1 The U.S. National Innovation System: Potential Insights for Russia Kenneth L. Simons Department of Economics Rensselaer Polytechnic Institute 110 8th Street Troy, NY 12180‐3590 USA Tel: (518) 276‐3296 Fax: (518) 276‐2235 [email protected]http://www.rpi.edu/~simonk 15 November 2008 (with updated references, Dec. 2009) Published in Russian, in Innovative Development: International Experience and Russia's Strategy, I. Danilin, I. and E. Klochikhin, eds., Moscow: MGIMO‐University Press, pp. 97‐119. This paper is based on a presentation made at the International Conference on Innovative Development: World Experience and Russia’s Strategy, 23‐24 October 2008. The author thanks conference participants for their discussion and for sharing their insights about Russia’s situation and potential regarding innovation and the economy.
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Press,pp.97‐119.This paper is based on a presentation made at the International Conference onInnovative Development: World Experience and Russia’s Strategy, 23‐24 October2008.Theauthorthanksconferenceparticipantsfortheirdiscussionandforsharingtheir insights about Russia’s situation and potential regarding innovation and theeconomy.
Although I am not Russian and do not much know Russia, I may havesomethingtooffertheRussianeconomy.Inthispaper,Idiscusstheimportanceofinnovation to economic growth, point out multiple categories of innovation,describeaspectsoftheUnitedStatesnationalinnovationsystem,andreflectonU.S.innovation policies and practices that might give ideas for Russia. Lengthieranalyses of the U.S. national innovation system include Mowery and Rosenberg(1993) and Simons and Walls (forthcoming), and statistics are available fromNationalScienceBoard(2008).ThediscussionherefocusesonideasforRussia.
how national innovation systems support innovation, it is therefore useful toanalyzetheroleoftechnologyingrowth.Technologyincludesscience,engineering,and managerial and social practices. Innovation is the novel application oftechnology for practical purposes, including the creation andproduction of goodsandservices.
Themost basicmodel of economic growth says thatwithout technologicalchange,economicoutputstopsgrowing,whereaswith technologicalchangeworldeconomicoutputgrowsforever.1Thisisillustratedinfigure1.Thefigureindicatesthatwithouttechnologicalchangeeconomicgrowthrisestoanasymptote,whereaswithtechnologicalchangeoutputcontinuestorisedrivenbythe improvements intechnology. More substantial models of economic growth account for the role oflabor, population increase, decision making by individuals and organizations,international differences, technology diffusion, and determinants of technological
1 In the model, , and , where Y(t) is economic
outputattimet;K(t)iseconomy‐widecapital(buildings,machinery,infrastructure,etc.)attimet;a(>0)isaconstant;g(≥0)isthegrowthrateoftechnology;α(>0and<1) is the coefficient of capital in the Cobb‐Douglas production function (α<1becauselaboraswellascapitalisassumedtoaffectoutputeventhoughthesupplyof labor is held fixed in this basicmodel); s (>0 and <1) is the fraction of outputsavedratherthanconsumed(thisiscapitalforfutureuse);andδisthedepreciationrateatwhichcapitalwearsout.Phaseportraitanalysis shows that thesolutionofthisdifferentialequationmatchesthepatternsoffigure1.
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increases, but these more substantial models maintain the same conclusion thattechnologicaladvancedrivesadvancesineconomicgrowth.2
could not have grown much by today. What has given us growth? Electricity,powered vehicles, computers,medicine, better fertilizers, better horseshoes,massproduction, telephones... all of the new and improved technologies since 1300.Withoutnewtechnology,theworldeconomywouldstagnate.Inanalysesofasinglecountry’seconomy,thatcountrywouldhavelittletotradewithdevelopednations,andagain itwouldstagnate.Withtechnologicalchange,however, theworldorthecountry grows nearly in proportion to the level of technology. This is whyinnovationisimportant.
