Speed is of the essence in introducing innovation in a competitive economy. Craig Barrett, the retired chairman and CEO of Intel Corporation, states that 90 percent of the revenues that firm derives on the last day of the year are attributable to products that did not even exist on the first day of that same year.3 Fortunately, Americans, especially immigrant Americans, have been demonstrated to be very accomplished innovators. They are commonly risk-takers.


The primary ingredients of successful innovation can thus be categorized as (1) new knowledge; (2) capable people, and (3) an environment that promotes innovation and entrepreneurship. Each of these factors is discussed, and the United States position assessed, in the succeeding sub-sections under the respective headings, “Knowledge Capital,” “Human Capital,” and the “Environment.”

4.1
KNOWLEDGE CAPITAL

The most fundamental building block of innovation is newly acquired knowledge, often in the form of scientific or technological advancements. Margaret Thatcher observed that,

… although basic science can have colossal economic rewards, they are totally unpredictable. And therefore the rewards cannot be judged by immediate results. Nevertheless, the value of Faraday’s work today must be higher than the capitalization of all shares on the stock exchange… . The greatest economic benefits of scientific research have always resulted from advances in fundamental knowledge rather than the search for specific applications … transistors were not discovered by the entertainment industry … but by people working on wave mechanics and solid state physics. [Nuclear energy] was not discovered by oil companies with large budgets seeking alternative forms of energy, but by scientists like Einstein and Rutherford….4

Unfortunately, the very real pressures of today’s financial markets make it difficult for corporations to invest in fundamental research, which by its very nature is risky, long-term, of uncertain applicability, and increasingly expensive—the latter particularly in the United States. In one survey, 80 percent of chief financial officers of United States firms respond-

3

N.R. Augustine, Is America Falling Off the Flat Earth? Washington, DC, National Academies Press, 2007.

4

M. Thatcher, Speech to the Royal Society, September 27, 1988. Available at: http://www.margaretthatcher.org/speeches/displaydocument.asp?docid=107346; M. Kenward, Let’s Get Back to Basics, Says Thatcher, New Scientist, December 16, 1989. Available at: http://www.newscientist.com/article/mg12416950.900-lets-get-back-to-basics-says-thatcher.html.



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