March 7, 2016
Innovation can be looked at from various points of view:
- of end users, whose life is made easier by innovations,
- of businesses that profit from selling their innovations,
- of businesses that modernise by purchasing innovations created by others,
- of the economy of an innovative country,
- of the economy of a country undergoing modernisation.
For end users, businesses or national economies innovation is a choice, one of the available paths of development. For the global economy and developed economies, innovation is not a mere option, but a necessity.
Analyses of growth processes, focusing on where revolutionary innovations emerge and how they later spread globally, have shown that innovations originate from developed countries. Next, through diffusion, they spread to other economies where they are modified, improved and inspire further innovations at which point the cycle starts over again.
In terms of boosting the productivity of economies, for less technologically advanced economies, copying innovations yields similar results as the emergence of revolutionary innovations in developed economies. Not to mention it is much easier, quicker and cheaper. Since the process of introducing new products and technologies also gives rise to improvements and even far-reaching modifications, the difference between original and imitation becomes blurred.
The source of innovation in less advanced countries is, therefore, technologies imported from more advanced economies. It also became apparent that new technological ideas are faster to propagate in economies that are more open, politically-stable and incentivise foreign investors.
Accordingly, the innovativeness of economies receiving innovations depends on policy. Countries may conduct a policy that either promotes or hampers innovation.
Those embracing new technologies spend more on research and development, which in turn facilitates the adoption of further technologies and ultimately leads to creating and developing their own technologies. I call this the model of development through modernisation.
The ever-entrepreneurial Poland has followed this path since the political transformation in 1989 and became the poster child for successful development through modernisation. But modernisation has its limits. As the economy grows, its potential is gradually exhausted.
What happens then? What should be done to gradually transition from a modernising Poland to an innovative Poland?
Let’s take a look at what drives innovation in developed countries. First and foremost, need. Without need, there is no innovation. Developed economies cannot simply copy third party technologies since these do not guarantee efficiency that would offset high costs of labour. To grow, countries must come up with new products, services and technologies. Ones no one has thought of before. And such that will bring enough money to pay the high salaries.
If this demanding development model is not an absolute must, common sense and practice dictate the choice of easier paths. After all, it is much easier to take something and improve it, rather than build it from the ground up.
Besides, innovations require conducting specific economic policies resulting in the accumulation of conditions favouring innovation. To cut a long story short, these policies favour long-term initiatives where cause and effect are separated by decades rather than months or years. It takes 15 to 30 years to transform a radical idea into a revolutionary, world-changing technology. Many unexpected things altering the playing field may happen along the way. Countless projects end in failure. Still, the world persist in seeking revolutionary innovations.
As the old Arabic saying goes: persistence will bring you success, even if it will be a long time coming.