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Block and Keller Call for Stim-Novation in D.C.

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In Washington, D.C. last week, Longview's Fred Block, writing with Matthew Keller, proposed that President Obama's economic recovery plan should place particular emphasis on strengthening the economy's capacity for innovation. They argue for "stim-novation"--policies that combine economic stimulus with prioritizing innovation.

Building on Success: Reforming the U.S. Innovation System

A White Paper by Fred Block and Matthew Keller, 12/1/2008

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Executive Summary

Crises are a time of both danger and opportunity. The current economic crisis in the U.S. is no exception. The danger of a long term economic slowdown in the U.S. and in the global economy is very real. In this crisis, the need for “stim-novation” is urgent. Stim-novation spending combines economic stimulus with measures that strengthen the economy’s capacity for innovation.

U.S. high technology has been one of the world’s economic success stories in the past thirty years. But there has been too little recognition that the U.S. government has developed a remarkable capacity to nurture innovation and the commercialization of new technologies across all sectors of the economy. Through financing, guidance, and connecting key players, government agencies have played a crucial role in developing America’s innovation economy.

This highly decentralized system has significantly shortened the time span between technological breakthroughs by researchers and their transformation into usable products or processes. Over the last twenty-five years, this system has produced key advances in computers, biotechnology, medical instruments and the development of new materials. In the face of environmental crisis, it has helped to nurture hundreds of new companies pursuing both alternative energy sources and new green technologies.

However, this formidable machinery for supporting innovation has many key weaknesses.

  • First, Federal budgetary support for the innovation system has been insufficient and unstable, and sometimes resources for commercialization have come at the expense of foundational scientific research.
  • Second, the priorities of the U.S. innovation system have been too often dominated by national security concerns or the needs of entrenched corporate interests. Moreover, weak priority setting co-exists with weak coordination across different agencies.
  • Third, many of the small high technology firms that the system has supported find it difficult to raise private capital so that they can survive through “the valley of death” — the long period before they have a marketable product.
  • Fourth, the U.S. system has been weak at deploying and implementing new technologies where there is a significant need for coordination and public-private cooperation. With broadband internet, flat panel displays, and photovoltaic solar energy, the U.S. made the key technological breakthroughs but then lost global leadership to other nations.
  • Finally, because this federally organized innovation system is largely unknown to the public, it lacks the visibility and support that it needs to function effectively.

  • The current economic crisis provides an opportunity to address all of these weaknesses. We propose:

  • Creating a cabinet level Department of Innovation that would raise the profile of current federal innovation efforts and improve their coordination. This new Department would also accelerate the deployment of new technologies that meet such critical national needs as energy independence and reducing greenhouse gases.
  • Elevating the need to include innovation spending in an economic stimulus package so we can build for the short term and the long term simultaneously.
  • Creating a new financing mechanism that would direct capital flows directly into the small firms that are the core of the innovation economy.
  • Read the rest of the white paper

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