Continuing my posts on the importance of entrepreneurship to innovation, the Office of Advocacy last week released a study by Ceteris, Inc., titled “Innovation in Small Businesses: Drivers of Change and Value Use.” This research examines patent applications and finds that research and development enhances the overall market value of many firms; moreover, overall innovative activity increases with more employees. (Note: this study only looks at small businesses; therefore, it does not conflict with earlier studies from the Office of Advocacy highlighting the importance of small business innovation.)

As with a number of other issues, I asked users of Linked In to discuss policy solutions to stimulate more small business innovation.  Among their suggestions  are the following:

  • “…we need to start at an earlier age preparing the next generation be become more entrepreneurial and innovative. We can do this by giving them the skills needed to transform an idea into a concept and a concept into a business.”
  • “Reducing taxes on, or providing grants for, R&D/investment at the small business level.”
  • Increasing the overall amount of capital available to small businesses.
  • Policymakers can promote increased collaboration, helping to increase the overall information flow to better serve the needs of small businesses. Also, identify “analogous innovators, possibly not in small business, which might have relevant skills that overlap” and “provide canned toolsets that increase likelihood of innovative solutions.”
  • Utilize the innovative talents of scientific researchers within government (e.g., NASA).
  • Government can let “businesses do business” by getting out of the way. Help to reduce the overall regulatory burden for small business.

I suspect that there are many more ideas out there, but it is nice to see such universal appreciation of our innovative capacity. Moreover, all of this has real implications for our economic growth, which also appeals to be fully understood.


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