After already slashing R&D funding, the Sequester is about to deliver another kick in the teeth to American competitiveness: it’s going to sharply reduce our ability to measure it. This one comes courtesy of the Bureau of Labor Statistics, which announced last month that the sequestration has forced it to eliminate its International Labor Comparisons (ILC) program, a neat little database that adjusts foreign data to a common framework, allowing you to compare the traded sector health and competiveness of the United States against that of other countries.

This may not sound like much, but in the nerdy world of competitive analysis economics, it’s huge. No one else provides this data to the same extent as ILC. The OECD does a bit,^[i] but their data are rife with warnings about the perils of cross-country comparison among their indicators. Moreover, the OECD has little-to-no data on the big boys such as China and India, which renders its data useless for any “big picture” comparisons of our competitive health. Other organizations, such as the UN Industrial Development Organization, provide limited competitiveness data that is vastly incomplete.

In contrast, the ILC … Read the rest

As we argue in our book “Innovation Economics: the Race for Global Advantage,” the United States has been losing the competitiveness and innovation race, with severe consequences for our economy. And we can’t get back to winning the race unless we put in place a national competitiveness and innovation policy. And we won’t do that unless policymakers recognize that America is an intense race for innovation and competitive advantage with other nations.

Unfortunately, too many economists who advise policymakers rightly note that U.S. companies compete with foreign companies but mistakenly counsel that America itself is not in global economic—and innovation—competition with other nations. Perhaps most well known for making such a claim is economist Paul Krugman who makes the astounding—but quite conventional (at least among neoclassical economists)—contention that “the notion that nations compete is incorrect . . . countries are not to any important degree in competition with each other.” And it’s not just liberal economists that hold such a view, so do many conservative economists. AEI’s Kevin Hassett claimed, “Non-economists regularly appeal to competitiveness when motivating a wide array of policies, while economists protest or look the … Read the rest

In this overheated political season there is no worse thing to be accused of than an offshorer: someone who moves jobs out of America. With unemployment stubbornly stuck north of 8 percent, offshoring is seen as a convenient culprit for what ails us. The Obama campaign accuses Romney of offshoring jobs when he ran Bain capital. The Romney campaign has pushed back dubbing Obama the “outsourcer in chief” and charging that public green energy investments created jobs overseas instead of the United States. In this environment, the last thing you want to be known for is moving jobs offshore.

This is not new of course. During his 2004 presidential campaign, John Kerry called U.S. CEOs who moved jobs offshore “Benedict Arnolds.” Lou Dobbs made a good living accusing U.S. corporations of fighting a “War on the Middle Class.” Russell Shaw, a technology writer and Huffington Post blogger, even went so far as to call CEOs who move jobs offshore, “evil.” Not callous. Not greedy. Evil. More recently, Apple has been pilloried by the New York Times and others for making iPhones in China.

It is no wonder that … Read the rest

In perusing the Census Bureau archive at http://www.census.gov/history/, I found, deeply embedded in multi-thousand-paged censuses of manufacturers for 1900 and 1909, relatively sophisticated analyses of U.S. clusters, organized by industry and locality.

The 1900 version goes on for 25 pages, covering for each of 15 industries, major manufacturing operations by state and city, nominally and in terms of localization (city’s share of the U.S.) and specialization (industry’s share of city’s output).It summarizes these findings into several tables regarding the industry localization and specialization by cities and states. It ends by discussing, in detail, “The Universal Character of the Localization of Industries,” describing how the phenonmenon of industry agglomeration has been well known for centuries and explaining “The Causes of Localization”: nearness to materials, nearness to markets, waterpower, a favorable climate, a supply of labor, capital avialable for investment in manufactures, and momentum of an early start.

I’ve posted the 1900 cluster analysis here:

Also available via GW: http://www.gwu.edu/~gwipp/1900%20Census%20of%20Manufactures%20Cluster%20Analy…

Source materials are here: http://www.census.gov/prod/www/abs/decennial/1900.html

The 1909 analysis is shorter, by far, but offers additional reasons for localization, e.g., convenient transportation facilities and the “habit of industrial … Read the rest

Innovation needs to be a verb.  Unfortunately, most people think of it as a noun.  Innovation is a thing, an outcome.  As Webster’s defines it: a new idea, method or device.  But we also need to think of innovation as a process.

