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Asia is using technology to build new models for delivering goods and services to its vast low-income populations. Many of those models will lead to powerful innovations for global markets. -
The US relies on market forces to spur innovation, but it's starting to lag behind nations that make innovation a national priority with policies that support research and education.
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Iqbal Z. Quadir
Why Asia can take the lead
Asia is positioned to generate a torrent of new products and services that could make it the global leader in innovation. China and India are fast adopting modern technologies and making great economic strides. South Korea, Taiwan, and Singapore have already leaped forward. Yet all of these countries were among the world’s poorest only a few decades ago. With this momentum, Asia could become the center for innovation in the 21st century.
But that outcome is hardly certain. Asia has much to overcome: the region has adopted innovations primarily from abroad; about 45 percent of its four billion people live on less than $2 a day; the average Asian income is only 40 percent of the world average; other than Japan, successful Asian economies are newly industrialized; and many Asian governments are weakly democratic or nondemocratic.
Yet adversity can foster innovation, and innovations can convert adversity into advantage. Indeed, Asia has been doing just that. The region has generated innovations—defined here as new ways of doing things that have actually been put into practice, not patents or good ideas that haven't—in at least five ways. Each could generate innovations at an even faster pace in the not too distant future.
First, innovations often emerge from existing technologies. Electricity, for instance, was not harnessed originally to facilitate computing or wireless communication, but it led to these transformative innovations. Likewise, Filipinos and Indians are innovating in ways to transfer money through mobile phones, which were originally invented in Western countries for other purposes. Thus, when technologies—no matter where or why they were invented—are applied to diverse contexts, they provide a foundation for previously undreamed-of permutations and combinations.
Second, 1.8 billion people in Asia live on less than $2 a day. Although India is considered an IT powerhouse, more than one billion Indians lack Internet access. However, the self-interest of Asia's considerable commercial entities will compel them to engage vast low-income populations in serious commerce. That will require new products, approaches, and forms of employment and participation. Microcredit and innovative distribution schemes for solar panels, cell phones, and drip irrigation systems in rural communities are examples of ways to engage the traditionally unengaged.
Third, Asia's companies know that by addressing low purchasing power, they can reach vast markets. The lure of these markets is pushing them to search for ways of achieving dramatic savings in energy and materials. Tata's affordable, fuel-efficient Nano automobile, for example, caters to low-income markets, but its impact may extend well beyond them. Admittedly, the environmental effects of the Nano remain to be seen because it will probably translate into more cars on the road and the product itself has yet to mature. However, the thinking behind the Nano and the practical experience that will result from its use could lead to innovations for global markets that increasingly must reckon with climate change.
Fourth, while Asia's late industrialization implies a weakness in fundamental research, it also means that the region is less locked into old infrastructure and legacy technologies and more willing to adopt new ones. For instance, 95 percent of South Korean households have broadband Internet access, while only 60 percent of US households do.
Fifth, though vast amounts of human energy and ingenuity remain dormant beneath Asia's weakly democratic or nondemocratic regimes, this is changing rapidly. Recent events in Iran—whatever their eventual outcome—demonstrate the potential for the Internet, mobile phones, and Twitter to bolster democratic pressures. As democratic forces gather steam and people become more empowered, new entrepreneurial activities and innovations will follow.
These forces of innovation are self-reinforcing, their effects cumulative, and their impact exponential. Together, they can make Asia this century's global center for innovation.
Robert Atkinson
America's policy problem
Investment literature warns that “past performance is no guarantee of future results.” This advice should be attached to anything written about the innovation position of the United States vis-à-vis Asia. All too often, defenders of the status quo dismiss Asia’s prospects as an innovation leader because the United States has been the leader for so long—and they assume it will continue to be. But past performance in innovation is no guarantee of future performance, as we have seen with one-time leaders that have lost their advantage, such as Germany and Great Britain. In fact, while the United States once led the world, it no longer does by many measures, and absent significant changes to public policy, it won’t in the future. Asia will.
Already, the United States lags behind other countries in innovation-based competitiveness. The Information Technology and Innovation Foundation (ITIF), which I head, recently published a report called The Atlantic Century. It used 16 indicators to examine the innovation-based competitiveness of 40 nations, including the United States and five Asian nations (China, India, Japan, Singapore, and South Korea). We found that the United States is sixth, not first—behind Singapore, Sweden, Luxemburg, Denmark, and South Korea.
Strikingly, the ITIF found that all of the 39 other countries studied have made faster progress toward an innovation economy over the last decade than the United States has. Dead last is not good either in sports or in innovation-based competitiveness. Among Asian nations, China made the most progress, followed by Singapore (2nd), Japan (10th), India (14th), and South Korea (17th). While the United States ranked 30th in the rate of growth of corporate R&D as a share of GDP, China ranked 4th and South Korea 10th. The United States ranked 29th in growth in the number of scientific researchers as a share of total workers, while China ranked 1st, South Korea 4th, Singapore 5th, and India 10th. If these different rates of improvement continue, as they are likely to, without significant policy changes in the United States the US position will probably continue to fall and Asia’s will likely rise.
