Rising to the Challenge U.S. Innovation Policy for the Global Economy (2012) / Chapter Skim
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Chapter 2 Sustaining Leadership in Innovation
Chapter 2 Sustaining Leadership in Innovation
Pages 61-126
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From page 61... ...
For much of the post-war era, America's boasted some of the world's best transportation, energy, and communication infrastructure.1 In the 1980s, America's corporate tax rates were among the lowest in the industrialized world.2 The U.S. also has had one of the world's strongest legal systems for protecting intellectual property rights.3 1 Michael Porter observed that American communication, power transportation, and transportation infrastructure was "arguably the best in the world" after World War II, and the fact that infrastructure companies were privately owned "was a stimulus to investment and innovation." See Michael E
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ranks only No. 27 in terms of infrastructure, according to the World Economic Forum, a major factor in America's falling place in the WEF's overall global competitiveness rankings.10 That compares to seventh place in 2000, observes the McKinsey Global Institute.11 The American Society of Civil Engineers asserts that most of America's infrastructure is in poor shape due to delayed maintenance and lack Software Alliance and IDC, 08 Piracy Study, May 2009, (http://portal.bsa.org/globalpiracy2008/studies/globalpiracy2008.pdf)
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16 Cathy Yan, "Road-Building Rage to Leave U.S. in Dust," Wall Street Journal, January 18 2011.
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Investors could choose which projects meet their investment criteria, and, in return, share in project risks that today fall solely on taxpayers."19 Energy Efficiency: Reliable, clean, and relatively inexpensive energy has long been an important competitive advantage for the United States. As a recent UNIDO report notes, "Energy efficiency contributes toward reducing overall company expenses, increases productivity, has effects on competitiveness and the trade balance on an economy-wide level, and, by creating a home market for energy efficient technologies, supports the development of successful technology supply industry in that field."20 Energy efficiency also represents a major opportunity to increase energy security while also limiting carbon dioxide emissions.
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In Germany, broadband penetration is at 30 percent. The rate is 31 percent in France, 34 percent in South Korea, 38 percent in Denmark, and 41 percent in Sweden.24 While recognizing that a number of these countries do not have the same geographical spread as the United States, the McKinsey Global Institute nonetheless estimates that the U.S.
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China's long-term plans call for boosting R&D to 2.5 percent of GDP by 2020.31 The government also has set an ambitious target of 29 National Science Foundation Science and Engineering Indicators: 2010 and Ministry of Science and Technology of the People's Republic of China, China S&T Statistics Data Book 2010, Figure 11. 30 UNESCO Science Report 2010, Paris: United Nations Educational, Scientific and Cultural Organization.
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40 Brazil Innovation Secretary Francelino Grando, "Brazil's New Innovation System," National Academies symposium, Clustering for 21st Century Prosperity, Washington, DC, February 25, 2010.
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68 RISING TO THE CHALLENGE 3.9 percent in 2010, one of the highest levels in the world.41 In 2006, the Singapore government tripled its five-year R&D budget and set a target of pushing national spending to 3.5 percent of GDP by 2015.42 In the United States the growth in pubic R&D funding has been more uneven. Public research spending received an $18.7 billion temporary boost under the 2009 American Recovery and Re-investment Act of 2009.
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The federal share, with its greater focus on basic R&D, has fallen steadily since the mid 1980s and now is about 0.7 percent of GDP -- its lowest level since World War II.48 47 National Science Foundation, Science and Engineering Indicators: 2010, Chapter 4. 48 National Science Foundation Science and Engineering Indicators, 2010.
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SOURCE: National Science Foundation, National Center for Science and Engineering Statistics, Science and Engineering Indicators 2012, NSB 12-01 (January 2012) , Appendix Tables 4-8, 4-9 and 4-10.
