The Good, The Bad, and The Ugly (and The Self-Destructive) of Innovation Policy:
A Policymaker’s Guide to Crafting Effective Innovation Policy
The Information Technology & Innovation Foundation
Stephen Ezell and Robert D. Atkinson
October, 2010

Ezell and Atkinson discuss how innovation as a means to economic growth in a society can have positives and negatives because governments can implement policy in different ways that affects innovation and it’s ability to grow the economy differently.

The authors very early on set up several policy principles:

• The central goal of nations’ economic policies should be spurring productivity growth and innovation in all firms and sectors, including both their traded and non-traded sectors, and in services as well as goods production. In doing so, countries need to balance the interests of both their workers and their consumers/taxpayers over both the short-term and the long-term.
• Countries’ support both for factor conditions—including skills development, investing in innovation infrastructure, supporting knowledge production and transfer, and ensuring the widespread use of ICT—and for competitive domestic markets is fundamental to achieving productivity growth and innovation.
• Fair competition to implement the best “Good” innovation policies forces other countries to ratchet up their game, enhancing the competitiveness of all countries and raising the welfare of all citizens.
• As the WTO has established, markets should set currency rates, not governments; policymakers must insist that countries enjoying the privileges of WTO status adhere to this obligation.
• Corporations should make their own location decisions, not governments. Forcing offsets, transfers of intellectual property, or sourcing of production activities as a condition of market access should be unacceptable.
• Competitive domestic markets let foreign firms in and encourage foreign direct investment (FDI).
• Countries should respect property rights, while being neutral with regard to country of ownership.

The authors stress that “getting innovation policies right is…critical,” and that policy makers “need to be able to differentiate between Good, Bad, Ugly, and Self-destructive innovation policies.”  It is suggested that governments that have a desire to introduce quality innovation policy must master three areas within the “Innovation Policy Triangle”:

1. Business environment
2. Technology policy environment
3. Regulatory environment

Each environment and it’s component parts is discussed in detail within the article.  The authors believe that good policy can benefit the country and the world around it, bad policy benefits no one, and ugly policy benefits the country it was developed in while simultaneously hurting other countries.

You can find the article in full here.