Why America is wrong to fear Asian innovation
“WE MUST re-examine long-held assumptions about the global dominance of…American science and technology.” Those dark words come from Subra Suresh, director of America’s National Science Foundation (NSF), an official body. The NSF has just released its biennial report on global investment in science, engineering and technology. It gives warning that America is losing ground fast to Asian rivals, especially China.
The ten largest economies in Asia now spend roughly $400 billion a year on research and development (R&D)—as much as America, and well ahead of Europe’s $300 billion. China’s investment leapt 28% in a year, propelling it past Japan to become the world’s second-biggest spender. “Troubling trends,” declares one of the report’s overseers.
Hang on a minute. Merely counting pennies is no way to measure national prowess. Research spending is an input, not an output. Many a clever gizmo produced by well-endowed Japanese corporate labs has turned out to be worthless.
Useful innovation means fresh thinking that creates value. Booz & Co, a consultancy, has found that firms that spend little on R&D do indeed fare poorly by this measure. But those that spend a fortune do not, on average, outperform their more parsimonious peers.
The NSF boffins fret that America’s share of global R&D spending is falling. In the decade to 2009, it tumbled from 38% to 31%, whereas Asia’s rose from 24% to 35%. But science is not a zero-sum game.
One reason why spending in Asia has risen is that American firms nearly doubled their R&D investments there in the decade to 2008, to $7.5 billion. GE recently announced a $500m expansion of its R&D facilities in China. Such investments give American firms access to a wider pool of brains, many of them fizzing with ideas.
Products developed in or for emerging markets are making their way to developed ones. Coca Cola’s Pulpy is now a billion-dollar global brand, but it was first a smash in China. Text4Baby, an American campaign to send medical advice to pregnant mothers via text messages, was inspired by the work of Voxiva, an American firm, in Peru and Rwanda. Foreign innovation may threaten American firms; but it can also make them more competitive.