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In 2000, for example, the European Union set a target of 3 percent of GDP by 2010 for its members. But collectively the EU remains at 1.9 percent.49 (There are notable exceptions: Germany and France are both significantly increasing their R&D budgets.50)
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Fraunhofer operates 59 well-staffed Institutes of Applied Research across the country working closely with German manufacturers in 16 different innovation clusters. Fraunhofer Executive Director Roland Schindler described the organization as a "technology bridge," helping industry partners develop production processes, 56 For example, see Richard W
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plays a similar role. With 60 Presentation by Roland Schindler at the National Academies Symposium on "Meeting Global Challenges: US-German Innovation Policy" November 11, 2010.
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ETRI currently is number one in the world among public research organizations in terms of patents generated, with second place going to the University of California and third to MIT.65 ETRI laboratories now specialize in fields such as information technology convergence, new materials, next generation semiconductors, and new broadcast and telecom technologies.66 In the emerging field of flexible electronics, in which Korea is becoming a major player, ETRI is developing flexible memristor memory technology, utilizing graphenes, which are highly-conductive carbon nanoparticles seen as having a vast range of potential applications in electronics.67 U.S. Applied Engineering Programs Federal applied R&D is fragmented among many agencies.
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74 See presentations by Grace Bochenek and Sonya Zanardelli of the U.S. Army Tank and Automotive Research, Development, and Engineering Center at the National Research Council conference on Building the U.S.
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. Also Pradeep Haldar "New York's Nano Initiative," in National Research Council, Growing Innovation Clusters for American Prosperity, C
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. 81 Presentation by Roland Schindler at the National Academies Symposium on "Meeting Global Challenges: US-German Innovation Policy" November 11, 2010.
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See also the presentation by Roland Schindler, Executive Director of Fraunhofer CSE, at the National Academies Symposium on Meeting Global Challenges: U.S.-German Innovation Policy, Washington, DC, November 1, 2010. Germany's Fraunhofer system has established seven research institutes based at U.S.
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From page 79... ...
This was due in large part to an increase in the growth of knowledge- and technology-intensive industries worldwide, but especially in emerging economies as they liberalized markets, increased spending on R&D and education, and adopted policies to encourage hightechnology manufacturing production and exports.88 The development of global supply chains initially increased specialization as lower value-added production was moved to lower cost locations. Emerging economies increasingly have moved up the value-added supply chain so that they are now competing in the same product and technology space as the United States.
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loss of competitiveness with the Pacific Rim area in general because China primarily is an assembler of high-technology components made in nations and regions such as Japan, Taiwan, Korea, and the United States.92 China and other emerging economies, however, are continuing to move 89 The traditional factor endowments are labor and capital. See International Monetary Fund, "Changing Patterns of Global Trade," June 15, 2011, pp.
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based manufacturing.93 By shifting and reorganizing global supply chains, the globalization of the world economy has also affected the price of products, employment patterns and wages in advanced and emerging economies alike. One of the most significant changes for the United States, as documented in a recent study by Spence and Hlatshwayo, is that from 1990 to 2008, almost all incremental employment growth came from the non-tradable sector of the U.S.
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95 The authors state that the manufacturing job losses were due to the lower value added positions moving offshore while higher value added positions remained.
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Region Exports Imports Balance Pacific Rim 95.7 219.9 -124.2 EU 67.0 75.3 -8.3 Other 124.0 90.8 33.2 World 286.7 386.0 -99.3 SOURCE: U.S. Census Bureau, Foreign Trade, Trade in Goods with Advanced Technology Products.
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. See also President's Council of Advisors on Science and Technology, "Report to the President on Ensuring American Leadership in Advanced Manufacturing," June 2011.
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106 Ross Bringans, "Challenges and Opportunities for the Flexible Electronics Industry," Presentation at the National Academies conference on "Flexible Electronics for Security, Manufacturing, and Growth In the United States." September 24, 2010. 107 See Bob Street, "Next Generation: The Flex Display Opportunity" in The Future of Photovoltaic Manufacturing in the United States, C
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The tariff obligates regional or national electricity utilities to buy renewable electricity, such as electricity generated from solar photovoltaic panels, at above-market rates. See presentation by Bernhard Milow of the German Aerospace Center at the National Academies symposium on Meeting Global Challenges: U.S.German Innovation Policy, November 1, 2010.
