Cato Institute examined certain specific factors that foster innovation. Researchers Thomas Jorde and David Teece wrote this:
Although the evidence is sketchy, factors that are important include: the availability of a labor force with the requisite technical skills; economic structures that permit considerable autonomy and entrepreneurship; economic systems that permit and encourage a variety of approaches to technological and market opportunities; access to “venture” capital, either from a firm’s existing cash flow or from an external venture capital community; good connections between the scientific community, especially the universities, and the technological community, and between users and developers of technology; strong protection of intellectual property; the availability of strategies and structures to enable innovating firms to capture a return fromtheir investment; and, in fragmented industries, the ability to quickly build or access cospecialized assets inside or outside the industry. 14
Now that’s a list, and I have no quarrel with most of it. But it seems to consist of factors that are and have been prevalent in other industrialized countries, so it doesn’t necessarily explain the supremacy of
American
innovation. I think my list better accounts for America’s innovation exceptionalism.
No other country has reached the U.S. level of creativity and innovation, and one result is that U.S. culture, language, and, to some extent, values have infiltrated other nations, multiplying the impact of our innovations themselves. This gives us global influence disproportionate to the size of our population and our economy, amplifying my concerns that innovation is too important to continue being less than an urgent national policy priority.
Thanks to many very smart people, we have a better, but not complete, understanding of how to foster innovation. But we also have a better understanding of how fragile our innovation leadership can be. And we see increasing threats to this leadership, and so to our economic health as well.
In February 2010, China announced it had issued a record number of patents in 2009: more than 580,000, a 41 percent increase from a year earlier. 15 Meanwhile, a September 2010 report from the United Nations’ World Intellectual Property Organization announced that patent filing in the U.S. fell by 11.7 percent between 2008 and 2009. 16 Indeed, the drop in the United States—as in most developed nations—can be attributed to the global economic downturn, and will likely rise when the economy recovers.
But that’s what makes China’s growth so much more maddening.
To sustain and even enhance U.S. innovation, there are several essential and fundamental actions that I believe need to be taken, and these are addressed in the following chapters. These actions involve every important institution in our country, including education; federal, state and local legislators, and governments; industries large, small, and not yet created; law and the courts; labor; cultural centers; banks and private equity firms; and so on. Spurring action will require that each institution recognize the challenges, establish remedial goals, and fashion appropriate strategies. Qualified and energetic leadership is needed from the United States president on down.
We currently face a severe economic crisis, but like the Chinese, I believe every crisis contains the seeds of future success. “Innovate or die” was the concept I counseled companies about in the recent Great Recession. Some died, but many more innovated. A market cycle is tough, but it does weed out the weaker competitors and can certainly foster innovation.
The time for action is long past due.
4
Entrepreneurial Innovation: The Jobs Engine
“This summer, the America Recovery and Reinvestment Act (the ‘Recovery Act’) will shift its emphasis from short-term rescue efforts to long-term recovery and reinvestment projects. These projects will
John W. Evans
Rhiannon Frater
Greg Bear
Diane Rapp
Julie Mulhern
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C.L. Stone
Elaine Feinstein
Reavis Z Wortham
Martin Edwards