Innovation

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World Intellectual Property Day – Highlighting How IP Incentivizes Innovation

Every April 26, the World Intellectual Property Organization (WIPO) celebrates World Intellectual Property Day to promote discussion of the role of intellectual property (IP) in encouraging innovation and creativity. Given the increasing tempest over the role of IP in the Trans-Pacific Partnership (TPP) trade agreement, the day provides an important reminder about the foundational role that IP plays in supporting innovation. IP is more important than ever as it is embodied in many economic sectors, especially across the digital economy, which means it affects not only innovation, but also trade, competition, taxes, and other areas of public policy and society. According to the OECD, investment in IP-protected capital is growing faster than investment in tangible capital.

To analyze this critical relationship between IP protection and innovation, ITIF compared the strength of IP laws and the effectiveness of anti-counterfeiting laws based on data from the World Economic Forum’s Global Competitiveness Report 2015-16 and creative output scores from the Global Innovation Index 2015, a report from Cornell University, INSEAD, and WIPO. The Global Innovation Index applies three distinct measures of creativity in an economy that taken together provide a measure

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The Demography of Innovation in the United States: Who Innovates and How Do They Succeed?

Behind every technological innovation is an individual or a team of individuals responsible for the hard scientific or engineering work. And behind each of them is an education and a set of experiences that impart the requisite knowledge, expertise, and opportunity. These scientists and engineers drive technological progress by creating innovative new products and services that raise incomes and improve quality of life for everyone.

But who are these individuals? How old are they? Were they born in the United States or abroad? Are they male or female? What are their races and ethnicities? What kind of education do they have?

To find out, ITIF surveyed more than 900 people who have made meaningful, marketable contributions to technology-intensive industries as award-winning innovators and international patent applicants. We learned that the demographics of U.S. innovation are different from the demographics of the country as a whole, and also from the demographics of college-educated Americans—even those with Ph.Ds. in science or engineering.

The study finds that immigrants comprise a large and vital component of U.S. innovation, with more than one-third of U.S. innovators (35.5 percent) born outside the United States. Alarmingly, women

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Innovation Fact of the Week: US Leads World in Period of Data Exclusivity For Biologic Medicine Innovators

(Editor’s Note: ITIF features an “Innovation Fact of the Week” in each edition of its weekly email newsletter and on Innovation Files.)

In addition to awarding patents to creators of novel biologic medicines, countries also mandate varying periods of intellectual property protection for the clinical test data on the drugs. This “data exclusivity,” as it is commonly known, helps ensure that creators of biologic medicines have sole rights for a certain period to all of the underlying IP necessary to make and market the drugs. Once the patent on the original compound expires, other manufacturers are free to produce similar drugs—and they are free to generate their own clinical trial data in the process—but, until the period of data exclusivity expires, they cannot use the original patent holder’s clinical trial data to prove the safety and efficacy of their new “biosimilar.”

This additional period of data exclusivity is important because it makes the economics of drug development work. It gives the innovator more time to market the drug and recoup the costs of developing it, which today can approach $3 billion for innovative biologics. The United States offers 12 full

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President Obama’s Final State of the Union and the 2016 Presidential Campaign

President Obama’s final State of the Union address serves both as a marker for his last year in office and as a reference point (and foil) for candidates on both sides of the 2016 presidential race. So the State of the Union speech that ITIF would hope to hear the president deliver and the campaign stump speech we would hope to hear his would-be successors deliver are one and the same.

Last June, ITIF sent an open memo to all presidential candidates outlining exactly what we would dearly love to hear someone say. Written in speech form, the memo provides a detailed policy agenda to foster innovation, boost productivity, and make the United States more competitive in the global economy.

In the campaign debates that have ensued, several candidates have touched on issues that ITIF highlighted—from reforming the corporate tax code to bolstering STEM education—but none have yet embraced the fundamental precepts of our agenda, so we continue to hope.

On the eve of the State of the Union address, here again is our policy wish list:

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Read the detailed campaign memo here.

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The Architect of Europe’s Digital Single Market Leaves Important Questions Unanswered on U.S. Visit

At a time of considerable uncertainty about the future of transatlantic digital commerce, one Europe’s top officials for such issues, Gϋnther Oettinger, visited the United States last week and did little to dispel concerns that the EU’s Digital Single Market (DSM) may raise new barriers for U.S. companies. Of particular concern for many in the United States is vague language in the DSM that appears to be designed for protectionist purposes. As one of the strategy’s chief architects, Oettinger would have been uniquely well-positioned to offer needed clarification. He didn’t.

The growing list of political, legal, and regulatory cases involving top American technology companies prompted U.S. President Barack Obama earlier this year to call out Europe for protecting domestic competitors. More generally, it has raised serious concerns about the direction that Europe’s regulatory environment is heading as it proceeds through multiple policy initiatives in parallel—the Digital Single Market, the General Data Protection Review, a revision of the U.S.-Europe Safe Harbor Framework, and the Trans-Atlantic Trade and Investment Partnership. Any one of these on its own would be a major issue for the transatlantic trade relationship, but taken together, they

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Don’t Blame ICT for Manufacturing Offshoring

During the 2000s, globalization took millions of jobs from the United States. Some have been quick to associate this job loss with the technology that ostensibly made it possible, chiefly the adoption of ICT that allowed for global connectivity. So, would the United States have been better off if it had simply never invested in ICT in the first place?

