By: Claudia González

Like many countries of the world, Mexico sees the impetus toward science, technology and innovation (STI) as a key strategy for its economic and social development.

Like many countries of the world, Mexico sees the impetus toward science, technology and innovation (STI) as a key strategy for its economic and social development. The country gives prime importance to STI, and the Constitution stipulates the support that the government should provide to these activities.

In addition, there is a Law of Science and Technology (C&T), which lays down the foundation of the National System of Science, Technology and Innovation. This was conceived as the guiding principle of the economy and is expected to help raise the country’s competitiveness so it can achieve substantial growth and a better distribution of wealth.

However, expenditures on research and experimental development have remained at around 0.4% of the GDP for more than two decades, and the impression is that the participation of STI in the country’s economy has been moderate. Looking at the history of STI in our country allows us to better understand our current context.

The STI system in Mexico began in the 1930s with the creation of the National Institutes of Health. Government support was dedicated almost exclusively to improving the nation’s health. It was not until 1960, with the creation of the Institute for Scientific Research, that the country took a first step toward consolidating its STI system.

The Institute’s main function was to provide scholarships to fund undergraduate college theses and the pursuit of graduate studies. But the real evolution of the system did not occur until the 1970′s when there was an unprecedented expansion of the higher education system. The majority of the state universities and the third largest public university in Mexico City were established in that decade. At that time, the country’s economic policy was based on import substitution, and raising the educational level of the labor force was seen as critical.

The National Council for Science and Technology (Conacyt) was also created in 1970. It took on the functions of the Institute of Scientific Research and started awarding grants for research projects. Even though Conacyt administered relatively limited resources, its creation meant that the government would have the STI on its agenda, and as a result, a small but active scientific community was established.

The decade of the 80s was marked by economic stagnation, and the development of STI was not excluded from this situation. By the end of this decade, both trade and STI started changing significantly. In terms of international trade, the country became a member of the General Agreement on Tariffs and Trade (GATT) and in 1992 it signed the North American Free Trade Agreement (NAFTA). In that same year, the World Bank gave Mexico its first loan for science and technology, called the Science Support Program in Mexico (Pacime).

This program provided a little more than 300 million dollars in matching funds by the government and the World Bank to support primarily scientific activities. These funds were used for research projects, scientific infrastructure, repatriation and retention of scientists, and endowed chairs. These programs had a significant impact on STI investment. Research and experimental development expenditure, as a percentage of the GDP, rose from 0.28% in 1990 to 0.33% in 1991. By 1994, it had reached 0.41%, roughly what it is today.

During the 1990s, the main objectives of the S&T policy were to increase the country’s capacity in scientific research, and to train high-level human resources. Supporting technological development and innovation was not a priority at that time.

For example, in Conacyt’s 1993 budget, 26% went to strengthening scientific capabilities, 29% scholarships (both nationally and abroad), 20% to the National System of Researchers (SNI), and only 2% to technology, with the remaining 23% for other programs. This budgetary distribution remained during the rest of the decade. Without a doubt, these programs had a favorable impact on the country’s capabilities of scientific research. According to the Institute for Scientific Information (ISI), the participation of Mexican scientists in the global scientific production increased from 0.2% in 1993 to 0.5% a decade later.

With the arrival of the new century, the STI system had grown in size, output and international impact, but its investment as a percentage of the national GDP remained at the same low level. In spite of the few resources spent on technology and innovation during the decade of the 90s, Conacyt designed various programs to promote technological development.

However, the scarcity of resources, together with the high interest rates that prevailed at that time, the lack of capacity for technological risk evaluation, and poor program design, led to very low demand for these programs. Their impact was modest, at best.

Toward the end of the 1990s, new programs were created to promote innovation. In 1998, the World Bank awarded a second loan, called the Program of Knowledge and Innovation (PCI in Spanish). Specific resources to support innovation were earmarked in this program. Also, a system of fiscal incentives for S&T was established.

But very few companies benefitted from these new initiatives. In 1999, only 20% of the national expenditure on research and experimental development was invested by the private sector.

As the millennium began, an attempt was made to give new impetus to innovation. One of the first instruments was a new S&T law which, among other things, requires that 1% of GDP be committed to research and experimental develop expenditure. The law also placed special emphasis on linking scientific activities to national problems. This effort included the creation of new programs, among them the Mixed Funds and the Sectorial Funds. The Mixed Funds, which operated with matching funds between Conacyt and state governments, were directed to regional development. The Sectorial Funds, which operated with matching funds between Conacyt and federal agencies, were to address the most relevant national problems.

To foster innovation, the AVANCE program was created in 2003. It included three modalities: Last Mile, which supported the pre-commercial stage of innovation; Entrepreneurs Fund, which supplied angel capital to companies; and the Warranty Fund, which helped securing bank loans. The new Law generated strong expectations, but these expectations were not completely met. Investment levels in S&T remained without significant changes, and the new programs had a relatively low demand, relative to the size of the country’s economy.

The most important change that occurred in recent years has been the significant increase in the participation of the private sector in the R&D expenditure. Currently, about 40% is provided by this sector, and government participation is little more than 50%. However, as Dutrenit (et al 2010) mentions, the private sector’s reorientation of the R&D expenditures should be interpreted with caution. Despite the increase in spending, there has not been an increase in the level of patents (patenting activity) by domestic companies – nor has there been an increase in the level of competitiveness of the country, or in the technological trade balance.

Mexico’s innovation process lacks coordination among the actors of the national innovation system, and the private sector is one of the weakest links. Companies invest very little in innovation, which means having an infrastructure with very little technological development and a shortage of highly trained human resources. Similarly, the link between companies, and higher education and research centers is very limited.

The country’s industrial ecosystem is primarily made up of micro, small and medium-sized enterprises. There are more than 4.5 million micro businesses (with fewer than 10 employees). About 90% of the companies employ less than 50 people, and they devote themselves to services and small-scale agriculture, with its production oriented to local markets. In addition, there are very few innovators, and their contribution to the total value of production is low.

In addition, production is highly concentrated in a few States – 10 of them generate 41% of the GDP.

The challenges of the Mexican system of innovation are complex and of a highly diverse nature. One of the most important is access to private sources of funding. Suppliers generally finance companies in Mexico. The use of bank credit is an expensive resource, and limited only to a small group of companies. The capital market, both public and private, is small. Entrepreneur capital in Mexico lags greatly behind, compared with other countries, barely reaching 0.004% of the GDP. It is also difficult for research and development expenditure to reach 1% of the GDP unless private investment is increased substantially.

Another great challenge is to efficiently coordinate the different actors, in order to create a true innovation ecosystem. But to do this, it is necessary to develop the internal capacity to generate knowledge and technology, so that the business sector takes full advantage of such knowledge. There is no doubt that the business sector must play a fundamental role in innovation, and for this to happen, the most important thing is changing the culture toward innovation in this sector.

Another important challenge is to attract researchers’ interest in participating in innovation projects. They could either do this jointly with the private sector, or become entrepreneurs themselves. University incubators, for the most part, have not succeeded in enlisting a critical mass of high-technology projects, to justify the participation and use of the university infrastructure. A prerequisite is to increase the entrepreneurial culture in technology-based companies, and this is where the ITAM Center of Creativity, Innovation and Entrepreneurship can play a critical role in the future development of our country.?

References

• Dutrénit, G., Capdeville, M., Corona, J., Puchet, M., Santiago, F. & Vera-Cruz, A., (2010), El Sistema Nacional de Innovación Mexicano: Instituciones, Políticas, Desempeño y Desafíos, México, UAM-X
• OECD (2009). Reviews of Innovation Policy, Mexico, OECD, Paris.
• INEGI (2009). Censo Económico, Mexico.

By: Pritha Dev, ITAM

In a world where information is gold, why would anyone give it away instead of keeping it to himself and thus reaping the maximum benefits?…

What drives stock market recommendations by analysts who are also trading on their own account? That is, what propels them to share their information (often freely) in newspapers, trade magazines, online forums or television channels? In a world where information is gold, why would anyone give it away instead of keeping it to himself and thus reaping the maximum benefits? This article, based on Dev(2013), shows that there is a direct economic incentive for this transfer of information.

