Innovation Economics: The Race for Global Advantage [Hardcover]

Robert D. Atkinson (Author), Stephen J. Ezell (Author)

Book Description

Publication Date: September 4, 2012

This important book delivers a critical wake-up call: a fierce global race for innovation advantage is under way, and while other nations are making support for technology and innovation a central tenet of their economic strategies and policies, America lacks a robust innovation policy. What does this portend? Robert Atkinson and Stephen Ezell, widely respected economic thinkers, report on profound new forces that are shaping the global economy—forces that favor nations with innovation-based economies and innovation policies. Unless the United States enacts public policies to reflect this reality, Americans face the relatively lower standards of living associated with a noncompetitive national economy.

The authors explore how a weak innovation economy not only contributed to the Great Recession but is delaying America's recovery from it and how innovation in the United States compares with that in other developed and developing nations. Atkinson and Ezell then lay out a detailed, pragmatic road map for America to regain its global innovation advantage by 2020, as well as maximize the global supply of innovation and promote sustainable globalization.

Editorial Reviews

Review

"For those of us who believe America's brightest days are ahead of us, Atkinson and Ezell offer important insights about how we can insure that innovation is at the core of our country's progress."—Jack Markell, Governor of Delaware (Jack Markell )

“Rob Atkinson and Stephen Ezell present a compelling analysis of the causes of America’s long-term structural decline, providing a very readable account of the decline in our innovation advantage.  They lay out an important agenda for learning from what other countries have done, and overcoming our barriers to making our innovation system more robust and globally competitive.”—Willy C. Shih, Harvard Business School

(Willy C. Shih )

“It was rousing to read Innovation Economics. The authors have built a thorough and extensive understanding of the wide nature and spectrum of innovation as well as of reasons why the U.S. and all nations have so many challenges to run successful innovation policy. The list of eight “I’s” is an excellent summation of the broad areas that are crucial for successful innovation policy. I really enjoyed becoming familiar with the in-depth study and argumentation by the authors, and fully agreed with them.”—Dr. Veli-Pekka Saarnivaara, CEO, Tekes – Finnish Funding Agency for Technology and Innovation

(Veli-Pekka Saarnivaara )

"Atkinson and Ezell provide the definitive guide to innovation and its impact on economic prosperity. If you care about innovation, you need to read this book."—Justin Rattner, Chief Technology Officer, Intel Corporation

(Justin Ratner )

"In today's highly competitive global economy, innovation matters more than ever to a country's standard of living. But as Atkinson and Ezell so persuasively argue, this is a race in which the US is falling behind.  Even more concerning, they draw striking parallels to other countries that have followed similar paths.  This book challenges many myths about the US's long-term competitive situation, and offers important suggestions for how to reverse course. With Innovation Economics,  Atkinson and Ezell have sounded an important wake up call."—Gary Pisano, Professor of Business Administration, Harvard Business School

(Gary Pisano )

"Innovation Economics offers a frank assessment of many of the underlying causes of our economic challenges and helps explain why recovery has remained so elusive. Rob Atkinson and Stephen Ezell have collaborated on a timely call to action: America can compete and win the global economic race, but only if we change our mindset and update many of our policies.”—Senator Mark Warner (D, VA)

(Mark Warner )

“Innovation Economics” is a valuable book. The authors are right to warn that America’s leadership in several areas has eroded much more rapidly than most Americans think. They are right to argue that classical economists are often blind to the fact that innovation is the product of ecosystems rather than individual companies and that ecosystems are fragile. They are also right to worry that “innovation mercantilism” can be much more harmful to its targets than traditional mercantilism: even if it doesn’t benefit the sinner in the long run it can seriously damage the sinned against.”—Business Books Quarterly Review, The Economist

(The Economist )

“Yet why should government support for scientific research and technology development be spared from the belt-tightening? Unless society benefits inordinately from such spending, there is no case for special treatment. In a new book, Innovation Economics: The Race for Global Advantage (Yale University Press), Robert D. Atkinson and Stephen J. Ezell forcefully present the argument for the exceptional role that science and technology play in the economy. In their book, Mr. Atkinson and Mr. Ezell define innovation as not only the generation of new ideas but also as their adoption in new products, processes, services and organizational models. In their view, the goal of policy should be to invest in and nurture the development of the innovation pipeline, from basic science to commercialization. A linchpin of innovation policy, according to Mr. Atkinson, is collaboration between government and industry.” —Steve Lohr, The New York Times

(Steve Lohr The New York Times )

