The IPL newsletter: Volume 14, Issue 280

News from the IPL


This newsletter is published by The Innovation Policy Lab at the Munk School of Global Affairs, University of Toronto, and sponsored by the Ministry of Research and Innovation. The views and ideas expressed in this newsletter do not necessarily reflect the views and policies of the Ontario Government.


The Rise of the Intangible Economy: U.S. GDP Counts R&D, Artistic Creation

On July 31, the U.S. Bureau of Economic Analysis rewrote history on a grand scale by restating the size and composition of the gross domestic product, all the way back to the first year it was recorded, 1929. The biggest change will be the reclassification of research and development. R&D will no longer be treated as a mere expense, like the electricity bill or food for the company cafeteria. It will be categorized on the government’s books as an investment, akin to constructing a factory or digging a mine. In another victory for intellectual property, original works of art such as films, music, and books will be treated for the first time as long-lived assets.

L.A. Initiates $155 million Tech Cluster Project

SSTI Weekly Digest 
The city of Los Angeles is working with a consortium of public and private partners to redevelop unused docklands into space that will support new industry cluster development. The project highlights a trend of high-profile projects across the country, with cities like Brooklyn and Philadelphia repurposing dockside warehouse space to seed tech startups and advanced manufacturing. A 100-year old dock in Los Angeles is being developed as an urban marine research and business park. The development is a public-private collaboration between the Port of Los Angeles, the Annenberg Foundation, and a host of regional universities. The development will be used to focus on an untapped niche in ocean science, turning the LA waterfront into a global center for the study of the effects of climate change on coastal cities.

Pennsylvania to Invest $100 million in Tech Startups

SSTI Weekly Digest 
Pennsylvania Gov. Tom Corbett has signed off on the creation of a new program, InnovatePA, which will auction off $100 million in tax credits to generate state revenue that will be invested in the funding of tech and biotech startups. Of these auction proceeds, $37.5 million, or roughly 50 percent, would go towards funding Ben Franklin Technology Partners, which provides funding and support for tech and biotech companies across the state. Another $33.75 million, or roughly 45 percent, would support the Ben Franklin Technology Development Authority’s Venture Investment Program, which provides loans to in-state venture capital and angel firms. The remaining $3.75 million, or 5 percent, would be split between Pennsylvania’s regional biotech centers, the Life Sciences Greenhouses. In recent years, the Ben Franklin Technology Development Partners have helped create or retain 9,000 high-paying jobs through 145 companies. The Life Sciences Greenhouses have helped grow more than 225 new companies, which have directly or indirectly created over 20,000 jobs. According to the bill’s sponsors, the initiative is expected to generate $2.37 for every dollar invisted by the state and distribute benefits evenly across the state.

U.S. Department of Defense (DOD) Commits $140 million to Establish Two Manufacturing Innovation Institutes

SSTI Weekly Digest
The Department of Defense (DOD) released funding announcements to help establish and sustain two new manufacturing innovation institutes in the areas of lightweight and modern metals manufacturing and digital manufacturing and design. DOD intends to commit up to $70 million for each institute, with at least a 1:1 cost share ($70 million over five years) of non-federal funds from the recipient organizations. Proposals for both awards are restricted to domestic nonprofit organizations, but applicants are encouraged to partner with local small businesses, institutions of higher education and government entities.

Editor's Pick

2012 Survey Findings: The State of Firm-Level Innovation in Canada

The Conference Board of Canada
This is the first of three reports based on an extensive survey of Canadian industry that probes deep into the ways that firms strategize, plan, manage, and conduct their innovation activities. The 2012 Centre for Business Innovation Survey on Innovation Management in Canadian Companies generated over 630 responses from leaders in firms of all sizes, many industrial sectors, and all provinces and territories of Canada. The survey collected data on innovation activities and their intensity, firms’ business models, competitive culture, sources of innovation, perceived challenges to innovation, various aspects of innovation management, and the factors that affect innovation performance in Canadian firms. This first report documents Canadian firms’ innovation strategy preferences, the types of innovations pursued, the intensity of innovation activities, the sources of innovation, and their challenges to innovation. The report provides a foundation for identifying ways that Canadian companies can enhance their innovation performance through improved management and other measures.

Innovation Policy

Dancing With Robots: Human Skills for Computerized Work

Frank Levy and Richard J. Murnane, Third Way 
With this report Third Way is continuing NEXT—a series of in-depth commissioned research papers that look at the economic trends that will shape policy over the coming decades. This deeper, more provocative academic work focuses on what is one of the most central domestic policy challenges of the 21st century: how to ensure American middle class prosperity and individual success in an era of everintensifying globalization and technological upheaval. The paper describes the exact kind of work tasks that are now, or will be, automated. With the constant upgrades in computer speed and capacity, the authors point out that computers will ultimately perform nearly all “tasks for which logical rules or a statistical model lay out a path to a solution,” including “complicated tasks that have been simplified by imposing structure.” They posit that the future of middle class work will necessarily have to rely on uniquely human brain strengths: “flexibility—the ability to process and integrate many kinds of information to perform a complex task, [such as] solving problems for which standard operating procedures do not currently exist, and working with new information—acquiring it, making sense of it, communicating it to others.

