## The Innovation Blindspot

## Source details

**Canonical URL:** [The Innovation Blindspot](https://www.imf.org/-/media/files/publications/fandd/article/2026/09/gul.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/fandd/article/2026/09/gul.pdf.md)
- [Structured JSON version](/-/media/files/publications/fandd/article/2026/09/gul.pdf.json)

---

### Framing and central argument
- The global technology narrative is overly binary, framed primarily as a US–China zero-sum competition across domains including "AI foundation models and electric vehicles to biotechnology and renewable energy."
- Focusing on those two countries obscures important, alternative models of innovation that expand understanding of how technological progress can look and how to improve it.
- The contest is better seen as a competition between different systems rather than merely different countries; today’s debate lacks a systemic angle and centers on tribal competition between two principal antagonists.

### Limits of the US–China contrast
- Common dichotomies (market-oriented versus state-led) do not accurately describe the tech sectors of the main rivals:
  - Chinese tech firms like Alibaba, Tencent, and ByteDance are not creations of the state and often follow Silicon Valley’s playbook.
  - China’s tech sector benefited from American-style risk capital, with investments structured by US lawyers and disputes settled under New York state law.
- The contest between China and the US is largely different intensities of the same model—venture capital, staged funding rounds, rapid scaling, and winner-take-all economics dominate in both.
- Many revolutionary technologies (the internet, email, Bitcoin) emerged apart from commercial companies, showing that the VC-backed monetization model is a choice, not a necessity.

### South Korea: longevity, conglomerates, and cooperative competition
- South Korea’s transformation from one of the world’s poorest nations at the end of World War II to one of the richest is tied to technology conglomerates (chaebol) such as Samsung, Hyundai, and LG.
- The chaebol demonstrate resilience against the innovator’s dilemma (Clayton Christensen’s term) and the paradigm of creative destruction:
  - Samsung traced handheld devices to the 1970s, became the second-largest producer in 2007, and within five years topped Apple as the No. 1 smartphone maker.
  - Samsung also serves as Apple’s largest supplier, profiting when rivals sell products as well as when it sells its own.
- Chaebol evolution:
  - Hyundai founded in 1947, expanded into robotics, batteries, and electric vehicles.
  - Korean governments pursued a three-decade push to reduce conglomerate dominance, yet chaebol have aggressively entered new sectors and are central to the country’s AI and semiconductor strategy.
- Trade-offs:
  - Korea’s model offers stability and the ability for large firms to adapt, but the expansive political role of conglomerates remains a central theme.

### Singapore: government-led, GovTech, and state-backed venture strategy
- Singapore’s growth was shepherded by government planning; the Technopreneurship Investment Fund in the 1990s allocated $1 billion as a limited partner in foreign venture capital funds to attract them to Singapore.
- Government-linked venture funds became early investors in Alibaba, Baidu, and BYD.
- GovTech:
  - The government’s digital capabilities are centralized in an agency called GovTech, which employs "more than a thousand developers" and operates with the culture of a tech start-up.
  - Notable initiative: Singpass, a digital ID used to access thousands of services; described as "one of the world’s most widely adopted digital ID systems."
- Singapore challenges the assumption that meaningful innovation must emerge from private enterprise and shows the public sector can drive technological change if structured and directed appropriately.

### Alternatives to the dominant VC-backed startup model
- Important historical evidence: some of the most consequential technologies of the past 50 years were protocols and open standards, not commercial products.
- Examples of alternative organizational experiments:
  - DeepMind explored becoming a public interest company.
  - Jack Dorsey argued Twitter should have been built as a protocol.
  - OpenAI began as a nonprofit before transitioning.
- Little evidence exists that a radical alternative is emerging at scale in the two main markets (US and China).

### Key findings and exact figures
- "$1 billion" allocated by Singapore’s Technopreneurship Investment Fund as a limited partner in foreign VC funds.
- "more than a thousand developers" employed by Singapore’s GovTech.
- Samsung’s handheld device origins traced to the "1970s".
- Samsung was the "second-largest producer in 2007" and within "five years it topped Apple as the No. 1 smartphone maker."
- Hyundai founded in "1947".
- Korea experienced a "three-decade" policy effort to shift the economy away from chaebol dominance.
- Some of the most consequential technologies emerged over the past "50 years."
- References in the narrative: Sebastian Mallaby’s 2022 book, Kai-Fu Lee’s 2018 book, Joseph Schumpeter and Clayton Christensen (terms and concepts cited), and Mehran Gul’s book recognized by the Financial Times in "2025."

### Policy implications and recommendations
- Reframe technology competition from a bilateral rivalry to a comparison of alternative innovation systems to reveal different possible pathways for technological development.
- Explore and foster alternative institutional forms beyond VC-backed firms, including:
  - Public-interest corporate structures (e.g., public interest companies).
  - Protocol-based designs (akin to email) for social and communication platforms.
  - Nonprofit or hybrid models for foundational technology research and deployment.
- Strengthen public-sector capacity for technology development where appropriate:
  - Invest in in-house government tech units modeled on GovTech to retain deep technical capabilities.
  - Use patient, long-term public investment (as Singapore did) to attract private capital and build domestic venture expertise.
- Recognize the social costs of creative destruction and consider models that balance innovation with stability for workers and communities.

*Source: "The Innovation Blindspot", Mehran Gul, F&D, September 2026.*

---


_Source: https://www.imf.org/-/media/files/publications/fandd/article/2026/09/gul.pdf_