IST Report 2015

Science, Business & Innovation

Innovation Study Trip

2015

Brazil - São Paulo & Rio de Janeiro

Differences in innovation between Brazil and the Netherlands

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Differences in innovation between Brazil and the Netherlands

Report and outcomes from the Innovation Study Trip 2015 to Brazil, executed by 19 advanced bachelor and master students Science, Business & Innovation from VU University in Amsterdam, the Netherlands.

EditorsIris HoefnagelsAswin YauMilou van RijnbachSara Lopes van den Broek

Layout and designAswin Yau

© Copyright 2015Stichting Buitenlandse Excursies voor Science, Business & Innovation StudentenVU University AmsterdamFaculty of SciencesStudy Association SubliemDe Boelelaan 1085 - P0041081 HV Amsterdam

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Table of contentsIntroduction

1. Summary of visits

2. Development of Brazil

3. Innovation in Brazil

4. Benefiting from local needs

5. Organizational culture and innovation

6. Work ethic and internationalization

Conclusions

Word of thanks

Bibliography

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List of participants by research theme

27th of February: DSM Brazil - São Paulo1st of March: Tour through Rocinha - Rio de Janeiro2nd of March: PUC Rio - Rio de Janeiro3rd of March: Rabobank Brazil - São Paulo3rd of March: Dow Chemical Company - São Paulo4th of March: Consulate General of the Netherlands - São Paulo4th of March 2015: CIETEC – São Paulo5th of March: Enactus Insper - São Paulo

2.1 The Brazilian government2.2 The companies located in Brazil2.3 The Brazilian society2.4 Conclusion

3.1 Attitude towards innovation3.2 Innovation by sector3.3 High- and low-tech innovation3.4 Sustainable innovation3.5 Conclusion

4.1 Multinationals moving to Brazil4.2 Start-ups in Brazil4.3 Conclusion

5.1 Work mentality5.2 Organizational structure5.3 Communication5.4 Collaboration5.5 Conclusion

6.1 Language6.2 International employees and expats6.3 Working motives6.4 Hierarchy6.5 Conclusion

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IntroductionBefore you lies the Innovation Study Trip 2015 Research Report, result of the study trip that took place during the first week of March. On the 26th of February, 19 students and 2 teachers travelled to Brazil for a week of inspiring company visits and cultural experiences in São Paulo and Rio de Janeiro. In all, eight visits were paid to several types of institutions, including large multinationals, a university, an incubator, a bank, a government agency and a not-for-profit organization. During these visits, research was conducted by student teams, each focusing on a different subject that all focused on one central theme.

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Brazil was chosen as the destination of this year’s study trip for several reasons. First of all, Brazil is classified as a BRICS-country, and as such is expected to be a motor of the international economy. Secondly, it is a developing country, and therefore it tries to find answers to several social and economic issues such as illness, poverty, lack of education and corruption. Sustainability, innovation and entrepreneurship have the potential to become important sources of solutions to these issues. Innovation has an important part to play in Brazilian development, and the country therefore served as the perfect location for the Innovation Study Trip 2015!

Development can lead to different kinds of new processes and ideas that we have never thought of in the West. The most important question that had to be answered during the trip was: “What can we learn from Brazil concerning sustainability, innovation and business processes?” We therefore decided to focus the research on the differences in innovation processes between Brazil and the Netherlands. The central theme of this study trip is Developing Innovation. The theme is made up of several subthemes, each of which describes a different aspect of innovation and entrepreneurship.

In the first subtheme, called Development of Brazil, students researched which growth potentials and opportunities are available to the Brazilian market, but also which challenges have to be overcome in order to continue the recent economic growth and which actors are essential in this process. The main question that needed to be answered in this subtheme is: “What is essential for the development of Brazil to encourage innovation and entrepreneurship?”

The second subtheme focused exclusively on Innovation in Brazil and in this subtheme research

was conducted to find answers to questions such as: “In which sectors is innovation a necessity?” and “What is the local attitude towards innovation and entrepreneurship?” The central goal was to find out how Brazilians give meaning to the concept of innovation.

Benefiting from Local Needs is the third subtheme and, as its name suggests, this subtheme is centered on the country’s economic assets. Here, special attention is paid to environmental factors that influence innovative capacity. Here, questions such as “Which economic benefits does Brazil have?” and “Where do strengths and opportunities lie?” are especially relevant.

The fourth subtheme focuses on work mentality, organizational structures, communication and collaboration within and between organizations in Brazil. The subtheme is therefore called Organizational Culture and Innovation and strives to answer questions like: “How can the work mentality of the Brazilians be described?” and “To what extend do Brazilian companies communicate with other (international) parties and how does that influence innovation?”

In the last subtheme, called Work Ethic and Internationalization, special attention was paid to employees and their interactions in Brazilian corporations. In particular, working motives, language (barriers) and collaboration with international employees are analyzed. Questions such as “How can the work ethic in Brazil be described” and “What is the level of international orientation” were answered here.

In this research report, the findings of these subthemes are presented. In the remainder of the report, a short summary of each of the visits will be given, followed by the results and conclusions of each of the

Introduction

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subthemes discussed above. We will then conclude the report by giving general conclusions and answering the main question: “What can we learn from Brazil concerning sustainability, innovation and business processes?”

Introduction

List of participants by research theme

Development of Brazil- Ruben Douma- Vito Havik- Josefien Knoeff- Laura Mittelmeijer

Innovation in Brazil- Michiel Drijver- Charlotte Schulte- Eva Sormani- Mark Ulrici

Benefiting from local needs- Lindi Barla- Sophie van den Berg- Florentine van der Laan- Ivor de Rond

Organizational culture and innovation- Iris Hoefnagels- Sara Lopes van den Broek- Milou van Rijnbach- Aswin Yau

Work ethic and internationalization- Fleur de Haan- Sjoerd Herlaar- Deline Verkerk

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Introduction

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1. Summary of visitsDuring the Innovation Study Trip 2015, eight visits in all were paid. We were able to take a look at various innovative processes conducted by large multinationals at DSM and Dow Chemicals. An international perspective on all aspects concerning business processes in Brazil was provided by our visits to the Rabobank International Office and the Consulate General of the Netherlands in São Paulo. Our visits to both CIETEC, the largest start-up accelerator program in Brazil, and the entrepreneurship department at the PUC Rio university, gave us a unique insight into the circumstances entrepreneurs have to deal with when starting a business in Brazil. And finally, the visits to the Rocinha favela in Rio de Janeiro and the projects set up by Enactus Insper in São Paulo made us understand the importance of social entrepreneurship programs.

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27th of February 2015: DSM Brazil - São PauloDSM is a big multinational company specialized in the production of chemicals for various industries, which started in the Netherlands in 1902. More than a hundred years later DSM has hundreds of international offices around the globe and employs close to 25,000 people. It started as a mining company, but has now grown to be one of the biggest worldwide players in life and material sciences. It operates under a “People, Planet, Profit”-sustainability regime and has been very successful in implementing it throughout their business operation30.

During our visit to DSM, we were given the opportunity to learn more about both innovation and sustainability processes within the company, focused on both Animal & Human Nutrition and Bio-Based Products & Services departments. The result was a highly interesting and profound insight in this extremely successful and innovative company. One of the visit’s highlights was the tour through the Animal & Human nutrition plants, which gave us a unique insight into the everyday activities of DSM Brazil.

1st of March 2015: Tour through Rocinha – Rio de JaneiroThough not technically a visit to an organization, our tour through the favela called Rocinha made such a deep impression that we wanted to include it in this research report. Rocinha is the biggest favela in Brazil. Its official records show that about 70,000 people lived there in 2010, but our guide told us that the actual number was between three and four times as high. The largest part of the favela is built on a steep hill, overlooking most of the sea-side of Rio de Janeiro. In comparison to most urbanized slums, Rocinha has better infrastructure and a well-developed business environment, with hundreds of small local businesses such as banks, pharmacies and restaurants. Most

houses have basic sanitation, plumbing and electricity facilities. In addition to local businesses, there are numerous local non-governmental and non-profit organizations that initiate and maintain social projects. Many teachers, workers and volunteers live in Rocinha.

Our guides all live in the favela, and though they originally come from western countries (United States, England and Portugal), they would not want to live anywhere else but in the favela. Rocinha is a poor neighborhood, but regardless of that, its inhabitants are very welcoming to visitors. They are hospitable and cheerful, and are proud of the community they have built together. As they should be; together they have provided the favela with solutions that take care of all basic needs and set up an impressive number of small businesses. The result is beautiful and inspiring, a community where people know and support each other, and which is completely safe for visitors. Various incidents happen between police and drug cartels, but most of the population of Rocinha is not affected by these. In short, our visit to Rocinha was an eye-opening experience, which erased many of our former prejudices and made us see how innovative and resourceful people can be without having much money and other resources.

2nd of March 2015: PUC Rio – Rio de JaneiroPontifícia Universidade Católica do Rio de Janeiro (often abbreviated as PUC Rio), is one of the largest universities of Rio de Janeiro. With its 12,000 undergraduate and 2,500 postgraduate students, it is considered to be one of the best universities of Brazil and South-America. The university has especially successful programmes in Engineering, Computer Science, Business and Economics, Law and Psychology, for which it is widely acclaimed. The institute aims to foster and develop diversity


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amongst its students, and encourages internationalization through various exchange programs with top universities in the United States and Europe27.

