Policy makers pinning their hopes on cutting-edge “clean” technologies to create jobs on a large scale are likely to be disappointed. Innovation in R&D-intensive sectors can play a vital role, enabling productivity gains and consumer benefits in the economy more broadly—think IT. But such sectors alone are simply too small to make an economy-wide difference in growth and employment.
These are among the key findings of new McKinsey Global Institute (MGI) research, How to compete and grow: A sector guide to policy, which examines what drives the growth and competitiveness of industries, as well as which policies have succeeded—or failed—in generating jobs and growth in six sectors across eight countries. In the wake of the financial crisis, many governments are attempting to boost growth and competitiveness more actively. The fragility of the business climate heightens the responsibility to get public policy right. In the past, it has too often been hit or miss because it was based solely on a macroeconomic view—whether one country is more competitive than another.
Unfortunately, this approach doesn’t reflect the fact that the conditions that promote competitiveness differ significantly from sector to sector—and so do the most effective policies.