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Restore America's Engines of Opportunity Restore America's Engines of Opportunity
by Prof. Michael R. Czinkota
2016-04-18 10:03:00
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Restore America’s Engines of Opportunity
By Michael R. Czinkota, Georgetown University, Washington D.C.
& Peter R. Dickson, Florida International University, Miami

The extraordinary growth of Asian economies, in particular China’s over the past twenty years has dramatically changed global challenges and stakes. Learning-by-doing has made many sectors of Asian economies more capable and competitive than their counterparts in the United States. Failure to learn because of not doing will lead to diminished results for the U.S. economy. It will bring lower wages and greater income inequality to the United States over the next several decades.  We propose a number of public-private sector initiatives that can be implemented rapidly by a new administration to rebuild the nation’s competence and confidence in its process learning capabilities and commercialization of innovation. First the story behind why these initiatives are needed.

cha01_400The business world has changed with the learning curve advantage of imitators. The decline of energy prices and the growth of information flows has shifted the key trade barrier from transport cost to manufacturing and distribution quality control. Breakthroughs in innovation then have dramatically accelerated the marketplace technology transfer between low labor cost (LLC) economies and Western markets, further enhanced by the theft of intellectual property empowered by the internet.

American business ideas support America’s competitors. American higher education transfers its newest thoughts and practices to the world’s knowledge workers. American multinational companies transfer ideas and processes to their global supply chains and operations in LLC economies. Sadly, the transfer prices typically reflect the cost of knowledge replication rather than that of re-generation.

No matter how fast we move into new fields, the rest of the world will catch up. Many Asian companies find innovative ways of dealing with new issues, further raising their climb rate since an imitator’s learning curve is always steeper than the original innovators’ learning curve. But the advantage flips when America creates new firms, markets and learning curves. Yet, the Kauffman index reports the U.S. intensity of start-up activity of firms to be declining or tepid at best.

The availability of cheap and unskilled labor dictates the country of production. Without planning for transition, the value of unemployed workers quickly races toward zero. This explains why re-shoring must become a new preference. Currently, the dynamic progresses through the following steps: 1. Western technology and manufacturing innovation are transferred to new supply chain partners 2. Supply chain partners improve processes with increasing manufacturing experience and decreasing costs 3. Goods supplied by supply chain partners start to be sold in the LLC domestic economy like China, India and Mexico at low prices, helping them to create powerful brands 4. These goods often outcompete established Western brands 5. New brands absorb global share and profitability 6. New brands become of higher quality.

The slow, intermittent nature of trade dynamic makes the situation highly insidious. Like the slowly cooked frog, who does not notice the rising heat, there is no alarm to trigger broad based sacrifices in support of decisive action.

Here are some possible remedies to rapidly increase the number and proportion of new firms. 


1. Encourage and assist with the cost of training process improvement expertise.

2. Sponsor research and training centers focused on supporting new processes such as big data analysis. 


3. Have public and private sectors jointly create pop-up research centers that better train process improvers, and domestically distribute insights of companies that innovate successfully. 


4. The Commerce Department should patronize an annual case competition with emphasis on process innovation. 


5. The U.S. Commercial Service should identify key global innovators to acquire and distribute process information.

6. Create an ongoing thrust in support of innovation – maybe through an Innovators’ Day, when firms can brag a little and crown their key contributors to innovation. There could even be innovation competitions in schools, reminiscent of spelling bees and an annual School District innovation runoff.

Innovation Scholarships can be awarded to local students and faculty with the best commercializing innovation ideas for the three business sectors most important to each State’s economy. There must be an early cross-fertilization between fields, for example venture capitalists, successful academics, service experts and engineers. University business incubators have been successful in cultivating such an environment. Also, each team will nurture a start-up business venture, enlightening and encouraging supporters and participants. Such collaboration between fields and facility has already been applied quite successfully in Germany.

In sum, we recommend a sustained decade-long deployment of government and higher education resources to provide incentives that encourage planning and training for the facilitation of creating more, younger and more internationally oriented firms. The youth of this nation must again think of progress in terms of internationally commercializing its work. After all, they are the future!


     
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Emanuel Paparella2016-04-18 11:33:14
Could it be though that the future may also be determined by climate change, and the survival of the Liberal Arts in education, not merely economic growth? Just a thought expressed as a comment.


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