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117 See Jason M Forcier, "The Battery Industry Perspective," presented at the National Research Council conference on Building the U.S.
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. 120 President's Council of Advisors on Science and Technology, Report to the President on Ensuring American Leadership in Advanced Manufacturing, Executive Office of the President, June 2011.
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See presentation by Eric Shreffler, "Michigan Investments in Batteries and Electric Vehicles," at the National Academies Symposium on Building the U.S. Battery Industry for Electric Drive Vehicles, Livonia, Michigan, July 26, 2010.
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Wessner, ed., Washington, DC: The National Academies Press, 2011. 128 From presentation by John Lushetsky of the Department of Energy at National Academies symposium "Meeting Global Challenges" in Washington, DC, November 1, 2010.
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Roth, et. al, "2010 Global Manufacturing Competitiveness Survey," Deloitte Touche Tohmatsu and U.S.
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Census Bureau. 137 Presentation by Simon Ng, "Technical Training and Workforce Development," at the National Academies Symposium on Building the U.S.
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America's fledgling advanced battery industry illustrates this paradox. Some 48 factories funded by private investors and government incentives are being established, but industry analysts project serious overcapacity for at least five years before the hybrid and computing, including the internet.
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Battery Industry for Electric Drive Vehicles. 144 From presentation by Les Alexander at the National Academies Symposium on Building the U.S.
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150 President's Council of Advisors on Science and Technology, Report to the President on Ensuring American Leadership in Advanced Manufacturing, op.
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Manufacturing companies account for nearly 70 percent of U.S. industrial research and development153 and employed 63.4% of all domestic scientists and engineers in 2007.154 Domestic manufacturing is a critical element in the creation of new technologies.
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158 See presentations of John Pellegrino of the Army Research Laboratory and Grace Bochenek in of TARDEC at the National Academies Symposium on Building the U.S. Battery Industry for Electric Drive Vehicles, July 26, 2010.
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160 Economists also have estimated that manufacturers pay 30 to 40 percent of all corporate taxes collected by the federal, state, and local governments and that each $1 of final manufacturing output creates another $1.43 in economic output when services such as finance, construction, and transportation are included.161 The Heritage Foundation notes that while U.S. manufacturing employment dropped by one-third since 1987, output rose by 46 percent, thanks to a 114 percent increase in productivity.
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From page 99... ...
The successor to the Advanced Technology Program, the Technology Innovation Program (TIP) at the National Institute for Standards and Technology "supports, promotes, and accelerates innovation in the United States through high-risk, high-reward research in areas of critical national need" through "targeted investments in transformational R&D that will ensure our nation's future through sustained technological leadership." See http://www.nist.gov/tip/.
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SBIR is increasingly seen as "Best Practice" around the world. As we see below, a growing list of countries have adapted the SBIR program within their own innovation systems.171 • Brazil: The Brazilian Innovation Agency, better known by its acronym FINEP, operates the PIPE and Pappe programs that provide grants to hundreds of small companies that are commercializing technologies.172 • Japan: Japan is expanding the scope and scale of the Small Research Innovation Research program, which was established in 2003 and is directly modeled after the U.S.
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National Innovation System, 1970-2006," Washington, DC: The Information Technology and Innovation Foundation, July 2008. • India: The Small Business Innovation Research Initiative (SBIRI)
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NIST's Technology Innovation Program, which replaced the Advanced Technology Program, is now unfunded, despite a proven track record of success, at least for the ATP antecedent. A major advantage of ATP was its focus on linking small and large companies, along with universities to develop new high technology products.
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See Peter McPherson, David Shulenburger, Howard Gobstein, and Christine Keller, "Competitiveness of Public Research Universities & the Consequences for the Country: Recommendations for Change," Association of Public and Land-Grant Universities, March 2009, (http://www.aplu.org/NetCommunity/Document.Doc?
