Successful investment in innovation often requires support, implicit or explicit, from external actors such as regulators, politicians, and the local community. Companies may need to persuade those external actors that innovation is economically valuable, either in terms of growth or job creation. Making the case for the economic benefits of innovation can help surmount regulatory barriers, or generate support for such public expenditures as training for skilled workers.
Mack Institute Senior Fellow Michael Mandel, chief economic strategist for the Progressive Policy Institute and president of South Mountain Economics LLC, has recently released two widely-publicized papers linking business innovation to economic growth and job creation.
The first paper, “Can the Internet of Everything Bring Back the High Growth Economy?” considered the economic benefits of the “Internet of Everything,” which the paper defines as building up a new infrastructure that combines ubiquitous sensors and wireless connectivity in order to greatly expand the data collected about physical and economic activities; expanding ‘big data’ processing capabilities to make sense of all that new data; providing better ways for people to access that data in real-time; and creating new frameworks for real-time collaboration both within and across organizations.
The paper argued that the “Internet of Everything” would extend the impact of the Information Revolution to “physical” activities such as manufacturing, energy, transportation, healthcare, and public sector services such as waste collection. The paper concludes that the result could be a projected U.S. GDP gain of 2%-5% by 2025, translating into a 0.2 to 0.4 percentage point increase in the annual growth rate.
The second paper, “Building A Digital City: The Growth and Impact of New York City’s Tech/Information Sector,” examined the economic impact of New York City’s tech/information boom. Based on a careful analysis of detailed industry data, the paper concluded that innovation combined with good government policy had propelled the growth of tech/information jobs in New York City after 2007. In turn, these gains from innovation had unexpectedly enabled the city to greatly outperform the national economy despite the financial crisis and the ensuing damage to New York’s financial sector. Indeed, using a conservative estimate for spillover, the paper calculates that the tech/information boom was responsible for roughly one-third of the private sector job creation in New York City since 2007.
This is precisely the sort of information that can inform the conversation between New York City’s innovative companies and the winner of the November mayoral election. The top-level managers of those companies must learn how to actively engage with external actors in order to maximize the odds of successful internal innovation.