'The Politics of Innovation'

Author asks why some countries are better than others at science and technology.

July 26, 2016

The subtitle of Mark Zachary Taylor’s new book, The Politics of Innovation (Oxford University Press), asks why some countries are better than others at science and technology. He argues that the answer lies in politics and proposes a theory of “creative insecurity,” arguing that innovation rates should be higher in countries in which external threats outweigh domestic tensions.

“S&T progress creates winners and losers, and the losers resort to politics to slow innovation,” Taylor, an associate professor of political science at Georgia Institute of Technology, writes in the book’s introduction. “However, external threats increase political support for S&T and thereby counteract domestic political resistance to innovation.”

Taylor answered questions about his book via email.

Q: There seem to be two main questions in your book -- how countries become leaders in science and technology innovation and why. Let’s start with how. What are the critical ingredients for fostering innovation?

A: Innovation is plagued by what economists call market failures. Market failures are when free markets should lead people to innovate, but fail to. For example, private companies tend to underinvest in [research and development] because the results can be easily copied by their competitors. Similarly, companies will not invest much in [science, technology, engineering and mathematics] education because firms can only capture a fraction of the return on that investment. It’s just not that profitable for them. There are myriad other examples that I explore in the book. When markets fail, the solution usually takes the form of government policies and institutions. These are things like intellectual property rights, research subsidies, public education, research universities and trade policy. In fact, I call these the Five Pillars of innovation in the book. They work because they create or heal the markets for S&T. But I found that government policies, such as the Five Pillars, only take us part of the way to understanding how countries innovate. They leave an enormous amount of unexplained success and failure.

I also look at big picture institutions like democracy, capitalism and political decentralization. They are supposed to aid innovation by affecting competition, mobility and freedom. Indeed, some very prominent economists argue that when these particular institutions are missing or broken, then it explains “Why Nations Fail.” Once again, I find that they take us only part of the way to explaining success and failure in S&T. They still leave a lot of unexplained behavior.

That is, there are simply too many countries with “good” policies and institutions that fail to innovate much (e.g., Norway, Austria, Italy). Also, there are many countries with “bad” or missing policies and institutions that innovate surprisingly well (e.g., Taiwan, Israel, South Korea). And no one has yet identified precisely which set of institutions and policies are the “right” ones. Sure, there are plenty of theories which emphasize the vital importance of this or that institution or policy (e.g., patent rights, science education, R&D subsidies, research universities, etc.). But, throughout the book, I show that although institution or policy X may explain success in country Y at a particular point in time, it fails to do so in other countries or even in the same country during a different time period.

So, I try a different approach. I investigate several recent cases of national success and failure in S&T, and ask what did successful governments do (or avoid doing) that the cases of failure did not? Two surprises come out of this investigation. First, I found that there is no single best institution or policy that all countries need to converge upon in order to achieve national S&T competitiveness. Different countries have achieved S&T success using very different sets of institutions and policies. Governments therefore have lots of freedom to choose and customize their policy strategies. Second, solving market failures alone is not enough. Most national success stories in S&T also involve the use of social networks to take shortcuts around markets for access to high-quality science labor, technical knowledge, investment capital and even marketing expertise. Social networks provide vital information which neither free markets nor government institutions easily capture, but networks are often ignored due to our preoccupation with domestic institutions and policies. Also, because foreign information is often the most difficult knowledge to capture, international networks play important roles in national S&T performance. So explaining innovation is not just a domestic story, it also has an international side.

Of course, understanding how nations innovate does not explain why some countries create and use their institutions, policies and networks to foster innovation, while others chose not to. That is, neither institutions nor policies cause nations to innovate. They are merely tools that nations can use to become more innovative. But even the right tools will fail to produce results when placed into the wrong hands, or into hands not motivated to use them properly. Therefore in order to explain why some countries are better at S&T, we need to explain why some countries adopt the “right” institutions, policies and networks and then use them properly over time, while others do not.

Q: As for the why, you propose a theory of “creative insecurity,” which holds that countries generally have higher innovation rates when the external threats they face exceed domestic political or economic tensions. Why does this imbalance matter? Are there parallels to the idea of a Sputnik Moment, the popular idea that a fear of falling behind foreign rivals can stimulate consensus around a need to invest in science and technology and education?

A: The balance between domestic tensions and external threats matters because it determines overall political support for all those institutions, policies and networks. Innovation is expensive. It is risky. It also creates a lot of economic “losers” in the economy: jobs get lost, obsolete industries die and every dollar spent on S&T is a dollar not spent on welfare, agriculture subsidies, tax cuts, infrastructure, military salaries or lining elite pockets. So innovation is not a no-brainer for governments. Usually there is a lot of pressure not to spend the money or take the risks, unless there’s a convincing sense in external threat.