Our visit to PUC Rio gave us the opportunity to meet our Brazilian colleagues and learn more about their innovation and entrepreneurship programmes. We met several students that try to start their own companies through the Genesis Company Incubator, and students that help others be successful entrepreneurs by advising them on diverse and important topics through the Empresa Júnior Program. Their drive and dedication to these programs was inspiring, and we have developed a deep respect for their motivation and the hard work they put into making their programs a success.

3rd of March 2015: Rabobank Brazil – São PauloRabobank is a Dutch bank that operates in several locations in Brazil. Its headquarters is located in São Paulo. Rabobank has been operating in Brazil since 1989, and has been a licensed Brazilian bank since 1995. It offers several financial products and services. We visited Rabobank International Desk. Here, an international team consisting of both Dutch and Brazilian employees support Dutch companies that hope to pursue international business opportunities. It offers a set of services that help their clients adjust to the culture, language and banking methods in Brazil28, 29.

Our visit to the International Desk of Rabobank Brazil was very informative. We had the opportunity to listen and engage in a discussion with two Dutch employees that live in Brazil. The visit offered us unique new views on Brazil, its politics, economy, and its population. These insightful new perspectives made us rethink and adjust our initial impressions on Brazil and enabled us

to sketch a picture of it that was as complete as possible.

3rd of March 2015: Dow Chemical Company – São PauloThe Dow Chemical Company (commonly known as Dow) is a multinational that has its roots in the United States. It produces chemicals, agricultural products and plastics, and is the second-largest manufacturer in its industry. Most of its revenue streams from business-to-business interactions. Its tagline, “Solutionism”, clearly indicates their way of operating and their substantial innovation capacity. Dow has offices and production plants in 160 countries and employs around 54,000 people worldwide. São Paulo alone houses seventeen of Dow’s manufacturing facilities and five research centers, and also functions as headquarters of South-America13, 14.

During our visit we learned a lot more about how innovation and sustainability is implemented in all of Dow’s operations. We were also able to have in-depth discussions with three of Dow’s researchers about the projects they’re working on, what they think about innovation in Brazil in general and how the chemical industry in Brazil is changing. A tour through one of Dow’s labs gave us a good idea of what happens there and what problems their researchers are trying to solve. Especially the engaging discussions with some of Dow’s employees were interesting for us, because they gave us yet another insight in Brazil and its many opportunities and challenges.

4th of March 2015: Consulate General of the Netherlands – São PauloThe Dutch government has fourteen representations in Brazil, of which the Consulate General in São Paulo is one. The people working at the Consulate General are occupied with providing information for Dutch citizens that wish to travel to, move to, or do business in Brazil. We paid a visit to the Consulate’s


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Innovation Attaché. They supply various services that helps the Dutch adjust to the differences in business and culture in order to proactively improve the Dutch innovation capacity. It forms part of a worldwide network that connects knowledge of innovative developments to related trends22.

During our visit to the Consulate General we were able to discuss various topics related to doing business in Brazil with representatives of the Consulate and the Innovation Attaché. Similarly to our visit to Rabobank, this visit offered a new view on Brazilian innovation and entrepreneurship, this time from a political and governmental perspective.

4th of March 2015: CIETEC – São PauloOn the enormous campus of the University of São Paulo (USP) stands a large building that is used exclusively by CIETEC (Centre for Innovation, Entrepreneurship and Technology). As the name suggests, CIETEC focuses on improving and developing Brazilian innovation through entrepreneurship and technology. It is an incubator program that helps young entrepreneurs grow their business by supplying various important services, such as office space and consultancy. Most of its incubated companies are located under the same roof, which makes exchanging ideas easier. All start-ups incubated are high-tech, but the problems they are trying to find solutions for are varied10.

During our visit we heard more about how CIETEC operates and how it is organized, and we were able to meet the entrepreneurs of three incubated companies. After the presentations we were given a tour through the building, to see all the installations and prototypes the start-ups are currently working on.


5th of March 2015: Enactus Insper – São PauloEnactus is an international social entrepreneurship program that aims to connect universities and businesses around the globe in order to set up successful projects that transform lives and make communities more sustainable. The name of the organization, Enactus, is an acronym for “Entrepreneurial”, “Action” and “Us”. Enactus Insper is part of the Enactus community belonging to Insper, which is one of the universities of São Paulo. We did not visit Enactus at Insper University; instead, we visited their projects in the Vila Nova Jaguaré favela32.

One of the projects Enactus Insper works on is focused on one of the poorest favelas of São Paulo. They try to socially reform the slum in order to make it completely sustainable. There’s a community center, people are keeping up a communal vegetable plot where all produce is grown, and a new factory will be built soon where ex-convicts and immigrants will be put to work to produce the so-called One Dollar Glasses (glasses that can be produced for a little more than one dollar, so that even the poorest people are able to receive the right eye care).

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Brazil has gone through a huge development the past five to ten years (see figure 1). From being a country with great poverty issues, it has worked itself up to being a world player in various fields. The consequences of the corruption scandals in Brazil, especially the problems with state-owned company Petrobras, and their impact on possible investors have demonstrated that the economy of Brazil is still highly fragile, despite its enormous potential for growth3. Because of these recent occurrences, a clear prediction about the development of Brazil is more difficult to make. A lot will depend on the structural changes that are made in government policy.

To accomplish these required changes three different types of stakeholders are of most importance: the Brazilian Government, the companies located in Brazil and society itself. During our stay in Brazil we have gained insights about all these stakeholders’ interests and their behavior. The variation in the study trip’s program ensured us enough input throughout all these different actors to come with a thorough analysis of this subtheme. In this chapter, we will try to answer the following questions, which will elaborate about the role of each actor in the development of Brazil:-

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How does the Brazilian government influence the development of Brazil? Does she have a supporting or repressing role?How active are companies in the further development of Brazil? What necessities are there for these developments?Does the Brazilian society contribute to the development of Brazil? Are schools and universities involved in this process? What struggles are necessary to overcome in order to enable the further development of Brazil?

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2.1 The Brazilian GovernmentThe Brazilian government, perhaps the most influencing actor for the development of Brazil, is the biggest cause of a major crisis at the moment, with a lot of corruption scandals. We often noticed a strong negative sentiment towards the Brazilian government throughout different layers in society.

During our two visits to the favelas, both in Rio de Janeiro and Sao Paulo, we have learned how the lower class citizens are opinionated towards the government. The lower class often feels they are not taken seriously, and do not believe that the government actually cares about their situation. In these favelas, people take care of their own community without interference of the government. The community leaders have a delegation that communicates with the local government. This communication is not very smooth though; both parties have very different opinions on what the

society needs and how to accomplish more welfare. The government takes very little responsibility in the basic needs provision such as sewerage or electricity, according to the residents of the favelas.

In contrast to this criticism, we have also learned that the government is increasingly involved in the lower-class society. During our visit to the Rabobank, we have learned about a social project initiated by the local government, named ‘minha casa, minha vida’. In this project the government is giving the residents of the favelas affordable houses. The favelas are demolished and instead, flats are built. The improvement in this case is that the residents are now the owners of their houses. This causes them to be responsible for their own domestic environment, which has a positive influence on the welfare of the neighborhood. In recent years, federal government’s spending on social programs has increased in


Figure 1: Brazilian annual GDP growth rates, set out against growth rates of other developing economies. As can be seen in the graph, Brazilian GDP has been growing from 1995 till 2010, except in 1998-1999 and in 2009, where the characteristic fall in growth rates due to the worldwide economic crisis can be seen in all GDP growth rate curves19.

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education, housing, healthcare and social assistance programs (see figure 2).

Moreover, the government does not provide decent healthcare. The basic healthcare services are affordable, but the resources are limited and waiting time for treatment is often long. The accessibility of the public health care is therefore very poor (see figure 6).

We have learned during our visit to start-ups and other organizations that the government is criticized for the high level of bureaucracy. Because of a lack of trust within and between organizations and the government, a lot of paperwork needs to be filled in to start and maintain a business. All agreements have to be tangibly fixed on paper, according to the Rabobank. This makes it hard for new businesses, or foreign businesses who want to start in Brazil, to build up their company. There is a term for this, which we have come to know at the Dutch Consulate in São Paulo: ‘Custo Brasil’. Custo Brasil stands for all the costs, time and hassle new companies have to go through before they can actually start doing business. This slows down entrepreneurship and ultimately slows down the innovation

and development in Brazil (see figure 12). This was confirmed by the start-up incubator CIETEC. According to them, the government does not create the right environment for start-ups to successfully make it through the early phases. Dutch companies that plan to expand to Brazil are advised by the Dutch Consulate to engage with a good lawyer and tax advisor to help bridge this ‘Custo Brasil’.

For the perspective of innovation this is a poor situation. In most countries start-ups take part in innovative processes, with a less rigid view on established products and processes than the larger, more advanced companies. Luckily, some progress is made in this area. According to the Dutch Consulate, the government has started several projects to lessen the bureaucracy.

Among larger companies a lot of criticism on the government exists as well. Especially the high amount of rules and regulations, and the on-going changes that are made by the government are seen as an obstructive factor. The absence of continuity condemns the companies to a lot of extra effort, only to comply with the changing regulations.


Figure 2: Federal government expenditures on social development programs. Even though the population’s perspective on the government’s participation is mainly negative, the government has increased spending in health, education, social assistance and housing11.

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Another point of criticism is the short-term vision of the government. For structural, social and sustainable development, a long-term vision is needed. Most politicians however are only concerned with their own 4-year term. The focus in this short term is mostly on preserving jobs. For instance, in some parts of the country, roads are very poor. Asphalt roads or railways would contribute to lower transportation costs of resources for companies and more sustainability due to less fuel consumption. The government however, wants to preserve the jobs of the truck drivers, and therefore does not invest in better roads, railways or maritime transport.

