Srividya Jandhyala, Professor of Management and expert in international business and public policy at ESSEC Business School Asia-Pacific, draws on her keynote address at the 2019 India Conference on Innovation, Intellectual Property and Competition to highlight the importance of diplomacy in innovation.  

Diplomacy and Innovation by Tom Gamble from conference proceedings by Prof. Srividya Jandhyala.

Far from the candlelit garret

Think of Leonardo da Vinci, Johannes Gutenberg, Henry Ford or even James Dyson – in fact anything from paintings and flying machines, to printing presses, mass production lines and super-efficient hoovers and hand-dryers. It’s true that we tend to think of innovation as being synonymous with the lone genius; as a single, simple observation, a flash of brilliance, and – eureka – a new world is born. Good science – the data, theories, numbers, and hypotheses – by a brilliant individual lead to innovations which then transform our world, we tell ourselves. The reality could not be further from that. What starts as an idea for a product or a service depends on thousands of forces, seen and unseen, for it to be transformed into its functional form.

One important factor is diplomacy. Although we don’t usually associate innovation with political or diplomatic factors, whether innovation occurs, what forms it takes, which standards get adopted, how businesses evolve, and when it is a force for good are all as much questions of social and political factors as they are of technological factors. Take for example one technological advancement that could potentially our world, 5G networks: the standards the world will end up with is going to reflect politics as much as it will technological factors. Or in a wider sense, which companies will come to dominate our healthcare system, connect us to each other, provide large scale employment with good wages, or simply entertain us will depend on political, regulatory, legal, and diplomatic factors as much as those firms’ new innovations, technologies, efficiencies, or capabilities.

Dipping into diplomacy: Access to knowledge and information

So how can diplomacy influence – indeed sometimes make or break – innovation? One channel is through generating access to knowledge and information.

A recent article appearing in the Harvard Business Review cited the example of a tech giant which had won a multi-million-dollar contract to design a sensor to could detect pollutants at very small concentrations underwater. It was an unusually complex problem, so the firm set up a team of crack microchip designers, and they started putting their heads together. Not long into their first working session, the marine biologist assigned to the team walked in and laid a bag of clams on the table. Seeing the confused looks of the chip designers, the biologist explained that that clams can detect pollutants at just a few parts per million, and when that happens, they open their shells. As it turned out, this company didn’t really need a fancy chip to detect pollutants – just a simple one that could alert the system to clams opening their shells. The company saved nearly $1m in innovation development costs.

As this example shows, complex problems can be solved by bringing together unlikely combinations of people, domain expertise, and ideas.

But accessing and integrating knowledge across different technologies, expertise, and borders is a big challenge. In order to make things happen, a strong framework is needed to facilitate a pattern of interaction that connects innovators across countries, geographies, and regions. And it is here that diplomatic efforts can play a major and important role. Diplomatic efforts establish and facilitate connections among different parts of the world to generate access to knowledge and information that might otherwise be challenging to reach.

A salient example of just this is the weather forecast – be it for the monsoon season in India, or the heatwaves that have affected Europe and other parts of the world in 2019. Climate models are notoriously difficulty to build and micro-level predictions that focus on small areas are even harder. The meteorological departments in many countries rely on supercomputer simulation driven methods for forecasting with better accuracy. But, all the technological progress in either supercomputing or simulation modelling would be held back without access to data points to feed into the system. And the relevant data points are not only from within the country but also from around the world. Ocean temperatures around the globe, el-nino effects in the Pacific, sea ice conditions, sea levels, salinity, wind speeds, atmospheric conditions across the world are all important parameters that improve the accuracy of the models.

Many countries glean large chunks of global data from The World Meteorological Organization (WMO) – a UN organisation that coordinates observations from 10,000 weather stations, 7,000 ships, 3,000 aircraft, 170 satellites and nearly 9,000 observing platforms around the world. The WMO also standardises the instrumentation, observation practices, and timing of these observations worldwide. Without the world leadership and expertise of such inter-governmental organizations, our models would be ineffective stymying our preparations for adverse weather events like floods, heat waves, cold waves, and lightning.

Yet, countries’ participation in the WMO – and other such international bodies – is no accident. It is a diplomatic effort: countries sign treaties to take part. In a recent study, my co-author and I examined whether a country’s participation in such organizations has any effect on innovation. Across 83 countries over a 10-year period, the results suggest a dramatic increase in national innovation when countries are better connected to intergovernmental organisations. Participation in 12 additional learning-focused intergovernmental organisations was associated with a 15% increase in the number of patents filed.