Strategic traders participate in the market for an asset if they believe they have an informational advantage over the rest of the market. They trade only if they have information which implies that the asset is mispriced. If they had only as much information as the rest of the market, they would have no incentive to trade since the price that they expect the market to set would be no different from their valuation of the asset. Information is crucial for the strategic traders to make any profits; as such they are generally willing to pay for it. This article considers the possibility of an information transfer from an informed strategic trader to other uninformed strategic traders.

Many authors have considered the sale and transfer of information in asset markets. The theoretical model often used is based on Kyle(1985). He considers a model with one informed trader (who knows the liquidation value), a market maker and noise traders. They trade in the asset for some periods at the end of which the liquidation value is announced and profits are realized.

Market makers are assumed to set prices equal to the expected value of the asset given their information. In a linear equilibrium, prices are linear in the total trade and the insider’s trade is linear in the liquidation value. In a series of papers on the sale of information, Admati and Peiderer (1986), Admati and Peiderer (1988), and Admati and Peiderer (1990), find that in a rational expectations equilibrium it is never optimal to let a positive fraction of the traders know the exact value of the asset, that a risk averse trader will sell information to share the risk and that indirect sale of information, e.g. through a mutual fund, is more profitable than direct sale of information.

Another reason for information release could be stock price manipulation, where the informed trader transfers a signal contrary to his information to the uninformed traders with the intent to push the price in the wrong direction and making larger profits. Alternatively, the trader might not be informed and still transfer a signal to push prices in the direction which favors his trading position. In this paper, the incentives behind the direct transmission of information are not to manipulate or to share risk, but rather to use the trade by less informed traders as a camouflage for the trade by the informed trader.

I claim that there can be transfer of information by a risk neutral trader if he transfers a noisy signal of this information. The informed trader knows exactly what the final liquidation price of an asset is going to be. Instead of giving out his information as is and letting other traders know the liquidation value, the informed trader gives out a hint regarding the liquidation value. He transfers this noisy version of his information directly to the buyer. The buyer then uses this information to trade strategically. If the informed trader regularly makes such transfers of information he has reputational concerns which ensure he transfers the information at the quality promised.

The exact setup of the market is such that all traders trade in a single risky asset and submit the quantity they wish to trade of that asset to a market maker. The market maker then sets the price of the asset according to the information available to him and at that price executes all the trades. There are two types of traders – strategic traders and uninformed noise traders. The noise traders are non-strategic traders and they trade for reasons other than to make a profit. For instance, they might have liquidity constraints which force them to trade. Noise traders trade a random amount $u$ which is normally distributed with mean 0. The strategic traders trade only if they have information regarding the liquidation value of the asset. Suppose there is single informed trader who knows the liquidation value of an asset. If he does not transfer the information, the other strategic traders stay out of the market. The other strategic traders are able to participate only if the informed trader transfers his information fully or partially to them.

The risky asset has a liquidation value denoted by the random variable v, where v is distributed normally with mean µ and variance ?2. The informed trader knows the exact realization of v and he transfers a signal s=v+ ? where ? is normally distributed with mean 0 but with positive variance. In this case, ? is the noise added to the actual information. Since the mean of the noise is 0, it must be that this noise has no bias. Note that if variance of this noise term is zero then the information is transferred as is without adding any noise. The sequence of events is as follows:

• Stage 0
• The informed trader receives accurate information, $v$, regarding the liquidation value of the stock.
• He then decides whether or not to freely transfer some of his information to other strategic traders in the form of a signal. To make the decision, the owner compares his expected trading profits with the transfer of information to the profit in the case of no transfer of information.
• Stage 1
• All traders submit market orders to the market maker. The market maker observes only the total order volume and not the individual orders.
• The market maker sets the price $p$ at which all orders are executed.
• Stage 2
• The true liquidation value is announced and all traders liquidate their positions and realize profits.

The informed trader never transfers his exact information since that leads to him losing his informational advantage completely and giving rise to an equal competitor. The competition leads to lower total profits for both the informed traders. If the informed trader transfers a noisy signal, he retains an informational advantage over the rest of participants in the market since this trader knows the true information as well as the signal. The decision to transfer information involves a tradeoff on the part of the informed trader.

On the one hand, the informed trader loses part of the informational advantage to another trader with a negative impact on his profits. On the other hand, the informed trader knows exactly how much the prices are affected by the trade of the other less informed strategic trader and he can use it to his advantage.

The informational advantage of the informed trader over the market maker is given by the difference between his information and the expected value of the asset or v – µ. Similarly the informational advantage of the informed trader over the other strategic trader who got the signal is given by v – s and that of the other strategic trader over the market maker is s – µ. Solving the game theoretic problem implied by the sequence of events, it must be that the prices set by the market maker are increasing in the total total order volume.

The trade of the informed traders is increasing in their informational advantage(s). The informed strategic trader would be willing to transfer information for free if in the case without transfer of information his trading profits are not too high or if the variance of the underlying asset value is large enough. Moreover, as the number of traders to whom he can transfer the information increases, his trading profits increase.

The interesting result is also that the informed trader does not always choose to transfer information. He only transfers the information if his informational advantage over the market maker is not too high. In other words, he transfers information only if the information does not have too much value to begin with or the liquidation value of the asset is very unpredictable. If the information is indeed very lucrative, which in this model implies the realised v is very far away from its expected value of µ then the informed trader keeps it to himself!

This article shows that there is indeed an economic motive for the financial gurus to make public predictions about stock price movements. But the adherents of such gurus must keep in mind that public predictions are only made when the future price movements is going to be relatively small. Any information which predicts massive swings in the prices is always kept private.?

By: Dr. Javier Muñoz

One of the effects of the global village among economic agents and in the social sphere is the awareness of the differences between local ideologies and the overpowering force of triumphant capitalism after the fall of the Berlin Wall.

The business of international business is culture

Hofstede’s (1994) comment “The business of international business is the culture”. is becoming more and more relevant in the context of multinational corporations. One of the effects of the global village among economic agents and in the social sphere is the awareness of the differences between local ideologies and the overpowering force of triumphant capitalism after the fall of the Berlin Wall.

Knowledge of the culture of the host country is not only required when doing business in the world. The very future of the planet, according to Hofstede (2001), largely depends on people with different ideas and ways of thinking working together. Therefore, international cooperation requires knowledge and understanding of different cultures.

Still, after World War II, the great international consortia of influential countries imposed their ways of thinking and doing things in places where they expanded their businesses, in the style of the 19th century colonizers. What was good for the center was good for the periphery, since they regarded the exported culture and technology as a gift for the receiver.

The Wakon Yôsai culture

But, starting with the 1970s, Japan entered the international business scene. The overwhelming success of Japanese products, and their growing involvement in the market thanks to their quality, threatened U.S. and European hegemony because of the challenge imposed by a way of thinking and doing things that was not contemplated by the complacent powers.

In the beginning, the quality of Japanese products was very poor. In the 1950s, “Made in Japan” was synonymous with cheap junk. Japanese entrepreneurs, whose impressive industrial structure had been destroyed during World War II, were forced to learn the statistical process applied to quality from the United States. But they were excellent students and they exceeded their teachers, thanks to their culture of Wakon Yôshai (Japanese spirit, Western technology), which translated and adapted western technology to their own way of being, to then surpass it thanks to the built-in complexity in their products and the reduction in size and cost.

At the present time, in spite of the important role that China plays in world trade, Japan has not been left behind, and is distinguished for having a unique system of business practices enveloped in a culture that has much to contribute to the organizational culture in the world.

The first amendment and constitution freedoms

William Ouchi William Ouchi laid the groundwork for the adaptation of Japanese culture to western manufacturing in his book Theory Z, a best seller in its time. Academics and entrepreneurs were convinced they had rediscovered the way to efficiency and quality. But, with the passage of time, Theory Z became one more theory that was taught in business school, but that was never put into practice.

Cultures are dynamic, but their dynamism is not evenly distributed or permanent. For that reason, they have a part that is nearly static, which is transformed very slowly over time. With regard to U.S. culture, its static part is rooted in strong individualism, derived from the postulates of the Protestant ethic, and in the constitutional freedoms in the first amendment, which promote the managerial prerogative, the right to work (job entitlement) and the psychological transactional contract. This has nothing to do with a collectivist culture, of mutual responsibility between employers and employees, or with the psychological relationship contract, typical of Asian systems.

