Is 'Innovation Policy' an Oxymoron?

Is 'Innovation Policy' an Oxymoron?

Where does innovation come from? In one view, it's something that just happens naturally in any society. In another, it's something more individualized and unpredictable, a magic that springs forth from the minds of creative iconoclasts in places like Silicon Valley.

These two prevailing views of innovation are wrong, or at least incomplete, and their errors have significant implications for the role of government. If innovation were a constant, or something that emerged full-blown from the minds of creative entrepreneurs, there would be little for government to do. But in fact, it comes from organizations assembling resources and working together to solve problems.

Indeed, the innovation consultancy Doblin has found that by applying a rigorous, formalized innovation process, enterprises can achieve up to a seven-fold increase in their innovation success rate. And frequently, a single enterprise working in isolation is not enough: U.C. Davis professor Fred Block has found that approximately two-thirds of the best U.S. innovations now involve some kind of inter-organizational collaboration with other firms, government agencies, federal laboratories, and research universities.

Because innovation is a process and a discipline, there is a vast array of things government can and should do to encourage it. It's time for our nation to rally around solving a few big challenges — like the development of low-cost, low-carbon energy sources, affordable robotics, and a cure for Alzheimer's and other chronic diseases — the way President Kennedy did with putting a man on the moon.

Governments can ensure that organizations — from startups to major global corporations — have access to needed innovation inputs, such as a skilled workforce and scientific and technological knowledge. This means providing workforce training and expanding the immigration of scientists and engineers, as well as funding university research, where the U.S. now ranks just 24th in the OECD. Government also needs to ensure an adequate legal, regulatory, and trade environment, taking steps not only to fully fund regulatory agencies, but also to ensure that regulation is smart and limited and does not squash innovation.

An effective innovation policy also includes things like a permanent and much more generous R&D tax credit (the U.S. R&D credit is an abysmal 27th in the world in generosity), programs to help small and mid-sized manufacturers adopt new technology, and funding public-private research partnerships in key technologies (such as advanced batteries, robotics, and artificial intelligence) and key industries (like semiconductors, aerospace, IT, and life sciences). And we should also copy over 20 other nations around the world and create a National Innovation Foundation, akin to the National Science Foundation, but with a mission to help organizations and entrepreneurs turn ideas into innovations.

Accelerating innovation also entails focusing on how technology can transform government and government-related industries like education, health care, and transportation. This means that Congress should task each major federal agency with developing action plans for the particular industries they are involved with. For example, the Department of Housing and Urban Development should develop an action plan to support innovation in the construction industry, and the Department of Transportation should develop a plan to spur the adoption of intelligent transportation systems.

Innovation policy need not be a left-right issue, although Washington's hyper-partisan environment makes it one. Too many liberals buy into the incorrect notion that almost all the gains from innovation have gone to the "1 percent," and therefore either oppose or ignore federal policies like the ones above. Too many conservatives buy into the incorrect notion that maximizing innovation is simply about unleashing the private sector from government shackles, and therefore oppose expanded R&D tax incentives and funding of public-private technology programs.

In short, if America is to thrive through innovation, policymakers need to recognize that the forces for innovation that come from all parts of the system, including from smart government policies, and support those forces. Indeed, accelerating the rate of innovation is the most important thing they can do when it comes to economic policy.

Robert Atkinson is founder and president of the Information Technology and Innovation Foundation, a technology-policy think tank in Washington, D.C.

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