News from the IPL
ANNOUNCEMENTS
Senate Committee Advances Bill to Fund Regional Innovation at US $25 Million
SSTI Weekly Digest
The Senate Committee on Appropriations recently advanced a funding bill that includes $25 million for Regional Innovation Strategies — $4 million more than the current funding round. Commerce, Justice and Science Subcommittee Chairman Jerry Moran (R-KS) spoke to the importance of funding scientific innovation in a statement, and the bill strongly supports many science-related activities. The bill would provide level funding of $140 million for MEP; increase NSF to $8.1 billion (nearly $100 million less than the House bill), with more for research, STEM education and EPSCoR; and, NASA would see a nearly $600 million increase, including $179 million more for science and $10 million more for education.
Editor's Pick
Promise and Peril in the Smart City: Local Government in the Age of Digital Urbanism
John Lorinc, Institute on Municipal Finance and Governance
The market for smart-city technologies – such as cutting-edge networked sensors, big-data repositories, powerful analytics software, and smart grids – has gathered momentum, as leading technology suppliers develop products and services geared to this domain. Entire new communities are being developed using smart-city systems, in some cases as proof-of-concept living labs. Yet the rapid adoption of consumer and security technologies that do not fall under the conventional “smart city” definition also have far-reaching impacts on municipal systems (such as housing, transportation, and policing), including those that have benefited from new smart-city systems. These include ride- and apartment-sharing apps, autonomous vehicles, and data-driven law enforcement or predictive policing applications. In other words, the emerging challenge facing municipal policymakers is to determine the degree of investment or procurement in purpose-built smart-city technologies while adapting regulatory and governance systems to respond to changes arising from the adoption of services such as Airbnb and Uber. At the same time, policymakers must consider some unfamiliar issues in responding to smart-city developments, including equity, privacy, algorithmic bias, and data governance. The report concludes by observing that policymakers must be smart when thinking about the smart city trend and ensure that technologies are not adopted for their promised efficiencies only
Innovation Policy
How Canada, the EU, and the US Can Work Together to Promote ICT Development and Use
Nick Wallace, Alan McQuinn, Stephen Ezell, and Daniel Castro, ITIF
Governments in Europe and North America want to harness information and communications technology (ICT) to boost productivity and innovation, but uncoordinated strategies and incompatible regulations make it difficult for them to benefit fully from the mutual gains that would come from greater transatlantic cooperation in the development and use of ICT. This report analyzes key policies shaping ICT innovation in Canada, the European Union, and the United States, and identifies opportunities for policymakers to ensure policies maximize productivity and innovation. The report describes four policy areas: intellectual property rights (IPR), data protection, the wider regulatory environment, and support for digital innovation.
Are Ideas Getting Harder to Find?
Nicholas Bloom, Charles I. Jones, John Van Reenen, Michael Webb, NBER
In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity. The authors present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, the researchers find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.
Why US Business R&D is not as Strong as it Appears
John Wu, ITIF
Investment in research and development (R&D) lays the foundation for the successful evolution of the innovation economy. By investing in R&D, science is advanced, fresh ideas are generated, technologies are developed, and new products, services, and processes emerge. But while business R&D investment in the United States jumped by two-thirds on an inflation-adjusted basis from $328 billion in 2000 to $458 billion in 2016, the rate of R&D growth as a share of GDP over the same period has been anemic—inching up from 2.61 percent to 2.74 percent. Moreover, businesses are investing a much smaller share of their revenues in riskier early stage basic and applied research than in later-stage development, and the global share of business R&D performed in the United States has fallen significantly in the last decade. In order for the United States to continue expanding its innovation economy, it must enact stronger policies that support both business R&D—such as more-generous R&D-specific tax incentives and expansion of the STEM workforce—and federal R&D, as every dollar of federal R&D spurs an additional 30 cents in business R&D. This report briefly describes how business R&D leads to greater productivity, more employment, and increased competitiveness. It also explores the R&D landscape in the United States—both across the economy and by industry—and how U.S. businesses’ R&D investments compare with those of their counterparts in other countries. The report concludes by offering a number of policy recommendations
Cities, Clusters & Regions
Smart Cities: Digital Solutions for a More Liveable Future
Jonathan Woetzel et al., McKinsey Global Institute
After a decade of experimentation, smart cities are entering a new phase. Although they are only one part of the full tool kit for making a city great, digital solutions are the most powerful and cost-effective additions to that tool kit in many years. This report analyzes dozens of current applications and finds that cities could use them to improve some quality-of-life indicators by 10–30 percent. It also finds that even the most cutting-edge smart cities on the planet are still at the beginning of their journey.
