“Innovation distinguishes between a leader and a follower”Steve Jobs, 1955-2011
“The Shock of the New”Robert Hughes, 1938-2012
We live in an age of innovation, of rapid technological change, one that is exemplified by the fact that smartphones, in the hands of teenagers in Britain, Japan, America, Kenya or India, each contain more computing power than was available for NASA’s Moon landings just half a century ago. The important questions, though, concern what we do with such technology and whether our countries are leaders in its creation and implementation or laggards. Moreover, the paradox right now is that technology is changing rapidly but productivity, the supposed fruit of such innovation, is growing at historically low rates in most advanced countries. It could be that our measurements are faulty, or that the effects of the 2008 financial crisis are still overwhelming the productive potential of innovation, or that many countries are not putting innovation to good use – or perhaps all three. For the economic and social impact of innovation comes not just, or even mainly, from technological discovery and development but also from whether societies are able to use it to find new and better ways of doing things and organizing themselves.
In our attempt to measure how well countries are preparing themselves for, and exploiting, this age of innovation, we have therefore combined two indicators of the “production” of innovation with two of the ease of “consumption” of new ideas, or rather of their dissemination, adoption and implementation.
The first “production” indicator is of the number of patents awarded to citizens and organisations from each country. While this can be affected by legal and cultural propensities to apply for patent protection, it is nevertheless a good indicator, over time, of the degree to which a country is generating new technological ideas. Secondly, we have used the level of spending, both public and private, on research and development as a share of GDP. While this naturally raises questions about the quality of spending and about how it is defined and monitored in each country, R&D expenditure is nevertheless a fair sign of the seriousness with which science and technology are being taken. No one visiting Silicon Valley, the world’s epicentre of entrepreneurial technological innovation, can fail to note the role played in that region’s success not only by start-ups, big tech firms and venture capitalists but also by the huge national research institutes that operate nearby, and by the world-class research universities of Stanford and Caltech: private and public spending both matter.
Yet to have an impact, it also has to be relatively easy to use innovation to create new companies and offer new ideas, and easy to get access to it. As proxies for that, we have used as our “consumption” or “implementation” indicators two sets of statistics that should track how well countries, through public and private policies, are facilitating the adoption of innovative technologies and ideas. One is the World Bank’s “Doing Business In” ranking, which assembles a wide range of measures of the ease or difficulty of starting and expanding companies in each country, thanks to regulations, justice systems or other factors. The other is simply a measure of the penetration of broadband subscriptions. For many sorts of innovation, both technological and organizational, access to and use of fast, reliable broadband is now as crucial an enabling factor as electricity was a century or so ago.
It is not possible to predict which of many potential technological revolutions – biotechnology, nanotechnology, energy, artificial intelligence, new materials, or many others – will have the most impact. What countries need to do is to make themselves as able as possible to absorb and exploit whatever comes along. It is worth recalling that in 1995 none other than Microsoft’s Bill Gates badly under-estimated the future impact of the internet in the first edition of his then new book. Its title? “The Road Ahead”.