State funding can drive high-value entrepreneurship, innovation

Many start-ups may not achieve desired goals if they ignore new technologies

Naveed Iftikhar June 19, 2017

ISLAMABAD: Steve Jobs, former CEO of Apple Inc, became aware in the early 2000s that two academics of the University of Delaware, namely John Elias and Wayne Waterman, had developed tablets with multi-touch screens.

Jobs bought their company called FingerWorks and also acquired services of Elias and Waterman. The next task was to produce an iPhone having a touchscreen by using the technology and patents of the newly acquired company.

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Initially, Job’s team opposed the idea, but he remained confident that the touchscreens would give a lot of flexibility and space to the users of cellphone and iPad. The multi-touch screen technology was developed by the University of Delaware’s researchers through a federally funded research programme. iPhone and other such high-value entrepreneurship and innovation in the US have relied enormously on the research financed by different agencies of the federal government.

The phenomenal contribution of entrepreneurship in the US is often attributed to the market economy and entrepreneurial talent. However, the role of federally funded research and development is grossly undervalued in the literature and policy dialogue.

Jobs’s vision certainly made a difference in advancing Apple products, but many of those advancements were built on the technologies produced by the funding of federal research organisations to universities and research centres.

An entrepreneurial state

Mariana Mazzucato, Professor at the University of Sussex, has documented, in her book “The Entrepreneurial State: Debunking the Public vs Private Sector Myths”, the contribution of US federal funding in the development of iPhone and many other modern technologies.

Just to mention a few, GPS, the internet, super computers, avionics, driverless cars, artificial intelligence, robotics, solar/wind technologies and many of the biotechnology advancements are based on the defence research grants and other federal funding programmes in the US. The system of federal funding for research and development mainly started during the World War-II and was later expanded to a wide range of civil and military technologies.

Some of the prominent federal organisations and departments include National Science Foundation, Defence Advanced Research Projects Agency, Advanced Research Projects Agency-Energy, National Institute of Health, Department of Energy, Department of Commerce and Department of Education.

Most of the basic and risky research is funded by the government through grants to the universities. Private sector mainly developed later part of the technology and over time its contribution to basic research has considerably reduced.

Recognising the serendipitous nature of research outcomes, the federal funding has been supporting long-term and riskier research projects. Many thriving start-ups have benefited from the knowledge spillover from these research projects. This phenomenon of utilisation of knowledge by new agents for starting businesses is eloquently explained by the Knowledge Spillover Theory of Entrepreneurship, advanced by Indiana University’s David Audretsch.

The case of Pakistan

Why is this discussion relevant to Pakistan? One of the reasons is Pakistan’s recent rise in start-up movement. Lately, entrepreneurial ventures are garnering a lot of attention from the government and universities in Pakistan.

However, there is little realisation that a high number of start-ups will not achieve the intended goals of value creation, economic growth and employment generation if most of them are not exploiting the new technologies produced by research organisations.

Most of the start-ups cannot think beyond launching mobile apps. The universities are jumping on the bandwagon of entrepreneurship without the much-needed focus on the production of relevant research and technologies that can solve the social and scientific problems faced by the society.

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According to the World Bank’s data for 2013-14, Pakistan’s research and development expenditure (both public and private) as a percentage of gross domestic product (GDP) was 0.3% while it was 1.2% in Brazil and Malaysia, 1% in Turkey, 0.8% in India, 0.7% in South Africa and 0.5% in Thailand.

Entrepreneurship suffering from Appnesia

Some time ago, Muhammad Hamid Zaman, an academic, wrote an article titled “Suffering from Appnesia”. In his piece, he characterised Appnesia as “those afflicted by Appnesia often forget that mobile phones and even apps rest on rigorous understanding of mathematics, high science of optics, innovation in image acquisition and sophisticated electrochemistry to name just a few.”

Pakistan is, thus, acutely suffering from this type of Appnesia in entrepreneurship initiatives. There is a dire need to acknowledge the current ignorance of science and research funding in Pakistan.

It is understandable that Pakistan will not be able to finance basic research, but a lot can be done to exploit the existing research and technologies. High-value entrepreneurship can only be founded with the newly developed technologies and breakthrough in science. It is advisable to start this journey with enhancing funding for research and technological development in the universities.

Afterwards, the knowledge spillover from such research projects can feed into high-value entrepreneurship and innovation.

The writer is a public policy practitioner and researcher

Published in The Express Tribune, June 19th, 2017.

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