What struck Microsoft executive Marshall Phelps at a recent series of conferences in developing nations was that government, business and academic leaders often asked him: "How can we invent the next Google?"

It's not that he took it as a slight that they said ‘Google’ and not ‘MSN’. What struck him was the view that a single big idea could transform a country overnight. "Not everything has to be the next big breakthrough," said Phelps, Microsoft’s corporate vice president for intellectual property, during an interview last week.

The key to building a prosperous economy is to create an environment that supports innovation, he said. Innovation can take place at a piecemeal pace and does not have to happen in one fell swoop - and usually, it doesn't.

Phelps had just finished a series of conferences on innovation co-sponsored by Microsoft in Indonesia, Malaysia and Thailand. The idea was to bring together national leaders and help them figure out how to encourage innovations that play to the strengths of their countries, and how to create an environment to ensure that innovation continues.

For example, Phelps said, in Indonesia many people are artistic, and the country has started to focus this talent on visual multimedia software. A drawback for the country is that around 65 percent of college graduates go abroad to find jobs.

In Thailand, government agencies tend to be aggressive and forward thinking, and that can help strengthen a number of industries. Medical tourism is booming there, and Thailand is growing into an automobile titan in Asia. Innovation can occur in any of these industries - especially with software, Phelps said.

The idea of drawing on local strengths can be applied to the US too, said Bob Hayward, a managing consultant in Thailand with Strat-etech Consulting. The US software industry is a by-product of a business environment that relies heavily on new technology for efficiency. "You must work with what's in your environment," Hayward said.

Malaysia is the most advanced of the three countries Phelps visited. It has high-tech parks and attracts investments from global technology companies, which in turn support innovation locally by providing training and engineering jobs that increase the skills of the work force. Malaysia also has strengths in building data centres, and in ‘Islamic finance’, a type of financing that does not charge interest for religious reasons.

South Korea is one country in the region that has developed so far in recent decades that it is now a technology leader in some areas. It's years ahead of other countries in certain types of internet applications because of its early focus on broadband. Its online gamers are famous, and a host of multiplayer games developed there, such as ‘Guild Wars’ and ‘The Legend of Mir 2’, have won acclaim outside Korea.

Many poor nations are still struggling to adjust their economies to the modern world, and they are often wary of solutions proffered by rich nations and multinationals. The innovation conferences give Microsoft a chance to meet local officials and try to win their trust. It gets other benefits too, such as boosting its image and giving it a chance to discuss issues that are important to the company, like intellectual-property enforcement.

The countries where the conferences were held certainly face hurdles to innovation. They are still largely agricultural, and are moving into heavier industries, where less money is traditionally spent on research and development. Intellectual-property rights are not strongly enforced, meaning inventors see their products copied in the local market, making it hard for them to expand in their country, much less internationally.

Such countries may have intellectual-property laws on their books, often enacted to meet the criteria of trade deals, but enforcement of those laws moves slowly. "Once R&D is near or approaching 1 percent of a country's gross national product, then their enforcement of IP gets very serious," Hayward said.

Another hurdle is the lack of a "culture of failure" in Asia, Phelps said. Government and business leaders need to be realistic that some companies and some products will fail. Governments often provide resources to keep companies afloat artificially because, they fear, if they fail it will reflect badly on their development policies.

There is also a debate in many countries over which economic model to follow, and how to create a modern nation without losing cultural identity. While these are sensitive issues, several countries, such as Japan, South Korea and Taiwan, have found ways to develop while maintaining their cultural roots.

The best economic model is "not a mystery", according to Hayward. "We kind of know what works and what doesn't." For him, capitalism, for all of its faults, is the best economic system available.

The next step for Microsoft is to arrange more meetings and create better coordination between government officials and local Microsoft offices, Phelps said.