Does Innovation Guarantee National Success?
U.S. And The Space-Race Era
Unless Europe can accept plant closures and job losses, new technologies with uncertain environmental impacts and new kinds of business models that may challenge traditional assumptions about privacy, “it’s unlikely that it will be able to keep up in the race for global innovation advantage,” Atkinson said.
Warning Signs For The U.S.
The poor U.S. economy has led to a heated political debate about the size of government, and many experts fear that less government seed money for businesses and universities will hamper the country’s innovation leadership.
One ranking in the ITIF index measures how much a country has improved its innovation capacity from 1999-2009, using measures such as government funding for basic research, education, and corporate-tax policies. Of the 40 countries analyzed, the U.S. finished last.
Marshall thinks “the persistent vilification of government in public discourse—that it is too big, too intrusive, too involved, too broken—has crippled the ability of the U.S.A. to use government effectively, in the common good, with regard to innovation.”
The U.S. government still spends proportionally far more on research and development than Japan or Germany, says Archibugi of the Italian National Research Council, but momentum may have been lost.
Innovation experts often point to the U.S. “space race” as an example of government spending that resulted in an astounding array of products: kidney dialysis machines, CAT scans, magnetic resonance imaging (MRI), freeze-dried food, cordless power tools and appliances, disposable diapers, satellite dishes, bar codes, and smoke detectors.
“Only government policies and funding commitments have the capacity to create whole ecosystems that can support innovation, regardless of the immediate financial return, that can cut across markets and sectors,” says Marshall of Innochat.
But too much government intervention can upset the atmosphere conducive to innovation, says James Milway of the Rotman School of Management at the University of Toronto.
“I think there are more failures than successes when governments intervene in specific industries,” he says. “Green energy and Solyndra [a U.S. solar company that recently failed] come to mind.”
To create an environment conducive to investment and innovation, governments should concentrate on providing rule of law, sound infrastructure, excellent educational systems, and low taxation on business investment, says Milway. Some of these factors have clearly held back Russia, which ranked 52nd in the Global Innovation Index.
“If the U.S. shies away from competitive markets through ongoing government bailouts—or completely embraces the view that only significant government intervention can create new industries—then it could lose its status as an innovation leader,” he says.
Government usually plays more of an architectural role in creating a supporting environment for innovation, such as providing policies that make it easier for the country to attract and retain skilled talent, says INSEAD's Dutta.
“To enhance innovation in an economy, one needs both government and corporate policies to support innovation—they are complementary to each other,” he says.