About the Author

Robert D. Atkinson is one of the country’s foremost thinkers on innovation economics. With has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is a valued adviser to state and national policy makers, and a popular speaker on innovation policy nationally and internationally. He is the author of Innovation Economics: The Race for Global Advantage (Yale, 2012) and The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth (Edward Elgar, 2005). Before coming to ITIF, Atkinson was Vice President of the Progressive Policy Institute and Director of PPI’s Technology & New Economy Project. Ars Technica listed Atkinson as one of 2009’s Tech Policy People to Watch. He has testified before a number of committees in Congress and has appeared in various media outlets including CNN, Fox News, MSNBC, NPR, and NBC Nightly News. He received his Ph.D. in City and Regional Planning from the University of North Carolina at Chapel Hill in 1989. Stephen J. Ezell is senior analyst, Information Technology and Innovation Foundation, and leads ITIF’s work on trade, manufacturing, and measuring international innovation and information technology competitiveness. He lives in Washington, DC.

Product Details

• Hardcover: 440 pages
• Publisher: Yale University Press; First Edition edition (September 4, 2012)
• Language: English
• ISBN-10: 0300168993
• ISBN-13: 978-0300168990
• Product Dimensions: 6.1 x 1.3 x 9.2 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (8 customer reviews)
• Amazon Best Sellers Rank: #87,236 in Books (See Top 100 in Books)

More About the Author

Dr. Robert D. Atkinson is one of the country's foremost thinkers on innovation economics. With has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is a valued adviser to state and national policy makers, and a popular speaker on innovation policy nationally and internationally. He is the author of "Innovation Economics: The Race for Global Advantage" (Yale, 2012) and "The Past and Future of America's Economy: Long Waves of Innovation That Power Cycles of Growth"
(Edward Elgar, 2005). Before coming to ITIF, Atkinson was Vice President of the Progressive Policy Institute and Director of PPI's Technology & New Economy Project. Ars Technica listed Atkinson as one of 2009's Tech Policy People to Watch. He has testified before a number of committees in Congress and has appeared in various media outlets including CNN, Fox News, MSNBC, NPR, and NBC Nightly News. He received his Ph.D. in City and Regional Planning from the University of North Carolina at Chapel Hill in 1989.

Most Helpful Customer Reviews

6 of 7 people found the following review helpful

4.0 out of 5 stars Pragmatism, Not Ideology, Key to Remaining in Pole Position in the Innovation Race November 4, 2012

By Serge J. Van Steenkiste

Format:Hardcover

Robert Atkinson and Stephen Ezell systematically challenge the ideological tenets of the dysfunctional Washington Economic Consensus that the U.S. economic elites cherish (pp. 54-56; 73-74; 78-80; 82-84; 93; 231-232; 250; 360; 363-364). Messrs. Atkinson and Ezell convincingly demonstrate that the U.S. is losing the innovation race by making the same mistakes that the United Kingdom made during its dramatic industrial decline from the mid-1950s to the late 1970s. The outcome of this decline has been trifold: 1) a decline in real manufacturing output as a share of gross domestic product, 2) the emergence of chronic trade deficits, and 3) slower per capita economic growth than most comparable nations over a sustained period of time (pp. 9; 32-56; 57-84; 360).

If the U.S. does not want to follow in the footsteps of the United Kingdom, it needs to acknowledge the gravity of the situation and acts decisively and boldly before it is too late (pp. 31-32; 62; 85-127; 162-163; 234; 250; 252; 263). Therefore, Messrs. Atkinson and Ezell call for a new Washington Economic Consensus based on the following ten principles:

