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America’s climate
for innovation

When Forbes magazine crowned Tesla Motors as the world’s most innovative company in 2016 few in the global business community would have raised an eyebrow. After all, Elon Musk’s pioneering American outfit is challenging the automotive industry in two distinct ways – by making sporty cars with powerful electric engines and Autopilot technology. Full automation is inevitable.

More surprising is the fact that the list of the top 10 companies, operating in sectors ranging from life sciences to biotech, includes nine based in the United States. Globalisation may have boosted the drive to innovate around the world, but the American Dream – that unique blend of ambition, inspiration, implementation and reward – is still a hard-nosed reality.

A look at the number of international patent applications filed under the Patent Co-operation Treaty of the World Intellectual Property Organisation (WIPO) highlights the continuing dynamism of US companies. Last year the number of patents hit a record 218,000 and it was US innovators, with 26.3 per cent of the total, that led the way. For the 38th straight year. 

Global competition
The annual Global Innovation Index (GII) – a ranking of more than 100 countries drawn up by WIPO, Cornell University and INSEAD – also gives a fascinating insight into the latest trends in international innovation. This year Switzerland is top followed by Sweden, the UK, US and Finland – typical of the highly-developed economies that have traditionally dominated the index. (As a knowledge-based economy with one of the highest GDPs per capita in the world, Switzerland scores well across various measures such as “institutions” and “human capital” used to create the GII.)

The rapidly-developing countries of Asia, however, are rising fast. China, for example, has recently entered the top 25 – the first time a “middle income” nation has started to compete at this level. The country that gave the world gunpowder, the compass, the waterwheel, paper money, printing and porcelain has finally started the long march back to a position among the world elite.

The incentive to innovate has never been higher. “Investing in innovation is critical to raising long-term economic growth,” says Francis Gurry, WIPO director general. “In this economic climate, uncovering new sources of growth and leveraging the opportunities raised by global innovation are priorities for all stakeholders.”

Freedom of speech and innovation
The US, however, remains well positioned to continue its successful record of invention and innovation. From its diverse population and tradition of free speech to federal investment and the high level of academic and commercial co-operation, many factors combine to ensure the environment is a supportive one for entrepreneurs intent on developing the next breakthrough product or service.

“An environment that supports the expression of multiple perspectives stimulates innovation,” says Soumitra Dutta, co-author of the GII report and dean of the Samuel Curtis Johnson Graduate School of Management at Cornell University. “Greater competition also pushes firms to be creative, invest more in R&D and become more innovative.”

In addition, the US education system and private sector have a symbiotic relationship, with universities, according to Dutta, forming the core of local innovation ecosystems in many parts of the US, including Silicon Valley, Southern California, New York, Minnesota and North Carolina. 

“Universities serve as magnets attracting global talent – both students and professors,” Dutta explains. “Then talented graduates seek employment in local firms and start-ups. And the commercial sector in turn feeds universities with practical problems which increases the real-world relevance of university research.”

US universities have also earned reputations for excellence that ensure they can compete internationally for talent. “The quality of universities is critical as global talent is very mobile and the best professors and students naturally gravitate to the best concentrations of peers,” Dutta adds. “The best talent combined with an active engagement with the private sector provides strong foundations for creating an effective innovation ecosystem.”

Government backing
The naturally innovative private sector is also backed by government money – President Barack Obama called for a 6 per cent rise in the 2016 federal R&D budget to $146bn –and part of the government’s procurement budget supports innovative start-ups and small firms. There is also a willingness to make regulatory change to enable innovation. 

“Breakthrough developments in sensing, computing and data science have brought vehicle-to-vehicle communication and cutting-edge, autonomous technology safety features into commercial deployment, while vehicles approaching full autonomy – self-driving cars – are already being tested on public roads,” explains a White House spokesman.

Those self-driving cars criss-crossing towns and cruising on highways include the Tesla, Google Car and a much-rumoured Apple iCar, each one a product of American ingenuity and ambition. With tech giants and automotive makers combining with universities in Silicon Valley and beyond to push the boundaries of their industries, each one is also a model of how American business is designed to innovate. 

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