Future Role of Governm and Industry in Foster Innovation
ment ring n
In the 20tth century, naations that inv earch, both fr
vested significantly in rese rom the public and the priv vate
eveloped their economies and the quality of life of their citizens s
sector, de better than
nations thhat did not. Innovation is aan important nvestment in innovation, b
t driver for success. The in both
mulation of the initial idea
in the form a and the prac ctical application can be critical in the ddevelopment of
Historically the United States was a leader in inn novation, science and technology. They y still file 52% of
although othe er nations, inccluding China
a, South Korea a are increasing their sharei. The Unite ed
States’ ec ess has been attributed too their focus o n
on innovation . The curren nt administration
create a new O
plans to c ovation and Entrepreneurs
Office of Inno he Departmen
ship within th nt of Commer rce to
encourage e innovation based busine essesiii.
The strong correlation between R& &D investment t and econom mic growth fueled by innov vation is not
o the USA or o other OECD nations. China a and India ha ave both achi ieved high economic grow wth
rates over – 30 years. It has been spe
r the last 20 – eculated that s success has been
t a significant factor in this
caused by y an increased d output in th
heir innovatioon systemsiv. China, in parrticular has increased its R& &D
expenditu ure from USD 4‐7 billion in n the early 90ss to over USDD20 billion in 2004. China and India bot th
increased focus on the e integration oof science and business se ectors and inccreased incentives for
Source: ww 24236156.pdf
The UNES SCO Institute for Statistics report, A Glo ive on Resear
obal Perspecti rch and Development (2009 9),
hat most deve
reports th eloping count f GDP in R&D
tries invest less than 1% of D, although they note that
China and significant exceptions. The
d Tunisia are s ey found that in most deveeloped countrries, R&D
activities are largely financed and conducted by the business sector. Yet, the public sector plays a major
role in most developing countriesvi.
Investment in innovation appears to contribute to success. Nations can develop strategies to encourage
innovation, through both government and industry. Even in the case of developing countries there is a
case to be made for setting the climate of encouraging innovation, research and development.
There is an emerging trend for multinational corporations to set up research centers in countries like
China and India, in many cases to tailor products for those particular markets, but also in some cases to
contribute to global research and developing knowledge. Companies such as General Electric, Nokia and
Motorola have set up R&D laboratories in Chinavii and General Electric set up the John. F. Welch
Technology Centre in Bangaloreviii.
Other strategies include investment in education; robust intellectual property rights regulations,
fostering partnerships between universities and private business, and providing fiscal incentives for
investment in research and development.
Another interesting development is with respect to the aspirations of much smaller nations to focus on
R&D in specific areas with an objective to punch beyond their weight. Singapore in biotechnology,
Ireland with computer hardware, and Abu Dhabi with renewable energy are some examples. The
energy industry in the USA has significantly reduced their R&D investments in the last decade, as they
try to cope with the rising prices of hydrocarbon based energy imports. However, the same industry is
also in dire need of increased R&D in renewable energy in order to create and innovative and
sustainable energy base for the near future. Current balance sheets of these companies do not support
such investment into the future. As a major oil exporter, Abu Dhabi, on the other hand, has been
blessed with additional liquidity at this time and hence has wisely decided to invest this surplus into R&D
in renewable energy with a long term view to maintain its lead as a major supplier of energy even after
running out its hydrocarbon resources.
Some of the critical questions that governments and industry may need to respond for the near future
• In the increasingly inter‐connected, globalized business environment, would national governments
change their strategies to directly support R&D and indirectly incentivize industry to invest in R&D?
• How can industry or national governments align their need for larger investment in R&D with their
current economic situation?
• What are the risks and rewards of outsourcing part or all of R&D to nations that may have better
availability of well qualified scientists?
Innovations initiated by Defense Industry:
The defense industry in developed nations is another strong driver of innovation. These innovations
have resulted in benefits not only for national defense but also for civilian life. Technical expertise has
been a key on the battleground since the invention of the club. Superior equipment and materiel has
often been a decisive factor in defense: guns replacing the bow, cannons replacing the siege engine,
mounted cavalry superseded by the tank. Today, the United States Department of Defense budgets
nearly $80 billion for Research, Development, Testing and Evaluationix. Over the last half century the
Pentagon has funded the pre‐award research of 58% of the Nation’s Nobel Prize winners in chemistry
and 43% of laureates in physics. x In the United Kingdom, in 2005, 30% of the total public research and
development budget was spent by the Ministry of Defense. The UK Ministry of Defense also employs
40% of all government researchers.
Major innovations developed by the defense industry include:
Although the development of radar systems began in the early twentieth century, it was in 1935
that a patent was taken by Robert Watson Watt for a prototype devicexi. Radar was initially focused
on the detection of fighter aircraft, but now is used for civilian aircraft, car speed detection and
other civilian uses.
• Nuclear Power
During World War II, the US government set up the Manhattan Project to develop an atomic bomb.
The development of nuclear power followed. Nuclear weapons were linked to nuclear power as the
use of a by‐product; plutonium was instrumental in assessing the feasibility of nuclear power at first.
• The Internet
On October 29, 1969, the first message, “lo” (the beginning letter of login), was sent between two
computers, over network known as ARPANet at UCLAxiii. The development of ARPANet was funded
by ARPA, an agency of the United States Department of Defense. This later developed into the
• Global Positioning System
Originally developed by the Department of Defense in cooperation with MIT, GPS is now in
widespread use with many applications, both civilian and military.xiv
• Silly Putty
Originally created by accident in the US when searching for rubber substitute, it became an
extremely popular toy and is used in stress reduction and as an adhesive by Apollo astronautsxv
Although these innovations may have derived from research and development of the national defense
industry, questions concerning this need to be raised:
• Would these innovations have occurred if other incentives were funded?
• The civilian uses of military inventions are often side effects. Would it be better to look for
these innovations directly?
• At what point does civilian use of military inventions become a justification for the vested