Competitiveness

Innovation, including the diffusion of information technology throughout the economy, is key to boosting productivity, which in turn is at the heart of increasing living standards.

Frequently Asked Questions About the Creation of a National Innovation Foundation (NIF)

July 3, 2008
| Reports

1. How does NIF differ from industrial policy?

NIF is not industrial policy because it is not about picking industrial “winners”. Rather than taking the view that some industries are more important to the U.S. than others, NIF is based on the idea that innovation and productivity growth can happen in any industry and that the nation benefits regardless of the industry in which they occur.

Moreover, NIF decisions about which proposals to fund and which firms to assist would be based on collaboration with industry rather than Washington telling industry what to do. When businesses come to NIF with proposals, NIF would evaluate them with the assistance of knowledgeable experts from the private sector and academia.

Finally, a significant share of NIF funds would go to support states in the kinds of technology-based economic development activities that transcend politics. That is, funding will be available regardless of what party controls the legislature or the governor’s office.

2. Reorganizing existing agencies into the Department of Homeland Security (DHS) was difficult and complicated. Wouldn’t the creation of NIF involve similar problems?

DHS involved bringing together a large number of long-established agencies from many different parts of the federal government with very different agency cultures and missions. By contrast, NIF would bring together the activities of just six small programs—including some that are less than a decade old—from only three federal agencies. These would be the Manufacturing Extension Program (MEP) and the Technology Innovation Program (TIP) currently in the Commerce Department; the Workforce Innovation in Regional Economic Development (WIRED) in the Labor Department; and three commercial innovation programs in the National Science Foundation (NSF). These existing programs already have much in common in their institutional cultures and missions. In NIF, they would be combined with several complementary activities that are new to the federal government

Precisely because of the DHS experience, NIF is designed not to include every federal program that remotely contributes to innovation, but only a small core of complementary activities that directly contribute to non-farm commercial innovation.

3. Why not just coordinate existing federal innovation-related activities rather than create NIF as a new entity?

A loose coordinating structure for existing programs would not achieve a federal innovation policy. As it is, existing activities are fragmented and diffuse, underfunded, pay little attention to innovation in services, and do not take advantage of state-level expertise in promoting innovation. Even if additional funding, expanded missions, and better coordination could fix these problems, there would still be no person, program, or agency with the mandate and ability to improve the nation’s capacity to innovate. As a separate entity, NIF would have the responsibility for formulating innovation policy and carrying it out through assistance to businesses.

4. Couldn’t NIF become one, big political target?

Activities that have been threatened with elimination in the past could certainly become more visible targets for budget slashers if they were all brought under one agency. But this is a risk worth taking. Under the status quo, MEP, TIP, and the other programs whose activities would be folded into NIF will remain small, underfunded, neglected, and unable to realize their full potential to contribute to the nation’s economic well being. And they would still periodically be in danger of elimination. Right now, each program has its own constituency and none of these constituencies is powerful enough to guarantee that their program continues to receive funding or to play an increasingly prominent role. If brought together by NIF, however, all these separate constituencies would have a shared stake in the new entity and could conceivably speak with one voice. In this way, NIF could actually be less politically vulnerable than the separate programs and activities that now exist.

5. Why not just fund America COMPETES?

Congress should fund America COMPETES, but funding America COMPETES is not a prerequisite for creating and funding NIF. The main emphasis of America COMPETES is on improving some of the inputs to the innovation process, including educating more scientists and engineers and funding more scientific research. NIF is about improving the way those inputs are put together at the firm level to create more new products, services, technologies, business models, and ultimately jobs. Although we should strive for both goals – more inputs to innovation and a better functioning commercial innovation process — the nation would benefit enormously if we could have the latter even without the former.

