California and a Global Standard for Innovation

Even though the state has slipped in the rankings over the past several years, California is still an innovation hub with an economy that is firmly grounded in innovative industries from videogames to internet, and technology hardware to movies. There are nearly 43 technology jobs per 1000 people in California.  Per capita spending for venture capital is $891.41 and $2,751.13 for research and development. California’s highly educated workforce can be expected to do its part for years to come to support the Golden State’s innovation ranking.

But dangers loom. In particular, California’s tax policies are hostile to business, sporting a hefty corporate tax rate of 8.84 percent, coupled with some of the highest sales and income tax rates in the country. Beyond these poor state policy choices, a new effort to create global standards – which will also act as a new international proxy for quality – could threaten the innovation underpinnings of the state’s economy.

The ISO 56000 standards are being developed to provide assurance in the field of innovation management. ISO is the International Organization for Standardization, founded in 1946 as a new international organization “to facilitate the international coordination and unification of industrial standards.” At ISO, the standards are developed by experts from around the world in the particular subject area where the standards will be applied. The benefit is that a great deal of knowledge and expertise pours into the creation of the standard.

As with most standards, the value comes from customers understanding what they are receiving, a fundamental quality in both products and services. In the case of global standards, customers are assured that there is a common global basis of comparison, instead of comparing various standards from different countries. The development of ISO 56000 will require decisions to be made about intellectual property, audits, assessments, idea management and even definitions and terminology.

Standards compliant companies have historically gained a marketplace advantage. Between companies, these standards enable collaboration and the development of innovations, as they share their best practices in innovation management amongst each other in a way that guarantees that everyone is speaking the same language. So, complying with standards is economically very compelling.

But the creation of the “wrong” standard, one that does not reflect current industry norms, can force industry to reimagine their processes and controls, costing time and money and forcing a remaking of industry to fit into some new model.

The foundations of modern innovation management have already been developed and deployed here in the US. Silicon Valley is one example, as is Los Angeles, San Diego and San Francisco. But their innovation could be devalued if the “wrong” approach becomes the global standard.

Governments are also implicated as citizens increasingly demand world class service from state and local governments. To continue to meet expectations, government will have to make sure that those with whom they work are benchmarked to a global standard. Such benchmarking provides another needed tool to guard against wasting taxpayer money on systems, products or services that do not perform as expected.  All in all, for industry and government, the wrong standards would be costly.

Yet, US company and government representation at the global standards setting meetings is minimal, with the US in general having the lowest participation of any country. Robust representation at the global standards setting meetings by US companies, government and academia is a minimum requirement for the protection of innovation done the right way. Some of our global competition is investing heavily in making sure their view of innovation wins as a global standard. Countries such as China are aggressively pushing their own interest in the development of innovation standards.

To miss a beat in the race for greater innovation will have dramatic consequences.  As more and more of our nation’s wealth and success is grounded in intellectual property and innovation, the results could be dire for our economy and for US citizens. Not all national policy is made where we think, and yet the implications can be just as far reaching if not more so.

Bartlett Cleland is senior fellow in tech and innovation at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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