Weenhance innovation to enhancegrowth.Alsowe enhance innovation toaddressdangerousworldproblemsthatwouldotherwiseharmourgrowthandourwell‐being:problemslikeenergy,climatechange,andsecurity.Alloftheserequirepartlytechnologicalsolutions.
KindsofInnovationNeededWemust enhance innovation of several kinds. No one kind is enough. To
Innovative ideas come from universities and laboratories, from
entrepreneurs,andfromestablishedbusinesses.Allthesesourcesareimportantindifferent ways. Universities and non‐business laboratories tend to be sources offundamentalresearchideas,drivenmorebythepotentialofnewtechnologiesthanby commercial gain. Entrepreneurs are often sources of major new products ortechnological approaches, since they are the people who build new businessesindependent of established firms and their incentives to earn profit fromestablished products (Jewkes, Sawers, and Stillerman, 1959; Acs and Audretsch,1990).
2 Introductions to this topic include, at themore basic level, Jones (2001), and atmoreadvancedlevelsBarroandSala‐i‐Martin(2004),whichisageneralPhD‐levelintroduction, and Aghion and Howett (1997), which focuses on models in whichtechnologicalchangeisendogenous.
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These sources lead to products, such as listed in figure 2. Some productsreplaceexistingproducts: automobiles replaced carriages,ballpointpens replacedfountainpens.Otherproductshavenewusesas for theantibioticpenicillinor forinformation technology (IT) consultancy. New products typically require years ofdevelopmentinvolvingmanypeopleandcompanies.
Onceaproducthasbeencreated,itisusuallyofpoorqualityanddifficulttoproduce.Hugenumbersoftinyinnovationsareneededtoimproveboththeproductand how it is produced.Without these innovations, the productwould have littleuse. Therefore, follow‐on innovation is also crucial to society, and crucial to thecompaniesmakingtheproductsincenon‐innovativefirmswouldlosetheirsalestocompetitors.
An example is the television receivermanufacturing industry (Klepper andSimons, 1997, 2000). Many entrepreneurs and companies helped to developtelevision,fromthe1920stothe1940s.AfterWorldWarII,productionoftelevisionsets increased. The first setswere expensive luxury goods. They broke every fewweeks.Ifyoumovedatelevision,anengineerhadtocomeandre‐tuneit.
Hundreds of companies began making televisions. Figure 3 shows thenumberofcompaniesthatmadetelevisionseachyearintheUnitedStates.Topointout that similar patterns happened in many countries, the figure also shows thenumber of companies in the United Kingdom. Many entrepreneurs plus existingfirms started building and improving television receivers. Some did not innovatefast enough. Their production cost soon exceeded their sales price, or theirtelevision sets became relatively poor in quality. These companies or theircustomers therefore gaveupon these televisions; such firmsexited the televisionreceivermanufacturingbusiness.
[FIGURE3ABOUTHERE]
The number of firms eventually stopped going up,when entry became too
Fortelevisions,Japanesefirms,otherAsianfirms,andPhilipsmadethebestsetsinthecheapestmanner.Japanesefirmsremained2‐3generationsaheadofU.S.andBritishfirmsintheuseof integratedcircuits. Japanesesetsbroke3timeslessoften than American and British sets. These Japanese and other foreign firmseventually acquired or put out of business all of the U.S. and British firms. Thedashedlinesleaveoutthenewsubsidiariesofforeignfirms.Youcanseethedashedlinesgoingtowardzero.EventuallyalloftheU.S.andBritishfirmshadgoneoutofbusiness or been acquired. They had been very innovative, but not innovativeenough.
