Innovation endures in the most trying of circumstances

In the 1949 British film The Third Man, the character Harry Lime observes that, during the Borgia family’s rule in Renaissance Italy, the country “had warfare, terror, murder, and bloodshed. But [it] produced Michelangelo, Leonardo da Vinci, and the Renaissance”. By contrast, he contends, Switzerland’s 500 years of democracy and peace produced little more than the cuckoo clock.

While the implication that innovation and creativity are born only of conflict is extreme — in fact, Switzerland is a world leader in innovation — Lime makes a crucial point. Although peace, order and political stability are widely perceived as essential prerequisites for invention, entrepreneurship and economic development, there have been many exceptions to this rule, especially when it comes to creativity and innovation.

The US is consistently ranked among the world’s top ten countries for innovation, including by INSEAD’s Global Innovation Index. But on the Global Peace Index, it is ranked 88th out of 153 countries. Likewise, the United Kingdom and the Netherlands rank fifth and sixth respectively on the Innovation Index, but only 28th and 29th on the Peace Index. Conversely, Bhutan is among the 20 most peaceful nations, but does not even make it to innovation indices.

Of course, crime, terrorism, conflict and political instability, severe enough to cause a total breakdown of law and order, significantly impede creativity and innovation. But some countries show strong resilience in the face of pervasive violence and volatility.

For example, despite widespread violent crime, Mexico and South Africa have high levels of innovation (measured by patent filing and trademark registration). When terrorism indicators are taken into account, Lebanon, Turkey, Jordan and Israel emerge as resilient innovators. Just as peace and stability do not always lead to creativity and innovation, fighting and uncertainty do not necessarily deter it.

Although peace, political stability and civil order are important factors to consider when selecting a location for large-scale foreign production or service operation, they are far less important when it comes to sourcing creativity and making the related investments. In particular, creative industries such as animation, arts, design, and software, which are mostly based on individual skills and talent, tend to be more resilient to conflict than others.

Given this, officials, investors and business leaders in search of revolutionary ideas, cutting-edge solutions and untapped talent should not allow turbulence in some societies, or tranquillity in others, to influence their decisions excessively. In fact, stepping out of one’s comfort zone may offer significant benefits.

Some evidence suggests that the prevalence of uncertainty may boost competition, thereby sparking innovation. Furthermore, social environments that are characterised by lower levels of consensus and higher levels of violence may be more likely than their more harmonious counterparts to catalyse radical innovation.

Lebanon’s experience supports this assessment. Despite its long history of political violence, its creative industries are expanding. According to a 2007 study of Lebanon’s copyright-based industries conducted by the World Intellectual Property Organisation, the main challenges facing the country’s software sector, an important part of its economy, include restricted markets, intense competition, a brain drain (loss of human capital), inadequate technology policy, a lack of government incentives and rampant piracy. Violence is conspicuously absent from the list.

To be sure, violence is always a problem, but countries like Lebanon have become resistant to its effects — by developing creative industries, for example — diminishing its negative impact on economic, social and intellectual development. In 2005, 10 per cent of all new businesses in Lebanon were in the creative sector, and the copyright-based industries contributed 4.75 per cent of gross domestic product.

Similarly, despite high levels of political violence, Nigeria produces more than 1,000 movies annually. Indeed, Nigeria’s film industry is the world’s third-largest, after the US and India, and is second only to oil production in terms of its economic significance to the country.

According to a 2010 United Nations report on the creative economy, global trade in creative goods grew at an annual rate of 14 per cent in 2002-08. Meanwhile, exports of such goods from developing countries, which tend to experience more violence, grew at a rate of 13.5 per cent, reaching $176 billion (43 per cent of total world trade in creative industries) in 2008. Although overall global trade declined by 12 per cent that year, trade in creative goods and services continued to expand. This has significant implications for political and business leaders, especially in turbulent regions like the Middle East.

In order to bolster economic growth and innovation amid conflict and volatility, policymakers and investors should focus on building creative industries. The resilience and adaptability that they provide are crucial to supporting long-term economic growth and job creation — no matter what the future brings.

— Project Syndicate, 2013

Sami Mahroum is Academic Director of Innovation and Policy at INSEAD.