Economic Forecasts

Human capital has many determinants: health and nutrition; education, training, and work experience; social and communication skills; habits and personality traits; and individual fame and brand image. It is evident that education plays a fundamental role in building human capital in the form of knowledge, skills, values, beliefs, and habits. Further, a sound education system can create a pool of potential innovators by fostering inquisitiveness and creativity.

Learning poverty and GDP per capita in Asian economies

Note: Bubble size represents population size. Learning poverty is the percentage of children aged about 10 who are unable to read and comprehend a short text appropriate for their age. Data from World Bank (2019).
Source: Newman, Gentile, and dela Cruz, forthcoming.

How entrepreneurship, innovation, and economic development interact is more complex than is often thought. Entrepreneurs are a mixed bag, as are the teams they form and the new businesses they create. Most entrepreneurs are not economically innovative, as few create new jobs in any significant number or have the means to be productive.

New and entrepreneurial business categories

Source: Autio, forthcoming.

This study has examined the role of human capital in spurring innovation in developing Asia, taking into account the intrinsically and fundamentally human nature of innovation. It analyzed the role of the education system and the entrepreneurial ecosystem in fostering an innovative culture that can encourage more Asian innovators. Notwithstanding the central role played by brilliant individuals in innovation, it takes teamwork, networking, and collaboration to transform innovative visions into reality.

Registration of IPRs in the Republic of Korea, 1970–2010

IPRs = intellectual property rights.
Note: Utility model registration rapidly diminished because that process changed in 2006 into an evaluation system. At the same time, patent registrations decreased because large firms such as Samsung and LG reduced their registration of patents with the Korean Intellectual Property Oƒce. Since the mid-2000s, large ROK firms have applied for and registered patents with the United States Patent and Trademark Oƒce instead, to better compete in the global market.
Source: Lee, Kang, and Park, forthcoming.

Access to finance is indispensable to innovation, which is inherently costly and fraught with risk and uncertainty. There is almost no way of knowing beforehand which particular innovations will turn out to be commercially successful. It is even more difficult to predict whether an innovator can turn his innovative vision into a viable reality. Yet even the greatest inventions need financing to succeed. While Apple is widely associated with Steve Jobs, for example, the iconic tech giant would never have emerged without the bold, high-risk investment of Mike Markkula, who provided critical seed money and managerial support during Apple’s embryonic phase. A crucial component of viable innovation is, therefore, a sound and efficient financial system that can channel resources to aspiring innovators.

Urban agglomeration plays an important role in fostering innovation (Feldman and Audretsch 1999, O’Huallachain 1999). As shown above, economies in developing Asia are becoming increasingly innovative. At the same time, they are experiencing rapid urbanization. Urban innovation clusters or hubs can be a powerful promoter of innovation. Silicon Valley, the birthplace of the global tech industry, is perhaps the bestknown example. Some well-known urban innovation clusters in developing Asia are Zhonguancun, Shenzhen, and Zhangjiang in the PRC; Bangalore and Hyderabad in India; and Pangyo Tech Valley in the ROK. But is there a systematic relationship between innovation and urbanization? Most existing evidence on the effect of urban agglomeration on innovation comes from developed economies. Systemic evidence is lacking as to whether urban agglomeration affects innovation, and if so, what the channel might be for it to occur in the developing world, including Asia.

Share of urban population and innovative firms in the 10 most innovative cities in selected countries

PRC = People’s Republic of China, R&D = research and development.
Note: The 10 most innovative cities in each country are the ones with the highest share of firms that undertake process innovation. Each cell is the sum of shares of these 10 cities.
Source: Chen, Hasan, and Jiang, forthcoming.