Moving Forward: The Challenge of the Future PlanSmart New Jersey: - - PowerPoint PPT Presentation

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Moving Forward: The Challenge of the Future PlanSmart New Jersey: - - PowerPoint PPT Presentation

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June 13, 2014 Moving Forward: The Challenge of the Future PlanSmart New Jersey: 2014 Regional Planning Summit Stephen Ezell, Senior Analyst Information Technology and Innovation Foundation ITIF is a public policy think tank committed to

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June 13, 2014

Moving Forward: The Challenge of the Future

Stephen Ezell, Senior Analyst Information Technology and Innovation Foundation PlanSmart New Jersey: 2014 Regional Planning Summit

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ITIF is a public policy think tank committed to articulating and advancing a pro-productivity, pro- innovation, and pro-technology public policy agenda internationally, in Washington and in the states. ITIF focuses on: § Innovation processes, policy and metrics § Science policy related to economic growth § E-commerce, e-government, e-voting, e-health § IT and economic productivity § Innovation and trade policy § Clean energy

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Today’s Presentation

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What’s Happened to the U.S. Innovation Economy? What is Innovation and Why Does it Matter?

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How is New Jersey Faring? How States & Regions Can Spur Innovation-Based Growth

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Yale University Press September 2012

Rob Atkinson Stephen Ezell

Innovation Economics: The Race for Global Advantage

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Innovation Myths and Realities

  • 1. Innovation is only about new or better products and services …

It’s about transforming existing conditions into preferred ones…

  • 2. Innovation is risky…

Failure to innovate is what is risky…

  • 3. Innovation is expensive, demanding lots of resources…

Failure to innovate is what is costly…

  • 4. Failure is unacceptable…

Failure has value so long as it generates useful learning.

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Innovation Isn’t “Manna from Heaven”

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Today’s Presentation

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What’s Happened to the U.S. Innovation Economy? What is Innovation?

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How is New Jersey Faring? How States & Regions Can Spur Innovation-Based Growth

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U.S.: Worst Recession Since the 1930s

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Caused by Deep Manufacturing Job Losses in the 2000s

  • 40%
  • 30%
  • 20%
  • 10%

0% 10% 20% 30%

Total Jobs Manufacturing Jobs

2000-2011 1990s 1980s

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Many Fewer Major Industrial Manufacturing Relocations & Expansions To Go After

Average Annual U.S. Industrial Relocations, Source: Innovation Economics, ITIF, 2012

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Countries and States Have Become Price Takers in Global Markets

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U.S. Now a Less Attractive Location for Investment

§ Highest corporate tax rate in the OECD § 27th most generous (& unstable) R&D tax credit § Stagnant science funding (22nd in university research funding) § Faltering education system (23rd in science education) § Inadequate physical infrastructure (23rd in quality) § Counter-productive high-skill immigration policy

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§ The Study: compares innovation-based competiveness of 44 nations and regions. § 16 indicators: including corporate and government R&D, scientists and engineers, new firms, corp. tax, productivity growth and

  • thers.

The Atlantic Century II

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Overall Score for Global Competitiveness and Innovation

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0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

Singapore Finland Sweden U.S.

  • S. Korea

UK Canada Denmark NAFTA Netherlands Japan Australia Belgium France Ireland Germany Austria EU-15 EU-25 Czech Rep. Estonia Hungary Spain Slovenia Portugal Slovakia EU-10 Latvia Russian Italy Malaysia Lithuania Chile China Cyprus Poland Greece Brazil Turkey Mexico South Africa Argentina India Indonesia

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0.0 5.0 10.0 15.0 20.0 25.0 China

  • S. Korea

Cyprus Slovenia Estonia Czech Rep. Latvia Singapore EU-10 Portugal Hungary Lithuania India Austria Chile Greece Japan Slovakia Finland Denmark Australia Indonesia Ireland UK Brazil Mexico Poland EU-25 Netherlands Turkey Spain Argentina Russia Canada Malaysia EU-15 France Germany Sweden Belgium NAFTA South Africa U.S. Italy

Near Bottom at Improving Innovation Capacity

Change Score: 2000-2010

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1. Believe we’ll always be #1 without having to do anything about it. 2. Don’t believe we’re in economic competition with other nations. 3. We lack a political consensus that technology and innovation drive economic growth. § We demean proactive innovation-promoting policies as “industrial policy.” 4. We believe markets acting according to price signals alone will generate all the innovation society needs. 5. We’re more concerned with redistributing the pie than growing it.