Public-private-partnerships (PPP’s) are very hard to accomplish, which we have learned at DSM and Dow Chemicals. The Brazilian law states that when you do an integrated project with a university and want to file a patent, the given patent is divided by the amount of contribution made by each

partner. Some contributions however, such as research or knowledge, cannot be given a fixed value. This causes insecurity for companies concerning their share of a patent going into a project. It is impossible for them to calculate their share and there is no possibility to change the size of this share afterwards. These uncertainties prevent intellectual property protection (see figure 3).

In the area of nutrition, DSM would like to co-operate with the government to help and solve malnutrition problems in the lower classes of Brazil. In Guatemala and Costa Rica, DSM has worked with the respective governments to solve the vitamin A deficit, which causes blindness among young children. They add vitamin A to several other products to prevent this blindness. It is very hard to accomplish a similar public-private partnership in Brazil due to the political climate and accompanying instabilities.


Figure 3: Patent Applications per country in 2011 (for Brazil only the numbers of 2010 are known). Brazil has least patent applications of all countries listed here, indicating the limited intellectual property protection37.

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During our visit to DSM however, we have also learned about some successful collaborations between the company and the government. The government buys sachets full of nutrients from DSM for lunches at public schools. This provides them with better health and therefore more welfare. Another example of a successful PPP is the recourses for eco-friendly lamps that DSM provides while GE and Philips are collaborating with the government to replace old lamps.


2.2 The companies located in BrazilEven though the situation in Brazil could be improved a lot, there are also many actors in Brazil with great potential, such as companies and businesses. Where the government is seen as a delaying factor, rather than a stimulating one, the business community has a great perspective of growth (see figure 4). The large availability of land and the rich resources, combined with the increasing wealth among the entire Brazilian population, provides Brazil with a major part of the required attributes to stimulate economic growth. The largest growth is expected to be in the agricultural sector and therefore a large part of innovation takes place within agro- and food sciences. In 2005, the agro-food sector was valued at US$254 billion, which accounted for 28 percent of the country’s GDP. Brazil has the largest agro-food trade surplus in the world (see figure 5)36.

The factor of sustainability slowly becomes more important in innovative processes. As for most developing

Figure 4: This table points out that Brazil is seen as the second worldwide growth opportunity, above other enormous economies as India and the United States31.

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implies that individuals or organizations act in their own self-interests, and in this case often contrary to the interests of the rest of the world population. Although we felt a strong social involvement at various companies, it cannot be expected from them to harm their own competitiveness by taking counterproductive measures just to reduce greenhouse gases. Government legislation is of most importance in this matter.

Beside the sustainability projects that businesses are involved in, they also stimulate social projects. DSM, for example, cooperated in the project described earlier to provide better lunches for children at public schools. Recycling is one of the processes Dow Chemical focuses on and the way plastic is collected contributes also to a social benefit. This is because the poorest people in Brazil can make some money collecting plastic bottles on the streets. These bottles are bought by a corporation at the beginning of therecycling chain which provides them with a small payment. In this situation, sustainable and social development is combined.

countries the emphasis on sustainable innovations is not seen as a priority. The primary reason for this is that the reduction of greenhouse gases hardly coincides with the economic growth directly. Nevertheless, very recent developments give Brazil a more promising outlook concerning sustainability. Laws and regulations have been adopted that counteract the formation of waste26. This, together with natural circumstances (such as the recent scarcity of water in certain areas of Brazil), forces companies to a more efficient and environmentally friendly performance of its production processes.

Our findings show a larger emphasis on waste reduction within companies, rather than on the reduction of greenhouse gases. A reason can be that a reduction in exhausted gases is more difficult to achieve in a growing industrial sector. An increased efficiency and a reduction of the waste stream cause a direct cost reduction and are therefore carried out earlier by the companies. The so-called ‘tragedy of the commons’ is a perfect metaphor to describe this situation. It

Figure 5: Agribusiness in Brazil, one of the most important foundations of the Brazilian economy2.

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2.3 The Brazilian societyThe people of Brazil have shown us an inspiring attitude. Where the circumstances did not always give them a reason to be cheerful, we encountered a vivid and positive attitude towards their future. For us, Dutch people, coming from a well-organized society with relatively much prosperity, it was a genuine reality check.

During our visit to Rocinha, the biggest favela in Brazil, we learned what a strong community is able to do. The favela has its own unwritten rules that are being respected and controlled by the community. Furthermore, the favela takes care of their own water supply and has contracts with a private electricity company. The community leaders receive money from renting market stalls on the main road.

Rocinha is one of the exceptions of a favela with sewerage and other facilities, of which the community is very proud. The community is able to sustain itself despite the lack of support from the local government. You can sense the positive energy of the people that want to improve their lives, by starting businesses for instance. However, with limited support of the government the steps forward are very small.

Despite this positive attitude, there is also a lot of room for improvement. Our research has indicated that the most important factor for the development among the Brazilian society is the enhancement of education. With the significant rise of the middle class in slightly more than ten years, it is only logical that a large majority of this population is not highly educated. Research taught us that “a more educated society even translates into higher rates of innovation, higher overall productivity and faster introduction of new technology”33.

The younger generation, that is educated at for instance the universities we visited (PUC Rio and University of São Paulo), considers sustainable and social development as a priority in Brazil. Several entrepreneurs at CIETEC have shown us very creative and promising sustainable technologies, such as organic fertilizers by Horizonte Fértil or ozone environmental solutions by Brazil Ozônto. However, it may take one or more generations for Brazil before a high level of education is provided to the majority of society.

To increase Brazil’s position as economic global power, one aspect that needs to be improved in particular

Figure 6: A map of the world, showing the efficiency of healthcare systems around the globe. As can be seen, Brazil falls in the lowest efficiency category, with a score of less than 20. The efficiency score is based on factors such as money spent on healthcare, waiting times and quality of provided health care11.


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is the mastering of the English language (see chapter 6). Where the upper class of the society is in most cases perfectly able to communicate in English, the vast majority of the Brazilian population struggles when using the English language. With the increasing globalization of the world economy this is one of the key factors that will play a part in the development of Brazil.

The Brazilian healthcare system, as mentioned before, is also of very bad quality. A big part of the population has no healthcare insurance and the only healthcare they can get are the basic health facilities from the government. Those facilities have very limited resources and the waiting time for a decent treatment is often very high (see figure 6). The incentive for the societal top layer (including the people regulating the public healthcare) to improve the healthcare system is absent. Improvements made would be at the expense of their own healthcare, since they can afford a better healthcare insurance.

Another point we were informed of in Brazil is the mind-set and ambition of the youthful population. The young vivid entrepreneurs we met showed a great

drive to thrive in the business world, but according to most questioned experts these entrepreneurs are the exception rather than the rule (see chapter 6).

We have also learned that the idea of going to a university has not been part of their culture. A large part of the young society sets different goals for themselves. According to DSM, becoming a professional football player, actor, or celebrity is preferred over a career as a doctor, academic or business (wo)man. A change in this mind-set can give a great boost to the development of Brazil. The enormous potential of this large group can flourish when this change in mind-set is coupled with a high-quality educational system.

Despite the challenges, improvements have also been observed in the past years. In Brazil, the society and its welfare is divided into five classes, of which the lowest two are truly poor. While 55% of the entire Brazilian population was part of the lowest two classes in 2003, this has been decreased to 28% in 2014 (see figure 13)17. The level of unemployment is the lowest in history (see figure 7). The Brazilian middle-class has significantly increased. One positive aspect of this is that


Figure 7: Unemployment rates in Brazil, in percentages, for the years 1995 until 2014. Unemployment rates have decreased significantly during these years35.

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the middle-class spends substantially larger percentages of their earnings on education and healthcare. But people are also interested in buying consumer goods they were not able to afford before, of which cars is the main example. It serves as a symbol of their newly gained wealth. As a result, there is very little interest in sustainability.

2.4 ConclusionBrazil is a fast developing country. It is a world economy that is still growing very fast. The growth is dependable on three stakeholders: the government, the local businesses and the society. We have spoken to very different parties and have made our conclusion about the question how the development of Brazil takes place and what the impacts of the parties on this development are. The government is an important stakeholder, because they are the law entity. They are the cause of a major crisis in Brazil, because of all the corruption scandals. We learned that the government is just starting to contribute to the social development, but a lot more changes are needed.

Companies see the high level of bureaucracy as a threshold for development. Laws are changing very often and not many certainties are given to entrepreneurs. It is also very difficult for foreign companies to build up their company in Brazil. Sustainability is not a priority to the government. Not only start-ups in sustainable technologies, but also large companies as Dow Chemical and DSM share the opinion that the government should facilitate sustainable development a lot better.

The companies want to grow further and want to be sustainable. Brazil is a growing industrial country wherein people do not realize the real need for sustainability. There is slight sustainable development, but overall there is not a big need for this. We can conclude that the society is not completely ready to make a sustainable transition. There must be a change of mind-set within the society to develop even more socially and further as a country.

Brazil is a country that has enormous possibilities and potentials, but it faces large struggles due to the lack of long-term vision and efficiency of the government, the lack of education

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and the mind-set of the society. For both companies, entrepreneurs and the society, there are a lot of challenges to develop these potentials into social, economic and environmental benefits.