Enabling investors and innovators to reap rewards

Any innovation inevitably gives rise to thorny questions about –who should capture the commercial benefits of the new technology, trade-offs between individual rights and collective interests, as well as balancing internal and external imperatives. And diplomacy plays a key role in shaping the patterns of reward distribution.

One example stems from the issues surrounding the use of big data, machine learning, and AI. As governments, companies and individuals understand and comprehend the scale of data collection and use, new approaches are being adopted to regulate the cross-border transfer of it. Indeed, data has become to be seen as “the new oil” of the 21^st century, and those who have control over it can generate new businesses, services, and economic activity. So it’s not surprising that governments turn to protecting this new form of wealth. Take, for instance, the recently issued guidelines by the Reserve Bank of India on data localization. The RBI reiterated the need to store all financial data, including by multinational companies, on servers in India. Not surprising too is that fact that many US companies such as Google, MasterCard, Visa, and Amazon have lobbied against these regulations.

But it doesn’t end there. Data localization is just one of the sticking points in the current trade frictions between India and the US. Over the past year, the Indian government has also adopted new e-commerce rules that work against the long-term commercial interests of foreign online retailers. Amazon and Walmart have opposed these new rules and it is easy to see why – the Indian market is crucial for American e-commerce firms. Having been shut out of China, they view the untapped potential of India’s e-commerce market as an important source of growth in the coming years. This has spurred roughly $5 billion in investment from Amazon, and a $16 billion investment by Walmart into the local player Flipkart. So, any rules that restrict their potential operations in India might be seen as a significant challenge. Media reports indicate that Nasdaq-listed Amazon and NYSE-listed Walmart lost a combined $50 billion in market cap when the policy came into effect.

With so much at stake, it is not inconceivable that US firms would lobby their home government to intervene diplomatically. And, when combined with the other sticky trade issues on the US-India agenda, the US government has responded by revoking India’s trade benefits under the Generalized System of Preferences.

My fellow researchers and I analysed investment disputes such as these between developing country governments and American investors. Our findings suggest that firms often requested diplomatic assistance in investment disputes, and in many cases the US government intervenes to various degrees. Sometimes, they provided information to the firm, for example on local attorneys, judicial system and dispute resolution procedures, and ways to contact host government officials. In other instances, they represented the firm by writing official letters of complaints or protests, convening meetings with representatives of the firm and home/host country officials, mediating in disputes, lobbing regulators, reminding appropriate officials about their obligations and the importance of transparency. In a few cases, they escalated the dispute all the way to the Prime Minister or President’s office or explicitly linked the resolution to the dispute to issues such as aid or trade or other priorities of the bilateral relationship. The last is likely to occur when dispute characteristics allow the issues to be framed on normative grounds. That is, the firm claims to be discriminated against, treated unfairly, or otherwise singled out. In addition, high levels of diplomatic intervention may exist when the dispute aligns with the US foreign policy objectives in the foreign country. In the current trade cases, these conditions appear to have been met; the US thus responded aggressively by revoking India’s trade benefits and threatening further actions.

Back to the future

So how we can address the big challenges that confront our world today? We need innovative solutions if we are to meaningfully overcome challenges like climate change, migration, and food security – new ideas, products, processes, business systems, organizational forms, bold reforms. But these innovative solutions are going to be as much a function of political and social factors as they are going to be technological and scientific. As such, diplomacy will play an important role in determining when innovation occurs, what forms it takes, which standards get adopted, how businesses evolve, and when it is a force for good.

Leonardo da Vinci, the genius innovator and artist, and very much a necessary diplomat during his colourful and varied career on the 15^th-16^th chessboard of Europe, may be the first to agree that diplomacy is a key tool to enabling innovation and securing returns from it. Although one wonders what he would make of the fact, if he had gazed seven hundred years into the future to modern times, that India – with 1.3 billion people – has barely more diplomats than tiny Singapore or New Zealand.

Srivydia Jandhyala

Useful links:

• View Dr Srivydia Jandhyala’s academic profile
• Visit Srividya’s website and blog
• Read a related article: For a thoughtful and responsible innovation
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