Sputnik is a great example for the U.S. But was it just a one-time event? In the book, I ask whether we see the same dynamics in other countries. I found that, in Israel, very similar politics kicked in after the Six-Day War (1967) was followed by the Yom Kippur War (1973), and combined with a rapid decline in precious foreign exchange earnings. Suddenly, Israel was threatened militarily and economically in a way it never had been before. And this occurred at a time when fierce domestic political divisions were on the decline. As a result, the Israelis supported a rapid pivot from an agricultural economy to a high-tech economy. In Taiwan, it was China’s atom bomb and guided-missile technologies, the cutting of massive U.S. financial aid, and then the derecognition of Taiwan and global reconciliation with China. Meanwhile, intense domestic conflicts between native Taiwanese and the relocated [Chinese Nationalist Party members] had settled down. The islanders suddenly had less to lose from one another, and far more to lose from mainland China. So Taiwan rapidly restructured its economy from a natural resource and agricultural base, to high technology.

Fear of falling behind one’s military or economic competitors is a powerful motivator. Governments, and their citizens, need that sense of competition. For without it, they tend to fight domestically over “goodies” of science and technology. There are a lot of domestic forces working against progress in science and technology. Without a more urgent sense of external threat, the natural result is for governments to let flounder the policies and institutions which foster innovation.

Q: You argue that threats to a nation’s economic and military security accelerate science and technology progress at the same time that you warn about the risks of a “conflict-driven innovation policy.” What are the benefits and risks in linking innovation policy to national security-related concerns?

A: The benefits are that innovation does work. S&T progress can create an economy that is more competitive on international markets. Innovation can boost exports, thereby earning the foreign exchange necessary to purchase strategic imports, like energy, food, raw materials or military equipment. Also, a globally competitive high-technology sector can provide the foundation for a domestic defense industry. This can ease a nation’s reliance on imports of foreign weaponry. In civilian sectors, the development of indigenous high-tech capabilities can enable domestic industry to produce those strategic goods which are either expensive to purchase abroad, have unreliable foreign suppliers or are vulnerable to hostile interdiction. Competitive S&T-based industries can also generate capital by satisfying investors at home and luring investment from abroad. High-tech sectors also provide jobs for skilled workers and an attractive career path for youths, while pulling up the aggregate skill level.

The risk is that pro-S&T groups will simply invent foreign enemies to fear. With external threats serving as a constant menace, the risks and expense of innovation can be indefinitely justified. This has been the unintended course followed by the United States since World War II. At first, defense research in the U.S. focused mostly on weapons systems and battlefield medicine. But over time, it has slowly come to include research on information technology, telecommunications, infrastructure, as well education policy, and more recently investment in energy and general health care advances. Japan went down a similar path during the first half of the twentieth century. China now appears to be pursuing it.

However, in a world typified by increasing freedom of information and debate, this innovation strategy is unsustainable. In open societies, false alarms about manufactured enemies soon become transparent. Also, without a real competitive threat, S&T institutions and policies become corrupt and mismanaged. Worse yet, in those nations which suffer from restrictions on information and debate, such a strategy is highly destructive. Imaginary enemies can become real ones, risking unnecessary and destructive conflicts. In either case, it leads to a bloated defense sector and a militarized society in which all spending is questioned except that which goes towards defense. A far smarter strategy is to emphasize real long-run competitive and security threats, such as energy efficiency, climate change, aging and disease. The book argues that war and the garrison state are not necessary for S&T leadership.

Q: What are the limitations of your argument in explaining national innovation rates? Are there exceptions you identified, countries where the creative insecurity theory does not seem to fit in explaining progress in innovation? What else is needed in innovation research to help better understand why some countries do better in science and technology than others?

A: Creative insecurity theory does not attempt to be a universal theory of everything. It has some limitations which must be taken seriously if the theory’s full potential is to be realized. First, it’s meant to be probabilistic, not determinist. That is, creative insecurity explains and predicts much of the variation in national innovation rates over time, but it does not claim to explain each and every case throughout history. Rather, the book’s claim is that creative insecurity provides us with a better explanation for national innovation rates. It better fits the data, explains more of the data and explains many outliers and unexpected results that other theories fail to account for.

Second, creative insecurity theory does not rule out other important causal factors. Innovation has many powerful driving forces; I claim that, at the level of the nation-state, creative insecurity is one of them, but not necessarily the only one. Personally, I speculate that culture, ideology, individual leadership, climate and perhaps even social psychology may also play important causal roles in explaining differences in national innovation rates. Each of these factors is understudied and deserves more attention from innovation scholars.

Third, creative insecurity theory expects lags across time and within society. That is, it does not predict an instantaneous change in support for S&T in response to a change in a nation’s balance of external threats versus domestic rivalries. Nor does it predict complete societywide agreement on support or opposing S&T. Some individuals and interest groups will change their minds faster than others. Some may never change. A few may even support or oppose S&T out of habit, or ideology, or in allegiance with their social network. But creative insecurity does predict that, on average, changes in the balance of domestic rivalries versus external threats will trigger changes in the political support for S&T over time, and thereby affect national innovation rates.

It is also important to emphasize what creative insecurity is not arguing. It is not arguing that nations only innovate when threatened with invasion. If this were the case, then Belgium, the Balkan states, Iraq and Afghanistan would currently rank amongst the most innovative countries on earth, while the U.S. should be stuck in the preindustrial era. Nor does creative insecurity argue that defense spending and military procurement are the sine qua non of technological development. Clearly, important outliers such as Japan, Germany and Switzerland (each notoriously low military spenders) and Saudi Arabia (one of the world’s top military spenders) make hash of this assertion.


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