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Innovate America: Thriving in a World of Challenge and Change

A report by the Council on Competitiveness
December, 2004

Talent Recommendations
Investment Recommendations
Infrastructure Recommendations
Principals Committee Members



In October 2003, the Council on Competitiveness formed the National Innovation Initiative (NII) with the goal of creating "a comprehensive strategy to optimize our entire society for a future in which economic growth, productivity, and personal prosperity - the pillars of competitiveness - are increasingly linked to our capability to innovate." At the head of NII was the Principals Committee, made up of 19 university presidents and CEOs. This committee was supported by the 30-member Advisory Committee, co-chaired by Norm Augustine, Retired Chairman and CEO of Lockheed Martin, and William Brody, President of Johns Hopkins University. Additional advice was provided by the Honorary Committee, a group of 20 congressional representatives, administration officials, and state governors.

The majority of the analysis was performed by seven working groups, focusing on innovation skills, finance, infrastructure, the public sector, research frontiers, trade and investment policy, and innovation in the 21st century. After 15 months of research the working groups released over 80 recommendations. The final priorities were selected by the Principals and Advisory Committees and were first presented at the National Innovation Summit on December 15, 2004. The recommendations fall into three broad focus areas: talent, investment, and infrastructure.

Talent Recommendations

Goal No. 1: "Build the Base of Scientists and Engineers"
The committee proposes a number of mechanisms to increase the number of science and engineering students at the undergraduate and graduate levels.

In order to increase undergraduate enrollment, particularly from underrepresented women and minorities, the committee recommends the creation of a national science and engineering scholarship fund entitled "Investing for the Future." The fund would provide a scholarship to any qualified math or science major who demonstrated financial need and high levels of achievement. The government would provide tax incentives to individuals and corporations who donate to the fund. The committee also recommends fully funding the science and engineering education incentives authorized in the 2002 NSF Authorization Bill.

At the graduate level, the committee recommends three tactics. First, the government should create a merit-based, portable fellowship program. Modeled after the NSF Graduate Research Fellowship Program (GRFP), these grants would allow students to choose their research institution, field of study, and area of specialization, rather than be tied to existing grants. The committee recommends awarding at least 5,000 fellowships for up to five years at a stipend comparable to that of the NSF GRFP.

Secondly, the committee recommends establishing traineeship grants to academic institutions. These grants would focus on "frontier research areas and multidisciplinary or innovation-oriented studies" and would involve an element of exposure to academic, industry, or government labs and research.

Finally, the committee recommends expanding the number of Professional Science Masters (PSM) programs, a recently developed degree that combines training in science and business skills. The government would provide matching grants to institutions that establish PSM programs.

The last recommendation of Goal No. 1 is designed to maintain the foreign talent pool in the United States. The committee recommends establishing an expedited immigration process. This would include providing automatic work permits and residency status for students who have graduate degrees in science or engineering from US universities and for students who have been offered jobs by US employers and have passed security tests.

Goal No. 2: "Catalyze the Next Generation of American Innovators"
To promote an innovation-oriented culture in US universities, while continuing to focus on basic research, the committee recommends a number of curricular and administrative changes. Universities should alter current tenure and promotion procedures to recognize professors in technical disciplines who teach creativity, inventiveness, and innovation. They should also develop multi-disciplinary curricula that include innovation skills and emphasize experiential learning, establish programs to teach innovation management skills to managers from small businesses, and fund internships for students technology students interested in local business environments. The committee also recommends developing "Innovation Partnerships" between academia, business, and government in order to catalyze the transition from discovery to commercialization. Finally, the National Science Foundation should fund new programs to create innovation education and opportunities at the K-12 and higher education level.

Goal No. 3: "Empower Workers to Succeed in the Global Economy"
To increase the skill set and flexibility of the US workforce, the committee recommends creating voluntary asset accounts for employees to finance lifelong learning and training activities. Contributions to the accounts by workers would be tax-exempt, and contributions by employers would result in tax credits.

The committee also recommends increasing the portability of healthcare and pension benefits. Employers should automatically enroll employees into portable retirement plans, increasing the number of workers who invest in retirement savings. States should offer tax incentives for annuities, clarify annuity regulations and legal aspects of cash-balance pension plans, help employers provide financial advice to employees, and help expand the availability of Health Savings Accounts.

In order to support workers who lose their jobs due to new technology and trade, the committee recommends reforming the Trade Adjustment Assistance (TAA) Program to include workers in the service sector. The TAA provides income support, training resources, health benefits, and relocation assistance for displaced workers. Furthermore, federal and state employment and training programs should devote more resources toward high-growth and in-demand skills. Temporary wage supplements should also be expanded so that younger workers can move quickly from unemployment to new jobs and job training. The government should "re-institute H1-B training grants to ensure that Americans are trained in the skills and fields for which companies now bring in foreign nationals." Finally, companies should offer training programs that encourage innovation and commercialization skills.

Investment Recommendations

Goal No. 1: "Revitalize Frontier and Multidisciplinary Research"
To increase frontier research, the committee recommends creating "Innovation Acceleration" grants for high-risk exploratory research by reallocating three percent of all federal R&D budgets. Additionally, the NSF budget should be doubled and three percent of the Department of Defense (DOD) budget should be allocated to science and technology. Of that three percent, twenty percent should be reserved for 6.1 long-term, basic research. Additionally, university funding should be allocated to multi-disciplinary programs and "services science," a discipline that combines computer science, operations research, mathematics, social sciences, and legal sciences. Finally, the R&D tax credit should be restructured and made permanent.

