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Rob Atkinson Balt Tecna 2009

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The document discusses innovation and entrepreneurship opportunities during economic downturns. While recessions are difficult, they can also drive innovation by lowering costs and increasing unemployment. The US used to be a global leader in innovation but has fallen to 6th place, lagging countries like South Korea in areas like corporate and government R&D spending. To regain its competitive edge, the document argues the US needs innovation-based economic development policies that align incentives with investing in knowledge infrastructure and developing skills.

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Innovation and Entrepreneurship: Policy Opportunities and Challenges Remarks at TECNA Baltimore, March 19, 2009 Rob Atkinson President Information Technology and Innovation Foundation

2

ITIF is public policy think tank committed to articulating and advancing a pro-productivity, pro-innovation and pro-technology public policy agenda internationally, in Washington and in the states.

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Is There Opportunity in Crisis? Recessions “are the means to reconstruct each time the economic system on a more efficient plan. But they inflict losses while they last, drive firms into the bankruptcy court, throw people out of employment, before the ground is clear and the way paved for new achievement of the kind which has created modern civilization and made the greatness of this country.” (Joseph Schumpeter, The Theory of Economic Development.)

4

IT Drove the U.S. Productivity Turnaround (Annual rate of total factor productivity growth)

5

And Continues to Drive Productivity, Even in Recession

6

There are Innovation and Entrepreneurship Opportunities in Downturns Startups respond positively to growth. But they also are promoted by a low cost of capital and higher unemployment. Quality of startups is higher in recessions. Cressy, 1993; Audretsch and Acs, 1994

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Industry R&D Investment Does Not Appreciably Decline in Recession Investment as Share of R&D Percent Annual Growth Average, 1953-2007 1.22% 2.3% Average, downturn years 1.19% 2.9%

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But the Other Challenge is Long Term: The U.S. is Lagging in Innovation

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The Study: comparing innovation-based competiveness of 40 nations and regions Countries: EU and NAFTA countries, Australia, Brazil, China, India, Japan, South Korea, Russia, and Singapore Regions: EU-10, EU-15, EU-25, and NAFTA

13

6 Groups of 16 Indicators to Assess Global Innovation-based Competitiveness: 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)

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We’re Number 1?

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Actually, We’re Number 6 Now No. 6

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Behind… Singapore Sweden Luxembourg Denmark South Korea

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Benchmarked Change from the Beginning of the Decade

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China Singapore Estonia Denmark Luxembourg Slovenia Russia Lithuania Cyprus Japan Hungary Slovakia Czech Republic India The U.S. is Behind…. Latvia Austria S. Korea Ireland EU-10 Spain Sweden France Portugal Malta Belgium EU-25 Poland UK EU-15 Mexico Netherlands Australia Finland Canada Germany Italy NAFTA Greece Brazil United States

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Corporate R&D

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Corporate R&D Change: 2003-2007

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Government R&D

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Government R&D Change

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Some States Are Also Lagging in Innovation

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The 2008 State New Economy Index uses 5 groups of 29 indicators to map how well places are adapting to the New Economy: Knowledge Jobs Globalization Economic Dynamism Digital Economy Technological Innovation

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2008 SNEI Overall Scores TOP 5: Massachusetts Washington Maryland Delaware New Jersey

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Workforce Education

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U.S. Migration of Knowledge Workers

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Immigration of Knowledge Workers

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Fastest-Growing Firms

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Venture Capital

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High-Tech Jobs

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Industry Investment in R&D

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So, What To Do?

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An Innovation Economy Requires an Innovation-Based Economic Development Policy

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Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics

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Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Principal Economic Development Means Drive down costs through firm-specific subsidies Object of Policy Recruitment of out-of-state firms Quality of Life Minor importance Goal Get big

38

Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Quality of Life Minor importance Not important Goal Get big Get big

39

Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Worker incomes Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Drive up wages and benefits and foster more progressive taxes and public spending Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Small business and socially- conscious business Quality of Life Minor importance Not important High importance Goal Get big Get big Get fair

40

Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Worker incomes Innovation and organizational learning Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Drive up wages and benefits and foster more progressive taxes and public spending Spur firm innovation through targeted supports (e.g., research, financing, skills, etc.) and incentives for firms to produce these themselves. Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Small business and socially- conscious business High growth entrepreneurs and existing firms Quality of Life Minor importance Not important High importance Moderately important to attract and retain knowledge workers. Goal Get big Get big Get fair Get more prosperous

41

Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive.  

42

Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing.  

43

Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing. Extend sales tax parity for manufacturing purchases to computers and IT equipment.  

44

Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing. Extend sales tax parity for manufacturing purchases to computers and IT equipment. Create, expand and align state R&D tax credits with the new Federal R&D tax credit.  

45

Don’t Forget Institutional Innovations Create Different and Better K-12 Schools.

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Don’t Forget Institutional Innovations Create Different and Better K-12 Schools. Shift the Focus of Post-Secondary Education More Toward Acquiring Skills.

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Don’t Forget Institutional Innovations Create Different and Better K-12 Schools. Shift the Focus of Post-Secondary Education More Toward Acquiring Skills. Take Industry-University Partnerships to a New Level.

