Much has been written about innovative companies and what sets them apart. Less obvious is the role that government can and does play to create the conditions for success. A recent report by BCG, in conjunction with the National Association of Manufacturers, highlights the interdependence of government and business and the mutual need for innovation leadership.

A critical driver of growth, competitiveness, and shareholder value, innovation is cited by senior executives around the world as integral to their company’s success. But innovation benefits countries, too. Those with thriving industries have higher incomes, a better quality of life, and a higher standard of living than their less-robust peers.

Governments around the world are committing high-level policy attention and significant resources to the challenge of knowledge-based competition and growth. Success in this endeavor depends on effectively transforming national investments in research into competitive products for the market.

Too often, national policy reflects a belief in a linear process of innovation, one that assumes that more funds for research will lead automatically to the development and commercialization of new products for the market. Yet real-world innovation processes are normally incremental, with technological breakthroughs often preceding, as well as stemming from, basic research.

Initial capital to encourage cooperation between universities and businesses is key to this transformation.

In today’s innovation-obsessed, knowledge-intensive global economy, it might come as a surprise that for most of their long histories, science and business have had almost nothing to do with each other. Had you suggested to a silversmith working in ancient China, a captain plying the spice trade during the Age of Exploration, or a Quaker brewer in 18th-century Philadelphia that science could improve commerce, he would have looked at you as if you were crazy. Even today, describing the relationship between science and business — and figuring out how science and industrial policy can be designed to work to the benefit of both parties — is a challenge.