Table 1 presents some of their process innovations, which this authorcataloguedbyreadingallrelevantindustryarticles.Thereweremanymoreproductinnovations,buttheyarenotlistedhere,asthisismerelytheinitialpartofalongerlist. Most of the innovations are very minor improvements to manufacturing. Intotal,however,theyaddeduptomassivechange.
economy,inparticular,theeconomyoftheUnitedStates.Thissectiondrawsheavilyon Simons and Walls (forthcoming). An older but still revealing analysis of theUnitedStatesinnovationsystemisMoweryandRosenberg(1993).
steadily in theU.S., as table 2 shows forR&D from1953 to 2006. Basic research,applied research, and development have all grown. Basic research grew by amultiple of 21 over this 53‐year interval, and applied research and developmentresearcheachgrewbyamultipleof9.
Bythe1950s,industrywasthelargestsectorinwhichR&Dwasperformed.In fact, as table 3 shows, industry R&Dhas far exceededR&D in universities andcolleges,governmentlabs,andnonprofitorganizations.Governmentfundedmostofthe R&D in universities, and some of the R&D in non‐profit organizations. TheindustryR&D, in contrast,was funded almost entirely by industry itself (NationalScienceBoard,2008).
ReasonsforSuccessfulInnovationintheU.S.,andIdeasforRussiaFourkeytraitshavebeen important forU.S. innovation: incentives,societal
institutions, a mix of entrepreneurial and large‐firm capitalism, and governmentsupport. Incentives are crucial because they determine individuals’ and business’willingnesstoinnovate.Inorderforindividualsandbusinessestoinnovate,andforinvestors to pay the cost of that innovation, they must be able to capture asubstantial portion of the monetary returns to invention. This requires a well‐functioningbusinessenvironment,inwhichpropertyrightsandlegalprocessesthataffectbusinessesworkeffectively.
Although patents and copyrights are usually thought of as providing theseincentives, inpractice they typicallyprovide limitedprotection,and inmanywayslimitedprotectionisbest.3TheU.S.SupremeCourtin2006and2007madeseveral3Patentstendtobehardtodefendincourt,andcompetitorsoften“inventaround”existing patents to achieve the same purpose by different methods. Indeed,companies tend to acquire large number of patents and to form agreementswithother companies in an industry to trade the rights to use these large numbers of
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decisions that tend to reduce the breadth of patent claims, make it harder forrelatively obvious inventions to be patented and defended in court, and weakenpatentholders’ rights, effectively responding tomounting evidence that toomuchgrantingofrelativelyobviouspatentswastendingtostifleinnovationandwastetoomuchmoneyoncourtcases(JaffeandLerner,2004,detailsuchconcernsregardingimproperfunctioningofthepatentsystem).
R&D tax credits are another incentive used to spur innovation. Such taxcredits reward companies for doing R&D by reducing taxes they owe to thegovernment. Nations offer competing R&D tax credit policies to try to attractresearch‐intensivefirmstotheirnations,andwithintheU.S.states,differentstateshavesimilarlyofferedalternativeR&Dtaxcreditpolicies(Wilson,2009).
Societal institutions to encourage innovation include legal, social, andinfrastructure systems that function reasonably. These societal institutions arelargelytakenforgrantedintheUnitedStatesandreceiverelativelylittlein‐countryresearch. Incontrast,RussiancitizenswithwhomtheauthorspokesuggestedthatlegalinstitutionstodefendpropertyrightsareinparticularneedofimprovementinRussia. Investmentinroads(andnodoubtothertypesof infrastructurethataffectbusinessactivity)inmanyregionsmayalsobeimportantforRussia.
Legal and social institutionsmustmake it easy forbusinesses to formandchange,ratherthanhinderingbusinessformationandchange(WorldBank,2008).Again, these issuesare largely taken forgranted in theUnitedStates.Settingupabusiness needs to be as rapid and simple as possible in order to encourage theformationonentrepreneurialbusinesses that spur innovation.Businessesneed tobeable tochange theirpoolofemployeesand thekindsofproducts theydevelopand produce, as easily as possible (although allowing for individual nations todevelop theirownpriorities andmeansof socialprotections), inorder tomake itpractical for existing businesses to innovate. Graft in bureaucratic approvalprocesses, in contrast, stymies business formation and change by making themexpensive and time consuming, and thereby stymies innovation needed to fueleconomic growth. Business closuremust also be easy. Entrepreneurswho start abusinessusuallyfail,andwithoutbankruptcy lawsandareasonableruleof lawtoprotectthemagainstpeopletowhomtheyowedebt,individualsmightbeunwillingtotakeontheriskofstartingabusiness.
