On a planetary scale, annual budgets devoted to R&D will soon exceed one trillion US dollars. According to UNESCO Science Report 2005, investments were all ready up to $830 billion in 2002 and were allocated as follows:

• 37.0% in North America, with 35.0% in the United States;
• 31.5% in Asia, with12.8% in Japan, 8.7% in China and 2.5% in India;
• 27.3% in Europe, with 6.7% in Germany, 4.2% in France and 3.5% in the UK;
• 2.6% in Latin America and the Caribbean, with 1.6% in Brazil;
• 1.1% in Oceania;
• 0.6% in Africa, with 0.4% in South Africa.

(Figures extracted from the table Key Indicators on World GDP, Population and GERD, 2002)

Compared to 1997, China has more than doubled its share of world investments in R&D going from 4% to 8.7%. Within the same five years, America has lost 1.2% and Europe 1.5%, including the former states of the Soviet Union where the R&D systems are but “a shadow of what they once were” according to the UNESCO report. In fact, the Russian Federation has 8.9% of the UNESCO counted world researchers but now contributes to only 1.8% of the world’s R&D expenditures.

In 20 years, we have witnessed a significant change in the worldwide share of exported “high tech” products.  Since 1980, the global share has varied as follows:

• Europe, from 43% in 1980, to 34% recently, or a reduction of more than 1/5;
• United States, from 31% to 18%, or a drop of more than 2/5;
• Japan from 15% to 10%, or a decrease of 1/3;
• Asia (China, Korea, Taiwan, Singapore, Hong Kong, India), from 7% to 25%, or more than three times; and
• Others, from 4% to 13%, or more than three times.

(Figures extracted from The Knowledge Economy: Is The United States Losing Its Competitive Edge?)

Statement of Some Facts on Innovation for OECD Countries (5, 6)

According to the report OECD Science, Technology and Industry Scoreboard 2005 - Towards a knowledge-based economy :

• OECD countries accounted for just under 80% of worldwide value added in manufacturing in 2002. Out of the ten top global manufacturing countries in 2002, nine were OECD members.
• Government R&D budgets in OECD countries have increased annually by an average of 3.5% (in real terms) since 2000.
• An increasing number of countries use R&D tax concessions to encourage business R&D expenditure: 18 OECD countries have R&D tax credits in place (in 2005), 50% more than in 1996.
• Countries with the most searchers are the United States (1.26 million), China (810 000), Japan (647 000) and the Russian Federation (492 000).
• More than 442 000 patent applications were filed in Europe and the United States in 2002, compared to around 224 000 a decade earlier.
• Patenting activity is heavily concentrated. In 2001, France, Germany, Japan, the United Kingdom and the United States accounted for 83.6% of all triadic patent families. (Note : triadic refers to a patent taken in three countries at once: United States, Europe and Japan)
• R&D activities are increasingly internationalized, but the share of foreign affiliates in industrial R&D varies widely, from less than 5% in Japan to over 70% in Hungary and Ireland.
• In 2001, 82% of the world’s scientific articles were from the OECD area, two-thirds of which from G7 countries.

(From executive summary of the report Towards a knowledge-based economy )

China: Incomplete but Revealing Statistics (7, 8)

Expenditure on R&D in China climbed from 0.6% of GDP in 1995 to 1.2% in 2002 (during a time of record GDP growth). UNESCO Science Report 2005  states: “China listed information technology, biotechnology, new materials technology, advanced manufacturing technology, aerospace and aeronautics as priorities in which it aims for breakthroughs. In 2002, China spent 75.1% of gross expenditure on R&D on experimental development, 19.2% on applied research, and just 5.73% on basic research”.

• According to a survey taken of 3,012 private enterprises in China:
• 16.7% of private enterprises own their technical patents;
• 30.8% start manufacturing products of their own design;
• 42.3% invest in R&D for new products, new technologies and cutting-edge projects;
• 30.3% were able to sell more than half of their products to neighboring provinces;
• 21.4% have seen their product penetrate overseas markets (8.1% of this enterprise category export more than 50% of their sales); and
• 2% are starting to invest abroad.