Japanese multinationals in Mexico

In Mexico, the direct investment of Japan is well below that of the United States and Europe, however, the impact of the 200 Japanese companies operating in the country has had a very deep effect in the minds of Mexicans. In particular, the large automotive assembly plants seem to thrive in Mexico. Honda is building a plant in Celaya, Mazda in Salamanca, and the Nissan 2 plant in Aguascalientes has already been completed. Honda, in Guadalajara, has a long track record of success by combining an abundant supply of specialized Mexican labor (automobiles and motorcycles are handmade with the same quality as in the plants using robotics) with the practices of the Japanese business system in the manufacturing of automobiles.

It seems that the Mexican-Japanese marriage in the industry has had excellent results. This success (as seen in the tour of Japan in the 1970s by a team of executives who rescued Harley Davidson) is not due to the application of technology, but to consolidating a learning organization with highly motivated employees. Technology can be acquired in the market – the motivation of employees cannot.

Research on organizational culture in Japanese multinationals in Mexico

In the study by the author (Muñoz, 2011) on the acculturation of Mexican employees to the Japanese business practices, the cultural component is an important factor in this process. The purpose of the study was to determine whether Mexican workers were able to work with cultural variables that were different from their own: the culture of the Japanese business system. At the same time, it tried to determine what values were similar in both cultures and, if possible, to understand the ideological assumptions underlying these values, according to the Schein model (1991).

The variables in the study were the following: valuation of the work, citizenship behavior (citizenship), constant learning, formalization of the tasks, independence on the job, inclusion, and satisfaction (Liker, 2004). Together in a questionnaire of closed-ended questions there were some open-ended ones, which were to be answered in writing, about the lessons learned in the company. The survey was conducted in its entirety on one occasion with Mexican employees in three Japanese companies in the automotive parts industry and in a distributor of food products.

The results indicate a strong valuation by the participants of the citizenship variable, which is “the positive behavior toward the organization, not explicitly included in the formal system of rewards, but that contributes in terms added to the effective functioning of the organization” (Organ, 1988) and whose dimensions in the survey were shaped by the rubrics of conscience, sportmanship, civic virtue, altruistic aid and courtesy.

Citizenship behavior relates to the psychological capital of the organizations, facilitates teamwork, and promotes the cordial relations between management and workers. Previous studies have linked a perception of fairness at work with the development of citizenship behavior. It is clear that this result points in the direction of positive interaction between the employees and management of these companies.

The valuation of the work proved to be the second most highly valued. With that, the myth that Mexicans do not like to work – that they prefer to party and do not take their work seriously – was shattered. Also treated with the same importance (received almost the same consideration) were job satisfaction and the formalization of the tasks, followed closely by independence. Constant learning and inclusions showed a significant difference; their averages were at the bottom with respect to the other variables.

The information provided by the open-ended questions shed more light on the qualitative results. In effect, the employees say they have an appropriate citizenship behavior because of the treatment they receive from their employers, which is of respect and fairness. They appreciate the work as the source of livelihood for their families and for their professional advancement.

We found a difference in opinion between operational and administrative employees with respect to the formalization of the tasks variable. In this aspect, there is a cultural coincidence, since both Mexico and Japan scored high in regard to uncertainty avoidance (Hofstede, 2001), and in Japan this is resolved with clear and precise rules, which lead to proper structuring of the work.

For the blue collar employees, the input they receive from the company is the structure that the administrative practices in Japan provide them, not only at work, but also in their personal and family life. Many take the Five S method home to sort their spaces and establish rules for coexistence and family schedules inspired by the discipline practiced at work. In some cases, the participants share their experience on how discipline has changed their lives – providing them a structure, which they had lacked.

There were other significant statistical differences between genders: women pay less attention to citizenship behavior – they feel less included, less independent and less satisfied. In this aspect, both Japan and Mexico have a high level of masculinity (Hofstede, 2001) and this fact may have some relationship with these differences. However, in the log, there are some observations about the care of pregnant women in the factories; they are assembled in a special room where they are watched over and provided with adequate attention. Many testimonies of women workers are very favorable in regards to the treatment they receive and the positive experience on the assembly line.

Factors that affect employee satisfaction – the variables of citizenship, independence, valuation of the work and inclusion – emerged in the regression study. Of these four, three obtained a good rating by employees, and only inclusion received a low score.

The analysis of qualitative information, in addition to improving the understanding of the quantitative results, revealed some aspects that were not addressed by the latter. Within Schein’s model of organizational culture (1991), assumptions are spoken of that are the basis of the values and that support the artifacts.

It is difficult for assumptions to appear since, in general terms, they correspond to an ideology that is unconscious and that is taken as a given. In the field of assumptions, the findings point to a conception of the labor world on the part of the worker in that there is an awareness and acceptance of cultural diversity, an understanding of the interdependence between the people and the parts of the company system, and more important still, an absence of both the managerial prerogative, on the part of the company, and the demand of the right to work, on the part of the employee. The climate observed – both in the workplaces visited to conduct the study and in others that did not participate but opened their doors to the observation of the researcher – is due to this underlying ideology, which promotes healthy coexistence and productivity within the organization.

Conclusion

It is unrealistic to expect that the subsidiaries of Japanese multinationals operating in Mexico will exercise the exact same characteristics regarding treatment of workers that is given to Japanese workers in their country. The companies comply with all legal and labor requirements to produce low-cost, high-quality products, but they do not have lifelong employment contracts (with some exceptions) or personal development programs such as those offered to their workers in their country of origin.

For its part, Mexico’s labor force has a virtue in addition to their liking and acceptance of the job. It has on reserve the ability to deliver citizenship behavior, which is free of charge. While being discretionary, it is available to the company by the employee if only one basic requirement is satisfied: to be accepted, understood, respected, treated with kindness, friendliness. In other words, that they are treated in a way that makes them feel valuable and important to the degree that will raise their self-esteem. The demands and the discipline need to go hand in hand with respect.

Mexican workers want to continue to appear in the photo, have a place in society, a decent place that gives them a sense of identity and belonging – as they had during the Viceroyalty, when all castes were a legitimate part of the social system – and that, after two centuries of independent life and in spite of social mobility, they have yet to find again.?

References

• Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations. Thousand Oaks, CA: Sage Publications, Inc.
• Hofstede, G. (1994). The Business of International Business is Culture. International Business Review , 1-14.
• Liker, J. K. (2004). El Modelo Toyota: 14 Principios Gerenciales del Mayor Fabricante Mundial. México: Mc Graw Hill.
• Muñoz, J. (2011, Marzo 11). La Cultura Organizacional en Empleados de Empresas Multinacionales Japonesas Radicadas en México. Tesis no publicada. Universidad de Celaya, Celaya, Gto., México.
• Organ, D. W. (1988). Organizational Citizenship Behavior. MA, EE. UU.: Lexington Books.
• Schein, E. (1991). What is Culture? In P. J. Frost, Reframing Organizational Culture (pp. 243-253). Newbury Park, CA: Sage Publications.

By: Sandra Minaburo
Director of the Accounting Research Center
spmina@itam.mx

Among the projects that the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have worked on together is, dating back to 2004, the joint project regarding changes to the Conceptual Framework, which so far has undergone many adjustments.

Among the projects that the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have worked on together is, dating back to 2004, the joint project regarding changes to the Conceptual Framework, which so far has undergone many adjustments. In October 2004, both the FASB and the IASB added this comprehensive project to their agendas and divided it into the following phases:

• Phase A: Objectives and qualitative characteristics.
• Phase B: Elements of financial statements and recognition.
• Phase C: Measurement.
• Phase D: The reporting entity.
• Phase E: Presentation and disclosure.
• Phase F: Purpose and status of the joint project.
• Phase G: Application to non-profit entities..
• Phase H: Pending issues.

These phases were developed as single chapters to compose the new Conceptual Framework. In 2010 three chapters were issued: Chapter 1: The objective of financial information with a general purpose, and Chapter 3: Qualitative characteristics of useful financial information. These two chapters, which make up Phase A of the initial project, became effective on the same day they were enacted, which was September 28, 2010. Similarly, Chapter 2: The reporting entity, was issued for review and comments. Chapter 2: The reporting entity, which was already examined and revised but has not yet been enacted, would make up Phase D of the original project.

According to statements made by both agencies in late 2010, the IASB and the FASB decided to suspend the work they were doing together to give priority to other projects on their own agendas.

