BQF Innovation

In this article in Businessweek Sami Mahroum says that ‘during economic downturns, innovation is the single most important condition for transforming the crisis into an opportunity’.  He argues for active government intervention to boost innovation.  ‘In the short term, governments need to provide support to small companies to help them manage the crisis and continue to develop their portfolios of products and services. The British Innovation Advisory Services model, where government-supported consultants are paid for and loaned to companies, is one example of the type of thing that governments can do. Another is the Dutch voucher system, under which the government gives vouchers to small companies, allowing them to source the expertise (mostly consultants) they need from public research institutes. Some 80% of such voucher-supported projects otherwise would not have been undertaken. This type of support is critical to help many small, successful companies get through the crisis.’

‘For the long term, governments should do four things so their countries can emerge from this crisis as winners:

Inject capital. Inject new funds to fill the gap in any serious downfall in private investment in strategic science and technology (S&T) areas such as nanotechnology, alternative energy, health and life sciences. This is what the South Korean government did when the country was hit by a major economic crisis in the late 1990s. Two years later spending on R&D exceeded pre-crisis levels, and Korean businesses did not have to play catch-up when the economy bounced back.

Think Global. Encourage leverage of international investments in S&T programmes from nations and regions that have the cash such as China, the Gulf, and Japan. The Japanese are looking to expand globally, the Chinese are hungry for knowledge transfer, and more recently, small, rich Gulf countries have allocated billions of dollars to spend on science, technology, and learning programs. Expensive long-term S&T programs can become new platforms for multilateral collaboration.

Focus on Public Programs. Maintain and expand levels of funding for public S&T programs. This should help keep a country’s knowledge base expanding. When Finland was hit by a massive economic crisis in 1990, after the collapse of its main trade partner, the Soviet Union, its government’s expenditure on R&D and education in all sectors increased. Ten years later, Finland emerged as one of the most competitive and innovative countries in the world. In Sweden, a major economic crisis in the early and mid-1990s saw the number of people engaged in R&D activities increase by about 20%. Swedish businesses emerged from the crisis with global leadership in sectors such as telecom and machinery.

Support Talent. Governments should create big seed capital funds to support the newly created army of potential entrepreneurs composed of highly skilled people made recently redundant in specific sectors.’

There is a real danger that in this recession we will see governments borrow money on a large scale and spend it on consumption rather than invest in infrastructure and innovation.  Mahroum’s views are a useful input to the debate.

Paul Sloane