The Power of Technological Innovation in Rural America

2 0 0 7 • Vo l I I I s sue IV echnological innovation often stimulates economic growth by creating new products, improving efficiency, and opening doors to new markets. Yet many rural communities believe these advantages are off limits to them—because their towns are either too small or too remote for their entrepreneurs to create technological innovations. In reality, though, the advantages of innovation are often well within the reach of rural America. Size and distance may limit a rural entrepreneur’s ability to produce radical new innovations. But adopting new technologies and retailoring them for new and better uses exemplify the traditional spirit of rural America, especially in agriculture. In the language of economists, rural places are adept at technological adoption, a kind of innovation that improves existing technologies. The key players in this crucial game of innovation are rural entrepreneurs. Can technological adoption help invigorate rural economies? This article explores how such innovation can boost rural prosperity in three ways: by creating new products, improving production processes, and opening doors to new markets. The article also discusses some of the federal policies that support technological adoption in rural America. InnovatIon Creates new ProduCts Innovation is the fuel entrepreneurs use to power economic engines. In the United States, private industry spends billions each year to discover the next great invention, hoping it will spawn new products that will transform the economic landscape and create new sources of economic return. According to the National Science Foundation, U.S. private industry spent $300 billion on research and development (R&D) in 2004, about 70 percent of the nation’s total (Chart 1). T