The FASB has definitely stopped progress on the review of its conceptual framework, but the IASB decided to resume and continue to work on its own in 2012 when, through a public consultation, it determined that the project was considered a priority by many users of financial information, and labeled it as the IASB-only comprehensive project.

The IASB has set 2015 as the deadline to finish reviewing the Conceptual Framework. Because of time constraints, it decided to focus on improving and filling the gaps in the current document, rather than restating and reconsidering certain aspects that currently are considered contradictory. To this end, it decided to dedicate itself to the development of a comprehensive proposal and not on one of each phase at the time as originally proposed, focusing on the following topics:

• a) Elements of financial statements
• b) Recognition and derecognition
• c) Measurement
• d) Presentation and disclosure
• e) Other Comprehensive Income (OCI)

It was based on the analysis of these issues, which the IASB considers to be a priority, that the proposed changes to the Conceptual Framework were developed. The proposal is known as Discussion Paper DP/2013/1: A Review of the Conceptual Framework for Financial Reporting (DP), and was published in July 2013 to receive comments until January 14, 2014. It contains 26 questions, whose answers are intended to guide the IASB regarding the path that users of financial information suggest it follow for the development of the Conceptual Framework.

This DP is divided into nine sections that develop the main ideas and alternatives that the IASB is considering in order to carry out the Exposure Draft of the Conceptual Framework. Among the most important changes that are proposed for the accounting information system are new proposals regarding the definitions of assets, liabilities, equity, income and expenses, and of course, recognition, measurement, presentation and disclosure of said elements.

There is an intent in the DP to clarify and expand the definitions of both assets and liabilities, with the goal of more firmly stating that the asset is “an economic resource controlled by the entity and which is expected to generate economic benefits,” and that the liability is “an obligation on the part of the entity to transfer economic resources.” It includes, therefore, the definition of what should be considered an economic resource, which is “a right or other source of value that is capable of producing an economic benefit.”

Behind the current definitions of asset and liability is the concept of “uncertainty,” which is immersed in the identification of the likely economic benefits, both inflow and outflow, which are expected to be received or delivered for an asset or a liability. The DP discusses the advantages and disadvantages of using a threshold of certainty, whether under the current concept of virtually certain or of probable. IASB’s view is that these concepts of uncertainty are not needed to identify whether an asset is able to produce an economic benefit or a liability is capable of producing a transfer of an economic resource, so the proposed recognition criterion does not include any reference to the concept of probability.

Regarding equity, the focus is to provide the user with more information about the different types of capital investment, such as senior capital claims or subordinate equity claims. The DP suggests a statement of changes in equity that shows the different types of capital and wealth transfers that exist between them. The definition of capital remains in the statutes as the difference between total assets and total liabilities; that is, the entity’s net assets or the residual interest.

The document includes the concept of derecognition of assets and liabilities, which the current Conceptual Framework did not consider, although it is used in some of the International Financial Reporting Standards (IFRS) to define certain types of assets and liabilities. The general rule is that any asset or liability that does not meet the established criteria for recognition within the financial information should no longer be identified as such starting on the date it was no longer defined that way. Although the recognition criteria are clear, the problem arises when an entity retains part of a previously recognized asset or liability, in which case the DP suggests strengthening the rules of disclosure and presentation for these kinds of operations.

An important shortcoming of the current Conceptual Framework is that is does not include all the measures recently used to evaluate the different elements of financial statements. The DP suggests a limited number of measures to improve the comprehension of financial information and how to make it comparable. The measures fall into three categories: those based on cost, those based on market prices, and other measures based on cash flow. As for assets, the entity should choose the one that adequately reflects the way in which they contribute to the future cash flow, and for liabilities, it should choose the one that shows how the entity will cover or comply with said obligation.

Regarding the elements of the Income Statement, the DP proposes defining clearly the criteria that must be followed to differentiate between profits and losses; between the subtotals that make up the SCI (Statement of Comprehensive Income) and the recycling of OCI (Other Comprehensive Income) toward income for prior years. Thus it is proposed that it be determined which items of income or expenses must be submitted as part of the profits or losses, or as part of the OCI, and under which circumstances should the items previously recognized within them be recycled. For this, the DP proposed two approaches, one broad and one narrow. The difference between the two is that the broad approach proposes a continuous monitoring of recycling in order to determine when it is providing relevant information to determine the profits or losses for the period, and then in that moment the recycling should be made.

As for the presentation and disclosure criteria, the IASB is considering developing communication principles that ensure that the information that should be disclosed is disclosed, and also to reduce the burden of complying with the current rules of disclosure. The IASB bases itself on the idea that disclosures should complement the information presented in the financial statements by providing additional useful information regarding the items that are included in them. Other concepts are also included in the DP, such as the reporting entity, the business model, the unit of account, the going concern assumption of the operating business, and the idea of capital maintenance.

Finally, one must keep in mind that according to the IASB the Conceptual Framework has the following objectives:

• a) To assist the Board in the development of future IFRS and in its review of existing ones.
• b) To assist the Board in promoting the harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments allowed by the IFRS.
• c) To assist national standard-setting bodies in developing national standards.
• d) To assist preparers of financial statements in applying IFRS and in dealing with topics that have yet to form the subject of an IFRS.
• e) To assist auditors in forming an opinion on whether financial statements comply with IFRS.
• f) To assist users of financial statements in interpreting the information contained in financial statements prepared in compliance with IFRS.
• g) To provide to all those who are interested in the IASB’s work with the information about its approach to the formulation of IFRS.

Although the IASB’s Conceptual Framework is not part of the International Financial Reporting Standards, that is to say, it is not above any of them and it does not apply to any particular circumstance. It is important to know and understand its contents, since the IASB will guide itself by it and depend upon it for the development of future IFRS and for the revision of existing standards, which is reason enough to analyze and understand the potential impacts that the proposed changes could have on financial information.?

References

• FASB. 2013. “International Convergence Page”. E.U.A. Available at FASB . Retrieved October 28, 2013.
• IAS Plus. 2013. “Conceptual Framework: IASB – FASB Joint Project”. UK. Deloitte Global Services Limited. Available at IAS Plus. Retrieved October 28, 2013.
• IFRS Foundation. 2013. “Conceptual Framework Project Page”. Londres, IFRS Foundation. Available at IFRS. Retrieved October 28, 2013.

Por: Carlos Amtmann

El objetivo principal de una nación es conseguir un alto y creciente nivel de vida para sus ciudadanos. La actitud para hacerlo depende de la productividad con la que se empleen la mano de obra y el capital.

“El único concepto significativo de la competitividad a nivel nacional es la productividad. El objetivo principal de una nación es conseguir un alto y creciente nivel de vida para sus ciudadanos. La actitud para hacerlo depende de la productividad con la que se empleen la mano de obra y el capital.

La productividad es el valor de la producción por unidad de mano de obra o de capital. La productividad depende tanto de la calidad y las características de los productos (las cuales determinan los precios que se pueden alcanzar) como de la eficiencia con las que son producidos. La productividad es el determinante fundamental de la vida de una nación a largo plazo; es la causa fundamental de la renta per cápita nacional. La productividad de los recursos humanos determina los salarios de los trabajadores; la productividad con que se emplea el capital determina el rendimiento que obtienen sus propietarios.”

Michael E. Porter¹

INTRODUCCIÓN

El Plan Nacional de Desarrollo (PND) 2013-2018 inicia ubicando el desarrollo nacional en el contexto actual, hace un diagnóstico general de las barreras que limitan el desarrollo de México, partiendo de su fortaleza institucional pero reconociendo la necesidad del desarrollo social para un México incluyente, educar con calidad para fortalecer al capital humano, el esfuerzo requerido en mejora regulatoria para ofrecer igualdad de oportunidades y así lograr un México próspero, la necesaria proyección internacional señalando además, las oportunidades para el desarrollo que se nos presentan para llevar a México a su máximo potencial, que es el objetivo general del PND.

Con base en ese análisis plantea la estrategia general: mayor productividad para llevar a México a su máximo potencial. Inicia señalando la importancia de la productividad para luego plantear cinco metas nacionales: I. Mexico en paz; II. Incluyente; III. Con educación de calidad; IV. Próspero y con V. Responsabilidad global.

