Does Innovation Guarantee National Success?
Innovation has spread far beyond its traditional boundaries of theUnited States, Europe,and Japanas cheap technology allows more countries to compete in the global marketplace.
But great new ideas, no matter how groundbreaking or potentially valuable, are only the first link in a chain that includes government and corporate allies in an economy that supports risk.
“Innovation is an important prerequisite for national economic success,” says Soumitra Dutta, a professor of business and technology at INSEAD, a multinational business school with campuses in France, Singapore, and Abu Dhabi.
It’s gone global for two reasons, adds Dutta, “The rise of emerging markets with populations moving out of poverty and asking for new products and services,” while the spread of technology has enabled less-developed economies to innovate.
“There are no nations that dominate innovation at the global level,” says Drew Marshall, a New Jersey-based consultant and co-host of Innochat, a weekly innovation-focused chat on Twitter. “There are now many countries that see innovation as a path to economic advancement."
Two influential studies this summer that rank nations in terms of their innovative policies may underscore that point, as they both show traditional powerhouses slipping in favor of smaller, far-flung rivals.
"The ability to innovate is the great equalizer in the global economy,” says Shumeet Banerji, CEO of global consulting firm Booz & Co. “In the industrial era, nations relied on their natural resources to compete. Today, any country can advance with carefully focused investments in talent and R&D."
Booz helps produce the annual Global Innovation Index, whose chief editor is Dutta and covers 125 economies that account for 98 percent of the world’s economic output.
Current Leaders
Here are its top 10 for 2011: Switzerland, Sweden, Singapore, Hong Kong, Finland, Denmark, the U.S., Canada, the Netherlands, and the U.K.
The Information Technology and Innovation Foundation (ITIF),also released in July, ranks countries based on their innovation and competitiveness.
Its top 10 list: Singapore, Finland, Sweden, the U.S., South Korea, the U.K., Canada, Denmark, the Netherlands, and Japan.
These rankings use key indicators, such as the number of scientists and engineers; corporate, government and university research and development; venture capital; and productivity and trade performance. They serve as a benchmarking tool for policymakers, business leaders, and other stakeholders.
“The U.S. supremacy that existed during the 20th century has faded, as the access to the drivers of national innovation are accessible to more nations,” says consultant Marshall.
Old World, New Leaders
Germany and Japan, powerhouses of innovation after they were forced to rebuild their economies following World War II, have also slipped in recent years.
“Japan and Germany are somehow paying the price of having concentrated too much on manufacturing and not so much in services,” says Daniele Archibugi, author of "Innovation Policy in a Global Economy" and research director at the Italian National Research Council. “It was good for the period from 1946 to 1990; it may be less good for the last 20 years.”
The key is to consider innovation holistically, says Marshall of Innochat. For a country to have successful innovation policy, its government must work in concert with industry and higher education to produce a business environment that ensures market forces are allowed to work freely.
Take Japan, for example. What was a manufacturing and exporting powerhouse just two decades ago now has a sputtering economy. What's more, outstanding government debtis now equal to more than 200 percent of the country's gross domestic product.
“If any part of the system is out of alignment, it is rare that other system elements can compensate,” says Innochat's Marshall. “Japan has many of the elements necessary for national innovation, but lacks the ready movement of capital to capitalize on its intellectual capacity.”
Much of Europe has yet to fully embrace innovation, says Robert Atkinson, president of the ITIF. “They want the benefits of a knowledge-based economy without the creative destruction that not only accompanies it but is required to achieve it,” he says.