Government must create the climate for innovation and then stand well back

David Payne
Director, Optoelectronics Research Centre
University of Southampton

In my definition, innovation is the wandering of a free spirit, unfettered by regulation and unlimited by imagination. Innovation is answerable only to the judgement of the market and of history. It disrupts the existing order and is the toolkit of the entrepreneur.

So which one of these is a description of the way that government operates?

I would argue that it is the government’s role to create and support an environment in which innovation can thrive to create a nation’s wealth. But it is not its role to become involved in the process of innovation.

A key task of government is to regulate, but a vital part of innovation is to find a competitive edge, which cannot exist in a fully regulated world. There is therefore a fundamental conflict of interest.

The UK is widely seen as below average in innovation. While the proportion of UK businesses that make routine innovations is roughly equal to the EU average, the share of turnover accounted for by new products, which measures the intensity of innovation, is lower.

Why do we excel at research but remain merely average at translating this into innovation and creating wealth? Could we associate our relatively poor performance with our cultural tendency to gold-plate regulations and rigorously comply with them? In more successful countries they treat regulations as advisory, like traffic lights in Latin countries.

Take the example of the internet, which now even free-world governments are considering regulating. Lack of regulation over the internet is precisely why it has created huge numbers of innovators and had a major impact on democracy and free speech.

Where government creates an environment in which entrepreneurs can thrive, it works. But direct involvement in innovation does not work for anyone.

For every regulation introduced there will be 10 fewer web entrepreneurs. Ask yourself what the web would look like if it had been designed by government. Google, Apple and Microsoft were not products of government initiatives and the iconic innovations that shape our world had no government.

There are identifiable factors that lead countries to be more or less innovative, including low start-up costs, a strong entrepreneurial climate, public perception of entrepreneurs, an ability to commercialise innovation and a good IT and telecoms infrastructure.

Where government creates an environment in which entrepreneurs can thrive, as they do in Sweden, Denmark, the US and Finland, it works. But direct involvement in innovation does not work for anyone.

The government and the innovation community are complementary but have wildly different cultures. The entrepreneurial approach can be written down on a beermat (The Beermat Entrepreneur, Mike Southon and Chris West):

  • write elevator pitch;
  • find business mentor;
  • attract first customer; and
  • make a profit.

By contrast, I looked at the Department for Business, Innovation and Skills’ excellent annual innovation report for its guidance and found a section called ’Innovation in Public Services’, which seemed something of an oxymoron. It has three points:

  • the Operational Efficiency Programme;
  • the Cabinet Office Public Service Reform agenda; and
  • the assessment of innovation in Capability Reviews, which assess the performance of government departments.

Government is concerned with consensus rather than leadership, stability rather than risk, control rather than setting imaginations and aspirations free. Its job is to create the environment in which innovation can thrive, but not to be involved in the process. It simply isn’t very good at it and never can be.

David Payne
Director, Optoelectronics Research Centre


  • 1964-1967 BSc (Hons) in Electrical Engineering, University of Southampton, UK
  • 1967-1968 Diploma in Quantum Electronics, University of Southampton
  • 1969-1976 PhD degree, University of Southampton

A pioneer in photonics research, Payne’s career has spanned a variety of academic and commercial roles.

  • 1969-1981 A number of research roles at the University of Southampton
  • 1981-1991 Co-founder and director of York Technology (now PK Technology)
  • 1989 Deputy director, Optoelectronics Research Centre, University of Southampton
  • 1991 Professor of photonics, University of Southampton
  • 1991-2000 Founding consultant, Sensor Dynamics
  • 1995-present Director, Optoelectronics Research Centre, University of Southampton
  • 1998-present Co-founder, first chairman and director of Southampton Photonics
  • 1999-2001 Director, Geosensor

This article is based on a speech given at a recent Royal Academy of Engineering debate.