The world economy and the political turmoil of the past year has had a major impact on business innovation in the technology industry and beyond.

The global battle with COVID, the conflict between Ukraine and Russia and the economic fallout from the COVID lockdowns and supply chain disruptions have combined to create a painful combination of a global recession, global inflation and unpredictable instability in the global economy.

All of these factors have led to corporate tightening, layoffs and hiring freezes, and a more conservative investment stance from the investor community. Inevitably, these changes will have a deterrent effect on innovation in the coming years.

However, there may be a bright spot when it comes to the prospects for innovation. In some ways, these market forces could even serve as an accelerator for creativity and technological progress.

Short-term consequences

In the short term, the impact of these negative economic trends and political instability will be felt by innovation hubs in both the corporate and startup worlds.

Companies are likely to cut back on internal and external innovation. That is, they will reduce their research and development budgets and likely focus R&D on projects that can have an immediate impact on profitability at the expense of long-term visionary projects.

Companies will also spend less on collaborations with other innovators and costly acquisitions of advanced technology. We expect more acquisitions from early stage companies as they weaken and companies look to develop new technologies more cheaply by buying at a discount rather than building from scratch.