Is America No Longer an Innovation Nation?

January 29, 2015

America’s lackluster position in Bloomberg Business’ 2015 Global Innovation Index should serve as a red flag to the nation. A dismal sixth place is unacceptable for the country that has brought the world an endless stream of disruptive technologies, vast new industries, and novel solutions to meet mankind’s needs—and for whom innovation is the economic lifeblood.

Given our laggardly position, is the evaluation flawed? Or are we?  The answer, it seems, is both.

The annual survey evaluates over 200 countries according to five key criteria that are characteristic of an innovative economy: 

  • Research & Development: Research and development expenditure as a percentage of GDP
  • Manufacturing: Manufacturing value-added per capita
  • High-tech companies: Number of domestically domiciled high-tech public companies—such as aerospace and defense, biotechnology, hardware, software, semiconductors, Internet software and services, and renewable energy companies—as a share of world's total high-tech public companies
  • Postsecondary education: Number of secondary graduates enrolled in postsecondary institutions as a percentage of cohort; percentage of labor force with tertiary degrees; annual science and engineering graduates as a percentage of the labor force and as a percentage of total tertiary graduates
  • Research personnel: Professionals, including Ph.D. students, engaged in R&D per 1 million population
  • Patents: Resident utility patent filings per 1 million population and per $1 million of R&D spent; utility patents granted as a percentage of world total

Clearly, each of these criteria is an essential component of national innovation.  Still, capturing the full equation of national “innovatability” (if the reader will allow me to innovate a new word) is a tricky and complex business.  Several important elements and indicators are not yet captured by the index; it might be time to consider developing a deeper, richer algorithm. 

Four missing factors stand out and should find their way into future evaluations:  

  • Market competitiveness. Where markets are vibrant and enterprises must compete, innovation results as enterprises vie to survive and thrive. Conversely, in markets where state-owned enterprise and national champions dominate, bigness and exclusivity beget stagnation.   A nation’s level of entrepreneurship and the competitiveness of its markets should count in the evaluation.
  • Collaboration. Today innovation takes place at the intersections of disciplines.  Creativity demands excellent collaboration and networking. In this regard enablers of collaboration such as a nation’s level of Internet access and speed, open source databases, and so forth should be baked into the analysis. 
  • Synergy.  Akin to collaboration, fostering an ecosystem of innovation is fundamental to national creativity. Among America’s greatest economic assets are our “innovation clusters” where national laboratories, technology companies, and major universities are co-located, enabling a cross-disciplinary spectrum of intellectual capital, assets and capabilities to comingle and create fertile synergies. Countries around the world are emulating America’s “cluster” model, including iconic U.S. hotspots like Silicon Valley, Research Triangle Park, San Diego, New Jersey (pharmaceuticals) and the Boston corridor.  The number and sophistication of such clusters are a telling indicator that should be included in the rankings.
  • Incentive. Without proper protection of intellectual property and the ability of an innovator to reap benefits for his or her investment of time, effort, resources, and brainpower, then risk taking will flag and so will innovation. This important aspect needs to be factored in.

That said, we would be arrogant and foolish to simply wave off our evaluation as the product of an incomplete analysis, or one that simply fails to account for the overall scale of the U.S. economy’s

innovation ecosystem. Indeed, the rankings spotlight major deficiencies in America’s capacity to maintain our position of leadership in an innovation-based global economy, particularly as blossoming consumer markets and labor forces abroad begin to attract industry and capital.  

The spotlight bring enormous challenges to America’s innovation competitiveness into sharp relief:  

  • It will be difficult to sustain robust public funding for research and development when the national budget is gobbled up by mushrooming debt service demanded by a galactically high debt, and equally hard to maintain strong private funding when CEO’s are compelled to trim long-lead R&D to meet short-term earnings benchmarks.
  • It will be hard to foster manufacturing when the cost of taxes, regulations, and lawsuits are escalating in a borderless global economy where manufacturers have choices about where to locate.
  • It will be impossible to produce a sufficient cadre of research personnel or a workforce with an adequate number of people holding advanced degrees when our elementary education system is producing a student body inept and ill-motivated in the STEM disciplines (science, technology, engineering, and mathematics) – skills elemental to innovation in today’s high-technology world.
  • And, a nation’s patent stream will eventually slow to a trickle if a fertile ecosystem of innovation is not nurtured. 

Innovation is the flywheel of prosperity.  It’s a comprehensive system resulting from the interplay of a diverse set of factors.  The science of finding the right algorithm to capture a phenomenon as complex as national innovation is an inexact one to say the least; but one well worth seeking.  

America’s economic future demands we remain innovation leaders. To that end, the Bloomberg rankings provide us with an important performance review and the framework for an agenda essential that we tackle. The beginning of a new year and a new Congress seems like an excellent time to start.