One reason many observers maintain their faith in US innovation leadership is that they focus only on the core strength of the United States: its strong market and business environment, which are conducive to innovation. The culture of the United States is more entrepreneurial than that of many nations, including China and Japan. Many US firms continue to be leaders in innovation. But national innovation leadership also depends on having a strong innovation policy system, and on this score the United States is at risk.
Unlike most leading Asian nations—including Japan, South Korea, Singapore, and China—the United States does not have an explicit national innovation policy. Other nations have developed explicit and strategic national innovation policies that, among other factors, include generous tax incentives and direct funding for innovation. In the United States, the continued dominance of neoclassical economics doctrine, which holds that the market will take care of everything, means that efforts to develop similar strategies here are attacked as heavy-handed industrial policy. In fact, the emerging field of innovation economics makes it clear that markets, left to themselves, will underperform with regard to innovation and that they need to be complemented by strategic innovation policies: generous R&D tax credits and capital investment incentives, strong support for science and technology (including efforts to ensure an adequate supply of scientists and engineers), and other related policies. The short answer to the question of whether Asia will lead is that it will do so if the United States lets it by continuing to rely on market forces alone to generate innovation leadership.
07 May 2010 · 08:42:14 PM GMT
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Very interesting thoughts into the dynamics and velocity of Innovation. My 2 cents..
One of the fundamental raw material for Innovation is Human Power. Reading on how population dynamics is changing. I feel that innovation needs close collaboration and the volume of manpower in Asia could tilt the number of innovative ideas towards China and India. On those lines, I was reading another article of how people in Israel and Palestine are working together on New SW development. It will be interesting to see how this topic plays out in next 15-20 years. I feel that we in US need to be aware and make sure we are not blind sighted… Cheers..
Posted 14 July 2009, 18:54 by Ravi B
Is it an innovation policy that furthers innovation possibly a path to limit innovation? A policy sets out peramiters and, eventually, peramitors are limiting. . . limiting because there are those who do not want a particular peramiter broken or expanded. When it reaches this stage, then the policy becomes political and that alone will further limit innovation.
Innovation comes from creating an environment that allows free thinking to improve what is or create what isn’t. It seems that if there is to be an innovation policy, then, to my way of thinking, its only purpose is to help create the types of environment where creativity and innovation can happen.
Innovation comes in two forms — innovating improvenment on what is; creating what isn’t. The former can be worked into the marketplace slowly but faster than creating something that, until this time, wasn’t. For the latter, it will take money because innovation does not create its own funding until it can be tested that it has a use by enough people or businesses and can be put to use. That takes time especially if what innovation has created requires a learning curve to put it to use.
An innovation policy should be that there is no policy . . . there is only funding to allow the innovators to create what isn’t.
Posted 14 July 2009, 18:06 by Alan J. Zell
I fully agree with the general argument as presented. While it is true that the US still has, in some areas, a unique ecosystem that truly fosters innovation, this is no longer true across the board.
The US Government has to invest heavily in basic science and R&D.
We should reclaim or reaffirm leadership in important sectors: such as space, ICT, renewable energy, automotive technologies, high speed trains, nuclear power generation and more.
We need to dramatically improve the overall quality of US secondary and University education. Not every American University is an MIT or a Caltech. Too many high school graduates are functionally illerate; while many do not even get to a mediocre high school diploma.
Again, we know that government-led plan and spending alone are not a guarantee of improved quality of innovation. But we need the additional resources and the creation of an environment in which demand is driven in significant measure by Government. US technological leadership in aerospace was not created by the market; but by the demand generated by a Government that wanted to win the technological competition with the Soviet Union during the Cold War.
So, while market forces are important, they are not everything. If the US cannot nurture the innovation friendly ecosystem that made America the choice destination of scientists and entrepreneurs, economic decline will be the inevitable consequence.
Posted 14 July 2009, 16:01 by Paolo Liebl von Schirach
The US has been innovating – just not in the form of typical industrial or consumer products. We created all sorts of creative mortgage structures, securitization structures, credit default swaps and other financial derivatives, and, not to forget less recent issues, energy trading companies. The issue is both fostering innovation and fostering PRODUCTIVE innovation. For the US to keep its “title” we need to export products and ideas that create sustainable value. We need to export more than movies, music and bad debt. We need to harness our intellectual capital and other resources to innovate in areas everyone will need – water purification, energy distribution, energy creation etc.
Our current economic crisis shows us that talented, smart, creative and innovative people will gravitate to the most lucrative fields. For too long, that has been financial engineering. Time to start building again!
