Before his appointment as senior fellow at the Edmund Walsh School of Foreign Service, Dr. Augusto Lopez-Claros was a director at the World Bank. With years of experience as a development economist Dr. Lopez-Claros has written and lectured extensively about policies that encourage growth. In a talk he delivered in 2009 at Microsoft’s Government Leaders Forum he addressed the importance of adopting an information and communication technologies (ICT) platform to remain competitive. He said that an increasingly important factor in explaining successful economic development concerned the agility with which an economy adopted existing technologies to enhance the productivity of its industries.

This is critical because technological differences have been shown to explain much of the variation in productivity between countries. In fact, the relative importance of technology for competitiveness has been increasing in recent years, as progress in the dissemination of knowledge and the increasing use of ICTs have become increasingly widespread. Technology-intensive foreign direct investment not only provides strong productivity gains and improvements in business processes, but also has a number of important spillover effects, including improvements in management practice and positive effects on human capital where new technologies provide the incentive for employees to acquire new skills. At the same time, other companies become increasingly aware of the advantages of upgrading technology, with positive repercussions for the productivity of the sector as a whole.

Innovation, of course, is particularly important for countries that have reached the high-tech frontier. While less advanced countries can still improve their productivity by adopting existing technologies or making incremental improvements in other areas, for countries that have reached the innovation stage of development, this is no longer sufficient to increase productivity. Firms in these countries must design and develop cutting-edge products and processes to maintain a competitive advantage. This requires an environment that is conducive to innovative activity, supported by both the public and the private sectors.

In particular, this means sufficient business investment in research and development, high-quality scientific research institutions, collaboration in research between universities and industry, and protection of intellectual property. As of 2018, four of the seven countries that are home to the top 100 digital companied were in Asia. The other three were in North America and Europe. In terms of figures, the global digital economy is worth $11.5 trillion, equivalent to about 15 percent of global GDP. This point is made relevant when considering countries in Africa. While Africans use technology, they face significant challenges accessing data, mobile services, and dealing with excessive data costs, among other broadband issues. These challenges directly impact social and digital sectors, e-commerce, e-health, and e-government capabilities, which prevent African countries from competing on an even footing globally.

Given the importance of innovation for long-term growth, innovation policy is currently very much at the center of economic policy in many countries. A key insight from these discussions is that innovation policies should aim to foster an environment which promotes entrepreneurship and innovation across the economic spectrum.