"With manufacturing now barely a fifth of economic activity in rich countries, the “knowledge economy” is becoming more important. Indeed, rich countries may not be able to compete with rivals offering low-cost products and services if they do not learn to innovate better and faster. But even if innovation is the key to global competitiveness, it is not necessarily a zero sum game. On the contrary, because the well of human ingenuity is bottomless, innovation strategies that tap into hitherto neglected intellectual capital and connect it better with financial capital can help both rich and poor countries prosper. That is starting to happen in the developing world."
Click here to read about how so-called "open innovation" is transforming the corporate attitude toward intellectual property rights (in the public realm this is often referred to as "policy transfer").
See this graph for a nifty visual of the relationship between innovation, labor, capital and productivity growth in the US.