Sir Andrew Witty’s Independent Review of Universities and Growth: Preliminary Findings

The preliminary findings in this report do not make recommendations but cover a number of themes. These include: using sectoral/cluster strengths, rather than geographical units, to develop plans for regional growth; universities playing a stronger role in economic development; improving small and medium-sized enterprise (SME) access to universities, including university business schools playing a greater role in providing business support to SMEs; reducing complex funding streams supporting research and innovation; and aligning the incentives and national organisations supporting innovation and regional growth to deliver to their full potential for the Industrial Strategy and for local growth. The preliminary findings include maps showing locations of excellent research, and where the economic activity in the industrial strategy sectors and technologies takes place. The report also encourages Local Enterprise Partnerships (LEPs) to work closely with universities and develop strategic plans rooted in a sound understanding of a locality’s comparative advantage.

Cities, Clusters & Regions

Regenerating America’s Legacy Cities

Lincoln Institute of Land Policy
Many of America’s legacy cities — older industrial metropolitan areas facing manufacturing decline and population loss — have had a difficult time bouncing back. But the key to revitalization for Baltimore, St. Louis, Camden, N.J., Youngstown, Ohio or Flint, Michigan, is to take stock of the assets right at their doorstep, such as downtowns, parks, transit systems, and academic and cultural institutions. That’s the message of this report , an analysis of 18 cities by Alan Mallach and Lavea Brachman, who advocate step-by-step “strategic incrementalism” as a path to economic development, rather than the silver-bullet approach of signature architecture, a sports stadium or other megaprojects.

Rebuilding and Reinvesting in Infrastructure in an Age of Fiscal Restraint

Robert Puentes, The Brookings Institution
Robert Puentes presented this testimony before the Joint Economic Committee of the United States Congress on July 24, 2013. In the testimony Puentes describes ways that the federal government can invest in infrastructure despite strained resources.

Statistics & Indicators

The Global Innovation Index 2013: The Local Dynamics of Innovation

Johnson – Cornell University, INSEAD, and WIPO
This new innovation index itself innovates in how it measures innovation. Instead of objectively counting the inputs and outputs, it relies on nuance. For example, rather than ranking overall education, it looks at the top three universities, since elite institutions may be more important than the average. Instead of counting each patent, it tracks only those filed in at least three countries, which suggests it is a more valuable technology. And rather than look at scientific journal articles en masse, the index includes how often they are actually cited. Among the interesting findings are how Japan and South Korea differ in cited articles. And how does Canada fare? Among major industrialized economies, it’s a middle-of-the-pack innovator – nestled in between France and Sweden, a discernible notch or two below the traditional innovative leaders such as the United States, Great Britain, Germany and Japan. (Among all countries globally, Canada ranks 11th.) But the details of Canada’s ranking by this measure are more telling. By the university education measure, Canada’s top three schools rank higher than every other country except the U.S. and Britain. Canada’s citations of scientific research are in the top five in the world. Where Canada’s innovation falls down, however, is in international patents. Canada ranks a weak 19th in the world by this measure, well behind the likes of Denmark, Israel and even Barbados. In short, Canada has great schools and world-class thinkers, but for some reason that’s not translating into a lot of global-scale breakthroughs. This finding suggests a need to address the policy approach to research and development; and that the country is stumbling on a critical step needed to convert big brains and great ideas into vehicles for economic growth and global leadership.

INNO-Policy Trendchart

European Commission
The INNO-Policy Trendchart provides independent analyses of major innovation policy trends at national and regional levels across the EU-27 and other countries in the Mediterranean region, North America and Asia. It aims to contribute to policy assessment and to identify examples of good practices, thus improving the basis for decision making in innovation policy. A policy monitoring network of country correspondents tracks developments in research and innovation policy measures in 48 countries. The study draws lessons from the comparison of policies for Research, Development and Innovation (RDI) in EU countries between 1999 and 2012 – as recorded by the Erawatch/TrendChart inventory – and of the innovation performance of these countries over the same period – as measured by the Innovation Union Scoreboard.

Policy Digest

The Impact of Government Support on Firm R&D Investments: A Meta-Analysis

Paulo Correa, Luis Andres, and Christian Borja-Vega, World Bank 
This paper analyzes almost 40 papers published worldwide between 2004-2011 and finds that government funding significantly increases R&D investment in firms. Although there is a large variation in the type of R&D funding examined, the study methodologies, and location of the studies, the results are clear: government funding boosts R&D spending. The paper tackles another important question as well—whether government spending “crowds out” private sector spending. (Crowding out is the idea that private companies will not invest if the government is doing it for them.) The paper finds evidence of the opposite, however, with data that shows public funding actually incentivizes firms to invest more in R&D.

