Since the 1960s, both women and underrepresented minorities have earned an increasing share of bachelor’s degrees and advanced degrees in fields most associated with invention—the STEM (science, technology, engineering, and mathematics) fields. Yet, we do not observe a similar increase in patenting activity among these groups. Economists have identified multiple sources of gender and racial disparities in allocation of talent, including disparities with respect to the process of innovation. Whatever their source, gender and racial disparities exist at each stage of the innovation process—education and training, the practice of invention, and commercialization of invention—and can be costly to both productivity and the economy. The costs of misallocating talent in the economy are increasingly being identified and estimated in the economics literature. It is estimated that GDP per capita could be 0.6 percent to 4.4 percent higher with greater participation in the innovative process among women and minorities. These disparities can also lead to increased income and wealth inequality at each stage for those who would otherwise participate in the innovation economy. A range of approaches could help close these gaps, including policies aimed at further increasing the share of women and underrepresented minorities who are educators in STEM fields, bringing more people into the world of invention, and ensuring equal access to the tools and resources needed to drive innovation. The policies proposed here focus on improving data collection at the U.S. Patent and Trademark Office (USPTO) and measurement of potential innovation, making commercialization more inclusive using the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs housed at the Small Business Administration (SBA), and addressing issues related to workplace climate in the innovation economy.