There are those who would love to somehow put the technology introduced by the ICT revolution back in the box. But a new study shows that doing so would have detrimental impact on the economy. Yes, in some cases ICT investment introduced the tools which allowed companies to outsource jobs. But, as new paper, Does ICT Investment Spur or Hamper Offshoring?, finds, the same ICT investment enabled productivity gains that kept companies at home.

Of course, it is difficult empirically to determine whether ICT investments increase the likeliness of offshoring, as causality is difficult to determine. To address this problem, authors Luigi Benfratello, Tiziano Razzolini, and Alessandro Sembenelli examined small and medium-sized Italian manufacturing firms with varying access to local broadband facilities, a random variable that was used

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‘Innovation Box’ Proposal Would Stimulate U.S. R&D and Innovation

In recent years, the United States has become less competitive in retaining and attracting globally mobile capital. That’s in large part due to an uncompetitive tax code that features the highest statutory corporate tax rate among OECD countries; a worldwide, as opposed to territorial, tax system; and an intermittent research and development (R&D) tax credit that has fallen to just the world’s 27th most generous, behind even Brazil, China, and India.

It’s high time for Congress to begin a serious reexamination of U.S. tax policy and to incorporate innovative approaches that spur greater levels of R&D, innovation, and investment by enterprises operating in the United States. One proposal that ITIF has long championed is the “innovation box” (or “patent box”). So named because it is implemented through a check box on a tax form, the policy provides favorable tax treatment for revenues generated from newly developed intellectual property (IP). As ITIF explained in its 2011 report “Patent Boxes: Innovation in Tax Policy and Tax Policy for Innovation,” these provisions differ from—and should be seen as a supplement to—R&D tax credits in that they provide firms with

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Pharmaceutical Investment Saves Lives: Innovation in Cancer Treatments Well Worth the Cost

A new NBER paper from Columbia University economist Frank Lichtenberg examines how pharmaceutical innovation correlates to fewer deaths among people with certain types of cancers. Fewer cancer patients died before the age of 75 if their particular type of cancer had experienced more medical innovation.

The basic message here is intuitive—new drugs and treatments save lives—but Lichtenberg does a good job of breaking down the costs and benefits. He estimates that medical innovation saved more than 100,000 years of aggregate life in Canada alone, at a cost of $2,730 per year based on the total spending for drugs to treat those forms of cancer.

Unfortunately, Lichtenberg does not factor in R&D costs for the discovery and development of these drugs. He does estimate the cost if the drugs had been brand name (versus the generics they are assumed to be), which comes out to $11,000. This is still significantly below estimates for the value of a year of life, and it is possible to assume that prices would be set by private companies high enough to recoup their research investments. This leaves only the question of public investments in R&D;

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High-Growth Entrepreneurship for Development: Report of a Roundtable with Michael Dell

Policymakers around the world have increasingly come to realize that entrepreneurship, particularly high-growth entrepreneurship (HGE), is critical for economic development in nations at all levels of development. That is one reason the United Nations Foundation asked Michael Dell, founder and CEO of Dell Inc., to be the Global Advocate for Entrepreneurship and to work closely with the Foundation and its Global Entrepreneurs Council to help shape and advance a global entrepreneurship agenda.

To inform the Council’s thinking, Michael Dell led a meeting in Washington, DC, on December 2, 2014, hosted by 1776, a cutting-edge “accelerator” to help technology-based entrepreneurs translate their ideas into growing businesses. The meeting participants included tech-based entrepreneurs and policymakers, and I was asked to participate and serve as rapporteur.

Michael Dell opened up the roundtable with a discussion of proposed policy mechanisms to spur high growth entrepreneurship, including ensuring access to capital, technology, talent, and markets. The following is a summary of the themes and recommendations from the discussion.

The Nature of Technology-Enabled Entrepreneurship Opportunities

Policymakers around the world are interested in HGE because they understand that technology opportunities driving this type of entrepreneurship have exploded.

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New Report on R&D Tax Incentives Shows Best Practices

Earlier this year the European Commission released a substantial report on R&D tax credits throughout the EU and several other OECD countries including the United States and Japan. R&D tax credits have been widely adopted across the developed world since the United States introduced the Research and Experimentation tax credit in 1981: only two countries in the EU do not have tax policies intended to encourage R&D.

The report is a thorough meta-study looking at the existing economics literature and available data on R&D-focused tax policy, including the impact of R&D tax policies on R&D expenditure, innovation, employment, productivity, and other factors. It also covers the literature on how corporate tax policy can affect the location of R&D and patents. Finally, the report examines the details of various tax policies and benchmarking them based on what they determine to be best practices.

The report makes a number of facts clear. First, despite a broad range of findings, “the vast majority” of studies surveyed show that R&D tax incentives are effective, with the most recent (and rigorous) studies finding that a 10% in the user cost of R&D results in a

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