43 Pages Posted: 12 Oct 2015 Last revised: 26 Mar 2017
Date Written: October 7, 2016
There is a fierce regional competition to grow “innovation clusters” going on in the U.S. Many worry states and cities are overspending on innovation rather than focusing on more immediate problems like improving basic infrastructure. For the first time, the federal government has taken action to reduce the costs of regional cluster competition through the America Competes Act’s “regional innovation program.” Drawing on patent law theory, I argue the program represents an innovative way to “manage” local investments in innovation. Instead of granting regions exclusive rights over particular clusters, the Competes Act authorizes federal grants for regions that design and disclose winning cluster strategies. In theory, this will encourage regions to specialize in areas where they have a real comparative advantage — efficient energy in Philadelphia, PA, 3D-printing in Youngstown, OH — rather than wasting money in a race to be winners in the same technology fields. In addition, it will change the type of innovation that regions invest in, making high-spillover research more attractive through the promise of federal subsidy. Lastly, the statute creates a completely new system for collecting and analyzing data on cluster activity that must be made available to other state and local actors. However, this strategy faces a serious challenge. As in patent law, where inventors may spend more due to the prospect of getting a patent, regions may engage in more rather than less wasteful spending on innovation in the presence of federal subsidies. Therefore, I argue the “carrots” provided in the Competes Act must be accompanied by the “stick” of preemption in limited circumstances.
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