Pillar 7 Overview
Innovation occurs everywhere. As a nation, we must double down on our efforts to deepen and broaden innovation ecosystems in all parts of our country—amplifying the networks of people, places, and assets that create the basis for growth and inclusive prosperity. Regional innovation hubs that bring together businesses, universities, national laboratories, and government in hyper-connected and collaborative networks can stimulate unexpected and productive partnerships, cultivate pro-innovation regional cultures, and support the development of specialized workforce skills and expertise.
There are seven key Pillar 7 topics of competitiveness, under which we have identified ten specific recommendations. The seven topics include:
urban youth, rural Americans, and communities without research institutions—are not part or beneficiaries of the innovation economy. Yet, there are many talented and resourceful people in these communities who are not viewed by others, and who do not view themselves as potential innovators or entrepreneurs. We are not engaging the full potential of our citizens to drive innovation. To raise the U.S. rate of innovation, we must engage more Americans and more U.S. regions in the innovation process.
Every region of the country, large or small, possesses assets that can be leveraged for economic gain. These concentrations of intellectual capital can generate inventions, discoveries, innovations, and ideas for new products and services that hold the potential for new business formation and job creation in these regions. To expand the U.S. capacity for innovation, the United States must capitalize on these geographically-diverse sources of innovation and not leave significant sources of promising creativity and innovation untapped.
U.S. leaders should focus on building capacity for innovation in places where it is weak, and capitalize on places with higher capacity and entrepreneurial potential to boost regional and national competitiveness in a range of technology fields.
The primary function of the Regional Economic Development Council would be to facilitate strategic coordination among federal, state, and local agencies. Currently, many economic development initiatives are fragmented, and often there are missed opportunities for collaboration, or worse, competing programs that operate in silos. By collaborating with agencies like the National Science Foundation (NSF), the Department of Energy (DOE), and the Department of Defense (DoD), the Council can help coordinate targeted research funding to regional hubs. This centralized approach would help address economic disparities, foster sustainable growth, and expand innovation and entrepreneurial ecosystems across the country.
The Regional Economic Development Council should have a strategic focus on investments to establish or strengthen foundational innovation capability and capacity rather than one-off grants not linked to building lasting capability. They should also support workforce development linked to ecosystem building in addition to providing opportunities for small communities to receive grant funding for innovation projects. Through this long-term investment, regions across the nation can develop their capabilities and capacity, capitalize on promising innovation opportunities in their community, or link to broader regional ecosystems.
These agencies play pivotal roles in advancing national policy, funding, and resources that are vital to fostering a thriving innovation economy. However, their current focus is often concentrated in areas with established research institutions, tech hubs, and large metropolitan areas, leaving much of the country’s talent and potential innovators untapped. To address this gap and raise the U.S. rate of innovation, we must build a more inclusive ecosystem that engages more Americans, particularly those from rural areas, urban youth, and underrepresented communities, who have the potential to become innovators but are not typically seen as key players in the innovation process.
Companies looking to locate new facilities may examine factors beyond the business climate, for example, a location’s ability to support the company and its growth. This can include whether a location is a good place to live, work, and raise a family—essential elements of attracting and retaining a workforce; the region’s infrastructure; and whether the location’s R&D, energy, and workforce pipeline can support growth and company supply chains.
For example, States could leverage the Department of the Treasury’s State Small Business Credit Initiative—which supports programs that offer funding to small businesses and entrepreneurs through equity/venture capital, loan participation, loan guarantees, collateral support, and capital access programs—as well as other models, such as impact investing, and link this support to technology incubators and accelerators.
This would support the following objectives:
The scaling of AI is driving skyrocketing demand for data centers. Academics are concerned that the high cost of working with AI—in terms of computing power and data sets—is squeezing them out of the field. This problem is not unique to AI; across many fields, researchers, academics, and the private sector lack the necessary facilities to adequately perform innovation.
Leadership in today’s emerging and critical technologies—dual-use technologies that are crucial for U.S. national security—is in commercial firms, high-tech start-ups, universities, and national laboratories. The Department of Defense and defense primes must reach into these generators of research and technology to bring advanced technologies to military systems. This requires spaces and facilities in which defense systems program managers, researchers, and technologies developers can conduct classified discussions and collaborative work with universities and commercial firms.
In addition to federal government-supported facilities, systems integrators should explore the use of the authorities of the National Cooperative Research and Production Act to jointly fund and operate these secure facilities. Collaborating with international partners is critical to accelerating research and technology development, especially when partners have unique skills or resources. However, secure data sharing practices must be strengthened to allow collaboration without compromising national or research security.
In times of rapid revolutionary technological change, high competitive pressure, and major economic transition—hallmarks of the era in which we currently live—the fortunes of places can change very quickly. In an historical example, under the pressure of global competition, the steel industry in Pittsburgh, Pennsylvania collapsed. In just five years, from 1979 to 1984, manufacturing employment in Pittsburgh dropped by 104,000, and its unemployment rate skyrocketed to a 1983 high of 18.2 percent.13 Today, some communities are experiencing the tough times of major change, for example, the coal communities being impacted by the global transition to cleaner energy. With multiple technology revolutions unfolding across the globe, and AI poised to become a powerful economic, industrial, national security, and societal disruptor, more places could experience the fall-out from massive creative-destruction. These events can create losses that constitute an economic disaster with cascading effects that echo through the local economy.
Together, the Departments of Energy, Defense, and Commerce and the National Science Foundation were selected in 2023-2024, and prospectively funded at more than $9 billion, 37 regional technology, energy, and innovation hubs. This presents a golden opportunity to gain deeper insights into place-based innovation. In addition, while most federal agencies fund research and technology development to meet their missions needs, such as the Departments of Energy and Defense, many do not specialize in economic development, and may not consider how these investments could contribute to innovation ecosystem development.
Greater study is needed into the development of the coalitions that ultimately won competitive funding for America’s innovation hubs; before selection and on-going planning; leadership; sources of cost-sharing, if required; roles of state and local government, the private sector, universities, non-profits, and other coalitions; organizational and membership models; models for financial sustainability; physical assets and infrastructure involved; nature of workforce development activities; challenges, barriers, and how they were overcome; and results and failures.
The private sector’s dominance of investment in the Nation’s overall R&D portfolio has grown to unprecedented levels, overwhelming the federal government’s place. In 2022, the private sector’s share was 76 percent of U.S. national R&D investment, and the federal share was 18 percent.14 The private sector leads advancements in critical dual-use technologies for applications that underpin both U.S. economic and national security. In addition, businesses now play a significant role in U.S. basic research, funding 37 percent and performing 36 percent of it.15 U.S. prosperity and competitiveness are now tied more than ever with our ability to leverage the private sector’s R&D investment. Federal R&D and policies should strategically leverage and support private-sector research, with an emphasis on commercializing, scaling, and deploying technologies developed by the private sector.
Deploying and scaling technology much more quickly would increase numerous economic and national security benefits. The United States would be better positioned to leverage waves of new technology arising from multiple technology revolutions, keep pace with technological change, and run faster in the competitive race for 21st century global technology dominance. Economic and productivity growth could be accelerated. Solutions to global grand challenges in climate, sustainability, food, energy, and water could come more quickly, as well as new medicines and medical therapies. The U.S. military could capitalize on emerging advanced technologies to quickly field more powerful capabilities and weaponry, streamline logistics, and enhance soldier lethality and safety across all military domains. Businesses could keep better pace with global market change, increase efficiency, and improve product quality and functionality. Speeding up scaling is possible—generative AI has scaled faster than any technology in history.
