The financial and economic crisis has highlighted the central role of a sound and well-functioning financial sector for economic activities. An efficient financial sector allocates the resources saved by a nation’s citizens, as well as those entering the economy from abroad, to their most productive uses. It channels resources to those entrepreneurial or Investment projects with the highest expected rates of return rather than to the politically connected. A thorough and proper assessment of risk is therefore a key ingredient off sound financial market. Business investment is also critical to productivity.
Therefore economies require sophisticated financial markets that can make capital available for private-sector investment from such sources as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other financial products. In order to fulfill all those functions, the banking sector needs to be trustworthy and transparent, and-?as has been made so clear recently-?financial markets need appropriate regulation to protect investors and other actors In the economy at large. Technological readiness In today’s globalizes world, technology Is Increasingly essential for firms to compete and prosper.
The technological readiness pillar measures the agility with which an economy adopts existing technologies to enhance depreciatively of Its Industries, with specific emphasis on its capacity to fully leverage information and communication technologies (Sits) in daily activities and production processes for increased efficiency and enabling innovation for competitiveness. 14 Sits have evolved into the “general purpose technology of our time,15 given their critical pullovers to other economic sectors and their role as industry-wide enabling infrastructure.
Therefore CIT access and usage are key enablers of countries’ overall technological readiness. Whether the technology used has or has not been developed within national borders Is irrelevant for its ability to enhance productivity. The central point Is that the firms operating In the country need to have access to advanced products and blueprints and the ability to absorb and use them. Among the mall sources of foreign technology, FDA often plays a key role, especially for entries at a less advanced stage of technological development.
It is important to note that, in this context, the level of technology available to firms in a country needs to be distinguished from the country’s ability to conduct blue-sky research and develop new technologies for innovation that expand the frontiers of knowledge. That is why we separate technological readiness from innovation, captured in the 12th pillar, described below. Business sophistication There is no doubt that sophisticated business practices are conducive to higher efficiency in the production of goods and services.
Business sophistication concerns two elements that are Intricately linked: the quality of a country’s overall business networks and the quality of Individual firms’ operations and strategies. These factors are particularly Important for countries at an advanced stage of development when, to a large extent, the more basic sources of productivity Improvements have been exhausted. The quality of a country’s business networks and supporting industries, interaction, is important for a variety of reasons.
When companies and suppliers from a particular sector are interconnected in geographically proximate groups, called clusters, efficiency is heightened, greater opportunities for innovation in processes and products are created, and barriers to entry for new firms are reduced. Individual firms’ advanced operations and strategies (branding, marketing, distribution, advanced production processes, and the production of unique and sophisticated products) spill over into the economy and lead to sophisticated and modern business processes across the country’s business sectors.