R&D evaluation studies are not characterized by having strong and rigorous methodologies. However, data from surveyed studies are heterogeneous enough to allow for meta-data analysis. Very few studies are devoted to quantitatively estimating the impact of innovation, although there is a growing body of literature on the effects of direct R&D grants. Despite this, there is still a knowledge gap on how input, output and outcomes relate to each other in the presence of grants and subsidies. Some studies that claim to be evaluations fail to fill the gap of endogeneity between R&D interventions and a firm’s outcome variables, in impact studies. Without solving for endogeneity, impact results are biased and in some cases spurious.

The literature review showed that results vary substantially depending on the countries and/or the types of sectors/industries analyzed; other categories of R&D interventions are inconclusive due to the nature of the weak designs created to evaluate these interventions. Overall, the meta-analysis revealed that there are some studies that produce biases in metaestimates: such studies tend to use perception surveys and subjective methods to evaluate R&D programs. The meta-analysis bias correction assigns weights to be computed in metaregressions (WLS), where the papers producing bias receive a weight of zero. The final regressions with the bias-correction weights show positive and significant impacts of R&D subsidies on a firm’s innovation activities with a mean of 19 percent (compared to different types of non-recipient/counterfactual firms) controlling for precision, methodology, and paper attributes. Although the results are robust from a meta-analysis standpoint, the weakness of the original methodologies makes it hard to build a case for causality and calls for increasing randomized designs in R&D interventions.

The design of a public program of subsidies to business R&D projects requires defining a selection and ranking system in order to decide which projects should be supported. The decision criteria of the agency should be part of the evaluation of a public program because, as the structural models on this subject show, such decision criteria in the selection of projects has as major impact on the results of the program as well as on the effect of the subsidies.

Govvernment-wide evaluations of efficiency are often based on complex composite indicators. These indicators are useful to get a broad overview of efficiency gains achieved. However, in order to arrive at concrete policy recommendations, it is more promising to investigate the efficiency of public expenditure in individual spending areas. Growth enhancing expenditures, such as R&D, education and to some extent infrastructure, as well as expenditures, affected by the ageing of population (such as health care), are first candidates for such investigations.

Overall, the quality of the evaluations is also affected by the fact that selection of the funded projects is not often granted based on quality and on specific goals. Despite that it is recognized that rigorously evaluating R&D interventions has high implementation and monitoring costs- there is a new set of evaluations that are introducing more robust statistical analysis to build valid counterfactuals. Most of the time, randomized methodologies are not to be applied to these sorts of interventions because of competition rules and the institutional regulations. But more often, governments sponsor cutting-edge pilot programs that can be subject to prospectively-designed randomized evaluations. With these types of methods the researchers may even have more outcomes to evaluate, by building different comparison groups. More recently, researchers are intrigued by determining if a lower user cost entails higher R&D expenses, or the degree to which innovation outputs and productivity relate to one another in the presence of subsidies. Other important research questions deal with understanding at which point R&D produces desired effects. If marginal productivity of R&D is decreasing, additional units could generate less innovation. Further, it is important to include R&D evaluation programs in the innovation agenda by knowing the degree towhich subsidies stimulate innovation that is valued by the market.

As the evaluation methods used are more sophisticated and statistically robust, the effects appear to be conclusive. Recent R&D evaluations that follow a logical framework and focus on addressing the issue of causality, through matching methods, find consistently positive and significant results. A tendency to overestimate impacts in the absence of statistically valid counterfactual, regardless the aspect of the firm influenced by R&D subsidies reflects the ambiguous results come from a design effect of the evaluation methods used. The metaanalysis revealed that there is indication of positive R&D impacts, but such effects are highly sensitive to the method used. In addition, evaluations of certain areas of R&D still have important knowledge gaps because of lack of data.

Finally, one of the main challenges to overcome the insufficient number of randomized evaluations has to do with the potential endogeneity of the subsidy, the assignment of which fails to satisfy the randomness property that should characterize pure social experiments. This is why most recent R&D IEs studies estimate a counterfactual through Propensity Score Matching. An evaluation of the expected innovative outcome, by both the firm, which has to decide whether to apply for the subsidy, and the public agency, which must decide which projects to subsidize, is likely to precede the allocation process. This makes public funding an
endogenous variable with respect to innovation itself. This is one of the reasons why evaluators tend to (over)estimate impacts, using existing (administrative) data. Butthese types of models fail to correct for important source bias. Prospectively designed impact evaluations help researchers incorporate other factors that produce biased estimates. This is important because the scale of intervention, size of the firm, type of beneficiary, and project attributes can produce biases in R&D impact estimates.