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3. Innovation in BrazilBrazil is socially and economically falling behind compared to western-European countries and the United States. They moved up in the list of world’s largest economies, but inflation remains a problem24. This study is about what the innovation process looks like in Brazil. Therefore, the main question of this subtheme is how people innovate in Brazil. The focus is mainly on how companies in Brazil approach innovation and what difficulties they encounter.

Sub-questions that have to be answered in order to give a complete answer to the main question are: -

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By searching for answers to these sub-questions we should be able to answer the main question about how Brazilians innovate. The next section will go through the results and the last section will present the conclusion of the research.

What is the attitude of Brazilians towards innovation? In which sectors is innovation needed most? Do people mostly rely on high-tech or low-tech innovation? How much do people value sustainable innovation in comparison to other innovation types?

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3.1 Attitude towards innovationThe general, most simplified definition of innovation is: “Innovation is the successful exploitation of new ideas”6. However, the director of innovation at DSM Brazil described innovation as a change in behavior and a change in mind-set. It is about taking another perspective instead of really creating something new4. It is also about looking at the same thing from different perspectives. Generally, the innovation process takes about five years. However, in the business of DSM it takes even longer. Also, a lot more money is needed to innovate. The reasoning behind this is that their business is highly technological. Moreover, their products have to meet strict requirements due to legislation. For example, in the nutritional business the products of DSM first have to be approved by the FDA34.

The literature describes five stages of innovation: creation, generation, implementation, development and adoption6. The view of the Brazilians on innovation fits within these stages. The Brazilians agree that mind-set, behavior and communication are key concepts during the process. For example, during the recent merger

of DSM and Tortuga23, a team was assembled with employees and managers from both companies. They took time to communicate within the team and with all other co-workers. They were keen on listening to all ideas, regardless of the function of the employee who voiced it. It did not matter if the idea came from a cleaner or from a manager. They first wanted to align the behavior and attitude of the employees of their businesses, before they started the physical process of their integration. The process of integration in this context is remarkable as well. The meaning of this integration is that one company will not become part of the other; they have to integrate and create something new, something on which all parties can agree. That is what Brazilians mean by being open-minded and changing behavior in the innovation process. They create something new, like a new company, and guide everyone through the process towards adoption.

The firm Dow innovates on a geographical favorable position; on local markets with unique demands and local competences. According to


Figure 8: The four types of innovation12.

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Dow they need to invest more money, because the lack of money causes many innovations to fail.

Talking about innovation, we can recognize four different types; product, process, paradigm, and position6 (see figure 8). Paradigm innovation is not about creating something that is entirely new. It is about ‘changing the way we do things’. Previously we described that DSM joins this view. Besides paradigm innovation, DSM Brazil also makes use of product innovation throughout three platforms: Biomedical, Biobased and Advanced Surfaces.

According to Marcos França, manager of R&D New Business Development at Dow Brazil, innovation within Dow mostly comes from the customer. Scientists working for Dow visit their clients and so come up with new insights and develop these in the company. This refers to innovation that is market-pull oriented. At Dow we also learned that they are involved in Public Private Partnerships sometimes. The difficulty, however, is all the paperwork, as described in the previous chapter of this report. The large level of bureaucracy makes this kind of collaboration less attractive. Moreover, Dow does not really apply the concept of open innovation. They try to capture knowledge from the environment by hiring interns, for example, but they are not willing to share their information with the market. Marcos França argued that no company really commits to open innovation, because it remains a risk and you could give away ideas that are worth billions of dollars.

This is why companies are trying to exchange information to a certain extent, but only to the extent that is needed for their own competitive positioning. This was confirmed by the Brazilian staff at DSM, who did not seem to know the whole concept of open innovation and from this the

conclusion could be drawn that DSM does not commit to open innovation either. However, a Dutch expat working at DSM argued that DSM does collaborate with the government and also with other companies like Dow Chemical to create new products. This leads to the conclusion that large companies in Brazil do collaborate, but they do not necessarily apply the concept of open innovation.

The Dutch Consulate General understands that Brazil can learn from the Netherlands concerning science, technology and innovation. Furthermore, they pointed out that innovation is important, but it can reduce the amount of jobs. If that is the case, no one will agree with the idea.

Entrepreneurship is taught at PUC Rio and the professor of this program described that teaching entrepreneurship is the transfer of tacit knowledge. It is teaching something that cannot be described literally, but has to be learnt by experience. To illustrate this: It is different from teaching calculus, it is more like teaching sports. So it is possible to teach entrepreneurship. However, it is important that students understand the process of thinking before the exploitation of an idea. For example, two students founded ‘Brownie do Luiz’. Brownies existed already in many different countries, but in Brazil the brownie was not a common product yet. With the slogan “Brownie is the new bolo” (Portuguese for cake), they managed to introduce these brownies in Brazil and create a business that has already been very successful for seven years9.


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3.2 Innovation by sectorAccording to the Rabobank, if you want to start a business in Brazil, you can best take over an existing business and change small things, rather than start a whole new business. This results in a focus on incremental innovation. The Rabobank also gives the advice to innovate in a market-niche. The reasoning behind this is that there are fewer competitors in the market niche, so the risk for competition is lower and you will get more time to develop and grow. Local companies are already active in the market and can therefore produce at a lower cost. This enables them to sell products at a lower price, so as a foreign company you have to come up with a really competitive idea in order to be successful in Brazil.

Each sector in Brazil has its own problems. The infrastructure is the first sector that needs innovation (see figure 9). The infrastructure throughout the country is very bad. This has to do with the weather conditions, but also with the size of the country. The

problems regarding the infrastructure are the worst outside the cities, but also within the big cities in Brazil a lot can be improved. As mentioned in the previous chapters, the government’s short-term vision has not played a supportive role in dealing with this problem.

Moreover, the supply of water is very bad at the moment in Brazil. Several companies like Dow Chemicals, the Rabobank and also DSM mentioned that the drought in Brazil and mainly in São Paolo leads to a faulty water supply. This causes a lot of trouble throughout the state of São Paolo. According to the Rabobank, investing in the water infrastructure is an opportunity.

The Rabobank also suggested another sector that needs improvement in Brazil: healthcare. The basic healthcare insurance in Brazil is free for the whole Brazilian population, but the care provided has a lot of concerning disadvantages (see figure 6). For example, health institutions treat people with an additional, paid, healthcare


Figure 9: State of Brazilian infrastructure, as compared to four other fast-growing economies. 144 countries were analyzed, and Brazil falls behind in all relevant infrastructure categories8.

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insurance first, before reserving time for people that do not have the money to pay for an insurance. This leads to very poor healthcare provision for people who cannot afford an additional healthcare insurance, and could mean that they have to wait for days before they get help at a hospital or other health institution.


3.3 High- and low-tech innovationWhether high-tech or low-tech innovation dominates in the Brazilian market is hard to say. DSM showed that they commit to both high-tech and low-tech innovation. However, it is not very clear how these types of innovations are balanced within the company. A scientific career is not one that is pursued by many Brazilians, which leads to a lower degree of high educated people and therefore to a lower degree of high-tech innovation. The bigger international companies are more likely to commit to both high-tech and low-tech innovation. The smaller local companies are more likely to commit to low-tech innovation only. For example, a representative of the Genesis Company Incubator at PUC Rio told us that of all companies at their incubator, only three out of thirty start-ups have a technological perspective. This does not give an idea about the ratio high-/low-tech, but it becomes clear that many small companies enter the market without technological innovation. It depends on the company and the sector whether high-tech or low-tech innovation is more important, though.

Figure 10: Maslow’s Pyramid of human needs20.

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In general we can say that low-tech innovation is bigger in size if you compare this to high-tech innovation in Brazil. The reason for this probably is the level of poverty. Because of poverty, people have to innovate with a lack of resources. Moreover, they cannot afford high education in order to comprehend and apply high-tech solutions. If we look at the pyramid of Maslow we see why low-tech innovation is more apparent in Brazil20 (see figure 10). Poor people are in a physiological state, at the bottom of the Maslow pyramid. Before developing themselves personally and investing money in innovating high-tech applications, people first have to innovate low-tech in order to provide themselves with food, water and shelter (see figure 11).

3.4 Sustainable innovationDSM is a leader of production and innovation in health, nutrition and materials. The innovation platform of DSM is bringing life science and material science competences together. Nowadays the innovations of DSM are more focused on sustainability. The concept of People, Planet, Profit (PPP) is applied, which means that sustainability is balanced by these factors. PPP is an example of sustainability in a broader perspective; corporate social responsibility (CSR). DSM wants to fight malnutrition. For them it is a business opportunity. Adding vitamins to food will result in a healthier diet and a healthy society. Despite their interest, they experience some problems with this idea. The additional vitamins are an option for the food manufacturer, which makes their food more expensive. So if the government does not make it mandatory to add vitamins, the implementation will fail.

Moreover, the Rabobank explains the importance to fight local challenges, like slavery. If a company is able to do so, they can create a stream of revenue and improve society. How they can fight this, remains unclear, but it gives


Figure 11: Distribution of wealth across Brazilian social classes7.

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an idea about what sustainability is all about.

As mentioned earlier, sustainability can be an opportunity for innovation, but sustainability is important in existing businesses as well. Therefore, Dow and DSM adopted Safety, Health and Environment (SHE) guidelines. These rules have to guarantee a sustainable working environment, which hopefully results in a more sustainable business that is safe and healthy to work for. The environment is included in these rules as well – Chemicals are, for example, collected separately in order to process them as safely as possible. This is done to protect life and earth.