From Prediction to Reality: Ontario’s AI Opportunity
Institute for Competitiveness and Prosperity
How can Canada overcome the costs and maximize the benefits of artificial intelligence (AI)? This working paper examines the current AI ecosystems in Ontario and Canada, how the benefits of the coming AI revolution can be maximized, and what can be done to minimize the disruptions caused by it. Artificial intelligence, in the broadest sense, is the ability of a computer to perform tasks commonly thought of as intelligent or human. More specifically, machine learning feeds data into algorithms, allowing it to learn from examples. AI’s strength lies in its predictive ability, learning from patterns and allowing for the analysis of vast troves of structured and unstructured data and can increasingly provide more accurate results than humans. The report argues that in order to overcome the drawbacks associated with AI and maximize the benefits, Canada and Ontario must make the necessary public investments now, so that Canadian companies can compete in the global AI market, create jobs domestically, and provide opportunities for those who are displaced to find a place in the new economic landscape.
State of Work: The Coming Impact of Automation on New York
Matt A.V. Chaban, Center for an Urban Future
Millions of jobs in New York State will feel the effects of automation in the coming decades. These jobs are not necessarily disappearing, but they are transforming, as artificial intelligence, machine learning, and advanced robotics tackle more roles in the workplace. Policymakers should act now to help New Yorkers prepare for the changes that are coming to the world of work.
Statistics & Indicators
SBIR/STTR Awards by Metro (2013-2017)
SSTI Weekly Digest
Recently, SSTI examined the geography of “America’s Seed Fund,” the SBIR/STTR awards, on a state-by-state basis. A look at how the more than 25,500 awards were distributed at the regional level over the five-year period from 2013 to 2017 yields additional insight. The metropolitan areas with the largest concentrations of SBIR/STTR awards include knowledge hubs with large universities and access to federal R&D, such as Boston, Los Angeles, and Washington D.C. Smaller regions with a large federal R&D presence, like Huntsville, Alabama, Santa Maria, California and Dayton, Ohio also rank highly. This analysis includes an interactive, searchable map that highlights the average SBIR/STTR awards per year from 2013-2017 for a metro area, how 2017 compared to previous years, the concentration of SBIR/STTR awards, and the area’s ranking in these categories.
Policy Digest
Canada’s Advanced Industries: A Path to Prosperity
Mark Muro, Joseph Parilla, Gregory M. Spencer, Martin Prosperity Institute/Brookings
In a world where talent is mobile and technology central, Canada stands out with its vibrant democracy, growing tech clusters, and unparalleled openness to the world’s migrants. Yet there is a problem: Despite the nation’s many strengths, Canada’s economy faces serious structural challenges, including an aging population and slowing output growth. Even more important, the nation needs to ask urgently whether it possesses the right mix of industries performing at a high enough level to allow for new levels of prosperity. Which is why the nation, its provinces, and its local economies must renew their focus on expanding Canada’s high-value “advanced industries.”
As defined by Brookings, advanced industries—which include industries as diverse as auto and aerospace production, oil and gas extraction, and information technology—are the high-value innovation and technology application industries that inordinately drive regional and national prosperity. Such industries matter because they generate disproportionate shares of any nation’s output, exports, and research and development.
