Technological Change and Innovation in Latin American Emerging Economies: The Pork Industry of Antioquia, Colombia

Introduction

According to Peter F. Drucker (1997, pp. 71-73), “our time is one of those transformation periods. [...] every organization must incorporate in its structure change management”. That is the case of agribusinesses in Latin America facing direct consequences of globalization. If they do not appeal to technological change and innovation management, the likely result will be to close all further operations. The extensive advance of free trade and the lack of relative competitiveness compared to foreign companies which no longer consider a risk to settle activities in some of these countries is a serious threat to Latin American businesses. This is especially true for companies in emerging economies where competitive advantages are temporary due to hypercompetition, changing business environments, and internal management obstacles (D’Aveni, 1994).

The relationship between technological change and innovation can be traced back from the mid-20^th century (Ruttan, 1959), with special reference to the works of Joseph A. Schumpeter who states technological innovation is defined as the combination of factors of production in such way that the output is different to current applications (Schumpeter, 1939). Today, innovation systems are accepted as a very important determinant of technological change (Hekkert, Suurs, Negro, Kuhlmann, & Smits, 2007) and have positive effects on organizational performance (Sapprasert & Clausen, 2012). To further illustrate the effects of technological change and innovation in organizational performance, Castellacci & Zheng (2010, p. 1856) argue that technical progress and technical efficiency as components of productivity growth “are significantly related to the level of technological opportunities (as measured by the acquisition of external knowledge)”.

In this context, emerging economies are very attractive to investors. Latin America is reaching the potential for becoming a continental emerging economy with a variety of business environments that range among agricultural, industrial, and service-based economies attracting interesting amounts of foreign direct investment (ECLAC, 2012).The technological change in the region is evident, especially when considering agribusinesses. Argentina and Brazil have established serious competence with the United States to become the main suppliers of products such as soybeans and corn. There is no doubt Brazil is now an economic super power (Brainard & Martinez-Diaz, 2009). Most of the North American corn and soybean crop cannot compete with the prices of Brazil and the Southern Cone of America. This has directly impacted the whole feed industry on the continent. Of course, some of these effects could be blamed on ethanol industries in the United States which have demanded larger amounts of grains, but the “grass-roots” problem might not be the ethanol production.

In this Latin American scenario, Colombian businesses are impacted as well since they are facing new challenges in connection with deficient management, low productivity, few financing opportunities, and poor international skills in the small- and medium-sized enterprises (SMEs) that constitute 92% of the entrepreneurial infrastructure of the country (Bustamante, 2013). One of the most impacted industries is livestock and feed production. Not only do they compete against finished product from all over the world, they also have feedstock experiencing trade preferences which change the entire dynamic of the supply chain. Since no company can escape from the forces of globalization (Deresky, 2005), managers (or farmers in this case) must meet market expectations by increasing the relative competitiveness of their companies and optimizing their available esources.