Innovation- it’s the buzzword of the day. From President Obama’s State of the Union address to Foreign Policy’s latest cover story to initiatives to revive Middle America, the word has been invoked to solve problems from Africa to St. Louis. It’s a seductive notion: if we just innovate, discovering new technologies, drugs, and agricultural products, the global economy can be driven out of the stagnation it’s experienced since the Great Recession. Even the great Robert Solow realized that technological process was the primary driver of long-run economic growth.
But, innovation largely remains a goal without a clear path towards attaining it. Should research and development be funded primarily by the private or public sector? Should the government direct its increasingly limited funds more towards basic research or towards developing products for commercialization?
As sequestration and concern over rising budget deficits continue to slice into discretionary spending, including in the sciences, new techniques for funding innovative discoveries in the biosciences and beyond will need to be utilized.
This means the private sector will have to step up its investment in risky, basic research. Venture capital has dried up in the last five years, and large corporations have only filled a portion of the gap. Some have proposed novel securitization techniques to minimize risk and attract large investors like pension funds. Others have proposed a sort of non-profit organization for useful innovations in academia.
Meanwhile, the government has showed wild ineptitude in “picking winners,” or handing out grants and loans to bring products to market: from the infamous Solyndra collapse to countless others, the government has squandered millions of taxpayer dollars in the name of “innovation.”
A recent article published in the journal PLOS One suggests that funding scientific research is more productive when it promotes diversity, rather than aiming funds at a few heralded projects. The private sector’s efforts to fill the void left by budget cuts are slowly achieving this. Corporate venture capitalism efforts reflect the different values of different parent companies. Novel funding efforts aim to fund a wide array of products from the same pot of money to minimize risk.
Instead of trying to invest in commercialization, the government needs to spend its time and resources simplifying regulations and making the approval process for new products more transparent. The more innovation a society generates, the more it is capable of generating. Ideas spillover, creating inventions we never thought possible. “Creativity is just connecting things,” Steve Jobs was fond of saying.
With this in mind, the best the government can do is limit costs corporations incur when trying to comply with often unruly regulations. A 2011 study illustrates that regulations made up 25 percent of the total cost of bringing a new agricultural biotech product to market, in addition to taking 41 percent of the total time of development. In addition, the government can simplify institutions to ensure promising discoveries don’t get lost in the long, complex hand-off from academia to start-up to multinational company. This in itself can help attract more venture capital, as it mitigates the regulatory uncertainty many investors fear.
Instead of using it as a seductive buzzword, it’s time the government actually pursue innovative policies to stimulate, well, innovation.