1. Although the U.S. still has important strengths in sectors such as advanced aerospace and medical devices, it is no longer leading in innovation-based competitiveness. Think for example about the fast declining manufacturing sector, the more rapid growth of R&D overseas, or the relative decline in the number of scientists and engineers. This decline is expected to continue unless business, labor, academia, and the government work together (pp. 9; 17; 25; 34-46; 49-54; 59; 82; 89; 95; 97; 103; 109-124; 181-187; 227; 233; 236-237; 312).
2. The major economic role for the government is to organize societal resources (research, finances, knowledge, skills, and entrepreneurial effort) to generate new products, processes, and business models. The key to success for innovation is to combine flexibility for organizations to restructure and to innovate with security for workers. The security of workers should be tied to employability, not to employment (pp. 233; 300; 315-316).
3. Fiscal discipline is important, but funding for policies to spur innovation and competitiveness should not be subordinated to the short-term individualistic orientation of both the Left and the Right. The U.S. business community and society do not seem to be able to summon the will to invest for the long term and to grow wealth anew (pp. 13; 27; 66-68; 71-72; 75-76; 80-81; 233; 242-245; 312; 319; 359-360).
4. Globalization can be beneficial to the U.S. under two conditions. First, the country needs to systematically bring cases whenever U.S. interests are being hurt, even if U.S. companies do not want them to proceed. This policy would make clear to mercantilist nations, especially China, that threatening to punish U.S. firms for bringing cases is futile. Secondly, the U.S. has to correctly structure the three sides of the innovation success triangle, i.e., an effective business environment, an effective regulatory environment, and a strong innovation policy system. The U.S. innovation policy environment falls short in the areas of tax, trade, technology, and talent (pp. 10-11; 13; 31; 134-135; 141; 209; 215-216; 218; 233; 245; 251; 254; 259-263; 316-318; 320).
5. More and more nations have adopted a zero-sum, beggar-thy-neighbor innovation mercantilism to attract or to grow high-wage industries and jobs at the expense of the U.S., and in violation of the spirit and / or letter of the law of the global trading system. However, the export-led growth model pioneered by Japan and abundantly copied thereafter is hitting a wall due to the increasing inability of the U.S. and Europe to import at high enough levels (pp. 6; 11; 77-78; 90; 159; 191-225; 233; 259-263; 327; 331-332; 334; 356-357).
6. America's role in the global economy is to be a tough competitor that looks after its own economic interests first. The U.S. foreign policy has been focused mainly on military, not economic issues since the end of WWII. Furthermore, the U.S. needs to take the lead in working with other liked-minded nations committed to enforcing the global rules of fairly growing an innovation economy (pp. 46-49; 76-77; 100; 104-108; 159; 192-209; 210-211; 218; 224-225; 230; 233; 319; 346-348; 350; 352; 356; 359; 365-366).
7. Firms in traded sectors, high-growth entrepreneurial companies, and U.S.-headquartered multinational corporations are the jobs, innovation, productivity, and export engines of the U.S., which need to be encouraged by policy. Contrary to popular belief, Wall Street and Main Street play a secondary role in these areas (pp. 14-15; 27; 130-133; 142-159; 233; 274-275).
8. The best tax code is one that offers more incentives to invest in the U.S. Therefore, the U.S. Congress should take measures such as making the R&D credit permanent and more generous, recognizing the importance of high-skill immigration, and giving the Office of the United States Trade Representative more resources for trade enforcement. At a combined state-federal rate of 32 percent, the U.S. effective corporate tax rate is one of the highest in the developed world (pp. 171-176; 234; 238-239; 241; 298).
9. The federal government needs to not only support what the authors call "factor conditions" (e.g., basic scientific research and education), but also key broad industries and technologies (pp. 99; 134-141; 234-235; 245-249).
10. The government should pick winners by identifying general industries and broad technology areas of national economic importance and play a decisive role in mobilizing public and private resources to meet clear opportunities and challenges. Firm size should not be a criterion to pick winners. More and more U.S. companies realize that they are competing against foreign companies that are backed by their states (pp. 14-15; 69; 91-101; 124-127; 133-141; 158; 176-181; 192-209; 234; 275; 279; 291).

In summary, Messrs. Atkinson and Ezell invite Americans to recognize that the U.S. is no longer in pole position in the innovation race and to act decisively and boldly before the ongoing decline becomes irreversible.

4 of 5 people found the following review helpful

5.0 out of 5 stars If Only More Policymakers Would Read This Book November 14, 2012

By Joseph Kennedy

Format:Hardcover

This book lays out a clear case for a third approach to economic policy. The authors solution rejects the heavy faith that conservatives place on markets but agrees with them on the importance of economic growth. It also disagrees with most liberals about government's ability to pick winners and losers among different companies and industries but agrees with them about the importance of income inequality and infrastructure. The authors firmly believe that countries compete against each other in the economic and political environment they create. Their book explains the need for an innovation policy to improve this environment and explains what this policy would include.

Atkinson is the President and Ezell a senior analyst at the Information Technology and Innovation Foundation, which has produced much of the best policy research on competiveness over the last decade. They believe that most observers are underestimating the erosion of America's advantages in global trade. Until recently, much of this failure was covered up by our strong performance in a few computing industries and by the growth of debt-fueled consumption. Meanwhile the social and physical infrastructure supporting U.S. companies was not being replenished, leading to the decline of most manufacturing industries. Unlike conservatives, they believe that the competitiveness of American companies is strongly linked to the overall economic infrastructure and that this infrastructure requires sound government policies to encourage it because companies do not have an incentive to create it themselves.

But Innovation Economics is also careful to warn against the dangers of heavy government intervention. They spend a whole chapter on the decline of the United Kingdom and are skeptical about the ultimate benefits of China's intervention in markets. They do, however, argue for a much firmer trade policy because China's export mercantilism is imposing real costs on American industries.

