A key way for the United States to improve productivity, create jobs, and grow the domestic economy over the long term is for the government to support the growth of regional centers of innovation. Yesterday morning, the Center for American Progress hosted an event, “Enabling Economic Recovery Through Innovation,” that explored policies for place-specific, technology-based economic development. But investment alone will not enable the next Silicon Valley—as panelist and former Chief Democratic Council to the U.S. House Committee on Science and Technology Jim Turner noted, “If we’re not organized, we’re going to fail.”

Joining Turner on the panel were CAP Senior Fellow Tom Kalil, Information Technology and Innovation Foundation President Rob Atkinson, University of Chapel Hill Public Policy Professor Maryann P. Feldman, and Richard Seline, CEO and Principal of New Economy Strategies.

Innovation is not distributed, noted Feldman, saying that “what makes the world interesting are spikes,” or areas with technological corridors and communities that serve as hubs of innovation. Speaking specifically about case studies assessing Silicon Valley, San Diego, and Route 128 in Massachusetts, Feldman said it was the creation of good infrastructure and the support for small and medium enterprises that helped the flow of innovative ideas. But even for less glitzy innovation outside of computer software and biotech, she explained the importance of place: Toledo, Ohio is in fact a world leader in photovoltaic technology.

Atkinson explained the comparative inadequacy of U.S. investment in innovation support, noting that to match the per-capita government contributions of Finland, the government would need to spend $34 billion a year. State and regional economies underinvest in innovation, he said, and his proposed solution is the creation of a National Innovation Foundation that would coordinate efforts across the country. Kalil also said that, “The capacity of the federal government to promote various kinds of innovation is not even distributed,”which was a coordination problem that Seline echoed.

While policymakers work to remove those federal barriers, Kalil explained that universities—often hubs of regional innovation—can shift priorities to enhance the innovation process by funding students and faculty with novel ideas and incorporating entrepreneurial principles across the curriculum. Young students, Seline explained, are excited about starting innovative projects not just to make money, but also to find solutions to societal problems.

UPDATE: Full video of the Regional Centers panel is available:

The second panel of the day tackled patent reform:

To learn more, read the reports from the Taskforce on Regional Centers of Innovation:

Place Matters
Innovation Springs from Many Seeds, But Soil Is Equally Important
By Maryann Feldman

The Federal Role in Catalyzing Innovation
Beyond the Beltway and Through the Networked Economy
By Richard Seline and Steven Miller

Pittsburgh’s Targeted Incubator
Taking Innovation to the Next Level
By James F. Jordan and Paul L. Kornblith

Creating a National Innovation Foundation
Economic Prosperity Rests on Diverse Technology
By Robert Atkinson and Howard Wial

Benchmarking Foreign Innovation
The United States Needs to Learn from Other Industrialized Democracies
By Stephen Ezell

British Innovation Policy
Lessons for the United States
By Will Straw

Regional Centers of Innovation 101

Innovation Clusters (full archive of innovation clusters work on Science Progress)

Science Progress Editorial Director Ed Paisley provides a brief overview in this Ask the Expert video:

What are regional centers of innovation?

A regional center of innovation is a geographic area that supports technology-based economic development through a dynamic mix of researchers, entrepreneurs, investors, and infrastructure, with support from universities and local, state, and federal government policies.

In the United States, the two best examples are Silicon Valley, the hotbed of computer technology in northern California, and the metropolitan Boston area connected by Route 128, which is a nexus of biotechnology research and development. Each is centered around key research institutes: Stanford University in California and the Massachusetts Institute of Technology in Massachusetts. Both areas excel because they are regions where exciting work happens and where high-tech workers socialize, sparking unexpected and unexplored ideas. Innovation springs from these interactions as individuals connect with capital, business and marketing talent, and ideas evolve into successful products, services and businesses.

Prosperous regional centers provide dividends to the domestic and world economies—advanced IT in the case of Silicon Valley and life-saving medical advances in the case of Boston. They also benefit local communities by attracting a talented and high-paid workforce, cultural organizations, and start-up businesses that generate tax revenue and support the cycle of growth.

What factors encourage the formation of a regional center?

Because economic growth is complex, local, and ultimately beyond anyone’s control, there is no one-size-fits-all formula for creating a regional center. Many areas have failed despite valiant efforts. But examining those that have succeeded reveals a set of principles that provide a framework for what works and what doesn’t. To paraphrase the innovation experts writing in Science Progress: policymakers can’t always predict how regional factors will contribute to innovation, but they can till the soil that will allow them to flourish. At the state level, these elements are key:

Comparative Advantages

Regions must identify advantages in science, technology, and innovation that sustain and drive a state economy. These can include life sciences, information technology, manufacturing, or agriculture. A regional center takes advantage of existing resources and talent.

