Jose Angel Gurria

"Knowledge is the main driver of today's global economy," said OECD Secretary-General Angel Gurra at the launch of the OECD Innovation Strategy in Paris. "Countries need to harness innovation and entrepreneurship to boost growth and employment. This is the key to a sustainable rise in living standards."

Governments have a key role to play to boost innovation, says the Strategy. The long-term nature of the investment needed to tackle challenges such as climate change and infectious diseases, and the risks involved in developing commercial responses to these challenges, mean that some essential research often attracts little private-sector support.

Governments must continue to lead and invest in research in these areas, but also do more to co-ordinate their policies across borders. This involves promoting international mechanisms to share the cost of innovation through co-operation and technology transfer between countries.

The current crisis makes it even more urgent to push through necessary reforms to increase the innovative capacity of societies. Governments battling to get their economies onto a sustainable growth path need to reduce administrative hurdles for new and existing companies and make their tax policies more friendly to innovation and entrepreneurship.

Young firms are key to job creation, the OECD says. In the United States, for example, firms less than five years old have accounted for nearly all of the increase in employment in the private sector in the past 25 years.

"Many governments raised spending on education and research as part of their stimulus packages," Mr. Gurra said. "That was a wise move. Now, as they embark on fiscal consolidation, they should be careful not to jeopardise long-term growth by cutting spending on activities that are essential for a country's future."

But they also need to ensure that they do not waste the money invested in fostering innovation. Simple measures like cutting red tape, reforming universities to give them more independence and opening up access to more public research data (from mapping the human genome to weather maps) can all help to increase the efficiency of public spending on innovation.

In many countries, there is scope for rationalising and simplifying policies that support innovation. Better focus on improvements in education, training and public research can also help unleash productive change, says the OECD Innovation Strategy.