ECONOMIC PROSPERITY AND SOCIAL COHESION: THE ROLE OF ENTREPRENEURSHIP AND INNOVATION AN OECD PERSPECTIVE Speech by the OECD Deputy Secretary General Mr

I am honoured to be here today to discuss entrepreneurship and innovation, a topic which is crucial for economic and social development. This is especially true for Bahrain, one of the fastest-growing countries in the Middle East, but which still relies heavily on oil, financial services and construction as the key pillars of the national economy. Let me be clear in saying that nobody can doubt how oil extraction and processing have positively shaped the modernisation of Bahrain. It is equally doubtless that Bahrain's futuristic skyscrapers leave all of us nose up and mesmerised, wondering about the very meaning of the word 'development'. And yet sustained economic development requires diversification, which is precisely where entrepreneurship and innovation play their role contributing to economic prosperity and to social cohesion. Indeed, these two objectives cannot be divided if a government is to deliver increased welfare to its people. Economic prosperity The contribution of entrepreneurship and innovation to economic prosperity has grown with the shift of the global economy towards a mode of production in which knowledge has become a key input. The challenges of the knowledge economy originally interested the most advanced economies, but are now critical to growth in emerging economies as well. Vigorous entrepreneurship and SME development are among the most important conditions for successfully meeting the challenges. It is worth recalling the main factors underpinning the shift to an entrepreneurial economy in which new and small firms are critical components:  Firstly, increased competition, growing incomes and new technologies have reduced the average lifetime of products and reduced the possibilities for product standardisation and large-scale production. The development of the telephone is an example. Whereas until the 1980s there was only one standard type of home telephone for landline communication, the introduction of mobile phones in the 1990s has come with an enormous diversification of the