The ADO 2020 theme chapter, What Drives Innovation in Asia?, highlights the increasing importance of innovation—new and better products and processes—to Asia and the Pacific’s transition to a middle-income region. Some countries are closing the gap with advanced economies when it comes to first-in-the-world - “frontier” - innovations. But just as important are the first-in-your-context - “catch-up” - innovations that are taking place across Asia and the Pacific, and which matter greatly for development. The theme chapter documents the state of innovation in developing Asia, examines its drivers—including the roles played by human capital, entrepreneurship, finance, institutions, and cities—and discusses how policies can spur innovation in the region.


Innovation is the beating heart of thriving economies.

Some products, like mobile phones replacing landlines, bring radical change.

Others, such as cost-effective water filters, might be simple, but improve countless lives.

Asia and the Pacific's long-term growth depends on it becoming more innovative.

Countries that manage to escape the middle-income trap invest 3 times more in research and development than those that don't escape. And they also apply for 4 times as many patents.

For sure, Asia and the Pacific is already innovating. But countries are innovating at different speeds and in different ways.

The Republic of Korea, Singapore, and the People's Republic of China are frontier innovators, creating unique products and services for the world.

Other are catch-up innovators, tweaking existing products and services for first time use in their home market.

And the region overall, still lags developed economies.

So how can Asia and the Pacific, become more innovative?

Quality basic education for all children is key. Creativity, critical thinking, and other soft skills must complement the technical and academic. Otherwise, the next Albert Einstein could well remain undiscovered in one of Asia's slums.

Entrepreneurs, especially new firms, need encouragement through new policies or financial support. Enabling more research and development is one way.

A 1% increase in per capita research and development increases innovation by 0.2% in developing Asia.

And in-house training and forward-thinking managers help. Right now, companies that are bigger and that export, innovate more.

We must nurture the innovation gazelles so that they stand out from the herd.

Conducive institutions and regulations lay the groundwork. Good rule of law, ease of doing business, and property rights smooth the way.

Innovation is the future. Asia and the Pacific must embrace it, or risk being left behind.