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Point of View : Feb 1, 2006 (Vol. 26, No. 3)

Wake-up Call for U.S. Innovation

When it comes to innovation in science and technology, the U.S. has been the recognized global leader since the end of World War II. Today, however, that No. 1 position is in jeopardy as many foreign governments strengthen their educational and research programs.

Consider:

From 1989 to 2001, U.S. patent applications from Asian researchers in China, India, Singapore, South Korea and Taiwan increased 759%, while patent activity for homegrown technology grew at a slower pace of 116%.

Sweden, Finland, Israel, Japan, and South Korea each spend more on research and development as a share of their gross domestic product than the U.S..

Only 5.7% of undergraduate degrees in the U.S. are in natural sciences and engineering, compared to 8% in Japan and 11% in Taiwan and South Korea.

Although these benchmarks are relative, indicating percentage growth rather than absolute numbers, they reflect a disturbing trend.

The United States continues to have an innovative edge, but at the same time our advantage is shrinking, says G. Wayne Clough, president of the Georgia Institute of Technology and co-chairman of the National Innovation Initiative (NII), sponsored by the Council on Competitiveness (COC). A task force of business and academic leaders, NII released a report, Innovate America, in December 2004, that recommends specific tactics for honing Americas innovation capabilities.

Sustaining the United States leadership position is a serious issue, with far more at stake than national pride. Because it leads to new industries and higher-paying jobs, innovation is directly linked with economic prosperity.

Not the Usual Suspects

This isnt the first time Americas competitive advantage has been threatened, but today the challenge is more complex.

In the 1980s, the United States was inventing things, but not manufacturing them as well, particularly at the small- and medium-sized establishment level, says Jan Youtie, a senior research associate at Georgia Techs Economic Development Institute. That led to government programs like MEP, or Manufacturing Extension Partnership, to enhance our competitiveness. Now, the real concern is whether we can maintain our pace of innovation.

Another twist is a new cast of players. In the 1980s, competition came from high-skilled, high-wage countries like Japan and Germany. Today, emerging Asian countries are displaying surprising clout in technology. India is winning recognition in software development, and South Korea is showing strength in electronics and computer storage and display technologies.

China is sparking some of the greatest concern as it evolves from being merely a low-cost competitor to one with growing technology capabilities. From 1989 to 2001, Chinas high-tech industry output, which includes aerospace, computers, communications equipment, pharmaceuticals, and medical instruments, jumped eightfold from $30 billion to $257 billion. In comparison, the United States output slightly more than doubled from $423 billion to $940 billion.

Knowledge economies depend on skilled scientists and engineers, and in the U.S. that workforce is aging. More than 25% of todays scientists and engineers are in their fifties, and many will retire by 2010. Also, fewer students are pursuing science and technology degrees.

In the last three decades, the U.S. has fallen from No. 3 to No. 17 in global rankings of countries with college students earning science and engineering degrees.

Compensation is one deterrent, experts say. Pursuing a business degree is viewed as an easier and faster payoff.

Students spend a great deal of time and money to obtain doctoral degrees when they could have been out in the market earning salaries and building pensions, says Diana Hicks, chair of Georgia Techs School of Public Policy.

At the same time that American students are abandoning science and engineering, fewer foreign students are coming to the U.S.

Thats a problem because foreign students have helped make up for the dearth of U.S. students enrolled in science and engineering. After graduating, foreign students often remain in the U.S. for research jobs, contributing to our nations knowledge base.

Some of the decline stems from 9/11, with new immigration policies making it more difficult for foreign students to secure visas. Another reason, as other countries have bolstered educational centers, their young people no longer are dependent on the United Sates for advanced training.

And if foreigners do choose to study in the U.S., they have more reasons for returning home. In many countries with reformed economies, salaries for professors and researchers have escalated significantly.

When Xiao-Yin Jin, a visiting scholar at Georgia Techs Technology Policy and Assessment Center, was working at the Shanghai Industry Foundation in 1990, his annual salary was less than $1,200 in U.S. dollars. Today, Chinese professors in key universities earn more than $12,000 per year, he says.

Chinese professors can further increase their income by doing government- or industry-funded research, where about 10 to 15% of grant money is available as salary or bonuses. Another incentive, government policies encourage scientists to become entrepreneurs, Jin adds. If a researchers innovation can be used to start a business, the organization is tax-free for three to five years.

The Money Pot

From the end of World War II to 1980, Uncle Sam provided the bulk of the nations research and development dollars. Yet, the private sector now foots the lions share (68%), and nearly three-fourths of that money is earmarked for development, not basic research. Sometimes referred to as discovery research, basic research seeks to expand knowledge of a subject without specific applications in mind.

Basic research is important because it sets up the country for the next generation of technology so we dont run out of innovations, Hicks says.

Yet, the portion of the federal governments R&D portfolio that goes toward basic research has been stagnant or declining for most nonbiomedical disciplines during the past 15 years, says Kei Koizumi, R&D budget and policy director at the AAAS. Looking at 2006 and beyond, cuts for basic research look worse, he adds.

President George W. Bushs 2006 proposed budget devotes $132.3 billion to R&D spending, up a mere 0.1% from 2005.

At the Department of Defense (DOD), the biggest supporter of engineering research, there would be a slight budget increase. Yet within the DODs accounts devoted to science and technology, basic research dollars would drop 12.9% with a 14.7% decrease for applied research, according to Koizumi.

The NSF and NIH will see slight budget increases, but once adjusted for inflation, there is actually less discretionary money for research.

Basic research may seem expendable to politicians because its not about instant gratification. Samuel Rankin, associate executive director of the American Mathematical Society, likens it to a 401(k) fund.

For example, basic research funded by the government has led to the Internet, bar coding, robotics, and gene mapping. If we arent making that investment today, the chances of there being innovations for us to enjoy in the future are slim, says Rankin.

In addition to increased funding, experts call for a diversified R&D portfolio for basic research. Health sciences may be poised for great breakthroughs, but you still need the talented mathematicians for computer modeling. Its the interface of disciplines that will lead to new fields of discovery, says Evans.

Increased funding is just one aspect of sustaining the United States knowledge base; innovation depends on a complex ecosystem.

Underscoring that fact, NIIs Innovate America report recommends 32 strategies across three categories: talent, infrastructure, and funding. Implementing the plan calls for a unified effort, Clough stresses: It cant be done solely from the government side. It requires the cooperation of industry and universities as well.

And though the U.S. is still at the front of the innovation race, thats no excuse to delay action, experts agree.