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Race to Innovate

Competitiveness, Manufacturing, and Trade Policy Analysis

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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Latest Data Lend Urgency to Need for Ex-Im Bank Reauthorization

With Congress in the midst of considering legislation to reauthorize the U.S. Export-Import (Ex-Im) Bank—its current authorization expires and thus must be extended by June 30, 2015—comes fresh evidence reiterating the vital need for the Bank in providing export credit finance support for America’s exporters. On Friday, June 12 the Bank released its annual Report to the U.S. Congress on Global Export Credit and Competition, which once again demonstrates the emphasis America’s leading competitors place on providing export credit support for their traded-sector enterprises and underlines the risks if Congress does not reauthorize the Bank with alacrity.

As the chart below illustrates, as a share of GDP in particular, a number of countries significantly out-invested the United States in new medium- and long-term export credit assistance in 2014. In fact, as a share of its economy, China invested eight times as much in export credit assistance than the United States did in 2014, while Germany invested six times as much, and France and Italy almost five times as much. In fact, of 10 nations assessed for their 2014 export credit volumes, the United States ranked ninth in export credit

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What Presidential Candidates Should Stand For on Tech and the Economy

As of this week, there are 16 declared candidates in the 2016 presidential sweepstakes, with at least five more waiting in the wings. This makes for a rich cacophony of themes, messages, and policy proposals. But at the end of the day, this campaign really should be about one thing above all else—how to make the U.S. economy truly flourish again. Most people would agree we need an economy that is marked by expanding opportunities, rapidly rising wages, lower unemployment, and a broad-based sense of optimism about America’s fortunes. The question is: How can we create those conditions?

The Information Technology and Innovation Foundation has offered a series of concrete recommendations in an open strategy memo and suggested campaign speech that we invite all candidates to borrow from freely. They detail a comprehensive policy program to grow the U.S. economy by invigorating enterprises through greater innovation, productivity, and competitiveness.

This enterprise-centric approach would constitute a wholesale reimagining of both conservative supply-side and liberal demand-side economic doctrines, yet partisans in both camps will find proposals they can embrace unreservedly. Among other things, the right will welcome initiatives to streamline regulations

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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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The Leaky STEM Pipeline Can’t Be Patched with Higher Wages

Even with the economic recovery, recent graduates have it rough. Unemployment among young people remains high and wages remain depressed. Frequently, graduates accept low-wage positions that do not utilize their degrees.

However, one group of recent graduates—those in STEM fields—has it easier than their peers. For these graduates with degrees in fields such as computer science and engineering, high-paying jobs are plentiful. Eighty-one percent of STEM grads hold jobs closely related to their degrees, compared to 72.5 percent among all graduates. Median starting salaries for computer science and engineering are estimated at around $67,300 and $64,400 respectively, 80 percent higher than starting salaries for humanities and liberal arts majors. Moreover, most sectors of today’s economy rely on STEM skills, so graduates have a plethora of career paths to choose from. In addition, compensation is high because companies face an acute shortage of qualified STEM workers.

Economics 101 tells us that the laws of supply and demand should fix this problem as high wages motivate more students to pursue computer and engineering degrees. Instead, exactly the opposite has occurred. We currently have fewer computer science graduates than we did

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Chris Dodd and Nancy Pelosi

The Culture Addict Dream Conference

Each year, the Motion Picture Association of America (MPAA) hosts a large conference at the Newseum dedicated to highlighting what is new in creativity, content, and technology around the world. At the most recent confab, held on Friday, April 24, MPAA’s message focused on how creativity and innovation will play an even more integral role in the future than they do today. Indeed, the Creativity Conference is about exploring the critical intersection between technology and the arts, and their capacity to drive invention and economic growth across industries and regions. Bringing together leaders from the worlds of politics, media, business, and the arts, the Creativity Conference engages its audience in an open dialogue on the meaning of creativity, its economic impact across sectors, and the ways in which we can continue to protect and nurture American innovation and innovators.

