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Week of December 18 - 24, 2006

SBA Office of Advocacy Report Notes Entrepreneurial Growth

The Small Business Administration Office of Advocacy just released its latest annual report to the President, The Small Business Economy. This year’s model presents 2005 data. Notably, 671,000 firms were started in the US while 599,000 shut their doors. In total, there were 5.99 million firms with employees in the US in 2005 and sole proprietorships reached a total of 19.86 million.

The report is not just a dry recitation of statistics. It also includes chapters that examine the impact of the Regulatory Flexibility Act, the implementation of economic gardening – an economic development approach focused on supporting new and existing small businesses – and the benefits of entrepreneurship education. While recognizing the rapid rise of entrepreneurship education on campuses across the country (more than 1600 in 2004), the authors point to a direct correlation between the number of endowed chairs and the growth of entrepreneurial activity in the US.

Download The Small Business Economy: A Report to the President

New Advisory Panel to Measure Innovation

Fifteen business and academic leaders – including six Fortune 500 executives – were named by Commerce Secretary Carlos Gutierrez to serve on a new panel to understand better how U.S. innovation contributes to American economic prosperity and high living standards. Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation will join other notable names including Microsoft CEO Steve Ballmer, IBM CEO Samuel Palmisano, 3M CEO George Buckley and Wal-Mart Vice Chairman John Menzer. The Measuring Innovation in the 21st Century Economy Advisory Committee will help develop better ways to measure innovation so that the public and policymakers can understand its impact on economic growth and productivity.

Learn more from the Department of Commerce announcement

Business-Non-Profit Convergence?

A new article in the Stanford Social Innovation Review posits that non-profits and businesses are starting to converge -- in terms of how they operate, how they finance themselves and how they create value. In many cases, it’s hard to tell the difference between a big non-profit (like Goodwill or the Red Cross) and a large corporation. As a result, similar challenges are emerging. Just as non-profits must communicate effectively with donors and stakeholders, private firms often now link a positive social message (e.g. around sustainability) to their regular operations. Similarly, non-profits are starting to use venture capital-like funds to finance their operations, and both businesses and non-profits are experimenting with hybrid organizational forms such as cross-sector joint ventures. The authors conclude by arguing that these trends can create positive learning opportunities for both sides, as non-profits can become more entrepreneurial and for-profits can learn how to be more effective contributors to a healthy and sustainable economy.

To access the Winter 2007 Stanford Social Innovation Review article, “Capitalizing on Convergence,” by James E. Austin, Robert Gutierrez, Enrique Ogliasti, and Ezequiel Reficco, visit
http://www.ssireview.org/articles/entry/capitalizing_on_convergence/.

Benchmarking our Innovation Future

The Task Force on the Future of American Innovation, a private consortium of leading industry and academic organizations, has a released a new report that assesses America’s future innovation capacity. Measuring the Moment: Innovation, National Security, and Economic Competitiveness is a benchmarking exercise designed to assess how America stacks up on key measures of research investment, knowledge creation, and the development of critical industries such as biotechnology, semiconductors and information technology. The report’s main findings are similar to other recent studies from the National Research Council and the Council on Competitiveness. While the US economy has many strengths, it also faces serious long-term challenges in its educational systems and in its future ability to attract and retain talent. The study emphasizes the national security implications of these trends, arguing that declines in research spending may hamper our ability to develop the most advanced weapons systems and defense technologies. Similar threats may emerge if the US is unable to continue creating and nurturing a skilled pool of scientists and engineers.

Download Measuring the Moment: Innovation, National Security, and Economic Competitiveness

The Politics of Patent Reform

Reforming the patent system has been a hotly debated political topic for the past decade. Yet, at the same time, recent research shows that patents are not really a critical factor in explaining why firms invest in and profit from new R&D initiatives. Harvard researcher Frederic Scherer seeks to explain this puzzle in a recent research paper for the AEI-Brookings Joint Center for Regulatory Studies. Scherer argues that patent policy changes of the 1970s and 1980s have had a mixed effect. They have increased the importance of patents (at least in a legal sense), but they have also fostered the creation of many dubious patents and increased litigation around the entire process. Scherer concludes with recommendations for future reforms. He supports the creation of third party opposition rights during the patent application process, reform of technology transfer rules to encourage more rapid commercialization, and limits on the ability to obtain patents for business methods or natural processes. Overall, the paper is a useful review of the issues raised by ongoing patent policy reform debates.

Download “The Political Economy of Patent Policy Reform in the United States,” by F.M. Scherer.

British Intellectual Property Review

The US is not the only nation reviewing its patent and intellectual property (IP) laws. Great Britain is also engaged in a similar exercise. As part of this month’s Pre-Budget reports, Britain’s Department of the Treasury has released several independent studies on key topics. Under the leadership of Andrew Gowers, editor of the Financial Times, the Gowers Review of Intellectual Property is an assessment of how Britain can best support and promote innovation in knowledge-based industries. The review offers a detailed and readable review of the importance of intellectual property in the 21st century economy. It also offers some guidelines and recommendations that may sound familiar to those who follow similar debates here in Washington. The report recommends that the UK Patent Office improve its business outreach and also work with British firms to protect their IP rights abroad. It also advocates creation of new venues (via mediation and consulting) to avoid costly and time-consuming legal battles over IP rights. In general, the report seeks an elusive balance: “. . . an IP system that creates incentives for innovation, without unduly limiting access for consumers and follow-on innovators.”

Download the December 2006 Gowers Review of Intellectual Property

The National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

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