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November 5, 2009
Benchmarking U.S. Innovation Capacity and Performance
Dr. Robert Atkinson President Information Technology and Innovation Foundation
Innovation Drives National Economic Growth
The societal rates of return to R&D are at least twice the estimated private returns.
At least two-thirds of increase in per-capita GDP is attributable to innovation.
Jobs in technology industries pay approximately 70 percent more than other jobs.
It is the key source of competitive advantage against low-wage nations.
Traditional manufacturing jobs are declining.
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Why Does Innovation Matter?
Because economic transformation is constant and innovation is required to continually renew a region’s economy.
The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process... the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.”
(Joseph Schumpeter, Capitalism, Socialism and Democracy, 1942)
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Innovation Drives Growth
Between 1991 and 2003, the shares of corporate R&D devoted to basic and applied research fell by 3 and 4 percentage points, respectively
America’s challenge
The U.S. is running unprecedented trade deficits, estimated at $650 to $700 billion in 2008
The share of U.S. corporate R&D sites in the United States declined from 59 percent to 52 percent over the last decade
U.S. Trade Balance in High-Tech Products
Source: U.S. Census Bureau Foreign Trade Statistics, U.S. International Trade in Goods and Services.
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Economic Structure human capital (college education; researchers) innovation capacity (corporate R&D; government R&D; scientific
publications) entrepreneurship (new firms; venture capital) IT infrastructure (e-government; corporate IT investment; broadband)
Economic Policy (corp. tax; ease of doing business)
Economic Performance (trade balance, FDI, GDP per worker, productivity)
6 Groups of 16 Indicators to Assess Global Innovation-based Competitiveness:
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We’re Number 1?
Actually, We’re Number 6
Now No. 6
Singapore
Sweden
Luxembourg
Denmark
South Korea
Behind…
Overall Score
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Benchmarked Change from the Beginning of the Decade
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1. China 2. Singapore 3. Estonia 4. Denmark 5. Luxembourg 6. Slovenia 7. Russia 8. Lithuania 9. Cyprus 10. Japan 11. Hungary 12. Slovakia 13. Czech Republic 14. India
15. Latvia 16. Austria 17. S. Korea 18. Ireland 19. EU-10 20. Spain 21. Sweden 22. France 23. Portugal 24. Malta 25. Belgium 26. EU-25 27. Poland
The U.S. is Behind….
28. UK 29. EU-15 30. Mexico 31. Netherlands 32. Australia 33. Finland 34. Canada 35. Germany 36. Italy 37. NAFTA 38. Greece 39. Brazil 40. United States
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Overall Change
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Researchers
Researchers Change: 1999-2005
Government R&D
Government R&D Change
Corporate R&D
Corporate R&D Change: 2003-2007
IT Investments ICT Investments as % of GDP
Broadband Quality and Subscription Rates Broadband Quality and Subscription Rates (2009)
-2
-1
0
1
2
3
4
5
6
7
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Arguments Against
This is just about catch up
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Arguments Against
This is just about catch up
The U.S. can rely on our entrepreneurial resources.
Venture Capital
New Firm Change: 2003–2005
Singapore
India
Sweden
Ireland
EU 10
France
Russia
UK
EU 25
EU 15
Japan
U.S.
NAFTA
Canada
Spain
Poland
Australia -10% 0% 10% 20% 30% 40% 50%
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Other Arguments
The market will take care of it.
We will thrive on services.
We can rely on “venturesome consumption.”
We’ve been challenged before (e.g., Sputnik, the 1980s) and we always prevailed.
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Our Decline is Real and One Reason is Policy, or Lack Thereof.
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Country Existence of National Innovation Foundation (s) or Agency
Definitively Articulated National Innovation Strategy/Policy
Stated Commitment to Lead the World in Transitioning to a Digital Economy
Implemented a National Broadband Strategy
Denmark Yes Yes Yes Yes
Finland Yes Yes Yes Yes
Ireland Yes Yes Yes Yes
Japan Yes Yes Yes Yes
The Netherlands Yes Yes No Currently Being Written
Portugal Yes Yes No Yes
Singapore Yes Yes Yes Yes
South Korea Yes Yes Yes Yes
Sweden Yes Yes Yes Yes
United Kingdom Yes Yes No Yes
United States NO YES? NO Currently Being Written
Comparing Countries’ National Innovation Strategies September 2009
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U.S. is Falling Behind on R&D Tax Credit Generosity The United States was one of the first nations to offer an R&D tax credit. The U.S. has slipped to 17th in R&D tax credit generosity in OECD.
Other countries innovating with flat tax credits. Lack of permanency of R&D tax credit stymies innovation in U.S.
Unfortunately, the conventional liberal and conservative neo-classical economics doctrines don’t recognize any of the five statements.
Rather, they believe that : 1. Managing the business cycle and allocating scarce goods and services are
the key goals; 2. Capital accumulation is the key to growth; 3. Companies compete with each other, but countries do not; 4. Government intervention only distorts allocation efficiency; 5. Economic is a well-developed science who’s laws apply to all places and
all times.
Therefore, according to the conventional view there is little need for a proactive innovation policy. In fact, one is likely to do more harm than good.
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…
The intellectual foundations for an explicit national innovation strategy require a recognition that:
1. growth is the key goal;
2. innovation is the key to growth;
3. countries compete with one another for growth;
4. government can play a key supporting role in spurring innovation;
5. we don’t have definitive answers and policy experimentation is the order of the day
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Time To Think Like Schumpeter, not Smith or Keynes
The Emerging Doctrine of Innovation Economics Holds that …
1. growth is the key goal;
2. innovation is the key to growth, and is endogenous to the model;
3. countries compete with one another for growth;
4. government can play a key supporting role in spurring innovation;
5. we don’t have definitive answers and policy experimentation is the order of the day.
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