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eu-investment

Innovation Fact of the Week: EU Private Sector R&D Investment is 57% of U.S. Level

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

After controlling for GDP, businesses in the European Union were investing 57 percent as much in research and development (R&D) as their U.S. counterparts as of 2013. This should be of great concern to EU member countries since the bloc’s public investment in R&D was similar to that of the United States—just under 1 percent of GDP. Simply put, European businesses haven’t been doing enough to spur innovation in the region’s economy.

A successful innovation ecosystem requires robust investment from both public institutions and private industry. Bruegel, a Brussels-based economic policy think tank, has examined key measures of the region’s innovation capacity and found that the gap between the EU and United States reflects “a growing innovation-performance divide” between EU member states themselves. Bruegel finds that compared to EU’s innovation leaders (Denmark, Finland, Germany, and Sweden), other EU countries invest between 20 percent and 70 percent less in business R&D.

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Roads

Innovation Fact of the Week: When India and Indonesia Adopted E-Procurement For Infrastructure Projects, Construction Quality Improved 16% on Average

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Developing countries often invest heavily in infrastructure as part of their economic development strategies. Contractor collusion, poorly qualified contractors, and corruption among public officials are often cited as factors that have hurt the quality of these projects. But India, Indonesia, and others have begun to address this problem by adopting e-procurement platforms, and as a result new roads and bridges are now of higher quality and being built in less time.

That is because e-procurement platforms improve transparency between government and industry while increasing competition between contractors. The platforms allow a government to centrally post requests for proposals on all of the projects it plans. Contractors can then bid on multiple projects and check who has won which ones, how much they bid, and the technical details of their proposal. This creates greater transparency and accountability along the entire contracting process.

In a recent article, a team of economists from University of Wisconsin-Madison, MIT, and Harvard estimate the impact that e-procurement platforms

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University

Innovation Fact of the Week: Doubling Number of Universities Will Grow Country’s GDP By Average of 4%

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Innovation thrives off well-educated and high-skilled workers, and institutions of higher learning, such as universities, play a key role in developing such workers. Establishing a university generates a self-reinforcing cycle of human capital development by generating and disseminating knowledge. As workers learn and develop more advanced skills, they in turn contribute more to the innovative capacity of high-tech sectors.

Economists Anna Valero and John van Reene from the London School of Economics developed a data set that catalogued universities in 185 countries between 1950 and 2010. They estimate that when a country doubles the number of universities, it leads to an average of 4 percent higher GDP over the long-run. To illustrate their findings, they estimate that if the United Kingdom were to establish 10 more universities, it would increase its GDP by £11.3 billion. In terms of weighing cost versus benefit, expected GDP growth would be five times the cost of opening these 10 institutions.

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STEM Education

Innovation Fact of the Week: Students Are More Likely to Pursue STEM Degrees in College If They Are Exposed to More Science Subjects During High School

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

STEM workers punch above their weight in contributing to innovation and productivity in the digital economy. But economic projections show that demand for STEM skills is growing faster than the number of workers with STEM skills. Part of the problem has been that countries’ investments in increasing STEM graduates have not yet produced appreciable results—the level of interest and graduation rates in STEM fields both have remained stable since the 1980s.

But if countries can get their STEM education policies right, they will be well positioned to capture maximum benefit from the expanding digital economy. London School of Economics research assistant Marta De Philippis finds that tweaking subject curriculum can foster a student’s interest in STEM fields. Using education data from the U.K., she estimates that when a student takes more science classes in secondary school, it increases the student’s probability of enrolling in a university STEM program by 1.5 percentage points, and it increases the probability that the student will eventually graduate

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Countefeit

Innovation Fact of the Week: Counterfeit Goods Accounted for 2.5% of Global Trade in 2013

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Companies depend on intellectual property rights, including patents, trademarks, and copyrights, to derive revenue from their innovations. When counterfeiters flout these intellectual property rights to cash in on ideas that aren’t theirs, they undermine the economy by eroding the incentive to innovate. This is a huge problem worldwide. Indeed, by analyzing the manifests of detained shipments of counterfeit goods, the OECD has estimated that this misappropriated revenue stream totaled $461 billion in 2013, or 2.5 percent of global trade.

Counterfeit products impact innovators all along the supply chain and across many industries, with examples ranging from factory machinery to industrial chemicals to consumer products such as apparel and pharmaceuticals. Governments can support innovation by legislating and enforcing robust intellectual property rights.