Posted 14 July 2009, 13:13 by Todd
Innovation is a team sport. It requires cross-disciplinary teams that include participants from company R&D centers, business strategy folks, suppliers, universities and braniacs that all contribute to successful innovations. Increasingly those teams are spread around the world. Trying to say that one of those countries where a team member is located is more important than another is distracting. Going forward, the best innovators will be the partners of choice. They will be the sought after by companies, universities, suppliers, and others located everywhere around the world. The partner of choice innovator will be located in a country —or in several countries— but it doesn’t matter where the corporate headquarters are located. What matters is the team they assemble. Trying to place the credit or the blame for innovation with a country that has part of the team simply does not give credit where credit is due.
Posted 14 July 2009, 13:06 by Rob Shelton
The centre of gravity for innovation is starting to shift from west to east. The substantial rise in socio-economies of India, China and other Asian countries will certainly remake the innovation landscape. Although each has issues, India and China are also currently the best bets for FDI and, pending political stability.
The growth will prove the World is no more any flat.
Apart from huge size & scale of economy, India & China can facilitate access to skills, capabilities, and intellectual property (IP) that other developed economies does not possess internally. Both can also allow other nations to establish relationships and sharing knowledge in the areas where it has no experience, and can become a real source of competitive advantage.
Further, more knowledge jobs will be outsourced from Asia. Research and development will become more international. In the long run, Asian nations will start to earn more from exploiting their own intellectual property.
Posted 14 July 2009, 13:05 by Vatsal Vaishnav
The article is truly a thought provoking one. As I reviewed it I had several points come to mind:
1. Does it really matter where innovation comes from? We see ideas spring from around the world and get implemented and shared right away. So whether it is China the Middle East or America the key matter is do we have enough innovation.
2. I think the free American Enterprise system is difficult to replicate in other parts of the world. The American system harnessed the art of sheparding ideas from infancy stage to maturity and implementation. In America there is a very sound process where it does not matter who you are. You can change things around and go to market with your ideas and most often you can find someone to endorse you. That is what other parts of the world are missing. Geniuses will go crazy regardless of where they live if the environment surrounding them does not nurture and protect their ideas.
That type of thinking takes a long time to develop and requires a true democratic system that protects the intellectual rights and properties of individuals. I have not seen a great evidence of that in many parts of the world and until then innovation is going to appear like a mutation; unpredictable and does not happen very often.
Posted 14 July 2009, 12:07 by Saado Abboud, Ph.D.
American public education is destroying innovation for a number of reasons:
Children are indoctrinated at an early age the very economic engines that encourage innovation such as capitalism, free enterprise and business in general are evil.
Children, typically boys, who do not fit the mold of “proper” student and can not be controlled are labeled as troublemakers with ADD and drugged so the system can properly manage them.
There are no incentives for children to innovate since the group is the focus not the individual. This has always been the reason why Japan (culturally hierarchical; same for India and China) has focused on incremental improvement instead of true ground breaking innovation.
Critical thinking skills have been pushed aside as a child’s self esteem is more important than getting the answer right or solving the problem.
True innovation is always destructive by it’s very nature. As a result, there will be winners and losers…something that is no longer tolerated in the United States but appears to be gaining momentum in other countries.
Posted 14 July 2009, 12:05 by Jerry Martinez
Innovation does not necessarily means ideas, it just means everyone involved with social and ecomomic activity have the freedom and the motivation to experiment new ideas to make life easy,exciting and passionate of whatever activity one is involved. simple activity like making marginal improvements on a day to basis, switching off water taps or electric switch would also mean innovation.Indulging in extrvagance,and wastage,would mean the opposite of innovation.
simon
Posted 14 July 2009, 11:22 by j.a.simon
To sum up the points I made in my previous post: there will be a lot of innovation occurring both in Asia as well as in the US/West. However, one kind of innovation — typically, Innovation from Abundance — is likely to get more airtime and recognition (as well as bring in revenue) than the other — Innovation in Scarcity. The latter kind is usually treated as subsistence/survival innovation when viewed through the lenses worn by Western commentators — i.e., a means of making it through the present while working towards attaining Western lifestyles.
Hence, given the different metrics and standards used for evaluating innovation (including such things as publications and patents) this debate is in one sense pointless. We’ll have the Apple-innovators on one side debating the Orange-innovators on the other.
Suddenly, esp. in the wake of the financial meltdown, many aspects of US/Western lifestyles and practices now seem to be fading out of favor. I bet the standards used for judging innovation and innovativeness will also change as a consequence. No longer will it be considered innovative to launch 25 different brands of toothpaste in a year. Or better yet, 50 different and “innovative” financial instruments.
Many business journals get excited about shiny, plastic and chrome innovation because it provides them with pretty pictures to print in their issues. Process and social, and even subsistence-level innovation is not sexy and hence won’t show up in BusinessWeek’s annual Innovative 100.
I’m not dissing shiny innovation — shinovation? I love shiny bling myself. But this comparison game of whose innovation is bigger, especially across different Cultures and Contexts, needs to stop.
Posted 14 July 2009, 11:05 by Murli Nagasundaram, Ph.D.