Legal and social institutions also affect the provision of financing for newprojects by existing firms and new businesses. Financial institutions that helpinvestorsatearlystages,suchasso‐calledangelinvestors(wealthyindividualswhoprovidefundsinexchangeforashareintherightstoanewfirmanditshoped‐forfutureprofits),areparticularlyimportantastheygreatlyexpandtheamountofnewbusinessactivityforriskyprojectsthatrequireR&Dinvestments.IntheU.S.,manytypes of funding sources, not just banks, provide funding. Figure 4 indicates thepatents,sothatitisthewholegroupofpatents,notanyoneeasily‐defensiblepatent,that is used to defend a company’s profits. Moreover, profits are far more oftendefended by other means including innovative lead time, steady decreases inproductioncost,secrecy,andsalesandservicenetworks(Levinetal.,1987,pp.794‐795).
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mostmajorcategoriesof fundingsources in2007.The individualsandbusinessesprovidingfundsknowthatbusinesseshaveachancetoearnmoney,andknowthatthey have appropriate legal protections to be able to obtain their due share ofprofitsamongsuccessfulbusinesses;otherwisetheywouldnotinvest.Soinadditionto having the right to lendmoney, investors need to know that bureaucracy andotherproblemswillnotimpedebusiness.
The mix of entrepreneurial and large‐firm capitalism in the United Statesencouragesinnovationofdifferenttypes(Baumol,Litan,andSchramm,2007).BothentrepreneursandestablishedfirmshavebeensourcesofnewproductsintheU.S.,withperhapsagreatertendencyforentrepreneurstoconsidernovelapproachestoinnovation.4 Established firms, however, are by far the dominant source ofincremental improvementstoexistingproductsandtheirproductionprocesses,aswasshownintherightpaneloffigure2.Boththesetypesofinnovationareessentialtoeconomicgrowthand to thecompetitivenessofanation’s firmswithinaglobaleconomy. Althoughmost U.S. government R&D awards to industry tend to go tolargeestablishedbusinesses,thegovernment’sSmallBusinessInnovationResearchprogram reserves 2.5% of large (over $100 million) external R&D budgets forawardstosmallbusinesses.
Government support for innovation is important because innovation is apublicgood.That is, thepublic (society‐wide)gains from innovationare less thantheprivatefinancialgainstotheinnovator,causinglessinnovationtooccurthanissociallyoptimal.Thisisevenmoretrueforappliedresearchandespeciallyforbasicresearch. The potential gains from appropriate government support fordevelopment,appliedresearch,andbasicresearcharethereforeenormous.Thishasbeen a key rationale for U.S. government support of R&D, which in 2006 totaled28%ofoverallU.S.R&Dexpenditures.
Gainsfromgovernmentsupportmaybeevenmoreimportantinthecontextof international industry competition, because government‐funded R&D can notonly benefit society at large but also help a nation’s businesses to develop viableproducts that are competitive internationally ‐‐ that is, thathave sufficientlygoodproduct quality and features and sufficiently low production cost that firms canremainprofitabledespite any international competitors. This canhelp indigenousindustry develop, with both employment benefits and the stimulus of otherbusinesses(includingsuppliers,downstreambusinesses,andspun‐outbusinesses)inthesamegeographicregion.IntheU.S.,thisrationaleisalsosometimesdiscussedregardingsomegovernment‐fundedR&D,andforexamplehelpingtomaintainU.S.economic competitiveness is one of the aims in research supported by the U.S.DepartmentofEnergy.
