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The Innovation Economy


PIE = Pan-National Innovation Economy ' ... 1. What Every American Wants to Know (cont.) Some attributes of PIE ... fiscal strategies have not adapted to PIE ... – PowerPoint PPT presentation

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Title: The Innovation Economy

The Innovation Economy
  • Presented at
  • Innovation Matters! Building Competitive
    Advantage in States,
  • 2004 / 2005 National Governors Association
    Workforce Development Policy Forum, Miami,
    January 2005

Graham S. Toft Economic Competitiveness
Group Thomas P. Miller and Associates and
GrowthEconomics 317 894 5508 941 383
  • What Every American Wants to Know - - What is
    Happening to Us?
  • High Stakes for States - - Who is Getting a piece
    of the PIE?
  • PIE Jobs
  • Major Implications of PIE for States
  • Wrap UP Keep Your Eye on the PIE - - Try ILPO

1. What Every American Wants to Know
What is happening to us and what to call it?
Digital Economy
High Tech Economy
Global Economy
Innovation Economy
Knowledge Economy
PIE Pan-National Innovation Economy
1. What Every American Wants to Know (cont.)
  • Knowledge is the ingredient that underlies the
    competitiveness of regions, nations, sectors or
    firms. It refers to the cumulative stock of
    information and skills concerned with connecting
    new ideas with commercial value, developing new
    products and, therefore, doing business in a new
    way. At its most fundamental level, the
    knowledge-base of an economy can be defined as
  • The capacity and capability to create and
    innovate new ideas, thoughts, processes and
    products, and to translate these into economic
  • value and wealth.
  • Source World Competitiveness Index

1. What Every American Wants to Know (cont.)
  • Some attributes of PIE
  • High productivity / low inflation (even danger of
  • Rapid technological change
  • High capital / labor ratios (capital deepening)
  • Deregulation and market liberalization
  • Global marketplace
  • Sub-national regionalism
  • Mobility of
  • Capital
  • Innovations / Ideas
  • Business
  • People

1. What Every American Wants to Know (cont.)
  • Some Attributes of PIE (cont.)
  • Churning
  • Business locate, then relocate (some off shore)
  • Small Businesses start many fail.
  • Businesses grow Businesses decline( even big
  • Jobs increase jobs decrease (often at the same
  • People come people go.
  • Theoretical Underpinnings
  • Joseph Schumpeter Gales of creative
    destruction. or, is it wails or sails
  • Many state and local economic policies and
    fiscal strategies have not adapted to PIE

1. What Every American Wants to Know (cont.)
  • When did it start? When will it end?

Start During the last business cycle (1991
2001) but many of the discoveries leading to the
.com boom began a decade before. Discernable
improvement in U.S. productivity began in 1995,
next is global productivity improvement in the
BRICs (Brazil, Russia, India, China). End
Barring major geopolitical disruptions, global
health epidemics or natural disasters, this is a
long-lasting industrial revolution - - with
major consequences for organization of work, type
of work, location of work, global
interdependencies and shifting competitive
advantage of nations, states, localities.
1. What Every American Wants to Know (cont.)
  • Why is it different this time?
  • Knowledge explosion (doubling every 10 years)
  • Accelerated exchange of knowledge / ideas due to
    advanced telecommunications and transportation.
  • Transforming nature of many new discoveries - -
    transforming health / longevity, lifestyles /
    work-styles, urban form, value chains, global
    relationships . .
  • Speed Reduced cycle time from discovery to
    development to deployment.

1. What Every American Wants to Know (cont.)
  • Why is it different this time?
  • Rapid growth in global brain-power - - global
  • Global consumerism that offers market niches at
    scale economies
  • Without high-level innovation/productivity, the
    U.S. would be crushed by its twin deficits and
    global recession could follow.

1. What Every American Wants to Know (cont.)
  • Note There are several economies running in
    parallel and overlapping with the Innovation

1. What Every American Wants to Know (cont.)
  • In summary, great uncertainties today call for
    discerning the engines of growth for the future
  • This is the century of
  • Asia (high savings, emerging middle class, high
  • Transforming technologies - - Biotech
    Nanotechnology Advanced Materials, Energy and
    Food IT is now a given - - next jump is Internet
  • An Aging Workforce, even in the less developed
    world (the 50 60 year olds are your future!)
  • The emerging Creative Sector

Agriculture / Mining / Construction
The Creative Sector
1. What Every American Wants to Know (cont.)
  • This is the century of (cont.)
  • Trade / Global Markets
  • The Entrepreneur
  • States and localities without an appropriate
    response to each of these will hurt many are not
    well prepared.

2. Big Stakes for States - - Who is Getting a
Piece of the PIE?
  • Top 10 most competitive states 2004 - - The
    Economic Competitiveness Groups State
    Competitiveness index (2004). (Measured by five
    drivers, 88 metrics)
  • WA CA
  • UT AK
  • DE IA
  • MA CO
  • VA WY
  • Whats common strong technology / innovation
    base or resource base most have above average
    human capital base.