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[email_address] www.itif.org Thank You

More Related Content

Rob Atkinson Balt Tecna 2009

  • 1. Innovation and Entrepreneurship: Policy Opportunities and Challenges Remarks at TECNA Baltimore, March 19, 2009 Rob Atkinson President Information Technology and Innovation Foundation
  • 2. ITIF is public policy think tank committed to articulating and advancing a pro-productivity, pro-innovation and pro-technology public policy agenda internationally, in Washington and in the states.
  • 3. Is There Opportunity in Crisis? Recessions “are the means to reconstruct each time the economic system on a more efficient plan. But they inflict losses while they last, drive firms into the bankruptcy court, throw people out of employment, before the ground is clear and the way paved for new achievement of the kind which has created modern civilization and made the greatness of this country.” (Joseph Schumpeter, The Theory of Economic Development.)
  • 4. IT Drove the U.S. Productivity Turnaround (Annual rate of total factor productivity growth)
  • 5. And Continues to Drive Productivity, Even in Recession
  • 6. There are Innovation and Entrepreneurship Opportunities in Downturns Startups respond positively to growth. But they also are promoted by a low cost of capital and higher unemployment. Quality of startups is higher in recessions. Cressy, 1993; Audretsch and Acs, 1994
  • 7.  
  • 8.  
  • 9.  
  • 10. Industry R&D Investment Does Not Appreciably Decline in Recession Investment as Share of R&D Percent Annual Growth Average, 1953-2007 1.22% 2.3% Average, downturn years 1.19% 2.9%
  • 11. But the Other Challenge is Long Term: The U.S. is Lagging in Innovation
  • 12. The Study: comparing innovation-based competiveness of 40 nations and regions Countries: EU and NAFTA countries, Australia, Brazil, China, India, Japan, South Korea, Russia, and Singapore Regions: EU-10, EU-15, EU-25, and NAFTA
  • 13. 6 Groups of 16 Indicators to Assess Global Innovation-based Competitiveness: 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)
  • 16. Behind… Singapore Sweden Luxembourg Denmark South Korea
  • 17.  
  • 18. Benchmarked Change from the Beginning of the Decade
  • 19. China Singapore Estonia Denmark Luxembourg Slovenia Russia Lithuania Cyprus Japan Hungary Slovakia Czech Republic India The U.S. is Behind…. Latvia Austria S. Korea Ireland EU-10 Spain Sweden France Portugal Malta Belgium EU-25 Poland UK EU-15 Mexico Netherlands Australia Finland Canada Germany Italy NAFTA Greece Brazil United States
  • 24. Some States Are Also Lagging in Innovation
  • 25. The 2008 State New Economy Index uses 5 groups of 29 indicators to map how well places are adapting to the New Economy: Knowledge Jobs Globalization Economic Dynamism Digital Economy Technological Innovation
  • 26. 2008 SNEI Overall Scores TOP 5: Massachusetts Washington Maryland Delaware New Jersey
  • 28. U.S. Migration of Knowledge Workers
  • 34. So, What To Do?
  • 35. An Innovation Economy Requires an Innovation-Based Economic Development Policy
  • 36. Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics
  • 37. Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Principal Economic Development Means Drive down costs through firm-specific subsidies Object of Policy Recruitment of out-of-state firms Quality of Life Minor importance Goal Get big
  • 38. Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Quality of Life Minor importance Not important Goal Get big Get big
  • 39. Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Worker incomes Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Drive up wages and benefits and foster more progressive taxes and public spending Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Small business and socially- conscious business Quality of Life Minor importance Not important High importance Goal Get big Get big Get fair
  • 40. Economic Development Doctrines and State Economic Development Policy Conventional Economic Development Neo-classical Business Climate Neo-Keynesian Populist Innovation Economics Source of growth: Capital investment Capital investment Worker incomes Innovation and organizational learning Principal Economic Development Means Drive down costs through firm-specific subsidies Drive down costs through lower taxes and reduced regulations Drive up wages and benefits and foster more progressive taxes and public spending Spur firm innovation through targeted supports (e.g., research, financing, skills, etc.) and incentives for firms to produce these themselves. Object of Policy Recruitment of out-of-state firms Recruitment of out-of-state firms Small business and socially- conscious business High growth entrepreneurs and existing firms Quality of Life Minor importance Not important High importance Moderately important to attract and retain knowledge workers. Goal Get big Get big Get fair Get more prosperous
  • 41. Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive.  
  • 42. Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing.  
  • 43. Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing. Extend sales tax parity for manufacturing purchases to computers and IT equipment.  
  • 44. Align incentives to innovation Use targeted investments in knowledge infrastructure as an incentive. Investment tax credits should include R&D and software, not just manufacturing. Extend sales tax parity for manufacturing purchases to computers and IT equipment. Create, expand and align state R&D tax credits with the new Federal R&D tax credit.  
  • 45. Don’t Forget Institutional Innovations Create Different and Better K-12 Schools.
  • 46. Don’t Forget Institutional Innovations Create Different and Better K-12 Schools. Shift the Focus of Post-Secondary Education More Toward Acquiring Skills.
  • 47. Don’t Forget Institutional Innovations Create Different and Better K-12 Schools. Shift the Focus of Post-Secondary Education More Toward Acquiring Skills. Take Industry-University Partnerships to a New Level.