How important is innovation in sustaining economic growth and boosting greater connectivity between markets across the globe? A recent report by the World Intellectual Property Rights (WIPO) – “The Changing Face of Innovation” – provides some interesting insights to answer this question.
The report clearly states that in high-income countries, estimates show that innovation accounts for as much as 80 per cent of economy-wide productivity. Though no data is available for the medium- and low-income countries, evidence shows that companies with higher levels of innovation outperform companies with little or minimal level of innovation. The report states that for East Asian countries, innovation has been an important factor in their quest to catch up with the advanced nations. South Korea has been a good example of this over the last few decades and China, too, has been focussing very hard on this aspect in the last four to five years.
Innovation is becoming important since companies worldwide are spending more on research and development (R&D) to ensure they remain competitive in a globalised world where technology plays a very crucial role in accessing markets. The WIPO report states that global R&D expenditure has almost doubled in real terms from 1993 to 2009. However, due to an increased globalisation of economies across the world, the share of global gross domestic product (GDP) devoted to R&D increased only from 1.7 per cent in 1993 to 1.9 per cent in 2009. However, interestingly low- and middle-income countries increased their share of global R&D expenditure by 13 per cent between 1993 and 2009 with China accounting for majority of this increase. China was the second largest R&D spender in 2009.
The report also states that the demand for patents has risen from 800,000 applications worldwide in the early 1980s to 1.8 million in 2009 due to the efforts of different countries like Japan in the eighties, Europe and South Korea in the nineties and more recently by China. Trademark applications, too, have seen a tremendous rise from about one million in the 1980s to over three million in 2009. The other areas of intellectual property like industrial designs, according to the WIPO report, have also seen serious increases in applications. This obviously has led to tremendous increases in receipts of royalty and fee for companies and institutions across the globe.
What is important to note in the report, though it does not primarily focus on countries per se, is that India is still not seen as a major contributor to the growing focus on intellectual property, especially innovation. While industry and some public research organisations have been making a serious effort towards rectifying this position, there is a need for a tremendous push from the government to make India move towards this trend so that the country finds easier and more sustainable ways of ensuring economic growth.
The report provides some pointers towards what governments need to do to focus the country towards greater innovation. Since the government is among the core stakeholders in the national innovation systems, it has to continue to directly fund research and provide incentives to firms to invest in innovation that includes protection of intellectual property. Governments also need to review the current policies to ensure that they focus companies towards changing trends around the globe so that they remain competitive in world markets.
An important pointer in the report is the need for reforms for incentivising universities and public research organisations towards patenting and innovation ideas so that they could work with industry closely. Turning academic ideas into business leads for private sector needs substantial investment will need to be supported by a strong policy regime from the government.
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Globally, there is a trend towards greater integration of public research organisations, universities and the private sector to focus on intellectual property. This will need to be given more focus in India if the country has to move up the value chain in global markets.
There is a need for setting up new institutions that work on a collaborative effort between the government, industry and public research organisations and academics to ensure that there is a blending of minds towards greater emphasis on innovation and IPR.
Innovation is a dynamic process and, therefore, it will continue to provide opportunities to industry and the government to join the global trend towards achieving this objective. A good blend of policy initiatives by the government combined with private sector investment and academic interest can help develop greater innovation hubs in the country to sustain economic growth as also access global markets.
The author is Principal Adviser with APJ-SLG Law Offices