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Photo Credit: UK Home Office via Flickr

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Airline Science

Innovation Fact of the Week: Increased Airline Industry Competition Boosted Researcher Collaboration by 50 Percent Between 1991 and 2012

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

The saying “two minds are better than one” is more than just a cliché when it comes to scientific research. In fact, it is widely understood in academia that collaborative research projects produce better outcomes than solo efforts. That is why competition in the airline industry—which drives down ticket prices—also has a beneficial side effect for innovation: It is easier for colleagues far afield to get together to work face-to-face.

Economists Christian Catalini, Christian Fons-Rosen, and Patrick Gaule studied the impact of increased airline competition on research collaboration between 1991 and 2012 by matching the introduction of new airline routes with the effect on ticket prices and research activity at universities in the vicinity of the new routes. They estimate that because of cheaper airline tickets, collaborative projects increased by 36 percent in chemistry, 26 percent in physics, 49 percent in engineering, and 85 percent in biology. On average, cheaper airline tickets boosted collaboration by 50 percent over the past two decades.

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National Innovation

Innovation Fact of the Week: When the Federal Government Committed $500M to a Manufacturing Innovation Initiative, Industry and Academia Threw in $1B More

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Understanding that certain challenges in advanced manufacturing cannot be solved by industry, academia, or government alone, the Obama administration set up the National Network for Manufacturing Innovation in 2012. At the beginning of 2016, the network was comprised of nine innovation institutes, which are structured as public-private partnerships. Each institute specializes in a specific field of advanced manufacturing (for example: 3D printing, fiber-reinforced polymers, next-generation electronic devices) and brings together experts from academia, government, and private industry to share best practices, bridge gaps in the knowledge base, and develop innovative solutions.

The president’s fiscal 2016 budget request calls for an additional six institutes to be funded, bringing the total to 15 by the end of the year. Industry and academia response has already proven to be positive, as evidenced in August 2015 when it was announced that the seventh innovation institute would specialize in flexible hybrid electronics. While the Department of Defense and Department of Energy committed to invest $500 million in this

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Rice

Innovation Fact of the Week: Indian Farmers Who Planted Flood-tolerant Biotech Rice Increased Yields by 13.5% From 2012 to 2013

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Although rice requires wet conditions to grow, it cannot survive being submerged for too long. In the tropics, the unpredictability of flooding poses a massive risk. Because rice farmers plant seeds without knowing how much flooding there will be in the season ahead, they have little control over the impact of floods on their final harvest.

Global warming will only increase the unpredictability and scale of floods in the tropics. Fortunately, advances in biotechnology allow scientists to engineer flood-tolerant varieties of rice. The Swarna-Sub1 variant has seen great success in India, giving rice farmers a means to mitigate flood risk and damage. In 2012 and 2013, economists surveyed a sample of 1,200 Indian farmers and found those who adopted this flood-tolerant variety increased their yields by about 840 pounds per hectare, or 13.5 percent.

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ICT Use

Innovation Fact of the Week: From 2001-12, Increased Internet Use Boosted Countries’ Exports by Almost 2 Percent

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Internet-enabled platforms facilitate online trade for firms by increasing efficiencies in the supply chain, including lower transaction costs and greater access to various destinations. The Internet also allows firms to easily customize their marketing information to the local setting and language and reduces information asymmetries between exporting and importing firms, expanding market access. These efficiencies add up to increase the volume of trade between countries.

Analyzing countries’ Internet adoption rates and trade flows between 2001 and 2012, The World Bank estimates that a 10 percent increase in Internet use in an exporting country increases the volume of trade between that country and its import partner country by 1.5 percent. They explain that as export-oriented firms adopt Internet technologies, they gain access to a greater number of markets, which leads to a more diverse range of products exported. Additionally, the World Bank estimates that increased Internet use further increases trade by 0.4 percent through allowing export firms greater market penetration. This means an increase

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INfrastructure

Innovation Fact of the Week: Insufficient Infrastructure Investment Will Cost U.S. Economy $4T & 2.5M Jobs by 2025

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Investment in U.S. infrastructure lags behind the levels necessary to maintain the country’s roads, bridges, ports, railways, and other transportation networks. As this infrastructure deteriorates, U.S. businesses face increasing transportation costs, while households face increasing water and electricity service costs. The American Society of Civil Engineers estimates that by 2025, this investment deficit, if left alone, will cost the U.S. economy $4 trillion and 2.5 million jobs.

Maintaining current standards of surface transportation infrastructure will require an investment of approximately $2 trillion through 2025, of which only $941 billion has been earmarked, a 54 percent deficit. Maintaining current standards of water infrastructure (such as drinking water and sewage systems) will require an investment of $150 billion in the same period, of which only $45 billion has been earmarked, a 70 percent deficit.

For more on this issue, including other areas of the U.S. economy where investment isn’t sufficient, see ITIF’s recent report, “Restoring Investment in America’s Economy.”

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