Can the U.S. Retain Its Innovation Edge?

The Conference Board today released an important study about the state of innovation in the United States.  This past weekend I read the report, which  Microsoft sponsored.  Somewhat to my surprise, I found itboth disturbing and encouraging.  The report suggests that unless we take new steps, the U.S. could lose its competitive innovation edge.  Yet the report also provides some good suggestions about positive steps we can take to reinforce and enhance our capacity for creative problem-solving.

 

CBMost Americans appreciate the important role innovation has played historically in establishing and reinforcing U.S. competitiveness.  Since the end of World War II, the country’s investments in education and research and development have been powerful engines of innovation and economic growth. 

 

The report raises fundamental concerns about the country’s future innovation capabilities, however.  For example, the percentage of people getting a college education has hit a plateau.  Between 1950 and 1975, the percentage of Americans in their 20s getting a college degree jumped from 10 percent to almost 25 percent.  Since then, the share has not moved above 30 percent. 

During the last half of the 20th century, the U.S. was able to compete quite effectively despite sending less than a third of its next generation through college.  Will this be enough for the first half of the 21st century?  As a country, I don’t think we’re focusing enough on this question. 

For example, it’s clear that the world our young people inherit today is more technologically advanced than when I started college in 1977.  More importantly, competitive strengths are far more evenly distributed around the globe.  These realities suggest we must think anew about the educational opportunities needed for the country to be successful over the next several decades.

The report also highlights the need for greater investment in R&D. In recent years U.S. government funding for R&D has flattened, and in some fields it has declined.  As a country we need to turn this around. 

I found the report to be especially helpful in highlighting issues of quality as well as quantity of innovation.  For example, the Conference Board’s surveys of CEOs bring to the surface an issue that is widely appreciated in business but not necessarily well understood:  The challenge of  getting a strong innovation return on R&D investments.  

For instance, the study does a nice job of explaining the importance of getting organizational alignment around innovation priorities and processes.  At Microsoft, where we’ll spend $9 billion on R&D this year, achieving such alignment is – not surprisingly – a major priority.  Getting the alignment right requires a lot of senior executive time.  The report suggests this issue is important for most innovation-based companies, large and small.  It’s apparent that broader improvements in this area could help accelerate innovation in the economy as a whole.

Similarly, quantity and quality are high priorities in the context of patent laws.   As the report indicates, patents continue to play a critical role in stimulating innovation.  But as many of us in the tech sector have advocated, we need to continue to make improvements in our patent system. 

It’s important to strike the right balance to ensure that patent laws encourage new innovation.  Last month the Senate Judiciary Committee reported out patent reform legislation that advances this goal.  It does this in part by addressing one of the key processes where the rubber meets the road for patents – the respective roles of the judge and jury in assessing damages claims in patent litigation.  It might seem like a dry topic to many, but it’s the type of technology issue that is critical to get right.  As we’ve experienced, when damages assessments go wrong, they can lead to verdicts of hundreds of millions of dollars that the appellate courts then need to reverse.  And that can have an adverse impact on innovation more broadly.

At the moment a lot of public attention rightly is focused on short-term problems and specific industry sectors such as autos and banks.  But we can’t lose sight of longer-term and broader innovation issues. 

In fact, I believe this is the right time to address this issue with a renewed sense of urgency.  As this report illustrates, the topic is multi-faceted, but many of the opportunities are clear.  Some critical new steps are needed in Washington.  Many more will be required across the country in state capitals, schools and universities, and innovation-based companies.

 

About the Author

General Counsel & Executive Vice President, Legal and Corporate Affairs, Microsoft

Brad Smith is Microsoft's General Counsel and Executive Vice President of Legal and Corporate Affairs. He leads the company's Department of Legal and Corporate Affairs (LCA), which has approximately 1,100 employees located in 55 countries. Mr. Smith is responsible for the company's legal work, its intellectual property portfolio and patent licensing business as well as its government affairs and philanthropic work. He also serves as Microsoft's corporate secretary and its chief compliance officer. Mr. Smith currently co-chairs the board of directors of Kids in Need of Defense (KIND) and is the chair-elect of the Leadership Council on Legal Diversity. In Washington state, Mr. Smith has served as chair of the Washington Roundtable, a leading Washington state-based business organization, and he has advanced several statewide education initiatives.