Choosing the best places to innovate

“Innovation arbitrage.” That’s a term John Kao uses in an article in the new issue of Harvard Business Review — to describe the way that companies can now parcel out their innovation activity around the globe, to locations with strengths in particular aspects of innovation. (HBR online subscription or article purchase required to read the full article, which is called “Tapping the World’s Innovation Hot Spots.”)

Kao’s analysis — and his description of various countries’ innovation strengths — is intriguing.  Readers who live in the U.S. may, however, be discouraged by his description of four trends that are eroding the U.S.’s historical leadership position in innovation — including the fact that numerous countries now have explicit and systematic national innovation strategies.

On the other hand, things can change — and economic downturns can sometimes be a catalyst for change. Kao, who was formerly on the Harvard Business School faculty and is the author of Innovation Nation, praises Finland’s national innovation strategy — and notes that it was born partly in response to a “economic near-death experience” following the breakup of the Soviet Union, which had been a major Finnish trading partner.