Governments' role in innovation

Governments' role in innovation What is the role of government in innovation? What should or shouldn’t governments do? These were the questions raised at the Innovation Summit organized by The Economist in Hong Kong in October.

At the panel discussion, government representatives from Singapore, Hong Kong, and Japan expressed their views on whether governments should have a heavy hand or light touch in nurturing innovation and entrepreneurship, and what criteria governments should use to decide whether they are doing too little or too much to help innovation.

Competitive manufacturing
“Our mission is economics development,” said Raj Thampuran, managing director at Agency for Science, Technology and Research (A*STAR). “To make our manufacturing sector competitive, we in Singapore decided to make significant investment in R&D”.

He added that the government agency aims to foster scientific research targeted at sectors most important to the Singapore economy, such as electronics and biomedical sciences. In addition, by providing a stable regulatory environment and diverse pool of talents, the government aims to attract overseas companies to invest in Singapore.

Hong Kong’s 3Cs
Meanwhile, the government in Hong Kong sees its role in innovation differently. According to Fanny Law, member of HKSAR Government Executive Council and chairperson of Hong Kong Science and Technology Parks (HKSTP), “the government’s role in innovation can be summarized with 3Cs: connect, collaborate, catalyze.”

She explained that Hong Kong is a free and open society, thus innovation is driven from bottom-up rather than top-down. The government’s role is to connect the parties, including academia and industry, to drive innovation. This is how the idea of building HKSTP emerged.

“We put incentives for academia and industry to collaborate in research and bring that into the production stage, but we don’t dictate what they do,” said Law. “We are not picking winners.”

In terms of funding, she said that most of the R&D expenditure comes from private sector, instead of the government. But the government does provide seed money to startups where the private sector has yet to evolve. She added that such financial support acts as a catalyst to the existing Hong Kong business environment—a simple and low tax system, proximity to China, and a strong IP protection—to attract innovators.

Driving innovation in aging society
For Japan, the biggest challenge is to bring innovation to a rapidly aging society.

“The average age around the world where major innovation occurs is around the age of 27”, said William Saito, a special advisor to the Cabinet Office for Government of Japan. “However, in 20 years, 40% of the population in Japan will be over 60”.

Another major challenge for driving innovation in Japan is the young people’s unwillingness to take risks. Saito said the younger generation Japanese highly influenced by their parents would prefer a stable job with the government or large corporation than take risks and be an entrepreneur.

“It is the government’s role to address the culture and encourage young people to choose innovation rather than other fields such as finance,” said Saito. “This in turn will help create more young innovators.”

“The role of the government is also to provide incentives and subsidies for innovative undertakings,” said Saito. The government partners with different private businesses to provide funding to entrepreneurs, encouraging more R&D initiatives.

One of the major partners in this area is venture capitalists (VCs). Saito, also founder and CEO of VC firm InTecur, said his firm runs a model similar to those in Silicon Valley. InTecur manages incubation facilities in Japan, but it also helps startups and large companies to reinvent themselves.