Accelerating Innovation

Enhancing the Economic Impact of Scientific Discovery

SOURCE: iStockphoto Creating a vibrant entrepreneurship ecosystem is key to fostering broad-based economic growth and competitiveness. Astute policymaking is necessary.

A vibrant, healthy economy requires innovation as well as the commercialization of innovation in the form of products, services, processes and business models that create value in the economic marketplace-what is generally considered entrepreneurship. This process of discovery, development and commercialization occurs within a dynamic innovation and entrepreneurship ecosystem that includes enablers and accelerators, as well as barriers and retardants.

In addition to enhancing the discovery and development processes that occur within corporate, university, and government laboratories, enhancing the ecosystem that supports the commercialization process-including the institutional and individual actors-is critical for enhancing the overall return on investment, wealth creation and broad-based economic growth. And we are fortunate that the Obama administration “gets it.” One of the six major Department of Commerce initiatives highlighted in the White House Office of Management and Budget outline for the fiscal year that will begin October 1, 2009 is the following:

Expands economic development through the promotion of regional innovation clusters and the creation of a national network of public-private business incubators.

Specifically, the budget proposal includes $50 million for the Department of Commerce to create “a nationwide network of public-private business incubators to encourage entrepreneurial activity in economically distressed areas.” Further, a study conducted for the Department of Commerce’s Economic Development Administration and released on September 30, 2008, entitled Construction Grants Program Impact Assessment Report, highlights the following:

EDA’s strategic focus on innovation and entrepreneurship makes sense, in that investments in business incubators generate significantly greater impacts in the communities in which they are made than do other project types.

This key finding is particularly relevant in the current economic downturn when job retention and job creation is a high priority. Yet job creation—in good times and bad—is an indicator of healthy economic dynamism. The concept of an incubator as one element of an innovation and entrepreneurship ecosystem can apply at the local level in “economically distressed” areas—as envisioned in the White House’s budget outline—but it also makes sense to consider the application of business incubation more broadly, including development and alignment of incubators (and networks of incubators) with sources of innovation, such as university, corporate, and government labs.

In each case there is longstanding pressure on these institutions to enhance the conversion of technology into commercial value with respect to the rate of conversion and yield from the conversion process, which can be reflected in a comprehensive return on investment analysis that could include factors such as increase in aggregate revenues, increase in jobs, increase in companies, increase in risk capital, increase in number of serial entrepreneurs, and so forth.

It is also important to consider the role incubators can play in catalyzing the creation of—and supporting the success of—complementary elements within the innovation and entrepreneurship ecosystem. These elements include:

• Sources of capital, such as angel networks, venture capital firms, corporate venture capital funds
• Programs that develop entrepreneurial talent, particularly universities with highly evolved entrepreneurship degree and certificate programs
• Technology transfer and business development programs that are affiliated with corporate, university and government labs.

Various researchers have explored the concept of an entrepreneurship ecosystem, focusing in particular on regions that have demonstrated success over many decades, such as Silicon Valley and the Route 128 corridor in Massachusetts. Keys to success include production of innovation and intellectual property, the availability of resources, particularly risk capital, an entrepreneurial talent pool, and the extent to which these elements are able to freely flow across the ecosystem. Leading-edge, well-managed incubators have proven to be useful catalysts for the development of talent, the attraction of resources, and the enhanced flow of intellectual property from sources of innovation into new start-up company and corporate ventures.

These ingredients of successful innovation clusters are largely well understood, but how policymakers can encourage the growth of these clusters is less clear. The policymaking debate now going on in Washington centers on whether new funding for innovation should flow through:

• Existing programs
• A new public/private partnership programs that includes existing program managers and the private sector in crafting better innovation policy and investment decisions
• A new public innovation fund such as the one proposed by Robert Atkinson of the Information Technology and Innovation Foundation.

This debate undoubtedly reflects the tension between the need for short-term, high-impact economic stimulus that can help pull us out of the current economic crisis versus the desire for long-term restructuring of our innovation ecosystem to ensure that the United States is a leader in innovation globally.

A two-pronged approach seems most sensible. The existing U.S. entrepreneurship/innovation/risk capital ecosystem has evolved over the past 60 years and is the envy of the world. In the short run, we should take advantage of our leadership position in this arena. In my view, the federal government would be well-advised to establish a blue-ribbon panel of leaders with deep experience in the existing innovation ecosystem.

This panel should include representatives from the National Business Incubation Association, the Association of University Technology Managers, and the Center for Venture Education, alongside leaders from various government agencies such as the National Science Foundation, the Defense Advanced Research Project Agency, or DARPA, the Department of Energy, the Small Business Administration, the National Institute of Standards and Technology, and the National Institutes of Health that promote innovation through Small Business Innovation Research and Small Business Technology Transfer programs and other programs, such as those run by EDA.

These experts could quickly assemble a portfolio of ready-to-implement projects through which leading innovation-support organizations can have immediate impact on the growth of ventures already operating in strategic innovation domains. In addition, this blue ribbon panel should be charged with:

• Monitoring the impact of the near-term investments into the existing innovation ecosystem
• Identifying the highest leverage opportunities for medium-to-long term investments that can accelerate the further development of the innovation ecosystem to ensure continuing U.S. leadership.

Engaging in a two-pronged approach under the direction of a blue ribbon panel of the most experienced and accomplished leaders in the innovation ecosystem would enable the federal government to aggressively address short-term opportunities to leverage the existing innovation ecosystem and long-term opportunities to accelerate our nation’s continuing evolution into the global leader for driving economic and social development. In this way, we will achieve the greatest short-term impact on overcoming the current economic crisis while also ensuring the greatest return on public investment in advancing the U.S. innovation ecosystem over the long term.

Mark P. Rice is the Frederic C. Hamilton Professor for Free Enterprise at Babson College and the former Dean of Babson’s Graduate School, which has been ranked number one for entrepreneurship for the past sixteen years. Dr. Rice co-founded one of the first companies in the pioneering Rensselaer Polytechnic Institute Incubator Program in 1979, and subsequently served as the Director of the RPI Incubator, which in 2005 was recognized as the Randal Whaley Incubator of the Year by the National Business Incubator Association. In his doctoral dissertation research, Rice gathered extensive field data in ten incubators across the country, exploring the intervention mechanisms used to influence the critical success factors of new ventures.

Tags: innovation clusters, reg

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