New Report Questions U.S. Ability to Lead in Innovation

Despite a multi-year upswing in the national economy, the United States is not laying the foundation for its long-term prosperity says a new report issued by the Council on Competitiveness. If current policy and investment trends continue unchanged, the U.S. could lose its status as the world's preeminent innovator, according to The New Challenge to America's Prosperity: Findings from the Innovation Index.

The Index quantifies and compares the innovation capabilities of the U.S. and 24 other nations. According to the report, there are three main contributors to a nation's overall innovative performance: the common innovation infrastructure that supports innovation in the economy as a whole (e.g., investment in basic science); the cluster-specific conditions that support innovation in particular groups of interconnected industries (e.g., automotive, information technology); and, the strength of the linkages among them (e.g., the ability to connect basic research to companies and the contribution of corporate efforts to the overall pool of technology and skilled personnel.)

The report indicates that the U.S. may be living off historical assets that are not being renewed. Investment in the fundamentals of innovative capacity reached a peak in 1985 and then fell. During the first half of the 1990s, the U.S. Innovation Index remained flat. The report highlights the particular issues which led to this decline. They are the following:

• There has been a serious weakening of the nation's available scientific and technical workforce;

• Current investment in R&D is lower as a percentage of national wealth than it was in the early 1980s;

• Overall, the U.S. regulatory and legal environment still inflicts substantial, unnecessary costs on industry, and is ranked poorly relative to other countries; and,

• The United States, while enjoying its best macroeconomic performance in a generation, is reducing public investment in the national innovation infrastructure.

To remedy these deficiencies, the report recommends a new national innovation strategy which includes the following suggestions:

• The downward slide of federal support for R&D outside the health sciences must be reversed;

• The United States must rebuild its dwindling pool of scientists and engineers;

• Policies for improving intellectual property protection in areas such as copyrights must become a top priority;

• Historic American leadership in market-opening efforts both at home and abroad must be renewed; and,

• The U.S. must revisit the national regulatory environment in order to encourage innovation while maintaining high standards.

The Innovation Index is the second report from the Council's Global R&D project. It is available for $35 per copy by calling the Council at 202/682-4292 or visiting their web site at http://www.compete.org