Source | www.gsb.stanford.edu | Katia Savchuk
Elected leaders around the globe often take office with promises of driving growth through innovation. But deciding which policies to champion in order to achieve this goal can prove difficult. Nicholas A. Bloom saw the challenge firsthand when he served as an advisor in the UK treasury department in 2001.
“Ministers get lobbied by endless firms, academics, and other politicians. It’s hard for them to conclude what works and what doesn’t, because each group only presents evidence favoring their own policy,” Bloom says. “I remember wishing there was some overview by an independent group based on actual research.”
Nearly two decades later, Bloom, now an economics professor at Stanford School of Humanities and Sciences and by courtesy at Stanford Graduate School of Business, did exactly that. Along with economists Heidi Williams of Stanford University and John Van Reenen of the Massachusetts Institute of Technology, he came up with an evidence-based toolkit for governments looking to spark innovation.
Research shows that innovation is the main driver of a country’s long-term economic growth. At the same time, companies in free market economies are likely to underinvest when it comes to research and development, Bloom says. That’s because an individual firm bears all the costs for developing a new solution, but competitors reap some of the benefits by either imitating the invention or waiting until a patent runs out. That’s where the government comes in.
The Top Five Policies for Boosting Innovation
Outlined in a recent paper in the Journal of Economic Perspectives, here are five policies that Bloom and his colleagues say can effectively drive innovation: