Innovation may be hit by economic crisis says OECD

The report also includes a breakdown of government stimulus packages in the 30 OECD countries (and others including Russia) and the measures taken relating to innovation, including broadband, science and innovation, and green technology.

Historically, business R&D spending and patent filings have moved in parallel with GDP, slowing markedly during the economic downturns of the early 1990s and early 2000s. Recent evidence, based on corporate reports from the first quarter of 2009, confirms this is already happening, with R&D spending declining in many cases.

In the US venture capital investments plunged 60 per cent in the first quarter of 2009, compared with the same period a year earlier, and the same is true in Europe and in China. Patent applications are down across the board.

The report urges governments and business to limit cutbacks in spending on research and development and innovation, and mitigate as far as possible the negative impact of the crisis on innovation taking a long-term view. It advises governments to avoid locking-in old economic structures and business models. Supporting firms and industries that do not have a viable business model will thwart the restructuring required for more sustainable growth.

The report points to the governments of Finland in the early 1990s and Korea in the early 2000s, which both increased investment in R&D during those downturns and the role this played in making their economies more competitive and innovative.

Leading technology companies such as Google and Samsung also increased their R&D spending after the dotcom bubble of 2001 and came out stronger. The focus on innovation-related stimulus measures also showcases how economic recovery packages deployed today can help prepare future growth – including in the area of green technologies.

Incentives to develop a greener economy have also been weakened by the crisis, says the OECD. Lower oil prices have reduced incentives to switch to alternative energy sources and declining raw material prices have reduced pressures to use these resources more efficiently.

In response, governments should share the risk of new technologies with the private sector through R&D tax credits, public-private partnerships and supporting innovation in SMEs.