Expanding Innovation

Innovation is good. Everyone says so. It will increase worker productivity and thus the world’s wealth and the value of work. It will cure deadly diseases and ease the ailments that afflict us as we age. It will enable us to tap the unlimited resources of renewable energy and to use our finite resources of soil, water, plants, and minerals more sustainably. It will expand our access to knowledge and the arts and provide us with new tools with which to express our own creativity.

Of course, it is not that simple. Innovation has enabled us to devastate some fish populations and drain some aquifers, increase the time demands of many jobs and sap the creativity from others, provide tools that enable a small band of terrorists to do unimaginable damage, and create a global financial system of mind-boggling power and worrisome fragility. Nevertheless, virtually all the world’s nations and their leaders see innovation as a force that they want to nurture and direct to meet the needs and aspirations of their people.

Stimulating innovation and directing it to the proper ends is not easy. To begin with, innovation entails much more than inventing clever new gadgets. Even with gadgets, it involves design to make the gizmos appealing, safe, and easy to use, manufacturing processes that avoid waste and ensure quality, marketing systems for distribution, business management systems that coordinate all these activities, financial mechanisms to provide capital where it can be best used, government policies that protect workers, preserve intellectual property, and facilitate trade, and an education system that will provide the skills needed to keep all of these activities going in the future. And all of these activities will also be necessary to accomplish similar goals in the proliferating and expanding services sector.

The articles in this tour of innovation policy around the world illustrate how a variety of countries that differ in size, history, political culture, and many other ways are finding their own way to pursue the shared goal of innovation. Although countries can learn from observing the experience of other countries, no single template for innovation policy exists. The United States, Brazil, Singapore, and Ireland differ in obvious and subtle ways, and those differences are reflected in the innovation strategies they have adopted. They share a concern with education, research, capital formation, global market position, and government regulation, but what they do in each of these areas varies considerably. Understanding these differences is the key to understanding why each of these countries is now successful at expanding its innovative capacity. And the differences are not only among countries but within each country over time.

Brazil is a country that has been reinventing itself during the past half century. In the 1960s, Brazil had no graduate education programs, and undergraduate teaching was not a full-time job. Students seeking graduate degrees had to go abroad. In 1968, the country began reforming the federal university system, and the country now has tens of thousands of people with graduate degrees and a productive domestic research system. The country also began developing technological strength with initiatives in a number of key areas, most notably Embrapa in tropical agriculture, Petrobras in deep-water oil drilling, and Embraer in commercial, defense, and executive aviation. A financial crisis in the 1990s devastated innovation programs, but the government responded by creating sectoral funds that were collected from specific activities such as extraction of natural resources and designated for programs to promote innovation. These funds grew rapidly during Brazil’s economic recovery and continue to fuel what has become a large and diverse research and innovation program.

Singapore’s road to progress also began in the 1960s with a strategy built on foreign direct investment and export-led growth based on low-tech manufacturing. It also invested heavily in educating its people, which made it possible to move up to more sophisticated manufacturing, such as electronics and pharmaceuticals, and into new areas such as supply management and research. A small country with limited natural resources, Singapore recognized that the skills of its people would be a key to its success and that it would have to focus on just a few areas of expertise. Beginning around 2000, Singapore placed a major emphasis on developing expertise and capacity in the biomedical sciences. It soon became a regional power in this field and now it is establishing itself as a significant global player and a site for investment for many of the world’s largest multinational medical companies.

Ireland shares some experiences with Singapore and Brazil. Roughly the same size as Singapore and similarly lacking in natural resources, Ireland emphasized education as a key ingredient to success and used the quality of its workforce as a magnet for foreign direct investment. It quickly moved up the ladder from simple manufacturing to more sophisticated products to a wide variety of business and financial services. It also began the process of developing world class expertise in a number of key research areas such as biotechnology. With one of the world’s fastest growing economies, Ireland was particularly vulnerable when the recent global financial crisis arrived. The government has had to reduce spending in many areas, but like Brazil it has not forgotten the importance of research and innovation for its long-term economic well-being. In spite of its current state, Ireland is sticking with its program of building its economy through a strong foundation of education, research, and innovation.

Widely recognized as the world leader in innovation, the United States faces a different challenge. With dozens of countries eagerly trying to follow U.S. success in innovation-led growth, the country is under mounting pressure to increase its pace of progress. The Obama administration is pursuing a strategy that aims to avoid the extremes of laissez-faire government detachment and heavy-handed federal interference.

It seeks to use education, research, infrastructure investment, and regulation to create a market environment in which new products and services can emerge quickly and reach consumers at a competitive cost. And as it moves to shift the U.S. innovation system into a higher gear, it will also have to create the institutional structure that will be necessary to update policies and provide continuity.

The data presented by Andreas Schleicher in the “Real Numbers” feature in this issue should capture the attention of U.S. leaders. President Obama has expressed his desire to see the United States reclaim its position as the world leader in educating its entire population, but the data indicate that the country has been barely treading water while a number of countries have made stunning progress in just the past decade. Lip service to the importance of quality education is plentiful in the United States, but effective action to improve schooling is much more common in many countries in Europe and Asia. This appears to be a case where the United States needs to follow the lead of others.

Finally, in the midst of this pell-mell stampede to promote innovation and increase economic output, Patrick Cunningham reminds us that production alone is not an adequate measure of a nation’s well-being. Although wealth does contribute to national happiness and satisfaction with life, it is more an enabler than a real goal. When we talk about innovation policy, we should also be thinking about all that government can do to promote the well-being of its citizens. Education can enrich lives intellectually and culturally as well as make workers more productive, research can uncover the secrets of physical and psychological health as well as develop new medical technologies, businesses can be managed more effectively not just to lower costs but also to increase worker satisfaction. Social innovation deserves as much attention as manufacturing and commercial services.