(From document in French)

Only a small portion of Chinese enterprises exports more than 50% of their production. Imagine how our markets could be flooded if local manufacturers do not keep a definitive edge over other potential Chinese exporters!

Statistics are proving it: the dragon exists, it has taken off and it is “breathing fire”. Instead of wondering if China will surpass Japan in terms of innovation, it is time to ask when it will happen.

Favoring Innovation: A Role Made to Measure for Governments (9, 10,11)

With the reduction of grants and tariff barriers, governments have lost many tools that helped local enterprises compete against foreign competitors. However, governments can still play a MAJOR role in innovation. Many countries show ingenuity in doing better than their competitors in this area.

Government aid to national innovation can take many forms:

• Adapting the education system to changing needs ;
• Investing in fundamental research;
• Favoring regional development or connecting complementary people through the technical support of state-paid experts;
• Encouraging know-how exchanges including access to technologies developed with State funding (see January article about Bayh Dole Act);
• Specializing national research in priority niches;
• Ratifying international agreements in areas complementary to local expertise;
• Easing immigration criteria for people with specialized expertise;
• Recognizing intellectual property and facilitating patent grants through adequate support;
• Reducing financial burden usually by tax credits for R&D;
• Facilitating loans;
• Reducing government red tape for applicants;
• Giving research contracts (notably in areas of national interest such as health, environment, natural resources and defense);
• Sharing risks and profits to favor innovators instead of the State;
• Creating an innovation culture.

The State has many tools to influence innovation and statistics show that a country creating an innovation culture harvests its fruits. Among the 10 European countries which have the highest share of population attracted by innovative products or services, 9 have an above average output/input rate. Conversely, seven countries among the 10 where population readiness for innovation is the lowest are below average output/input rate.

The Essential Role of the State in Fundamental Research (12, 13)

The “Waiting for Sputnik” report gives three examples of fundamental research studies, that were extremely important to the world economy, …many decades after their start:

• Research into quantum physics in the 1920s laid the foundation for a microelectronics industry that did not appear until the 1950s.
• Physicists began to discuss nanotechnology in the late 1950s, but products are only now appearing on the market.
• The research behind the Internet began in the late 1960s, years before it unleashed sustained economic growth.

In the beginning, many thought these works were harebrained or constituted “solutions to the research of a problem to be solved”. However, history has shown they were fully justified.

Some private enterprises still support ambitious fundamental research studies. It is notably the case with particularly audacious projects conducted by IBM («The Computer Brain»), Intel («Precision Biology») and Bell Labs («Quantum Computing»). According to Technology Review, these projects could revolutionize the world as much as great projects of the past, like laser development (Hughes Aircraft), transistors (Bell Labs) or optical fibers (Corning Glass). That is really saying something!

However, these remarkable projects are swimming against the tide: they are looking at long term instead of short term and they are aiming at pushing the limits of science instead of minimizing the risks borne by promoters. They are exceptions confirming the rule.

Today’s competitive environment does not allow the private sector to invest in experiments whose payoff may not appear for a decade. Basic research, which has no immediate commercial application or use, depends on governmental funding.

Europe has Ambitious Objectives (14, 15, 16, 17, 18, 19, 20, 21, 22)

In 2000, Europe established its objective to turn the Union into “the most competitive and dynamic knowledge-based economy in the world” by 2010. The means to achieve this are defined as the “Lisbon strategy”, which is composed of countless documents.

Europeans are deeply concerned that results obtained in the last five years are not up to expectations. However, Europe now has a much better appreciation of its strengths and weaknesses that will, in the next five years of its ten-year plan, help catch up part of the accumulated delay (see The Innovation Gap between EU & US: Myth or Reality?).  Europe maintains a firm resolve to ensure its competitiveness by favoring innovation.

