Editor's Note: James P. Dougherty is an Adjunct Senior Fellow for Business and Foreign Policy at the Council on Foreign Relations. His essay comes from CFR.org's Expert Roundup on innovation. For more on innovation, visit our Global Innovation Showcase produced with the New America Foundation.
By James P. Dougherty
In a rapidly changing world, wrought by incessant technological advances and global dissemination of technology, America must respond to keep its seat at the head of the economic and innovation table. There are three straightforward actions that can be taken that would have large and immediate benefits.
1. Aggressively improve the H1B visa process
First, strategically simplify and speed up visas for the best and brightest from around the world. The United States may have already hit a negative tipping point, which we hope can be reversed, but we must move quickly. In 2008, all 65,000 H1B visas were gobbled up the first day of availability. In 2011, only 16,500 visas were applied for on the first day! This is a stunning turn of events that is harmful to U.S. interests.
The economic downturn and better options in home countries definitely have an impact. But the fact is that many very talented people with choices don't want to go through the hassle of the U.S. visa system. It is viewed as unfriendly, long, and unpredictable. Whether that impression is right or wrong, that's how it is often perceived. The Congress and the State Department should make it an urgent priority that these highly qualified individuals are always welcome in the United States, as they have been for most of our history.
The Small Business Administration should select a meaningful number of cities and set out to bring together local universities, existing businesses, and entrepreneurs to jumpstart local innovation organizations.
2. Enable and encourage entrepreneurship
Second, the Small Business Administration (SBA) should catalyze innovation organizations across the country. Such organizations as Y Combinator and TechStars are great examples that grew organically in places where concentrations of innovation already existed and are doing great work fostering entrepreneurship. What needs to happen is to spread this type of organization to smaller cities throughout the country.
SBA should select a meaningful number of cities and set out to bring together local universities, existing businesses, and entrepreneurs to jumpstart local innovation organizations. SBA could, in addition to providing seed money, offer access to facilities, best practices, and connections to other centers. But it must be done strategically and with the specific mission to replicate innovation organizations across America to empower entrepreneurs, the bedrock of our national economy.
3. Encourage risk capital
With technology advances allowing for lower costs and faster times to launch new companies, early-stage risk "angel" capital increases in strategic importance. To encourage risk capital, the government should allow some portion of early-stage investments to be written off against current income.
Maintaining a low capital gains tax rate is crucial as well. The SBA could also augment the innovation centers just mentioned with organized angel investor activities. Growing the size of risk capital and the number of angel investors is more important than ever.