6 ways governments are driving innovation – and how they can contribute to post-pandemic resilience

The COVID-19 pandemic has had a huge impact on the global economy, with a total cost likely to exceed US$12.5 trillion according to International Monetary Fund estimates.

At the same time, the crisis has accelerated huge changes in the way we live and work, as well as the adoption and invention of new technologies.

Policy makers and leaders in science and industry are pinning their hopes on new innovations to drive economic recovery.

It’s a good plan, but driving innovation isn’t easy. I’ve studied attempts to stimulate local innovation around the world over the past century and found six broad approaches, each with their strengths and weaknesses.

1. Location

This is the development of specialized high-tech clusters or hubs (think of the next Silicon Valley). There is every reason to believe that high technology poles are crucial for national competitiveness.

Industrial clusters (and cities more generally) are centers of innovation, productivity, skills development and the creation of new businesses. Clusters facilitate both cooperation and competition between companies, build local supply chains and can create regional brands such as Geneva watches or Savile Row suits.

Many governments have tried to create these clusters from scratch with public research institutes, by creating science and technology parks or by offering financial and other incentives. Only a few of these attempts have succeeded.

Attempts to accelerate existing or emerging industrial clusters have been more successful. The creation of new industrial clusters is also extremely costly and can take decades to pay dividends.

2. Cultivation

This approach aims to create an innovative and entrepreneurial environment by improving lifestyle, culture and public facilities. It seeks to create a “human climate” where residents can experiment, build, share their knowledge and form creative partnerships. It should also attract and retain young, creative and educated future wealth creators.

Urban regeneration projects around the world have followed this approach. These projects transform downtown and downtown areas into hip, hip environments that encourage casual interactions, casual conversations, and group learning.

However, improving lifestyle does not always lead to more innovation. This can lead to rapid gentrification, which displaces creative communities that can no longer afford rising rents.

3. Skills

Another way to stimulate innovation is to increase the local level of valuable skills. This can be done by attracting skilled migrants or by training the local population.

The problem with focusing only on skills is that people are mobile. Qualified people will leave if they don’t have continued opportunities or if the financial, lifestyle, or creative rewards are higher elsewhere.

The global competition for highly educated or skilled people with experience building successful businesses or products is getting fierce.

However, skills-based approaches to innovation can be powerful within the “triple helix model” that integrates research, government and industry. It is essential that skills development is accompanied by local opportunities.

4.Mission

The mission-based approach pools private and public financing and skills to meet a medium- and long-term challenge. The most famous example is America’s Moonshot: the 1961 mission to send a person to the moon and bring them back by 1970.

NASA funded the Moonshot over three presidencies. The mission was successful, and in doing so, it developed several new technologies and products.

Since then, “mission statements” have become common in business and government. Governments and NGOs use missions and goals to inspire action on a range of challenges, from net zero commitments and the United Nations Sustainable Development Goals to developing vaccines against global pandemics in less than 100 days.

However, missions can encounter difficulties due to lack of permanent funds, unclear objectives, competing interests and the generation of unintended consequences. Missions can also divert funding from curiosity-driven “blue sky” research, which has been behind some of the greatest scientific breakthroughs of all time.

5. Finance

A crucial element in stimulating innovation is increased funding for research and development, universities and other research institutes, and the commercialization of new technologies. However, the relationship between increased funds and increased innovation is complicated.

As countries become more advanced, innovation spending may become less efficient. Once initial gains have been made through the adoption of existing technologies, further progress can only come from the more expensive and riskier processes of creating and commercializing new technologies.

This pays off for countries with large markets and high levels of productivity, but more difficult for other countries.

The venture capital that allows many start-up companies to grow rapidly is highly concentrated geographically. Venture capital also tends to focus on a few sectors, notably the information technology and pharmaceutical industries.

6. Technology

This approach uses public spending to provide purpose and funding for new and emerging technologies such as drones, AI, blockchain and robotics.

When governments engage early with innovative local businesses, build their capacity and co-develop technology applications, it can be good for government and industry. Government gets more modern services, while industry has a strong customer.

This approach has created some of the largest and most successful innovation hotspots in the world, including Silicon Valley. The downsides of this approach are that it can play with funds allocated for other government purposes, embarrass governments when things go wrong, and depends on the government’s ability to rigorously assess new technologies.

No quick fix

Succeeding in building dynamic and innovative neighborhoods at the local level is crucial to stimulate and develop the national economy. None of these six approaches will on their own be a “silver bullet” for innovation and economic recovery.

So what will work? Pay particular attention to local contexts and balance all these approaches: mix and match local circumstances, while focusing on national productivity, technological development and future markets.

Alicia (Lucy) Cameron does not work for, consult, own stock or receive funding from any company or organization that benefits from this article, and has disclosed no relevant affiliations beyond her academic appointment.

/ Courtesy of The Conversation. This material from the original organization/authors may be ad hoc in nature, edited for clarity, style and length. The views and opinions expressed are those of the authors.

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