Capital

Groups aiming to cultivate a regional center must find the sources of seed capital and venture capital needed to invest in research, business incubation, and people.

Networking: Capital and Ideas

Policymakers, entrepreneurs, and researchers must work to align research interests in the region with opportunities for commercialization—the complex process of turning new discoveries into marketable products—that will spark investor interest. This requires utilizing sources of innovation that include universities, entrepreneurs, and dormant intellectual property housed in private industry. In some instances, this necessitates importing innovation from outside the region.

Networking: People with Capital and Ideas

Innovation policy should attract the best researchers to develop regional centers of excellence. To complement research capabilities, it’s also necessary to attract industry-specific business talent to provide key commercialization skills, access to venture capital investment, and mergers-and-acquisitions experience.

Space

Innovators and entrepreneurs need space to do high-quality work. Development groups, often working with local universities, must provide the physical space necessary for innovation and commercialization to thrive. This involves creating the best research space to draw the best talent and building cost-effective incubation space and services. Quality housing, transport facilities and schools will also help attract the best people to the region.

How can regional centers support economic recovery and growth?

The United States, now ranks seventh among the 30 most developed countries in the amount of gross domestic product devoted to research and development, falling most recently behind Japan and South Korea.

The main reason: Since the late 1960s federal government spending on research and development has declined as a share of both total R&D spending and GDP. This has contributed to an alarming decline in the number of researchers as a proportion of the labor force. Boosting government funding of basic R&D in a number of economically innovative ways must be part of the new administration’s economic stimulus program.

Science Progress Advisory Board member Thomas Kalil, a Senior Fellow at the Center for American Progress, outlined a variety of ways in which the federal government can work with universities and state and local governments to foster regional centers of innovation in his report, “A National Innovation Agenda: Progressive Policies for Economic Growth and Opportunity Through Science and Innovation.” And Rob Atkinson, a member of Science Progress’ Taskforce on Regional Centers of Innovation and president of the Information Technology and Innovation Foundation, presents his proposal for a National Innovation Foundation as one fruitful approach to distributing these funds in the latest edition of Science Progress.

A long-term sustainable increase in U.S. economic growth depends upon a continual stream of new ideas, products, and processes. It is these innovations that will fuel improvements in productivity across the entire economy and raise living standards for all.

To learn more, read the reports from the Taskforce on Regional Centers of Innovation:

Place Matters (.pdf)
Innovation Springs from Many Seeds, But Soil Is Equally Important
By Maryann Feldman

The Federal Role in Catalyzing Innovation (.pdf)
Beyond the Beltway and Through the Networked Economy
By Richard Seline and Steven Miller

Pittsburgh’s Targeted Incubator (.pdf)
Taking Innovation to the Next Level
By James F. Jordan and Paul L. Kornblith

Creating a National Innovation Foundation (.pdf)
Economic Prosperity Rests on Diverse Technology
By Robert Atkinson and Howard Wial

Benchmarking Foreign Innovation (.pdf)
The United States Needs to Learn from Other Industrialized Democracies
By Stephen Ezell

British Innovation Policy (.pdf) (online exclusive)
Lessons for the United States
By Will Straw

For much of the postwar period, economic discourse focused on the internecine warfare between Keynesians and monetarists, yet cutting-edge economic thought increasingly is exemplified in “innovation economics,” whose simple principle is that new ideas, products, and processes are the key to unlocking broad-based economic growth. As Stanford University Professor Paul Romer puts it, “human history teaches us that economic growth springs from better recipes, not just from more cooking.”

The right incentives must exist to ensure that inventors have a reason to innovate, and the right policy environment must be in place to encourage regional centers of innovation to flourish across the country.

Most countries in the world import their innovation by adopting technological developments from abroad. But the United States has always been on the technological frontier. Whether it is the automobile, airplanes, lasers, or the Internet, innovators in America have pushed the boundaries of ingenuity. Over the last few decades, however, other countries have begun to catch up—and in some measures are moving ahead. The United States, for example, now ranks only seventh among the industrialized democracies in the amount of gross domestic product devoted to research and development, falling most recently behind Japan and South Korea.

The main reason: Since the late 1960s federal government spending on research and development has declined as a share of both total R&D spending and GDP. This has contributed to an alarming decline in the number of researchers as a proportion of the labor force. Boosting government funding of basic R&D in a number of economically innovative ways must be part of the new administration’s economic stimulus program, as the Center for American Progress detailed in its November 2007 report “A National Innovation Agenda.” The latest volume of Science Progress, to be released on January 12 at our event “Enabling Economic Recovery Through Innovation,” contains two new reform initiatives grounded on two central principles: the right incentives must exist to ensure that inventors have a reason to innovate, and the right policy environment must be in place to encourage regional centers of innovation to flourish across the country. Let us consider each of these principles in turn.

