America Develops a New Policy of Innovation

The United States has always been characterized by its defense of the free market and discouragement of government intervention in business. Yet, new global activity and massive developments in the industrial activities of emerging countries are changing this attitude. At the request of Congress, ad hoc academic committees have been developing a new practical doctrine that seeks to combine the entrepreneurial liberalism that drove successes in Silicon Valley and Route 128 with strategic interventionism similar to practices that European countries have used to develop technology programs or combat unfair competition.

An Evolutionary Past

Innovation in the United States is grounded in a strong historic tradition of productive research that has unfolded since the 18th century. American innovation was born in the 1900s with inventors such as McCormick, Edison and Bell and is based on the idea of dynamic entrepreneurship. In the 20th century, the federal government began to intervene, with the creation of the National Advisory Committee for Aeronautics in 1955 and, during the war, with the organizations established by Vannevar Bush, the founder of Raytheon who became President Roosevelt’s advisor. This early policy, which endures today, is based on a division of labor between the central administration that funds and directs fundamental research and the big businesses that develop the applications. In addition, the federal government developed a public procurement policy to fund very large programs, such as the aerospace program.

In the late 1950s, the desire to stimulate entrepreneurship appeared in the form of the Small Business Administration, created in 1952, and the Small Business Investment Companies created by Congress to fund almost any type of business. These policies profoundly stimulated the creation of new businesses in the United States. Yet, these actions were not sufficient to compete with the technical and monetary resources of the Japanese electronics industry, and in the early 1980s, the U.S. responded by trying to stimulate technological development through the Bayh-Dole Act and other laws (such as the Department of Defense’s Small Business Innovation Research-Small Business Technology Transfer program) as well as encouraging collaborative research in areas such as microelectronics through programs such as SEMATECH. The devaluation of the yen (its parity with the dollar was set by MacArthur in 1945) in 1987 complemented these policies.

These new policies have resulted in much success, but now they face new problems from emerging national economies: the Four Asian Dragons, BRICS (Brazil, Russia, India, China and South Africa) and others have provoked a deterioration in the number of grants given to the U.S. and have developed many technological innovations. That’s why, in the mid-2000s, Congress asked American institutions to formulate recommendations that can serve as a new innovation policy for the development of industrial technologies. The National Research Council prepared an initial report, “Rising Over the Gathering Storm,” and a series of reports and seminars conducted by Charles Wessner followed, allowing for an elaboration of the bases of a new innovation policy for the future.

Toward Consensus

Reading over the reports and laws adopted around two years later shows that the U.S. is reaching a consensus on four points:

• The need to develop a global innovation policy

• Defining a sphere of reference for all parties involved: the federal government for research and large programs; the individual states for training and more focused programs; big business for incremental innovation; and small and medium-sized enterprises and start-ups for more open innovation

• Defining operating rules for dealing with competing countries, based on the desire to restore fair competition

• Remaining open to innovation through entrepreneurship and a competitive internal market

This new vision will serve as the basis for federal and state policies and will guide other actors as well. This slow elaboration of a consensus was 10 years in the making and suggests that America is preparing for a bright future of innovation. It also could be accompanied by a strong currency realignment, similar to what happened with Japan in 1987.