2019 Week 1: Innovation Policy

Should innovation policy consider wider social benefits and if so, how should we define what constitutes the public good?  

The immediate motivation lies in today’s Financial Times headline:

Qantas hopes its ultra-long-haul flights will go the distance: Routes from Sydney to London and New York force Boeing and Airbus to push innovation

This raises obvious questions about the wider social desirability of innovation.  We all know that one of the fastest growing sources of greenhouse gas emissions is from air transport and in all current projections it is virtually the last sector to transition away from fossil fuels because the technical options are so daunting and the costs would be so high.

As a case study of Australian-led innovation, an obvious place to start is to consider how the Australian government envisions its innovation policy.  The Australian Department for Business website has a dedicated section on innovation, which highlights how:

Everyone can innovate. Innovation means coming up with new ways of doing things. Bringing innovation into your business can help you save time and money, and give you the competitive advantage to grow and adapt your business in the marketplace.

What is innovation?

Innovation generally refers to changing processes or creating more effective processes, products and ideas.

For businesses, this could mean implementing new ideas, creating dynamic products or improving your existing services. Innovation can be a catalyst for the growth and success of your business, and help you to adapt and grow in the marketplace.

Being innovative does not only mean inventing. Innovation can mean changing your business model and adapting to changes in your environment to deliver better products or services. Successful innovation should be an in-built part of your business strategy, where you create a culture of innovation and lead the way in innovative thinking and creative problem solving.

Innovation can increase the likelihood of your business succeeding. Businesses that innovate create more efficient work processes and have better productivity and performance.

[…]

Remember, innovation is the key to competitive advantage for your business.

So far, that is all relatively innocuous, if banal, since these are quite generic truisms that would be hard to dispute.  The critical question for us is raised by the very next sentence:

By clicking on the link, you can find *74* results for currently open competitions.  These range from an R&D Tax Incentive to an  Australia-India Strategic Research Fund to the Defence Cooperative Research Centres Program to Priority Sector Collaborative Grants NT and Industry Tech Fund QLD

You would find a similarly dizzying array of schemes and programmes in most other major economies.  So without needing to spend much additional time worrying about Qantas or Australian policies, one can then ask broader questions that you should feel free to apply to your favorite country or sector where you would like to see innovation.

  1. There is no reason to believe or expect that all innovations should be related to preferred societal outcomes, but does that mean that innovation policy should simply support innovations that lead to better outcomes in terms of jobs, GDP, etc or is there any role for any other considerations?
  2. If you believe that that innovation policy should concern itself with ‘good’ societal objectives how do you establish what is a good outcome and, importantly, how do you establish whether some new innovation will be used to produce a superior heart stent or a better way of pulling oil out of the ground (or both!)?
  3. If you don’t believe that innovation policy should account for these other considerations are there any limits you would want to see put in place to constrain how funding for innovation is allocated?
  4. Even narrowly defined, how do you demonstrate value for money in supporting innovation and decide where to spend limited resources?

p.s. You only need to respond to one of the questions. In any case, please do try to keep to the 140-word limit (or at least keep to it within a factor of two!) 

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