There’s a great quote from Jason Pontin – editor of MIT Tech Review – in his editorial of Feb 08 :

…can governments do anything to increase innovation among companies and organizations within their borders? Not much. Ever since I became the editor of Red Herring magazine in the mid-1990s, I have heard countless story pitches about the establishment in different countries of government-supported technology clusters or hubs. All were to have competed with Silicon Valley and Cambridge, MA. All ignominiously failed, with the possible exception of the technology cluster in Cambridge, England. The things that governments can do to foster innovation are limited and simple: fund research based on long-term discovery, devise regulations and tax incentives that promote risk capital and entrepreneurialism, protect intellectual property, uphold the rule of law, and maintain flexible labor markets. Otherwise, governments do best by doing least.