However, questions surround the state of Canada’s advanced sector. True, the sector is in many respects well-positioned to compete for market share in the global scrimmage to create value. And yet the fact remains that, at least in comparison with its American counterpart, Canada’s advanced industries are not realizing their full potential, with ramifications that promise slower growth and a declining standard of living for Canadians. Therefore, Canada needs to target the growth of these industries to build a more dynamic, advanced economy that works for all. Along these lines, this report advances three major findings:
1. Canada possesses a diverse, widely distributed, and quite promising advanced industry sector
An analysis of the size, geography, and growth of the Canadian advanced industry sector shows that:
- Canada’s advanced industry sector anchors the nation’s high-value economy. High R&D, high-STEM advanced industries are the bedrock of Canada’s high-value economy. About 1.9 million Canadians worked in advanced industries in 2015, about 11 percent of the nation’s employment. From this relatively small share of jobs, however, advanced industries generated 17 percent of Canada’s GDP, 61 percent of national exports, and 78 percent of research and development. These outsized shares reflect that the average value added per employee in advanced industries was 34 percent higher than in the economy overall. High productivity within the sector ensures that the average worker employed in an advanced industry earned a yearly wage nearly 50 percent higher than the average Canadian worker.
- Canadian provinces and metropolitan regions vary significantly in the scale, intensity, and diversity of their advanced industry sectors, which in some ways compare favorably to that of the United States. Every part of Canada can lay some claim to the nation’s advanced industry economy, albeit at varying scales and intensities. With that said, Canada’s advanced industry base has undergone a notable transition since 1996. In that year, advanced manufacturing accounted for over half (52 percent) of the nation’s advanced industry employment, while services employed only about 34 percent of advanced industry workers. Incredibly, those shares essentially switched between 1996 and 2015. Tremendous growth in advanced services employment and a slight decline in advanced manufacturing employment fueled this transition
- Canada’s advanced industry mix is quite diverse—and changing. As of 2015, the 50 advanced industries in Canada employed nearly 1.9 million workers and generated $247 billion in output. As such, the sector has notable specializations. In terms of employment, services account for just over half of the Canadian advanced industry worker base (51 percent), followed by manufacturing (36 percent) and energy (13 percent). The impact of the Canadian energy industry, however, becomes apparent in the output statistics. The three advanced energy industries account for 42 percent of national output, led by $67 billion generated by oil and gas extraction alone. Advanced services and manufacturing, meanwhile, each account for 29 percent of national output. In terms of both output and employment, then, Canada’s advanced industry mix skews toward energy when compared to the United States. Diving below the provincial level reveals further notable geographic patterns. Not unexpectedly, Canada’s largest Census Metropolitan Areas (CMAs) contain the largest number of advanced industry jobs. Toronto leads the nation with 384,000 workers in advanced industries, followed by Montreal (260,000), Calgary (138,000), and Vancouver (134,000). Together, these four CMAs account for nearly half (49 percent) of Canadian advanced industries employment.
2. Advanced sector productivity and productivity growth are much lower in Canadian metro areas than in U.S. metro areas
And yet, while Canada’s advanced industries sector compares favorably to its American counterpart, such a comparative lens also reveals a serious problem: Advanced industries in Canada are much less productive than in the United States, with major implications for the nation’s future. Several takeaways arise:
- Canadian advanced industry productivity growth has been seriously lagging. Above all, it is clear that the Canadian advanced sector has failed to respond to the global productivity challenge, at least relative to the U.S. sector. To see this, consider that between 1996 and 2015, U.S. average annual value added per worker growth in advanced industries averaged 3.2 percent per year, while Canadian productivity growth in these industries averaged 0.3 percent. Or, to put it another way: In 1996, the productivity differential between the average Canadian worker in a metro area and the average U.S. worker in a metro area was about 17 percent. By 2015, that gap had grown to 100 percent. In non-advanced industries, meanwhile, Canadian productivity converged with the U.S. between 1996 and 2015.
- Due to its productivity shortfalls, Canada’s advanced industry sector is depressing the overall productivity of the nation’s regions.The average value added per worker of all workers in Canadian metro areas is about $82,000, 37 percent lower than the $113,000 per worker figure in the United States. However, given that advanced industry value added per worker languishes at just half the level in Canadian metros as in U.S. ones, it’s clear that advanced industries are inordinately contributing to the nation’s regional productivity deficit.
- Behind these trends lie authentic productivity deficits rather than differences of industry structure. In this regard, the deterioration of Canada’s per-worker advanced sector output since 1996 extends across the vast majority of advanced manufacturing, services, and energy industries. The productivity gap in advanced industries did not arise, then, because Canada’s employment shifted into lower productivity industries. Rather, the differences in productivity growth between Canadian and U.S. metro areas result from advanced industry productivity having grown three times faster in U.S. metro areas. In other words, the differences in productivity between the two countries do not stem from different industrial structures.