Para lograrlo, establece como base operacional del PND tres estrategias transversales que deben dar soporte a tales metas y son: I) Democratizar la productividad, II) Gobierno cercano y moderno y iii) Perspectiva de género.

El presente trabajo atiende a la primera de estas estrategias transversales. Propone pasos metodológicos que las organizaciones, principalmente empresas pueden adoptar para aportar en lo que le corresponde: ser más productivos y en consecuencia poder trasladar parte de esa mejora en productividad hacia el ingreso de los trabajadores que coadyuvan a realizar el fin que las empresas se proponen: generar valor a la sociedad y obtener por ello una retribución que se refleje en utilidades para su crecimiento.

Antecedentes

Reformas a la ley

En el artículo 153-E la Ley Federal del Trabajo establece la obligación de establecer una Comisión Mixta que vigile los acuerdos de productividad; en toda empresa que tenga más de 50 trabajadores, es en el artículo 153-E. El artículo 153-J dispone que debe instituirse un programa para elevar la productividad de éstas, incluidas las micro y pequeñas:

“El programa tendrá por objeto: I. Hacer un diagnóstico de la situación de la empresa; II. Proporcionar a las empresas estudios sobre las mejores prácticas tecnológicas y organizativas que incrementen su productividad; III. Adecuar las condiciones materiales, organizativas, tecnológicas y financieras que permitan aumentar la productividad; IV. Proponer programas gubernamentales para el aumento de la productividad (sic); V. Mejorar los sistemas de coordinación entre trabajadores, empresa, gobierno y academia; VI. Establecer compromisos para elevar la productividad; VII. Evaluar periódicamente el desarrollo y cumplimiento de los programas; VIII. Mejorar las condiciones de trabajo y las medidas de Seguridad e Higiene; IX. Implementar sistemas que permitan determinar en forma y monto apropiados los incentivos, bonos o comisiones derivados de la contribución de los trabajadores a la elevación de la productividad que se acuerde con los sindicatos y los trabajadores; …”

Tal es la claridad del propósito que marca la ley, basado en el acuerdo entre organizaciones patronales, sindicales y gubernamentales, y definido tanto por el trabajo digno como por lo que la ley plasmó en el artículo 153-I: “Se entiende por productividad, para efectos de esta Ley, el resultado de optimizar los factores humanos, materiales, financieros, tecnológicos y organizacionales que concurren en la empresa, en la rama o en el sector para la elaboración de bienes o la prestación de servicios, con el fin de promover a nivel sectorial, estatal, regional, nacional e internacional, y acorde con el mercado al que tiene acceso, su competitividad y sustentabilidad, mejorar su capacidad, su tecnología y su organización, e incrementar los ingresos, el bienestar de los trabajadores y distribuir equitativamente sus beneficios”.

Alta demanda en pagos por productividad

Las leyes del mercado dicen que debemos orientar las baterías hacia donde esté la demanda. Incluso, lo novedoso en marketing es navegar en los océanos azules, es decir en mares de mercados donde los productos innovadores se encuentran aun sin competencia.

Así es el potencial de remunerar por productividad: hay una gran demanda por flexibilizar la nómina. ¿Cómo lograrlo? Incrementando las percepciones salariales en la parte variable y no en la parte fija. Hay también una gran demanda por recuperar el poder adquisitivo de los trabajadores, perdido durante las décadas del desorden monetario, y que no ha alcanzado a recobrar el 70.1% de lo perdido. Los cambios citados en la ley también incrementan la demanda por que se busque ser más productivos. De acuerdo con Porter,ⁱ el crecimiento surge a partir de mejoras en los productos (innovación), cambios en lo que la gente quiere (el poder de la demanda), y ante cambios en las leyes (facilidades para competir). Hay que recordar que la correlación entre las empresas que más remuneran en forma variable y las que más utilidades generan es de 82%^2.

De hecho, si es bien entendido por las empresas, ese cambio en la ley puede dar pie a que se generen fondos adicionales para el retiro, tomando parte del pago por productividad para destinarlo a los fondos de separación voluntaria, que reducen el pasivo laboral y flexibilizan su rigidez, pero que además constituyen el pilar para una pensión más robusta que la que proyecta el SAR en la actualidad ¡con fondos obtenidos de la productividad!

Democratizar la productividad requiere generar el cambio

Para operar la nueva Comisión Mixta de Capacitación y Productividad es necesario hacerlo de una manera reflexiva. No es hacer lo mismo que antes hacía la Comisión Mixta de Capacitación, cooptada por una inmensa cantidad de empresas. Hacer algo diferente da resultados diferentes.

Si México opta por hacer caso al legislador y unir fuerzas en línea con la iniciativa del Presidente de la República, quien ha integrado en el Eje México Próspero del Plan Nacional de Desarrollo este tema de democratizar la productividad, lema en sí mismo políticamente genial, el éxito que debe sumar cada grande, mediana y pequeña empresa como consecuencia de su aplicación debe dar buenos frutos. Que se alcanzara obtener el premio Nobel de Economía para la Legislatura que aprobó este plan y para quienes lo requirieron no sería remoto; y sería por haberlo hecho, no por haberlo dicho.

Administrar el cambio en la empresa, que luego lleve a un cambio de cultura, involucra, de acuerdo al documento que ganó el premio MIT de Administración del Cambio en 2009. Basar las acciones de cambio en por lo menos cuatro de seis pilares, (ver ilustración 2) cuadro adaptado con base en ese artículo incorporando cada paso según la motivación y habilidad empresarial requerida³.

Honestamente, en mi opinión, para lograrlo en una economía con un modus operandi como el nuestro, que tiene lastres culturales por todos lados, requiere para la consolidación de los seis pilares una ruta que los lleve a la Comisión Mixta, paso a paso.

Ruta crítica para operar el plan de productividad de la empresa

Mi propuesta para activar el cambio se podría iniciar con motivación personal. Sin embargo, administrar la complejidad implica contar con información veraz y compartida. La primera condición (1) consiste en que haya transparencia en el manejo de la información. Si los trabajadores no saben si perdemos o ganamos no tienen elementos para entender que, en función de ello, también está en riesgo su pago variable, por lo que se debe poder contar con una política de dividendos definida, generadora de valor social. En otras palabras: si hacen ganar más a la empresa, por arriba del presupuesto que es la base de su salario fijo, les pagamos más y en proporción al incremento en productividad.

Una vez establecido el compromiso ético de manejar la verdad como moneda de cambio, procede el paso (2): calcular si la empresa genera valor económico y cuál ha sido el comportamiento de su productividad histórica. También es preciso hace ver la posición competitiva, externa e interna, con respecto a su gente.

Con tales puntos de partida, se revisa si se tiene el pilar (3): la definición estratégica con líneas de acción, para validar que estén alineadas a ella las actividades en los puestos, con unidades de medición de salida, que integran el rubro (4), y revisar si el personal que las ejecuta las domina. Luego se procede al paso (5): calcular si hay posibilidad empresarial de mejora en la productividad, para determinar en forma e importe apropiados los incentivos, bonos o comisiones que por su contribución serán otorgados a los trabajadores.

Los siguientes pasos serán: (6) determinar las reglas de actuación del plan de productividad, que incluyen la Instalación y operación de la Comisión Mixta de Productividad; (7) instrumentar los indicadores para llevar a efecto el paso (8) medir la eficacia de los procesos. El punto (9) es anticipar riesgos inherentes y alertar al respecto, para estar en condiciones de ejecutar el paso (10), negociar metas, tanto para la empresa como personales.

Con ello, se procede al paso (11): desplegar compromisos y monitorear la colaboración y contribución a resultados, para seguir con el (12), calificar, el (13), evaluar resultados, y el (14), dar el tiempo para discutir resultados con cada individuo y planear mejoras que lo motiven en relación a sus metas personales.

Así, se estará en posibilidades de continuar al punto (15): hacer retribuciones en forma diferenciada, lo que es importante porque, medido con índice Gini, mejora la distribución del ingreso al interior de la empresa, de acuerdo al desempeño mostrado. Puede procederse ahora al renglón (16): capacitar en lo necesario, para tomar oportunidades y resarcir deficiencias, lo que incidirá en que se alargue la permanencia del trabajador en la empresa y mejore su productividad. De este modo puede pensarse en el paso (17): construir fondos adicionales para el retiro.

