Economic growth depends on the flow of people and ideas

It has been almost a decade since Northwestern’s Robert Gordon reflexive if stalled innovation caused the death of economic growth as we had learned it. He argued that far from some form of miraculous perpetual motion machine that would ensure economic growth in perpetuity, the engines of our economy need a constant stream of new innovations to thrive.

As a general thesis, it is a thesis supported by research of the Stanford Institute for Economic Policy Research, which found that we are spending more and more on research and innovation and that we are receiving less and less in return for that investment. In addition, this “innovation contribution” is not purely financial, since the authors have pointed out that around 20 times more people are currently working in R&D than they were in the 1930s.

Recombinant growth

An explanation comes in the form of a paper by Mark Buchanan of Northwestern, in which he highlights what is called recombinant innovation. Essentially, it is the process by which existing technologies and processes are combined or deployed in new ways. Buchanan points out that 40% of all parents in the US Patent and Trademark Office take this form, with the ratio increasing year on year.

While this may sound like a beige version of the innovation that we’ve been conditioned to see as something innovative and groundbreaking, it’s actually quite the opposite. Indeed, as Martin Weitzman argued in a famous paper As of 1998, recombination is not only the foundation for knowledge production, but is inspired by the kind of work Gregor Mendel did when he mixed and matched peas to discover the power of genetics.

From an innovation perspective, therefore, it can be extremely valuable to be able to cross borders and use a wide range of perspectives. César A. Hidalgo and Ricardo Hausmann compare the best savings to a bucket of Lego bricks, with the most diverse buckets those who are able to grow and produce the most innovative solutions.

As Mancur Olson said in his book, Power and prosperity: “Because uncertainties are so pervasive and unfathomable, the most dynamic and successful societies are those that try many, many different things. These are companies with countless thousands of entrepreneurs.

The inherent value of diversity is one of the main reasons immigrants make such powerful entrepreneurs, as they bring a whole new set of norms from their home countries that can inform new ways of doing business in their country of origin. ‘adoption. Likewise, the evidence that the best entrepreneurs tend to be a bit older is also largely based on their greater life experiences combined with which to combine in various ways.

Favor combinations

Within countries, universities tend to be at the heart of attempts to foster such diversity. As Jason Owen-Smith of the University of Michigan argues in Research universities, universities tend to be great sources of innovation because they contain not only a diverse range of people, but also a diverse range of specialties to juggle together.

There are also initiatives such as the European Union European Institute of Innovation and Technology, which aims to encourage and support the fertilization of ideas and innovation across the European Union. These efforts have been reinforced against the rise of nationalism in recent years.

Recent research of the Max Planck Institute for Collective Goods Research suggests that when it comes to cooperation, such nationalism is not as uncommon as one might think, with people appearing to prefer to collaborate with those who are like them rather than with those that are different in any way. . At the individual level, it can close us off to potential opportunities, while at the national level it can create an insularity “not invented here” that ignores potential innovations from abroad.

Knowledge transfer

Like the World Economic Forum strong points, this is particularly important for developing countries which tend to import science and research rather than developing it at the national level.

“Knowledge transfer between countries is an important driver of innovation,” they say. “In countries with strong education systems and deep financial markets, the estimated effect of the adoption of foreign technologies on productivity growth – through doing – is particularly important.”

Indeed, in Dynamism, Edmund Phelps argues that imported innovation contributes more to a country’s productivity than native innovation. This importation of ideas and innovations is certainly no less impactful for having been “invented” elsewhere, but it is increasingly attached to the people who have the knowledge to make the idea work.

Although this knowledge can be imported as intellectual property, it is most often attached to us as individuals. For example, The data of the McKinsey Global Institute reveals that about 35% of people living outside their country of birth have at least a higher education degree. What else, research of The Royal Society underlines the crucial role these migrants play in the intellectual production of universities.

Not surprisingly, at the height of Trumpism, the deans of many American business schools felt compelled to write a paper urging an easing of restrictions on talent because of their impact on US competitiveness. As the latest edition of INSEAD’s Global Talent Competitiveness Index illustrates, we are in a competition for talent like never before. While the bulk of the report focuses on the organizational challenges of attracting, developing and retaining the talent needed, the same urgency must also be seen from a national perspective.

Like Ricardo Hausman of Harvard and César Hidalgo of MIT illustrate, there is a clear and direct link between the know-how of a nation and its economic prosperity. From an innovation and entrepreneurship perspective, this largely involves having an open and liberal approach to immigration so that the various ideas can fuel the recombinant innovation that is the norm today. .

* this article was co-authored with Muneeb Sikander