Does the US Face an Innovation Crisis?

Is the innovation crisis a red herring, Steve? Is the real problem a critical mass of engineering talent? Several hundred thousand engineers graduate every year in India and China. The US? Under one hundred thousand as far as the more recent reports show me. Perhaps an interesting follow-up to your story would be about the changing attitudes towards nationalism, here in America and abroad. Driven by capitalistic forces. My company and others like it draw on a global talent pool in order to be ahead of the curve. Geography does matter. But intellectual talent matters more to customers sometimes. Western European companies are becoming more comfortable near-shoring projects to Central Eastern Europe, so attitudes are changing there as well. Investigating the changing patterns of thought regarding outsourcing and off-shoring would make an interesting read.

Tax credits are beside the point. The US (gov't, business, and public) needs to commit to a small handful of big, hairy, audacious goals to drive innovation. Renewable energy, green tech, even Mars colonization (not as crazy as it seems), etc. will encourage innovations that not only will address the primary goal, but also provide secondary or serendipitous benefits -- DARPA's Internet, for example. We don't have the threat of Soviet nuclear annihilation anymore, and we're not going to start a new Cold War with China, so we've got to be our own motivators.

Fundamental research remains strong. The US somewhat made up for the loss of the Bell Labs by NIST and NIH. Keep that momentum. The key to converting that deep investment into contribution to economy is the midstream and downstream links that pull results of basic results into forming a complex product then next to factories. For some technologies this can fast-track to 5 years from the 10~20 years of the past. Don't get gov't into this, else all sorts of corruptions sprout. Revise the securities and tax laws to incentivize investments to convert basic research into factory productions on US soils. Revise the patent laws to fast-track scheduling for lawsuits brought by patent owners that use the patents to protect products built on US soils. Create an environment that smart brain and smart monies swarm into building great stuff that 5 billion people on earth want them, and build on US soils, then you have a sustainable US economy.

The rest of the world sure is catching up. Nor does US want to keep them down. More affluent people among the 5 billion out there, more customers to afford the high-value-added products made on US soils. (No the US don't want garment factories and, btw, nor does Shenzhen these days.) Create an environment most conducive in the world for fast-tracking basic research into production (thus reduce risk of investments), hoards of best brains and smart monies will flock to the US, and those who are already in don't want to leave for anywhere else. Compete, and using a better macro system!

Big corporation had proven failures to turn basic science into business. Classic example: Ed Oates and Larry Ellison took IBM's relational database management systems basic research ideas to form Oracle, $22B revenue in 2008. Cable modem? Broadcom, founded 1991, went public 1998. ADSL? Amati Communication, founded 1991, sold to TI in 1998. Wireless LAN? Atheros Communication, founded 1998, went public 2004. Where were the BigCo's? No where.

It's not that our country doesn't have innovative entrepreneurs. It's that the status quo kills anything remotely innovative so they can retain power.

Even ideas worth billions are repressed while the corp and university labs push through their agenda.

Shame they aren't willing to share even a small amount to reward those who've developed ground breaking innovation.

Agree with Downhill on the point about Big Corps failure to innovate. The R&D tax credit is a vehicle for incentivizing large companies. As a somebody who has grown several small business I can tell you first hand it is a very unlikely route to navigate without some scale. What about vehicles to incentivize small and medium sized companies? We spend billions upon billions bailing out the architects of failure and throw a few crumbs at small business.

Luckily the US has a core competency in growing small business and it's the best place to invest if we expect our economy to keep pace. There is nothing nationalistic about this. We simply need to play to our strengths and export those strengths as we would any other natural resource.

The bottom line is that if we want to increase the rate at which we innovate we need to focus on this and increase the degree to which we support small business through smart tax policy, federal innovation zones, and a radically overhauled SBA.

Sadly, current patent laws allow only the ultra rich to enforce patents, leaving the small business bankrupt after paying for years of litigation after some huge corporation infringes new technologies developed / invented by small businesses..usually after the small biz innovators make many friendly attempts to establish a FAIR license deal with the big guys. This is the punishment we small businesses and patent holders get for innovating in the USA. Once you are bankrupt, the big guys get to use your patented technology with impunity. And the more who infringe it, the less the courts will allow the inventor to defend it..they call it "trolling" and throw your case out after your years of hard work, R&D and patent filings come to fruition, allowing the big guys to use your technology without paying you for it. Now you know why real innovation is DEAD in America. I can't wait to move my firm overseas!

I agree that the R&D Tax Credit needs to be made permanent in the US to remain competitive worldwide. How can a company plan to develop in the US when they know the credit will expire every two years and other countries, like Canada, have a permanent SR&ED credit?