2 - Challenges to the Story of Innovation

Summary

The connection between innovation and economic growth is not new. For more than two decades, policy professionals and economists of various stripes have promoted innovation as a major source of economic and social development, arguing that it is a must for the creation of well-paying jobs, securing social welfare and strengthening capacities for international competition and global growth. The Organisation for Economic Co-operation and Development (OECD) claims that innovation is both a ‘proven driver of sustainable growth’ and ‘imperative’, especially in a time of slow economic development, global warming and rising prices for natural resources (OECD, 2015). Accordingly, OECD member states – mainly high-income, knowledge-based economies – promote the rapid development of new technologies, products and services, as well as industrial renewal and transformation to make their economies more productive and competitive. For example, in a 2008 governmentsanctioned report entitled Innovative Flanders: Innovation Policies for the 21st Century, we read that Flanders must ensure ‘innovationled growth’ (NRC, 2008, p 31), as the welfare and wellbeing of the Flemish people depends on high-tech innovation in the wake of globalization. The report emphasizes that Flanders must invest in science and technology (S&T) so as to maintain its position as a leading innovation region (NRC, 2008, pp 14–32).

The equation of a region's or country's wealth with its innovative capacity is not spurious – Flanders is overall wealthier than Wallonia, the French-speaking area of Belgium. The Nordic countries and others which invest over 3 per cent of their Gross Domestic Product (GDP) in research and development (R&D) tend also to have a higher quality of life, often accompanied by strong social welfare systems (and the higher taxes which support them). It seems obvious that funds raised from the public through taxation and reinvested in the public through research grants, start-up funding and other incentives will contribute to job creation. This, in turn, increases the general circulation of goods and services, all of which is reflected in GDP even if no new goods or services ever make it to the market as a result. Therefore, as we will discuss further in Chapter 7, it is not innovation per se which stimulates growth, but investment (without which, of course, most market-directed innovation would not happen).