by: Idris Mootee

Bruce Nussbaum’s (B-week) wrote a post with the title “The U.S. Is A Failure At Innovation.” That caught my attention. What was he talking about? Despite what's going on today, I believe US is still the most innovative country in the world and there are plenty of examples and reasons.

Whether is design-driven innovation, technology-driven innovation or business model innovation, US is still the leader. Up till last year the US is more than 75% wealthier in terms of real G.D.P. per capita than it was 30 years ago, which is largely attributable to productivity gains driven, in large part, by innovation. The result of industrial innovation.

Bruce was quoting Mike Mandel, the chief economist at Business Week, presented a paper to the Massachusetts Technology Leadership Council on “Innovation and the Financial Crisis.” His conclusions are:

"Looking back, the Internet Decade (1997-2007) was much weaker than we realized; There was a technology shortfall—The Internet alone is not enough.
 Our existing technology and business-know flowed to the developing world. We did not create sufficient new products and services to pay for imports. Dependence on financial innovation instead of real innovation;
Real wage gains were nonexistent (and paltry for college grads); Real stock market gains were nonexistent; Leading tech sectors struggled—
Weak performance of infotech stocks
. Weak performance of pharma stocks
. Mediocre performance of biotech stocks. Since 1997, infotech and pharma stocks are flat, after adjusting for inflation;

 The result? Financial crisis = Adjusting to a world with slower expected innovation. $4 trillion in excess debt goes bad and needs to be written down. Nationalization of banks, repudiation of debt.
 Collapse of trade bubble.
How long will the crisis last? Without innovation, it’s a slow slog. It takes a long time to dig ourselves out of a $4 trillion hole just through savings. Consumer demand will stay soft for years.
 That’s why economists are increasingly gloomy. Innovation is the wild card. It can surprise on the upside, as well as the downside. New products and services boost both demand and supply. Innovation creates jobs, spurs growth.”

I think it is too simplistic to link stock market cycle or performance to innovation effectiveness of a country. When the market is down, it is not one market but across the world. No countries can avoid the financial markets adjustment, so you’re not able to name another country that performs better than the US. At the end of the day, many of the most successful Internet innovations were started in the US.

Measuring for innovation progress are always tricky, since social practices evolve slowly and surround us continuously, and thus become part of our frame of reference. It is not until we are abruptly forced to put them aside that we become aware of how much they have been shaping our lives.

To determine whether a country is innovative, you need to measure the four legs. The first one is education. That’s the no. 1 factor. Then economic policy (tax incentives) and infrastructure (VC or risk money availability) to support it. The last leg is whether you can provide a lifestyle to attract the creative crowd.

Education is at the heart of human progress. Economic and social prosperity very much depend on the ability of nations to educate their people, engineers, scientists or designers. An innovative society prepares its people to embrace change and innovation. US ranks high according to the Global Competitiveness Report 2008-2009 conducted by the World Economic Forum.

The development of a global innovation society depends on the mobility and integration in different nations of people, knowledge and technologies. As science, technology, and economic progress become more global, international collaboration is indispensable to generate the talent and knowledge needed to find solutions to many of today’s global challenges. Education needs to have larger goals than just better school. It needs to take up a knowledge facilitation role between businesses and societies.

Education is to generate new knowledge and nurture innovation to sustain long-term economic growth. This means collaborating on creating research networks among higher education institutions, research centers, business and start-ups, and capitalize on these ideas and knowledge. Developing a strategy for knowledge-based cluster development and public-private partnerships to facilitate global knowledge dissemination and move technologies quickly from the laboratory to rapid prototyping and to the marketplace. It is time for higher education institutions to start playing a bigger role.

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