Resource Reallocation and Innovation : Converting Enterprise Risks into Opportunities
This paper argues that the increased flow and management of knowledge permitted by knowledge-based capital, supported by appropriate policies, can be an important factor in reducing the decision risk facing enterprises due to uncertainty and imperf...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/07/18015946/resource-reallocation-innovation-converting-enterprise-risks-opportunities http://hdl.handle.net/10986/15892 |
| Summary: | This paper argues that the increased
flow and management of knowledge permitted by
knowledge-based capital, supported by appropriate policies,
can be an important factor in reducing the decision risk
facing enterprises due to uncertainty and imperfect
information, helping improve the resilience of development
outcomes. Enterprises are conceptualized as information
platforms that manage risk through investments in
knowledge-based capital and complementary assets, providing
them with the knowledge, protection/enabling, insurance, and
coping/leveraging abilities to make better decisions in
response to shocks. Investments in knowledge-based capital
allow enterprises to better convert voluntary but risky
reallocation and innovation decisions into productivity and
wealth-enhancing opportunities. They can help the enterprise
sector as a whole and most people to self-protect and
realize better jobs, earnings, and consumption outcomes by
adapting to shocks. However, absent appropriate policies,
knowledge-based capital can have adverse distributional
effects -- including a skewed industrial concentration of
productivity gains and more unequal consumption and
income-earning outcomes between rich and poor people. The
paper discusses the role of policy in facilitating risk
management by enterprises, ultimately to reduce poverty and
boost shared prosperity. Insufficient enterprise risk-taking
is costly for the enterprise sector and the economy as it
results in too little experimentation and learning. The
paper argues that governments should create business
environments that stimulate entrepreneurial risk-taking to
invest in market and social opportunities that combine new
technologies with appropriately-skilled workers. Policies
allowing people to better confront and manage their risks
include: (1) spurring entrepreneurial experimentation; (2)
supporting skills upgrading; and (3) promoting mechanisms
for joint learning through global collaboration. |
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