Innovation

GLOBAL INVESTOR FOCUS Innovation — 11
The revolution
is just starting
Growing computer power, nanotechnology, gene science: it is easy to see the early 21st century
as one of the globe’s most innovative periods. But it can be argued that what we have seen
so far of this information-based, technoeconomic revolution has yet to cause shifts as profound
as those triggered by, say, the Industrial Revolution or the invention of the internal combustion
engine. Changes in the way we foster innovation are needed if we are to gain full benefits of the
new revolution.
Giovanni Dosi, Professor of Economics at the Sant’Anna School of Advanced Studies, Pisa
Is technological innovation the most important driving force behind
economic growth, or do other factors have equal weight? Since the
Industrial Revolution, innovation has been a fundamental engine of
growth. History, however, is more complex than might appear at
first sight. It is too simplistic to look solely at technological innovation.
This must be accompanied by the evolution of organizational
institutions if growth is to be sustained. From the invention of modern
factories at the end of the 18th century right up to “Toyotism”
— the market-driven production techniques developed by Toyota —
in the late 20th century, one can see how organizational and technological
innovation are essentially two sides of the same coin.
Technological innovation will not create sustainable growth without
the evolution of formal organizational institutions. Paul David,
Professor of Economics and Economic History at the University of
Oxford, says the absence of such organizational development holds
back change in major new technological paradigms.
Another factor at play is the rate at which innovation is modulated
by the size and dynamic of the market. In the 1960s, a view
developed that much innovation was driven by demand, so one
would expect that high demand in one area of activity would focus
innovation research in that area. But, while some examples back
up this hypothesis, others indicate the activity of innovation is governed
more by supply than demand. In other words, opportunities
arising from developments in advanced applied sciences and engineering
can also push innovation. So the idea that bigger markets
trigger more innovation is sometimes true and sometimes not.
It is often said that the era of information and communication
technology (ICT) is producing one of the greatest ever periods of
innovation. Is this the case? Clearly, ICT encompasses a set of
broadly applicable technologies that influence the rate of innovation
in almost all industrial sectors – and increasingly in the service
sector too. In that sense ICT, as a new technoeconomic paradigm,
is comparable to electricity or the internal combustion engine, even
if the effects are not necessarily as dramatic. For example, changes
heralded by the introduction of electricity in terms of speeding up
the transmission of information can be seen as much greater than
those of the ICT era – the leap between the pre-electricity era of
carrier pigeons and horse-back mail and the innovation of the telegraph
and telephone was arguably much greater than that from
phone to Internet.