4Someanalystshavearguedthatentrepreneursaremoreactivethannewfirmsingenerating new products, but a careful comparison of their relative rates of newproductcreationremains for futureresearch. Inanycase,previousstudiesof theimportanceofentrepreneursandsmallbusinessestonewproductcreationhaveinfactshownthatmany(perhapsamajorityof)newproductsderivefromestablishedbusinesses(Jewkes,Sawers,andStillerman,1959;AcsandAudretsch,1990).
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However, government support can easily become wasted money. R&Dawards by U.S. government agencies nearly always require a competitiveapplicationprocess,sothatawardstendtobemadetoorganizationsandindividualresearcherswith a record of reliability and quality andwithwell‐developedR&Dplans that prove convincing to reviewpanels of independent experts. In contrast,some of the Russians with whom the author spoke suggested that Russiangovernment R&D funds are often allocated as personal favors from one largegovernmentorganization to another,with little oversight, little effect of pastR&Dsuccess (not to mention commercialization success) on future ability to obtainfunding, and little in thewayof competitiveallocationprocedures.While sensiblereasonsforsomeoftheseproceduresmightexist,moreeffectiveproceduresseemtobe crucial ifRussian governmentR&D investments are to yield successfulR&Doutcomesthatleadtoactualcommercializationofproductsthatarecompetitiveontheworldmarket(andwhoseaveragebenefitsexceedthecostsinvested).
TheBayh‐DoleActof1980allowedU.S.universities toobtainpatents fromU.S. government‐funded research. This increased commercial licensing fromuniversities, although few universities have profited substantially ‐‐ mostuniversities’technologytransferofficeslosemoneygiventherarityofpatentswithhighprofits.TheActalsoencourageduniversitiestoemphasizemoreappliedratherthan basic research (or among basic research programs to emphasize activitieslikely to yield commercial benefits). Whether this shift is beneficial has beencontroversial and remains unclear, although other government grants touniversitieshaveincreasinglyemphasizedtechnologytransfertoindustry.Arelatedconcernisthatuniversityresearchershavebecomemoresecretive,becauseoftheneed to avoid disclosure of R&D results that might be patented, reducinginterchange of ideas that is important to stimulate innovation (Lester and Piore,2004).
Allocation of government R&D funds across areas has sometimes beencontroversial. Controversies include whether government should provide anysupport for private corporate R&D efforts,5 how much military R&D findingscontribute to thegenerationofcivilianproductsandhowtoencourage thiscross‐over,andhowmuchtheU.S.governmentshouldfundresearchinthesocialsciences.Social science R&D made up only 2.2% of U.S. government R&D expenditureobligations in 2007 (National Science Board, 2008, vol. 2, p. A4‐55). Yet frequent5Asmallprogram,theAdvancedTechnologyProgram,hasprovidedpartialsupportforselectedhigh‐riskhigh‐technologyprojects(theprogramwasreplacedwiththerelatedTechnology InnovationProgram in2007). Theprogram is small in that itreceived for example only $79million in (fiscal year) 2006, compared to $81,160millionoffederallysupportedR&Din(calendaryear)2006(NationalScienceBoard,2008,vol.1,p.4‐61,vol.2,p.A4‐10).
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policy unknowns and failures suggest a need for a dramatic rise in funding ofserioussocialscienceinordertobetterascertainpoliciesthatwillachieveintendedgoals,yieldingpotentiallyenormousbenefitsfortheeconomy,individualwell‐being,and theoperationof businesses andotherorganizations.Thebulkof governmentR&Disformedicalsciences(lifesciencespluspsychology),whichtogetherin2007made up 54.0% of R&D expenditure obligations. Energy‐related R&D funding isgrowingandnodoubtwill continue togrow.AmongotherR&Dareas, there is anapparent need for growth in R&D related to climate change, climate engineering,andthemitigationofclimateimpacts.
