Shivakumar 12 12-11

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Addressing the Innovation Imperative

Science and Technology Landscape in a Changing WorldEnhancing US Collaboration with the EU and Member States

December 12, 2011Washington DC

Sujai Shivakumar, Ph.D.Board on Science, Technology, and Economic Policy

The National Academies


Global Challenges for the 21st Century• Fostering Economic Growth through Innovation

– Driving domestic Growth and Employment • Developing New Sources of Energy

– Commercializing renewable alternatives to oil– Increasing the capacity to fuel growing global demand for

electricity• Addressing Climate Change

– Growing a Green Economy; A major Growth opportunity• Delivering Global Health

– Transforming large investments in research to affordable and personalized treatment and care

• Improving Security– Through all of the above

• Addressing these Global Challenges requires Innovation

Leading Countries and Regions are Responding to the Innovation Challenge

• They are providing five things:– High-level Focus on Growth and Strength– Sustained Support for Universities– Rapidly Growing Funding for Research– Support for Innovative Small Businesses– Government-Industry Partnerships to bring new

products and services to market

• They are investing very substantial resources to create, attract and retain the industries of today and tomorrow.

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China’s Goal: To Become an “Innovation-Driven Economy”

by 2020• Boosting R&D Investments– Expenditure on basic research doubled between 2004 and

2008– Tax incentives for enterprises that invest in R&D

• Building R&D Infrastructure and Facilities• Focus on building world class universities to

create a Skilled Workforce• “Indigenous Innovation” supported by

Government Procurement and Financial Support– Financing for large projects– Facilitating Credit and investment capital for SMEsSource: Mu Rongpin, 2010 UNESCO Science Report

R&D Expenditures: Asia’s Surge

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The rapidly growing R&D expenditures of the Asia-8 economies (China, India, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand) surpassed those of the EU-27 in 2003.Source: NSF 2010 S&E

Indicators

U.S.U.S.

AsiaAsia

E.U.E.U.

The Rise of Global Innovation poses new

ChallengesEurope and the United

States


New Challenges for the US and EU

• New Competitors in New Markets– Emerging powers like China and India have critical masses of

highly educated scientists and engineers, rising R&D spending, and large, rapidly growing domestic markets for high-tech products.

• New Patters of Collaboration– Information technologies make knowledge, money, and people

flow across borders with ever-greater speed and ease– Growth in open collaborative innovation networks linking

corporations, researchers, investors and institutions around the world

• New Innovation Hubs– Innovation hubs like Silicon Valley and greater Boston, face greater

competition from dynamic new commercialization zones, such as Taipei, Shanghai, Tel Aviv, and Bangalore.


What is the Global Impact of China’s Innovation

Strategy?• Competitive pressures are providing consumers

with lower priced manufactured goods, but…– Imposing high environmental costs– Displacing workers and companies around the world

• Large scale free-riding on the global innovation system is not sustainable for China or for the US and EU– China is leveraging its large domestic market to get foreign

firms to transfer their technology—short term approach– Weak IP allows copying of foreign technology—but cripples

innovation in ChinaSource: Carl Dahlman, “The World Under Pressure,” 2011


How is Europe

Addressing the

Innovation Imperative?

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EU Innovation Funding Mechanisms: Some of the Most

Innovative in the World• 7th Framework Program (€ 50 Billion)

– Support to private companies, universities, public authorities, and researchers in developing countries

• Competitiveness and Innovation Program (€3.6 Billion)– Seeks to provide SMEs better access to finance and

business support services in the regions • EU Cohesion Policy (€86 Billion)

– Structural and Cohesion funds spending on innovation, growth, jobs as well as sustainable development goals

• Lifelong Learning Program (€ 6.2 Billion)– Erasmus and Leonardo Programs

Source: Delegation of EU to Washington, Jan 2010

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The European Paradox

Large international share of scientific publications

Low number of patents and share in high tech products trade


Resolving the Paradox: Europe’s Best Innovators are

Changing• Finland, Sweden, the Netherlands,

Germany & France are among those– Making Substantial public R&D investments

– Internationalizing the innovation environment

– Reforming universities and public research institutes

– Mobilizing private capital for start-ups and growth companies ( eg. by providing tax incentives)

– Introducing new partnership programs for greater productivity in the services sector (private & public)

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How is the United States Addressing the Innovation

Imperative? Strengths and Challenges

National Shares of Global R&D


Source: OECD, Main Science and Technology Indicators, 2008.

U.S.

Germany

France

UK

Japan

Korea

China

Others

Other EU

Federal R&D investment as a percentage of GDP has been

declining


The Major Risks to the U.S.

• Complacency about our competitive position in the world

• Limited attention to the composition of the economy, including trade and investment policy

• Focus on current consumption rather than investment for the future– A lack of investment in R&D on the scale of our

fathers and our competitors

• Failure to focus on the commercialization of research and on manufacturing


What must we need to do to Remain Competitive in the

21st Century?Preserve our AdvantagesReinforce our StrengthsEncourage Cooperation

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Major U.S. Advantages in Innovation• Openness to science and innovation

– Trust in Science & Scientific Institutions

• Positive Social Norms– High Social Value on Commercial Success – Forgiving Social Norms allow more than one try

• Entrepreneur-friendly Policies– Markets Open to Competition– Gentle Bankruptcy Laws permit rapid recovery– Taxes give Prospect of Substantial Rewards

• Strong Intellectual Property Protection: • Encourages Research & Diffusion of Research

Reinforce our Strengths• Boost R&D investment:

– The U.S. must fund R&D at the higher levels authorized under the America COMPETES Act

• Sustain University Research• Build and Reinforce Successful Public

Private Partnerships: – Renew and Expand programs like SBIR

• Attract Foreign Talent: – Reform immigration laws to attract foreign

scientists, engineers, and entrepreneurs


Building Innovation Clusters

• State and Local Initiative: Traditionally, state and local governments have sought to stimulate cluster growth

• Lack of Critical Mass: In many cases, however, state and local efforts lack critical mass– Funding; Facilities; Sustained Policy Support

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New Federal Initiatives for Clusters

• Energy Regional Innovation Clusters– DOE initiative to develop regional clusters in solar power,

energy-efficient buildings, nuclear energy, and advanced batteries.

• Regional Innovation Strategies Initiative– Commerce-EDA initiative to map clusters and provide

grants to support local cluster programs

• Nanoelectronics Research Initiative• NIST initiative brings together industry, government, and

academia to develop next-generation semiconductor technologies

• Index, a 11-university consortium, is based at the State University of New York-Albany.

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Conclusion

U.S. –E.U. Cooperation can help us both Address this Innovation Imperative


The U.S. Remains an Outstanding Partner for STI

Cooperation• Our open innovation ecosystem allows you

to:– Connect with a robust and open innovation

network– Draw on the US R&D and University Systems– Access one of the worlds largest and most open

markets– Attract the attention of some of the largest &

most dynamic overseas investors


Our Common Challenge• The Challenge for Europe and the United

States is to Adjust to the new Globalization Dynamic

• This involves initiating change through competitive incentives: – Incentives for entrepreneurial activity for

Small Firms, Large Firms, and Universities– Incentives (not mandates) for cooperation

among all actors

• Cooperation and Mutual Learning is the best way forward

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Thank You

Sujai Shivakumar, Ph.D.Board on Science, Technology, and Economic Policy

The National Academies500 Fifth Street NW

Washington, D.C. [email protected]: 202 334 1337

http://www.nationalacademies.org/step