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Investing in Innovation Pays Off

By Andreas Hellmann | October 27, 2016

The Progressive Policy Institute (PPI) released a new report, "U.S. Investment Heroes of 2016: Fighting Short-termism," its annual ranking of the top 25 nonfinancial companies investing in the United States. The top 25 companies invested an estimated $176.9 billion in 2015, which is a 2.9 percent increase compared to 2014.

This report provides an estimate of domestic capital spending by major U.S. companies and finds the companies resisting short-termism and making long-term investments in infrastructure, buildings, equipment, and software. PPI calls these companies "Investment Heroes" because their spending is helping the U.S. economy.

Similar to last year, the best "Investment Heroes" by industry were telecom and cable providers. Combined with other three categories these companies accounted for nearly 80 percent of the total investment.

This year's PPI report shows another interesting fact: Many of the top telecom companies on this list show global capital spending down in the first half of 2016. The decline in spending is particularly notable in the telecom and energy sectors, most likely as a result of regulatory disturbance in the telecom industry.

The report concludes with a debate of the mechanisms of a new policy framework to promote long-term private investment in the U.S. That's especially true in highly-regulated businesses, such as the telecom industries, where the FCC is forcing its regulatory regime and potentially undercutting the incentives for long-term investment.

Investments are important to digitalize the physical economy

Today’s slow productivity growths is often linked to the failure of “physical” industries such as manufacturing, construction or healthcare to use new, digital technologies, compared to other non-physical industries like banking, finance, entertainment or general services.

A recent McKinsey study claims that the United States has only reached about 18 percent of its digital potential and another PPI study concludes that the physical industry account for only 35 percent of private tech investment, though they make up about 80 percent of the private sector.

It is imperative to realize that the physical industries needs to make much greater use of new technologies like wireless data in order to increase efficiency in manufacturing physical objects.

According to the PPI study, this would result in an enormous increase and acceleration of productivity and growth in the physical industries- that still make up about 80 percent of the whole private sector and would add up to $ 2.7 trillion to U.S. GDP by 2013. This would translate into an 11 percent increase for the U.S. economy overall.

A very important factor for the success of digitalizing the physical industry is that policymakers and agency are not regulating and blocking this process, otherwise this could not only hinder or slow down the transition, but could prevent it from happening in general, as recent insecurity of tech companies, that fear new unreasonable regulations and ruling from the FCC and others.

Another important point for the success of this process is to encourage policymakers to get the government to open up or release more spectrum, due to the fact that it is needed now and will be even more precious later. This will also help providers to put up the money to afford large investments to build and maintain their networks and infrastructure not only this year, but the following years.