ImmigrationofskilledindividualshasbeenamajorcontributortosuccessfulR&DandinnovationintheU.S.(RoyandLerner,1984).Along‐termdeclineintheaverageskillofimmigrantstotheU.S.,relativetopersonsbornintheU.S.,hasledtoconcerns that theU.S. is failing to realizemanyof the economic gains that earlierskilled immigrants provided (Borjas, 1999). Indeed, after the Al‐Qaeda attacks ofSeptember11,2001,itbecamemuchmoredifficultforapplicantsincludingforeigngraduatestudentsandresearcherstoobtainentryintotheU.S.Notlongafterward,the number of temporary work visas (H1‐B visas) fell from 195,000 in 2003 to65,000in2004whentheU.S.governmentallowedlegislationsupportingthelargernumber of visa to expire. The net effect of these policies has been to make allimmigrationdifficult,althoughtheeffectmaybegreatestforskilledimmigrantswhogenerallyenterthecountrylegally(asopposedtoillicitlycrossingnationalborders).Incontrast,theU.S.couldreadilyattractandretainmanymoreofthehighest‐skilledworkers simply by streamlining immigration procedures for these people and bygrantingwork visas to their familymembers. Russia has recently suffered fromabraindrain as someof itsmost skilled scientists, engineers, and innovatorsmoveabroadtoseekbettereconomicandsocietalconditions.Regardlessofsuchabraindrain, immigration policies to attract skilled businesspeople, engineers, andscientists can benefit Russia (thoughbenefits are likely to be illusory unless suchimmigrantshaveeconomicopportunitiesinRussia).
The educational level in the U.S. relative to other nations is an ongoingconcern. Although literacy is high, average mathematics and science levels lagbehindlevelsinotheradvancednations.Inoneinternationallycomparablesurvey,theProgram for InternationalStudentAssessment’s2003 testof fifteen‐year‐olds,U.S. students scored almost the lowest among industrialized nations onmathematics questions, and well below median on science questions. A similarstudyoffourth‐andeighth‐gradestudents,theTrendsinInternationalMathematicsandScienceStudy, yieldedhigherbut still unimpressive rankingsofU.S. students’learningrelativetotheircounterpartsinothernations.(SeeNationalScienceBoard,2006, vol. 1, pp. 1‐20 to 1‐23.) Efforts to improve education in U.S. schools haverarelysucceeded.One idea thatmightwork,basedoncomparisonofnationswithvaryingskillsattainmentinschools, istoenhanceteacherqualitythroughahighlyselective program of teacher certification, with only highly capable universitygraduates(havinganydegreenotjustateachingdegree)beingabletoachievethehonorofselectionforcertification(Economist,2007).
TherelativelyflatnumberofU.S.graduatesinscienceandengineering,atatime when other nations’ output of scientists and engineers, has also triggered
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alarmamongscienceandengineeringprofessionalsandpolicymakers in theU.S.6Some recent efforts aim to encourage a greater number of youths to pursueuniversity educations in science and engineering. However, more carefulassessment is needed of the potential demand for scientists and engineers ofdifferent types and quality levels, aswell as ofwhether increased supply of suchpersonnelwillcreatenewbusinessesthatgenerateproportionalnewdemand,andoftheextenttowhichscientificandengineeringskillsarebeneficialforjobsthatdonot directly involve science and engineering work. Also, other skills besidesmathematics, science, and engineering may be most important, and an emphasispurelyonimprovingmathematicsandscienceskills,orongeneratingmorescienceand engineering graduates, risks ignoring and potentially harming aspects ofeducationthatmightbemostimportant.Oneideahasbeentoenhancetheskillsofstudentsregardingentrepreneurshipandinnovation.