Goal No. 2: "Energize the Entrepreneurial Economy"
To increase innovation in the private sector, the committee recommends creating at least ten "Innovation Hot Spots" - similar to Silicon Valley and the Boston area - over the next five years. The federal government should also develop a single lead agency to fund regional innovation-based economic projects, provide a 25% tax credit to companies making early-stage investments of at least $50,000 per year, and clarify guidelines in the Internal Revenue code relating to the investment of assets in start-up ventures. Finally, local and national leaders should provide education for local businesses on the positive regional impacts of entrepreneurial investments.

Goal No. 3: "Reinforce Risk-Taking and Long-Term Investment"
To reinforce risk-taking and long-term investment, the committee recommends that corporate boards change their incentive and compensation structures and that industry "initiate voluntary and supplemental disclosure of intellectual capital, innovation performance and indicators of expected future value." Business should also partner with universities to learn about trends in technology, innovation, and management, as well as to develop methodologies to asses the value of long-term investment. Additionally, the federal government should reduce tort litigation costs from two percent of GDP to one percent and "enhance … 'safe harbor' provisions to encourage the disclosure of longer-term innovation strategies." Finally, a public-private "Financial Markets Intermediary Committee" should be created to asses the impact of governmental regulations on investment in innovation.

Infrastructure Recommendations

Goal No. 1: "Create a National Consensus Supporting Innovation Growth Strategies"
To make innovation a legislative priority, the committee believes it is fundamental to have a national consensus that supports innovation. To that end, the committee recommends establish an explicit innovation strategy led by the President and coordinated by either the Cabinet or the National Economic Council. Additionally, leaders from industry, government, and academia should partner to advocate for innovation-related initiatives and to promote public support for innovation. New economic metrics that include innovation criteria should be developed to measure our innovative performance and national prizes that recognize excellence in innovation should be established by the private sector.

Goal No.2: "Create a 21st Century Intellectual Property Regime"
The committee recommends a reform of the US Patent and Trademark Office (PTO) to improve the quality of patents issued and reduce the time to receive a patent. This reform would involve increased resources for the modernization of patent examination and new post-grant review procedures. PTO should also invest in making a subset of key patents in the patent database searchable and should secure reciprocal rights to search foreign patent databases.

Goal No. 3: "Strengthen America's Manufacturing Capacity"
To revitalize manufacturing in the US, the committee recommends creating "centers of production excellence" These shared facilities for high-tech manufacturing sectors would promote collaboration, attract technical talent, and reduce individual costs. In addition, the Department of Defense should work with industry to support breakthrough manufacturing technologies. The committee recommends focusing significant attention on the small and mid-size manufacturing sectors (SMEs) by establishing innovation extension centers within the Department of Commerce to provide innovation assistance to SMEs. Finally, industry should create technology roadmaps to serve as the basis for public and private R&D investment priorities.

Goal No. 4: "Build 21st Century Innovation Infrastructures - the healthcare test bed"
The committee's final recommendation is to use a reform of the healthcare system as an avenue for developing new innovation infrastructure and technology. Specific components of the healthcare reform would include electronic reporting from hospitals and physicians to the Centers for Medicare and Medicaid Services (CMS), the Centers for Disease Control (CDC), and the Food and Drug Administration (FDA); health IT "readiness guides" to expedite IT implementation; an integrated healthcare IT infrastructure; research into ways to apply modern management practices to healthcare; international electronic exchanges of healthcare research and information; and an expansion of incentives that reduce medical errors.

National Innovation Initiative Principals Committee

Samuel J. Palmisano (Co-Chair), Chairman and CEO, IBM Corporation
G. Wayne Clough (Co-Chair), President, Georgia Institute of Technology
Gerard J. Arpey, Chairman, CEO and President, AMR and American Airlines
Shirley Ann Jackson, President, Rensselaer Polytechnic Institute
Lee C. Bollinger, President, Columbia University
Vikram Pandit, President and COO, Morgan Stanley
Molly Corbett Broad, President, University of North Carolina
Steven S Reinemund, Chairman and CEO, PepsiCo, Inc.
Michael J. Burns, Chairman, President and CEO, Dana Corporation
W.J. Sanders III, Founder and Chairman Emeritus, AMD
Mary Sue Coleman, President, University of Michigan
Ivan G. Seidenberg, Chairman and CEO, Verizon
Denis A. Cortese, President and CEO, Mayo Clinic
Kevin W. Sharer, Chairman, CEO and President, Amgen, Inc.
Robert M. Gates, President, Texas A & M University
Charles M. Vest, President, Massachusetts Institute of Technology
Sheryl Handler, President and CEO, Ab Initio
G. Richard Wagoner, Jr., Chairman and CEO, General Motors Corporation
John L. Hennessy, President, Stanford University

Source: Innovate America: Thriving in a World of Challenge and Change

Contributed by Jenny Fisher, AGI/AAPG 2006 Spring Semester Intern

Please send any comments or requests for information to AGI Government Affairs Program.

Posted February 3, 2006


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