Last week’s Bureau of Economic Analysis (BEA) report on GDP had some good news; the advance second quarter GDP estimates reflected overall growth, with improvements in consumer spending, and an increase in exports. However, business investment, as a component of GDP, is lagging. This is where policymakers need to focus. Business investment, which includes R&D expenditures, is key to economic growth.
Washington needs to ensure protection of intellectual property in order to capitalize on investment potential and increase innovation. Innovation boosts GDP in several ways: it increases investment through R&D expenditures which impacts consumption by creating new and improved goods and services (or more efficient processes for production) and increases export opportunities by providing these new products and services globally.
National Science Foundation found that 64% of companies who invested in R&D produced ‘new or significantly improved’ products or processes; that number fell to only 12% for companies with no R&D (NSF). Moreover, we know that innovative companies value IP protections because companies who invest in R&D protect their investment through the patent system. NSF estimates that 93% of patents issued, and 92% of a patent applications filed, belong to companies who fund R&D efforts (NSF).
The value companies receive from protecting their investments is evident in their continued use of patent system. Therefore, maximizing innovation requires strong, and smart protection of IP rights. Policy makers need to support policies that maximize these protections, while deterring system abuse, in order to increase innovation and ensure economic growth.