Chapter 4
Innovation Policy for Competitiveness
The pursuit of competitiveness through innovation is a hallmark of the modern knowledge-driven, globalized economy, primarily in the developed world but also extending to the developing economies wishing to catch up. Innovation is the basis of sustainable economic growth and a key driver of competitiveness. It also plays an important role in promoting economic convergence, increasing welfare, creating new jobs, and destroying old ones. The effects of innovation and competitiveness translate into economic growth at the macroeconomic level. Innovation and competitiveness have thus become major objectives of national policy. An understanding of the factors affecting the innovative efforts of firms and industries and the interactions among these is critical to informing policy for innovation and competitiveness. Innovation drives competitiveness at many levels—the firm, groups of firms in an industry, the region, and the nation—with substantial scope for interaction across these levels. The increasing interaction among firms—the “death of distance”—arises from interfirm knowledge flows.1 Knowledge has become easier to share and adopt because of globalization that has been driven by technological change and rapid advances in new technologies such as information and communication technologies (ICTs). Globalization and ICTs have facilitated new forms of competition and opened new markets for innovative products and services. Government, universities, and alliances among companies contribute to the codification of knowledge, that is, available to all, a process that increasingly benefits from ICT. Following an examination of the definition and measurement of innovation, the chapter highlights some examples of the positive relationship between innovation, economic growth, and competitiveness. Drawing on that discussion, it then examines the elements of an effective innovation policy.
Clusters of Competitiveness • http://dx.doi.org/10.1596/978-1-4648-0049-8
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