Productividad para la competitividad

Si bien la ley ha incorporado el concepto, la productividad no se decreta, se trabaja. La ley orienta, pero su ejecución debe llevarla a cabo cada empresa. Un país transita por tres fases para volverse competitivo. En el origen está la explotación de recursos naturales; se les agrega poco valor, pero exportarlos genera divisas. Para volverse competitivo en esta primera fase, un país debe contar con: 1. instituciones; 2. infraestructura; 3. ambiente macroeconómico estable; 4. salud y educación elemental. Con respecto a estos cuatro indicadores el Foro Económico Mundial nos califica, en promedio, en el lugar 67, no muy alto, aunque en estabilidad nos ubica en el lugar 39, es decir, con buenas bases.

Para alcanzar la Fase II el país debe contar también con: 5. educación y entrenamiento superior; 6. eficiencia en el mercado de bienes; 7. eficiencia en el mercado laboral; 8. desarrollo del mercado financiero; 9. disponibilidad tecnológica; y 10. tamaño del mercado. En cuanto a este grupo de indicadores, en promedio, ocupamos el lugar 67, debido a que en el rubro laboral, antes de la reforma, calificamos en el lugar 102; si quitamos ese dato estaríamos en el lugar 60.

La Fase III, la que verdaderamente hace a una empresa y a un país competitivo, tiene dos pilares: 11. sofisticación de los negocios; y 12. innovación. ¿Requiere esto de explicaciones? Se diría que no. Inventar para vender mejores productos y servicios de calidad y atraer consumidores se ha visto hacer una y otra vez, en particular por parte de nuestros vecinos norteamericanos, y en ultramar por europeos y asiáticos. Llegó la hora de emprender, el mundo espera la respuesta de México. ¿Qué va a hacer México con la estabilidad lograda? Ese es el tema de este artículo.

Más fácil señalar la necesidad de innovar que hacerlo

Implementar una mejora a un proceso, a los productos, o incluso a las relaciones es delicado. Hay que hacer bien la cuenta y estimar los riesgos ponderadamente antes de invertir. Es por ello que debemos proceder con cautela. Comprobar que la metodología funciona nos obliga a reflexionar en los riesgos de fallar.

Hay múltiples puntos de riesgo. El primero de ellos es no contar con los indicadores de medición adecuados; el más grande, no saber comunicar el objetivo de realizar el esfuerzo para obtenerlos. Por lo tanto, quienes nos ocupamos de su análisis, debemos dejar en claro que es una metodología recién legislada que queremos ensayar para que, al igual que con los autos de carreras, ajustemos piezas durante las pruebas y afinemos los motores y los combustibles para que el piloto pueda, apoyándose en un equipo interdisciplinario, competir y ganar una carrera seguida de muchas otras.

Por otra parte, la oportunidad de innovar se abre hoy dramáticamente. El Sistema Nacional de Investigadores tiene cerca de 20 mil participantes que difunden la ciencia, pero están poco vinculados a la industria. En cambio, en el país hay 31 mil523 empresas, con más de 50 trabajadores cada una, obligadas por ley a plantear sus planes de productividad. En ellas laboran 7.1 millones de trabajadores, de los cuales 1.2 millones tienen al menos un grado de educación superior y pueden ser capaces de innovar en los procesos, productos, servicios y relaciones que ellos conocen mejor que nadie. Es por tanto obligación de cada líder responder en su empresa al llamado de esta reforma estructural propuesta por el legislador para que impacte en su propia reforma estructural empresarial.?

References

• 1 Porter, Michael E., Ser Competitivo, Deusto, 1999, capítulo La Ventaja Competitiva de las Naciones.
• 2 Guerrero, Jorge y Amtmann, Carlos G, (2009), “Pago por desempeño al trabajador, motor del desarrollo económico” Boletín Técnico No.1 2009 Comité Técnico Nacional de Competitividad, Calidad y Tecnología, IMEF. Citado en Ponencia IMEF 2012, Acciones clave para incidir en el México competitivo para el 2030, Carlos G. Amtmann Ituarte, disponible en línea.
• 3 Joseph Grenny, David Maxfield, Andrew Shimberg, How to have influence, Fall 2008, MIT Sloan Management Review.

By: Martín Casillas de Alba

Never in the history of humankind have we had an offer of global knowledge as in our days. With the improvement of the bandwidth and the growth of Internet users (2,400 million users in the world, 45 million of whom are Mexican), in the last couple of years institutions such as the prestigious Massachusetts Institute of Technology (MIT) and other institutions of higher education have put courses on the web that anyone can view for free.

Massive Online Open Courses (MOOC) is the name of this relatively new phenomenon. One of its most notable examples is that of coursera.org, a portal that has had more than five million students. This site has 470 online courses with 92 partner universities offering courses of six weeks or more on various topics. It is important to note that the vast majority of these courses are taught in English (see Figure 1).

Another truly amazing development is that of khanacademy.org, initiated by Salman Khan. This man, who went from being a mere broker to becoming the leader of a small empire of virtual education online, created a portal that has had a serious impact on basic education. First, he significantly influenced the way math is learned, and then he covered other areas of knowledge. Currently, he has more than 4,000 primary education videos that have been seen by more than 235 million students. Today, more than 1,000 of the videos found on the Khan Academy’s portal are translated into Spanish, thanks to the funding from the Carlos Slim Foundation.

The courses that are open to the public depend on sponsorship and philanthropic investments to support this concept. As we can see in the graph, the entire array of service providers includes civil societies, risk capital or universities that have allocated part of their budget to developing these courses, and companies that have understood that “the best investment is to support knowledge.” With this vision – and the commitment to be involved in the offering of knowledge in Spanish – aulabierta.org was founded in September of 2013.

In this system, everyone is free to structure his or her courses in the best possible way. However, it is important to consider the users and the new technologies in order to obtain the best results. For example, it is necessary to take into account that a person’s concentration on the Internet is limited, as well as the time that can be devoted to the courses that have been selected. We must not forget that students enroll in these courses without being required to do so and without the expectation of receiving – most of the time – curricular credits as is the case with university students. The beauty of the online courses is that students’ enrollment is free and voluntary. Their motivation is to expand their realm of knowledge, not to obtain a certificate, diploma or official degree.

For this reason, the courses should be designed so that students can devote an hour a week to them, in sessions of 10 to 20 minutes a day. In addition to this advantage, the technology makes it possible to access a word processor next to the course in order to take notes. It is also possible to stop the video at any time and go back and listen again to what is being explained. In this way, in six or seven weeks students finish an online course with a substantive idea of the topic, with material to review and read, and with files of the presentations – if any – for a subsequent consultation.

For me, the experience of taking the “Introduction to Philosophy” course that the University of Edinburgh gave through coursera.org was unforgettable. I was very surprised to receive a message telling me not to send emails, and that I should use the forum instead because – as I could well imagine – it was impossible to answer the 100,000 students enrolled in this course. At the same time, I decided to participate in this exhibition of knowledge and create aulabierta.org. The purpose of this site is to promote culture in Mexico. To begin, my working group and I put the 10 conferences on the 2013-2014 opera season of the Metropolitan Opera House (MET) of New York at the public’s disposal. Later, we will upload two courses that will be available in January 2014: “Sustainability and Business”, taught by Dr. Antonio Lloret, professor at the ITAM, and “Guadalajara, the occident pearl,” sponsored by Volaris, a company that knows that #ElArteEleva.?

By: Caroline Auvinet
MBA ITAM

When we speak of the problems of our society we invariably think that the government, aid agencies and the third sector are responsible for finding the solutions. However, this perspective is changing.

“…the difference between a social entrepreneur, civil servants and business entrepreneurs is the source of their passion” (Kickul J. & Lyons T., 2012).

When we speak of the problems of our society we invariably think that the government, aid agencies and the third sector are responsible for finding the solutions. Similarly, we blame to a large extent the economic model and the government that we have for contributing to these social issues by generating a bad distribution of wealth, which leads to poor education, deficient housing, poor diet, pollution, little access to health services, among other factors. However, this perspective is changing.

Society is becoming more aware that waiting is not an option and that it must act (Kickul J. & Lyons Y., 2012). The reality is that neither governments, nor aid agencies or the third sector can solve all the social problems alone. The big problem that these institutions have, according to Michael Porter, is a matter of scale. The institutions that traditionally must resolve social problems do not have sufficient monetary resources to do so (Porter M., 2013).

