The productivity lag from AI reveals competing logics: automation that replaces labour to cut costs versus augmentation that expands capability to create value. For innovation ecosystems, this choice is existential. Strict safety regulations risk creating moats favouring large incumbents, while unrestricted deployment threatens research quality. The narrow path requires public interest AI infrastructure, risk-weighted governance, and incentives rewarding high-impact discovery

Artificial intelligence is reshaping industries, yet its productivity impact remains elusive. This Innovation Insight argues that the real challenge lies in outdated models of measurement and policy. To navigate the AI era, governments need a new playbook—one that measures transformation, not just outcomes, and builds the adaptive capacity of national innovation systems.