Industrial innovation and governmental policy: A review and proposal based on observation of the U.S. electronic sector

The U.S. electronics sector has been particularly successful at technological innovation since the 1940s. This paper addresses governmental policies that influence the process of technological innovation, drawing on aspects of the history of the electronics sector. Three topics receive particular attention—(1) uncertainties, ideas, and imperfect appropriability, (2) returns to R&D and associated investments, and (3) competition and selection environments. As a foundation for this discussion, several conceptual frameworks are briefly described and some classifications for innovation are explored, i.e., by importance (basic/improvement), by locus of change (process/product), by area of application (peaceful/dangerous), by locus of choice (private/public), and by value (worthwhile/not worthwhile). The discussion is underscored by the observation that better links between conceptual understanding and policy formulation are needed in order to derive practical insights into useful actions. One specific policy recommendation is tendered: an income tax credit on earnings of all employees (including salaried staff and managers) of R&D intensive firms. Such a policy would be appropriate from the standpoint of the topics outlined above (i.e., uncertainties, returns to R&D, and competition); the policy would also delegate responsibility for effective use of the subsidy to the employees and firms affected and would directly acknowledge and reward the contributions of individuals—whether in R&D, production, marketing, or support areas—to the innovative capabilities of their firms and the society at large