US innovation policy: creating (and expanding) a national agenda for global competitiveness.

SUMMARY

While many critics of the state of US global competitiveness believed they were faint voices in the economic policy wilderness, their concerns were being heeded by a leading national economic policy group, the Council on Competitiveness. The National Innovation Initiative Report (Innovative America), released by the Council on Competitiveness in December 2004, presents a national innovation policy agenda (under three broad categories of Talent, Investment, and Infrastructure) for the public and private sector to debate. The Bush administration, under its innovation policy agenda (A New Generation of American Innovation and American Competitiveness Initiative) released in April 2004 and January 2006, has emphasized three major technology policy initiatives (hydrogen fuel technology, health information technology, and broadband technology development) and increased federal R&D funding and tax incentives (totaling $5.9 billion for FY07) respectively. The weakness of both policy agenda approaches is in the narrow interpretation of 'innovation'; that is, focusing on the 'technology' side of innovation at the expense of market knowledge or organizational innovation In general, both public and private sector efforts need to be enlisted to encourage inter-organizational scientific and engineering communications across organizations and national borders (so-called 'public spaces'); create an internal environment within US corporations that is conducive to, not only technological, but also organizational innovation; and develop metrics to measure an expanded national inventory of innovation activities--beyond that of traditional science and technology indicators.

KEYWORDS

competitiveness; innovation policy; national innovation system; organizational innovation; technology

INTRODUCTION

According to many erudite students of international competitiveness, America does not have an effective national innovation policy to keep its economy at the forefront of global competition. As an example of this criticism, New York Times columnist Thomas L Friedman (2004) writes:

One can argue that Friedman is exercising journalistic hyperbole when he states that 'we are completely ignoring the latter' (the competitiveness-and-innovation struggle); however, until recently, American public and private sector leadership has been reluctant to recognize this global competitiveness issue. Before considering the development of a national innovation policy, one needs to understand what defines a national innovation system. The concept of a national innovation system was first introduced by Freeman (1987) in the 1980s and further refined through the scholarship of Lundvall (1992), Nelson (1993), Patel and Pavitt (1994) and Metcalfe (1995) in the 1990s. As in many relatively new concepts, there are a number of definitions of a national innovation system. Metcalf (1995) does, however, offer a policy-oriented definition of national innovation system which is useful for our analysis:

While many critics of the state of US global competitiveness believed they were faint voices in the economic policy wilderness, their concerns were being heeded by a leading national economic policy group--the Council on Competitiveness. In December 2004, the National Innovation Initiative (NII) Report (Innovate America) was publicly released. This 15-month study was commissioned by the Washington, D.C.-based Council on Competitiveness, whose membership includes CEOs of major corporations, university presidents of leading universities, and labor leaders of some of the largest unions in America. The NII Report is the first high-profile study commissioned in this millennium that encapsulates the international competitiveness concerns of a broad cross-section of American society. (2) The final document presents a national innovation policy agenda for the public and private sector to debate--and act upon. Does the NII Report, however, offer a comprehensive blueprint for America's private and public sector leadership to follow? Specifically, does it offer an economic policy agenda that will continue US leadership in the global economy? This question will be explored in the remainder of this paper. Firstly, however, will be a review of the key components of the Council on Competitiveness' Report.

NATIONAL INNOVATION INITIATIVE

The Council on Competitiveness argues that America finds itself at a unique and delicate historical juncture, shaped by two unprecedented shifts--one in the nature of global competition, the other in the nature of innovation itself. The world is becoming dramatically more interconnected and competitive; at the same time, economic interdependencies are growing. Furthermore, where, how and why innovation occurs are in flux--across geography and industries, in speed and scope of impact, and even in terms of who is innovating. The NII Report defines innovation as the intersection of invention and insight, leading to the creation of social and economic value. It posits that the innovation economy requires a new vision, new approaches and a new action agenda. The nation, says the Council on Competitiveness, must create the conditions that will stimulate individuals and enterprises to innovate and take the lead in the next generation of knowledge creation, technologies, business models and dynamic management systems. To facilitate these environmental conditions, a new relationship among America's companies, government, educators and workers is needed to assure a 21st century innovation ecosystem that can successfully adapt and compete in the global economy.

To meet these global competitiveness challenges, the NII Report puts forth a National Innovation Agenda organized under the following three broad categories:

* Talent. This category involves the human dimension of innovation, including knowledge creation, education, training and workforce support, and is divided into three subcategories:

--Build a National Innovation Education Strategy. This sub-category includes establishing tax-deductible, private-sector scholarships for American science and engineering undergraduate students; creating 5,000 portable graduate fellowships funded by federal R&D agencies; expanding university-based Professional Science Masters programs and traineeships to all state university systems; and reforming immigration policy to attract talented foreign science and engineering students, as well as providing work permits to foreign science and engineering graduates of US institutions.

--Catalyze the Next Generation of American Innovators. This sub-category includes stimulating creative thinking and innovation skills through problem-based learning from elementary through university education; creating innovation learning opportunities for students to bridge the gap between research and application; and establishing innovation curricula for entrepreneurs and small business managers.

--Empower Workers to Succeed in the Global Economy. This sub-category includes stimulating workforce flexibility and skills through lifelong learning opportunities; accelerating portability of healthcare and pension benefits; aligning federal and state skill needs more tightly to training resources; and expanding assistance to those dislocated by technology and trade.

* Investment. This category involves the financial dimension of innovation, including R&D investment; support for risk-taking and entrepreneurship; and encouragement of long-term innovation strategies:

--Revitalize Frontier and Multidisciplinary Research. This sub-category includes stimulating high-risk research through 'Innovation Acceleration' grants that reallocate three percent of the federal government R&D budget; restore the Department of Defense's historic commitment to basic research by directing 20 percent of the agency's science and technology budget to long-term research; intensifying support for physical sciences and engineering to achieve a robust national R& D portfolio; and enacting a permanent, restructured research and experimentation (R&E) tax credit and extending the credit to research conducted in university-industry consortia.

--Energize the Entrepreneurial Economy. This sub-category includes building ten 'Innovation Hot Spots' over the next five years to capitalize on regional assets and leverage public-private investments; designating a lead agency and an inter-agency council to coordinate federal economic development policies and programs to accelerate innovation-based growth; and increasing the availability of early-stage risk capital with tax incentives, expanded angel networks, and state and private seed capital funds.

--Reinforce Risk-Taking and Long-Term Investment. This sub-category includes aligning private-sector incentives and compensation structures to reward long-term value creation; create safe-harbor provisions to promote voluntary disclosure of intangible assets; reducing the cost of tort litigation from two percent to one percent of GDP; and convening a 'Financial Markets Intermediary Committee' to evaluate the impact of new regulations on risk-taking.

* Infrastructure. This category involves physical and policy structures that support innovators, including networks for information, transportation, healthcare and energy; intellectual property protection; business regulation; and structures for collaboration among innovation stakeholders:

--Create National Consensus for Innovation Growth Strategies. This sub-category includes enacting of a federal innovation strategy through the Executive Office of the President; catalyzing national and regional alliances to implement innovation policies and innovation-led growth; developing new metrics to understand and manage innovation effectively; and establishing 'National Innovation' prizes to recognize excellence in innovation performance.

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