Is America losing its innovation edge? For decades, the country has debated this question in the halls of Washington, on the nightly news, and in corporate boardrooms. Pundits have looked abroad for signs—from the Soviets during the Cold War to the Japanese in the late 1980s to the Asian Tigers in the early 2000s—that the United States was losing its economic advantage. Pessimists point to startling statistics, such as the rise in the number of patents filed by foreign inventors or the growing corps of engineers graduating overseas.
These statistics are indeed alarming. Yet despite the historical challenges, the United States has remained the home of innovation. From the Internet to mainframe servers to pharmaceuticals, major innovations are still “Made in the USA.”
So what is the disconnect? Is America’s innovation advantage simply too large to overcome? Are numbers of patents and engineers no longer relevant metrics in a digital world? Perhaps. However, we think that looking solely at innovation and leadership in basic research is far too narrow. The key question is whether the United States has been losing its ability to translate innovation into economic leadership.
Innovation may create profits and headlines, but it is only part of the economic engine. Intel’s Andy Grove writes that the United States has “misplaced faith in the power of start-ups.” German research labs may have created the MP3, but it was the scale-up capabilities of American technology firms that took this innovation and unlocked its value, from Apple’s iPod to file sharing to digital-media vendors like the iTunes store, and beyond. This ability to take basic innovation, deliver it at scale, and refine it with second- and third-order innovations plays a critical role in driving growth and jobs. To do all this, a country must be at the center of cutting-edge technologies, market demand, talent, and entrepreneurial spirit.
We see warning signs regarding each of these elements. The problems go well beyond jobs or patents—to the heart of US economic leadership. We do not have all the answers, but we are convinced that a course correction is necessary. Incremental steps by the public sector, through one-off tax credits and piecemeal government programs, won’t be sufficient. Neither will the short-term, quarter-to-quarter mentality in America’s corporate boardrooms. A national commitment and strategy are required.