Tapping the World’s Innovation Hot Spots

During the twentieth century, the world watched as the United States churned out innovation after innovation. Now, however, the tables are turning. Many other countries are placing innovation at the top of their national agendas. From Singapore to Finland, from Chile to China, countries around the world are designing novel approaches to innovation strategy. They are creating forward-looking education and talent-development policies, pouring money into large-scale initiatives, and snapping up new assets in the form of intellectual capital and infrastructure.

What does this new “innovation world” mean for companies, and what are the implications for the people who lead them? Executives can now weigh different national approaches to innovation in terms of their firms’ strategic requirements. The models described in this article offer companies both range and richness in developing their plans. Some of the models exist in a “pure” form in a given country, as the centerpiece of a national innovation system; others are but one component of a nation’s overall strategy. By partnering directly with various countries and setting up a lab or a marketing office in a yeasty environment where talent is concentrated and resources are readily available, companies can select from a menu of benefits. For example, high-tech start-ups can be “born global” by availing themselves of talent, capital, R&D tax credits, regulatory relief, and specialized facilities in such innovation hot spots as Helsinki, Singapore, and Shanghai.

Companies can also position themselves as “systems integrators,” which incorporate the elements of the models that are most appropriate for their strategies. Indeed, corporate strategists have more opportunity than ever to pick and choose from best practices and resources across the globe and combine them in new and unpredictable ways. In doing so, they can practice what I call innovation arbitrage, taking advantage of differences in regulatory environments as well as in the cost of talent, specialized services, and other inputs to the innovation process.

By John Kao - HBR