Waste separation is mandatory for chemicals, but can be applied to practically everything. In Brazil you can find different bins for plastics and paper, for example. Unfortunately, the infrastructure to realize the waste separation is not established yet, according to the Dutch Consulate General.

From the visit to CIETEC we learned that there are a lot of incubated companies which focus on innovation and specifically on sustainable solutions. For example, Brasil Ozônio developed a technology that which can clean air by the use of ozone. This is also an example of high-tech innovation and we saw that more companies at CIETEC are high-tech-oriented.

At Enactus Insper we saw more low-tech innovations, with the One Dollar Glass as most important example. It is a very simple product which gives a lot of people with bad eyesight new perspectives and more possibilities on a brighter future. Besides, the people producing the glasses are also people who do not have a good position on the labor market, for instance refugees and ex-prisoners.


3.5 ConclusionWe can conclude that the Brazilian perspective on innovation is different than ours. Brazilians take behavior as their starting point for innovation. Employees or entrepreneurs have to be open-minded to initiate innovation. By being open-minded they accept improvements and adopt innovations.

Innovation in Brazil is mainly problem-solution orientated and therefore the main focus lies in incremental innovation. In other words, corporate social responsibility is a central theme but does not create radical innovation. Besides this, Brazilians view innovation often as more a change in behavior than purely focused on products.

The investments made to solve problems are mostly focused on primary needs, like food and shelter. For the future, more has to be invested in R&D and education to realize radical and high-tech innovation.

People, Planet, Profit is a concept from which you can look at innovation, so sustainability for the environment is only an option if it also comes with profit. This concept is adopted by the Brazilians. For example, innovation may not reduce the amount of jobs. Environmental sustainability is an opportunity, but in Brazil all the three P’s must be considered.

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It is known that doing business in foreign countries includes adjustments to the new market and way of doing business. Companies need to anticipate to the local market. Mostly, adjustment is needed, because of a difference in culture and differences in available resources. This raises the question: how is it possible to adjust your business to a foreign market? For companies wanting to expand to Brazil, it is important to realize how to adjust to Brazilian business culture. Brazil and the Netherlands are different in many aspects, such as size, culture, language, climate, political system, and development. The aim of this chapter is to learn how several companies, both large and small in size, operate in Brazil. What is unique about their way of doing business? And more specifically, how does doing business in Brazil differ from what we are used to in the Netherlands?

It is known that many multinationals are situated in Brazil. To find out what the reason is for these multinationals to move to Brazil, several questions were formulated beforehand to serve as guidance during the trip. The questions that had to be answered were: -

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To answer these questions, the visits to DSM, Dow and Rabobank were of most importance.

How smaller companies anticipate to the local market and how their strategies differ from the larger sized companies is answered by the same questions, plus a few other ones. - What

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How and why do (foreign) companies conquer the market? And how big of a factor is the unique Brazilian culture in this process?What are the biggest struggles in moving your business to Brazil?

What is it like for entrepreneurs to start a small business in Brazil and what are the troubles these start-ups might face?Do Brazilian start-ups create or innovate products that the local market can benefit from?How do start-ups handle sustainability issues?

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4.1 Multinationals moving to BrazilA huge reason for most multinationals to extend themselves to Brazil is the amount of resources available. Brazil, with its favorable geographical position, is more than 200 times larger than the Netherlands and contains a lot of important raw materials28. As they said at Rabobank: “Brazil has it all!” Because of its enormous size and therefore an incredible amount of possible customers, most disadvantages are faded away (economies of scale)28. Especially for companies operating in the agricultural sector, Brazil comes with amazing opportunities. About 40% of the global food market depends on Brazil36. Furthermore, Dow is generating over 30% of their agricultural revenues in this country. It seems clear why becoming an established company in Brazil could be favorable.

However, it is not always attractive for companies to invest in the Brazilian economy (see figure 12). As mentioned in the first chapter, the legal system in Brazil has a lot of disadvantages. This system is not only a really slow working one, but there is also a lot of corruption. Furthermore, to agree to a partnership with the government is not always beneficial. This is due to the fact that the government is not always reliable in Brazil, which means that, as a company, you can never be sure

about receiving your money on time, for example.

But there are more elements that need attention before entering the Brazilian market. To be accepted in the market, one has to go down to a local level. A lot of customers in both Business to Consumer (B2C) and Business to Business (B2B) markets value any collaboration with local or national companies/products. They prefer stimulating their own national market and their trusted products, plus you need to have native employees; you cannot have too many expats. Furthermore, it is a must to speak Portuguese. Although many are able to speak English, you can only establish a business relationship in Portuguese. A good example of making a western multinational more personal for Brazilian citizens is given by DSM. Their strategy was to purchase Tortuga. Tortuga is leader in nutritional supplements for ruminant and beef cattle market in Latin America. Their product was really appreciated by the farmers in that region of Brazil. So when DSM bought Tortuga, they kept their animal nutrition line: same food, same product name, as this name sounds familiar and trustworthy to locals. This example shows how firms can operate in ways consistent with their strategic focuses, such as on high growth economies particularly for Brazil.


Figure 12: Part of the Doing Business 2011 report, a research comparing the ease of doing business in 183 countries. As can be seen in this table, Brazil ranks 127 in the ease of doing business, and scores relatively low for most categories. This table shows the different factors that inhibit doing business in Brazil18.

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Despite of all differences between Brazil and other parts of the world, there are only few structural differences between companies here and elsewhere. Apart from examples mentioned before, the products and their production processes stay the same. Only sometimes, very rarely, new products are conceived in Brazil. This is mainly caused by the unfavorable legislation surrounding R&D.

There is one big difference in how to work as we noticed at Dow. All people working in labs are also visiting the clients themselves to see what is going on when a problem occurs and then to find a solution. This is because of their limited research opportunities due to the unfavorable environment for R&D. If a new product is needed in Brazil, it will be developed in, for example, the USA. This way, much-needed scientists have to spend large parts of their time doing things they are not trained for, and amongst the employees this development is generally seen as an impediment.

Another difference noticed during all visitations, is that Brazilian companies have a big focus on Corporate Social Responsibility (CSR). This is within the company itself, but also their customers. This has to be more important in Brazil, because of the still existing slavery, for example. The latter is the reason for Rabobank to not be active in the Amazon. When you are (in)directly involved with such things, the company itself is responsible. In the Netherlands the government has that control duty.

To advise and accompany Dutch companies in doing business in Brazil, there is a Consulate General located in São Paolo. Next to providing passports and visas, they try to boost the Dutch economy in Brazil by being an advisory institute, stimulating innovation and reducing taxes. Dutch organizations are very interested in doing business

with Brazil, and vice versa. In this way, the Consulate General not only provides help for Dutch people interested in entering the Brazilian market, but also for Brazilians looking to expand in the Netherlands.

When moving to Brazil, a company must pay close attention to building relationships with others. Brazil is very focused on creating strong relationships before doing business. But once you are in, you are in for the long run and you could make serious money because most of the time there are no competitors yet. Furthermore, an important fact is that Brazil does not acknowledge foreign diplomas: you have to own a national one. At the consulate they told us that Brazil is a country for big companies to establish, you have to have resources beforehand. It could take over a year to even make a start and there is no exit-strategy (such as selling your company on the stock market, for example), so Brazil is not a favorable environment for start-ups. The easiest way to enter the market seems to be acquiring existing Brazilian companies or entering niche-markets.

The location of the company could play an important role in the success. Because of the size of Brazil, the way of doing business differs per region. In the south of Brazil the way of doing business can be compared to the German style. In the north there is an African way of doing business and surrounding Sao Paolo and Rio de Janeiro the style is equal to the South-European one.

The most inhibiting factor is the governmental regulations and legislation. It is extremely expensive to start a business. You have to pay an accountant for all the legal work you are not familiar with and you always need an lawyer. Most small companies cannot afford such costs (Custo Brasil). This issue will be explained in more detail later.


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Another mayor struggle is the infrastructure in Brazil. The infrastructure is very poor all over the country (see figure 9) . Surrounding São Paolo and Rio de Janeiro it is possible to travel by car, but up in the north there are no asphalt roads at all. It is not expected to be better soon, because there are so many other important things to improve. Furthermore, it will be an almost never ending project due to the size of the country.

Recently, the economic growth in Brazil has stabilized. On the other hand, according to the Rabobank, consumerism and wealth is increasing. Higher social classes are growing, meaning that more people achieve an income that enables them to buy consumer products (see figure 13). One development that makes this apparent is the increased number of applications for credit card registrations. Slowly people are getting more educated and this leads to a different distribution over the five existing social classes. The poorest leer gets smaller while the middle classes are getting bigger. According to the Rabobank, the need for better education is also getting bigger, which causes a higher pressure

on the government. People no longer accept poor education conditions; even the simplest jobs are having a hard time finding employees with the proper educational background.

But it is getting better. Because of the growing economy and the better educated people, Brazil will be getting out of their third-world status. At the Rabobank we learned that the banking system is also totally different and hard to get used to, one of the main problems is high base rate of 12.25%. This makes it hard for people to deal with money, especially for the poorest among the society.


Figure 13: Transition from the traditional pyramid-shaped social class division to the diamond-shaped current division. An enormous growth of the middle class (C) has led to the increase in consumer market5.

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4.2 Start-ups in BrazilThe opportunity to start a small business is almost only possible to find in market niches. However, there are many rules imposed by the government which slow down the process to create a start-up. The most important bridge to overcome is the innovation law. This law decelerates young start-ups by only supporting bigger companies instead of the smaller ones starting from university25. Another threshold is Custo Brasil, which means that all foreign products get a higher charge than Brazilian products. For example, every machine is charged 70% extra taxes by the government; in America it is only 10% which makes it much more profitable to locate the R&D in America instead of Latin America. This also counts for lawyers and accountants.

