U.S. Ranks 8th In Global Innovation

WASHINGTON -- In the largest and most comprehensive global index of its kind, the United States ranked eighth in innovation leadership among 110 countries, according to a new report produced jointly by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI), the NAM’s nonpartisan research affiliate.

Singapore topped the list, followed by South Korea and Switzerland. The United States ranked second among large countries (as measured by GDP), behind South Korea.

Unlike other indices, the BCG/NAM/MI International Innovation Index is part of a broad research study that looked at both the business outcomes of innovation and government’s ability to encourage and support innovation through public policy.

The study comprised a survey of more than 1,000 senior executives from NAM member companies across all industries; in-depth interviews with 30 of the executives; and a comparison of the “innovation friendliness” of 110 countries and all 50 U.S. states. The findings are published in a new report titled The Innovation Imperative in Manufacturing: How the United States Can Restore Its Edge.

The report discusses not only country performance but also what companies are doing and should be doing to spur innovation. It looks at a host of new policy indicators for innovation, including tax incentives and policies for immigration, education and intellectual property.

“America needs a bold innovation strategy,” said NAM President and Chief Executive Officer John Engler. “U.S. manufacturing innovation leadership is at risk. We’ve fallen behind countries in East Asia and Europe. America can not afford to lose its manufacturing innovation edge and the wealth and jobs that it generates throughout our economy. Government can help move America up the innovation index by enacting more competitive tax, trade and workforce policies that enable U.S. manufacturers to innovate and succeed globally. The report also shows the United States needs more competitive immigration and infrastructure policies to help drive innovation,” he said.

“In today’s global economy, innovation is critical,” said co-author James P. Andrew, a BCG senior partner and global leader of the firm’s innovation activities. “The emergence of challengers from rapidly developing economies such as India and China has transformed the playing field. With high-quality, inexpensive products flooding the market from every corner of the globe, competing on cost alone is a losing battle for most U.S.-based manufacturers,” Andrew said.

“A skilled, educated workforce is the most critical element of innovation success -- and the hardest asset to acquire,” added co-author Emily Stover DeRocco, president of The Manufacturing Institute. “The study shows that in companies and countries alike, a high number of researchers and advanced degrees -- particularly in science and engineering -- are the greatest predictor of success. Innovation requires capable and skilled people at every level -- from the factory floor to the top floor.”

Six states scored above average in both their innovation policy environment and performance: California, Connecticut, Delaware, Massachusetts, New York and Washington. Overall, however, the study found the states are quite similar with respect to innovation. The key reasons are that federal policy is the same across all states, and the United States has an “American culture” that affects the overall business climate, overriding the wide variety of geographies, industries and demographics.

To rank the countries and states, the study measured both innovation inputs and outputs. Innovation inputs included government and fiscal policy, education policy and the innovation environment. Outputs included patents, technology transfer, and other R&D results; business performance, such as labor productivity and total shareholder returns; and the impact of innovation on business migration and economic growth.

The report names four critical factors that lead to innovation success -- idea generation, structured processes, leadership, and skilled workers -- and stresses that government must support these efforts through effective policies. The report also suggests six concrete actions that states and countries can take to help drive forward innovation in manufacturing:
• Strengthen the workforce
• Maintain a strong manufacturing base
• Lead by example
• Make innovation easier
• Improve the payback
• Be consistent with policies.

