Institutionalization for Multinational Cooperation in Iran Startup Ecosystem

The global technology gap is one of the main hurdles in the way of international development. Enjoying first-mover advantage and positive feedback loop, leading countries and frontiers have expanded the gap between themselves and latecomers and follower or lagging countries.
In the face of growing technological divide, a new approach dubbed technology catch-up has been formulated, which envisions solutions for bridging the gap.
Following in the steps of leading countries would not benefit latecomers in narrowing the gap. They need to come up with solutions that would lead to technological development at higher speed and efficiency.
Devising such solutions has been the focus of numerous studies, one of the key findings of which highlights the importance of the fusion of local capabilities and foreign technologies.
Further analysis has revealed the pivotal role of institutionalization in bridging the technological gap. The importance of institutionalization is based on the fact that devising a sustainable and lasting development mechanism goes beyond one-off projects focused on a specific technology’s transfer. In other words, institutionalization is tantamount to continuous technological collaboration.
In such collaborations, the assumption that technology transfer is a one-way process needs to be overhauled.
Instead of a one-sided relation, institutionalization can help forge a two-way collaboration where foreign technologies and local capabilities intermingle and lead to the creation of novel technological solutions that can benefit both sides.
Institutionalization guarantees that new technologies are employed with a proper socioeconomic approach corresponding with the target country’s needs.
It will also lay the groundwork for training a capable workforce, incorporating local capabilities and foreign technologies, and developing novel solutions.

Startup Action Plan

On Sunday (May 19), President Hassan Rouhani’s Cabinet ratified the Startup Action Plan that highlights the importance of institutionalization in technology catch-up. The plan focuses on startups and innovative companies and their role in economic development.
As per the plan’s third clause, Iran IT Organization has been charged with supporting and facilitating the establishment of R&D centers and innovation accelerators by multinational companies in Iran. These firms can operate in the country independently and/or through collaborations with local entities. This clause is in line with Iran’s Sixth Five-Year Development Plan (2017-22).
The establishment of such institutions, in addition to helping attract investment, can accelerate startups’ growth. It can also encourage the fusion of innovations and technologies of frontier and latecomer companies.
The plan’s eighth clause envisages solutions for fostering multinational collaborations, based on which innovation centers (e.g., startup accelerators), incubators, innovation districts, and science and technology parks can enlist foreigners' help in various fields including, but not limited to, mentorship, international law consultancy, global patent solutions and advisory services.
According to this clause and in line with Iran Labor Law, the IT Organization is in charge of auditing and sanctioning the employment of foreigners in these fields.
The Startup Action Plan might not deliver the desired results in the short term due to the negative impact of some foreign unilateral, coercive measures, but it will definitely yield favorable outcomes in the long run.

Startup Action Plan Offers Incentives

Iran’s Startup Action Plan envisions incentives for boosting local startups and innovative firms.
According to the plan, all startups, which meet the prerequisites, can make use of these incentives, including a three-year tax holiday.
The first condition is that less than three years should have elapsed since the startup’s establishment.
The company’s capital should not surpass a ceiling annually determined by the government. For the current fiscal year (started March 21), the cap is 2.5 billion rials ($17,600).
There is also a cap for the company’s annual revenue updated by the government every year. Currently, the cap is 5 billion rials ($35,200)
These factors are monitored without human intervention and through Iran’s e-governance infrastructure.
As per the plan, each startup’s co-founders will be exempted from paying insurance fees.
The plan also facilitates the activities of co-working space service providers and startup accelerators.
One of the main issues startups struggle with is attracting investment. Instead of offering loans to these firms, the ICT Ministry and the state-controlled Iran National Innovation Fund are to establish a fund of funds for offering loans to active venture capital funds.
The plan also calls on authorities to facilitate mergers and acquisitions in the Iranian startup ecosystem by curbing overbearing regulations.
In order to keep the process of supporting startups transparent, an online platform will be established by Iran IT Organization that will publish detailed reports on the plan’s performance.