Race to Innovate

Competitiveness, Manufacturing, and Trade Policy Analysis

Santiago

How Immigration Policy has Walled Off Silicon Valley

In today’s fast-paced, globalized world, knowledge workers can choose to work anywhere. In fact, being an appealing place for people to locate, especially those with advanced skills, is a valuable national resource. Highly skilled workers earn high wages, spend those wages locally, pay domestic taxes, and contribute to spill-over effects that benefit everyone in the area. Most engineers will tell you that the most appealing location for tech workers is located right here in the United States. Some countries strike oil. Others find diamonds. The United States hit it rich with Silicon Valley.

However, Silicon Valley has a weakness that threatens this preeminence: the lack of enough skilled workers to promote expansion and innovation by existing firms and industries and the development of new ones. One of the chief causes of this problem is America’s growth-stymying, restrictive immigration policies toward high-skill, foreign-born talent. For example, for the first time in American history, there are fewer startups founded by immigrants than there were 10 years ago. The effect is especially apparent in Silicon Valley, where immigrant-founded startups dropped from 52.4 percent to 43.9 percent from 2005 to 2012. And unfortunately for … Read the rest

Gilmore-Girls

Spoiler Alert! Illegal Downloaders Steal Content Even When Legally Available

The film and TV industry receives a lot of flak from critics for being its own worst enemy. If Hollywood studios want consumers to pay for content, the argument goes, then they should make it easier to download legally. If piracy is a problem for the industry, then maybe it should take a hard look in the mirror.

The only problem with this argument is that it’s completely false. KPMG just released a first of its kind study assessing the availability of movies and TV shows online. It found that as of December 2013, 81 percent of the 808 unique films studied were available on at least 10 of the 34 online video-on-demand (VOD) service providers. Only 50 of the films studied were not available on any of the 34 online video offerings that KPMG reviewed. The study also found rapid growth in the number of TV viewing options available to audiences. Overall, 85 percent of the most popular and critically acclaimed TV titles were available in the U.S. through legitimate online video services.

This development could not be timelier, with both the ramp up to the Oscars and Fall … Read the rest

india

A Modi Administration Report Card on the Eve of His Visit to the United States

Indian Prime Minister Narendra Modi’s historic election was viewed with a great deal of optimism by much of the world, including here in the United States. His campaign platform—putting economic growth front and center—championed the kinds of policies needed to get India’s economy back on track. With the Modi Administration having been in office for just about four months now, and as he embarks on his first official visit to the United States, it’s a good moment to take stock of the Modi Administration’s accomplishments to date—and areas where we hope to see continued progress toward improving the state of U.S.-India economic and trade relations.

On the positive side, the Modi Administration has announced a number of promising economic reforms. In particular, it has:

  • Retired India’s Planning Commission, a vestige of centralized state planning;
  • Eased some restrictions and limitations on foreign direct investment (FDI), notably in the defense and railway sectors (with the FDI ceiling in the former raised to 49 percent and in the latter to 100 percent);
  • Committed to renewed infrastructure investment in power generation and transportation networks;
  • Set a year-end target to complete long-pending implementation of a
  • Read the rest

rami

U.S. House of Representatives Passes RAMI Legislation

Late yesterday (September 15, 2014), the U.S. House of Representatives passed the Revitalizing American Manufacturing Innovation (RAMI) Act of 2013 (H.R. 2996 in the House; S. 1468 in the Senate). ITIF commends the U.S. House of Representatives for passing this important legislation and calls upon the U.S. Senate to follow suit in quick order. The RAMI legislation calls for one-time funding of $300 million over seven years for the Secretary of Commerce to establish several Institutes for Manufacturing Innovation (IMIs), collectively known as the National Network for Manufacturing Innovation (NNMI). The IMIs represent unique public-private partnerships between the federal government, local governments, universities, research institutes, and industry designed to accelerate manufacturing innovation in technologies with commercial applications by leveraging resources to bridge the gap between basic research performed at U.S. universities and research laboratories and product development by U.S. manufacturers.

Four IMIs have already been established, including America Makes, focusing on additive manufacturing (i.e., 3D-printing) in Youngstown, Ohio; the Next Generation Power Electronics National Manufacturing Innovation Institute in Raleigh, North Carolina; the Digital Manufacturing & Design Innovation Institute (DMDII) at the University of Illinois; and the Lightweight & Modern Metals … Read the rest

classroom

Want a world-class workforce? Invest in education

Sometimes statistics just make sense. For instance, the revelation that spending more on education is correlated with a more highly educated workforce is hardly a surprise. To be sure correlation is not causation, but as more states look to cut corners on education spending, it is important to remember the relationship between spending and results.

Using the 2014 State New Economy Index’s workforce education score (a weighted score of the educational attainment of the workforce), there is a significant positive correlation of 0.46 between the education levels of a state’s workforce and the state’s current spending on education per student.

Of course, with a simple correlation it is impossible to attribute any directional causality. Part of the correlation could derive from higher incomes earned by a more educated workforce. Much of education spending comes from property taxes, so wealthy areas where land is more valuable tend to have higher education spending. For instance, education spending is highest in Northeastern states, led by New York ($19,552), where schools spent over three times as much per student as in Utah ($6,206). Resource rich Alaska and Wyoming also spent heavily, though … Read the rest

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Will the next Silicon Valley be located in the United States?