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Executive Pay and Corporate Greed Contribute to US Failure to Innovate 3/9/2009 4:33:00 PM Wall Street, Banks, and Corporate Executives can only look to themselves for this failure to sustain innovation. Corporate pay practices have failed to return wealth to shareholders and employees, and now NAM states they want the government (i.e. taxpayers) to step in and fill the void? Ok, change the tax code. But when will the executive pay return from its lofty heights of 39x the average employee wage in the Fortune 500 Corporations? The bleeding stops when corporate Boards stop giving hundreds of millions to CEO's who leave failed companies (Home Depot is an awesome example). The failure to reward employees leads to a complacent workforce, not an innovative workforce. When Executives return the wealth, perhaps employees will listen. It will take decades to regain the employees trust. For now, it is shattered across all generations. Global white collar theft is being measured in failure to innovate.... perhaps Executives can Lead by Example and reduce total compensation package (wage, bonuses, stock options) to less than 10x the average employee wage. I doubt they would be willing to that.
Fallen Behind??? 3/9/2009 4:45:00 PM We haven't fallen behind. We have exported the tech jobs and along with them the technologies they entail. Thus we are giving away our innovations to the Korea's, China's and India's of the world for FREE! Is it any surprise we are 10th and losing ground by the day? This doesn't even take into account the technologies that are stolen from us on a daily basis by our "friends". Then we wonder.....Gosh.....how did that happen?
how much does a trip to the restroom cost the shareholders? 3/9/2009 4:53:00 PM the problem is not just innovation in products, but also innovative (+effective) practices. As in many older companies, the CEO salary and any other compensation SHOULD NOT be more than 5-10X the lowest paid preofessional. I recall some years ago colleagues timing the CEOs trips to the restroom and saying that s*** cost the company x thousands of $.
Innovation!??!! 3/9/2009 4:54:00 PM As I brace for the second round of layoffs and involuntary severance, why don't you ask me and my fellow co-workers, automotive suppliers, to innovate? I know what....innovate THIS!
Look at Ex pay comment at the bottom 3/9/2009 4:59:00 PM Interestingly enough...this is what my rant was about (at least some of it!)
Innovation 3/9/2009 5:57:00 PM The government has been spurning innovation for years with impossible patent laws. There are impossible tax laws to complicate matters. The innovator attempting to form a business is horribly abused by the sources of capitol. And now, we have a President who believes in taking from the productive and supporting the unproductive. We will soon be a third world country....
GOV'T 3/9/2009 7:05:00 PM Too MANY REGULATIONS, LAWSUITS, TAXES and GOV'T CORRUPTION,ILLEGALS, now were headed for MARXISM.
what did you expect? 3/9/2009 8:58:00 PM Clinton fast tracked NAFTA and Favorite Nation Trading Status. He signaled to US industry offshoring jobs was the way to go. Go they did. US industries left the US in droves. GM and Delphi are the biggest employers in Mexico and India. Delphi has 80 plants employing 100,000 in Mexico. They have an Engineering center in Juarez that is sucking ALL of North America's engineering jobs to Mexican Tech center, 7,000 engineering jobs. China will be the other "global tech center" GM, the foreign car company with the American name, is moving their engineering to India and China. Delphi is in bankruptcy, but ONLY Delphi U.S. operations. Isn't that special? Now GM is threatening to go bankrupt. Tough! Get your bailout from China and India and Mexico. That's where you put your money. The US gov't and greedy CEO's gave away the industrial base and the of course the engineering/inovation jobs followed, but not the Exec jobs. The brightest used to come here from around the world to work for GM, Ford, Chrysler, IBM, Kodak, Zerox, Westinghouse, GE, Bethlehem Steel, etc. Those jobs have been given away. The WTO has ruled against the Chinese for patent infringement and pirating industry secrets with no power to actually do anything about it. For pete's sake what do you think a Chery is? As long as our gov't gives a "wink and a nod" (or nob) to industry, the US will continue the race to the bottom at record pace loosing the race for innovations that lead to prosparitty and world stability.
Yes! Innovation 3/10/2009 7:59:00 AM If the automotive industry had invested in real innovation instead of a wait and see what the other guy does mentality, then you probably wouldn't be looking at a second round of layoffs right now. The US auto industry is a prime example of the decline in American innovation and the spread of complacency. Can't blame job exporting on this one.
Short-term innovation 3/10/2009 12:03:00 PM The problem with innovation is it usually take a while to go from the mind to the shelf. Most American companies these days are only interested in innovations if they can be on the shelf in one or two quarters. That way, they can show the shareholders how much profit they made. In order for innovations to work in the U.S. again, companies must realize that they must plan for the long term (3-5 years minimum). Until that happens, other countries will continue to pull ahead of us.

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