Calif Innov Economy cover

California's Innovation-Based Economy: Policies to Maintain and Enhance It

Dec 01, 2015

Innovation is critical to the creation of high-quality, high-wage, sustainable jobs and economic growth, which, in turn, support a rising tax base in California and around the world. California’s policymakers can’t afford complacency in evaluating the dynamism of its innovation economy or in reviewing policies needed to buttress it. To maintain its leadership in innovation, California must provide a competitive business environment in which prospective and existing companies can conduct research.

In the global race for innovation, California enjoys advantages that other states and nations envy. These include leadership in diverse technology and knowledge-based industries, strong research institutions that provide unrivaled human capital and valuable intellectual property, an entrepreneurial culture aided by a deep pool of immigrant entrepreneurs, and the early-stage risk capital to bring innovations to market.

However, California also suffers from the widely held perception that it is inhospitable to businesses in terms of tax policy, regulatory regime, and other costs of doing business. This perception, along with competing incentives offered by other states and nations, means that California cannot rest if it wants to maintain its innovation supremacy and minimize the number of businesses choosing to locate or expand research operations elsewhere.

For this report, Milken Institute researchers conducted one of the most thorough analyses of the landscape of research and development (R&D) spending in California. The report demonstrates the key role of R&D in the state’s economy, and proposes ideas for spurring businesses to continue and intensify their research activity.