3. Canada should commit to addressing four particular sources of its deficient advanced-sector productivity growth, including issues involving the nation’s capital availability, competition levels, connectivity, and technological complexity (the four “Cs”)
Given the sector’s combination of critical importance and lagging productivity, Canadian leaders should focus urgently on finding explanations for that lag and work to address them. Along those lines, this report—without trying to be comprehensive—assesses four potential causes of Canada’s advanced sector productivity gap, at varying levels of detail, and suggests for each high-level strategic priorities for driving the Canadian advanced sector onto a higher growth path. In keeping with that, Canadian government and business leaders should:
Commit to capital deepening: Significant previous research has documented that Canada makes do with substantially lower capital intensities across its economy than the United States. This gap depresses productivity growth. Specifically, Canadian firms appear to invest much less than American companies in physical and knowledge capital, such as information and communications technology (ICT), and young Canadian companies enjoy much spottier access to risk capital for innovation and growth. In view of this, public and private sector leaders should expand ongoing efforts or develop new initiatives to:
- Promote digital adoption by building awareness of under-investment, especially in ICT, as a competitive problem;
- Incentivize greater risk capital investment by helping increase the number of top-performing venture capital funds; and
- Develop a public-private Canadian Matching Fund and an entirely private Business Growth Fund to provide capital to, take equity stakes in, or provide loans to high-promise small- and medium-sized enterprises.
Commit to expanding competition: Competition, in this regard, remains a critical spur to innovation and productivity growth. However, many of Canada’s largest sectors, such as finance and telecommunications, remain highly regulated and more shielded from global competition than firms in the United States. Meanwhile, the nation’s top managers are often trained in those same sectors: strong industries with blue-chip companies that are also highly sheltered. All of which makes it critical for the nation to embrace competition as a source of productivity gains. In this fashion, policymakers should:
- Allow greater market competition in Canada’s highly regulated network sectors; and
- Promote a business culture of risk-taking by emphasizing entrepreneurship in training and education.
Commit to connectivity: In addition, new evidence presented in this report adds to concerns that Canada contends with a dearth of large, successful, and globally networked companies in the advanced sector.
With too few of these global champions, the nation lacks access to key sources of knowledge, best practice exchange, organizational capacity, and power—all deficiencies that align with its productivity lag. Canada should therefore strive to build more globally competitive advanced industry firms as a way to alter its current branch-plant identity. To that end, leaders should:
- Make scaling up domestic companies a focus of the innovation ecosystem;
- Invest in globally connecting infrastructure, especially major international airports; and
- Support globally relevant institutions, such as major research universities.
Commit to complexity: With new research pointing to the association of local economic variety with growth, Canada and its regions should experiment with “complexity analysis” and “smart specialization” as tools for identifying local technological trajectories and projecting smart development strategies.
Because technological complexity improves the potential for new innovation, assessing the complexity of local innovation patterns allows for regions and nations to forecast promising developments and then focus and align interventions. Therefore, regional economic development leaders—in league with their provincial and federal partners—should adopt smart specialization as a useful strategic framework for improving the efficiency of innovation and the productivity of Canadian regions. To that end, policymakers and business people should:
- Build up data and analytics capabilities that inform policy making at the local level;
- Identify regional strengths and align policies and investment that enhance them; and
- Test network-building policies such as the “supercluster” initiative and expand where appropriate.
Events
4th ZEW Conference on the Dynamics of Entrepreneurship
Mannheim, Germany, 18-19 June, 2018
This conference is jointly organized by University of Mannheim and ZEW. The aim is to discuss recent scientific contributions to entrepreneurship research. Theoretical, empirical, and policy-oriented contributions from all areas of entrepreneurship research are welcome.
