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  • Writer's pictureDr. Itzhak Goldberg, PhD

Innovation – what is it?

Updated: Nov 17, 2022

By Dr. Itzhak Goldberg, PhD - Fellow at the Center for Social and Economic Research

In the late 1980s and throughout the 1990s, as the high-tech scene took off with Silicon Valley as its global center, the term "innovation" gained currency. What is innovation, you ask, and why is it important? Before I can answer, you're already checking Wikipedia. Why Wikipedia, I grumble. In 2011 we – Gabriel Goddard, Smita Koriakose, Jean Louis Racine and myself – published a book that opens with an explanation of what innovation is and why it's important to developing countries and awakening markets. Innovation is the development and commercialization of products and processes that are new to the firm, the nation, or the world. Innovation starts with an identification of problems and ideas for solving them. The solutions are then implemented – and as this happens, technologies are disseminated worldwide. In developing countries, innovation takes the form of technology absorption – the application of technologies, processes, and products from developed countries to the special conditions of developing nations. Contrary to what one might expect, new technologies are not easily adopted by developing countries. The absorption process is lengthy and cannot succeed without educational efforts and an appropriate business climate in the relevant country.

"But what does innovation have to do with the World Bank?" you ask. "What does it have to do with me?"

"That’s very simple," I explain. It happens that innovation and technology absorption greatly accelerate the pace of development in developing countries and awakening markets. And the Bank was, after all, founded in order to promote development. Innovation became a popular issue globally when people started understanding the power of "high" technology or "high-tech," and how it could be applied in less-advanced countries.

But let me tell the story from the beginning. As I've mentioned, I started working on this issue in Poland when the government wanted to assess its readiness in the innovation sphere as preparation for joining the European Union in 2004. Armenia is a small country with formidable logistical problems. It's landlocked, and worse: its border with Turkey is and will remain blocked until the issue of the Armenian genocide is resolved.

There is virtually no point in manufacturing products that need to be transported. The roads north to Georgia and Russia are impassible in winter. There's no trade with Iran due to the US sanctions. So out of sheer necessity, an information and communications technology has developed there – products that do not require transport. And it's all been done through startups, small businesses that became subcontractors of large international firms. Basically, Armenia's most significant assets are the Armenian diaspora, which played a role similar to that of the Jewish diaspora during Israel's early statehood years, and its tradition of valuing study and research. Both of these have helped move Armenia forward. Thanks to assistance from the diaspora, and the vestiges of excellence that characterized Armenia during the Soviet era, the country has been able to develop.

In 2000 the Armenian government approved a strategy to help information, communications, and technology companies become more competitive in international markets. In order to implement the strategy, the government, together with the World Bank, established the Enterprise Incubator Fund. Bagrat was appointed director of the fund, and over the years we enjoyed a fruitful collaboration.

The success of Armenia's small businesses, including those assisted by Bagrat, sparked the Bank's interest. In 2014, after many years of involvement there, I was asked to conduct a survey that would identify the secret of their success. Together with Bagrat, we chose a number of these Armenian businesses, most of whose founders are young people who gained experience with international firms. Also, in my visits to Armenia on behalf of the Bank in 2014 I met with researchers from the Armenian National Academy of Sciences who told me that they were working on a new biotech product but had no idea how to get it to market. I think it's important to note that in developing countries there's typically a gap between academia and business, and that was the background for our efforts.

Based on our work in Armenia, Poland, Russia, and the rest of Eastern Europe, we wrote the book – Igniting Innovation: Rethinking the Role of Government in Emerging Europe and Central Asia, published in 2011. Like all World Bank publications, the book is available globally to experts via the World Bank's Open Knowledge Repository.


About the Author

Dr. Itzhak Goldberg is currently a Fellow at the Center for Social and Economic Research, a Distinguished Fellow of Fraunhofer MOEZ, and a Senior Advisor of The World Bank. He worked for the World Bank from 1990 to 2009, most recently as a Policy and Strategy Adviser with the Europe and Central Asia Region. Itzhak was in charge of private sector development programs in various countries in the region and he was pivotal in the design and implementation of the privatization program of the government of Serbia. He published with R. Desai "Can Russia Compete?" (Brookings Institution 2008) and with G. Goddard, S. Kuriakose and JL Racine "Igniting Innovation" (WB, 2010). Recently Dr. Goldberg coauthored a background paper for the WDR16 on Best Practices and Lessons Learned in ICT Sector Innovation: A Case Study of Israel (with D. Getz of Samuel Neaman Institute, Technion, Israel).

Prior to joining the World Bank, Itzhak was the chief economist and member of the Management Board of Dead Sea Works Limited in Israel for 11 years. After obtaining his PhD from the University of Chicago in 1976, Itzhak worked as a research fellow at the Hoover Institution in Stanford, California



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