17.6. GLOBAL PERSPECTIVES ON INNOVATION
We are finding that many of our competitors, especially in Japan and Germany, are able to go through each turn of the innovation cycle more quickly than their competitors in the United States. As one would expect, it takes only a few turns for the company with the shortest cycle time to build up a commanding lead in terms of productivity and the latest technology in the product. Strategies that allow a company to shorten the innovation cycle inevitably make them more competitive so they can be leaders in the global market.
Many Europeans, on the other hand, feel that Americans are better than they are at adapting and exploiting technology and that there is a good working relationship between the university community and industry in the United States. According to Goldsmith (1970, p. xvi), American skills lie in adapting and exploiting rather than in creating. To support this statement, he has given a number of examples of recent European developments that have had a major impact on American engineering techniques: the triple-deck railway wagon for transporting automobiles (German), the horizontal climbing crane (French), the flotation process for plate glass (British), the basic oxygen furnace (Austrian), the Hovercraft (British patent), and the fundamental digital computer (British).
This is one interesting European perspective. A number of examples of developments from U.S. and other countries could be equally as interesting. It may be prudent to look at some substantive scientific accomplishments.
Notwithstanding the American ability to adapt and exploit technology developed elsewhere, let us examine the American ability to create and invent. The American share of world scientific and technical articles (Figure 17.7 and Table 17.5), patent applications (Figure 17.11b), and the number of prestigious awards (see Figure Figure 17.13 and Figure 17.14 for Nobel Prizes for Scientific Discoveries) earned by American scientists would indicate that American scientists are indeed leaders in inventing and creating new knowledge. As can be seen in Figure 17.15, there is a trend formed after World War II in which the number of U.S. laureates began increasing at a substantial rate. In fact, in the two decades of 1988–2008, United States citizens were sole or co-recipients of 88 percent of Nobel Prizes given in the fields of chemistry, medicine, and physics (Figure 17.13). And of the 61 prizes awarded in the past twenty years, 31 percent have been given solely to Americans (Figure 17.14). Perhaps many scientists and engineers in America feel, and rightfully so, that the emphasis on American investment in R&D needs to be strengthened further so as to sustain and enhance this leadership position. To the extent that this is not happening, many may feel that the United States is falling behind. One factor in the recent decline of American innovation may be the improvement in the conditions of scientific work in other countries, which has reduced the "brain drain" to the United States.
Figure 17.11. Number of Triadic Patent Families by Nationality of Inventor, Selected Countries: 1985–2003: (Source: Appendix Tables 6-50 and 6-51, Science and Engineering Indicators 2008, p A6-138. National Science Foundation, http://www.nsf.gov/statistics/seind08.)
Figure 17.12. Worldwide Patents in Force by Country of Origin: 2004–2006 (WIPO Patent Report, 2008, p. 23.)
Figure 17.13. GDP per Capita for United States, EU, and Japan: 1989–2005: (Source: Conference Board and Groningen Growth and Development Centre, Total Economy Database (January 2007), http://www.ggdc.net/dseries/totecon.shtml. See appendix table 6-1. Science and Engineering Indicators 2008.)
Nevertheless, some Europeans feel that the climate for research, development, and innovation is more favorable in the United States than in most European countries. The following are some examples (Charpie, 1970, p. 9):
The U.S. tax code provides an assured flow of high-risk investment capital to those would-be innovators who are able to establish contact with adequate venture capital sources. The capital gains provisions of the U.S. tax law provide an incentive for taxpayers in high-income brackets to assume substantial investment risks in anticipation of sharply reduced tax rates on high profits.
America has a tradition of publicly appreciating and recognizing the success of antiestablishment people. In addition, the mobile, less-structured American society is technologically sophisticated and is receptive to new ideas and inventions. American society is conditioned to give praise and prestige according to accomplishments and it does not ignore a person of humble beginnings who chooses to fight the system and thus achieves success.
One of the most important factors is the evidence of successful entrepeneurship surrounding the world-be entrepreneurs in America.
Figure 17.14. Nobel Prize Winners for Scientific Discoveries over the past 20 years by Country; Includes Awards in Physics, Chemistry, and Physiology and Medicine
Figure 17.15. Relationship of U.S. Laureates versus foreign, 1988–2008
Billings and Yaprak (1995) argues that inventive (R&D) efficiency may be an important factor in the competition for global market shares and goods and services. R&D efficiency is compared for 14 industrial groups in the United States and Japan using multiple indices of inventive efficiency. Examples of these indices are:
The marginal product of R&D capital
The rate of change in total factor productivity
Figure 17.16. Aggregate Noble Laureates by Country: 1901–2008
The effect of R&D on future sales
The effect of R&D on future value added
Findings show interesting differences in inventive efficiency across industrial groups and between the United States and Japan. U.S. food, textile, chemical, rubber, metals, fabricated metals, and other miscellaneous manufacturing industries appear to be relatively more efficient in inventive efficiency than their Japanese counterparts. In contrast, the Japanese excel in paper, petroleum, machinery, and scientific equipment industries; they display greater inventive efficiency than their U.S. counterparts (Billings and Yaprak, 1995).
According to a report in November 1995 by the Department of Commerce's Office of Technology Policy (OTP), foreign-owned companies are dramatically increasing R&D spending in the United States, with expenditures reaching $14.6 billion in 1993. At the same time, OTP says, U.S. companies have also increased R&D done abroad, nearly doubling spending between 1987 and 1993, reaching an investment of $9.8 billion in 1993 (Rotman, 1995). This trend of foreign-owned companies performing research in the United States has increased, as the NAS reported that in 2004 foreign-majority owned companies within the United States performed nearly $30 billion of R&D. Between 1999 and 2004, the rate at which foreign investment in R&D increased in the United States was 1.9 percent greater than the rate of growth from domestic companies investing in similar R&D (National Science Board, 2008, p. 4-51).