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FYI Number 11: January 24, 2007

”Competitiveness Index: Where America Stands”

The Council on Competitiveness has released a report, "Competitiveness Index: Where America Stands" reviewing the primary factors driving America's economic success during the last two decades, and which looks ahead to the nation's competitiveness prospects in the next twenty years. "The context for U.S. competitiveness has changed dramatically over the past two decades," the report states, providing both opportunities and risk for the United States in the future.

The Council, now twenty years old, focuses its attention on technological innovation, workforce development, and the comparison of the U. S. economy to that of other nations. Members include corporate chief executives, university presidents, and labor leaders. The Council is affiliated with nonprofit research organizations, professional societies and trade associations.

A significant portion of the 108-page report is devoted to a series of one-page exhibits that highlight U.S. dominance in many drivers of the American economy, but which also identify areas of concern. Of particular note is a section entitled "Foundations of U.S. Competitiveness and Sources of Future Prosperity." Illustrative of the report's findings in this section are the following:

"U.S. Share of Global Output Has Fallen Across a Range of Science and Technology Metrics"
The U.S. leads in the 2002-2003 shares of global output in domestic R&D investment, new U.S. patents, scientific publications, scientific researchers, bachelor's degrees in sciences and engineering, and new doctorates in science and engineering. But each of these shares has declined, in some cases quite dramatically, when compared to the mid-1980 figures.

"U.S. R&D Investment Remains the World's Largest, but Others are Increasing Their Investment Faster"
The report found that total U.S. industrial and government R&D spending of $286.4 billion was the highest of all nations. Other nations had a higher percentage growth rate in their R&D investment. China increased its R&D investment at an annualized rate of 19.3% in the last decade.

"U.S. Companies Perform Most Overseas R&D in Developed Countries, but Are Increasingly Turning to Emerging Economies"
The report explains: "Brazil, China, Hong Kong, India, Korea, Malaysia and Singapore accounted for a combined share of 2 percent in 1990, rising to 9.7 percent by 2003" of all foreign R&D spending by U.S. foreign affiliates.

"Global Corporations Rank China as the Most Attractive Location for New R&D Facilities"
The report states: "Most R&D abroad is either production-supportive or for the adaptation of products and services to local markets . . . . The challenge for developed economies such as the United States is that R&D may follow production overseas, and then the benefits from R&D (in terms of spillovers and spin offs) may accrue to those economies rather than the U.S. economy, as happened with Japan in the 1980s."

"American Firms Dominate the List of the World's Most Innovative Companies."
Sixteen of the top 25 companies are American companies.

"Federally Funded Basic Research Has Been a Major Driver of Innovation"
The report concludes "U.S.-government-funded basic research . . . has had a critical impact on innovation." The Internet, laser, Google, and MP3 players are examples.

"U.S. Universities Dominate World Rankings Based on Research Performance"
The report notes: "Seventeen of the top 20 are U.S. institutions."

"The United States Has More Scientific Researchers Than Any Other Country"
While the U.S. now leads with 1.3 million researchers, the European Union could produce twice as many S&E doctorates as the U.S. by 2010. China could produce more doctorates than the U.S. by 2010.

"The United States Has More Engineers Ready to Work for Multinational Enterprises"

Fewer engineers from emerging markets are ready to work because of language, mobility, educational quality, and cultural issues.

"Domestic R&D Investments by Multinationals [is] Rising as Fast as Foreign R&D Investment"
The report explains: "Corporate R&D remains the least internationalized activity of multinationals . . . . Research intensive activities often represent the core value generators of a firm, and companies are reluctant to move them far afield . . . ."

"Most of the Growth in U.S. R&D Investment Has Come from Corporate New Product Development"
The report explains that corporate R&D investment in basic research declined or remained constant as a percentage of GDP, shifting to an emphasis on development.

“Within the Federal Budget for Basic and Applied Research, Life Sciences Dominate”
The report states, “Nearly all the recent increases are in the life sciences.” The compound annual growth rate for life sciences is 5.9% in the period 1986 to 2005, while that of the physical sciences is 0.6%.

“American Citizens Make Up a Declining Share of Science and Engineering Students”
Foreign students account for most of the growth in Ph.D.s in science and engineering.

“In General, U.S. Students Perform Poorly by International Standards.”
The report states: “The United States Invests Significantly More in Education, Yet Test Scores are Low Compared to Other Nations.”

“Intellectual Property - the Foundation of Innovation - Is at Risk”
The report explains, “American Businesses Lose Billions of Dollars Annually Due to Intellectual Property Violations.”

This report can be obtained at the Council on Competitiveness web site at:
http://www.compete.org/

Richard M. Jones
Media and Government Relations Division
American Institute of Physics
fyi@aip.org
301-209-3095

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