CIETEC, the largest incubator in Brazil, is using another manner of implementing innovations; entrepreneurs come with an idea which can be approved or declined after a difficult selection process. Only 12 out of 25 ideas are getting realized every 4 months. After the selection they will get many opportunities to implement their technological innovation. There are three main funders for the selected innovations: CNPq, Finep, and Fapesp. Therefore many tips have been given by Mr. Nunes at CIETEC: If you want to get your own company with a new technological innovation, you should overthink every step as many times as possible. That is because from the moment of registration you will continuously make costs. Young entrepreneurs need a good lawyer and accountant. If they decide not to hire them, there will be a very small chance of success.


4.3 Conclusion Brazil is still a third-world country, which makes it ideal for start-ups and sustainable initiatives. There are many ways to create market value and there are so many different types of markets in which to operate because of Brazil’s size. The benefits for sustainability are definitely present but are expensive to realize, the government is forced to first create a strong foundation on education, medical facilities and public transport. However, the smaller start-ups and companies are very innovative and are desperately searching for the best low-tech or high-tech innovation to implement at the right time. For example CIETEC, they are the ones choosing which innovation succeeds or fails. Brazil Ozônio and Horizonte Fertil are examples of CIETEC’s selection, they are concerned about sustainability in terms of water and atmospheric pollution.

As the Dutch Consulate General in Brazil expected that the country would attract over $60 billion on foreign investments, it can be expected that many (foreign) entrepreneurs and business investors continue to face both the challenges and opportunities that the country’s market offers. Therefore, how to play into market needs is of large value to these investors. The government is playing a major role in the process of the success of foreign investments. The rules composed by the parliament need to change to help Brazil develop. At this moment it is hard to make a profit out of an investment. The provision of basic human needs are a priority right now, especially forced by the people. After that there may be a better chance of success for a foreign company or start-up in Brazil. But remember: once you are in, you are in for the long run.

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Corporate culture has a big influence on how business is conducted, and how innovative processes are shaped in a company. A company’s employees give shape to corporate culture, and since innovation processes are all inherently based on how people work together, exchange knowledge and form new ideas, the culture of a company forms the basis of corporate innovation. Organizational culture is defined as the behavior of employees and the way they give meaning to what they do16. Culture in corporations defines the principles, beliefs and values according to which each employee should operate. It is the cumulative result of various social factors such as (local and company) history, type of organization, operations of organization (based on defining factors such as technology-intensity, markets served, product types), strategy, company structure (including the way the organization is managed) and national culture.

Because organizational culture has such a defining influence on innovation, we want to investigate in what ways the Brazilian company culture differs from Dutch company culture. In order to do so, we want to analyze several of the mentioned influences on company culture (work mentality, company structure and management style) and then evaluate several factors that are based on corporate culture and can have a big impact on the way a company innovates (communication and co-operation within and outside of the company’s boundaries). We have collected information mainly by asking questions and observing how employees operate in their working environment during our company visits in Brazil. The main research questions we wanted to answer were:

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--

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In order to answer these questions, research in start-ups, SMEs and multinationals was all equally relevant. We were able to conduct our research during every visit we made on the study trip.


What is the organizational structure like? How can the management style be defined? How can the work mentality of Brazilian employees be described? How do employees communicate with each other and toward outsiders? To what extent does communication with third parties occur? How does this encourage innovation?

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5.1 Work MentalityThe mentality of the employees has a great impact on the functioning of a company. As was mentioned at DSM, if you have any goals for a company, for instance becoming more sustainable, you have to engage the employees in this process. It is important that they understand the company’s vision and mission and want to participate. Throughout our visits, we discovered great similarities between the work ethic of the employees between companies from different backgrounds, for instance multinational/national or big/small companies.

It is well known, that creativity is an essential quality of innovative firms6, 12. And this was well noticeable amongst the employees. When you live in a country where the government is not playing a supportive role in helping your company to succeed to become innovative, you have to find ways on your own to deal with the competitive market, thus being creative.

With this creative attitude, openness is a requirement. And this open attitude was recognized during the company visits as well. Everybody, no matter which company it was, was willing to tell openly about how the company copes in the current market and what their struggles, opportunities and threats were. They even seemed to be extremely excited that there was a great amount of interest in the activities of the firm that it seemed to work as an extra trigger to tell us more. An institution as CIETEC, an incubator, even has openness as a necessity for all the firms that are incubated there. If the start-ups have financial or technical problems, they have the opportunity to ask each other for help, instead of reaching out to extern professional help.

As mentioned, companies often have to find their own ways to overcome barriers without the help

of the government. Moreover, their economic climate is not as developed as it is for western countries, thus hard work is a necessity. But the government and the economic climate are not the only triggers for Brazilians to work hard. It is generally known that Brazilians are status-sensitive and they put a lot of effort in achieving a high place in the social ladder. They are eager to earn a lot of money and have, because of that mentality, a lot of perseverance. Unfortunately, being status-sensitive also triggers corruption issues. But this does not mean that hard work has to have a negative connotation to it. The students of the incubator Empresa Júnior, showed us how dedicated they were to work hard without having a huge compensation for it. They were extremely eager to get their incubator to a higher level and gain experience from their assignments.


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5.2 Organizational Structure One of the key characteristics of the organizational structures of Brazilian organizations is that it is very hierarchic. This is mainly due to the organization’s employees: they are status-oriented and are sensitive to hierarchy. This results in organizations that have a well-determined culture and structure. There are several advantages and disadvantages to having such a hierarchical structure. Every employee knows his or her task description and will mostly focus on that. This leads to high visibility in the organization in terms of who works in which departments and on what projects. It could mean that getting things done within the organization is highly efficient. However, as was indicated during our visit to the Dutch Consulate General and Dow, this type of organizational structure generally passively inhibits innovation and co-creation within an organization. It also means that, when trying to start a collaboration process, making arrangements can take a long

time, so it counteracts collaborative initiatives. A problem should be approached both bottom-up as well as top-down simultaneously in order to make changes.

One of the biggest inhibitors of innovation in Brazil is the lack of a high-quality educational system see figure 14). As was mentioned before, this leads to a deficiency in highly educated people. This is a big issue for many high-tech and multinational corporations, and it results in engineers and scientists having to take on tasks that they were not originally hired to do, and that they do not enjoy doing in many cases. This apparent antithesis is an example why a highly hierarchical organizational structure might not be the best option for many Brazilian organizations at the moment.

Emancipation of women in the workspace is quite high in Brazil. In some developing countries one can observe a certain subordination of women


Figure 14: Net rate of school attendance of seven to seventeen year-olds, separated into region, gender, race and household location. The data shows that there has been an increase in the percentage of children that attends school in Brazil. It also shows that the school attendance depends on the region. In 2005, only about 50% of children received secondary education. Though the data is from 2005, it gives a good indication of the education levels of Brazilian society21.

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compared to men. This does not seem to be the case in Brazilian organizations, as far as we can tell. There seems to be about an equal amount of women in manager-positions as there are men, and it is not uncommon to see female CEO’s. Some of the largest Brazilian corporations are led by women (such as Petrobras; however, their president resigned recently due to corruption scandals). The level of women’s emancipation seems to be higher than in Europe – then again, maybe this difference is observed because of the different attitudes to females in top-positions. In Europe, special attention is placed on the fact that a person is female. Maybe the Brazilians just do not consider it as something special. Whatever the cause, we observed a generally high emancipation of women in professional environments.

Brazil in general is very sensitive to relationships. The same holds true for organizations. There is a high focus on behavior and human interaction, which leads to informal ways of conducting business. This approach sharply contrasts with the formal ways of doing business that we are accustomed to in north-western Europe. Conducting business with Brazilian corporations, especially for foreign organizations, takes time and endurance, which are both needed to establish the required personal relationships. However, spending this time on building relations is worthwhile, especially for Dutch organizations. Throughout the company visits we have seen how well Brazilians and Dutch work together. Our cultures, ways of working, and talents are compatible and blending them result in efficient and profitable co-operations.

5.3 CommunicationAs mentioned above, the open attitude of the employees to visitors was remarkable. Even though most companies, especially the bigger companies such as DSM and Dow, wanted passport information before a visitor is allowed to enter the company, they are very open and friendly to visitors. In general, there seems to be a big contrast in attitude if you compare Brazilian companies with Dutch companies. The employees of the Brazilian companies were interesting and interested and gave a made you feel very welcome to the company due to their open attitude. They clearly took time for our visit and organized the visits to the best of their abilities with great speakers, good food and drinks and plenty of time for questions.

This open attitude was especially clear at DSM in São Paulo, where all the speakers were happy to give the most information as possible and answer remaining questions. They clearly tried to present a program that fits Science, Business and Innovation students perfectly, and they succeeded. This triggered our students even more to ask more questions and to listen carefully to the speakers. The employees were also open to talk about the cultural and political problems of Brazil concerning for example governmental issues and health and sustainability challenges. More conversations about several subjects could be continued during the lunch break, where we were invited to have lunch together with the speakers.

