Published in October 2015 as an update to the 2010 OECD Innovation Strategy, The Innovation Imperative: Contributing to Productivity, Growth and Well-Being calls on governments to stop policies that unduly favour incumbents, given that young firms are crucial in driving innovation, job creation and growth. With the digital economy and the sharing economy changing the business landscape by allowing new ideas and business models to emerge, it is more urgent than ever to give young firms the means to experiment with new technologies and organisational models. It also calls on policy makers to:
- Think long-term. Many of the key technologies driving growth today, including the Internet, mobile telephony and genomics, would not have been possible without public funding of long-term research. Yet this investment is now declining in many OECD countries as they engage in fiscal consolidation and focus more on short-term benefits. Innovation policies must look to the long term to answer major challenges like climate change and ageing.
- Provide more grants and fewer tax incentives. R&D tax incentives total almost USD 50 billion across the 34 OECD countries plus Brazil, China, South Africa and the Russian Federation, yet they often do not meet the needs of young, innovative firms and risk amplifying cross-border tax planning by multinational firms. The OECD also questions whether the growing use of special tax regimes for intellectual property presents value for money. Competitive and transparent grants are better suited to the needs of young firms, can foster co-operation in innovation, and can be directed towards areas with the highest impact.
- Learn from experience. Monitoring and evaluating innovation policies, learning from experience and adjusting policies over time, can help ensure that government action is efficient and reaches its objectives at the least possible cost.
The report also calls attention to the role of skills, an open and competitive business environment, access and participation in the digital economy, and the need for countries to adapt policies to their specific national and sector challenges.