by Elizabeth Laferriere
In the State of the Union address President Barack Obama challenged his countrymen to “out-innovate” the rest of the world and “make America the best place on Earth to do business.” His emotive rhetoric appealed to the perception of America’s entrepreneurial spirit: “what we can do – what America does better than anyone else – is spark the creativity and imagination of our people.” While some of his statements bordered on an exceptionalism of questionable accuracy, the proclamation reignited an intelligent debate regarding innovation.
The U.S. should endorse job-generating policies that incentivize entrepreneurship and attract the world’s brightest minds to study here, create here, and market here.
Innovation: A Loaded Concept
Some excellent dissections, past and present, have refigured the commanding notion that innovation is restricted to science and technology (see Innovation Isn’t About Math and Roger Martin’s “integrative thinking”). To some innovation might not necessarily facilitate job growth – it may simply define the materializing of new, transformative ideas. Unfortunately, that challenging question is worthy of much more space than this commentary can provide.
Instead the brief analysis will contemplate innovation as defined by inventiveness fixed with opportunity for job growth. In the global sense, it equates with competition that leads to jobs, rising standards of living, shrinking deficits, and the power to project authority on the global scene (Prestowitz, FP).
In December 2010 unemployment stood at 9.4% – stubbornly high in the wake of 2008’s global crisis (Bureau of Labor Statistics). In an era and country where innovation has allowed capital to become increasingly cheap relative to labor, companies are turning to “creative destruction”: destroying employment opportunities in the short-term through innovative utilization of technology (i.e., self-service kiosks)(Cooper). The competition to “squeeze out” productivity gains is contributing to stymied job recovery and growth (Businessweek, 2004). Since labor accounts for two-thirds the cost of creating a product, and in an environment with soaring employee benefits, most employers today associate greater labor productivity with survival and hire on a need-only basis.
Who, then, and what can create jobs if these large companies cannot? Sure, the Bureau of Labor Statistics reported some growth in hospitality and leisure in December 2010. But what sector has demonstrated sustainable promise?
Thomas Friedman responds in his column (2010): good jobs come from start-ups not bailouts. He cites a Kauffman Foundation discovery that between 1980-2005 virtually all net new jobs in the U.S. were created by firms under five years old. These small start-ups currently employ more scientists and engineers than do large companies, and more than universities and federal labs combined (Segal).
Small, innovative companies flourish in the U.S. not because of some inherent American mind-set, but because of free market democracy, a culture emphatic of risk-taking, strong intellectual property protection, and institutions that enable the smooth connection between the idea and market (Segal). Still the most vital factor in this system is the innovator herself. And who creates these start-ups that have consistently produced jobs? Intelligent, inspired entrepreneurs. Increasing the pool of American entrepreneurs is feasible, and important, but might require a generation for education reform and investment to make an impact.
Does another pool of able and willing entrepreneurs exist? Certainly. A 2007 Duke study found that there was at least one immigrant co-founder in 25.3 percent of all engineering and technology companies and in 2005 alone these companies generated more than $52 billion and created just under 450,000 jobs (Wadhwa). Thousands of promising foreign students study in American universities while one million scientists and engineers work here on H-1B temporary visas (Friedman). U.S. businesses use this visa program to employ foreign workers with technical expertise such as programmers and engineers.
Yet far too many educated and skilled migrants are being turned away. In 2008 163,000 H-1B applications were filed for the 65,000 visas in the H-1B lottery; many qualified applicants were turned down. More return home disparaged by inflexible visa regulations which make it incredibly challenging for workers to achieve permanent residency (Wadhwa). Several experts have argued persuasively that skilled migrants who start businesses and hire Americans should be given a green card (see Friedman, Segal). I have yet to find a particularly overwhelming counterargument.
On top of easing visa restrictions, the U.S. needs to recognize its actual global advantage in innovation for what it is, and not fall prey to demagogic, non-substantive conceptualizations of Americans as inherently innovative. Segal argues that what determines U.S. competitiveness in the “global ideas” market is not its labor force size or funds (hardware), but the strength of the system which molds and protects the visionary ideas from start to finish (software)(Segal).
Incentivizing migrant-led start-ups: now that’s innovative.
For further conversation on skilled migration and the innovation debate, see my forthcoming article on American “software” and global competition and consider the following:
Fallows, James, and Lane Wallace. “Innovation Isn’t About Math.” The Atlantic, TheAtlantic.com. 28 Jan. 2011. Web. 14 Feb. 2011. <http://www.theatlantic.com/national/archive/2011/01/innovation-isnt-about-math/70402/>.
Friedman, Thomas. “Start-Ups, Not Bailouts.” New York Times. 3 Apr. 2010. Web. 14 Feb. 2011. <http://www.nytimes.com/2010/04/04/opinion/04friedman.html>.
Kurlantzick, Joshua A. “The Asian Century? Not Quite Yet.” Council on Foreign Relations. Jan. 2011. Web. 14 Feb. 2011. <http://www.cfr.org/publication/23794/asian_century_not_quite_yet.html>.
Prestowitz, Clyde. “Will Obama Make America Competitive?” Foreign Policy. 26 Jan. 2011. Web. 14 Feb. 2011. <http://blog.foreignpolicy.com/posts/2011/01/26/prestowitz_will_obama_make_america_competitive>.
Rothkopf, David. “The Myth of the Innovation Nation.” Foreign Policy. 5 Jan. 2011. Web. 14 Feb. 2011. <http://rothkopf.foreignpolicy.com/posts/2011/01/25/the_myth_of_the_innovation_nation>.
Segal, Adam. Advantage: How American Innovation Can Overcome the Asian Challenge. New York: W. W. Norton, 2011. Print.
*This book has just been published and while I have not had a chance to read it myself, I would highly recommend taking a look.
Segal, Adam. “The Great Invention Race.” Foreign Policy. 25 Jan. 2011. Web. 14 Feb. 2011. <http://www.foreignpolicy.com/articles/2011/01/27/the_great_invention_race>.
“USCIS Runs Random Selection Process for H-1Bs.” US Citizenship and Immigration Services. 13 Apr. 2007. Web. 14 Feb. 2011.
Wadhwa, Vivek. “Chinese and Indian Entrepreneurs Are Eating America’s Lunch.” Foreign Policy. 28 Dec. 2010. Web. 14 Feb. 2011. <http://www.foreignpolicy.com/articles/2010/12/28/chinese_and_indian_entrepreneurs_are_eating_americas_lunch>.
Wadhwa, Vivek, AnnaLee Saxenian, Ben Rissing, and Gary Gereffi. “America’s New Immigrant Entrepreneurs.” Duke School of Engineering, UC Berkeley School of Information, 4 Jan. 2007. Web. 14 Feb. 2011. <http://people.ischool.berkeley.edu/~anno/Papers/Americas_new_immigrant_entrepreneurs_I.pdf>.
Wadhwa, Vivek, Una Kim De Vitton, and Gary Gereffi. “How the Disciple became the Guru.” Rep. Duke School of Engineering, Harvard Law School and the Kauffman Foundation, July 2008. Web. 14 Feb. 2011. <http://www.nga.org/Files/pdf/0808WDPGURU.PDF>.