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US performance in advanced industries declining, new regions entering top startup ecosystems, reports find

June 16, 2022

Two recent reports reveal U.S. standing in different global innovation spheres. The U.S. performance in advanced industries has been weak over the last two decades compared to other nations, finds a new Information Technology and Innovation Foundation (ITIF) report that calls for an economic “moon shot” initiative to help boost U.S. performance. Meanwhile, new regions are entering the top 10 global startup ecosystems but Silicon Valley remains at the top, according to a recent report from Startup Genome.

While ITIF found that U.S. output in key advanced industries is low and continuing to decline, it still holds significant market share in industries such as pharmaceuticals, other transportation equipment (aerospace), and IT and other information services (software and Internet companies). In its report, the Hamilton Center on Industrial Strategy at ITIF found that U.S. market share is declining in the sectors of electrical equipment, machinery and equipment, and motor vehicles industries. The decline in U.S. advanced industries has contributed to the overall decline of the U.S. in the global market. This decline has continued so much so that U.S. output would have to expand by nearly $680 billion (42 percent) to match the advanced industry share of China’s economy, according to the report.

To counter the downward trend in U.S. market share within particular industries, ITIF’s Hamilton Report offers policy recommendations to reverse this trend. The first of these recommendations is for Congress to pass and fully fund a “Super CHIPS Act”, which would be similar to the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act and would entail annual funding of $25 billion matched by state and local governments to stimulate advanced industries within the U.S. This legislation, coupled with an economic “moon shot” initiative, could commit the nation to increase its level of advanced-industry concentration by 20 percentage points within the next decade.

Other potential solutions include increasing the supply of STEM workers in order to boost key industry output. Further, ITIF urges lawmakers to create policies that have specific quantitative goals and frequently check on the progress of legislation in order to meet these goals.

In a separate report looking at the global drivers of entrepreneurial success, Startup Genome’s 10th anniversary edition of The 2022 Global Startup Ecosystem Report found that Silicon Valley has had a decline in its share of early-stage investment by dollar amount, which has declined from 25 percent in 2012 to 13 percent in 2021, yet it remains at the top of the ranking.

Seoul entered the global top 10 ecosystems for the first time. The report found that China’s ecosystems have declined in the rankings, which it said is a reflection of the relative decline in early-stage funding in comparison to other ecosystems. The report also found that several Indian ecosystems have risen in the rankings, with Delhi entering the top 30 for the first time.