Over several months I wrote a four-part series on how where competition fits, and doesn’t fit, in creating innovation, productivity, and improved standard of living. I applied the concepts towards policies for maximizing innovation and productivity. This article acts to provide an overview reference link for the series.
Part I of the series looks at the Prisoner’s Dilemma and how the incentives (rewards and punishments) affect the effectiveness of competition. If competition is used as a cure-all tool without aligning incentives properly, it can produce counter-productive results. When incentives are aligned with the goal, cooperation rather than competition can create new markets and improved output. Competition also comes with inherent transaction costs and these must be taken into consideration in determining if competitive incentives are more valuable than cooperative ones.
Part II looks at comparative advantage, and how specialization and cooperation create improved productivity and standard of living. Cooperation via comparative advantage also multiplies the value of innovation towards productivity and creates a market in helping others to innovate, even when (or especially when) you are actually better at the activity than those you are helping to improve. This is counter-intuitive from a purely competitive perspective, but the math behind comparative advantage bears it out.
Part III introduces the concept of efficient value as a driver of innovation. The context here is that opportunities to improve production costs or produce better goods for the same costs, where the improvement costs less than it saves, acts as a driver regardless of the competitive circumstances. To illustrate the problem, and some of the backwards thinking, I look at various analyses of government support for innovation and productivity in Canada which has dropped relative to other countries, and highlighted data that shows symptoms of the very same counter-productive competitive outcomes in Part I.
Part IV re-frames the innovation problem from the perspective of efficient value and derives general policy approaches aimed at maximizing innovation and productivity.
Parts I and II focus on principles, Part III on analysis, and Part IV on action. I hope you find these discussions valuable.
Author note: Chad English has been an engineer, project manager, and director in technology development and R&D in Canada for 18 years including graduate research, development and operational support of Criticality 1 systems on space shuttles and International Space Station, and five years as Director of R&D for a multiple award-winning NASA prime contractor. He has worked extensively within the Canadian innovation system including government programs and collaborations with academic, industrial, and government partners, performed duties as technical and sessional chair of conferences, sits on international standards committees, and contributed to Industry Canada’s Review of Federal Support to Research and Development that led to the Jenkins Report.