Institutional (Dis)Incentives to Innovate: An Explanation for Singapore's Innovation Gap

Abstract

Despite having the fifth highest per capita GDP in the world (according to IMF PPP statistics for 2007), and despite numerous government efforts to spur innovation, Singapore has faced difficulties in establishing a durable base of entrepreneurial activity. Many ascribe this failure to the city-state’s policies, which are often portrayed as generating a culture of risk-aversion and a lack of creativity. In contrast to this conventional view, we argue that the city-state’s institutional arrangements generate conflicting innovation incentives, and ultimately undermine innovative activity. Statistical tests across 23 countries offer evidence that is consistent with this argument.

Keywords: Innovation, Politics, Singapore, East Asia, Varieties of Capitalism

JEL Classification: O31, O38, P16