Innovation Policy on a Budget : Driving Innovation in a Time of Fiscal Constraint

Innovation – the improvement of existing or the creation of entirely new products, processes, services, and business or organizational models – drives long-run economic growth and quality of life improvements. As such, spurring innovation should be the centerpiece of national economic policies. To date, much of the focus of innovation policy has been on government investments in science, technology and education, either directly or indirectly through incentives such as the R&D tax credit. We believe that even in a time of fiscal constraint the U.S. federal government should increase, not cut, these key public investments. However, we recognize the political reality that substantial increases in public investment for innovation are problematic at this time. Nonetheless, the government is not powerless to drive innovation without its fiscal policy tool. To the contrary, it can take a wide array of actions to spur innovation that require little or no additional public expenditure. This report lays out a menu of such actions