Another company that gave us an unforgettable experience was Enactus Insper. Ralf Toenjes offered to take us to the favela in São Paulo where the company performs social entrepreneurship, in order to show us their real-time projects and to meet the community at the same time. The leader of the favela community project told as much about the favela as possible, despite her lack of speaking


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English. She explained how important she thought it was that people learn about living in favelas and she helped us gather the information to the best of her abilities. While she was speaking to us, there were three women cooking a lunch for us, which made our stay there extremely unique. The effort they put in making the delicious lunch was something we had never seen before in Holland.

However, something to take in to account is the information given by Dutch employees working at the Rabobank and the Dutch consulate in Brazil. They explained that there is a clear cultural difference between the Dutch and the Brazilians concerning communication. Dutch people are very strict and to the point, whereas Brazilians are considered more ‘soft’ in their communication. A clear example that the employees at Rabobank as well as the employees at the Dutch consulate mentioned was the use of the word ‘no’. In the Dutch culture it is of common use to say no if you are not going to do something, whereas Brazilians would say ‘maybe’ while they know that they are not going to do what is asked. This can lead to clashes between Dutch and Brazilians, because the Dutch can seem harsh and the Brazilians seem vague to the opposite cultures.

Another difference in attitude is the time planning. While in Holland employees are supposed to respond quickly to co-workers as well as visitors, in Brazil it is not irregular to wait with a response for several weeks.

What can the Dutch learn from the Brazilians concerning attitude and communication? Dutch can take the openness of the Brazilians as an example, since it stimulates a very social and friendly environment within a company as well as towards visitors. The openness leads to more open conversations which can be

beneficial for the company as well as for visitors. The Brazilians, however, could learn strictness from the Dutch especially concerning time planning and communication.


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5.4 CollaborationAs mentioned before, we visited two company incubators during the study trip. Both are located on the premises of a university, which is quite common for an incubator. Every project is screened before being approved to enter the incubator program. It is obvious that the collaboration between different incubated companies is very good. Everybody is willing to help one another out when necessary. This is also what we found when looking at the Brazilians. They are very friendly, warm-hearted and willing to help.

Furthermore, we went to two favelas. Collaboration within the favela is quite high as well. Enactus Insper is an organization which focuses on social entrepreneurship. Here the people are open for any collaboration to help the favela stay alive. This is also the basis for the collaboration with Enactus Insper, where students show how social entrepreneurship can help develop the favela.

When we look deeper inside a company, like DSM, we see that the collaboration within and between companies is going smoothly. At DSM there is a strict safety, health & environment protocol. All employees have a function to fulfil within this protocol. Gabriel Girari also notices that it is all about controlling the behavior of people. Everyone can and has the responsibility to speak up to one another when this person is operating unsafely. This indicates there is a good collaboration between employees. Furthermore, Luis Fernando Tomassia says there is much communication and collaboration between different departments and branches within the whole of Latin-America. Marcos França also indicates that there is a good collaboration between different branches in Latin-America at Dow.

What, however, attracts our attention is that many people do not have

faith in the government. This is mainly because of corruption, what recently also appeared to be the case at Petrobras1. There is a dominating culture where people can not rely on the government. This was noticed during visits at for instance DSM, the Rabobank and the Consulate General of the Netherlands. Marcos França at DOW indicates that there are many research-related collaborations with universities. These collaborations are being influenced by legislation, because they have to hire university employees on a project basis. This means the universities will not get any share in the intellectual property which is a result of the collaboration.

The language spoken in almost every company is Portuguese. This is because many people in Brazil have a poor English proficiency. We can see this when looking at DSM and the Rabobank, which are both Dutch companies by origin. This is therefore a barrier for collaborations with other companies from outside Brazil (see chapter 6). This is also indicated by Nico Schiettekatte from the Consulate General of the Netherlands. The Brazilians need to have an incentive to help you enter the Brazilian market. The economy of Brazil is one of relationships, which means you have to have a good relationship with people to be able to enter the market. A contract is needed for everything and you have to show your face regularly to work on the relationship.


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5.5 ConclusionDuring the various visits in Brazil, we gained a lot of insight about the organizational culture and innovation. Some of these insights were verbally explained during the visits, some were remarked by ourselves. It is interesting to see how people in different countries approach their company or institution in different ways, concerning work culture and innovation. It was remarkable to see the hard-working mentality of many of the Brazilian employees and students. As mentioned, companies have often to find their own ways to overcome barriers without the help of the government. Moreover, their economic climate is not as developed as it is for western countries, thus this hard working attitude is a necessity. And dealing with struggles requires creativity.

Furthermore, a remarkable open attitude was perceived during our visits. This open attitude was a very pleasant feature, because during the visits, everybody was eager to explain and answer any question there was. As we discussed before this openness isn’t solely a feature of their character, their take in innovation showed a lot of openness as well.

The management style in Brazil is very hierarchic, which is mainly due to organisations’ employees: they are status-oriented and are sensitive to hierarchy. Furthermore, management is relationship-sensitive and the emancipation for woman is quite high, which was noticed in many layers of the society. Due to the relation-sensitive style of management, collaboration is no exception. This takes place within the company, as well with clients and customers.


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In this chapter, the focus will be on work ethics and internationalization, as well as the internal activities related to the personnel of the different companies that have been visited. The ethics of multinationals, and if there is any difference in culture compared to their other offices in different parts of the world, will be analyzed. We will also look at the reason why these work-ethics might be different from other offices; if it might be because of the growth potential, a different perspective on rights and obligations or a different work standard. Last but not least, there will be some focus on how the different companies incorporate the creativity of the employees in the work-ethic and how these employees can change them if necessary.

Many students are interested in doing an internship in Brazil but are held back by the possible language barrier. Only the younger generations and the more important employees possess a certain standard of English. For this reason English is not spoken regularly in most companies. An important question is whether this influences the different processes within the different companies. Questions that need to be questioned regarding this subject are:--

--

Since many of these questions are related to the entire staff of a company, we decided that most of these questions should be asked during the different visits that we made. Besides, it is also interesting to see how foreign students see and handle the language barrier.


What language is used most to communicate?Does the lack of English affect the different processes within the company?How does this influence open innovation in any way?In what way have the expats or internationals experienced the language barrier and have they found any solutions for this problem?

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6.1 LanguageThe main used language outside and inside the workspace is Portuguese. Despite of the fact that most higher-educated employees possess basic English, it is not common to make use of this skill, as shortly mentioned in previous chapters (see figure 15). This has mainly to do with the insecurity of the Brazilians themselves. Because not many speak English regularly, there are not many opportunities to use and improve their English. Because the use of English is not necessary nor the norm, the use of English is rather avoided than encouraged because most people are afraid of making mistakes. This was very clear during the visits, where everyone excused him- or herself for the lack of knowledge in English while this lack of English was non-existent most of the time.

The reason that so few people are able to speak English in Brazil, is because English is not a compulsory course as it is here in The Netherlands. Naturally, this also has to do with the education system that is used in Brazil. There are two kinds of elementary schools,

public and private. The public schools have problems with the sheer amount of children they have to educate, and have very low standards as a result. At these schools, English is not a (compulsory) subject for the students, and so many children do not receive any education in English. The private schools deliver a far better quality of education, but cannot be attended by most children because of the high price that is asked by these schools. Most private schools do teach English, and it is almost necessary to receive education through one of these private schools in order to be able to attend a university.

A reason for this is that possessing the ability to speak English is not a priority for most Brazilians; many of them never leave Brazil and can therefore always speak Portuguese. Even if one has to leave Brazil this is usually to neighboring countries in South-America, where Spanish is spoken mostly. This is why most Brazilians are more proficient in Spanish, which is also more like Portuguese than English is.


Figure 15: English proficiency in South America. Brazil falls in the “low proficiency” category and ranks number 38 out of 60 countries analyzed. An increase of +2.80 points has been achieved for 2013, and English proficiency is expected to grow alongside with economic development15.

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The different universities of Brazil are without a doubt the places where most people, both students and educators, speak the best English. This is very logical, since most of these students have either already received higher education or are receiving it there. Secondly, because university is relatively expensive in Brazil, most of the students already went to private school, where education in English is more common. Still, the main language used is Portuguese instead of English. Just like in most companies, this does not create many opportunities for them to practice and better their English. Most students on the other hand, take every opportunity to speak English and better it if they can. There even were some moments where Brazilian students would start a conversation just in order to speak English.

6.2 International employees and expatsBecause most of the Brazilians do not speak English, foreigners and expats can experience serious problems when trying to communicate. In someone’s daily life he or she comes across many people that do not speak English, which means there is no way to exchange information. This is also in the little things, like shopping for groceries, asking directions or buying a ticket for public transport. This can all be easier when the foreigners or expats speak Portuguese, or the Brazilians speak English.

On top of that, almost every foreigner or expat noted that is nearly impossible to work in a Brazilian company without mastering the language first, even in international companies. As mentioned before, most of the Brazilians with a higher education do speak English, but they still prefer speaking Portuguese. If a foreign employee does not speak Portuguese, he or she will miss most of the group conversations because these will be in Portuguese. Another problem some expats have encountered is the fact that colleagues might avoid having to communicate with you because they would have to speak English to do so.

We found an example of this language barrier at Rabobank where Tanja Jungen works. She is from the Netherlands and has lived in Brazil for several years now. The common language at the Rabobank in Brazil is Portuguese because a lot of employees are not fluent in English. Luckily, she already spoke Portuguese and she only needed to improve that to be able to work at Rabobank. She also told us that there were only five expats from the total of 450 employees, despite the fact that Rabobank is an international company. This example shows that there definitely is a huge language barrier when you want to work in Brazil. Another example is Rogier Santing


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from the General Consulate, he said that he speaks Portuguese fluently but his wife does not; this makes her very dependent on him in their daily lives.

