Leadership in innovation is one of the most important factors for the economic and geopolitical future of the United States. Innovation makes the country more productive, dynamic and competitive. It is the process of taking an idea, a concept or knowledge and transforming it into something that creates new value. Through innovation, the United States can achieve sustainable, long-term economic growth that increases prosperity and leads to a healthier, safer and higher standard of living for all Americans — it is the path to the modern American Dream.

During the Cold War, the United States had a national strategy for innovation — one that put a man on the moon, created the internet and the modern computing industry, and established the United States as the global leader in the development of cutting-edge technologies for several decades. Today, the country is still riding the wave created by that strategy, but government commitment to innovation has waned.

While America remains the global leader in innovation, there are legitimate concerns that it is losing ground. The foundation upon which U.S. leadership in innovation was built is being eroded by the rise of protectionism, significant interventions by foreign governments and state-owned enterprises, and persistent regulatory barriers. Outdated regulations and underinvestment in science, technology, and math (STEM) education and infrastructure undermine U.S. leadership. The United States is at risk of losing its edge as the governments of other countries pour massive resources into research and development (R&D), advanced infrastructure, education, and acquiring market access for their industries. 

U.S. government focus on innovation is lagging.

The U.S. government has grown complacent — resting on legacy achievements while underinvesting in the drivers and enablers needed to build on these achievements in the future. Tight budgets, policy challenges and competing priorities have caused political leaders to avoid or postpone critical investments in human capital and R&D.

  • At just under 0.7 percent of gross domestic product (GDP), U.S. federal spending on R&D is at its lowest level in nearly 20 years.
  • U.S. public-sector investment in workforce training is only 0.03 percent of GDP, far behind its peers in the Organisation for Economic Co-operation and Development (OECD).
  • High-skill occupations in the United States have 25 percent more job openings than available workers. For middle-skill occupations, the gap between labor supply and demand shrinks to 13 percent, while low-skill occupations actually face a labor oversupply.

Other countries are gaining ground.

Other countries are challenging U.S. leadership in innovation on multiple fronts. There is now a fierce global competition to attract capital and talent, bolster connectivity, set standards and global best practices, and establish dominance in strategic technologies. 

  • More than one-half of all patents filed in the United States Patent and Trademark Office originate from outside of the United States.
  • According to the Global Competitiveness Index, China is now ranked first in the world in terms of supply and quality of knowledge workers.
  • U.S. spending on development research in 2003 was four times higher than Chinese spending. By 2013, spending was roughly even.
  • The United States ranks 12th in the OECD for average internet speed and 28th for internet use as a percentage of total population.

The pace of technological change is accelerating.

The United States cannot remain a global leader in innovation unless its policy and regulatory infrastructure is adaptive and open and provides the right balance of incentives, support and protections for private-sector innovation. Although core U.S. institutions remain strong, many enabling conditions — regulations, standards and policies — have not kept pace with the accelerating rate of technological change or with the rate at which businesses must adapt and react to compete in the new economy.

Innovation can have disruptive social and economic effects.

The process and outcomes of innovation can have potentially disruptive and destabilizing effects on society and the economy. If not actively managed, these effects can undermine social support for and the political commitment to innovation. Unfortunately, certain regions of the country and sectors of the economy are experiencing more of the costs of innovation transition and fewer of its benefits than others. For instance:

Under all these circumstances, America needs, more than ever, a national innovation agenda to ensure that the country remains the global leader in innovation across all industry sectors for generations to come. Government and the business community must work together to build a modern and high-skilled workforce, increase support for foundational R&D, modernize regulations for emerging technologies, position America to compete and thrive globally in the innovation race, and pursue innovation inclusively.

For these reasons, business leaders are stepping up to create a cross-cutting innovation policy agenda — to make sure that the United States remains the global leader in innovation across all sectors of the economy and for generations to come. 

[i] BEA, GDP-by-Industry, Value Added; BLS, Series CES3000000001

Principles for American Innovation

This policy agenda seeks to ensure that the United States is the global leader for innovation across all sectors of the economy, creating high-quality jobs for generations into the future.

Policymakers must focus on strengthening all components of the national innovation system, including people, institutions, rules and technology. America’s approach to protecting its leadership in innovation should be guided by the following five principles:

1.     Invest in People.

America needs to build a diverse, modern and world-class workforce for innovation across all sectors of the economy. The country should have the best education system and the most skilled workforce globally. Over the next decade, the United States needs to significantly reduce the shortage of highly skilled workers. The United States should have an education system that fully unlocks the potential of its human capital and boosts its rank in science and math education to the elite, top-ten level.

2.     Make strategic, long-term investments in science and technology.

America needs to strengthen foundational research, make strategic investments in science and technology, and deploy digital infrastructure to sustain dominance in underlying technology such as artificial intelligence, quantum computing, advanced robotics, aerospace and advanced medicine.

The ripple effects of strategic, long-term investment in science and technology are pervasive. The country needs a national innovation strategy to pursue ambitious, exploratory and ground-breaking projects to solve the toughest challenges in fields as varied as health, energy, transportation, education and national security. 

3.     Remove roadblocks to innovation.

The United States is the top global destination for developing and bringing to market innovative technologies and processes because of its market-based economy and culture of entrepreneurship and risk-taking. Unfortunately, outdated regulation threatens U.S. competitiveness. Regulation must be agile and light-touch as well as clear, precise and enforceable to accommodate a rapidly changing technology landscape. At the same time, regulation must be predictable to avoid creating uncertainty and undermining the investment environment. 

The United States needs to create a regulatory environment that enables and supports innovation. The United States should consistently attain a top ranking for its regulatory transparency and flexibility, preserving its status as the top global destination for innovation.

4.     Position America to compete and thrive worldwide.

The country that wins the innovation race wins the future. Other countries are challenging U.S. leadership in innovation in the competition to secure capital and talent, bring new products and services to market, set technology standards, and dominate strategic technologies. The country must understand the scope of their efforts and respond to their actions while promoting market access for U.S. innovations as well as rules to protect those innovations and investments.

5.     Pursue inclusive innovation.

America cannot continue to be a country where a few groups prosper while many others experience economic uncertainty. Innovation activity in the United States needs to be pursued inclusively and its benefits shared broadly across diverse groups and communities throughout society. Innovation needs to provide access to quality goods and services for all socioeconomic and demographic groups.

The following pages outline the Business Roundtable perspective on what must be done to ensure that the United States remains the global leader for innovation for generations to come. The recommendations are organized into the five policy areas presented above with specific policy recommendations for a national innovation policy agenda.