Innovation Policy and the Economy.

• Position: Conferences

The NBER's fifth annual conference on Innovation Policy and the Economy took place in Washington on April 13. The conference was organized by NBER Research Associates Adam B. Jaffe, Brandeis University; Joshua Lerner, Harvard University; and Scott Stern, Northwestern University. The following papers were discussed:

Ashish Arora, Carnegie Mellon University, "The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries"

William J. Baumol, New York University, "Education for Innovation: Entrepreneurial Breakthroughs vs. Corporate Incremental Improvements"

Mary Ann Feldman, University of Toronto, "Jurisdictional Advantage: Why Location and Local Economic Development Policy Matter"

William Gentry, NBER and Williams College, and R. Glenn Hubbard, NBER and Columbia University, "Success Taxes, Entrepreneurial Entry, and Innovation"

Michael L. Katz and Howard A. Shelanski, University of California, Berkeley, "Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?"

The spectacular growth of the software industry in some non-G7 economies has aroused both interest and concern. Arora addresses two sets of inter-related issues. First, he explores the determinants of the success stories. Then he touches upon the broader question of what lessons, if any, can be drawn from economic development more generally. From the U.S. perspective, the interesting debate is not the current one on the impact of outsourcing on jobs, but rather whether offshoring of software is a long-term threat to American technological leadership. Arora concludes that policymakers in the United States should not fear the growth of new software producing regions. Instead, the U.S. economy will broadly benefit from their growth. The U.S. technological leadership rests in part on the continued position of the United States as the primary destination for highly trained and skilled scientists and engineers from the world over. Although this is likely to persist for some time, the increasing attractiveness of foreign emerging economy destinations is a long-term concern for continued U.S. technological leadership.

Baumol explores several hypotheses on the appropriate education for innovating entrepreneurship: 1) breakthrough inventions are contributed disproportionately by independent inventors and entrepreneurs, while large firms focus on cumulative, incremental (and often invaluable) improvements; 2)...