OECD Report: “Creative Destruction,” Innovation Focus Needed In Economic CrisisPublished on 16 June 2009 @ 9:31 pm
By Catherine Saez, Intellectual Property Watch
As members of the Organisation for Economic Co-operation and Development (OECD) prepare to meet for their annual ministerial meeting in Paris next week, the organisation has issued a report calling for a strategic, innovation-driven response to the economic crisis.
The document entitled Policy Responses to the Economic Crisis: Investing in Innovation for Long-Term Growth [pdf] was prepared by Dominique Guellec and Sacha Wunsch-Vincent of the OECD Secretariat.
The report from the Paris-based OECD offers policy suggestions and advises governments to invest in innovation to achieve long-term growth. It suggests that efforts to stimulate the economy need “to take advantage of the process of ‘creative destruction’ to accelerate structural shifts towards a stronger and more sustainable economic future.”
Evidence suggests that the crisis has begun to affect innovation, according to the report. Research and development (R&D) is declining because it is mainly financed by cash flow, which contracts in downturns.
“As first signs of recovery are emerging, leaders should be careful not to forget about some of the future-oriented elements of the stimulus measures and carry them out,” said Wunsch-Vincent, an OECD economist. “These future-oriented investments are not luxury but necessity to reach to the necessary levels of growth and innovation again.”
He added that “the area of green and sustainable growth will need most attention [as] it would be a terrible waste if we do not ‘seize the moment’ to introduce some binding commitments in this area now and before we return back to normal.”
“Next week’s OECD ministerial meeting in Paris will be crucial in this respect,” he said.
The document was based on a questionnaire circulated by the OECD Directorate for Science, Technology and Industry to its member countries and five accession countries (Chile, Estonia, Israel, Russia and Slovenia) to take inventory of specific innovation-related initiatives that they were undertaking.
According to the report, many of today’s leading firms such as Microsoft or Nokia were created or transformed in the “creative destruction” of economic downturns.
The questionnaires show that current economic stimulus efforts in the OECD countries include measures directed towards investment in R&D, education, the greening of the economy, support to innovation and to small and medium-sized enterprises. Non-OECD countries are also carrying out significant economic stimulus packages.
The report says that when it comes to measures relating to innovation and long term growth, OECD and non-OECD economies focus on: improving infrastructure; support science, R&D and innovation; invest in human capital, education and training; and promote the investment in green technologies and innovations to foster energy-efficiency and sustainable economic growth. Most countries are implementing the above measures in order to reach a new foundation for growth in the future.
Many of the existing stimulus packages put some emphasis on deploying information and communications (ICT) infrastructure and a “networked recovery,” the report said. ICT infrastructure is seen as a tool to revive the economy through innovative services and to offer solutions to pressing social challenges.
“The priority given to a networked recovery and broadband is very welcome, a sign that political leaders now treat ICT infrastructure on the same par as roads, trains and energy infrastructure,” Wunsch-Vincent told Intellectual Property Watch. “To prepare for the future, we need to move the debate beyond giving everybody access to a halfway decent broadband connection.”
“Imagine,” he said “you build 50 kilometres of single lane highway in a big country – which one can only travel in one direction and at slow speeds. Would you expect great impacts? No.” Instead, he said, next generation networks with “50-100 Mb/s symmetric speeds and their use for smart infrastructures – intelligent transport, smart grid – should be the norm.”
The report will be continually updated to reflect corrections or adjustments on ongoing stimulus packages. This exercise should help reconcile short-term stimulus measures and plans for sustainable growth. The report said more work will be needed to measure the implementation and assess the impact of the economic recovery measures.
The OECD is developing an innovation strategy, to be presented to ministers in 2010.
Catherine Saez may be reached at email@example.com.