Monday, May 31, 2010

OECD Advises Invest In Innovation To Boost Economic Growth

Innovation is key to boosting economic growth, and governments should resist the urge to cut spending on activities that are 'essential for a country's future', the OECD (Organization for Economic Co-operation and Development) has warned.

Speaking at the launch of the new OECD Innovation Strategy, the organization’s Secretary-General Angel Gurría said: 'Many countries increased their public investment in education, research and smart infrastructure to strengthen their growth performance. But now with the weight of fiscal deficits, there is a risk of such spending being cut. This would be a mistake.

'While cuts may provide short-term fiscal relief, it will hurt growth in the long term, not to mention the ability to deal with challenges such as climate change, hunger and disease; all of which require innovative solutions.'

The strategy encourages governments to take a broad approach to innovation. 'Our innovation policies must have a broader view than simply supporting science and technology (S&T),' explained Mr Gurría. 'Countries need whole-of-government innovation strategies capable of aligning the different ministries, policies and reforms around a nationwide 'innovation crusade'.'

According to the OECD, governments must make sure that money spent on promoting innovation does not go to waste. Simple measures like cutting red tape, granting more independence to universities and opening up access to public research data can enhance the efficiency of public spending on innovation. Governments also need to break down administrative hurdles that make life hard for new companies and make tax policies more innovation- and entrepreneurship-friendly.

The OECD's Innovation Strategy identifies five priority areas for government action. On the human aspect of innovation, the report recommends that people should be empowered to innovate. Among other things, the report highlights the importance of developing education policies that foster an entrepreneurial culture and ensuring that labor markets encourage the international mobility of skilled workers.

The second priority focuses on innovation in firms, as 'firms are essential for translating good ideas into jobs and wealth'. On an optimistic note, Mr Gurría pointed out that recessions are often associated with the birth of highly innovative companies. 'Microsoft, Nokia, Google, Blackberry (RIM) were all born, or reborn, during an economic downturn,' he noted. 'In fact, over half of the companies on the 2009 Fortune 500 list began during a recession or bear market.'

However, up to 40% of new firms fail within 2 years. 'The tax climate for entrepreneurs should be made more neutral,' the OECD writes, adding that 'policy can also help existing small and medium-sized firms enhance their capacity to innovate, e.g. in supporting the formation of relevant skills.'

On the diffusion of knowledge, the strategy calls on governments to promote information and communication technologies (ICTs), particularly broadband networks. It also highlights the importance of intellectual property rights (IPRs) in providing companies with an incentive to innovate.

The fourth priority focuses on the role of innovation in addressing major challenges. Here the strategy encourages governments to work closely together to solve some of the biggest challenges facing society today. 'A new model for the governance of multilateral cooperation on international science, technology and innovation should be explored,' the strategy reads. This model could focus on setting priorities, funding and institutional arrangements as well as procedures to ensure access to knowledge, the OECD suggests.

Finally, the OECD calls for improvements in the governance and measurement of policies for innovation. 'Evaluation is essential to enhance the effectiveness and efficiency of policies to foster innovation and deliver social welfare,' the strategy states.

In Europe, the EU's 2020 Strategy places innovation firmly at the heart of efforts to help Europe emerge stronger from the current economic crisis. The new European Commissioner for Research, Innovation and Science, Máire Geoghegan-Quinn, is chairing a group of Commissioners whose portfolios touch on innovation in some way.

For more information, please visit:
OECD:  http://www.oecd.org/
Europe 2020 Strategy: http://ec.europa.eu/eu2020/index_en.htm

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