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The university expects a further 16.4 percent cut in Fiscal Year 2011, reducing state funding to 1999 levels even though there now are 73,000 more students.186 At the University of Georgia, state funds per student have dropped from $8,191 in FY 2009 to $6,242 in FY 2011 and also now are at 1999 levels not adjusted for inflation, despite 4,000 more students, additional buildings, and higher teacher salaries.187 Arizona State University's budget was slashed by $88 million in 2009, and a further cut of 20 percent for four-year colleges in universities in the state has been proposed for 2011.188 In all, 32 U.S. states cut their support for higher education in 2010 by between 0.3 percent and 13.5 percent, with double-digit declines in Missouri, Delaware, Iowa, Minnesota, Arizona, and Oregon.189 "Given the national reliance on public universities for majority contributions to the nation's need to advance knowledge and prepare new scientists and engineers," warns the Association of Public and Land-Grant Universities, "a serious decline in the capacity of public research universities critically risks the attainment of these national goals."190 • Limited use of Dedicated Taxes: Funding from states for universities is especially vulnerable to state budget cuts because it often comes 184 Charles M
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Governments in emerging economies also are aiming to 191 Alene Russell, "Dedicated Funding for Higher Education: Alternatives for Tough Economic Times," American Association of State Colleges and Universities, Higher Education Policy Brief, December 2008. Access at http://www.aascu.org/uploadedFiles/AASCU/Content/Root/PolicyAndAdvocacy/PolicyPublications/ 08.decpm(2)
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197 A committee studying reforms of IITs is expected to call for granting them greater management and financial autonomy from the government and to encourage research partnerships with private companies.198 India's Five-Year plan, for example, calls for establishing a network of globally competitive "centers of excellence" in certain technologies based at universities.199 • Canada: As part of Canada's efforts to promote commercialization by universities, the Foundation for Innovation since 1997 has allocated $5.2 billion to research projects, new laboratories, industry collaborations, and recruitment of foreign faculty. The government also has increased the number of Centers of Excellence based at universities 194 Fientje Moerman "Keynote Address," National Research Council, Innovative Flanders, Innovation Policies for the 21st Century, C
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2002. 205 Francelino Grando, "Brazil's New Innovation System," National Academies symposium, Clustering for 21st Century Prosperity, Washington, DC, February 25, 2010.
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federal government needs to assume more responsibility for funding public research universities. 208 To provide more stable funding for higher education, the American Association of State Colleges and Universities has called upon states to earmark more revenue from recurring sources such as excise taxes, gaming, and land use rights.209 New Models of 21st Century Universities While it's often the case that other nations are adapting best practices from the United States, new schools are being established around the world based on innovative models designed to meet the needs of the 21st century global economy.
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Such new arrangements may also include the coaching and steering of research programs in emerging countries, their early inclusion in international networks, and the affiliation of private companies to academic and research programs. On the other hand, many emerging nations are now facing the need and the opportunity of large investments in science, technology and higher education (public and private)
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213 Collaboration with Industry The culture of academic collaboration with industry is well established in the United States. Notable among these is the Semiconductor Research Corporation Focus Center Research Program, a multi-million dollar, 30university research collaboration to address long-term technology issues of relevance to the semiconductor industry.214 University-industry collaboration, particularly with regard to technology-transfer programs, offers a mixed picture.215 Over all, the number of start-ups spun out of elite research universities in the United States has risen from 200 in 1994 to 651 in 2010.
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One North also includes Fusionopolis, a futuristic 24-story tower intended as a one-stop R&D shop mixing companies in energy 217 Presentation by Ashley Stevens at the National Academies Symposium on Clustering for 21st Century Prosperity, February 25, 2010. 218 National Research Council, Managing University Intellectual Property in the Public Interest, Stephen A
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225 See Zhu Shen, "China: Navigating the Frontier of Life Sciences Silk Road," in National Research Council, Understanding Research, Science, and Technology Parks, op.
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cit. 230 In his presentation at the March 13, 2008, National Academies symposium "Understanding Research, Science, and Technology Parks," William Kittredge of the U.S.