Numerous information sources talk about Europe’s innovation problem. TrendChart Innovation Policy in Europe is one of the more complete easy-to-use sources on the subject. Beyond general statistics, one simply clicks on Europe’s map to get information on countries. The following excerpt is a first glance of the site, offering detailed information through numerous links:

• The European Innovation Scoreboard 2005 (…) confirms that Sweden, Finland and Switzerland are the European innovation leaders, followed by Germany and Denmark. Most of the new member States are engaged in the catching up process, however following a low rhythm that will not allow for short-term convergence in Europe. In addition, would trends for the 25 Member States remain stable; the gap with the US will not close within the next 50 years.
• The EIS 2005 comes with a new analysis of innovation efficiency, capturing how countries are good at transforming their innovation assets into innovation results (Innovation inputs and outputs). (…)  A particular emphasis has also been given to 5 key dimensions of innovation, which are further explored in the EIS (innovation drivers, knowledge creation, Innovation and Entrepreneurship, Applications, IPR) (Five key dimensions of innovation). Some new evidences show that an even performance on all dimensions is a positive driver for a strong overall innovation performance, therefore suggesting to rather investing in areas of marked weaknesses (Strengths and weaknesses).
• These detailed statistical analyses are fully available in the EIS 2005 document and accompanying reports. They will directly contribute to the policy discussions aiming at strengthening the European Innovation Area.   All documents can be downloaded under the scoreboard papers page.

It is hard to get 25 countries to agree and avoid duplication. Diversity could become one of Europe’s major strengths once the inevitable differences are leveled. Europe is thus a melting pot of ideas that could profoundly modify the innovation universe. It‘s an experience to be watched even farther beyond the 2010 deadline.

The US Federal Government will allocate more than $136 billion for innovation in the next 10 years (23, 24, 25, 26, 27, 28, 29, 30, 31, 32)

In the United States, as on the other side of the Atlantic, self-criticism has characterized recent years. Numerous American reports come to the same conclusion and wave a red flag: “If nothing is done to stop the actual slow-down, the United States will lose their technological leadership”.

• For more than half a century, the United States has led the world in scientific discovery and innovation. It has been a beacon, drawing the best scientists to its educational institutions, industries and laboratories from around the globe. However, in today’s rapidly evolving competitive world, the United States can no longer take its supremacy for granted. Nations from Europe to Eastern Asia are on a fast track to pass the United States in scientific excellence and technological innovation.
  The Task Force on the Future of American Innovation

The following are among the more explicit reports on American innovation problems and their solutions:

• Crunch Time: The Competitiveness Audit Report 
• Losing The Competitive Advantage?  The Challenge For Science And Technology In The United States
• The Knowledge Economy: Is The United States Losing Its Competitive Edge?
• The National Summit on Competitiveness - Investing in U.S. Innovation (document)
• Investing in U.S. Innovation (web site)
• Wake-up Call for Innovation
• The National Innovation Initiative Final Report: Innovate America: Thriving in a World of Challenge and Change
  

(Also, see the reports and articles listed on Task Force on the Future of American Innovation and Association of American Universities

The scientific, industrial and financial advice of experts seems to have reached its goal. The White House will go forward with many of the recommended measures.

In his January 31, 2006 “State of the Union” speech, President George W. Bush announced a budget of $136 billion to be spent in the next ten years as the “American Competitiveness Initiative” plan. (NB the yearly American budget is about $2.7 trillion). He mentioned, among other points, these four:

• American Competitiveness Initiative, to encourage innovation throughout our economy, and to give our nation's children a firm grounding in math and science.
• To double the federal commitment to the most critical basic research programs in the physical sciences over the next 10 years.
• To make permanent the research and development tax credit to encourage bolder private-sector initiatives in technology.
• To encourage children to take more math and science, and to make sure those courses are rigorous enough to compete with other nations (…) so they have a better chance at good, high-wage jobs. If we ensure that America's children succeed in life, they will ensure that America succeeds in the world.

President Bush has also stated “Keeping America competitive requires us to open more markets for all that Americans make and grow. One out of every five factory jobs in America is related to global trade, and we want people everywhere to buy American. With open markets and a level playing field, no one can out-produce or out-compete the American worker.”