At the conference, a group of leading, innovative women discussed the ways in which Hollywood and Washington, D.C. intersect. Rep. Rosa DeLauro (D – CT), Evan Ryan (Assistant Secretary of State for Educational and Cultural Affairs), Barbara Hall (Creator and Executive Producer, Madam Secretary) and Lori McCreary (President, Producers Guild of

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50 Years of Moore’s Law

For 50 years, Moore’s Law has served as a guide for technologists everywhere in the world, setting the pace for the semiconductor industry’s innovation cycle. Moore’s Law has made a tremendous impact not only on the electronics industry, but on our world and our everyday life. It led us from the infancy of the PC era, through the formative years of the internet, to the adolescence of smartphones. Now, with the rise of the Internet of Things, market researchers forecast that in the next 5 years, the number of connected devices per person will more than double, so even after 50 years we don’t see Moore’s Law slowing down.

As chipmakers work tirelessly to continue device scaling, they are encountering daunting technical and economic hurdles. Increasing complexity is driving the need for new materials and new device architectures. Enabling these innovations and the node-over-node success of Moore’s Law requires advancements in precision materials engineering, including precision films, materials removal, materials modification and interface engineering, supported by metrology and inspection.

Though scaling is getting harder, I am confident Moore’s Law will continue because equipment suppliers and chipmakers never cease to innovate.

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Health Innovation More Valuable Than Previously Thought

Innovation is frequently underemphasized in the economics literature because it is qualitative by nature, and qualitative changes are hard to measure. A new NBER paper by three economists, Lakdawalla, Reif, and Malani, makes some progress toward a better measure of innovation, specifically innovation in health care. They show that by ignoring the way medical innovations help reduce risk, previous studies have tended to underestimate the true value of medical innovations—by as much as 30-80%.

To arrive at their estimates the authors use a new way of valuing risk. Our health is inherently risky, which is why we have health insurance for smoothing expenses out over time and between people. Innovation is also risky, which is why investors in startups often expect high returns and we often look to the government to fund basic research. But Lakdawalla, Reif, and Malani show that risks don’t always add up—sometimes they cancel out. Risks taken to innovate and create new health products and treatments can reduce health risks for people, because new innovations help keep us safer and healthier.

When risks taken in health innovation pay off, the reward they bring isn’t just the

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Tax Proposals Attempt to Bridge the “Valley of Death” for Small Research Firms

A new coalition of trade associations, The Coalition of Small Business Innovators, has developed two innovative tax reform proposals designed to help small research companies attract more investors, even if they are many years away from profitability. These proposals would allow passive investors to take advantage of losses and research credits generated by the company and allow companies to carry net operating losses forward even when they raise new financing. The former proposal has already been included in broader bills aimed at boosting innovation and economic activity. If enacted, the proposals could increase investment in small, research-intensive firms by $14.1 billion and create 72,000 jobs in eligible companies.

Although the U.S. financial system is the most sophisticated in the world, it still contains at least one significant gap. Small, capital-intensive companies often find it very difficult to raise the additional capital needed to go from start-up through the long development phase until they are near enough to profitability to conduct an initial public offering or be attractive to a prospective buyer. This period is commonly known as the “valley of death.” Firms in this position may have a very

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Time for America to Throw in the Competitiveness Towel

In 1871, America became the largest economy in the world. 144 years later we need to admit that while we’ve had a good run, it’s time to let other countries have their turn. China just overtook us as the largest economy last year. And other nations, like India, are on their way up.

So I say, let’s stop being selfish. We can get used to being number 2, or even number 20. We’re America after all, we can do anything, including lose gracefully.

Besides we don’t want to hurt other nations, especially those poor ones. We have lots more money than the Chinese and Indians. Why then are we trying to compete with them and not letting them have our high wage industries that they need more than us. If they want to take our aerospace, machinery, heavy equipment, computers, software and life sciences industries, who are we to say no, even if they use unfair methods to win. After all they are poor, so it’s okay for them to cheat.

Now it is true, as China specialist Michael Pillsbury writes in The Hundred Year Marathon, that China has

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