Case in point is the recent history of Motorola.  As everyone now recognizes, the proposed takeover of Motorola Mobility by Google is based on access to the Motorola patent portfolio.  The acquisition has little to do with Motorola’s hardware technology.  In fact, as a story in today’s New York Times (“Motorola’s Identity Crisis”) points out, Google may have difficulties figuring out what to do with Motorola’s hardware activities.  Google already has close relations with other hardware manufacturers, such as Samsung and HTC.  Getting into the hardware business could disrupt those relationship. 
 
This is far cry from Motorola’s reputation as an innovative leader.  Motorola pioneered wireless communications, starting with the first “carphone” (a radiotelephone) in 1946 to the first commercial cellular phone (the DynaTAC 8000X) to the breakthrough flip phone StarTAC and the hot selling RAZR.  Motorola also led in process technologies in the late 1980 … Read the rest

In an earlier post on “software factories”, I touched on the question of why America’s software engineers were not, by and large, working on projects that would enhance American software competitiveness:

…the finest software minds of the current generation are not interested in solving the American productivity problem, but are interested in profiting from what I elsewhere call flash-fads, huge blockbuster moneymakers that last for the comparative blink of an eye but, like the Pet Rocks of my youth, make lots of money.

This is probably rational behavior on the part of these software engineers.  Sacrificing current income to make the income of the nation greater over time is a bit like voluntarily helping to pay down the national debt by giving extra money to the Treasury: patriotic, maybe, but certainly not a mass choice.  (One of my partners told me this morning that some $81M had been contributed to the Treasury in this fashion, versus a national debt service obligation several orders of magnitude greater.)

But how does the rational behavior of individual software engineers feed the public good?  Our market orientation in the U.S. gives us … Read the rest

An oft-noted reason for lackluster venture returns is the lack of liquidity for private companies backed by venture capital.  For all kinds of reasons — regulatory, structural, madness-of-crowds — the IPO market for venture-backed startups has been essentially shut down for years.  Which means:

• Valuations for companies that do exit are depressed becuase M&A buyers know there is not alternative
• Companies need more capital to get to liquidity, which focuses investors on “certified” mega-hits rather than a broader range of innovation
• Backers of venture capital firms shift their assets to less innovative but more lucrative asset classes, including (depressed) public stocks.

In the last two or three years a new form of liquidity for private companies has emerged, principally in the form of online marketplaces for private companies.  These companies — such as SharesPost and SecondMarket — are handling increasing volumes of transactions and, as importantly, providing another form of liquidity for private companies and their investors.  See the Q&A in Quora for some opinions about the scope and efficacy of these new media.

There are some ticklish regulatory issues with these exchanges, having to do with the gray … Read the rest

When I worked at the PricewaterhouseCoopers Global Technology Centre during the height of the Internet Bubble, we were regularly visited by what we called the “Invest in <Mumble>” delegations.  These were investment authority groups from cities, states, regions, provinces, and even the occasional Principality.  Their mission: to find out what orders to issue to get a Silicon Valley in their catchment area.

I recall one group who came from an EMEA city and were wondering how to approach the problem of siting a huge multimedia facility that they were planning.  They had a list with what my then-young kids would have called a “bazillion” criteria.  It was a super-sized list, a real top-down approach.

We asked them if there were existing multimedia firms in or around the city.  They said “yes”.  We asked them if they knew which pub or pubs were the watering holes for the troops from the existing firms.  They said “yes.”

Why didn’t they site the new multimedia center near those pubs, we asked?  Amazement.  Deep respect for the geniuses from the Tech Centre.  But what had we done except port the old story about the … Read the rest

Traditional indices such as the Dow Jones Industrial Average (DJIA) or the Fortune 500 focus on top performers without any considerations other than their market capitalization, share price, revenue, or other 20th-century measures of business performance.

But in a “Technology Economy” technology is a strategic lever, a tool to drive new business growth, protect revenue, reduce business costs, and manage risk. So let’s do an experiment and look at a “new age” Dow Jones Industrial Average – a market index of firms that have been identified as technology leaders. Let’s call it the Technology Leaders Index (TLI). And by building and observing the behavior of the TLI we can test the hypothesis that has gone unspoken and unexplored — Information Technology is a strategic investment and firms that make the best use of it should demonstrate superior market performance.

It is definitely an interesting time to do such an experiment. Between 2008 and 2009, IT investment suffered a global slowdown. The recession led many CEOs to believe IT was one of the main cost pools that could safely be reduced without impacting a firm’s overall performance. As a result, IT … Read the rest