List of Topics (non-exhaustive)
̶ Impact of industrial dynamics (entry and exit) on aggregate productivity dynamics
̶ Direct and indirect contributions of entrepreneurial firms to innovation
̶ Personality traits and motivation of entrepreneurs
̶ Human capital of founders and employees
̶ Entrepreneurial teams
̶ Socio-demographic aspects of entrepreneurship (e.g. ethnic entrepreneurship, migrant entrepreneurship, and female entrepreneurship)
̶ Digital entrepreneurship
̶ Incubators, corporate and academic spin-offs
̶ Scale-ups, gazelles and unicorns
̶ Financing young firms: (corporate) venture capital, business angels, crowdfunding, and banks
̶ Employment, wages, and workplace quality in entrepreneurial firms
̶ Impact and efficiency of public entrepreneurship policies
̶ Impact of entrepreneurship on established firms
̶ Entrepreneurship in aging societies
Toronto: The Accidental Metropolis
Toronto, 20 June, 2018
Toronto is evolving with a style and character unique in the world, widely recognized for its livability. Now its economic power and its critical and largely successful function as a crucible of immigrant settlement is becoming more and more evident. Remarkably, the emergence of Canada’s cities on the world stage, and Toronto’s rise to the top dozen in global status, has been largely accidental. How did this happen? At this event, Joe Berridge will explore what makes a successful global city, trace Toronto’s trajectory as “the accidental metropolis,” and talk about where Toronto – and Canadian cities generally – are headed in the years to come.
Triple Helix XVI Manchester
Manchester, UK, 5-8 September, 2018
Across the world, states and city regions are facing huge societal, economic, environmental, and political challenges whose solutions require concerted new efforts and innovative partnerships. The 2018 International Triple Helix Conference brings together academia, government, business, and community to share effective practices and to advance the frontiers of knowledge about collaboration for economic progress, social development and sustainability, and the role of cities and regions as enabling spaces for these interactions.
Call for Participation: International PhD Course on Economic Geography
Utrecht, The Netherlands, 11-14 September and 30 October-2 November, 2018
The course aims to provide an introduction to contemporary research perspectives and approaches in economic geography. The core questions of this discipline – related to the role of place and space in processes of economic development – have in recent years attracted interest not just from geographers but also from economists and other social scientists. This course will debate recent theoretical developments (with special attention to evolutionary and institutional economic geography), and will discuss recent advancements in methodology and empirical analysis in economic geography.
2018 European Week of Regions and Cities – Masterclass on EU Cohesion Policy for PhD Students and Early Career Researchers
Brussels, Belgium, 7-11 October, 2018
As part of the 16th European Week of Regions and Cities (EWRC), the biggest event worldwide on regional and urban development, the Master Class on EU Cohesion Policy will be held for PhD students and early-career researchers for the sixth time. Applications are being sought from PhD students and early career researchers (defined as being within five years of the date on their PhD certificate or equivalent) undertaking research related to European Cohesion Policy to attend the 2018 University Master Class. The Master Class is a unique format to connect aspiring researchers and will include presentations of papers by the participants as well as lectures and panel debates with policymakers, EU officials and senior academics to improve understanding of, and research, on EU Cohesion Policy. In particular, the Master Class will serve to
- discuss recent research on European regional and urban development and EU Cohesion Policy;
- enable PhD students and early career researchers to exchange views and network with policymakers, EU officials and senior academics;
- raise awareness and understanding of the research potential in the field of EU Cohesion Policy.
The Master Class is organised and led by the European Commission, DG for Regional and Urban Policy (DG REGIO), the European Committee of the Regions (CoR) and the Regional Studies Association (RSA) in cooperation with the European Regional Science Association (ERSA) and the Association of European Schools of Planning (AESOP).
TCI 2018 – Unexpected Connections: Collaborating to Compete – Clusters in Action
Toronto, 16-18 October, 2018
Cluster success is often the result of collaboration, more than just the agglomeration of anchor firms, R&D labs, incubators and accelerators, and disrupting organizations. Regions with clusters that actively collaborate within and between one another are more competitive. As firms continue to face new challenges from technological, economic, and political shifts, clusters remain a driving catalyst that can create sustainable levels of innovation and economic growth. Firms, at the heart of active clusters, with the support of those within the cluster ecosystem, can weather the changing dynamics of the global marketplace. TCI 2018 explores the collaboration that is happening within clusters and the opportunities to work together towards shared prosperity.
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This newsletter is prepared by Jen Nelles.
Project manager is David A. Wolfe.