There was a time, about a half-century ago, when a majority of the world’s research and development happened within the borders of the United State.
Researchers, inventors, and firms didn’t move much. What was invented in the US had a tendency to remain, at least for a while, as domestic US economic activity. Those times are now behind us.
Bruce R. Guile and Caroline S. Wagner raise this issue in “A New S&T Policy for a New Global Reality” (Issues in Science and Technology, Summer 2021). Their essay is part of the beginning of a promised series of essays on the “The Next 75 Years of Science Policy.” They write:
In the past, countries depended on the low mobility of researchers, inventors, and entrepreneurs to link R&D to innovation and innovation to wealth creation. When researchers were less mobile and less engaged in close collaboration with peers in other nations, new knowledge tended to be retained by institutions and the countries that housed them. From a national perspective, this arrangement had the benefit of aligning intellectual property ownership, early applications, and company growth with the location of the R&D activity. …
At the same time that global collaboration has become ubiquitous, the rest of the world has begun doing more research. During the 1960s, US public and private R&D investment accounted for almost 70% of the global total. Today, even though US spending has increased, US R&D is less than 30% of the world’s total. Twenty nations now match or exceed US R&D intensity, with public and private R&D spending in these countries near or in excess of 2% of gross domestic product per year. In absolute dollars, China spends approximately the same amount on R&D as the United States. Furthermore, according to figures from the Organisation for Economic Co-operation and Development, China has nearly 2 million full-time equivalent researchers now, compared with the United States’ 1.5 million.
The common pattern is now that research and development happens in many places around the world, often coordinated by large companies, but also by the movement of academic and corporate researchers between places and organizations.
Simultaneously, US multinational corporations have established global networks of research laboratories, research university relationships, and talent recruitment efforts that partially decouple them from the science and engineering enterprise in the United States. Virtually every technologically advanced manufactured good is created by a production process (supply chain) that crosses national borders several if not dozens of times and draws on innovations from many countries.
Being first with new scientific knowledge or having a pioneering innovative company based in the United States does not guarantee success in domestic industry. Nor does it guarantee that the nation will capture substantial economic value from the new knowledge. In a globalized knowledge network, knowledge spreads so quickly and widely that being in “first place” is a notional distinction at best. New scientific and engineering knowledge and innovation cross US borders in both directions—as part of commercial exchanges and collaborations—every day. Economic value cannot be captured by erecting barriers to the flow of knowledge or trade as the United States needs new knowledge and innovation from outside its borders as much as it needs robust US-based scientific and engineering capability.
Thus, the US economy is confronted with two realities. One is that a rising standard of living in the future, which in turn would make it so much easier to address our ongoing economic and social problems than the alternative of not having a rising standard of living, depends on the increases in productivity that grow in substantial part from new technology. But the other reality is that relying just on US-created R&D is going to be a poor strategy, because US-created R&D (like all R&D), is flowing much more easily around the world than ever before. What are the implications of this situation?
Guile and Wagner argue that it still very much matters for the US to have cutting-edge domestic R&D capabilities, but in the modern world, this means being an attractive location for researchers from around the world–and adjusting immigration policies accordingly. It also means systematic and expanded ” US government support for tracking and monitoring research activity and output, regardless of where it occurs, and support for dissemination of that information to US-based companies and centers of research.” Finally, it means paying more attention to the ingredients needed for the US economy to capitalize on new R&D, which implies a focus on policies for a workforce with the necessary skills, as well as the design of tax, investment, and trade policies.
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.