How Would A National Innovation Foundation Work?

from the or-would-it-work-at-all? dept

The Brookings Institute has called for the government to set up a National Innovation Foundation modeled after the National Science Foundation. The idea is to offer government grants to companies doing innovation. This is an interesting idea, but it raises a variety of questions -- including the government's role in funding innovation. There isn't anything necessarily wrong with government funded innovation, as long as one realizes that it, by default, distorts the market in some manner. The NSF is really designed to help fund the sort of basic research that is much more difficult to get outside funding for -- but which could have some commercial potential. When you start talking about the much more amorphous "innovation," it's going to be a lot more focused on commercial potential from the get go -- which raises some questions about why the government needs to be involved at all. If the market is taking care of innovation, then is government funding necessary?

Along those lines, it also brings up the same old questions about how do you determine what innovation really is -- and how do you measure it. The Freakonomics guys just asked a panel of folks how to measure innovation and their answers diverged wildly. The good news is that only one out of the five responses seemed to think patents should be a part of the measure (one other answer mentioned patents as a measure, before noting that using patents to measure innovation was "largely hokum.") Even the one guy who does support using patents in some measures, notes the problems with doing so. Also, the research he quotes in favor of patents only shows that patents are valuable to patent holders (not something anyone disputes). That has little to do with whether or not they encourage or accurately measure innovation.

If we stick with the definition that innovation is the process of successfully bringing new offerings to market in a way that the market wants, then I think it's not as important to "measure" innovation, as to create the right ecosystem for it. That would mean encouraging competition (which drives companies to keep out innovating each other) and take away unfair roadblocks to competition. If a National Innovation Foundation can figure out a way to do that, then it might be quite interesting.

Filed Under: government funding, innovation, national innovation foundation, research grants

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  1. identicon
    rahul, 24 Jun 2008 @ 5:04pm

    The Wrong Way to do It

    India almost defines the wrong way to setup a National Innovation Foundation. I would agree with the idea that the best way a gov't can help is to create the right ecosystem, rather than funding innovation or incubating with gov't funds.

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