Time for bolder innovation policy, researcher says

WASHINGTON--Trends indicate that more and more commercially successful innovations are backed by federal dollars, a researcher said Monday, and politicians should do even more--even create a cabinet-level Innovation Department--to support the innovation economy if they want to kick-start the wider national economy.

"We need economic policies that pull us out of the recession but are oriented towards innovation," said Fred Block, a sociology professor from the University of California at Davis. "What we have to do as a country is figure out how to walk and chew gum at the same time."

Block co-authored a report released Monday that urges President-elect Barack Obama to integrate support for innovation in the stimulus package he is expected to sign at the start of his term. At a conference in here Monday, academics and industry representatives pointed out the weaknesses of innovation economy and ways the government could address the systemic problems. The conference was sponsored by the Economic Policy Institute, the Information Technology and Innovation Foundation, the Breakthrough Institute, the University of California Washington Center, and the Ford Foundation.

Block's paper suggests increased funding for federal innovation, new mechanisms to fund fledgling technology companies, increasing public knowledge about the government's role in innovation, and creating a cabinet-level Innovation Department. The new department, Block said, would not run innovation programs itself but instead oversee interdepartmental collaboration and the use of best practices, among other things.

While some conference attendees suggested that asking for innovation policy reform at the start of the new administration was asking for too much, Block said now is the time to bring together influential constituencies with an interest in innovation policy--labor leaders looking for job creation, environmentalists interested in green technologies, and the business community.

"There's the potential in the moment for these groups to cohere into a political coalition so we just don't have stimulus but 'stim-novation,'" Block said, coining a term.

The significance of government support for innovation research and development is evident in R&D Magazine's annual "R&D 100 Awards," which recognize products that skillfully combine research with commerce, Block said. In 2006, 88 domestically produced innovations won recognition from R&D Magazine, and of those, 77 had benefited from public funds. The recognition of government-backed products has increased over the years, Block said.

The industry is clearly interested in more government collaboration, the other conference speakers said. Venture capital firms have been closely following the Department of Energy's entrepreneurs-in-residence (EIR) program, said Victor Hwang, managing partner of T2 Venture Capital.

Established in the fall of 2007, the EIR program funds VC-sponsored entrepreneurs to work in national research labs in order to develop plans to commercialize new clean energy technologies. The first three entrepreneurs were funded with a total of $300,000. On November 19, the Department of Energy announced it is expanding the program to include five more entrepreneurs, funded at $50,000 each.

"With a very minuscule amount of money you can get the whole industry to pay attention because it's been waiting for something like this to happen," Hwang said. "There's no reason this couldn't happen on a wider scale at other agencies."

Federal support could be especially helpful for cases of market failure in which fragmented, state-based policies are insufficient, the panelists said. In today's global economy, entrepreneurs need to be able to find business partners outside their own geographic region, Hwang said, but the free market does not provide a wide enough social network for that. Even state agencies will rarely look outside of their own constituencies, he said.

It is difficult for innovators to accommodate inconsistent state-level policies, such as broadband or e-waste policies, said Sun Microsystems Senior Vice President David Douglas. Sun has 10 employees who simply track state laws, he said.