How Government Innovates

How Government InnovatesIn his column for our January issue, Roger Smith offered a provocative view of bureaucracy, considering it as both an innovation in itself and also-counter to accepted wisdom-a necessary enabler of innovation. Smith's perspective will be counter- intuitive to many innovators, who are largely accustomed to disparaging any bureaucracy as inimical to creativity. Many would apply the same broad judgment to government in general, seeing it only as a barrier between good ideas and the marketplace, one seemingly explicitly designed to com- plicate things and throw up roadblocks on the road to change. The view expressed by William D. Eggers and Ruben Gonzalez in a 2012 Harvard Business Review article adapted from a Deloitte GovLab study is common among many entrepreneurs and inno- vators: "Government is a monopoly that lacks both competition and a profit motive. It's an institution that deliberately protects incumbent produ- cers and programs against disruptors."Government, in other words, should stay out of the way of the real innovators. In a 2012 article on the coming digitization of manufacturing, The Economist admonished govern- ments to stay out of innovation: "governments should stick to the basics," the article insists, and "leave the rest for the revolutionaries." Gov- ernment and innovation, The Econo- mist's editors argue, are simply not compatible; government has nothing to contribute to innovation beyond supplying basic infrastructure. And many of their readers certainly nodded their heads in agreement. Indeed, some wouldn't even leave the basics to government; the idea that privatiza- tion can spur innovation is behind a number of reforms in a broad spectrum of fields usually relegated to govern- ment-see, for instance, the charter school movement.Sometimes, that's true. Govern- ments are large, complex organiza- tions, and like any large, complex organization, they can be difficult to change. And governments can over- interpret their mandates-for instance, to protect their citizens from harm-in ways that may impede or even kill innovation. Where the balance lies, between valid government action to protect citizens and unnecessary bar- riers to innovation, is (and should be) an ongoing topic of debate (most recently, around sharing economy innovations such as Uber and AirBnB).But government's role in innov- ation is far more complex than many people would allow, extending from policies that can stifle-or nurture- innovation to actual technical research and development and direct support for the development of nascent tech- nologies. Entrepreneurs and innova- tors benefit from that activity in myriad ways. For instance, as econo- mist Mariana Mazzucato points out in a 2013 article for New Scientist, Apple's rise has been fueled both by direct grants from government programs designed to support innovation and by key platforms first developed by government agencies-from GPS satel- lites to speech recognition to the Inter- net itself. In a TED talk, Mazzucato argues that early government invest- ment in basic research and technical development, either directly or by funding external researchers, enables the later entry of entrepreneurs into new, risky areas, such as biotech and the new generation of information technology. In recent years, for instance, 75 percent of truly innova- tive new drugs have received funding from the US's National Institutes of Health (NIH) during their develop- ments The Silicon Valley growth engine, Mazzucato argues, is not some nebulous "market-making mechan- ism," but ample government support, in both technology and policy. Of course, governments do sometimes make mistakes in these investments, but then so do many investors in early-stage innovation.Many people are aware of the less direct ways in which government supports innovation. A 2010 Pricewa- terhouseCoopers report enumerating "government's many roles in fostering innovation" focused on tax, legal, and fiscal policies that can foster innovation, suggesting how governments can create an environment that attracts innovative businesses. …