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Innovation Policy in Crisis Times

Today I got to know about an interesting initiative of the xprize foundation, because I am subscribed to Jason Calacanis email list. The foundation launched a competition for developing a vehicle that is able to drive a hundred miles with one gallon of gaz. That is approximately 160 kilometers with 3,8 liters of gaz. A few years the vision was to go 100 kilometers with 3 liters. That was the famous 3-Liter Lupo from Volkswagen. The car made it to the streets, but was never sold in proper numbers.

The foundation will award the winner with $10 Million for the development of this car. The interesting point is made by Jason in the email. If you award the top 50 of the proposed solutions with $20 million you provide them with the funds, that are currently used to save the american automobile industry. Of course this argument has downside like all the employees, that could loose their jobs when GM or other are getting bankrupt etc. But the point is remarkable.

What could be done to change the direction of the economy and technological developments, if a government decides to change its investment strategy and focus on innovation and new technology only. The automotive industry is a great example to show the real matter of the crisis. The companies with some environmental friendly and lower consuming cars are the winners. The ones able to meet customer requirements are more likely to survive. The ones not are suffering and asking governments for financial support.

If the government would use the money invested in automotive companies and banks to steer innovation and technological development, it could tremendously fuel innovations and new technology. Economies could gain a new technological momentum and especially the established big western economies could again lead with technological developments.

Competitions and awards are a strong driver for innovations. On the one hand successful developments get money to start the market entrance after the development prooved to be convincing, on the other side there is enough freedom for developers and entrepreneurs to be creative and think out of the box. This is the big difference to control of technological development through the government after receiving government aid. There is less flexibility and a clear focus for direction. Innovation instead needs the freedom and the chaos and the accident as research in all our various research projects on innovation policy at the University of Munich indicates.

Consequently this means, that innovation policy should be inspired by competitions like the xprize foundation offers and provide the entrepreneurs and innovators with freedom and creativity. These awards should have a topic or theme and not only provide money with watering-can, which seems to be often the leading scheme of government innovation policy. The Munich Business Plan Competition is one very successful example. But these initiatives are in the right direction. The money from the several economy recovery and support programs should be more invested in such competitions. The example of the xprize foundation for the future car is showing the way for a creativity fostering approach of innovation policy.

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