For his part, Yunus Muhammed, social entrepreneur and the father of microcredit, contends that the problem in itself is not the economic model chosen. Globalization, as a general principal of business, can bring more benefits than any other model in the fight against poverty. However, without proper guidance, it can be very destructive (Muhammed Y., 2007). In addition, Porter explains that now businesses should not only look to generate economic value but they must also look to generate social value. Porter calls this double value creation “shared value” (Porter M., 2013).

Today more and more entrepreneurs are seeking to comply with this double value creation. Among them are social entrepreneurs to whom the creation of social value is, if not above, at least at the same level of importance as the creation of economic value. But what is a social entrepreneur and what are the features that differentiate them from a conventional entrepreneur? What is it that makes a social entrepreneur able to solve problems that neither the public nor private sector can resolve?

Business entrepreneur or social entrepreneur: what is the difference?

Jean Baptiste Say, one of the main exponents of the classical school of economics, defined an entrepreneur in the 19th century as someone who “transfers resources outside an area of lower productivity to one of higher productivity and greater return. (Say J., 1803). In this way, a business entrepreneur seeks to generate economic value covering a need (Porter M., 2013).

According to Martin R., director of the University of Toronto, and Osberg S., researcher at Stanford University, the definition of entrepreneur denotes a special, innate ability to detect and act on opportunities; the ability to combine “thinking outside the box” with a unique brand of determination, to create or produce something new in the world. Entrepreneurship describes the combination of a context in which there is an opportunity, a number of personal characteristics required to identify and pursue it, and the creation of a particular result (Martin, R. & Osberg S., 2007).

A social entrepreneur shares these qualities with business entrepreneurs, however some differences do exist. Sarah Alvord, director at Harvard University, David Brown, executive director at Technology Underwriting Greater Good (TUGG) and Christine Letts, researcher at Harvard University, define social entrepreneurship as follows:

“Social entrepreneurship creates innovative solutions to immediate social problems and mobilizes ideas, skills, resources and social arrangements required for a sustainable social transformation.”

For these authors, the challenge of a social entrepreneur is to resolve a whole range of social problems through the sustainable reduction of issues of health, education, economic development, and political and cultural matters associated with long-term poverty (Alvord, Brown and Lets, 2004).

Unlike business entrepreneurs that are looking to generate economic value, social entrepreneurs are also looking to resolve social problems by creating a change in society.

Why would a social entrepreneur be able to resolve ancient problems that neither the public nor the private sector have been able to resolve?

In the book Understanding Social Entrepreneurship, The Relentless Pursuit of Mission in an Ever Changing World, Jill Kickul and Thomas S. Lyons explain why social entrepreneurs have certain qualities that make them a more attractive alternative to public or private institutions:

• Social entrepreneurs are passionate. They have a personal commitment to the problem they are addressing because it has a particular meaning to them. Whether the motivation comes from a personal experience, some second-hand knowledge, or a vocation, they have an intense desire to find a solution to the identified problem. This does not suggest that political or public officials are not passionate about certain topics, but their passion is usually tempered by political realities, which could lead them to fail to focus on resolving a particular problem.

  Similarly, business entrepreneurs are generally very passionate about their products or services, but this passion is concentrated in their ability to satisfy the needs of their customers and in generating economic gain. Therefore, the difference between a social entrepreneur, civil servants and business entrepreneurs is found in the origin of this passion. For civil servants the source of that enthusiasm is their political interests; for a business entrepreneur it may originate in the generation of monetary gain; while for the social entrepreneur the source of their passion is the desire to generate a change in society.

• Social entrepreneurs are not bureaucratic, they are agile. Unlike governments or large companies, social entrepreneurs are not subject to a large number of rules and procedures. Like small businesses, they are agile and strategic, and they can be mobilized quickly and decisively to resolve a problem. Entrepreneurs recognize a window of opportunity in order to capture a market, which does not remain open indefinitely, and they take it.

  At the same time, a social entrepreneur understands that the solutions to social and environmental problems are limited, and that the opportunities to carry them out are constantly changing. This agility to adapt to change is crucial.

• The social entrepreneur allows transformations. The majority of the products or services offered by private businesses or by the government are based on transactions. Products and services are exchanged through a relation of short-term operations. Therefore, they provide solutions in the short term, but they do not produce changes in the long term. They do not produce transformations. Social and environmental problems are not solved with transactions. The social entrepreneur seeks to change the system, which produces changes in the long term.

• The social entrepreneur uses social capital.They bring together people and organizations to focus on the solution of a problem and use capital from different sources to resolve it. With this network of trust, they implement solutions to create a shared mission and vision that foster a positive change.

• They are focused on the mission, not on seeking profit. The social or environmental mission is the most important priority. Social interests are above personal interests.

• They are accountable to society, not to investors. They need higher standards of accountability: They must measure their impact, justify their existence and give this information freely.

• Social entrepreneurs encourage social and environmental innovation. Governments are constrained by the constant fight between those who want change and those who want to preserve the status quo. Problems require changes to be solved, and to achieve systemic changes, innovation and creativity is needed. The difference with a business entrepreneur is that when considering an innovation, they evaluate its commercial potential, while the social entrepreneur not only evaluates the commercial part, but also the potential that it has to resolve social and environmental problems.

• The social entrepreneur skirts around politics. While the government debates the problem, the social entrepreneur is working to resolve it. Not being involved in politics, the social entrepreneur has greater agility to negotiate conflicts between different parties.

• Social entrepreneurs facilitate development by providing equity and stability. When working on issues like education, health, poverty reduction, community development, etc. they create opportunities for socioeconomic progress, develop equity and reinforce stability. Private companies do not believe this is their role. Governments can help to ensure fairness and stability, but they are usually limited by the factors mentioned above, which prevents them from facilitating the requirements for transformative change.

How do you know how to identify a social entrepreneur?

In Mexico, there are different organizations that are looking for this type of entrepreneur, but what are their criteria for selection?

IGNIA¹ is a company with entrepreneur capital, with headquarters in Monterrey, which supports the founding and expansion of high-impact companies that support the base of the socioeconomic pyramid in Mexico. IGNIA differentiates a social entrepreneur by their characteristics and motivation.

For them, the motivations of a social entrepreneur must go beyond the simple willingness to generate economic benefits. They are driven by a commitment to humanity, they have a decision-making process that includes factors beyond economic ones, and they have a willingness to disrupt the established order. In addition, for IGNIA, a social entrepreneur must have certain characteristics, such as personal honesty, patience, integrity, and analytical and business rigor even more outstanding than a conventional entrepreneur. At the same time, they must have a high degree of resilience. (Serfati F., interview conducted on October 18, 2013).

On the other hand, ASHOKA², an organization that promotes social entrepreneurship at the global level through support to social entrepreneurs who seek to act as agents of change, has an entire methodology to choose their beneficiaries. The criteria for selection are based on five different points:

• Creativity: Social entrepreneurs must be creative, both in their vision and in the definition of goals and the resolution of problems. They act creatively when meeting opportunities and obstacles and offer original solutions.

• Entrepreneurial Quality Social entrepreneurs must be deeply committed to their vision and must not stop until it becomes a new rule or a new pattern of behavior in their society (regardless of whether this involves long years of relentless pursuit and the testing of different methods to achieve their goal).

• Social impact of the idea: The social entrepreneur’s idea must solve a major problem at the state level or beyond state borders. It must be sufficiently new, practical and useful so that the people who work in the field of action adopt it, once it is approved and proven. The idea should have a significant impact, considering the dimension and meaning of the impact.

• Ethical Quality: Social entrepreneurs should be honest people who are trusted instinctively. Their motivations must emanate from a commitment to serve others.

In order to find a solution to the multiple social and environmental problems that we face as a society, social entrepreneurs use the processes, tools and techniques of business entrepreneurs, which go along with their entrepreneurial spirit. However, unlike business entrepreneurs, they will have a defined social mission, regardless of whether the organization is lucrative, non-profit or hybrid.

This struggle to find a defined social impact plays a predominant role in the differentiation with business entrepreneurs, and will be accompanied by certain essential characteristics of social entrepreneurs, which are found in their motivation and personal characteristics, as well as in their innovative approach to various problems.?

