By STEVE LOHR

Published: November 10, 2009

BY now, a thick pile of recent books and expert reports warns that the United States is losing its innovative edge, and a poorer future for the nation beckons unless the trend is reversed.

With the American economy in a wrenching downturn, the innovation imperative seems more pressing than ever. Is there a role for foundations in advancing an innovation agenda? And, if so, what?

Definitions of innovation vary widely, but in the current context a crucial distinction needs to be made between invention and innovation. Invention is coming up with the breakthrough idea, and foundations focused on science and technology typically support those ambitious quests, from H.I.V. vaccines (the Gates Foundation) to hyper-efficient cars (the X Prize Foundation).

Innovation is the process that translates knowledge into economic growth and social well-being. Invention is science, innovation is economics.

In universities, interest in “innovation economics” is surging. And foundations, experts say, could help advance innovation research.

“Innovation itself is a field in need of innovation,” said John Kao, a former professor at the Harvard Business School and an innovation consultant to governments and corporations. “What we really need is more original thinking about how innovation works in society, and that could come from the philanthropic sector as well as universities.

”Others make grants in the innovation field, but the Kauffman Foundation has made the broadest commitment. Its support and focus in recent years are helping push “innovation” from being a vague admonition in policy speeches to the basis for a growing discipline of serious research.

The Kauffman Foundation was established in 1966 by Ewing Marion Kauffman, a pharmaceutical entrepreneur and owner of the Kansas City Royals. A self-made man, Mr. Kauffman, who died in 1993, wanted his philanthropy to promote entrepreneurial activity and education.

The foundation, based in Kansas City, Mo., has assets of $2 billion and still broadly pursues the founder’s mission, but it has evolved considerably. In 2002, Carl J. Schramm, an economist and lawyer, became its president.

At the time, Mr. Schramm recalled, the foundation focused on trying to persuade business schools to begin entrepreneurship programs. Today, by contrast, the foundation is one of the nation’s largest private supporters of economic research in universities.

The climate for innovation, Mr. Schramm said, is vital in determining whether entrepreneurs succeed or fail. “We try to foster a deeper understanding of the innovation process,” he said “and that is our leverage point to help stimulate economic growth, create new jobs and wealth.

”Soon after he arrived, Mr. Schramm recruited Robert E. Litan, the director of economic studies at the Brookings Institution, to head Kauffman’s research program. Mr. Litan, who joined in 2003, recalled that his assignment was to expand and improve the foundation’s research, and sponsor more work by mainstream economists.

Recent grants went to Edmund S. Phelps, a professor at Columbia University and winner of the Nobel Prize in Economic Science in 2006, and William Baumol of New York University, a pioneer in applying economic theory to entrepreneurs.

The Kauffman Foundation often supports data-intensive research. For example, the Kauffman Firm Survey is a study of nearly 5,000 companies that were started in 2004. The survey will follow the fledgling firms over the years, seeking factors of success or failure. Each participant initially answered more than 100 questions.

The research, Mr. Litan said, is the economic equivalent of the Framingham Heart Study, the landmark health survey begun in 1948 to examine the causes of heart disease. The Kauffman survey data, he noted, has already been used by more than 100 academic researchers.

Kauffman, along with the National Science Foundation, is building a database that tracks government-sponsored research for science and engineering and links it with company start-ups, patents and other data. One goal of the research is to identify the characteristics of “star innovators,” scientists who are most effective in ushering research advances into the marketplace.

Kauffman’s research into technology transfer from universities suggested that formal programs tended to ignore many inventions and discoveries that could have commercial potential. So the foundation set up a Web site and database, the iBridge Network, where scientists and engineers from 40 universities have posted 3,000 inventions, from software to chemical compounds. “It’s an eBay for ideas,” Mr. Schramm said.

Kauffman has also begun a Law, Innovation and Growth program, which will make $10 million in grants over the next five years. The research, Mr. Litan explained, will look at how copyright, patent and other laws affect innovation. In 1960s and 1970s, scholars like Guido Calabresi and Richard Posner made it standard practice to begin looking at legal issues through the lens of formal economic analysis. The Kauffman program, Mr. Litan said, seeks to “generate and grow a whole new generation of scholars” who explore the interaction of the law and innovation.

“It’s a big-think initiative,” he said. “That’s what foundations can do.”