The State’s Role in Promoting Innovation (Essay Sample)

The State’s Role in Promoting Innovation
A Topical Overview
Innovation carries with it the power to change entire markets and on the philosophical end of the spectrum, it carries with it the potential to change the entire human experience (Collins 2000). As a result, it can be said that the human experience has been a continued evolution based on innovations of knowledge, technology and related facets. How we communicate, the tools at our disposal and the current environmental state are all elements that can be attributed to innovation on some level. While innovation can cause problems, it is best viewed as a problem solver and it is the key attribute for navigating changing organizational, political and environmental playing fields (Acona 2005). Organizations who continue to strive for innovation poise themselves to be in a better position for competition than those who do not (Collins 2000). While traditionally it can be stated that firms and individuals are the key actors in systems of innovation, they are not the influencers (Bunnel & Coe 2001). Beyond firms and individuals is the state as a driver of innovation. Holistically, the way in which a state impacts firms and individuals inherently increases or decreases their capacity for innovation.
Today, according to Phillips (2012), there is an even greater need for innovation as a result of failing trade barriers, increasing rates of change, customer expectation increases, increasing access to information and decreasing cost of entry into business. The success or failure of the industry players as well as the success or failure of the state will be contingent on how well they innovate and manage for change. In an effort to understand the role of the state in the innovation process and how states can innovate, this work will be examine the innate structures of innovation with critical attention to how the state impacts these respective dynamics. Implications will be considered at length drawing from academic research.
How Innovation is Driven
Like any other facet of an organization, the culture present within in a given a systems of people will influence their behavior. Whether or not these influences are positive or negative is primarily contingent on the objectives of the organization. For example, some corporate cultures push more communication and flattened tiers of management while others do the opposite. Depending on the firm, these could either be strengths or weaknesses. For it to be a strength, what is being facilitated by the culture has to be strategically aligned with the goals of the organization. Scholes and Whittington (2011) expressed that strategic purpose is at the center of innovation. Innovation simply to innovate and without a purpose is largely not useful. If it does become useful it does so primarily by accident. In a strong model of innovation, the strategic purpose would be at the center and the satellites around it would be governance structure, social responsibility/ethics and stakeholder expectations (Scholes & Whittington 2011). At all times, the innovation objective has to be clear. Scholes and Whittington (2011) state that innovation objectives are statements of specific outcomes that are expected to be achieved. Every stakeholder understands the objective and they are all working on what needs to occur. For a state, an objective may be increasing the efficiency of transportation inspection efficacy. Around this specific outcomes could be established.
According to Collins (2000), strategic human resource management has been linked to increased innovation. While this is perhaps a micro-level influencer, the same “cultural dimensions” can be facilitated on the macro level by states or governments. They follow the same principles of innovation and would work in the same way theoretically, however, they would look different than they do in an organization. Exactly how to facilitate innovation is not an exact science nor is it entirely agreed upon by all researchers. There are some theoretical dimensions that have been proven however. Some proven ways of increasing innovation that have worked in health care and beyond include: blending cultures, communicate/eliminate barriers, stress simplicity, recognize/reward, create solutions, collaborate/listen, create roadmaps and use people with IT (HiMSS 2014). Blending cultures, collaboration and listening are all well documented elements of a successful Twenty First Century organization (Acona, 2005). They are the primary reasons that organizations have been striving to diversify. On the other end of the spectrum, the needs of the new millennium alter the way in which organizations have to operate. Using elements that were successful in the past to meet the problems of the future simply is not going to work.
According to Acona (2005), there is a division between the old organizational or traditional paradigm favored in the 20th Century and the new Organizational paradigm that is favored in the 21st Century. The traditional model emphasizes the individual as the basic unit of operation, top down communication, single systems for rewards, localized operation focus and tiered levels of management (Acona 2005). In contrast, the modern organization that will be successful typically has teams as the basic unit of operation, 360 degree communication, tailored award structures, global focus and flattened levels of management (Acona 2005). These 21st Century attributes are also congruent with HiMSS’s (2014) established mechanisms for increasing innovation. Governments can either work to promote this in organizations operating within their borders or they can establish frameworks that force them to work in a more traditional method. The traditional method, as noted through this research, would likely not produce the same degree of innovation.
The State and Innovation
When asked the role of the state in the innovation process, a personal interview conducted with the CEO of an unnamed Fortune 500 company explained, “I don’t see it as the State’s job to help us innovate, we need to do that ourselves....but, anyone that tells you the state’s policies don’t impact innovation is simply wrong” (Personal 2014: 1). The interviewee continued discussing the subject:
When the state has an objective and they make it attractive and easier for an organization to meet those demands, then they have increased innovations. In the same regard, if they make it hard to do something or steer us away from change for whatever reason, they can actually decrease innovation. We see it all the time. In a perfect world there would be synergy between the state’s framework and policy and the organizations (Personal 2014:1).
The way the state impacts innovation can best be visualized in terms of a pyramid. On the tip of the pyramid you have the needs or demands of society, the top of the pyramid would be the government and it’s policies, below that would be the organization, below that would be the human capital at the organization and at the bottom would be the general population. An unstable or uncooperative state structure will make innovation very difficult and the organization cannot operate without consideration of state thereby making it the top of the equation. Each of its influencing powers will trickle down accordingly and greatly impact whether or not the established need or demand is met.
One of the primary ways in which the state impacts innovation is through the way in which they encourage direct foreign investment. Some nations, like Japan, are more closed to foreign investment and other states, like the US, are more open to it (Role 2014). Depending on the demand either of these elements can contribute or hinder the process of innovation. Much of the innovation today is globalization driven and there is conventional wisdom that the multicultural or multiple investor paradigm will drive competition and subsequently drive innovation (Role 2014). When foreign capital is investing in a host state, the host state will benefit by taxes and such but the host state organizations will have to rise to meet the challenges and this forces people to innovate. Some of the government policy instruments that can encourage or discourage foreign investment include tax incentives, low interest loans and infrastructure improvement (Role 2014). The US, for example, has had varying success with this. In the 90’s direction foreign investment had a 20% growth, it peaked around 1.4 trillion in 2000 and then it slowed (Role 2014). It has begun to increase.
These ebbs and flows are part policy and part environmental conditions. The US in the early 2000’s and slightly after experienced its first foreign attack on US soil, the subprime lending crisis and then the great recession. Some of these were policy related and other were not. For governments seeking to drive innovation, these kinds of elements can complicate matters. Some of the challenges include: managing shift from tariff to non tariff barriers, local content/export requirements, government involvement in industries, regional integration, the European Union and environmental/legislative safety (Role 2011). The way in which innovation is driven by government is best described as being in a systems capacity. In this regard, multiple stakeholders, outside influence and considerations work together to create the respective environment in which the government makes policy. To illustrate the ways in which these theoretical principles work in practice, the following section will take real life scenarios and demands and show the governments role in the innovation process.
Innovation and Government Examples
“States are emerging as ...