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Special Feature: Book Review - Innovation Economics: The Race for Global Advantage
Gilbert B. Kaplan and Lauren M. Donoghue

In their timely new book, authors Rob Atkinson and Stephen Ezell examine how the United States is now losing the global innovation advantage, an area where we once led resoundingly. They thoroughly examine where we’ve been, where things stand currently, and what needs to be done to get America's economy back on track. This is an important message with the start of the President's second term and a new Congress. The authors present a compelling analysis and offer numerous solutions centered around the need for innovation policy. They also recognize the importance of a thriving manufacturing sector to economic success. They point to the decline in manufacturing as one of the most evident signs of U.S. economic decline, and also highlight the important point that manufacturing is different from other types of economic endeavors because it is an employment multiplier.

Innovation Economics offers thoughtful policy recommendations, including common-sense ideas such as developing a national innovation policy (which we sadly lack), investing more in workforce training and research and development, and putting in place more competitive corporate tax rates. Our government has a role to play in promoting U.S. innovation, and we should focus on “carrots” rather than “sticks” to motivate corporate decision-making. The book frames the question not in terms of why our economic policies are failing us, but rather why we are not committing ourselves to those innovation policies that we could easily put in place.

Other nations engage in innovation mercantilism (China), but the United States should focus on policies that promote innovation and productivity both at home and globally. Although clearly writing from an American perspective, the authors point out that policies that benefit the American economy and policies that promote the global economy--if innovation is the focus--are not mutually exclusive. In fact, they envision a global innovation system, one in which all nations can reap the benefits of higher productivity and per capita incomes if all nations are playing by the rules and if we are willing to take action against the ones who are not. This global system needs to have an international innovation policy framework, not one that focuses solely on maximizing trade.

Although America's declining economic standing is a gloomy reality, the book puts forth a not altogether bleak message. As the authors show, many of the causes of our economic decline are tied to policies that we can change, and as such the solutions are within our reach. We need to acknowledge that government has a role in helping America win the innovation race, we need to focus on boosting productivity and efficiency, and we need to take steps to invest in wealth-creating innovation. The authors point to Boston as a location that has learned to harness and ride the innovation imperative. America, they say, has to become more like Boston, and put advancing innovation at the center of our economic policy. This is an important lesson that we should take to heart as we begin the new year, the new Presidential term, and the new Congress.

Rob Atkinson is founder and President of the Information Technology and Innovation Foundation (“ITIF”). Stephen Ezell is a senior analyst at ITIF and leads ITIF’s work on science and technology, R&D, trade, and manufacturing policy.

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice.
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