In 1956, an American engineer, William Shockley, had an idea that silicon could be used to make transistors, and founded a company in Mountain View, California. The rest is history. The area experienced explosive growth after the invention of the silicon semiconductor sparked waves of innovation. Other firms developed around the Shockley’s first company, also developing and improving on the invention. Continual support from nearby Stanford University, along with collaboration between local firms, created an innovative environment ideal for fostering growth. By the 1960s, 31 semiconductor firms had been established in the country, of which only five were located outside the region. Smaller firms providing research, specialized services, and other inputs located nearby the larger companies. Innovation thrived, the local economy boomed, the center of high-tech innovation shifted from the east coast to the west, and the Silicon Valley was born.

The Silicon Valley is a prime example of how advanced R&D tends to focus in clusters- geographically concentrated industries that maximize spillovers from firm to firm and between public and private researchers. Once research concentrates in an area, it is hard to displace, which is why DOE and other Read the rest

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New Government Report Confirms Benefits of Digital Trade

The digital economy has been a major boon to U.S. domestic and international trade, as is documented by a new report by the United States International Trade Commission entitled Digital Trade in the U.S. and Global Economies (summary here). And even though the report shows important benefits from digital trade, those benefits are likely understated. This is because the report limited its analysis to “digitally intensive” sectors, which means that its numbers exclude contributions from firms that only use digital trade as a smaller part of their business.

Still, digital trade has made quite an impact: the report estimates that digital trade has raised real U.S. GDP by $517.1-$710.7 billion (3.4−4.8 percent) by increasing productivity and lowering the costs of trade. By raising GDP, digital trade increased average wages, and the increased wages likely contributed to increased employment by as much as 2.4 million jobs.

Within digitally intensive industries (and likely within many non-digitally intensive industries, although the report focused on the former), the internet has come to play a major role in everyday commerce. Firms in these industries sell nearly a trillion dollars’ worth of goods and services … Read the rest

Robots

Reshoring optimism, but not much else

You’ve probably heard the good news. After a decade of being constantly bombarded with news of off-shoring, images of deserted factories, and heart-wrenching tales of laid-off American workers unable to find new employment now that their job is in China, jobs are streaming back into the country, factories are reopening, and we’re back to whistling while we work. We’ve even got a new word for the phenomenon- reshoring.

Just don’t look at actual data. Because funny enough, the numbers illustrate that reshoring is a myth.

True, off-shoring has slowed and has maybe even stabilized. But this respite does not mean that manufacturing jobs are reappearing. Yes, there are isolated instances which your local paper can emphatically cite. However, there is no evidence that America’s manufacturing woes have magically worked themselves out, or that a significant number of jobs that left for China and Mexico are being shipped back.

The truth is that even since the recession, more manufacturing firms have been lost than created in the United States. Manufacturing establishments (the number of factories or manufacturing sites), have followed the same trend. In 2011, the United States was home to … Read the rest

Cast pf Firefly

They Aim to Misbehave

Last Monday night, the television world was abuzz with anticipation for what seemed like the perfect end to the “McConaissance”: an Emmy, in the same year as his Oscar, for actor Matthew McConaughey’s performance in the acclaimed HBO drama True Detective. Defying all expectations (and perhaps the Vegas odds) McConaughey lost to repeat winner Bryan Cranston, for his equally acclaimed work on the hit AMC series Breaking Bad. The triumph of TV stardom over movie stardom is rare in Hollywood, and as host Seth Meyers noted at the beginning of the night, “[TV’s] not like that high-maintenance diva movies, who expect you to put on pants and drive all the way over to her house and buy $40 worth of soda.” Perhaps this is why TV is also gaining on movies in another area besides awards: piracy.

Piracy in TV is rapidly increasing, as just about every Emmy-nominated show—broadcast, cable, pay-per-view and streaming—suffers from illegal downloads. In fact, surprisingly, according to Tru Optik, it is Netflix’s Orange is the New Black (OITNB) that secured the second spot this year, behind oft-cited industry statistic, HBO’s Game of Thrones. … Read the rest

rutgers

Memo to Governor Christie: Time to Shut Down Rutgers University

For a long time, I and many other Washington tech policy types believed that our nation faced a shortfall in the number of highly skilled scientists and engineers (e.g., the STEM workforce) and that this shortfall hurt U.S. innovation and competitiveness.  But as Keynes once said when asked why he changed his mind, “when the facts change, I change my mind, what do you do sir.” So I am grateful to Rutgers professor Hal Salzman for pointing out the error of my thinking.

Salzman tells us that only one out of four STEM graduates works in their field (it’s actually 1 out of 2 and he knows this). He tells us wages for STEM workers have been flat for the last 16 years (STEM wages actually increased about twice as fast as non-STEM wages). He tells us that engineering colleges produce 50 percent more graduates that are hired into engineering jobs each year (actually its one to one, not 1.5 to one). He tells us that IT employment is below its 2002-2003 peak (actually between 2003 and 2010 IT workers grew by 19 percent while total employment fell by 0.8%). … Read the rest