Science, Technology & Economic Growth

Technology and Economic Growth:

• “Prospects for economic growth now depend importantly on a country's capacity to develop and apply new technologies.” –Alan Greenspan.
• Technological innovations have contributed more than any other single factor in America’s economic history to long-term growth.

Investing in Science: President George W. Bush has requested the largest federal R&D budget in history, $112 billion for FY03 alone.

§ Public-Private Investment Interface: Major public investment in the National Institutes of Health (NIH), which has seen its budget double in the last 5 years to nearly $27 billion for FY02 alone, has enabled the United States to both create a science and technology base in biotechnology and leverage substantial private investment in product and process applications.

Commercial Success: Since the passage of the Bayh-Dole Act, American universities have:

• Spun off more than 2,200 firms to commercialize innovations born of research.
• Created 260,000 jobs in the process.
• Now contribute $40 billion annually to the American economy.

Regional Economic Growth: When knowledge is produced, the benefits not only accrue to the producer, they “spill over” to the local economy.

State Policy: State and local policy makers are key in creating the environments that encourage innovation. Through targeted investment in the building blocks of knowledge infrastructure, states can draw private capital to invest in the building of regional strength in science and innovation and act as catalysts for regional and national economic growth.

In October 2002, United States Federal Reserve Chairman Alan Greenspan argued that we live and work in a global environment “in which prospects for economic growth now depend importantly on a country's capacity to develop and apply new technologies.” “If we are to remain preeminent in transforming knowledge into economic value,” says Greenspan, “the U.S. system of higher education must remain the world's leader in generating scientific and technological breakthroughs and in preparing workers to meet the evolving demands for skilled labor.”

Technological innovations have contributed more than any other single factor in America’s economic history to long-term growth. A great many of these technological innovations have grown out of publicly funded research, much of which has been undertaken at America’s universities. In the last twenty years, legislative and fiscal conditions in the United States have enhanced the ability of universities to interface directly with the market, thus increasing substantially the opportunities for private capital to benefit from public investments in scientific research. Private companies, both established industrial giants and emerging entrepreneurial ventures, have built on America’s foundation of publicly funded scientific research, investing capital and capturing the innovations that drive our economy forward. These investments have created multiple new industries, thousands of firms, and hundreds of thousands of new jobs.

Technological innovations drive much of our economic growth at the national level, but it is local economic environments that enable this growth to occur. State and local policy makers are key in creating the environments that encourage innovation. Through targeted investment in the building blocks of knowledge infrastructure, states can draw private capital to invest in the building of regional strength in science and innovation and act as catalysts for regional and national economic growth.

• Technology as a Driver for Economic Growth:
  Scientific and technological change accounts for over 50 percent of long-term economic growth.
• The Role of Science:
  Our ability to produce the incredible advances of the 20th century, the transistor, the laser, the microchip, for example, is dependent on our understanding of the basic sciences of the material world, and much of this understanding is based on publicly funded scientific research.
• Leveraging public investment:
  Investments in the research behind and development of technology produce greater returns than almost any other use of capital. Publicly funded science and technology research provides the foundation for private sector achievements that drive economic growth by building the scientific base for advances in industry and by generating commercial success in the form of spinoff companies and technologies.

Since the passage of Bayh-Dole, American universities have spun-off more than 2,200 firms to commercialize innovations born of research, created 260,000 jobs in the process and now contribute $40 billion annually to the American economy.

Current and past investment by the United States in our knowledge infrastructure enable U.S.-based companies to obtain science and engineering data much faster than in other parts of the global economy. Given ever shorter product life cycles, this timing factor can be critical.

President George W. Bush has requested the largest federal R&D budget in history, $112 billion for FY03 alone.

• Science, Technology and Regional Economic Growth:
  Firms, regions and nations that establish an initial advantage and invest in locally embedded knowledge production will enjoy the benefits of technologically driven economic growth.

When knowledge is produced, the benefits do not only accrue to the producer, they “spill over” to the local economy as technical knowledge accumulates in specialized local assets like labor pools and supplier networks.

States have the power to create local conditions most conducive to new ideas and new inventions, which in turn inspire new companies, industries, jobs and growth.

Science, Technology, and Economic Growth White Paper