Creative growth policies

Innovation Policy in a Global Economy is the final book in a series on the general theme of globalisation and technology. It addresses the role of innovation in international trade and economic growth in the context of national systems of innovation and the need to adapt to an increasing rate of technological change in a dynamic, highly competitive international environment.

The analysis provides insights into the issues of inter-country, regional and sectoral differences in innovation, the persistence of national systems of innovation and the implications for employment, wages and the distribution of income within and between countries. The richness of both the theoretical and empirical analysis in many of the papers produces an analytical subtlety that gives the lie to the popular canard that globalisation is an unstoppable homogenising force driving all countries towards a low-wage economy.

Unskilled workers are the most vulnerable, particularly in the declining industries of the developed world, but this is by no means necessarily the case for educated and/or skilled workers. Margaret Thatcher's vision of Britain being the low-labour-cost nation of western Europe is demonstrated to have been fatally flawed in its aggravation of social divisions through low wages and high unemployment. Instead, what is required for economic success is a "learning economy" with interaction between national policies, local competencies and comparative/competitive advantages.

The 11 papers from a range of countries fall into three sections. The first addresses national systems of innovation in the context of rapid technological change. Of particular interest is Marion Pianta's matrix of national research and development and investment, which reveals persistent patterns of specialisation. The United States, Switzerland, France, Germany and Japan have high levels of both R&D and investment. Greater specialisation in R&D intensive product innovation industries leads to better growth and employment effects than process innovation in more traditional industries.

In the section on regional, national and global forces, Jeremy Howells argues that even regional systems of innovation within a country are not necessarily homogenous. Keith Pavitt and Parimal Patel focus on the generation of know-how in multinational enterprises, which is the least internationalised of their activities. Paolo Guerrieri investigates the pattern of international specialisation in the face of globalisation and finds that the major regions (such as the European Union) are becoming increasingly heterogeneous, driven by inter-country and inter-industry differences.

The third section looks at globalisation and economic performance. Michael Kitson and Jonathan Michie analyse trends in economic and technological globalisation and argue for effective industrial and technological policies, while John H. Dunning and Clifford Wymbs look at the sourcing of technology by multinational enterprises, and John Cantwell elaborates on the role of innovation in growth and the importance of national systems.

Innovation Policy does not make comfortable reading from a technical or a policy viewpoint. Long-term growth and prosperity depend on innovation, learning and new and improved technologies to raise labour productivity. This book tackles these complex issues by sifting the evidence carefully to produce important policy implications highlighting the potential role of government as facilitator of the learning economy. Its likely audience will be academic specialists, including postgraduates, although it will prove useful for appropriate advanced undergraduate courses. Several chapters should be sent to shareholders in UK companies, to drive home the adverse long-term growth effects of high dividend payments at the expense of R&D and investment.

Robert Read is lecturer in international economics, University of Lancaster.