Although most of my blogs have focused on advice to technology entrepreneurs, I take the chance in this blog to reflect on the role of government in stimulating innovation. I was recently invited to participate in an on-line debate on government’s role in innovation on the Economist.com. The proposition was “This house believes that innovation works best when government does least”
I voted in favor of the motion, for three simple reasons. First, I believe governments are terrible decision makers in the innovation forum; they do not understand it and have access to limited expert help. As a result, much of their activities has, at best, limited impact, at worst damaging effect on the free-market decision-making process. Second, government involvement in innovation is usually slow, motivated by political imperatives and distorts market forces. As a result, it can damage as much as it can help. This is particularly the case when you explore the gestation period of innovation policies, which are longer than the life of government. Finally, by encouraging innovators to respond to government programs and fulfill government requirements, we divert their attention from identifying customers, and expanding internationally. Even with the best intentions, in the words of John Wanamaker
“Half the money governments spend on innovation is wasted – the trouble is we don’t know which half.”
Suggesting governments do least does not mean they should do nothing.
While not good at picking winners, governments have a crucial role in the development of an environment that stimulates innovation and risk taking. The problem is that innovation is pervasive, and requires a combined approach to have a profound national effect.
I provide my top ten suggestions, where government policy (and funding) could affect innovation rates. If coordinated into as part of a national innovation policy, they could enable private enterprise to increase their levels of innovation.
- Foster innovation in high schools
- Create a culture of innovation by recognizing innovative activities
- Support resources to help innovators develop their ideas
- Provide matching funds to support private sector funding initiatives
- Establish governments as demanding customers and early technology adopters
- Improve the incentives for innovation (recognizing the inherent risks)
- Review patent law to reduce uncertainty and accelerate the process
- Enhance links between business schools and industry
- Support third-party initiatives to develop innovation tools that can be shared
- Catalyze a multi-party innovation policy that exceeds the life of the government
Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.
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