Silicon Valley Summit ponders: Can government and big firms hinder innovation?

The 2012 Global Innovation Summit in San Jose, Calif. began yesterday afternoon, after attracting guests from 40 different countries, with a ‘Keynote Fireside Chat’ on entrepreneurship and innovation as engines of economic growth. 

The discussion was held between Philip Auerswald, of the Kauffman foundation, Richard Samans, Executive Director of the Global Green Growth Initiative, and Gerardo Corrochano, Director of the World Bank division for Private and Financial Sector Development in Europe and Central Asia, and was moderated by Bill Reichert of Garage Technology Ventures.

During Philip Auerswald’s keynote, he took an interesting viewpoint, stating that political incumbency, along with other incumbents in the economy are going to be a hindrance to any growth fuelled by innovation and entrepreneurship, particularly at the SME level.  He argued that, in consistency with the Rainforest model created by two of the event organisers, Victor Hwang and Gregg Horowitt, the canopy of trees at the top, i.e. those incumbent economic and political actors who dominate the markets with their own self interests, are the only things visible from the top of the Rainforest and leave no scope for smaller actors to be viewed, or develop in the business sense.  

Given the fact that SMEs contribute to nearly 50% of GDP in high income countries, this could provide an issue to those economies who are looking to rebalance themselves away from credit fuelled consumption to growth led by entrepreneurs and innovation.  Such incumbents include, for example, the Pakistani military who hold a lot of political power and are very reluctant to give away any of it at any cost, which may not always lead to the best solution for the economy. 

These incumbents exist not only at the political level, but also among big companies who look to protect their own interests, such as cartels in the oil industry.  Auerswald argued that for entrepreneurship and innovation to thrive, the incumbents, holding back their progress should be removed, or their actions limited, which touched on the creative destruction that is covered in The Rainforest.