Lessons from the US on Innovation Policy
A commentary by Sir Geoffrey Owen, Head of Industrial Policy at Policy Exchange and former Editor of the Financial Times. Sir Geoffrey examines the reasons for US leadership in two key sectors, information technology and biotechnology, highlighting the important role played by new entrepreneurial firms.
He stresses the need to improve the UK’s innovation system in three ways:
- Public procurement should be geared more actively towards the encouragement of new entrants.
- Government should seek to remove any obstacles, whether arising from the tax system or other factors. that limit the access of growing firms to external sources of finance.
- The entrepreneurial role of universities should be strengthened, making their technology transfer offices more efficient and their interaction with business more productive.
Sir Geoffrey said:
“Where are Britain’s Googles, Apples and Amgens? Why has Britain, despite its well-regarded universities and its many Nobel Prize-winning scientists, produced so few world-leading companies in science-based and high-technology industries? I have tried to answer that here.
“The US innovation system rests on two pillars: massive government support for basic and applied research, including technology that is too risky for the private sector, and an intensely competitive business environment that promotes a variety of approaches to commercialisation.
“Whilst over-centralisation in research policy should be avoided, governments can improve the organisation of publicly funded research and create an environment conducive to the creation and growth of new firms. As ARM has shown in microprocessor design, and Raspberry Pi in low-priced computers, there is no lack of opportunities available in parts of the market that are not dominated by US-based firms.
“Governments should also be wary about trying to steer research in preconceived directions. In rapidly advancing industries, success generally depends on multiple sources of initiative and innovation. New entrants are often better equipped than established companies to identify and exploit new lines of research.”