Commentary

Organization for Economic Cooperation and Development (OECD) Studies Link Between Innovation and Economic Growth

Jerry Sheehan
Special correspondent
Issues in Science and Technology
March 20, 2006

A recent report that has been attracting attention in Europe is one released last month by my own organisation (Organization for Economic Cooperation and Development) entitled Going for Growth. This is the second in what is to become an annual series that compares the performance and policy settings of OECD countries in a broad set of domains that contribute to economic growth.

This issue is of particular interest to the science and technology policy community because it extends the surveillance to innovation, reflecting a growing recognition that science, technology and innovation play an important role in driving economic growth. While this has been accepted in science and technology policy circles for some time, it has been slower to find acceptance in other economic policy domains in a number of countries.

This is certainly not the first time the Organization for Economic Cooperation and Development has studied the links between innovation and growth, but this work differs in that it takes a broad perspective that considers both innovation-specific policies (such as R&D funding and support for university-industry links) and more general economic policy related to competition, education, and financial and labor markets.

The report shows that both types of policy are important to innovation performance and offers country-specific recommendations for improving policy.

Recommendations for the European Union include introducing a "community patent" and making the patent system more accessible to small firms; increasing competition for research grants by making national grant competitions subject to European Community rules governing cross-border procurement (i.e., opening them to international competition from other EU countries); removing barriers to cross-border trade that limit the size of markets for innovative products and services; and giving greater priority in EU R&D funding to projects with greater economic spill-over.

The report is likely to give impetus to reforms in a number of countries and to the development of indicators that can allow better comparisons of policy settings across OECD countries.

Jerry Sheehan is a senior economist in the Science and Policy Division of Organization for Economic Cooperation and Development in Paris.