National Innovation Policies: What Countries Do Best and How They Can Improve
This report summarizes what 23 nations and the European Union are doing best in innovation policy, and where they have the greatest room for improvement.
Dedicated government agencies
The first thing that stands out is many countries—including Chile, Ghana, Honduras, and the United Kingdom—have established government agencies, councils, and organizations specifically responsible for innovation. For instance, Chile created a new National Office of Productivity and Entrepreneurship; Ghana created a Presidential Advisory Council on Science, Technology, and Innovation; and the United Kingdom established UK Research and Innovation to direct the nation’s investments in research and innovation funding. Conversely, the lack of such an entity was identified as a weakness in American, Malaysian, and Italian innovation policy.
Innovative tax measures
Several countries—including Argentina, Canada, Chile, China, Italy, Korea, and Poland—have implemented strong and innovative tax measures, such as more generous R&D tax credits, investment incentives, collaborative tax credits—which offer more generous incentives for industry-funded research occurring at universities—and patent boxes that tax profits from products deriving form new IP at a lower rate. Chile offers a flat 46-percent R&D tax credit. In Canada, Ontario has introduced a collaborative tax credit and Quebec has introduced a patent box. China offers a patent box that lowers the tax rate on qualifying R&D to between 0 and 12.5 percent. Italy offers super-depreciation for investments in new capital goods, tangible assets, and intangible assets such as software and IT systems; a tax credit on incremental R&D costs; and a patent box. Lack of tax incentives was identified as a German weakness, and a U.S. weakness is its collaborative R&D tax credit applies only to energy-sector collaborations. Beyond taxes, Poland has introduced innovation vouchers and loan programs in an effort to specifically stimulate innovation by small and medium-sized enterprises.
Improved regulatory environment
A number of countries have made efforts to improve their regulatory environment in support of innovation. Argentina and Chile introduced one-day registration for new businesses. Korea introduced a regulatory sandbox covering all industries—including information and communications technology (ICT), energy, and fintech—whereby no process of deliberation or approval is to exceed three months. The Philippines’ Central Bank is experimenting with a regulatory sandbox for fintech. Chile produced the report, “Regulatory Policy in Chile,” seeking to simplify and harmonize relevant regulations and improve its efficacy, predictability, compliance, and supervision. However, conversely, weak regulatory environments were cited as barriers to innovation in Canada, India, Korea (hence its introduction of the regulatory sandbox approach), Honduras, and South Africa. These countries noted their stringent regulatory environments as the most constraining innovation in their fintech and life sciences industries.
Open data initiatives
Colombia, the European Union, Mexico, Pakistan, and Taiwan all have initiatives to leverage open data as a platform for innovation. Colombia’s portal has more than 10,200 datasets from 1,184 public institutions. Mexico’s National Digital Strategy has more than 40,417 datasets from 278 public entities available on its open data portal. The European Union’s Ministerial Declaration on e-Government pledges to link-up members’ public e-services and adopt a “once-only” principle (i.e., ask citizens for data only once). Taiwan is implementing an “Action Plan of Open Data” in which government organizations, at every level, are required to have an open data committee and establish open-dataset goals. The country has almost 40,000 open datasets, and regularly holds events such as Hackathons, Data Jams, and Datapaloozas to stimulate open innovation.
Investment in AI
Several countries have introduced strategies to drive leadership in emerging information technology application areas. Canada has invested, established agencies, and developed strategies to spur growth in artificial intelligence (AI) and quantum computing. The European Union has developed an AI strategy and directed each of its individual member states to do the same. Among the countries represented in this compendium, that covers France, and Korea is also developing an AI strategy.
Investment in manufacturing innovation
Several countries have defined strategies to ensure leadership in manufacturing digitalization, or “Industry 4.0,” including Bangladesh, Italy, Malaysia, Mexico, Sweden, and the Philippines. For instance, in 2017, the Filipino government launched the Inclusive, Innovation-led Industrial Strategy, which represents a new approach to industrial policy for a nation anchored in competition, innovation, and productivity.
It’s difficult to achieve innovation without protecting ideas. Robust IP rights—an effective protection and enforcement mechanism—provide innovators security in the knowledge they can capture a share of the returns from their risky, expensive, and uncertain investments in innovation, and then be able to turn the profits from one generation of innovation into financing to create the next. While some members have reported improvements to their countries’ IP environment in recent years, notably Mexico, many reports point to weak IP environments inhibiting innovation. Reports from Bangladesh, Canada, China, India, Malaysia, and South Africa in particular note difficult IP environments.
Promote tech transfer and commercialization
Achieving effective technology transfer and commercialization of new discoveries from universities, research institutions, and national laboratories to the private sector has been cited as a challenge for a number of countries, developed and developing alike. The Italian submission has noted that despite its high-quality academic research, Italy performs relatively poorly in terms of patent submissions and time to market. Similarly, a recent study of Sweden’s life-sciences industry lamented, “There is currently no effective platform to industrialize ideas from higher education institutions in the life sciences sector.” Country profiles of Canada, India, and the Philippines also reference the challenge of creating stronger linkages between industry and academia, or between knowledge producers and consumers. Only the U.S. country profile reports this as a systemic strength, noting that America’s Bayh-Dole Act (which gives universities rights to innovations stemming from federally funded R&D) and the Small Business Innovation Research Program (SBIR), a program designed to help small businesses commercialize technologies stemming from federal R&D funding, have proven effective in tackling this challenge. Notably, America’s Bayh-Dole legislation has been copied by more than two-dozen countries and its SBIR program by at least 18 worldwide.