James Wood teaches at Cambridge University. In this blog he says that the funding cuts that Donald Trump started expediting a year ago (with respect to American universities’ and research institutions’ R&D budgets) will NOT stymie America’s ability to compete with China. Why so?
Mr Wood says,“… America’s “polycentric innovation state” – a hybrid system which combines market mechanisms with federal mission-oriented policies and state initiatives – remains and will continue to adapt to economic challenges…
America’s advantage lies not in relying entirely on market mechanisms to drive innovation, but in its ability to combine federal mission-oriented policies with diverse state-level initiatives. Whilst Trump’s federal R&D cuts may hinder coordination mechanisms and reduce resources, the polycentric structure of the US’ innovation ecosystem provides multiple pathways for the US to develop its international competitiveness.”
Mr Wood then gives the example of two states – Maine and Michigan – who have used very different funding mechanisms to fund innovation even though neither state is located on America’s coastal zones (which have historically been the hotbeds for American innovation):
“Facing an ageing population and dependence on low-value resource industries, such as forestry and fishing, Maine has developed a coordinated strategy to upgrade legacy sectors whilst building new high-tech capabilities. The state’s Forest Opportunity Roadmap links industry players, research institutions, and government agencies to develop high-value products like biofuels and advanced wood materials from traditional forestry. This approach culminated in securing federal designation as a Forest Bioproducts Advanced Manufacturing Tech Hub, demonstrating how state strategies can successfully leverage federal programmes. The state’s approach extends to strategic capital investment. The Maine Technology Asset Fund used $46 million in public funding to leverage $193 million in private investment across 18 projects, projected to generate over 5,300 jobs and add $1.4 billion to Maine’s economy. These efforts produced measurable economic outcomes for the state. Between 2018 and 2022, Maine achieved a 10 per cent real increase in mean wages and a 12.8 per cent rise in the value added of products and services…
Michigan represents a different model, where state government innovation policies have supported large-scale industrial renewal and diversification in the aftermath of the 2008 crisis. Through the Michigan Economic Development Corporation, the state deployed sophisticated coordination mechanisms including SmartZone technology clusters across 20 regions, strategic investment funds, and mission-oriented programmes supporting existing strengths in the automotive sector and developing new high-tech clusters. To support industrial renewal, the state’s Office of Future Mobility and Electrification coordinates multi-departmental efforts to transform Michigan’s automotive sector for the electric vehicle era, supporting major investments by Ford, GM, and Stellantis in battery plants. To diversify the state’s economy beyond the automotive industry, the Michigan Translational Research and Commercialization programme established five university-based innovation hubs to translate research into viable products in life sciences and advanced manufacturing. Underpinning both strategies is the state’s university system: the University Research Corridor, an alliance of Michigan’s three largest research universities, contributes nearly $24 billion annually to the state’s economy through collaborative R&D and technology transfer.”
For investors like us who are investing heavily in the United States it is reassuring to read that in the Trumpian world state-level R&D efforts to resuscitate local economies are alive and kicking.
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