6. Can we afford NIF?

NIF would have an initial budget of $1 billion per year and an eventual budget of $2 billion per year (about one-third of NSF’s budget). We could fund NIF by using funds that are currently slated to be spent on the programs that NIF would incorporate or replace (around $400 million in FY 2010), eliminating wasteful oil and gas subsidies (estimated at $1.7 billion in FY 2010), and using general revenue. General revenue financing is justified, even at the risk of increasing the budget deficit, because NIF is an investment in the nation’s economic future. Even if we funded NIF entirely from general revenue, NIF’s eventual $2 billion budget would be less than one-twelfth of one percent of the entire federal budget.

7. Why focus on and invest in innovation at all?

Innovation is the main driver of economic growth and ultimately determines the American standard of living. To maintain the high and rapidly growing standard of living that most Americans desire (and that is within the nation’s capacity to achieve), we cannot depend solely on the private economy to produce the required degree of innovation. At a time when America’s innovation leadership is slipping in comparison to other countries, we cannot continue to rely only on our strong market environment and our public support for research and education to ensure our global competitive edge. Other nations with advanced economies, including Britain, Japan and Finland, have recognized the need for government to work in collaboration with the private sector to boost innovation. It is time for the U.S. to do the same.

Boosting Productivity, Innovation, and Growth Through a National Innovation Foundation

April 22, 2008
| Reports

Innovation drives America’s economic growth and ultimately determines its living standards and those of its metropolitan areas. However, the nation faces a growing innovation challenge in today’s global economy. To respond, the federal government should establish a National Innovation Foundation (NIF)-a new, nimble, lean, and collaborative entity devoted to supporting firms and other organizations in their innovative activities. By enhancing America’s world-class entrepreneurial and market environment, NIF would boost the nation’s innovation leadership for the 21st century and raise productivity and incomes. Moreover, by supporting workforce development and performance improvement in firms, NIF would help create better jobs for high school graduates in manufacturing and “low tech” services as well as those with advanced degrees in high technology industries.

America’s Challenge

  • Global competition is increasing. Like manufacturing, call centers, and software production, corporate R&D is also shifting overseas. Over the last decade, the share of U.S. corporate R&D sites declined from 59 to 52 percent within the United States, while it increased from 8 to 18 percent in China and India.
  • American innovation leadership is slipping. The U.S. ranks only seventh among OECD countries in the percentage of GDP devoted to R&D expenditures.
  • Private markets suffer innovation inefficiencies. Private firms tend to under-invest in innovation because no single business can capture all the economic benefits arising from new technologies, products, or business models.

Limitations of Existing Federal Policy

  • There is no national innovation policy. Rather than comprising an explicit, focused, national agenda, federal innovation efforts are scattered throughout government.
  • There is little focus on services innovation and commercialization. Existing federal innovation activities pay little attention to the service sector and to the important roles that smaller firms and universities play in the commercialization process.
  • There is no systematic innovation partnership between the federal government and state and local governments. Federal policies do little to support the effective, albeit underfunded, innovation efforts established by state and local governments.

A New Federal Approach
The federal government should establish a new National Innovation Foundation (NIF) with the sole mission of promoting innovation. The NIF’s proposed budget would be $1-2 billion per year. The new entity could exist as a new agency within the Commerce Department, a government-related public corporation, or an independent federal agency like NSF. The NIF would:

  • Catalyze industry-university research partnerships through national sector research grants.
  • Expand regional innovation-promotion through state-level grants to fund activities like technology commercialization and entrepreneurial support.
  • Encourage technology adoption by assisting small and mid-sized firms in implementing best-practice processes and organizational forms that they do not currently use.
  • Support regional industry clusters with grants for cluster development.
  • Emphasize performance and accountability by measuring and researching innovation, productivity, and the value-added to firms from NIF assistance.
  • Champion innovation by promoting innovation policy within the federal government and serving as an expert resource on innovation to other agencies.

