How to Fix What the Innovation Economy Broke About America

7 mins read

Last Updated on September 16, 2022

So what are the biggest problems with our innovation economy? These are difficult to pinpoint and have a variety of different solutions, but let’s take a look at some of the most pressing issues. We must improve the quality of our infrastructure, increase competition and create more industrial labs. Then we can begin to address the problem of the labor shortage. But how do we go about doing this? Let’s examine each of these issues in turn.


What is the solution to this problem? How to repair the ecosystem that created America’s innovation economy? What are the barriers to innovation that have stymied America’s progress? What role has government played in ensuring that the innovation ecosystem is competitive? How can we foster more start-ups and small firms? In the late 20th century, the innovation ecosystem in America was transformed. Large firms had to invest heavily in internal R&D to avoid antitrust pressures.


In the last century, the American innovation ecosystem underwent a transformation. While the rate of new business formation fell by nearly 50%, the existing small businesses saw less competition and fewer opportunities to access markets and earn a reasonable return. While the current innovation economy can create wealth in places like Palo Alto, it is failing in other parts of the country. Here are some of the ways to fix what the innovation economy broke about America.

Start-ups and small specialized research organizations (SROs) trade in knowledge products. They sell their innovations to larger firms that commercialize them. While small specialized research firms often created the idea, large companies bought it and patented the invention. This process allows the innovators to reap profits without having to build the whole thing. But how do we fix this cycle? In short, we need to help small firms succeed in their ventures and encourage the growth of their ideas.

Innovation must be based on systematic application of science and technology. In recent decades, American productivity growth has been disappointing. This is partly due to the fact that universities produce their knowledge in indigestible forms that small firms cannot fully duplicate. Corporate research relies on the integration of multiple disciplines. Large corporations are also able to compete against small firms. This imbalance has been one of the main causes for the decline of the U.S. economy.

Industrial labs

If you’ve been following the recent developments in the technology and innovation world, you’ve probably noticed that the U.S. has lost much of its manufacturing base. As recently as 2010, U.S. high-tech manufacturing jobs accounted for billions in global value added. And yet, as these jobs disappear, so does the wealth that a well-paid, highly skilled workforce creates. In addition, these workers have lower wages and fewer benefits than their counterparts in other nations. And with less innovation, Americans will be more likely to suffer from technological decline, rather than benefit from greater profits.

Companies need breakthroughs to build successful businesses. But they can’t or won’t do this without the government. In fact, nearly every major innovation since the Second World War has required a big government push. The government can afford to take risks that private companies simply can’t. That’s why industrial labs are crucial to fixing what the innovation economy broke about America. But what’s the best way to ensure that the U.S. government’s innovation sector stays on track?

The digital output of federal laboratories includes data, metadata, images, software, code, tools, databases, algorithms, and statistical models. These products can be freely distributed and used by many without restriction, and they can have enormous positive externalities. Governments should foster widespread use of digital products, as they will create enormous benefits for society. This is especially true of digital products, which are in the public domain.

Public policy

The American innovation ecosystem underwent an abrupt change in the late twentieth century. Government has a role to play in rebuilding the innovation economy. In addition to investing in research and development, the government can help create the conditions for more innovation to happen. The Clinton-Gore strategy calls for a greater role for government in the innovation process. It calls for the government to play a larger role in basic technological research and innovation.

The emergence of science-based innovation in the United States required corporations to hire more scientists. Universities provided the necessary human capital. In the 1930s and 1940s, pharmaceutical firms began hiring scientists from local scientific doctoral programs. In the 1980s, the role of small firms re-established. However, by then, the scientific doctoral programs in small towns and cities were no longer fully substituted. The post-war period saw the development of research universities.

The new American economy is in a unique position to use more technical knowledge, albeit in a fragmented way. As a result, sources of private support for basic scientific and technological research are diminishing. Private-sector innovation is increasingly reliant on alliances and partnerships, and it looks for technical knowledge wherever it can be found. Government policy should foster these alliances and help compensate for short-term investments.

The globalization of innovation and R&D raises uncomfortable questions in politics. Many political parties oppose open markets, lower barriers to foreign investment, and accelerated diffusion of technical knowledge. In addition, governments attempt to capture the benefits of technology investments domestically. In short, public policy must change to reflect these new realities and take into account the concerns of both the political and economic elites. The policy should be focused on how the innovation economy works in a new global environment.

About The Author

Fernánda Esteban is a food fanatic. She can't go more than a few hours without eating, and she loves trying new foods from all over the world. Her friends know that they can always count on her for a good conversation, and she's an animal lover who will never turn down an opportunity to pet a dog or cat. Fernánda also enjoys learning about random facts, and she's a social media practitioner who loves to share what she knows with others.