Innovation will be the key to the survival of advanced economies in the intensifying competition with emerging powers with cost advantages.
But simply boosting the amount of money spent on research and development will not create innovative products or services. And innovation is not just about technological breakthrough, it’s about creating an environment to facilitate new businesses and ideas.
These were some of the statements made by five veteran journalists from British newspapers who took part in the May 23 symposium organized by Keizai Koho Center under the theme, “Innovation to be the winner in international competition.” Yuichiro Yamagata, editorial director of Toyo Keizai Inc., served as moderator of the event.
“When people talk about innovation, the image given is of scientists working at R&D laboratories, engaged in breakthrough work,” said Damian Reece, head of the business section of The Daily Telegraph.
But the innovation that took place in Britain during the past 30 years “has not just been in the field of industry . . . . It has been innovation in every walk of life,” he said.
“Innovation at a specific level of a complex economy such as those of the U.K. and Japan cannot happen overnight, nor can it happen on its own. Innovation requires a catalyst . . . a common will and purpose,” Reece told the audience.
When Britain in the 1970s was struggling to come to terms with what it meant to be a postindustrial society, the Conservative government of Margaret Thatcher provided “the necessary conditions to allow economic innovation to blossom” through tax reforms and deregulation, he said.
Perhaps the biggest single success story of British innovation in recent decades is the financial services industry in the City of London, which flourished after the Big Bang deregulation in the 1980s, he said.
Thatcher’s reforms were also hugely controversial, and the prime minister was criticized for destroying Britain’s manufacturing industry.
Today, there is no doubt that manufacturing is overshadowed by the services sector, said Grainne Gilmore, an economics correspondent for The Times.
The manufacturing sector, which employed almost half the British workforce right after World War II, today provides jobs for less than 15 percent of the country’s workers. But what’s left of Britain’s manufacturing sector is much healthier today and is still making a significant contribution to the economy, Gilmore said.
And innovation will be crucial for its survival because companies that cut prices to compete will eventually move to emerging economies, leaving only those who try to differentiate from their rivals with innovative products and services, she noted.
Innovation is often associated with greater R&D spending, but how much you spend is less important than how you spend the money, said Robin Harding, an economics leader writer for the Financial Times.
While much of R&D spending by Japan comes from the private sector, the British government accounts for a major part of the country’s R&D funding, especially on basic research, Harding said. However, Britain’s better record than Japan on pure science has not resulted in a greater commercial success, he added.
Harding warned that the Japanese government needs to be careful about its plan to increase spending on pure science R&D because it will not necessarily bring more economic benefits. It should rather focus on how to improve results from existing government-funded research projects, he said.
Another key component of innovation is to combine science and technology with entrepreneurship, said Jonathan Guthrie, an enterprise editor and columnist for the Financial Times.
Despite its tradition dating back to the days of the Industrial Revolution, there is a “bit of disconnect between business and science” in Britain today, Guthrie said. It is becoming more difficult than before to combine the two disciplines because specialization in science and business is much greater, he noted.
“So the future of British innovation lies in fostering collaboration between scientists and business people . . . and this is an area in which Japan could probably do much more as well,” he told the audience.
“We need intermediate people who would bridge the gap” between science and business, he said. “Japan is fantastic in terms of innovation within big companies and has great academic research, but I think the two sides don’t always communicate very well.”