There has been increasing investment in science and technology. Even developing countries are promoting start-ups, and youths are highly receptive. Furthermore, there has been a belief that start-ups could open new growth paths, helping developing countries engineer endless frontier of growth. Of course, there is no denying that a single idea like an automobile, transistor, or airplane can open the door of considerable prosperity. Technology innovation density has been growing in every sphere of life. On the other hand, we are witnessing growing unemployment among science and engineering graduates, particularly in developing countries. Such high contrast often raises the policy intervention for turning our investment in science and technology into economic prosperity, and quality jobs for the graduates. As there is no natural correlation between education, start-ups, technology, and economic value creation, we need to face realities to derive science, technology, and innovation policies.
1. In the absence of an intellectual asset base, start-up and innovation do not progress
Often, we perceive that innovation is the outcome of sudden sparks in the minds of creative genius. Of course, Thomas Alpha Edison, Carl Benz, Tesla, Wright Brothers, and Steve Jobs were creative genii. Some of their ideas have created large industries. For example, Carl Banz’s idea of the automobile has created a multi-trillion-dollar industry. In last year alone, the global automobile industry generated almost $4 trillion in revenue from 100+ m million vehicles. It’s quite intriguing to observe that all the mega innovation success stories are in advanced countries. The underlying success factor of developed countries is the growth of ideas from start-ups to large corporations and mega industries.
To leverage such potential of human minds, developing countries are promoting start-ups. Some of common fostering activities include idea competition, mentoring, offering shared office space, and providing seed funding. However, people in developing countries are also creative. They have a track record of coming up with numerous ideas to get the jobs done better. For example, the National Innovation Foundation (NIF) of India has registered more than 300,000 grassroots innovations. But, none of them has grown into a mega-success story.
Although many great ideas started the journey as an act of tinkering of creative minds, Thomas alpha Edison, the Wright brothers, and many others demonstrated their great ideas using their tinkering skills. But none of those ideas has grown as large businesses or industries based on fiddling act alone. More or less, all of the great ideas emerged in primitive form. They started the journey at a loss, let alone making innovators billionaires. Follow-up scientific investigation, forming an intellectual asset base, is the underpinning of their growth into remarkable success stories.
2. Science and technology competence in isolation of local demand does not create wealth
To advance science and technology (S&T) competence, often developing countries follow contradictory policies, with good intension, though. In addition to expanding science and technology education, they also invariably provide policy support for importing advanced technologies from developed countries. Does it mean that the S&T graduates be engaged to install, operate, maintain, and repair those imported machines? Policy for liberalizing technology import often leads to no demand for local value addition, whether through product or process innovation. Consequentially, along with technology richness through import, these countries keep suffering from growing S&T graduate unemployment. Such reality demands change in policy perspectives. On the other hand, advanced countries pursued missions demanding technologies that nobody could readily provide.
However, there is success in IT service export in India. This is about exporting knowledge-intensive labor-based services. In contrary to common belief, India has not succeeded in generating and trading large volume IT-based ideas. Perhaps, due to this reason, Chinese firms have taken over India’s home market of the mobile handset.
3. Technology import driven competitiveness does not support sustainable growth
To address the competitiveness in the globally connected value chain, developing countries are compelled to import technologies. This strategy offers short-term gain. In the long run, it weakens their labor-based value addition on the one hand. On the other hand, it blocks local value addition through product and process innovation out of science and technology competence. Moreover, the decreasing role of labor also reduces the attractiveness of offshoring. As a result, the technology import-driven agenda is detrimental to the sustainable growth of industrial capacity.
4. Protection does not create technology absorption and advancing capability for competitive industrial capacity
Developing countries are primarily adding value to their industrial outputs through natural resources and labor. Due to the diminishing role of these components in globally competitive, firms in developing countries are suffering from weakening competition edge. Hence, they are offering protection in the form of tax differentials, subsidies, and even cash incentives. But there is an alternative. In addition, or as opposed to protection, they can engage their S&T graduates to produce ideas and deploy them for addressing quality and cost issues. This later strategy will lead to technology absorption and advancing capability. Of course, it’s painful and requires hard work. Therefore, we should look into broader issues in adapting Science, Technology, and Innovation Policies.
