The Good, the Bad, and the Ugly of Innovation Policy

How effective is innovation policy and which policies help or hinder? The Innovation Technology and Innovation Foundation takes a fresh look at global competition, examining the role of innovation policies in shaping competitive environments.

From the beginning of the industrial revolution, communities and regions have sought to gain economic advantage, in part by ensuring that firms in their jurisdiction become more productive and innovative, but also in part by trying to gain advantage over neighboring jurisdictions with which they trade. For example, after World War II, U.S. states began to compete against each other for jobs, while European nations competed internally. As global economic integration has become much more widespread, the scope of economic competition has further broadened. What happens in China affects what happens in California and vice versa.

Not only are locales around the globe competing with each other for economic advantage; but also innovation has become a more central driver of growth and competitiveness. In just the past decade, a large number of countries have come to the realization that spurring the innovation economy must be a central component of their economic development strategies. For example, in 2009, the United Kingdom made a conscientious decision to “place innovation at the center of the country’s economic growth strategy.” Some three dozen countries have now created national innovation agencies and implemented national innovation strategies designed specifically to link science, technology, and innovation with economic growth.

However, this focus on innovation as the route to economic growth creates both global opportunities and threats, because countries can implement innovation policies in either good or bad ways. Countries can implement their innovation policies in a win-win, positive-sum fashion that simultaneously spurs domestic innovation, creates spillover effects that benefit all countries, and encourages others to implement similar win-win policies. But another path countries all too often take seeks to realize innovation-based growth through a zero- or negative-sum, beggar-thy-neighbor, export-led approach. At the heart of these negative-sum policies lies a misguided economic philosophy that many nations have mistakenly bought into: a mercantilism that sees exports in general, and high- value-added exports in particular, as the Holy Grail to success….

Download the complete report (107 pages).

Source: The Information Technology and Innovation Foundation (ITIF)
Written by: Stephen Ezell & Dr. Robert Atkinson

  • Arturius

    Rather a conservative treatise, one might say. Adam Smith in contemporary clothing. Perhaps it’s because the ITIF’s board is so densely populated with American free-trade lobbyists and former lobbyists who have passed through Washington’s infamous revolving door. They enjoy speaking to themselves.

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