Innovation Economics

440 Pages·4.137 MB·English

by  Atkinson R.D., Ezell S.J.

INNOVATION ECONOMICS
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Robert D. Atkinson and Stephen J. Ezell
Innovation
Economics
The Race for
Global Advantage
new haven and london
Published with assistance from the foundation established in memory of
Philip Hamilton McMillan of the Class of 1894, Yale College.
Copyright © 2012 by Robert D. Atkinson and Stephen J. Ezell.
All rights reserved.
This book may not be reproduced, in whole or in part, including
illustrations, in any form (beyond that copying permitted by Sections 107
and 108 of the U.S. Copyright Law and except by reviewers for the public
press), without written permission from the publishers.
Yale University Press books may be purchased in quantity for
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[email protected] (U.S. offi ce) or [email protected] (U.K. offi ce).
Set in Scala type by Westchester Book Group
Printed in the United States of America
Library of Congress Cata loging- in- Publication Data
Atkinson, Robert D.
Innovation economics : the race for global advantage /
Robert D. Atkinson and Stephen J. Ezell.
p. cm.
Includes bibliographical references and index.
ISBN 978- 0- 300- 16899- 0 (cloth : alk. paper)
1. Technological innovations— Economic aspects— United States.
2. Technological innovations— Economic aspects. 3. Diff usion of
innovations— United States. 4. Industrial policy— United States.
I. Ezell, Stephen J. II. Title.
HC110.T4 A8187 2012
338'.0640973— dc23
2012006642
A cata logue record for this book is available from the British Library.
This paper meets the requirements of ANSI/NISO Z39.48– 1992
(Permanence of Paper).
10 9 8 7 6 5 4 3 2 1
As Winston Churchill wrote, “Writing a book is an adventure. To begin
with, it is a toy and an amusement; then it becomes a mistress, and then
it becomes a master, and then a tyrant.”  I want to extend my deepest
appreciation to my wife Anne-Marie, son David, and daughter Claire, who
were more than patient with me when I was struggling with my tyrant,
instead of being the husband and Dad I would have liked to be.
—RDA
To my wife Lisa, for your enduring love, patience, and support;
and to my parents, for a lifetime of inspiration.
—SJE
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CONTENTS
1 The Race for Global Innovation Advantage 1
2 Explaining U.S. Economic Decline 17
3 Learning from the Wrong Master: Lessons from U.K. Industrial
Decline 57
4 Why Do So Many Refuse to See U.S. Structural Economic
Decline? 85
5 What Are Innovation and Innovation Policy and Why Are They
Important? 128
6 Crafting Innovation Policy to Win the Race 162
7 Cheating as a Way to Win the Race: Innovation Mercantilism as the
Strategy of Choice 190
8 Winning the Race for Innovation Advantage with the Eight “I’s” of
Innovation Policy 226
9 Why Don’t We Have More Innovation and Innovation
Policy? 264
contents
viii
10 Can Nations Overcome the Barriers to Innovation? 301
11 Creating a Robust Global Innovation System 338
Notes 367
Index 417
1
The Race for Global
Innovation Advantage
T
he so-c alled Great Recession that convulsed the U.S. economy
from the end of 2007 to the middle of 2009 has been offi cially
over for several years, but for most Americans it certainly doesn’t
feel that way. The offi cial unemployment rate still hovers around 8.5 per-
cent, and if the part-t ime workers who would rather be working full-t ime
were included, the rate would be almost double.1 In fact, the Congressional
Bud get Offi ce reported in February 2012 that after three years with unem-
ployment topping 8 percent, the United States has seen the longest period
of high unemployment since the Great Depression, yet it still expects that
unemployment will remain above 8 percent through 2014.2 Less than two-
thirds of adults are in the labor force, a twenty- fi ve-y ear low.3 Worse, from
2000 to 2010, the United States did not add a single net new job.4 Both the
federal budg et and trade defi cits remain unsustainably high. U.S. compa-
nies are sitting on, rather than investing, close to $2 trillion in cash reserves.
And some regions remain mired in recession, with many cities, towns, and
even states on the brink of bankruptcy.
By most accounts, this is all the result of an uncommonly severe but ul-
timately survivable fi nancial crisis, akin to the destruction wrought by a
1