Innovation and Wonderland (33)

In one of her adventures in Wonderland, Alice realizes the landscape has not moved even though she has run for a long time. She confides her astonishment to the Queen of Hearts:

•  “Well, in our country,” said Alice, still panting a little “you’d generally get to somewhere else if you ran very fast a long time as we’ve been doing.” 
  “A slow sort of country!” said the Queen.  “Now, here, I see.  It takes all the running you can do, to keep in the same place.  If you want to get somewhere else, you must run at least twice as fast as that”
  (Through the Looking Glass, from Lewis Caroll)

It goes the same with innovation: in a fast-paced evolutionary place, you need to run constantly just to keep ahead!

The Queen of Hearts anecdote shines a different light on how the innovation race reflects on each enterprise.

On the national scale, we can expect an increase of government support for the most innovative enterprises that will widen the gap separating them from others. There is thus an advantage in getting off the platform and getting on board the train of local innovation politics.

On the international scale, globalization implies that innovations will be known and competed for more and more rapidly. This will reduce the duration of the advantages gained. On the other hand, greater information availability dramatically increases the quantity and scope of possible collaborations for exchange of ideas and commercialization of new products. People looking for top-quality products in their area will increasingly find mutually profitable partnership opportunities with organizations working elsewhere in the world. To benefit from globalization, you need to look actively for alliances that will bring foreign innovations into your market, open the doors abroad for local innovations, or jointly develop new products based on the complementary expertise of partners.

Be it on the national or international scale, innovation is more than ever “condemned to excel!”  We, too, are in Wonderland!

Innovation: A Strategic Issue

Innovation has become the mantra of many governments. Even if the pace of innovation is already high, the beat will accelerate since the United States and Europe publicly claim the world innovation leadership and foresee a series of measures to reach their goal. No doubt, Japan, China, Korea, India and many other countries will want to keep up and even improve their position on the international scale. The race will accelerate. Think what impacts this will have on research in general and on you personally.

These are only the first laps of this marathon and already important trends are emerging:

• Countries are revising their strategies in accordance with their means and the international rules that are increasingly erasing borders. To avoid the dead end of successive cost reductions (since there is a lower limit), many countries have opted for an increase of support to innovation as the principal means to maintain the quality of life of their citizens (since there is theoretically no upper limit). The build-up between countries and the rapid dissemination of knowledge are transforming the innovation race into a forward escape. We need to develop continually new niches to maintain a short-lived lead. If it is true that “the early bird has an advantage”, we must concede that the others are never far behind;
• Enterprises must, at the same time, foresee opportunities to get strategically well positioned to conquer new markets and face the menace of being dislodged by a foreign competitor or a local competitor that has had government help to develop new technologies better suited to the needs. Those not moving forward fast enough fall behind competition. On the other hand, you must not try to innovate on all fronts. You must select targets for which your enterprise can be first (“the early bird”) or second (“the second mouse”);
• Since countries innovate to ensure the well-being of the population, people must be well-informed of the issues and we must conscientiously answer their questions and concerns. It is the best practice to have innovation as a part of solutions supported by the population rather than problems to which it is opposed. European studies have shown close correlation between the interest that population has in technologies and the success of incentives that favor innovation. The population perception is thus an important variable to consider in all innovation policy; 
• Specialists working in the large innovation commercialization domain must adjust their contributions to the new rules of the game. Their role is increasingly crucial and demanding in ensuring the success of an innovation.

Because of the effervescence of innovation commercialization and because of its impact on living standards, we must advisedly use all available resources. More than ever, to reinvent the wheel means to waste essential resources needed to succeed. BirchBob puts at your disposal more than 33,000 technologies coming from more than 1,889 organizations. You can find a proven solution meeting all or most of your requirements. Should you use a technology as is, or adapt it to your projects, you could save time, avoid errors and establish mutual profitable relationships with those who developed the innovation for other markets or other needs than yours.

It is wise to learn from our errors since it is part of experience but it is even wiser to benefit from the experience of others. The experience of thousands of specialists is at your disposal thanks to BirchBob. Make the most of it.

Your comments will be greatly appreciated. Use BirchBob’s blog to share your point of view with 15,000 readers of BIRCHBOB INNOVATIONS.

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