Page 72 - The Fourth Industrial Revolution

be greater and more effective collaboration for the bettering of society, or

will we see increased fragmentation not only within countries but also
across countries? In a world where goods and services can be produced
almost everywhere, and where much of the demand for low-skilled and
low-wage work is overtaken by automation, will those who can afford it

congregate in countries with strong institutions and proven quality of life?

Innovation-Enabling Regulation

In trying to answer these questions, one thing is clear and of great
importance: the countries and regions that succeed in establishing
tomorrow’s preferred international norms in the main categories and fields
of the new digital economy (5G communications, the use of commercial

drones, the internet of things, digital health, advanced manufacturing and so
on) will reap considerable economic and financial benefits. In contrast,
countries that promote their own norms and rules to give advantages to their
domestic producers, while also blocking foreign competitors and reducing

royalties that domestic companies pay for foreign technologies, risk
becoming isolated from global norms, putting these nations at risk of
becoming the laggards of the new digital economy. 42

As previously mentioned, the broad issue of legislation and compliance at
the national or regional level will play a determining role in shaping the
ecosystem in which disruptive companies operate. This sometimes leads

countries to lock horns with each other. A good case in point is the October
2015 decision by the European Court of Justice (ECJ) to invalidate the safe-
harbour agreement that guided the flow of personal data between the United

States and the European Union. This is bound to increase the costs of
compliance that companies incur when doing business in Europe and has
become a transatlantic issue of contention.

This example reinforces the increasing importance of innovation ecosystems
as a key driver of competitiveness. Looking ahead, the distinction between
high- and low-cost countries, or between emerging and mature markets, will
matter less and less. Instead, the key question will be whether an economy

can innovate.

Today, for example, North American companies remain the most innovative
in the world by virtually any measure. They attract the top talent, earn the

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