InnovationpolicycampaignshavelongsoughttoinfluencedecisionsmadeintheU.S.capitol.Themostrecentmajorinitiative,inwhichthisauthorparticipated,istheNational Innovation Initiative.Theprogrambrought togetherpeople from thepolicy‐making, business, science and engineering, and innovation researchcommunities.Thisprogramhelpedtostimulatethepassagein2007oftheAmericaCOMPETESAct.TheActaimedtodoublegovernmentfunds,overtenyears,forR&Dat government agencies including theNational Science Foundation, reinstateR&Dtaxcredits,enhancepre‐collegeeducationinmathandscience,enhanceworkforcetraining,andenactimmigrationpoliciesthatretainmorehigh‐skillforeignworkersintheU.S.However,thiswasenabling legislationthatallowedbutdidnotprovidefunding. The U.S. government budget approved December 2007 provided only aminor fraction of the intended funds for the initiative. A systematic reform andfunding of innovation policy remains under consideration as Barack Obama’spresidentialtransitionteampreparesforthenextpresidentialadministration.
Data on international output of patents and articles show that the U.S.continuesitsstrongR&Doutput,butthatotherworldregions‐‐particularlyAsianrimnations ‐‐haverecentlybeenexpanding theirR&Doutputmuchmorerapidlythan the U.S. The U.S. share of English‐language science and engineering articlesworldwide,forexample,fellfrom34.2%in1995to28.9%in2005(NationalScienceBoard,2008, vol. 1, p. 5‐38).The trend seems tobemorepronouncedwhennon‐English languagearticlesareconsidered.ThishascreateduncertaintieswithintheU.S.aboutthenation’s future,sothatsomeobserversaskevenwhethertheU.S. islikely to retaina leading role ingeneratingR&Dand inglobally competitivehigh‐technology industries, with serious potential ramifications for the U.S. economy.There isaclearneed,despite theU.S.’spast innovationsuccess, tostrengthenU.S.innovationpolicy.
6 For data on science and engineering graduates in the U.S. by discipline, type ofperson, and level of education, and comparison to trends in other nations, seeNationalScienceBoard(2008,vol.1,chapter2).
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Conclusion This paper has outlined the central importance of innovation in economicgrowth. It has pointed out that multiple parts of the economy and types ofinnovation are crucial for effective economic growth. And it has described keyaspects of the U.S. national innovation system. In doing so, the paper has soughtpotentiallyusefulapproaches toaid innovation inRussia.Hopefullysomeof thesepolicyideaswillnotbetoonaïveinthecontextofRussia. To enhance innovation in Russia, a key need is to decrease bureaucracyaffectingbusinesses,allowingeasierbusinessformation,change,andclosure.Graftand corruption affecting businesses, business innovation, and innovation moregenerally,shouldbesystematicallyaddressedthroughincentives,fundingmeasures,and lawsand judicial systems that reduce thegraftandcorruption.Legal systemssupporting property rights and personal and business protections should bestrengthened.Flexibilitymustbegiven to scientists, engineers, andentrepreneursto pursue the R&D approaches that seem to them most effective, and tocommercializeproductsinwaysthatseemmosteffective.Thenationshouldacttoretain and attract skilled individuals by creating in‐country opportunities forscientists, engineers, and entrepreneurs, and by making skilled immigrationattractive. The nation should continue strong governmentR&D funding, includingserious funding for serious social science research, and it should do so throughgrantallocationandfollow‐upproceduresthatensurethefundsarenotwasted.Thenationshould invest in strongeducationnotonly inmathandscience,butalso inotherskillsthatsupportinnovationandcommercialization.
Interacting policies such as these can propel the future Russian economy,allowing Russia to maintain a strong role among the world’s innovative nations.Russia has a history of fine accomplishments in mathematics, science, andengineering. There is every reason to expect that Russia can continue theseaccomplishmentsinfuture,inaburgeoningeconomy,butonlyifRussiasucceedsatthehardtaskofreformingitssocietalandeconomicsystemstosupporttheforcesthatdriveinnovation.
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