Weaknesses of the U.S. Innovation System

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Today’s Presentation

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What’s Happened to the U.S. Innovation Economy? What is Innovation?

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How is New Jersey Faring? How States & Regions Can Spur Innovation-Based Growth

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2014 State New Economy Index

The 2014 State New Economy Index assesses U.S. states on 25 indicators, divided into five key areas, that best capture what is new about the New Economy:

  • 1. Knowledge jobs
  • 2. Globalization
  • 3. Economic dynamism
  • 4. The digital economy
  • 5. Innovation capacity
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2014 State New Economy Index 10th

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The Leading States in the 2014 Index:

  • 1. Make significant investments to support key “building blocks of

innovation”: infrastructure, education, and scientific research;

  • 2. Have companies/industries oriented toward global markets, in

terms of exports and FDI;

  • 3. Are at the forefront of the ICT revolution, both with regard to

ICT usage and production;

  • 4. Have large concentrations of knowledge workers;
  • 5. Attract high levels of domestic and foreign migration of those

knowledge workers.

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New Jersey in the 2014 State New Economy Index

Scores Best:

§ Foreign Direct Investment (5th) § Fast-Growing Firms (5th) § Patents (Per Worker) (6th) § Broadband Telecommunications Adoption (6th) § Industry Investment in R&D (7th)

Scores Weakest:

§ Non-Industry Investment in R&D (40th) § Manufacturing Value-Added (39th) § Entrepreneurial Activity (37th) § Health IT (37th) § E-government (31st)

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Historical New Jersey SNEI Ranks

1999 2002 2007 2010 2012 2014 8th 6th 2nd 4th 10th 10th

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Today’s Presentation

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What’s Happened to the U.S. Innovation Economy? What is Innovation?

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How is New Jersey Faring? How States & Regions Can Spur Innovation-Based Growth

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1) Embrace “Innovation Economics”

“Productivity growth is the single most important factor to

  • ur economic well-being. But it is not a policy issue,

because we are not going to do anything about it.” § The central goal of economic policy should be to spur higher productivity and greater innovation. § Markets relying on price signals alone will not always be as effective as smart public-private partnerships in spurring higher productivity and greater innovation.

Joseph Schumpeter Paul Krugman

Maximizing Innovation-Based Economic Growth

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2) Master the “8 I’s” of Innovation Policy

  • 1. Inspiration – Set ambitious goals.
  • 2. Insight – Learn from the best practices of others.
  • 3. Intention – Commit to specific actions.
  • 4. Investment – Increase funding for innovation/productivity.
  • 5. Incentives – Incent desired firm and individual behaviors.
  • 6. Institutions – Doing new things in new ways.
  • 7. Information Technology – ICT as an innovation platform.
  • 8. International – Bolster traded-sector competitiveness.
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Business Environment Innovation Policy Environment Regulatory Environment

3) Get the “Innovation Triangle” Right

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  • 1. Vibrant capital markets;
  • 2. High levels of entrepreneurship;
  • 3. Strong management skills;
  • 4. Strong ICT adoption, especially among business;
  • 5. Embrace dynamic churn and change (e.g. creative destruction).

Business Environment

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  • 1. Transparent policies (including regarding land use policies);
  • 2. Reasonably enforceable property rights;
  • 3. Make it easy to start and operate businesses;
  • 4. Support pro-competition regulatory policies and foster economic

clusters.

Regulatory Environment

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Regulatory Principles for the Innovation Economy

  • 1. Anticipate innovation;
  • 2. Embrace transparency;
  • 3. Trust the customer;
  • 4. Try to avoid Type I errors;
  • 5. Adhere to cost/benefit analysis.
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Innovation/Technology Policy Environment

1. Strong STEAM-D education approach; 2. Active policies to spur digital transformation; 3. Incentives to invest in R&D, capital equipment, workforce training; 4. Supporting technology transfer from universities to private sector 5. Funding for research, especially that which is commercially-oriented.

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Technology Talent Tax Trade

Flickr: marzzelo Flickr: Alan Miles NYC Flickr: Nedral

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4) Just Remember the “4 Ts”

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Collaboration is Essential

§ For many states/regions/cities, the main competition isn’t the one next door—it’s half a world away. § Everyone has to collaborate/coordinate to create a more competitive environment for NJ/U.S. enterprises.

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facebook.com/innovationpolicy www.innovationfiles.org www.youtube.com/techpolicy www.itif.org

Follow ITIF:

Thank You

Stephen Ezell sezell@itif.org