For U.S. small businesses to stack up to foreign competition, innovation is a must.

That was one of the messages that Karen Kerrigan had for the Heartland Technology Alliance last week. Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, spoke about the technology issues facing small businesses at the group’s Small Business and Technology Forum.

“Certainly from a policy perspective, we might be falling behind a little bit in terms of tax policy and regulatory policy in what the other countries are doing to attract private sector investment,” Kerrigan said in an interview after her speech. “Countries like China – we’re seeing the education reports that they rank really high in engineering and science and those kind of things, where we’re falling behind.”

What small business owners in Des Moines can take heart in is that policy is only half of the equation. Kerrigan, who testifies before Congress on key issues affecting small businesses, said what business owners in the United States lack in public policy support they make up for in ideas.

“Our competitive advantage is our people and our creativity,” she said. “I’ve talked with Chinese policy leaders in the Chinese business community, and they think ‘If only we could make our people innovative and creative.’ That’s something you can’t make people do. I think that’s something instilled in our culture, and it’s what gives us our competitive advantage.”

Kerrigan would like to see greater access to capital for small businesses, noting that banks are getting mixed signals from the government on whether it’s safe to lend. Also important is coming up with a stable tax system that lowers both corporate and individual rates.

Another large issue is that companies aren’t finding access to the skilled work force they need. Kerrigan cited a Gallup Poll last year that said the No. 1 reason small businesses weren’t hiring is that they were concerned about payroll and cash flow. The No. 2 reason was that they couldn’t find skilled workers.

“That’s happening in our rough economy,” she said. “It’s going to be a real problem once we rebound. It will basically hold us back and undermine the economic recovery.”

Another underlying theme of Kerrigan’s speech, and a topic that was brought up in a question after the presentation by Rural Iowa Independent Telephone Association (RIITA) legislative liaison Judy Krewson, was broadband Internet access.

Kerrigan told the audience that the nation must continue to focus on ensuring access for everyone, saying that small businesses have become reliant on broadband access to lower obstacles to entrepreneurship.

The Federal Communication Commission’s (FCC) National Broadband Plan has been a point of contention between RIITA and the Iowa Telecommunications Association, which released a statement last year that the FCC proposal could potentially decrease broadband access for rural areas in Iowa.

“I think there are some things that are happening that are positive,” Kerrigan said in regard to broadband legislation. “The FCC is saying ‘Let’s look at the state regulatory environment and local regulatory environment and what’s getting in the way of broadband deployment.’ So that’s very good.”

The luncheon attracted an audience of about 60 small business owners and employees, both in technology fields and just looking to better utilize technology, as well as representatives from telecommunications organizations. The Heartland Technology Alliance, which launched in September, is a five-state alliance with a goal of being a resource for businesses and policy-makers.