As was mentioned briefly before, another problem for international employees is that they do not usually possess the right certificates that are valid in Brazil. A lot of foreign certificates are not recognized in Brazil which makes it hard to get a job within a Brazilian company. Most expats are therefore usually being transferred from their native country to Brazil.

Something that is very characteristic for Brazilian people is that they are afraid to say no, according to the Dutch Consulate General. If you would ask a Brazilian something work related, he would never say that he does not know it or is not able to do it. They will probably talk around the subject and tell you that it will probably work out or maybe work out even when this is never going to happen. For a lot of international employees this could lead to frustrations because things are being promised but in the end they are not lived up to.

6.3 Working motivesThe main motives for working for Brazilians are money and status. This is probably due to the huge differences between the rich and the poor. Being rich automatically gives people more status and due to this also some form of power. Possessing a lot of money in Brazil is shown differently than in for instance the Netherlands. An example of this is the difference in having a car or not. In the Netherlands it is usually more about what kind of car you have. When people do have a car they will never use the public transport anymore, because having a car gives you more status and the public transport is for the poor people.

In Brazil there is a clear trend going on nowadays where people around the poverty line are going to earn a bit more and that leaves them with some extra money to do nice things. To show that you have earned just a bit more, Brazilian people tend to spend this extra money on status objects. You could see this clearly in the favela where people live in the most moldered houses but they still have a huge flat screen to show that they do have some money. Another obvious status object is the car: due to the increase in wealth there is also an increase in cars which leads to more traffic jams.

Because the main motive for Brazilians is money, they are not very loyal to their employer. When they will get a better salary offer somewhere else, they will not hesitate to take the new job. In this case they do not really care about liking the work that they do or having nice colleagues, more money means more status and this is in almost all the cases more important. This fact is especially noticeable in the lower- and middleclass, where the craving for more social status is more apparent than in the higher classes.

Because Brazilians are so driven to earn a lot of money and to escape poverty,


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they are also very ambitious. You could really notice this when talking to the younger generations (the students of the universities). The students are convinced that when you get an opportunity to study at university you should go for it a 100% and put all your time in it. Going to the university is less customary in Brazil than in the Netherlands, so when you do study at the university you have to get the best out of it.

6.4 HierarchyThe hierarchy between the bottom layer and the top layer of the population is very clear. This means that the bottom layer earns extremely little and the top layer earns extremely much. This huge difference in income leads to the division between the poor and the rich in Brazil.

Within the companies there is not a very clear hierarchy. At Dow for instance they are really focused on innovative ideas from the entire company. If the cleaner has a good idea he or she could pass this to his or her person in charge and he would review the idea and determine if the idea indeed has potential or not. In this example you can see that even though the person in charge has a higher rank, input is always welcome.

Even though a lot of international companies are not very hierarchically structured, a lot of Brazilians do have a strong hierarchic image in their head. People with a good job or international employees are higher in rank and people tend to listen better to this group of people, even though international employees do not look at this the same way.


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6.5 ConclusionThe most noticeable thing in Brazil is that not many speak English, and the ones that can are hesitant to do so. Education is the main cause of not many Brazilians speaking English, as well as the fact that Spanish and Portuguese are spoken by most in South-America.

Because of this feat, foreigners or expats can experience many problems while trying to communicate. Because only a fraction of the lower-educated people in Brazil speak English, doing the necessary daily things like shopping can be quite a hassle. Also, many of the conversations inside most companies will be in Portuguese, which means not speaking the language is a serious problem. People can even avoid talking to you because they know they have to speak English and they are afraid to do so. This problem could easily be solved if the Brazilians would grow less hesitant to speaking English, especially since almost everyone we spoke to was able to make us understand their meaning rather fluently. Being afraid to make a mistake is very common for Brazilians, and it should be more accepted to make mistakes since it is one of the best ways to learn. Since they are not able to speak English fluently, one might find it strange to notice that most Brazilians do not try to become better at it.

It was found out that the motives for working for most Brazilians are money and social status. Showing the world you take good care of yourself and your family is very important in Brazilian culture, and so most of the extra money earned or saved will go to physical products that cost a lot of money. People are more likely to buy a car instead of renovate the bathroom, and would rather buy new clothing than saving something extra for lesser times.


The importance of status is also noticeable in the hierarchy of the most bigger companies. There is a lot of respect for employees that are higher up, and when someone in lower ranks is asked something it will likely get top priority.

All in all, it is clear that the Brazilian culture, both inside and outside the working environment have some key differences with that of the Dutch. There are also some issues with the language barrier which can make it hard for someone with a different nationality to get settled in the Brazilian culture, both nationally and within a company. But when these issues are known, one can learn to work around it, and learn to enjoy the sheer beauty that is Brazilian culture.

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Conclusions

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As announced in the introduction, the main purpose of the Innovation Study Trip 2015 was to find out what we can learn from Brazil concerning sustainability, innovation and business processes. With the help of students and employees of various companies and institutions, we have come to substantial insights into how substance is given to innovative processes and sustainability issues in Brazil.

As we discovered, Brazil is an enormous country with a lot of possibilities for the future. From being a country with great poverty issues, it has climbed itself up the economic ladder to becoming a world leader in various fields, such as raw materials and agriculture. To become a dominant player, innovation is a necessity, especially due to the magnitude of the country.

Our first remark has to begin with acknowledging that comparing the Netherlands with Brazil is almost impossible. These countries have such different qualities, so each problem or issue is placed in a very different context. Nevertheless, having a different context can bring certain issues in a different daylight.

Brazil inspired us with their perspective on innovation. Having behavior as starting point for innovation, an open attitude towards innovation is empowered. Being open-minded creates an atmosphere where everybody can get involved. Every actor is allowed to get engaged with the process, which stimulates each other to think creatively and outside the box. Most of the time, this involvement improves innovation and different perspectives are taken in mind. This open-minded attitude was as well recognized during the company visits.

As mentioned before, our focus for this report would be on what we can learn from Brazil concerning, sustainability, innovation and business processes.

But during the trip, we have learned that it is just as significant to learn from the society as well. The people of Brazil have shown us an inspiring attitude. Where the circumstances did not always give them a reason to be cheerful, we encountered a vivid and positive attitude towards their future and eager to learn how improvement can be accomplished. For us Dutch people, coming from a well-organized society with relatively much prosperity, it was a genuine reality check.

As mentioned in the report, there are many obstacles that Brazil has to overcome. You could say that in some aspects, such as law regulation, Brazil could learn from other countries, for instance the Netherlands. But comparing the regulatory system of a country with 17 million habitants with a country with almost 200 million habitants, would not be fair. The issues the Brazilian government has to cope with are not at all relatable to the issues our country faces.

But Brazil would be well advised to let innovation go hand in hand with sustainability. Especially due to the magnitude of the country, costs for certain projects, for instance water supply, infrastructure and health care, can go through the roof. For these complicated topics, innovative solutions are a necessity and sustainability can ensure a durable and lasting basis for a growing and developing nation. Especially the People, Planet, Profit-mentality is applicable here; innovation has to ensure that Brazil as a nation develops sustainably, taking both its natural environment, its society and its economic competitiveness into account.

Conclusions

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Word of thanks

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We would like to say thanks to everyone that has helped us accomplish our Innovation Study Trip and turn it into a great success.

First of all, our Brazilian contacts that have arranged our visits to their companies. Mr. Ruy Freire, Christian Palmer and Sabrina Silva, thank you for taking your time to plan our visit to DSM. It was a fantastic beginning to our study trip! Daniel Castro, from PUC Rio, and all speakers and student teams from Empresa Júnior and the Genesis Company Incubator, thank you for showing us around your campus and letting us experience your motivation and enthusiasm for entrepreneurship. Many thanks to Tanja Jungen and her team at Rabobank International Office in São Paulo, for an inspiring insight in Brazil from a Dutch perspective. Iris Raquel Tebeka, thank you for arranging our visit to Dow, introducing us to your colleagues and helping us out with any practical problems we encountered. With your help, our visit to Dow was incredibly interesting and inspiring. Rogier Santing and Nico Schiettekatte from the Dutch Consulate General in São Paulo, thank you for providing us with a Dutch perspective on politics and government in Brazil. Oscar Nunes, for helping us meet young entrepreneurs from the CIETEC incubator program, who showed us what levels of perseverance and dedication are needed in order to succeed in starting your own successful company. And last but not least, Ralf Toenjes and his student team at Enactus Insper, for introducing us to the people in the Jaguaré favela in São Paulo and giving us an idea of what social entrepreneurship can do for the development of a local community.

Secondly, we would also like to say thanks to our sponsors, who made our Study Trip possible. Many thanks to Biotop Medical, Gilco Nederland, Triggertag, Tandartsenpraktijk Meander and ‘t Groentje. We would

also like to thank the various VU research groups that were willing to make a contribution, and Andreas Ehlers, whose foundation helped us along as well.

Thirdly, we would like to thank those who helped us from within VU University. Many thanks to Bart Bossink and the entire SBI-team, for helping us make most of our study trip. Bhupinder Singh and Nicky de Wit, for representing our study association Subliem and giving us advice when we needed it.

Last, but definitely not least, we want to thank our two accompanying teachers, Peter van Hoorn and Joep Maas, for making our Study Trip an unforgettable experience. Thank you for your belief in our ideas, and for your help in making these ideas a reality. Thank you for your enthusiasm, your questions and practical tips, and for your help in completing the trip safely and in a fantastic way.

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IST Report 2015

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