“The Innovation Arms Race analysis illustrates that the US, EU and UK need to be more focused and strategic in converting R&D dollars into impact and outcomes,” wrote Rosemarie Truman, CEO and founder of CAI, as the report was released.
The report aims to provide clarity into the global innovation landscape, identifying how businesses, government bodies and academic institutions can capitalise more efficiently on existing maverick strategies and thus innovate more effectively.
By assessing key metrics including patent effectiveness, patent efficiency and patent grants per capita, the report compares innovation across different countries. According to the report, US innovation is slowing compared to other countries.
“While the west has - to a significant extent - pioneered technological breakthroughs in the past,” wrote Ray Chohan, SVP, Corporate Strategy at PatSnap, in the release following the report, “it is being held back by legacy processes and technology when it comes to innovation and turning it into economic gain. Much of the growth and efficiency we’re seeing in R&D in APAC is being supported by companies leveraging new technologies and processes with the aim of streamlining their R&D investment.”
Having already lost poll position in global patenting metrics, the US is set to lose leadership positions for all other key performance indicators by 2029, according to the report.
This latest find bucks a global trend within R&D funding, which has steadily increased for its third consecutive year to $2.19trn, while the US continues to dominate as the single biggest investor of R&D, a position it has held for 50 years.
But over the past 30 years, the returns on R&D investment have decreased by 65% despite an increase of 250% in scientists and researchers employed in R&D; the overall productivity of research, dubbed research quotients is thus in decline, according to Washington University’s business professor, Anne Marie Knott, who contributed to the report.
This correlates with the findings from the Innovation Arms Race 2018 report, which, at a glance:
Patent effectiveness declining in the West: The US, EU and UK have negative or near zero growth rate in producing quality patents for the last 20 years. From 2005-2015, the top five countries in the growth of high quality patents are China, Singapore, Brazil, Israel and India.
Patent efficiency needs to improve: Patent efficiency is the ability to convert one dollar in R&D spend to a granted patent. The report found that it costs much more for the US and UK than China, South Korea and Russia to produce a high-quality patent that gets granted; both the US and UK produce approximately 600 patents per US $1 billion of research expenditure.
Switzerland and South Korea hold the top spots for patenting efficiency as of 2015 with 1977 and 1562 patents per US $1 billion respectively. China and Singapore have the greatest improvement in efficiency with a 10% and 18% CAGR, respectively.
Research expenditure provides little ROI in the West: While the US spends twice as much as each of the UK and EU in research expenditure relative to GDP, R&D spend is not driving GDP growth in the US. In other words, one additional dollar of R&D spend in the US does not drive a corresponding growth in GDP.
Asia is dominating innovation metrics and will continue to dominate: East Asian countries are out-performing the US, EU and UK in growth of R&D spend and patent grants. China’s increase in R&D spend could see it surpass the US in GDP by 2025.
China and South Korea are consistently in the lead regarding a number of performance metrics and are poised to remain as such. India, Israel and Singapore are expected to see the highest growth in patents granted through 2035.
“It is critical to maximise the returns on past R&D investment by commercialising innovation sitting on the shelf,” suggests Truman, CEO of CAI, as a productive way forward “the US licenses only 0.3% of federally funded inventions out. If we could get 1% more inventions out a year, the value at stake is $1.5trn to the US economy alone.”
But spending more on R&D in the US, EU and UK is not necessarily a solution to innovation, as competing nations are more productive in converting research expenditure to issued patents.
This is largely down to the fact that the three regions' scientific community are incentivised to patent, meaning that more applications are pushed forward that are not high in quality. Scientists additionally have little reason to commercialise their patents, leaving many patents on the shelf.
This all leads to a waste of R&D resources, something a proposed tech startup initiative to the European Commission seeks to address.
“The EU is being outpaced by China and the US in levels of investments in the technologies that are set to dominate in the future” reads the report, entitled the Renewed European Agenda for Research and Innovation.
"With growing international competition, Europe needs to act urgently on research and innovation. The proposed €100bn for the next EU research and innovation programme would be a huge boost,” writes Carlos Moedas, Commissioner for Research, Science and Innovation, in the report.
Venture Capitalist, Spiros Margaris was not entirely convinced when he spoke to bobsguide shortly after the release of the proposal.
“The politicians have only just realised what’s happening,” he said. “The gap is actually widening between the EU and US or EU and China. The EU is trying to run for the innovation train that has already left the station.”