Innovation is subject to a fundamental market failure. Put simply, its lifeblood—research and development—is costly while the end product may be relatively easy to replicate. This means that unless inventors can claim monopoly rights of production for a period of time, they will not be able to recover their up-front investment costs. The United States’ patent system was initiated by the founding fathers in Article 1, Section 8 of the U.S. Constitution, which states “Congress shall have the power…to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

Congress has achieved this in different ways over the past two centuries, but the U.S. patent system is now stuck in the 20th century. Chief among the problems are the backlog of about 1 million patent applications; the poor quality of granted patents, which in turn lead to expensive and time-consuming court cases; and the emergence of so-called “patent trolls,” or investors who acquire the rights to certain inventions and then essentially hold that intellectual property for ransom when companies use them in their products and services.

Efforts fell short in the last Congress to reform the patent system. The incoming 111th Congress must conclude the process, but there are other changes that can be made which do not require legislation. President-elect Barack Obama must select a Patent and Trademark Office director with great organizational skills who will enhance the resources of examiners, increase transparency, and make better use of work sharing with other patent offices around the world. Patent applicants also have a responsibility to make the system work better by recommitting themselves to the highest and fairest standards as they craft their claims and defend their intellectual property. Finally, the courts should tread fairly but assertively into the legal frontier that remains unaddressed by the PTO and Congress.

Patentable products and services, however, require more than legal protection to boost economic growth. Innovative ideas also need good soil in which to germinate and grow. In the United States, certain regions are home to many of the world’s best inventions. The cluster of high-tech companies around Stanford University in Silicon Valley and biotechnology companies around the Massachusetts Institute of Technology are just two of the more eye-catching examples—clusters that evolved over time due to the confluence of academic, industrial, and financial specialization. Other clusters, such as Research Park Triangle in North Carolina, married innovative specialization with thoughtful government policymaking to create new ideas and new jobs.

To get the most from these centers, and to encourage new ones to emerge, universities and companies more than ever today require the right mix of government policies. The forthcoming edition of Science Progress and this website will include suggestions of how to get this right, including a tax system and regulatory structure that encourages risk taking and rewards R&D activity; a National Innovation Fund that allocates resources where they are needed; metrics by which to ensure the right local infrastructure is in place; and lessons from other governments that value service sector innovation as well as more traditional scientific R&D.

The Obama administration and the new Congress have a unique opportunity to craft a new set of innovative economic policies that encourage immediate and long-term sustainable economic growth. With the right stabilization, stimulus, and recovery policies, the United States can pull itself out of the current recession and restore science, technology, and innovation as the centerpieces of the U.S. economy. Reforms that reward and encourage invention are critical to that mission.

Will Straw is Associate Director of Economic Growth at the Center for American Progress.

The release event, here at the Center for American Progress, will feature two separate panels: one on regional centers, the other on patents. To RSVP, visit the americanprogress.org event page. Here’s the full description and list of participants:

Enabling Economic Recovery Through Innovation
The incoming Obama administration and the new 111th Congress will have a historic opportunity to boost U.S. economic competitiveness and broad-based economic growth through targeted reforms of our country’s patent system and scientific research-and-development and workforce development programs. Our patent system and today’s federal programs were designed to address 20th-century problems, not the new challenges posed by globalization and worldwide economic distress.

The latest edition of the CAP’s Science Progress journal presents the results of two roundtables convened to consider ways to reform our patent system and encourage the growth of regional centers of innovation around the country. Those recommendations will be unveiled in Science Progress along with two panel discussions on the topics. Please join our distinguished panelists, including participants of our two roundtables and authors of some of our new policy recommendations.

9:30 a.m.
Regional Centers of Innovation Panel:

Robert Atkinson, President of the Information Technology and Innovation Foundation
Maryann P. Feldman, Heninger Distinguished Professor at the University of North Carolina
Thomas Kalil, Senior Fellow at the Center for American Progress
Richard Seline, CEO and Principal of New Economy Strategies

Discussion moderated by:

James K. Turner, former Chief Democratic Counsel to the U.S. House Committee on Science and Technology

11:00 a.m.
Featured Speakers on Patent Reform:

Bruce A. Lehman, Chairman of International Intellectual Property Institute
Paul R. Michel, Chief Circuit Judge
Arti K. Rai, Elvin R. Latty Professor of Law at Duke University
Rick Weiss, Senior Fellow at the Center for American Progress

Discussion Moderated by:

Daniel P. McCurdy, CEO of Allied Security Trust and Chairman of PatentFreedom

RSVP
Click here to RSVP for this event
For more information, call 202-682-1611