How IT Can Help Fix America’s Ailing Construction Industry

January 24, 2008 - 12:00pm - 1:30pm
The Information Technology and Innovation Foundation
1250 Eye Street, NW, Suite 200
Room 2
Washington, DC
20005

Amid so much talk about the sub-prime mortgage mess, an overlooked problem continues to plague the housing industry, specifically, and the construction industry, generally: costs are spiraling out of control because the industry has not invested in technology, particularly information technology, to boost productivity. Read more »

Global Flows of Talent: Benchmarking the United States

November 17, 2007
| Reports

Economic prosperity depends now more than ever on the continual generation of new ideas as well as the conversion of those ideas into profitable products/services and higher-productivity processes. Countries aspiring to a higher standard of living must not only take part in the newest industries that flow from technological breakthroughs, they must also infuse all their industries with innovation in order to generate and sustain a competitive advantage. To do so, they have to have people with the right skills, educational background, and talent.

Not surprisingly, public policymakers around the world are waking up to the talent imperative, especially in the science, technology, engineering and mathematics (STEM) fields. Yet at a time when many other nations are making it easier for talented immigrants to enter their country, either as students or workers, the United States is struggling to decide what to do. We have sent out mixed messages to the rest of the world since September 11, 2001, and in the immigration debate of the past year, pragmatic discussion has been drowned out by heated rhetoric about other aspects of immigration.

This policy brief benchmarks flows of highly-skilled and highly educated people to the United States against similar flows to seven other high-income countries: Australia, Canada, France, Germany, Japan, New Zealand, and the U.K. The brief then compares how national immigration policies – permanent, temporary, and student – foster or constrict these flows. All seven nations in the comparison group are liberalizing their immigration policies for the highly skilled, although some more than others. Finally, we suggest several broad policy recommendations that the United States should consider to ensure that we not only compete effectively for talent in the short-term, but also lead the world toward a global system for developing and using talent that is beneficial for everyone over the long-term.

Science and Technology Is the Answer

October 9, 2007
| Blogs & Op-eds

Rob Atkinson's article in ScienceProgress about the importance of innovation for meeting the significant new challenges facing this country. The article discusses policies that the United States should adopt to promote innovation.

Does the United States Benefit from U.S. IT Products Made Overseas? Mapping the Global Value Chain of the iPod and Notebook Computers

October 3, 2007 - 10:00am - 11:30am
Cannon House Office Building
Room 210
Washington, DC

As U.S. IT companies extend their supply chains globally there is increased concern that other nations are receiving a growing share of the value-added and economic benefits from IT production. Read more »

The Role of Legislation Affecting the Small Business Administration's Investment Programs

September 6, 2007
| Testimony and Filings

ITIF President Rob Atkinson's testimony on the Small Business Administration's investment programs before the House Committee on Small Business.

IBM Forum on Global Leadership: U.S. Competitiveness in a Globally Integrated Economy

July 26, 2007
| Presentations

ITIF President Rob Atkinson’s presentation at the IBM Forum on Global Leadership, titled Creating Open Partnerships.

Massachusetts, New Jersey, Maryland, Washington and California Top State Rankings in Transitioning to New Economy, Says ITIF-Kauffman Foundation Report

KANSAS CITY, Mo., Feb. 27, 2007 – Massachusetts, New Jersey, Maryland, Washington and California top the list of states that are leading an economic transformation in adapting to an increasingly global-, knowledge- and innovation-based New Economy, according to The 2007 State New Economy Index, released today by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF) to mark EntrepreneurshipWeek USA. Read more »

The Implications of Service Offshoring for Metropolitan Economies

February 1, 2007
| Reports

In a coauthored report with The Brookings Institution, Robert Atkinson and Howard Wial analyze the projected impact of service sector offshoring on U.S. metropolitan economies. While the report finds that the impacts of offshoring in most metropolitan areas over the next decade are likely to be modest, it forecasts higher than average job losses in twenty-eight U.S. metropolitan areas between 2004 and 2015. To address the impacts, the paper urges federal, state, and local leaders to pursue together policies that boost productivity and innovation, assist workers who are harmed by offshoring, and modernize approaches to economic and workforce development.

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