Can America Close the 'Innovation Gap'?

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At the heart of her analysis is the "innovation ecosystem," her model of the overlapping communities—business, government, and academia—that created America's post-World War II innovation boom. Though the term "ecosystem" is overused, Estrin frees it from cliché by describing how the whole landscape has changed since the 1950s.

She highlights, for example, how big investments in research sparked by the Space Race ended up fueling innovation at institutions such as Bell Labs and Xerox Parc, and how breakthroughs fizzled as a result of public and private spending changes beginning in the 1970s. By the turn of the century, she writes, "spirits were high…but the core values that had sustained our 'innovation ecosystem' for decades had been gutted from within."

Highlighting Pixar, 3M

Interestingly, Estrin's ideal for an innovation ecosystem is relevant both to individual organizations and to the nation as a whole. Whether the ecosystem is large or small, some researchers should be given the flexibility to explore broad, open-ended questions. Product developers, for example, might be charged with sifting through different types of research in an effort to come up with new inventions. A more market-oriented group should be charged with commercializing the results. Disney's animation studio Pixar and 3M (MMM) are exemplary in this regard, Estrin says. Both companies benefited from innovation ecosystems, and both had leaders and investors willing to place patient, long-term bets.

Estrin acknowledges that many U.S. companies continue to innovate. Examples range from Tesla's electric roadster to Google's search dominance. But her main task is to diagnose what ails American innovation, and where the worst damage has been done. Some of the prescriptions she comes up with seem overly broad and implausible in the current climate. She imagines, for example, a new government entity that sets science policy without congressional oversight. Others ideas, like higher pay for math and science teachers, are more targeted and have some support from both Presidential candidates.

Estrin is no alarmist; her tone is cool and her arguments balanced. Though a seasoned executive, she writes with the detachment of a scientist. "The only way to get beyond mere incremental improvements," she writes, "is to question the status quo." This, and a keen sense of timing, must have served her well as an entrepreneur. Indeed, Closing the Innovation Gap could not have hit shelves at a better time. In the panic created by the financial meltdown, Estrin's book may provide a worthy life raft for executives and policymakers.

Vella is a writer for BusinessWeek.com in New York.