The “invisible hand” of Innovation – why public policy and the role of government are crucial to leapfrog innovation?

Our friends John and Clara ask their kids for “the password” before they allow them to turn on the car radio and switch to their favourite pop channel. “MARCONI”. Its John’s way of engraining the inventor’s name in seven and nine-year-old Josh and Jacob’s mind. What makes John’s password incomplete is the exclusion of government and state policy, AT & T, General Electric, Westinghouse, Graham Bell, Edison, Hertz, all together constituting a chain - The innovation ecosystem. Government’s visionary and strategic role is fundamental in establishing the innovation ecosystem, and is often forgotten, when we celebrate the success of entrepreneurs, who have come to be the brand for the innovation ecosystem.

From the Apollo moon landing, Michelangelo’s painting of the Sistine chapel, Christopher Columbus’s pioneering voyage that lead to the discovery of America, to Silicon Valley and the iPhone, what is often not acknowledged is the role of government policy in shaping innovation. Technological innovation triggered by mission driven policies and projects in the aftermath of the second world war and the cold war have had a major role in the development of the transformative and disruptive technologies that are driving innovation today. 

 “We choose to go to the moon in this decade, not because it is easy, but because it is hard, because that goal will serve to organize the best of our skills, because that challenge is one which we intend to win.” John F. Kennedy

Moonlight Vision – lighting up the innovation path with mega projects that spilled innovation - all over

 In 1961, the US President set a bold vision to send a man to the moon. NASA’s Apollo mission drove technology innovation over five decades, the inventions impacting several industries, not just space research, primarily in areas of microprocessor and memory/storage technologies. For more than 50 years, DARPA (Defence Advanced Research Projects Agency) has had a singular mission “to make pivotal investments in breakthrough technologies for national security”. The microchip and microprocessor technology was born from post World War II US Department of defence funding to Fairchild semiconductors and Texas instruments to build a tiny device for precise missile targeting. The bold government vision, strategy and decades of sustained funding for just NASA and DARPA have served as the cradle for the development of todays transformative technologies. 

  “I just think people from Silicon Valley can do anything.”   Elon Musk

 Economists who have studied Silicon Valley and models to replicate it have concluded that it was procurement contracts supporting NASA and DARPA’s mission that drove entrepreneurs to innovate and create transformative technologies. Government vision, mission and strategy to concentrate on a few technology tracks and sustained funding for these was crucial in creating legendary entrepreneurs, who now we associate with innovation.

Alan Turing, Artificial Intelligence, Google’s Algorithm and Apple’s iPhone – riding the government innovation bus

Alan Turing invented the Turing machine, becoming the father of computer science and Artificial Intelligence while working for the British government’s Codebreaker project at the Code and Cypher school during world war II. ARPANET, a program funded by DARPA in 1960 created the internet. Google and its signature search algorithm was born from a US National Science Foundation funded Digital Library Initiative to sort and index websites. Stanford researchers Larry Page and Sergey Brin improvised this later to establish Google. SIRI, the popular AI personal assistant (with Natural Language Processing, Machine Learning and web search algorithm) is another example of an innovation envisioned and funded by DARPA.

The iPhone’s touch screen was first conceived by a CIA and National Science Foundation funded Delaware University research that developed a sophisticated finger tracking and gesture recognise touch-screen tablet called iGesture Numpad, which Apple later bought and tweaked. Twelve of the major technologies that form the iPhone/iPAD (including microprocessor, memory, LCD, GPS and AI technologies) were innovations envisioned and funded by government. The crucial leadership of Steve Jobs and his team was in integrating these technologies to create a winning product and market.

In all key technology areas, Government created the vision and supporting public policy and funding to create innovations, when research was at the riskiest phase and uncertainties and risk of failure was high. Innovation economists have assessed that venture capitalists and funding came approximately 20 years after government first kick started research in nano- technologies, computer science and biotechnology (e.g. US National Institute of Health funds approximately $30 billion a year for drug research and has been the source for most promising drug discoveries).

Evolutionary Economics and Creative Destruction – the economics of innovation policy

Innovation policy lessons learned from the history of innovation show that from a public policy perspective, picking promising sectors or technology tracks seem to be crucial. Radical innovation occurred when government took a visionary role, envisioned a strategy and direction for technology change and invested in that direction over sustained periods of time, ultimately succeeding in establishing an innovation ecosystem in partnership with entrepreneurs, and venture capitalists. This is a deviation from classical economists view of the role of government as primarily being that of a regulator and intervener to correct market failures.

 The technology lead innovation revolution has resulted in a challenge to the classical economists (Adam Smith John Maynard Keynes) theory that government role is to be a service/infrastructure provider and regulator. I like the view and theory advanced by new “innovation policy” economists like Joseph Schumpeter (“Creative Destruction”), Carlota Perez, Mariana Mazucatto, which sees government having an active role in spurring innovation through long term strategies and targeted investments.

Why ‘marketing’ the government role in innovation matters?

Smart innovation policy role of the government is forgotten for its traditional branded role in building hospitals, schools and roads, providing health care, social security etc. Today, when we work on advancing innovation policies to make Ontario and Canada a global leader in AI, Driverless cars and Quantum computing, this branding matters. It matters because we are almost in a competition war to be the innovation capital of the world. There should be a clear recognition of the value of what the government does in this specific area to help every citizen understand what it means. This enables channelling the effort and sustained funding required to allow us to lead the world in innovation, by dramatically increasing our spending in R & D as a percentage of GDP (and related BERD rate) and many other relevant measures to help us leap ahead.

The Carousal ride - public policy as the backbone of the innovation ecosystem

Look at innovation policy as a carousal that lets inventors ride on ideas, with entrepreneurs and financers. Visionary Government research, strategy and seed funding is like the Carousal that attract entrepreneurs and venture capitalists to get on the innovation ride to create transformative technologies, products, markets, and prosperity for societies.

 About the Author: Joseph Kurian has more than 14 years of experience in the public sector, private sector and with international agencies, leading innovation and economic development strategy, technology marketing and policy initiatives.

Disclaimer: This article reflects the personal views of the author, and does not represent the views of the author’s employer or any other organization.