5. Technology is a dynamic phenomenon—affecting the value of raw material, and labor
Technology is dynamic. On the one hand, it’s expanding economic value creation opportunities out of ideas. On the other hand, it’s making the market value of labor and raw material highly volatile. For example, the invention and evolution of the automobile have expanded the demand for fossil fuel, consequentially making Saudi Arabia and other middle eastern countries rich. Subsequently, the emergence of an electric vehicle is posing a threat to the market value of oil and petroleum economies as a whole. Similarly, the 3rd industrial revolution scaled up the demand of a low-skilled industrial workforce, subsequently promoting export-oriented manufacturing in developing countries. As a result, many developing countries got millions of manufacturing jobs. Similarly, the expansion of ICT created a knowledge-intensive export service market, which brought India’s windfall gain. Unfortunately, increasing automation is threatening the future market value of labor.
6. Technology increases risks and insecurity—creating overall gain as opposed to benefiting a few is a challenge
In the market economy, society has been going through a transformation due to the unfolding of successive waves of technology innovations. Those waves create discontinuities, making people jobless, asking for reskilling, and making companies bankrupt. There is no denying that technology has been increasingly expanding the gap between individuals, firms, and countries. At the global level, the challenge is to empower developing countries by empowering them to create economic value out of generation and trading of technology ideas, as opposed to just being buyers of technology innovations offered by advanced countries. Technology innovations should be directed at the local level to reduce poverty, improve the environment, and empower people to get meaningful employment. Such reality demands science, technology, and innovation policies to focus on directional failure. Moreover, technology advancement is also empowering the military, increasing global security risks.
7. Technology intensifies market monopolization, but technology-enabled competition is more powerful than regulation
Profit-making competition is at the core to drive technology innovation progression. We also want this competition to intensify for offering us increasingly better products at a decreasing cost. However, through the process, the winner shows up with the capability to offer a better product at a lower cost than all other competitors. As a result, best-performing firms gain price-setting capability. Subsequently, it keeps weakening competition to profit from innovation. The usual solution is regulation. Unfortunately, regulation runs the risk of throttling innovation. A better approach could be to fuel the next wave of innovation by offering better substitution. To harness this potential, society should have a flow of knowledge and ideas to empower the formation and growth of ideas to grow as the next wave of creative destruction.
8. Technology-led wealth creation—by harnessing the mental capacity—is a long-term, often a risky proposition
Unlike labor, natural resources, and capital, technology ideas take a long time to generate economic value in a competitive market economy. Moreover, the path is risky. Hence, unless all other windows of making easy money are not closed, firms will not be willing to pursue this long, risk path of profit-making. On top of it, special interest groups in developing countries have blocked the door of creating economic value out of local technology ideas. Polices like import liberalization of technology and protection are highly detrimental to the growth of local capacity for creating economic value out of production and trading of science and technology ideas.
9. Stepwise progression, as opposed to leaf frogging, from process to product innovation offers a manageable path
Often developing countries suffer from the temptation of leapfrogging. Particularly, the globalization offering them export-oriented manufacturing jobs has been them a wrong lesson. As opposed to dreaming of having local Google or Steve Jobs, they should take a stepwise approach. As said, a great idea does not suddenly do not jump out a light bulb in creating a billion-dollar success business. A great idea needs a flow of ideas. Moreover, many of those great ideas fail to witness the success of one. Therefore, stagewise progression starting from the process and incremental innovation to disruptive innovation should be the strategy.
10. Culture of pursuing relentless perfection matters to Science, Technology, and Innovation Policies
In addition to having S&T capability, creative minds, and local demand for local ideas, culture plays a vital role in creating economic value from STI. The culture of craftsmanship for pursuing a relentless journey of perfection is vital in nurturing ideas to grow as a profitable business. Hence, focusing on developing suitable culture at all levels of the country is vital to profit from STI in the global market.
Often science, technology, and innovation (STI) policies focus on expanding S&T education, increasing R&D funds, liberalizing technology import, and offering incentives for start-ups. But there is no natural correlation between these measures and the growth of sustainable capability of creating economic value out of STI. Many other realities should be considered to formulate and fine-tune Science, Technology, and Innovation policies.