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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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Indian culture has always respected education. Indians are always good at software. Not only the IT software development but also in other creative areas such as Movie making, writing, Advertisement and conceptual designs and theoretical research. Only of late, India is trying to develop its hardware skills in pockets. Therefore India’s innovation could be largely in the areas of design, services and research rather than mass manufacturing, in which China may have an edge.
The most important trend that we see in India is that availability of channels for education, which has increased recently, which caters to the young and ambitious crowd. The new generation also does not know the problems that those previous generations faced. Without the inferiority complex, Indians now can aspire for things that they would not have done couple decades ago. However, India still lacks in quality, which it tends to make up from the large quantity. In other words, those who get in to some of the best schools in India are filtered through the system, which makes it easy for really talented to surface. Innovation also comes with risk. Typical Indians are lured by good job offers and parents/society often does not support entrepreneurship. Culturally unlike US, business failure in India can wipe-out even a very talented person. The system is not geared for this.
The IT outsourcing phenomenon has helped in the short-term to get some foreign exchange earing. But the real benefit is India moving-up in the learning curve in process and technology learning and management. This would eventually spill over to the other fields and help the nation improve productivity even if the outsourcing opportunity diminishes. The west has taught Indians a lots of good things. This is something more valuable than the earnings, because these are learnings.
The incubation/innovation ecosystems built over many decades in US Universities, by bringing together Academicians, venture capitalists, and businessmen is virtually non-existent in India. Therefore many innovations remain undeveloped. This trend may change slowly. As already pointed out by someone above, India has steep mountains to climb.
Posted 14 July 2009, 05:30 by Bala, India
I do believe that India and Asia will become centers for innovation. Innovation comes from need and of course pressure which the population and economy puts across. For poor nations, first priority is always to be able to earn two meals a day. Most of the Asian nations are now moving in that direction, even though it will still take some time to reach that goal. However, there are still a lot of people who are above that level and are keen to find new ways of doing things. As competition increases with opening up of economy, so does the innovative minds.
I am promoter of a company (www.triiton.com) which Mentors new and upcoming companies. The number of companies that are coming to talk to us is very very encouraging. This gives me a clear indication where we are moving.
Posted 14 July 2009, 05:14 by Dr. Nirmal Jain
I think we have to take care on ‘generalisations’ about how innovative in one country performs against another, one region of the world to the other. The parts of the world are in different levels of development and although we seem increasingly connected, this is in in trade not on deeper aspects of what ‘makes up society’. Equally the exchange of intellectual capital may be occurring also but the combinations offered in each place are different and provided for individual reasons and to meet specific goals
Where innovation needs far more attention is at Political level. The impressive results for Korea, Singapore, China & Taiwan is not clear National Innovation Policies but a greater understanding of the orchestrating that needs to be in place. In the West we have defined and even imposed positions for Government, Business and Society far too much, these need to blur and meld more to manage innovation for the betterment of the community not the individual.
Posted 14 July 2009, 05:07 by Paul Hobcraft
Is it not possible that all of this mesauring of globally successfull clusters will be unfair to economiies that has moved into a new stratosphere of open sourse innovation and crowd sourcing, where there is no patents pending but a boiler of entreprenuerships built on use and re-use of stuff that is given for free – but still creates new solutions, new software, new services – and last but not least new jobs?
Posted 14 July 2009, 05:04 by Ake Lindstrom
I dont quite feel it is as much about setting national policies that drives innovation. There is an old adage – Necessity is the mother of invention. Asian countries like India and China have vast populations surviving at low costs and to tap the value in the bottom of the pyramid, organisations are forced to come up with ideas like Tata Nano – the cheap car. Further, the vast knowledge pool within these countries brings more competition both for individuals and organisations that creates a ‘survival of the fittest’ environment which innovaiton thrives upon.
In the western economies, the current economic slump has perhaps created a trigger that will force companies to innovate. The abundance of resources is now threatened with climate change. Competition is increasing through immigration, globalisation, regulation and customer demand. These factors are conducive to innovation and the advantage with west is that countries already have the base infrastructure and finances to try new ideas. In case of Asia, innovation is despite the poor infrastructure and conservative culture issues while the west have a very individualistic culture supportive to creativity.
Bottomline – Low-cost innovations will continue to thrive in Asia but with the current conditions, western economies will certainly catch up especially for more high risk, radical innovations that are resoirce intensive. This is already evident by the number of inventions and patents filed by the west in recent time.
Posted 14 July 2009, 05:02 by Purav Shah
I think one can tide economic growth with application of innovation, rather than innovation itself. For example, both China and India have gone thru rapid growth in the last decade, I doubt that both countries have more innovation than U.S., Europe or Japan, their growth is merely a process of industrialization and application of foreign innovation (ala copying and applying what is known).
“Innovation Center” is only relevant in the context of what generates the most economic benefits (minus the economic cost) for the world in a “single” location. Therefore, quality innovation is more important than quantity – that is, more inventors do not necessary give you more economic benefits. Furthermore, the concept of “Center” implies a concentration of innovation in a single place. With the advent of communication technology and aviation, I think a single innovation will be contributed by people distributed around the world, and each region may have certain specialization.
Posted 14 July 2009, 04:45 by Jack
The protection of innovative ideas (IP rights) is one of the slowing factors in legally weak countries. Beside clear government focus and availability of funds, this could be one of the reasons why Singapore is a new leading innovator in Asia and Japan still remains.
The innovative ideas of Indian and Chinese nationals are currently transformed in profits using Venture Capital in the US.
In my view the legal protection is therefore a key driver in a possible geographical shift.
Posted 14 July 2009, 04:42 by Cor Beetsma
Interesting, but both commentators seem to miss the real points.
Asia and the US are not competing to be centres of innovation – more innovation in Asia will benefit the US and vice versa. Likewise, weak innovation in Asia will hamper US productivity and economic growth.
Atkinson wrongly focuses on the inputs of innovation – who has the most scientists, spends the most on R&D. But what counts is what comes out of the economy. The iphone is great example – both Japan and South Korea have a environments that Atkinson considers supportive of mobile innovation – nation champions and plenty of heavy handed state intervention in the ICT sector. However, Apple has captured much of the profits in the mobile sector with its innovative smartphone. The freedom (for businesses) to fail and the rule of law is very important to the promotion of innovation.
Posted 14 July 2009, 04:28 by David Black
Asis certainly has the potential to become the next hub for innovations.However,China still has to cope up with its non english speaking population while India is struggling to keep pace with the crumbling infrastructure
Posted 14 July 2009, 04:13 by Apurva
Provoking article, however i am trying to reconcile the following: “Although India is considered an IT powerhouse, more than one billion Indians lack Internet access. “
If India has a population of just over 1 Billion (1.1 according to Wikipedia) then are you claiming that only about 1 Million indians have access to the internet?
Addendum: According to: http://www.internetworldstats.com/asia/in.htm
in 2007 there were 42 million internet users in India, making up 3.7% of the population… extrapolating the numbers forward we could guess it to now be between 4-5% but it would be interesting to see how mobile internet has accellerated this trend.
But the general points of the overall article are still sound.
Posted 9 July 2009, 19:20 by simon spencer