Innovation Nation: How America Is Losing
Its Innovation Edge, Why It Matters,
and What We Can Do to Get It Back
By John Kao; Free Press; 306pp; $26
The Good An insightful, and scary, account of the innovation challenges faced by the U.S.
The Bad A key issue gets little space: the role of global corporations in innovation's changing geography.
The Bottom Line A very useful book that punctures America's complacency about innovation.
In a Sept. 7 speech before a World Economic Forum meeting, Chinese Premier Wen Jiabao announced his country was "pursuing an innovation-based model of development." Why should America care if China puts innovation at the center of its next five-year plan? In fact, why worry about Brazil, Britain, Canada, Denmark, India, Israel, Korea, or other countries whose government policies push innovation? After all, Google (GOOG ), Facebook, the iPod (AAPL ), and the Boeing (BA ) 787 Dreamliner all have "Made in America" stamped on them. Right? And we have Silicon Valley. They don't.
Well, actually they do. In fact, as John Kao, an innovation consultant, points out in his new book, Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back, all the key advantages once enjoyed by the U.S. are going, going, nearly gone. In a scary, insightful, and ultimately very useful book—written to inform the 2008 Presidential primary agenda—Kao punctures America's smug self-congratulation.
His strongest point is that the geography of innovation is changing. For much of the 20th century, the locus of leading-edge thinking was the U.S. and Western Europe. The rise of Asia is evening that out, redistributing the fruits of innovation: wealth and power. How did things switch so swiftly? Here are Kao's bullet points:
— Talent is now everywhere. The return to greatness of Asia's older universities and the building of new educational institutions mean that brainpower is more evenly distributed. In addition, a giant reverse diaspora is under way as tens of thousands of Chinese and Indian scientists and engineers, many of them tops in their fields, leave the U.S. to return to their homelands to teach and work.
— Capital is now everywhere. Venture capital pools are operating all over Asia and Europe, speeding the generation of new startups. European and American VC firms have offices in most major cities in Asia and Eastern Europe. Initial public offerings have totaled $40 billion in China so far in 2007.
— Silicon Valley is now everywhere. The social and economic ecosystem that has been so productive in Northern California is being reproduced all over the world. Bangalore in India, Biopolis in Singapore (for life sciences), and the Otaniemi tech cluster in Finland have found the magic once mainly centered in U.S. innovation hubs.
— Military spending is now everywhere. The high tech spin-off benefits that once accrued mostly to the U.S. are being spread around. A 2006 Defense Dept. survey of 42 leading-edge technologies for future weapons found that 20 came from outside the U.S.
Kao devotes little space to an important issue: the role of global corporations in innovation's changing geography. Such companies, he suggests, "operate with increasing independence from their country of origin.... They are shipping manufacturing, design and especially R&D abroad at a ferocious pace." So fast is this happening, says Kao in his book, that Craig Barrett, chairman of Intel (INTC ), told him his company might not even qualify as American anymore.
No doubt global corporations are benefiting from this global shift. Just as the fall of communism led to a wider pool of labor and capital, so too will the global spread of innovation create a wider pool of talent for companies.
But are Americans gaining as much from all this? Perhaps not. In the past, economic benefits have gone mostly to the first mover—the innovator, entrepreneur, or creator.
So how should America respond? Kao notes that the U.S. already spends more per public-school student than any other major country. He wants new ways to teach, such as integrating game culture with curriculum development.
His centerpiece idea is to spend $20 billion to create 20 innovation hubs around the country. The model would be San Diego, which transformed itself from a Navy town into a life-sciences and biotech center in 15 years. Imagine hubs revolving around clean energy (Detroit, say), digital media (New York), health care (Nashville), or education (San Francisco). It's not your typical giant government program but a local, pragmatic approach.
Finally, as part of what Kao calls a national innovation agenda, he suggests the White House create a Cabinet-level adviser, along the lines of the National Economic and National Security Advisers. The right person could perform an enormous service by focusing America's attention on honing innovation.
By Bruce Nussbaum