Contemporary economic thought is flawed, assuming that efficient allocation of traditional economic inputs (land, labor, capital, and knowledge) drives productivity and profit.
In reality, it is the core values of a society, as well as the complexity of human networks and social behaviors, that allow innovation systems to thrive. We call these systems Rainforests, and the secrets lie not in the ingredients used, but rather in the recipe itself.
The realities of global economic durability and competitiveness are putting pressure on governments around the world to seek alternatives to economic development focused on physically constrained resources and captive talent. Many regions are looking to build “innovation and knowledge economies” as the most viable solution to addressing these challenges, and turning to successful technology communities like Silicon Valley for insights. What they often fail to capture is the subtlety of exactly why Silicon Valley and similar places have been able to sustain and create such disproportionate impact while acting as a magnet for the best human, financial, and creative capital.
So, if we wish to drive greater economic and social prosperity, then what roles do each of us need to play, and for the purpose of this conversation: What is the role of government?
To answer this question, we need to understand what tools government has at its disposal. These generally fall into three main buckets: Fiscal (monetary adjustments), legislative (laws), and regulatory (policies). Actually, there is a fourth resource available to them – in many ways it’s their superpower – which is the ability to convene.
Collectively, what is the best way government can help entrepreneurial communities thrive?
First, we must ask the right questions and facilitate the right conversations. Then we will understand how to best apply our scarce public (and private) resources to their greatest benefit and impact. In this article, we will look at examples of how money, policies, and laws can encourage and discourage efforts to drive more innovation and entrepreneurial behavior.
These can be as simple as making it easier to register new startup companies, and can be as complicated as how we deal with entrepreneurial failures (bankruptcy, intellectual property, and equity).
Of course, there is a wide range of efforts in between, but to simplify, we can examine them in the following ways:
- What can we do to encourage risk taking, risk sharing, and risk acceptance?
- How do we foster the development, and celebrate the right types, of role models?
- How do we encourage investment in early stage companies that have the potential to create disproportionate impact in the economy?
- How can we optimize the preparedness and competitiveness of our workforce, and build new models for K-16 education that promote STEAM (Science, Technology, Engineering, Arts, and Math)?
- How can government act as catalyst for innovation, rather than merely being a stimulus (which can often create a sense of co-dependency, rather than private sector independence)? (Stimulus ≠ Catalyst)
- How do we encourage the private sector to take on more grand challenges to address globally relevant social, environmental, and economic challenges?
- How do we foster greater industry-academic partnerships in order to accelerate the commercialization of innovation?
Some solutions to focus on that we have seen work well in markets here and around the world include:
- Creating programs for matched funding, where the government only accepts a portion of the risk, and the private sector accepts the remainder, thereby ensuring proof of relevance, and not just proof of concept.
- Creating ‘skill vouchers’ which allow companies to redeem them for workforce development programs resulting in the skilling, re-skilling, or up-skilling of the workforce.
- Implementing tax incentives to encourage investment in riskier, early stage companies.
- Enacting and enforcing solid, but flexible intellectual property policies which protect inventors, inventions, and institutions.
- Adopting flexible loan systems for entrepreneurs, which have flexible debt forgiveness terms. These can be used for things such as supporting patent filings and proof of market studies.
- Convening groups to increase knowledge flows and break down traditional silos between industry, academia, and government (the Triple Helix).
- Use technology and innovation to better communicate and listen to constituencies (Open Government Initiatives).
This isn’t a comprehensive list, and each one of these items could be its own article.
The message to be delivered here is that government can be a trusted and valued partner in the innovation process, and like all of us, it is just a matter of understanding their role in the ecosystem, and how to best apply the resources available to them.
The good news is that we are all here to support, encourage, and enable one another. In this way, government is truly here to help.
Greg Horowitt is co-founder and managing director of T2 Venture Creation, which is sponsoring the Global Innovation Summit taking place this week in Silicon Valley. This is the final piece in an Ideas Lab special series about Innovation coming from the Summit.