16th TCI Global Conference – Designing the Future: Innovation Through Strategic Partnerships

Kolding, Denmark, 3-6 September, 2013
Throughout the world, cluster companies are working on turning new ideas into new  products and services that lead to higher turnover and growth. As a consequence we are witnessing new forms of innovation partnerships between companies, research institutions and public authorities in clusters. In designing this year’s conference program, the TCI aims at getting a better understanding of how innovation partnerships work in practice, what can be learned from them, and how they add value to clusters.

Regional Innovation Policy Dynamics: Actor, Agency and Learning

Manchester, UK, 23-24 September, 2013
The network seeks to advance the understanding of regional policy dynamics, the role of agency and leadership in policy change and institutionalisation, and associated challenges for policy evaluation. The workshop in Manchester builds on previous workshops in San Sebastian in 2012 and Tampere in 2013 and seeks to explore new methodologies, concepts and evidence that contribute to the understanding of public policy processes and regional dynamics.

International Benchmarking Forum 2013: Smart Specialization Strategies of Cities and Regions in Europe

Basel, Switzerland, 26-27 September, 2013
Smart Specialization means identifying the unique characteristics and assets of each country and region and thus highlighting each region’s true competitive advantages and potential. This process enables more effective rallying of regional stakeholders and resources around an excellence-driven vision of the future. It also means strengthening regional innovation systems, maximizing knowledge flows and spreading the benefits of innovation throughout the entire regional economy. In order to find answers to these challenges deeper knowledge about sectors, technological developments, and trends is needed. A better assessment of capabilities, potential, demand, and aspirations of regional and national stakeholders is essential. Smart Specialization is the basis of EU Structural Fund Investments in Research & Innovation (R&I) as part of the future Cohesion Policy of the EU within the Europe 2020 jobs and growth agenda. The conference gathers European and non-European stakeholders dealing with Smart Specialization strategies, coming from National, regional and also municipal levels, including scientists as well as business and governmental representatives.

City Age: The Innovation City 

Waterloo Region, 9-10 October, 2013
Join business leaders and city builders from across Canada and abroad to explore the partnerships in urban design, infrastructure development, research and urban resiliency that are the foundations of an innovation economy. Timed to coincide with North America’s largest Oktoberfest celebration, this two day event will provide a practical look at the steps your community, company, or organisation can take to lead in the 21st Century.

2nd European Colloquium on Culture, Creativity and the Economy

Berlin, Germany, 10-11 October, 2013
During the past decades myriad links between culture, creativity and economic practice have become major topics of interdisciplinary debates. No longer restricted to a few sectors, there is a growing consensus that the intersections between these spheres and symbolic and culturally embedded values in particular, pervade the global economy. Indeed, the formerly distinct logics of the cultural and the economic have become increasingly indiscernible. Similarly, the notion of creativity, once used to express exceptional talent, activities and outcomes, is now considered a key component to success in all fields of economic activity. At the same time, the Internet has revolutionized the conditions under which cultural production and distribution as well as creative collaboration can be undertaken. Despite the high degree of uncertainty about future developments, policy makers as well as business managers are highly optimistic, if not enthusiastic, about the ability of symbolic values and creativity to drive sustained economic growth and regional development. This colloquium will take up and continue an international and interdisciplinary debate on these topics.

8th International Seminar on Regional Innovation Policies

Donostia-San Sebastián, Spain, 10-11 October, 2013

This will be the latest in the stream of annual seminars that began in Porto in 2006 and have since been hosted in Saltzburg, Santander, Edinburgh, Grimstad, Lund and again in Porto (2012). These seminars have placed strong emphasis on regions as a key unit for policy analysis, highlighting the role that regional innovation policies can play in building sustainable competitive advantages. At a time when regions across Europe are adapting to new realities brought about by a deep and widespread economic downturn, changing environmental constraints and emerging social challenges, it is more critical than ever to analyze the roles and impacts of regional innovation policies. The seminar provides a meeting point for researchers, policy-makers, academics, practitioners and doctoral students interested in issues related to regional innovation policy, regional competitiveness and regional development. You are invited to present and discuss the results of cutting-edge applied research, and to join in learning together how to better understand regional innovation dynamics and how policies can orient these dynamics towards meeting existing and future regional challenges.

Atlanta Conference on Science and Innovation Policy

Atlanta, GA, 26-28 September, 2013
The Atlanta Conference on Science and Innovation Policy provides a showcase for the highest quality scholarship addressing the multidimensional challenges and interrelated characteristics of science and innovation policy and processes. This year’s sessions will explore the research front addressing the broad range of issues central to the structure, function, performance and outcomes of the science and innovation enterprises.

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This newsletter is prepared by Jen Nelles.
Project manager is David A. Wolfe.