t be built from the top down. They must be built from the ground up, with entrepreneurs helping entrepreneurs. What is needed—and what governments can’t create—is a culture of information-sharing and mentorship, which is what has made Silicon Valley a success. Chile is among the countries that drank the “cluster Kool-Aid.” It spent hundreds of millions of dollars building a series of clusters, including one focused on IT outsourcing, but none of them was able to create an indigenous innovation capability because they were focused on the wrong things and weren’t tailored to Chile’s needs. Chile’s Economic Development Agency (CORFO) invited me to Santiago in September 2009 to meet executives of its IT outsourcing industry. They wined and dined me, and tried to impress me with the progress they had made in creating an $840 million services industry, which they predicted would grow to $5 billion by 2015. I was impressed with their progress—and I loved the Chilean wine—but I told them that their projections were baloney. I told them that, before long, the IT services would choke off other industries and then implode, as labor shortages got