The search for a new U.S. innovation policy should begin with an understanding of America’s changing competitive position as compared with the rest of the world. Over the past several years, the Board on Science, Technology, and Economic Policy of the National Academies has engaged in an extensive dialogue on science, technology and innovation policy with countries that place a high priority on innovation. America’s competitive challenge comes into clearer focus when the strong measures taken by other nations to improve their innovation capacity are contrasted directly with the flagging U.S. commitment in many of the same areas. For example:

Support for the Pillars of Innovation:

•    R&D Investment: The U.S. is losing its once-overwhelming advantage in research. The U.S. share of global R&D spending dropped from 39 percent in 1999 to 34.4 percent in 2010. This is still very substantial, but trends suggest the U.S. share will continue to shrink. While American R&D spending has risen 3.2 percent a year on average for the past decade, for example, growth in South Korea has averaged 8 percent annually and China has averaged 20 percent. Brazil nearly tripled R&D spending between 2000 and 2008, and Singapore plans to triple spending between 2010 and 2015. U.S. federal spending on basic research as a percentage of GDP, which is critical to future technological progress, has virtually stagnated for the past 20 years and risks actual decline in the face of current fiscal pressures.

•    University Funding: Research universities—the engines of the U.S. innovation system—are suffering severe cutbacks across the U.S. due to state budgetary constraints. Other nations and regions are dramatically increasing funding to upgrade, expand, and open new research universities. China is spending billions to make 39 universities world leaders. India’s five-year plan calls for 1,500 new universities and a number of new elite technology institutes. And Taiwan plans to invest $1.7 billion to develop world-class universities.

•    Early-Stage Finance: Funding from angel investors and venture capitalists, another pillar of America’s innovation ecosystem, has fallen sharply since 2000 (albeit a peak year), and venture capital investors have grown steadily more risk-averse, putting less funding in the earlystage investments. But successful U.S. programs, such as the Small Business Innovation Research (SBIR) program, that are important sources of early-stage funding have struggled for reauthorizations. Others, such as NIST’s Advanced Technology Program, now the Technology Innovation Program (TIP), have struggled for renewed funding. Meanwhile, other nations have launched large funds to support

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