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234 Ibid. 235 Presentation by Andrew Reamer, "Stimulating Regional Economies: The Federal Role," in the National Academies Symposium, Growing Innovation Clusters for American Prosperity, June 3, 2009.
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cit. 242 See presentation by John Chen, "Taiwan's Flexible Electronics Program," at the National Academies Symposium on Flexible Electronics for Security, Manufacturing, and Growth in the United States." September 24, 2010.
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247 State governments are deploying a wider range of policy tools, from tax credits and R&D grants to low-cost loans to free workforce training, in the attempt to close the gap with financial incentives offered by offshore locations in the intense competition for investment.248 Few of these initiatives, however, can match the financial resources and policy support of those in other nations.249 The U.S. Federal Role In remarks at a STEP Board symposium, then Commerce Secretary Gary Locke declared that "regional innovation clusters have a proven track record of getting good ideas more quickly into the marketplace.
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255 Presentation by Karen Mills, "Building Regional Innovation Clusters" at the National Academies Symposium on Clustering for 21st Century Prosperity, February 25, 2010.
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Hamilton presentation at Brookings Institution conference on "Immigration Policy: Highly Skilled Workers and U.S. Competitiveness and Innovation," Washington, February 7, 2011.
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doctorate degrees granted in natural sciences.260 Now the competition for non-native talent is becoming global as more countries take an activist approach to recruiting talent.261 To address skill shortages exacerbated by an aging population, the European Union has promulgated a "blue card" that allows highly skilled migrants from non-EU nations to live and work on a temporary base, and also allows them to move freely among most member countries.262 The EU also is simplifying procedures for obtaining legal resident status for foreign workers to by setting up a "onestop-shop" system for applicants.263 Canada has made recruiting foreign talent a top priority in its national innovation strategy. 264 Forty percent of the 8,053 new faculty members and 44 percent of the 1,806 new researches recruited by Canadian universities and the Foundation for Innovation as of the fall of 2009 came from other nations, for example.265 Thirty percent of the nearly 2,000 department chairs hired the Canada Research Chairs program also were recruited outside of Canada.266 Singapore's innovation strategy puts a heavy emphasis on "drawing creative and talent people from all corners of the world to live and work in Singapore."267 Among its prize recruits are eminent scientists from the National Cancer Institute, MIT, and the University of California at San Diego.268 While other nations step up recruiting, it has been getting more difficult for highly skilled foreigners to live and work in the U.S.
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275 Vivek Wadhwa, AnnaLee Saxenian, Richard Freeman, and Alex Salkever, "Losing the World's Best and Brightest: America's New Immigrant Entrepreneurs," Ewing Marion Kauffman Foundation, March 2009.
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al., Growth and Renewal in the United States: Retooling America's Economic Engine, McKinsey Global Institute, February 2011 279 For a review of potential reforms concerning the H-1B visa, which enables U.S. employers to hire temporary, foreign workers in specialty occupations, see GAO, "Reforms Are Needed to Minimize the Risks and Costs of Current Program." GAO-11-26.
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collaboration between government, industry, and academia. They include federal programs such as the SBIR and the NIST Advanced Technology Program, research consortia such as Sematech, and newer institutions such as the Flexible Display Center at Arizona State University.283 This report also highlights a number of promising and innovative state and regional publicprivate initiatives to bolster competitiveness.284 Such initiatives include regional innovation clusters, new kinds of science parks, workforce-training programs, and efforts to help entrepreneurs obtain access to the facilities, technical assistance, and early-stage capital they need to convert U.S.
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From page 123... ...
In some cases, governments are adapting the most successful features of the U.S. innovation ecosystem -- such as universityindustry collaboration, public provision and support for early-stage risk capital, strong protection of intellectual property rights, and well-funded, scalable research parks.
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: Strategic Policy and the Semiconductor Industry, Washington, DC, Brookings Institution, 1996.
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The key is to take measures to provide the funding, support services, and to anchor new and existing companies in clusters of competency here in the United States. This report highlights the features of a more comprehensive innovation policy.
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