I spotted an article in today’s Wall Street Journal (US print edition) entitled, “How China Chases Innovation“. The article highlights how China has done well, so far, with a centrally planned basic R&D strategy where innovation ministries ‘pick’ investment paths. The examples are described as ‘innovation without invention’ since the Chinese are effectively just pointing their researchers and money to follow well proven Western ideas. This works ok for a ‘catch up’ industrial cycle. But what about the need for real invention, where no one has gone before?
This is where the article turns- China now needs, and soon, to focus on change in government policy. Instead of explicit selection of research, the Chinese government needs to focus policy on tax rates and recovery rates for free-market investment. That way the risk is borne by private enterprise, and competition weeds out winners and losers. And the benefits are what drives the innovation, and invention, process. You can bet the Chinese, mad to take over the US, will do something in this area. But overall the article highlights the pitfalls of ‘bigger government’ focused on ‘selecting winner’. That won’t work for real innovation. Can someone let Washington know?