2. Big Stakes for States - - Who is Getting a
Piece of the PIE? (cont.)
  • Growth States 2004 - - Dynamism Sub-driver from
    the Economic Competitiveness Groups State
    Competitiveness Index (positive change in gross
    state product, business growth, head quartered
    companies, incubators, capital formation,
    exports, income per capita, bank deposits,
    foreign investment)
  • HI MO
  • NV FL
  • AK OK
  • NM VA
  • WI PA
  • Whats common Many mid-size states on the move.
    Some showing multi-year turnaround.

3. PIE Jobs
  • Lots of mid-level jobs - - the new working
    class comprised of mid-level technicians,
    professionals, paraprofessionals, managers /
  • Multi-skilled
  • Basic skills (literacy , numeracy, basic
  • Technical skills (specific to the occupation).
  • Social skills (communication, team work,
  • Investigative and problem-solving skills

3. PIE Jobs (cont.)
  • Life Skills (time and financial management,
  • Strategic skills (optimism leadership,
    inquisitive about the future self-directed, self
    initiating agility / flexibility)
  • Entrepreneurial skills
  • Multicultural skills.
  • More part-college, industry-credentialed jobs
  • More self-employment
  • More contingent, contract employment

4. Major Implications of PIE for States
  • The Innovation Economy is very fluid,
    unpredictable (Schumpeters gales of creative
    destruction). Best suited to localities,
    states, nations that provide solid economic
    foundations for very agile firms and
    talent-acquiring workers. Not suited to
    heavy-handed public sector direction - - operates
    too slowly and lacks market signals. A danger in
    getting it wrong - - a real opportunity to get it

4.1 The Really Big Picture
Paradigm Shift Create wealth and good jobs will
  • You and fellow state leaders are in it for the
    long haul. Economic transforms transcend
    political / electoral lead times,
  • Even in tough times you will have pockets of
    growth - - monitor and understand where wealth is
    being created.
  • Dont walk away from your mainstay industries - -
    they are undergoing innovative transformations

  • Go with the flow Ride the horse, dont try to
    kill it. You can shepherd but not direct. Avoid
    picking winners.
  • Dont tax productivity-enhancing investment (e.g.
    business equipment taxation) dont unduly tax
    human capital (workers comp and unemployment
  • Do tax real property (especially land value).
    Growing real estate values are part of the Asset
  • Keep the public very well-informed and ahead of
    the game.

  • Innovation development calls for a bunch of
    non-economic conditions as well as economic e.g.
    quality of life for entrepreneurs, schools that
    value math and science highly, career technical
    education that tightly links school and
    workplace. Hot jobs grow in cool places.

  • Organize state government around what matters to
    the innovation economy Adult learning
    (technical and further education)
    entrepreneurial education small business
    development and growth from within business
    and industry liaison (engaged S L government).

  • Remember the state budget is usually more than
    10 of state GDP. How these monies are used,
    influences state economic growth.
  • China, get over it!

4.2 Implications for State Economic Development
  • Paradigm Shift Balance inside-out growth with
  • Avoid cluster-mania - - works sometimes, some
    places, some industries and not others. Some
    economic developers and state leaders have never
    seen a cluster they didnt like! Become skilled
    in nurturing industry alliances and see if they
    grow (e.g. OR)

  • Cultivate an entrepreneurial climate (in schools,
    in business organizations, in civic institutions
    social entrepreneurship). Know your angel
    network of potential investors. If not there,
    nurture it. Develop an entrepreneur attraction
    program to your state some are foot loose!
  • Have a very flexible pot of money for your
    business assistance / incentives. Traditional
    incentive packages may not work.

  • Capitalize on your knowledge industries, each
    state has them! - - dont write off your
    institutions of higher learning
  • Advanced Technology Centers co-located at
    community colleges / technical institutes.
  • Business attraction efforts in college towns that
    link graduate student output and research in
    specific university departments with business
  • University research parks and technology
  • Economic research on the states changing economy
    (lots to learn and to track).

  • Find ways by which small / mid-size enterprises
    can obtain strategic intelligence at modest cost.
    (economic gardening approach).
  • Find ways to accelerate wide-spread broadband
  • Aggressively advance trade and foreign direct

4.3 Implications for State Talent
Pdgm Shift workforce to talent-force
  • Experiential learning is back. Dont walk away
    from your career technical education system,
    transform it!
  • No child left inflexible. End senior high school
    as we know it.
  • Off-shoring, embrace it! Build really creative
    economic adjustment strategies (for individuals
    and firms) in cooperation with economic
    development agencies.

4.3 Implications for State Talent
Development (cont.)
Paradigm Shift from workforce to
  • Silos are for losers - - reinvent the human
    capital bureaucracy (state universities /
    colleges, community colleges, WIA, Adult
    education / ABE, Career Technical Education) for
    agility / flexibility.
  • Learning is for life, seriously!

Wrap Up Keep Your Eye on the PIE- - ILPO Magic!
Four ingredients for successful state economic
and workforce development Innovation -
Learning - Place-making - Optimism
  • Am I fostering and supporting a creative,
    innovative climate for large and small businesses
    alike, especially for new ventures?
  • Am I fostering life-long learning, combining
    classroom instruction with the experiential?
  • Am I creating cool places for residents of all
    socioeconomic groups?
  • Do I believe optimism can be learned and am I
    attempting to change aspirations and expectations?

Economic Competitiveness Group Thomas P. Miller
and Associates 317 894 5508