The Demographics of Innovation

Introduction

Since the Industrial Revolution, human society has undergone tremendous economic and social change. Economically, average per capita income grew more than 10 times, and people in developed countries are 100 times wealthier than they were 200 years ago. Historically, innovation has always been the driving force for economic development, but it is only recently that technology companies have become the main engine of wealth generation. In 2011, Apple overtook Exxon, an oil producer, to become the most valuable company in the world. In 2015, five of the top 10 most valuable companies were technology companies founded in the last 40 years. The Chinese Internet giant Alibaba.com is now the most valuable company in China, with over US$250 billion in market capitalization, and is ranked only after the big five U.S. technology companies.

Equally dramatic has been the rise of China over the last 40 years. China has transformed from a backward country to the second largest economy and the largest exporter in the world. Much more significantly, China is catching up as a hotbed of innovation, even more quickly than its near miraculous emergence as a dominant exporter a few decades ago. China's overall spending on research and development is growing at 15% a year (Figure I.1). This is much faster than its GDP growth. China already spends more on research and development than all the European countries combined, and will outspend the United States by 2020 on a purchasing power ...