Gregory Ferenstein posted a Fast Company piece Tue Sep 6, 2011 on his discussion with blockbuster author and New York Times columnist Tom Friedman about his new book, “That Used To Be Us,” which contends that prioritizing innovation can turn around America’s free-fall from superpower status. http://www.fastcompany.com//1778214/that-used-to-be-us-thomas-friedman#disqus_thread

We can do more to address our national innovation challenges and I believe creative new policies driving growth of entrepreneurial firms provides the ideal framework. I posted the following  comments on the Fast Company site

Excellent article Greg- thanks.

Innovation is absolutely a critical economic driver and I find it is counterintuitive to many that innovation is really driven by smaller, entrepreneurial firms (less than 500 employees) rather than our nation’s largest corporations as many believe.

I recently posted comments “Think Small. Create Jobs. Win-Win” on Fareed Zakaria’s Washington Post blog thread related to Job Creation Fareed Zakaria Wash Post Blog, reinforcing the point that we need to look at the numbers to build defensible new policies. I find the media has missed the mark here on the role innovation plays in our economic growth and Tom Friedman’s book sounds like an excellent vehicle to help jumpstart discussions. Here are 3 key highlights from my perspective:

• We need to reinforce the point that smaller, entrepreneurial firms (less than 500 employees), more so than major corporations, are the real drivers of U.S. innovation, job creation and economic growth. SBA statistics show that during the past 15 years, entrepreneurial firms accounted for 64 percent of net new hires in the U.S. and pay 44 percent of the U.S. private payroll. Exact percentages vary year to year but these are the facts.
• Most technology innovation is really driven by smaller, entrepreneurial firms who provide the rocket fuel driving our technology innovation engine. SBA statistics show small firms produce 13 times more patents per employee than large patenting firms; and these patents are twice as likely as large firm patents to be among the one percent most cited. Many other statistics also support this fact.
• Major corporations do account for the bulk of U.S. exports, representing 71.1 percent of total exports in 2006. But of the total number of firms exporting goods and services, 97.3 percent of the total were entrepreneurial firms with less than 500 employees. And in 2006, the entrepreneurial firms with less than 500 employees accounted for 28.9 percent of the total $910.5 billion in U.S. exports.Again, a statistic not widely mentioned in the media.

The above provides support for developing new national incentives and policies for driving innovation and economic growth. And we should not forget that while we proceed, other countries, such as China, recognized these same points long ago and are well ahead of us. Again look at the numbers, always a good starting point.

In a Washington Post OpEd several years ago (“New Ideas Needed as Jobs Shift”, Washington Post, Mar 3, 2008), I noted China’s smaller businesses drive economic growth, employing about 75 percent of all urban employees, holding about 60 percent of all invention patents and accounting for about 80 percent of new products. China is also pursuing a comprehensive plan to create 10,000 mostly small and medium-size companies each year, hoping to create 100,000 new jobs. And China’s growth was not by accident but through careful planning- we have lessons to learn here. I also noted Malaysia’s MSC initiative, managed within the prime minister’s office, has an impressive track record, attracting 2,006 companies representing about 63,000 knowledge workers- creative entrepreneurial policies such as R&D credits, tax incentives, strategic financing are some of the policies used to drive innovation and growth here.

Tom Friedman’s book hopefully will play a role in helping shape new policy initiatives to address our global innovation economic growth challenges. I may be more passionate than most about entrepreneurship driving innovation, value creation and economic growth and do have a vision here. Clearly exciting times lie ahead.

Paul B. Silverman