Bibliography:

• Alvord, H., Brown, D., & Letts, C. (2004). Social Entrepreneurship and Societal Transformation: An Exploratory Study. The Journal of Applied Bahavioral Science, 40, 260-282.
• Kickul, J., & Lyons, T. (2012). Understanding social entrepreneurship, the relentless pursuit of mission in an ever changing world. New York, NY: Routledge.
• Martin, R., & Osberg, S. (2007). Social entrepreneurship: The case for definition. Stanford Social Innovation Review.
• Muhammad, Y. 2007. Creating a world without poverty, social business and the future
  of capitalism. Estados Unidos: PublicAffairs TM. P4.
• Porter, M (2013). Why business can be good at solving social problems. TEDGlobal
  2013. (Visitado el 24-10-2013).
• Say, J.-B. (1971), A Treatise on Political Economy or the Production, Distribution and
  Consumption of Wealth, A.M. Kelley Publishers, New York (First edition 1803).

By: Claudia González and Silvia González

Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico…

Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico, and that our entrepreneurial ecosystem is increasingly robust and includes more players.

Last September 17, the Scientific American published an article entitled “Why Can’t Mexico Make Science Pay Off?”, written by Erik Vance. It tells the story of Enrique Reynaud, a professor of molecular biology at the National University (UNAM) who, together with a team of geneticists, created the company Biohominis. With an initial funding of 500,000 dollars, awarded by the federal government, this technology-based company developed various techniques of genetic testing to identify people’s proclivity to hypertension, diabetes, cancer and metabolic problems, among other diseases.

Dr. Reynaud’s innovative company promised to become the type of enterprise that Mexico needs, in order to have sustainable economic development, and the story indicates that it had everything necessary to succeed: technological innovation, a good team, and outside financing. However, the company went bankrupt two years after it was created.

In Vance’s opinion, this case demonstrates that Mexico is the antithesis of Silicon Valley, and that we are very far away from using our talent to create global products, new technologies and startups. Vance’s article illustrates the severity and lack of rigor with which some people judge our country in terms of innovative entrepreneurship. According to estimates of the National Venture Capital Association of the United States, between 25 and 30 percent of startups fail, so it is inaccurate, unfounded and non-scientific to reach conclusions about the entirety of a country’s entrepreneurial ecosystem on the basis of a single unsuccessful case.

Of course, there are unsuccessful cases in Mexico, as in any part of the world, but there are also many that are very successful. The point that we want to emphasize in this article is that in Mexico there has never been a more favorable time like the present for entrepreneurs. We have macroeconomic stability, a variety of government programs that support innovation, virtually all the universities are working to promote a culture of innovation and entrepreneurship, and there are increasingly more angel investor funds and venture capital. According to the Global Entrepreneurship Monitor, the entrepreneurial activity in Mexico increased from 9.6% in 2011 to 12% in 2012, which shows that business ventures do “pay”.

The number of entrepreneurs who find a market opportunity is increasing, although their number is still small for the size of the country’s economy. The most important challenge we face is to create new high-impact companies, i.e., those that have a great product or service, an innovative business model, a competitive advantage difficult to imitate, provide employee advancement opportunities, have the capacity to generate well-paid jobs, and that have made major contributions to the country’s Gross Domestic Product (GDP).

Having a brilliant idea and being able to market it as well is not common, because in reality several factors must be met for an entrepreneur to be successful. According to Timmons and Spinelli (2009), an opportunity must have at least two of the following six critical factors:

• License
• Patent
• Exclusivity
• Good team
• Revolutionary technology
• Complementary assets

Of these critical factors, the most successful startups are those with a good team and revolutionary technology. This is exactly what Vance said that Biohominis had.

After seeing several cases of success and failure, we would add that other critical factors for success are patience, and having an investor who believes in the idea. All companies need time to consolidate and begin to generate profits. Although many experts believe this period takes an average of two years, the truth is that it can be considerably more, particularly when it comes to products with a high content of scientific and technological knowledge.

For example, Tesla, the electric car company, first reported profits in the first quarter of 2013, after 10 years of operation. Its founders, Martin Eberhard and Marc Tarpenning, financed the company for one year. Subsequently, Elon Musk began to invest in it, with the marketing idea of making electric cars accessible to all.

Amazon, the world leader in retail trade by Internet, was created in 1995 and it was not until 2001 that it reached its equilibrium point. Twitter was founded in 2006 and, until it went public on the stock exchange in early October 2013, the company still had losses.

KidZania, the Mexican chain of “education-entertainment” centers, reached its equilibrium point in 4.5 years, even though the business model considers not only the sale of tickets for children to the centers, but also contributions from their sponsors, as income.

Of course, for a newly created company to survive a decade without generating profits it needs several rounds of investment. But, in order to have commited investors, it must have an excellent product or service, a good team, and belief in the idea, so that investors will be patient.

Not all ideas are going to be successful, but the greater the number of good ideas that are put to the test, the better chances there are for success. And to have many ideas, you need an entrepreneurial ecosystem that encourages students, professionals, academics and adventurers to generate concepts with an innovative component. And this is where you see a significant advance in Mexico.

The private sector has created numerous awards and campaigns to promote entrepreneurship, such as the Santander Prize for Entreprenurial Innovation, the Desafío Intel, the Prize for the Student Entrepreneur, the IBM Start Camp, the BBVA Open Talent and Red Innova, among others. To encourage networking among young entrepreneurs, a variety of initiatives have also been created, like Startup Weekend, the Campus Party,, Startup Drinks, and Global Entrepreneurship Week, to mention a few.

For its part, the federal government created the National Entrepreneur Institute (Instituto Nacional del Emprendedor (INADEM), and offers a large portfolio of support programs to entrepreneurs and micro, small and medium-sized enterprises through the Fondo PYME, FINNOVA, PRODIAT, Innavapyme, Innovatec and Proinnova, and the Fund for Technological Innovation (Fondo para la Innovación Tecnológica), among many others.

The number of investment funds has also grown significantly in recent years. Funds like Wayra, Angel Ventures Mexico, Capital Indigo, Mexico Ventures, Venture Institute, Mexican VC, Gerbera Capital, New Ventures Mexico, and Latin Idea Ventures are relatively young and are leading a significant change in the availability of risk capital in our country.

According to a study done by Enrique Wiencke, ofVenture Capital, on average, venture capitalists in Mexico are men, 42.7 years old, with studies toward a Master’s degree, and have invested in companies for only 2.8 years.

This same study shows that these funds have invested, on average, in 3.7 companies, and their capital is worth around 55 million dollars. In the opinion of the majority of these investors, there is more money to invest than good ideas ready for market.

An important number of the good ideas must undoubtedly emerge from research centers and universities. The successful examples of the contributions of Stanford University to the growth of Silicon Valley and of Massachusetts Institute of Technology (MIT) to the development of Information and Communication Technologies (ICT) in Boston’s Route 128 show that universities have gone beyond their traditional roles of teaching and research, to become key actors of innovation for economic development.

The story of Biohominis, and the non-rigorous way it was portrayed by Vance in Scientific American, should not discourage or mislead anyone. On the contrary, it only shows that a good idea and a good team are not enough for a technological innovation to be successful. What is needed is strong managerial talent (about which Vance is suspiciously silent), and an entrepreneurial ecosystem that allows a company access to venture capital funds that support and invest in the idea, so that after some time the business will begin to generate significant revenue.

We do not know the reasons why Biohominis went bankrupt, but it would be interesting to study them so that other entrepreneurs can learn from the experience. What is certain is blaming their failure on the national ecosystem of entrepreneurship shows a lack of rigor, to say it lightly. Not all entrepreneurs succeed the first time they try. And, as Winston Churchill said, “Success is the ability to go from failure to failure without losing your enthusiasm.” If Dr. Reynaud is encouraged to try again, without a doubt his probability of success is going to be much greater.

It is certain that in the next few years we are going to see the creation of a greater number of Mexican high tech companies that are internationally competitive, arising from universities and research centers, and that will contribute significantly to the growth of the GNP of our country. It would be desirable that the numerous success stories that have emerged in recent years deserved the same level of attention and be published in international magazines, showing that the talent in Mexico is generating high value-added products.?

References

• Timmons, J. A., Spinelli, S., 2009, New Venture Creation: Entrepreneurship for the 21st Century, 8th edition, Mc Graw Hill.
• Vance, E., Why Can´t Mexico Make Science Pay Off?, Scientific American Magazine, October 2013 Issue.