Innovation Bound or Unbound by Culture and Institutions

Abstract

The right culture, institutions, and policies all can encourage innovative dynamism. Heroes inspire cultural values of courage, perseverance, hard work, and tolerance. Religion enables innovative dynamism when it reduces violence and encourages respect for property. Religion constrains innovative dynamism when it limits questioning, as often occurs in hierarchical religions that emphasize faith. The Founding Fathers owed more to the tolerance of the Dutch of New Amsterdam, and to the trial-and-error experimentation of Galilean science, than they did to the religious fervor of the Pilgrims. Innovative dynamism often flourishes where institutions such as the rule of law, property rights, and the city enable diversity, collaboration, and a robustly redundant labor market. North and South Korea shared a culture, but through different institutions and policies, have diverged in innovation. Because policies matter, and we know best how to change them, policy reforms should be the focus of efforts to enhance innovative dynamism.