According to a recent report by the Boston Consulting Group (BCG), 25 out of the 50 most innovative companies are based in the United States (US) and promote technological innovation for economic growth. The companies at the top of the list included Apple, Tesla, Amazon, Alphabet, and Microsoft, all of which are American‐based multinational firms. Also in the list is Nvidia, which has invested heavily in artificial intelligence (AI) recently surpassing over one trillion dollars in market capitalization. Google, Amazon, Microsoft, Apple and Facebook collectively spend over $200 billion annually in research and development (R&D), and nearly another $200 billion in capital expenditures. Experts believe the reason why U.S. multinational companies are able to invest so heavily in cutting‐edge R&D and be at the forefront of technological innovation is because they leverage globalized supply chains and globalized production, which academic studies have found resulting in higher levels of R&D activity and innovation. The computer and electronic industry have pioneered a factory-less model, where those who are US-based focus on “knowledge”-intensive activities with overseas suppliers managing physical production.
The most important factor driving improvements in productivity and living standards is the rate of technological innovation progress. Technology makes workers more productive, and in the health sciences it enables them to live longer. One important way in which the federal government, in particular, has stimulated technological advancements is by funding basic research that provides the scientific foundation for future commercial applications. For instance, much of the information technology revolution including the hardware, software, encryption techniques, artificial intelligence, and the internet originated from federally funded research.
Despite this, the US finds itself in a technology race with China. According to a report by the Australian Strategic Institute, China has a lead in thirty-seven out of forty-four major emerging technologies. While the US continues to spend the most on R&D of any other country, the US is falling behind in developing new technologies. Here is an opinion piece we found of interest relating to how the US can develop a strong technology ecosystem for innovation.
Priming the Innovation System
In an opinion piece “Priming the Innovation System” for The Center for Strategic and International Studies, Sujai Shivakumar, senior fellow and director, discusses how innovation used to consist of a linear process, but now innovation consists of an “ecosystem” in which various networks play a role in developing new technologies, and bringing them to the marketplace. In order for innovation to reach its full potential, each of these networks need to operate individually as well as partner with the other networks across the innovation ecosystem.
According to Shivakumar, innovation ecosystems include:
- Research networks: American universities, research institutes, and national labs are abundant sources of new ideas and concepts.
- Financial networks: Banks, venture capital funds, and other sources of capital provide the resources for entrepreneurs to fund and develop concepts into products and services for the market.
- Entrepreneurial networks: Start-ups, innovative firms, and small and medium manufacturers play a key role in the innovation system, developing ideas, seeking funding, and driving innovation to the marketplace.
- Educational and training networks: Universities, colleges, and vocational institutes provide the skills and workforce needed by industry to scale up and produce new products and services.
- Manufacturing and distribution networks: Companies that make innovative products and services and find and develop markets are an integral part of the innovation system.
He believes the United States needs to upgrade its own policy structures and make large and sustained investments in R&D and in its industrial infrastructure in order to build out the innovation ecosystem. While the United States has set the global standard for fostering innovation in its history, it will require both effective long-term planning and the financial commitments to realizing those plans. Read more on The Center for Strategic and International Studies.
Disclosure: Fatty Fish is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
The Fatty Fish Editorial Team includes a diverse group of industry analysts, researchers, and advisors who spend most of their days diving into the most important topics impacting the future of the technology sector. Our team focuses on the potential impact of tech-related IP policy, legislation, regulation, and litigation, along with critical global and geostrategic trends — and delivers content that makes it easier for journalists, lobbyists, and policy makers to understand these issues.
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