Earlier this year, OECD Secretary-General Angel Gurría gave a speech to the China Development Forum on "Promoting Technological Innovation for New Sources of Growth." That talk essentially summarized the OECD's Innovation Strategy (see also earlier posting). What caught my eye was the following description of an expansive view of innovation:
The Strategy goes beyond R&D to describe the broader context in which innovation occurs. Let me briefly share with you some of its insights:
First, innovation is about extracting value from existing, traditional or emerging technologies to develop new services and business models. For example, the emergence of information and communications technologies (ICT) - like cloud computing - holds the promise of productivity gains. They help companies avoid heavy, upfront investments in IT infrastructure and staff in exchange for a sustainable, pay-as-you-go model, which can enable them to grow faster.
Second, knowledge assets - research, design, marketing, networks, software, data analytics - will increasingly drive growth and competitiveness. Today, companies often invest more in software alone than in machinery and equipment. According to sources in the car industry, these knowledge assets make up the majority of development costs for a new Volvo truck.
Other "intangible" elements, like design, branding and marketing, can also account for a huge share of a product's value-added. These are some of the reasons why the world buys Apple phones, Ikea furniture or Nespresso coffee. Smart companies know that, when they invest in intangibles, they can better capture value from global trade.
Third, innovation is a key pillar of green growth. It helps to decouple growth from natural capital depletion. It addresses knowledge gaps and fosters new technologies that can help the transition towards greener growth. It is absolutely central in enabling green and growth to go hand-in-hand.
Last, but not least, innovation depends on people: on their knowledge, creativity and skills. Your recently-launched human resources strategy acknowledges that a better educated workforce is critical to move up the global value chain, and to ensure a more inclusive economic and social progress for China's citizens.
I think that covers a number of key points: innovation is more that new tech and intangible play a big role. I know the Chinese audience was paying attention to Gurría's comments. I hope American policymakers were listening as well.