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Week of January 22 - 28, 2007

Deep Competitiveness

Various proposals to spur American competitiveness are good ideas, but don’t go far enough to help the US prosper in the 21st century. That is the primary message of a new Issues in Science and Technology article from Rob Atkinson of the Information Technology and Innovation Foundation. Atkinson applauds recent proposals such as President Bush’s American Competitiveness Initiative and the House Democrats’ Innovation Agenda. They contain helpful proposals, but don’t really respond in an urgent fashion to significant economic challenges. Atkinson believes that policymakers have become complacent about eroding American competitiveness. He contends that a more robust policy response -- akin to the reaction to the Sputnik launching in the 1950s -- is needed. What does this involve? Atkinson’s national competitiveness policy would include robust efforts to open global markets, an overhaul of the tax code to spur innovation, a major expansion of funding ($2 billion per year) to support research partnerships and technology led economic development efforts ($1 billion per year), and a strong national commitment to digital transformation.

Access the Winter 2007 Issues in Science and Technology article, “Deep Competitiveness,” by Robert D. Atkinson

Maximizing Economic Growth

While Federal Reserve Chairman Ben Bernanke warned Congress last week about the looming fiscal crisis caused by the national debt, a recent study contends that we could have avoided the $8 trillion debt altogether. A November 2006 report by the National Center for Policy Analysis (NCPA) argues that a lower tax burden over the last 50 years would have increased government revenues to the point that they would have covered actual spending and eliminated public debt. It contends that government policies should be focused on maximizing economic growth and that there is an ideal allocation of economic resources between public and private uses that can grow the economy at the fastest sustainable rate. That optimal level, for federal, state and local taxes combined, is 23% of GDP – far below the actual rates that have averaged between 30 – 34%. Had that rate been held for the past 50 years: government at all levels would have collected $61.9 trillion more in taxes; real GDP would be three times greater than it is; and, the average American family would have more than three times as much real income today than it actually has.

Download Taxes and Economic Growth (NCPA Policy Report No. 292)

Managing the Effects of Nanotechnology

As nanotechnology moves from the realm of science fiction to the reality of new products and technologies, experts are starting to take a closer look at how nanotechnology can and should be regulated. A new study from the Woodrow Wilson Center’s Project on Emerging Nanotechnologies offers a useful guide to these debates. The report’s conclusions are pretty straightforward. Our current regulatory regime is not well-suited to assess risks and regulate the development of new nanotechnology materials. The author, J. Clarence Davis, recommends a two-pronged response. First, policymakers should consider requiring nano-manufacturers to submit a sustainability plan that indicates why and how their new technology does not present an unacceptable risk to the public. Second, policymakers need to develop new tools via tax incentives and targeted procurement programs that encourage manufacturers to develop beneficial applications of nanotechnology.

Access the 2006 report of the Woodrow Wilson Center Project on Emerging Nanotechnologies, Managing the Effects of Nanotechnology, by J. Clarence Davis.

The Democratization of R&D

An interesting working paper from researchers at the Federal Reserve Bank of Philadelphia examines a phenomenon they describe as the “democratization” of R&D spending. Before 1980, large incumbent firms had much higher rates of R&D intensity (R&D spending/sales) than did small firms and those looking to enter the same industry. Today, that ratio is often flipped, with small firms often surpassing the R&D intensity of larger firms. Moreover, the overall increase in R&D spending since 1980 is largely attributable to increased R&D intensity among small firms. The authors attribute this shift to the electronic revolution. Before computers and the Internet, firms needed large clerical staffs and a major sales force to help market and publicize new products – working in favor of larger, incumbent firms. Thanks to information technology, smaller firms and can avoid some of these costly investments. With lower barriers to entry, they can more easily research, develop, and market new products, services and technologies.

Access the 2006 working paper, “The Democratization of US Research and Development after 1980” by Robert M. Hunt and Leonard I. Nakamura.

Next Steps in Federal Contracting

A Congressionally-chartered advisory panel has released its final report examining how to improve the Federal procurement process. The Acquisition Advisory Panel, which was composed of private industry leaders and government officials, examined all aspects of the government contracting process, including small business set-asides, government data rights, and the quality of the federal acquisition workforce. Their final report includes numerous recommendations. In the area of small business contracting, the report urges Congress to clarify rules over bundling of smaller contracts into one large package. This practice helps agencies skirt small business contracting rules. In general, the report urges a greater commitment to small business contracting and also encourages agencies to provide more flexibility in their rules regarding small business contracts.

View the December 2006 Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the U.S. Congress.

Innovation in Rural America

The latest issue of Community Development Investment Review, a journal sponsored by the Federal Reserve Bank of San Francisco, focuses on issues of innovation in rural America. The special issue contains articles on rural venture capital, angel investing, and the role of state government in supporting rural innovation. If you want to learn about innovations in how finance rural entrepreneurs, this special issue is a good place to start.

Access the special 2006 issue of Community Development Investment Review,(Volume 2, Issue 3: 2006).

Innovation Policy and the Economy

Some of the country’s leading academic and policy researchers will be center stage at the National Bureau of Economic Research's 2007 Innovation Policy and the Economy conference. The Innovation Policy and Economy Group focuses on the implications of rapid technological change for economic policy, and the appropriate policies and programs regarding research, innovation, and the commercialization of new technology. Made possible by a grant from the Kauffman Foundation, this year’s conference will be held on April 12 in Washington, DC. The program will feature remarks from Ed Lazear, chairman of the Council of Economic Advisors, and a session on commercializing university innovation by Bob Litan and Lesa Mitchell of the Kauffman Foundation. It also includes presentations by a number of notable economists and academics, including: Wesley Cohen, Duke University; John Walsh, University of Illinois at Chicago; Shane Greenstein, Northwestern University; Carl Shapiro, University of California, Berkeley; Jean Tirole, Institut d'Economie Industrielle, Toulouse; and Joshua Lerner, Harvard University. The deadline to register is March 30. If you would like to attend, contact Rob Shannon – rshannon@nber.org.

View the preliminary program for the 2007 Innovation Policy and the Economy conference.

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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