Innovation in the economy and society

Walid M Abdelnasser
Friday 31 Jan 2020

The links between innovation and economic development were high on the agenda of World Economic Forum meetings in Davos

One of the main themes on the agenda of the January 2020 session of the Davos annual meetings organised by the Switzerland-based World Economic Forum (WEF) was “innovative economies.”

There is no doubt that innovation has become a central theme of many of the international meetings taking place in different parts of the world over the past few years, whatever their overall subject matters. This has been partly related to the fact that almost all countries have incorporated in their visions for the coming years notions directly or indirectly related to the concept of “innovation,” besides, of course, explicitly highlighting the concept itself. These related notions have included, but have not been limited to, “a knowledge-based economy” and “a knowledge-based society” as targets to be attained in the coming years, as well as that of an “innovative economy.”  

The shared reference by many countries in the world today, whether developed, emerging, developing or even least developed, in their long-term plans to the notion of the “innovative economy” constituted a good reason for the WEF to place it at the top of the agenda for this year’s session of the Davos Forum. Discussions of it did not reflect any disagreement regarding the growing significance of “innovation” for national economies today or in the future and whether in the short, medium or longer term.

Innovation is perceived to be both an engine of economic growth, particularly in terms of helping to achieve the qualitative transformation and indispensable technology-based transformation of the economy, as well as a guarantee of the continuing, and even rising, competitiveness of national economies at the sub-regional, regional and global levels.

Several international reports and studies have showed the correlation between economic growth and development, on the one hand, and innovation, on the other. One of the most significant of these has been the Global Innovation Index (GII) published annually over the past 12 years by the World Intellectual Property Organisation (WIPO). Successive editions of the GII have confirmed the correlation between “innovation” and the extent to which an economy is developed. Over the years, the economically developed countries, as well as some of the emerging ones, have been in the forefront of countries that have achieved the highest scores, according to the almost 80 indicators that collectively constitute benchmarks for the global ranking of the more than 125 countries covered by the GII on an annual basis.

However, whether in the GII or other similar periodic and regular global reports and studies on innovation, and although the correlation between innovation and the degree and level of economic development has been clearly established, to date there has not been any clear scientific explanation of it or proven quantifiable measurements. There are no empirical data and statistics that have successfully and fully substantiated the relationship.

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There thus exists an urgent need to continue studies aimed at establishing the case for such a relationship. That said, almost all the countries in the world today are convinced that if their economies are to grow and compete, promoting innovation strategies and policies will be a key factor. Innovation is conceived of not only as a necessary condition for enhancing the competitiveness of an economy, but equally an indispensable one. 

On the basis of the linkage between innovation and the level of the development of the economy, one should focus on the major difference between the developed economies and some emerging economies versus other emerging economies and the developing and least developed ones. This major difference relates to the fundamental nature, basic characteristics and sources of funding for research and development (R&D) activities. 

While in the former category of countries, the state and public institutions have R&D bodies that they finance, the majority of these are affiliated to the private sector or civil society, whether in organisational, administrative or financial terms. The situation is exactly the opposite in the latter category of countries.

There, the state and public institutions are the main sponsors and funders of R&D, including those whose work and outcomes have direct impacts on the economic structure, performance and competitiveness of the countries concerned. R&D bodies affiliated to or financed by the private sector are either non-existent or minimal or at best constitute a minor portion of overall R&D activities at the national level.

This leads us to a point that needs to be clearly made regarding innovation itself. Although the Davos Forum has discussed the theme of “innovative economies,” the concept of innovation is not, and should not be, limited only to its linkage to the economy. In fact, innovation can neither be absolutely successful nor relevant in a positive sense to the economy and its competitiveness if it does not exist in an environment characterised by a comprehensive set of supporting mechanisms, laws and regulations. There need to be relevant institutional set-ups as well as appropriately educated and trained human resources. Innovation also needs to be perceived as a comprehensive, transboundary and cross-sectoral concept that has multiple impacts on various sectors of the state and society, including, of course, the economy.

According to the scenario outlined above, many sectors in the societies of the relevant emerging, developing and least developed economies need to be revisited, restructured and modernised, and one important and very relevant example of these, if not the most important, is education.

At all levels, including higher education and research, this needs to be constantly reviewed and updated in terms of curricula, educational materials and tools, well-trained and qualified instructors, facilities including laboratories and libraries, incentives, including financial ones, for innovation, such as an intellectual property office at every university or equivalent institution, and the encouraging of scientific research. 

*The writer is a political commentator.

*A version of this article appears in print in the 30 January, 2020 edition of Al-Ahram Weekly.

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