Government Role in Promoting Innovation

This week we focused on various aspects of sustainable development and my focus was how the government can influence innovation in both the manufacturing and service sectors. Like all challenges, the problem must be identified before solutions can be presented. In this case, the government must identify barriers to innovation before they can instate policies and regulations that promote innovation. Barriers range from educations issue, to immigration policies and everything in between. The government must also push the idea that the challenge of innovation should be viewed as a market opportunity. If a company can innovate and design new products that break into a completely new market, that company will essentially have a monopoly on the newest and greatest technology that so many consumers will want to get their hands on. Obviously this is the firm’s job but the government can most certainly provide a little nudge through 3 main outlets.

Through my research, I identified three focal areas in which government can impact innovation and address the many barriers to innovation: Tax Incentives, Funding, and Regulation.

Tax Incentives: The first and some may argue, the most obvious approach to inspiring innovation is through tax incentives and subsidies. The government must be able to create an environment of innovation and tax incentives can truly help establish the creative environment. For example, in 2010 President Obama authorized a new program that enables green transportation firms to get some help from the government when it comes time for Research and Development. The basic outline is that if the company invests the initial 70% of the costs, the government will cover the final 30%. This 30% is a risk that the government is willing to take in the name of innovation and sustainable development, yet it also serves as a sign of good faith to the firm that the leaders of their country believe in what they are doing and want them to succeed.

Funding: Funding = pumping money into programs that value innovation. In the United Kingdom, Knowledge Transfer Networks have received significant funding from the government’s change purse. A Knowledge Transfer Network, or KTN, is a single national network in a specific field of technology or business application which brings together people from from businesses, universities, research, finance, and technology organizations to stimulate innovation through knowledge transfer (innovateuk.org). Essentially this means a group of people from varying field sharing their specific knowledge with the end goal of innovation. These KTN’s are funded by the government and have been very successful in fields ranging from defense to bioscience.

Regulation: Laws. Regulation is the nice way of saying big government intervention in the private sector. Regardless of political affiliations, regulation in regard to innovation have proven to be rather successful. In 1970 India passed a patent act that made it very easy to get a patent, especially in the pharmaceutical industry, with the idea that it would foster an environment of innovation in the medical world in India. However, 35 years later in 2005, the patent act was amended to make it more difficult to get a patent. What the Indian government found out was that the law was in reality enabling the copying of already existent products and altering them slightly to “create” a new product. When the patent act was amended, many Indians hailed the change as a step in the right direction to innovation. Now that it is harder to get a patent, companies must truly innovate or else they will die. India made this decision as part of their bid to join the World Trade Organization, or WTO, which demonstrates rising international pressure to increase innovation around the world.

If governments across the board can focus their attention on these three aspect of government policy, I believe that we, as a global community, will see innovation increase significantly. Sadly though, I cannot even begin to speculate when this will happen.

 

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2 thoughts on “Government Role in Promoting Innovation

  1. Good start :) These three plausible innovation stimulating policy alternatives often serve as good macro incentives applicable across industry and government institutions. Organizational culture / structure – how individual institutions, whether private enterprise or government organizations, operate – plays a significant part in implementing innovation processes that lead to incremental and/or wholesale improvements. That may also be a good topic to investigate in the future.

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