Experimentation and entrepreneurship taking place all over the globe are bringing new ideas and providing ways of overcoming economic stagnation, a Bloomberg report said.
“Innovation is happening in centers of excellence around the world faster than ever before, ” billionaire venture capitalist Jim Breyer told the news agency, “largely because it’s more inexpensive than it was even five years ago to develop a product or service for a global audience.”
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“This is a magical time, ” said Breyer, founder and CEO of Breyer Capital and a partner at Accel Partners, which invested early in Facebook and RealNetworks. He rejects the argument that the world economy is stagnating. From San Francisco to Shanghai, new ideas are emerging, Bloomberg said.
His optimism is likely to be a welcome contrast to the trouble-ahead warnings that leaders of business and government will hear at the annual meeting of the World Economic Forum, beginning Jan. 21 in Davos, Switzerland. Japan and Europe are on the brink of deflation, and onetime dynamos like Brazil, China, and Russia are losing speed. The best antidote to stagnation is innovation: The creation of products, services, and processes that make life better, the report said.
The good news on the eve of Davos is that there has been some innovative thinking about innovation itself, some of which will be shared at a forum panel moderated by Breyer and including Qualcomm Executive Chairman Paul Jacobs and Rolf-Dieter Heuer, the director-general of the European Organization for Nuclear Research, Bloomberg said.
This past year the forum ranked Finland first for innovation, followed by Switzerland, Israel, Japan, the U.S., Germany, Sweden, the Netherlands, Singapore, and Taiwan. The purpose of the index isn’t to furnish certain countries with bragging rights. It’s “to build a shared understanding of the main strengths and weaknesses of each of the economies covered, so that stakeholders can work together” to make improvements, says the preface of the 2014-15 report, according to Bloomberg.
Bloomberg’s own ranking zeroes in on quantifiable inputs to the innovation process. Among the factors considered are the intensity of research and development, the amount of high-value manufacturing, college graduation rates, and the number of high-tech companies. In Bloomberg’s ranking, the top 10 countries for innovation in 2014 were South Korea, Japan, Germany, Finland, Israel, the U.S., Sweden, Singapore, France, and the U.K., the report said.
The WEF’s ranking is more qualitative, as it relies heavily on a poll of 15, 000 executives asked to grade the nations where they operate on factors such as “capacity for innovation” and the degree of cooperation between industry and university researchers, Bloomberg said.
A third approach, used by the Conference Board and others, is to measure what economists call total factor productivity. That’s the portion of an economy’s output not explained by the combination of workers and machinery used in production. The theory is that this extra output can be attributed at least in part to innovation — say, a smarter way to run an assembly line or organize a restaurant kitchen, the report said.
For advanced economies, innovation requires pushing on the frontiers of science and technology. That can’t happen without heavy government funding for basic research, along with pathways to its commercialization. The Internet and the Global Positioning System (GPS) are only two of the crucial technologies that originated as projects of the U.S. federal government. Singapore and South Korea have likewise used R&D to vault themselves into the top tier of economies, says Bart van Ark, the Conference Board’s chief economist, Bloomberg said.
That’s not to say that governments can conjure innovation simply by spending money. Breyer, the venture capitalist, said that while government can foster collaboration between universities and business, ultimately innovation must trickle up from the bottom, the report said.
“I’ve had dozens of meetings over the years with leaders from around the world who asked how they can build their own Silicon Valley, ” he said. “It never works. There’s a magic. There’s a love for entrepreneurship and experimentation that needs to occur.”