We live in a paradox. In Europe we are flooded with industrial policies, innovation policies, with investments reaching billions of euros, but the innovative dynamics of our country do not seem to evolve. Because? A first answer, simple but convincing, lies in the inefficiency of the administration. A second, simple and indisputable reason is that countries like Spain are unable to dedicate more than 1.5% of their GDP to innovation, considering, of course, that everything we count as innovation really is...
Now, after so many years of the European paradox, the fact that Europe is a leader in research but poor in innovation makes us think that there are deeper problems both in government policies and in business strategies. We identify three types of predominant innovation policies, both at the government level and in organizations. The first, and most common, is the one that seeks to enhance capacities. Here we find policies aimed at generating more doctoral students, repatriating talent, attracting multinationals or increasing venture capital funds (public, private or mixed). These are capabilities that innovation indices typically measure: how many PhDs there are in a given field, how much capital is spent on research and development, how much capital is available for innovation, and so on. The basic assumption is that an ecosystem with more innovation capabilities will innovate more.
All of that has a certain logic and works to a certain extent. However, large global companies have been developing tools for years to capture these capacities on a global scale, which is why innovation hubs, research centers are created, talent is attracted, etc. Which means that a large part of this local effort becomes a resource for global ecosystems. Additionally, local talent seeks to develop and does so where there are more possibilities. Thus, we see how the best companies in Israel or elsewhere end up in Silicon Valley or Boston to develop and/or succeed. In other words, a large part of these capacities are not capitalized locally, but instead enrich the global innovation hubs.
The second type of policies focuses on covering market failures. One of the best known is the difficulty for small and medium-sized companies to dedicate resources to innovation. Therefore, direct aid policies for innovation or technological centers that allow innovation to be outsourced appear. These policies work to the extent that bankruptcy exists. In short, if the organization has no need or interest in innovating, no matter how easy we make it for them, they will not do it, and if they do, they will allocate at least part of the money to areas that are important to the organization or will focus on make an incremental innovation, without moving too much, even if it contributes to maintaining the competitiveness of the company. Now, if there is a need to innovate to survive, to compete, then this type of policy works very well.
Finally, the third type is structured around direct interventions in the market. They seek to solve a market failure, not by supporting existing players, but by intervening directly. Here we would include accelerators or startup creation programs from research centers. This is a chapter with important successes everywhere, such as the programs of Teknion (Israel) or the unit 8200 of the Israeli army. Also incubation or acceleration programs that seek to create new companies, thus increasing the capacity to generate startups in local ecosystems. The main problem of this chapter is the same as in the case of the first. Once created, if they have chances of success, they look for the most appropriate ecosystem in which to develop, which obviously is not usually the local one, unless the local one is already a powerful hub.
As we can see, in many of these policies there is a tension between the creation of capacities and their use. To the extent that we are located in a powerful innovation hub, we will be able to take advantage of and capture value from investments in innovation. The case of Israel is well known; Most of the most successful startups are acquired by American companies at an early stage for a price that years later seems ridiculous. It is the price that must be paid to become a hub; However, paying for it does not automatically mean that you become an innovation hub.
What, then, is the determining element? Let's look at the miracles of the past decades. How have Korea, Japan or China innovated? They were characterized by being ecosystems with little innovation and little competitiveness; ecosystems often characterized by state companies that do not compete or large national companies with highly segmented markets, high entry barriers and low competition. How have they achieved it?
In all of them the key has been to increase the competitive intensity to which the actors are subjected. In some cases, the culture, demographics, and size of the country's homes, such as Japan, mean that consumption is limited. The only possibility was then to export. The Japanese model has been copied by Korea and to a large extent by China. The Chinese case is peculiar because in order to intensify the transfer of knowledge and taking advantage of the large size of its internal market and its totalitarian government, it has imposed on all foreign companies (except Tesla) their association with local companies that have obtained their technology (the case of Siemens and high-speed trains is the most flagrant).
The key element is incentives. Place the national players in an environment where they have to play with the best in order to be the best. If these incentives exist, the other three types of innovation policies will work and work well. Otherwise, most of the effort will be captured by those ecosystems that are in a better position to take advantage of the capacities or initiatives and we will continue immersed in the European paradox: good at research, mediocre at innovation. It is therefore necessary to pay attention to the essential, often invisible in the statistics, the incentives.
