AA Blog 2011 Feb 9 Obama Innovation Strategy and Doing More

Obama Innovation Strategy and doing more
By Ken Jarboe on February 9, 2011 11:51 AM | No Comments | No TrackBacks
Last week, the White House released their updated Strategy for American Innovation. This
is part of the Administration's new push on innovation, jobs and competitiveness. As the
Fact Sheet and the White House blog posting make clear, this is an expanded version of
their earlier document. To quote from the fact sheet, this latest version includes 5 new
initiatives:
• The Administration's proposed Wireless Initiative, helping businesses reach 98% of

Americans with high-speed wireless access within five years, accelerating wireless
innovations, and substantially expanding, by 500 MHz, the development of new
wireless spectrum for commercial use. Expanding new commercial spectrum is critical
to avoid "spectrum crunch" and facilitate the rapidly growing wireless technology
revolution.
• A patent reform agenda, working to overcome the enormous backlog at the patent
office and improve patent quality. Legislative and administrative initiatives can allow
the USPTO to adequately fund its operations through user fees and implement new
initiatives to improve patent quality. The overall agenda will reduce the average delay
in patent processing times from 35 months to 20 months, and to less than 12 months
where applicants prioritize their applications.
• A commitment to clean energy leadership, proposing a Clean Energy Standard that
will help us reach a goal of delivering 80% of the Nation's electricity from clean
sources by 2035. To accelerate innovation, the Administration's FY 2012 Budget further
proposes to expand funding for the Advanced Research Projects Agency - Energy
(ARPA-E), to create three new Energy Innovations Hubs to solve challenges in critical
areas, and to fund research, development, and deployment initiatives that will help
the U.S. reach the goal of one million advanced technology vehicles on the road by
2015.
• New commitments to improve K-12 education, emphasizing science and math
skills. Administration initiatives will train 100,000 new science, technology,
engineering, and mathematics (STEM) teachers over 10 years, establish ARPA-ED to
drive educational innovations, build on the success of Race to the Top in spurring
school reform, and expand on private-public partnerships to improve training and
inspire more students - including girls and other currently underrepresented groups -
to excel in STEM fields.
• The Startup America initiative, working to facilitate entrepreneurship across the
country and increase the success of high-growth startups that create broad economic
growth and quality jobs. Startup America will accelerate the transfer of research
breakthroughs from university labs, invest $2 billion in capital for entrepreneurs,
improve the regulatory environment for starting and growing new businesses, and
increase connections between entrepreneurs and high-quality business mentors.
Some of these, such as Startup America, were also announced separately last week. (See
earlier posting)
As I noted about the earlier version of the document, there is much to support in this
strategy. But there are other proposals that should be considered. Many of these points
can be found in our Athena working paper from December 2008 Crafting an Obama
Innovation Strategy. Rather than reiterating all the points in that document, let me focus
on the four areas that White House economist Austan Goolsbee highlights in his "white
board" talk on the Startup America initiative. Those are: access to capital; regulatory
barriers; business mentors; and tax cuts.
Access to capital: As I've argued for before, SBA needs to change its programs to utilize
intangible assets. SBA should work with commercial lenders to develop standards for the
use of intangible assets as collateral, similar to existing SBA underwriting standards.
Allowing IP to be used as collateral will increase the amount of funds a company, such as
one in the high-tech sector, would qualify for.
In addition, we shoud create an IP-backed loan fund. Other nations have developed
special programs to encourage IP-based finance. The U.S. should set up similar programs
on a pilot basis, ideally run by the SBA to take advantage of its lending expertise.
Technical support could be provided by the SBA's Office of Technology, which already
coordinates the Small Business Innovation Research (SBIR) program. The SBA technology
office also works with the U.S. Commerce Department's National Institute of Standards
and Technology (NIST) on its Technology Innovation Program and has a hand in other
federal science- and technology-related initiatives. Such a direct lending program would
be a step beyond SBA's current loan guarantee programs--direct lending is needed to
jumpstart the process. Once the process of utilizing IP as collateral is fully established,
the program could be converted to a loan guarantee structure.
Regulatory barriers: Regulations can be a barrier to small business. But, as I have argued
before, regulations can create new opportunities. We need a regulatory review system
that promotes these new entrepreneurial opportunities. The President's push as part of
the innovation strategy for clean energy standards is a perfect example of how
government push can create market openings.
Business mentors: We need to expand technical assistance to include identifying and

managing intangible assets. Entrepreneurs and small business especially need help in
utilizing their intangible assets. Other nations already have such programs in place,
previous postings. One possibility is to expand the mission of the Manufacturing Extension
Partnerships. Better yet would be to create our own equivalent of the Scottish Intellectual
Assets Centre and embed the tools and activities of such a Centre in the operations of all
our small business and entrepreneurship programs.
Tax incentives: In the past, starting up a new company meant building a factory, buying
raw materials and equipment, and hiring workers. Starting up a company today means
developing your intangible assets -- your knowledge base and the skills of your workers.
Yet our tax incentives are still geared toward the old model. Some of the tax incentives
proposed by the Obama Administration move in the right direction -- especially the cuts in
payroll taxes to lower the cost of hiring new workers. But we need to focus more on
helping companies -- especially small business -- increase the knowledge base and skill
levels of their existing workers. That is way we need a knowledge tax credit that would
apply to company expenditures on worker training and education -- just like the R&D tax
credit applies to expenditures on research activities. It only make sense that boosting
worker skill levels is a necessary compliment to any activities to raise innovation and
productivity.
---
So -- I support the expanded version of the Strategy for American Innovation. But much
more can and needs to be done. The strategy should focus on the broad range innovative
activity and recognize the role of intangible assets in fueling economic prosperity.
We have a good start. Let's push it further.

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Obama Innovation Strategy and doing more

By Ken Jarboe on February 9, 2011 11:51 AM | No Comments | No TrackBacks

• The Administration's proposed Wireless Initiative, helping businesses reach 98% of

Business mentors: We need to expand technical assistance to include identifying and

We have a good start. Let's push it further.

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