Dan Breznitz is the Munk Chair of Innovation Studies and co-director of the Innovation Policy Lab at the Munk School of Global Affairs at the University of Toronto. Amos Zehavi is a senior lecturer in the departments of public policy and political science at Tel Aviv University and a visiting professor at the Munk School.
In 2008, Rav Bariach, an Israeli firm manufacturing security doors, was on the brink. Sales were down and debts were accumulating. Today, Rav Bariach is thriving: production, sales and profit are up dramatically. No less importantly, the company’s workforce has increased by more than threefold to about 600 workers, of which the majority are low-skilled workers from Israel’s periphery. The key to this turnaround was firm-targeted government support for innovation that led to the development of new product lines.
Rav Bariach demonstrates that innovation is not a one-way street toward higher profit for some and insecure work for the rest – the prospect raised by both the U.S. rust belt and San Francisco – but is more accurately captured metaphorically as a menu of different possibilities, of which some raise all boats while others do the opposite. It is clear that innovation and inequality are salient questions to both business and political leaders. Indeed, many have latched on to a new buzzword: inclusive innovation. They wish to support innovation that benefits a broad swathe of society, often individuals who are economically marginalized.
But how? While statements such as “Innovation is the path to inclusive growth” make Canadian politicians sound good, details about how this is to be achieved are somehow always lacking. Ottawa, sadly, is not alone; a global survey of inclusive innovation highlights an inflation of rhetoric coupled with an almost complete dearth of action and details.
We, however, contend that there are already policies that achieve these goals – we termed them Distribution-Sensitive Innovation Policies (DSIP). These are policy actions devised to increase growth while taking into account economic distribution.
Looking at diverse countries from the United States to Canada, Sweden, Poland, Israel and Germany, DSIPs work by benefiting disadvantaged groups.
Low-skilled manufacturing workers
These workers have suffered from job and income loss over recent decades. Both globalization and automation are partially to blame. However, not all innovation leads to such results. As the story of Rav Bariach attests, government programs that enable small- and medium-sized manufacturing enterprises to succeed in product innovation, as opposed to process innovation, generate employment and do not simply substitute machine for man. Governments that support product innovation, especially in hard-hit traditional industries, help preserve relatively well-paying workplaces for workers most negatively hit by globalization.
The economic periphery
Stimulating growth in a disadvantaged region requires bolstering its innovative capacities. Doing so is, admittedly, difficult and many initiatives end in failure. Nevertheless, governments have made headway by strengthening the innovative capacities of existing clusters, and by prodding well-established research and development leaders to relocate to the periphery. The story of Poland, the most stellar growth miracle of central Europe, could not be understood without the billions of euros invested in the past 20 years to stimulate innovation in its companies.
These programs have been co-sponsored by the European Union and the Polish government, with the specific aim of raising Polish companies to the standards of leading European ones. This is a lesson well learned by Germany – a country the United States would do well to emulate – where, after reunification, innovation investments in backward Länder was viewed as a priority by the government.
Governments intent on better integrating members of disadvantaged, identity-based minorities into the workforce tend to focus on the low-end of labour markets. While this might be important, real growth happens when minorities can engage in growing and innovative sectors of the economy. It is not enough to get disadvantaged minorities into science, technology and engineering higher education – but to focus on involving them in innovative activities in technology-intensive workplaces.
Minority-group innovation pioneers play a critical role: they constitute both role models in their communities and become nodes in social-professional networks that help future generations navigate technology-intensive industries. For example, take the surprising example of the Israeli Arabs, and the plethora of policies by right-wing nationalist Israel governments, tackling everything from startup incubation to training for job interviews, which resulted in a tenfold increase in Arabs employed in the high-tech sector in less than four years, and a growing cohort of promising Arab-founded startups where there were none before.
People with disabilities (PWD)
Labour-market participation rates for PWD are disturbingly low. New technologies hold the promise of enabling PWD better incorporation into the workforce. Governments are able to further this goal by pushing for universal design in which new technologies are, from the start, designed for inclusive use. For example, Toronto-based company eSight developed a patented, assistive eye-wear device for visually impaired individuals that enables users not only increased independence, but also the ability to find work.
DSIPs are by no mean a panacea for all social and economic ills. However, given that economies are no better than the societies in which they are embedded, it is critical that business leaders turn their attention to them. We desperately need to maximize both growth and equality in society – the consequences of not doing so are dire. DSIPs offer a venue of constructive private-public experimentation.