The Good, the Bad, and the Ugly of Innovation Policy

November 22, 2010

An increasing number of countries think achieving economic growth through technology exports is preferable to doing so by raising domestic productivity levels through innovation, particularly by leveraging information technology. These nations, of which China is only the most prominent, are not so much focused on innovation as on technology mercantilism, specifically the manipulation of currency, markets, standards, IP rights, etc., to gain an unfair advantage favoring their technology exports in international trade. However, as ITIF explains in its report The Good, the Bad, and the Ugly (and the Self destructive) of Innovation Policy, such approaches are bad for the world, and quite often for the countries that practice themselves. For example, Japan’s recent economic stagnation is the inevitable denouement of an economic growth strategy based predominantly on high-tech exports. This event breaks in the trade, innovation, and globalization debate, and helps advance a framework that stresses global cooperation to promote good innovation policies and stem the use of bad, ugly and self-destructive policies by emerging actors.