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Writer's pictureExequiel Lacovsky

Innovation, small businesses, and exports in Latin America



Small businesses play a crucial role in the economies of developing countries. In Latin America, for example, small enterprises make up over 90% of all businesses and employ nearly 67% of the workforce. Despite their significant role in job creation, their contribution to GDP remains relatively low, and they account for only about 10% of exports (1). Promoting small business exports has been a challenge for Latin American countries, yet it is viewed as a critical factor for development and economic growth. For years, various initiatives have been introduced to address this, including training and education programs, export promotion efforts, grants and credits, free trade agreements, and tax incentives. Still, the lack of competitiveness among small businesses continues to hinder their expansion into international markets. Innovation is seen as crucial to closing this competitive gap (2). However, the relationship between small businesses and innovation is complex, as they face various barriers that limit their ability to innovate effectively. Among the challanges small businesses  face in pursuing innovation are (3):


  • Access to funding: Securing sufficient funding, in general, and especially for research and development, is complex. The inherent risks of innovation can deter investment since returns are not always guaranteed.

  • Technological knowledge: Many small companies lack information on technological advances,  infrastructure to support innovation projects, and established procedures for idea generation.

  • Talent Acquisition: Attracting and retaining talented people is difficult for small companies. 

  • Mindset: Some businesses lack an innovation mindset, resisting new ideas and changes to established practices. Additionally, concerns about failure can stifle creativity, preventing companies from pursuing ambitious ideas.

  • Market factors: High levels of market uncertainty, competition, and inadequate business models further complicate the innovation landscape for small businesses.


Closing the innovation gaps, a pathway for exporting  


PROCOMER (Promotora del Comercio Exterior de Costa Rica) is Costa Rica's export promotion agency, which is pivotal in facilitating and promoting international trade for local companies. It offers a comprehensive array of services designed to assist businesses in expanding their presence in global markets. PROCOMER supports exporters through market research, matchmaking services, trade missions, training programs, and various promotional activities to enhance their competitiveness on the international stage. The agency emphasizes adding value to Costa Rican products and services, fostering innovation, and helping small and medium enterprises navigate the complexities of global markets.

In this context, Noga is collaborating with PROCOMER to develop a training program to address the innovation challenges identified above. The program is called “Training Program for Companies with Export Potential”. It aims to empower future exporters to enhance the value of their products and services through innovation, thereby increasing Costa Rica's exports. The training program includes group and personalized sessions, with a primary objective of assessing each company’s current status, identifying competitive gaps in their innovation capabilities for export, and creating an innovation road map.

Together, Noga and PROCOMER have identified 15 companies that meet the program's requirements through an open call and a thorough analysis of their development stages and potential entrepreneurial teams.


The group sessions will comprise eight topics:


  • Introduction to the principles of innovation, strategies, and models.

  • Incorporating an Innovation Mindset

  • Collaborating with External Partners

  • Models and Financing Management

  • Management Tool for Businesses 

  • Business Development Models

  • Organizational Strategy


At the end of the course, there will be a pitch day, during which each company will present its innovation landscape, detailing the technology or methodology it will use to add value to its exports.

During the individual sessions, highly specialized mentors—primarily Latin Americans residing in Israel—will engage with each company to assess its innovation status and identify how innovative mindsets, technologies, or processes might add value to its products/services.

By the program's conclusion, Noga will deliver an innovation roadmap for the participating companies. These will include innovation gap analyses and a roadmap to address these gaps, offering targeted recommendations in relevant areas covered throughout the course.


A Step Forward


At Noga, we are eager to witness the success of this inaugural pilot program in Costa Rica. We expect the participating companies to adopt an innovation-driven approach that enables them to improve their exports. In the meantime, we aim to replicate this program in other Latin American countries to share Israel's mindset and best practices in innovation.



Notes


(1) Barbero, M. I., & Vidal Olivares, J. (2022). Latin American Small and Medium-Sized Enterprises: A Historical Perspective.

(2) Carvache-Franco, O., Carvache-Franco, M., & Carvache-Franco, W. (2022). Barriers to innovations and innovative performance of companies: a study from Ecuador. Social Sciences, 11(2), 63.

(3) Op. cit.

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