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#120. The New Economy – Developing Strategies, Part 2

Posted on | The Agurban
The New Economy – Developing Strategies, Part 2

Last week we talked about what exactly is the New Economy. This week we will look at the Formula for Success in the New Economy, identified by The Information Technology and Innovation Foundation and the Ewing Marion Kauffman Foundation entitled The 2007 State New Economy Index – Benchmarking Economic Transformation in the States.

To succeed in the New Economy, states will need to overhaul their familiar approaches to economic development. The formula for success in the old economy was to grow and attract capital investment in factories and other infrastructure. 

The New Economy is quite different from the old economy. Now, firms must innovate by developing new products, services and business models, and by continuing to transform existing business processes and make them more productive. This new model of economic development is grounded in the view that it is only through actions taken by workers, companies, industry consortia, entrepreneurs, research institutions, civic organizations and governments that an economy’s productive and innovative power is enhanced.

To prosper in the New Economy, states need to be focused on questions such as:

  • ** Are entrepreneurs taking risks to start new ventures?
  • ** Are workers continually upgrading their skills?
  • ** Are companies investing in those skill upgrades and organizing production in ways that utilize those skills?
  • ** Are companies investing in technological breakthroughs and is government supporting the technology base (e.g., funding research and training scientists and engineers)?
  • ** Are regional clusters of firms and other institutions fostering innovation?
  • ** Are policymakers avoiding erecting protections for companies against more innovative competitors?
  • ** Are research institutions transferring knowledge to companies?
  • ** Are policies supporting the widespread adoption of advanced information technologies and e- commerce?
  • ** And are state and local economic development efforts organized in ways that fit these new realities?
 
In short, the new economic development model recognizes the fundamental insight that innovation and entrepreneurship are key, and that the new focus centers more extensively on promoting technological innovation, supporting dynamic acquisition of workforce skills, spurring entrepreneurship, supporting industry cluster and knowledge networks, and also lowering business costs, but in ways that at the same time boost quality of life.

The Kaufmann report outlined a progressive, innovation-oriented public policy framework designed to foster success in the New Economy. The nine key strategies that states can employ are:
  • ** Align incentives behind innovation economy fundamentals
  • ** Co-invest in an innovation infrastructure
  • ** Co-invest in the skills of the workforce
  • ** Cultivate entrepreneurship
  • ** Support industry clusters
  • ** Reduce business costs without reducing the standard of living
  • ** Boost productivity
  • ** Reorganize economic development efforts
  • ** Enlist federal help

States that focus their policy efforts in these areas will be well-positioned to experience strong growth, particularly in per capita income. Developing a vibrant New Economy is not an end in itself; it is a means to advance larger, progressive goals, like higher incomes, new economic opportunities, greater dignity and autonomy for working Americans, and stronger communities. 

For more details on developing the nine key strategies, visit 2007 State Index.

We will wrap up this series next week with a summary of the study results and a list of the Top 10 New Economy States.