Is the U.S. in danger of losing its edge in innovation? Get the facts that expose our vulnerabilities and trace the course of action that a leading coalition recommends:

In recent years, we’ve been barraged with facts that seem to indicate that U.S. capacity to innovate is being eroded. Consider the following:

* Today, government spending on research and development is only around 0.75% of gross domestic product–significantly down from nearly 2% of GDP in 1965.

* R&D spending in the U.S. now trails many countries, including Japan and Germany.

* U.S. companies are spending less and less on research and development. In fact, R&D spending dropped by 3.9% in 2002–its most substantial decline since the National Science Foundation started tracking it in 1953.

* Faced with a costly war in the Middle East and massive budget deficits, the current administration has placed little emphasis on fostering the country’s scientific competitiveness. This issue was hardly talked about during the recent presidential campaign.

* Not only is manufacturing being outsourced but also design–the start of a longer-term trend toward diminished innovation and competitiveness among U.S. companies, say some economists.

* For the past 12 years, the percentage of R&D money being spent on innovation (the “R” in R&D) has been declining, points out Gregory Tassey, senior economist at the National Institute of Standards and Technology (NIST). More and more is being directed to product development, which can expand existing product categories but does little to generate new opportunities for revenue.

So what does all this mean for the state of U.S. innovation? Quite simply, our lead is in danger, says the Washington, D.C.-based Council on Competitiveness, a group composed of business, academic, government and labor leaders. The coalition recently released a report called “Innovate America: Thriving in a World of Challenge and Change,” warning that we could be conceding our edge in economy, science and technology to countries such as China and India. Among the coalition’s members are Stanford University president John Hennessy, AMD founder Jerry Sanders and IBM CEO Samuel Palmisano.

To preserve the U.S. lead in innovation, the group recommends forming a new partnership between government, industry and academia. Among its many ideas for making sure innovation flourishes in the U.S. are a tax policy that supports risk-taking, immigration reform, and improving the patent system so fewer dubious patents are granted. Moreover, the group suggests creating a cabinet-level head of innovation, a National Innovation Prize, and 5,000 new fellowships a year to back the ventures of graduate students. Additionally, federal research funding should support high-risk, long-term projects, says the group. In particular, the coalition suggests shifting 20% of the Defense Department research budget to long-term basic science research and directing 3% of overall government R&D funding to risky and multi-disciplinary projects.

It remains to be seen how the U.S. will respond to such pleas for action without the wake-up call provided by the Soviet Union’s launch of Sputnik in 1957–a development that prompted America to create the National Aeronautics & Space Administration (NASA) and pursue innovation with unprecedented vigor. Though less blatant, the challenges confronting our lead in innovation today are just as pressing as they were decades ago.

Sources:

Bright Ideas for Boosting Innovation
Steve Hamm
Business Week, December 15, 2004
www.businessweek.com/technology/content/dec2004/tc20041215_9674.htm

A Sputnik America Fails to See
The Mercury News, December 28, 2004
www.mercurynews.com/mld/mercurynews

Innovation Ships Out
Christopher Koch
CIO.com, January 15, 2005
www.cio.com/archive/011505/outsourcing.html