The authors do, however, believe that polices like lower marginal taxes, the research & development tax credit, easier visa laws for foreign engineers and scientists, better patent laws, and increased government funding for basic research are important. Their book is filled with references to the latest research backing up their case. Their solutions would deliver broad benefits to almost all investors, leaving the market to determine what particular industries or technologies deserve investment. They discuss the challenges any innovation policy faces; the emphasis on short-term growth over long-term investment, the lobbying power of entrenched interests, and the government's poor record of keeping political forces at bay.

Although there are plenty of reasons to worry about the direction of the country, Atkinson and Ezell are on the whole optimistic. They believe America retains key core strengths even if it is in danger of losing its lead in many of these. They do not overestimate the challenges that other nations face. Most of all, they are very optimistic about the promise of innovation and technology to deliver higher living standards if only Americans will make the short-term sacrifices that greater investment and market reforms require.

Although the authors are clearly aware of the need for market reforms, they may put too much emphasis on policies that encourage the supply of innovation and not enough on measures that would boost its demand. Despite current policies, many industries have seen significant productivity improvements in the form of lower costs and higher performance. Computing and telecommunications are the two obvious examples, but staid industries such as auto parts, supply chain logistics, and back office functions have also undergone dramatic improvements. The integration of information technology has been a big part of the improvement (as has, in some cases, the move to cheaper labor) but taking full advantage of these technologies has usually required significant disruptive innovation, including the displacement of incumbents and the loss of jobs. Companies in these industries continue to invest not because of the R&D tax credit but because consumers expect and demand it as a cost of staying competitive.

Health care, energy, education, government services and other areas of the American economy have experienced little or no productivity process for decades. The reason is not a lack of new technology: each industry is experiencing an excess of new capacities linked to the Internet. The problem is that none of these industries allow market forces to work. Bad performance continues to be rewarded and promising experiments often face political hurdles. In each of these we are also unwilling to see the significant restructuring that a full integration of market forces and technology would produce. The political system is more concerned about the short-term economic and political costs rather than the medium-term rise in wages and living standards.

A pessimist would argue that the American system is incapable of making the necessary structural reforms to entitlements, markets, tax policy, private pensions, etc. But these programs will eventually collapse of their own weight. When faced with few alternatives, Americans have usually bet on the future. When they do so this time, Atkinson and Ezell have shed a clear light on many of the right solutions.

4 of 5 people found the following review helpful

5.0 out of 5 stars A drifting nation must read this October 27, 2012

By Mark Muro

Format:Hardcover

Few analysts have tracked America's economic decline so incisively as Rob Atkinson.

For nearly two decades, Atkinson and his colleagues have systematically chonicled how a bad mix of laissez faire ideology and complacency has led the nation to cede economic advantage by allowing America's post-war system of practical innovation to dissipate. Others may have sensed decline but nobody probed so deeply.

And yet, what has always been compelling about Atkinson--the tribunal of decline--is that he is also America's leading polymath of practical solutions. Rob Atkinson knows not just what has gone wrong but exactly how to fix it, drawing from decades of experience with federal, state, and regional policy as well as with the best-in-class practices of our global competitors.

All of which makes Atkinson's new book "Innovation Economics"--written with his colleague Stephen Ezell--a must read this winter as the nation faces as must-win opportunity to roust itself from drift. With new force, Atkinson and Ezell pour into "Immigration Economics" their most relentless analysis yet of the causes of America's economic decline: the erosion of the nation's innovation capacity; the loss of its manufacturing base; the abdication by policymakers of any role in reversing decline. Yet beyond that, the authors also mount a fully worked out argument for how nations can regain their mojo. This is "innovation economics," and it entails placing industrial innovation--not lone inspiration but the busy, collaborative work of building innovative industries and firms and regions--at the very center of economic policy.

Nor do Atkinson and Ezell stop there: In addition to laying out a clear strategy by which nations and regions can win the race to lead, they provide a detailed framework for executing that affixes dozens of specific actions steps to the eight "I's" of innovation policy, ranging from "inspiration" (goal-setting) and "intention" (prioritization) to "incentives," "investment," and institutional innovation. In short, Rob Atkinson and Stephen Ezell provide with "Innovation Economics" not just a withering critique of past fecklessness and an exhortation to act but also a detailed action plan for getting the nation moving again.

In sum, "Innovation Economics" couldn't have come too soon. Now, here's hoping it's not too late for governors and mayors and industry leaders, if not Washington, to pick it up and get to work. There's a lot that needs to be done.