INSIGHT: US facing an ‘innovation crisis’ as China advances

23 December 2010 14:22  [Source: ICIS news]

US is facing a crisis in R&D and innovationBy Joe Kamalick

WASHINGTON (ICIS)--US spending on research and development (R&D) will see only modest growth in 2011, and the nation faces an “innovation crisis” as China surges ahead with science and technology education, a leading R&D institute said this week.

In its annual global R&D funding forecast, Battelle Memorial Institute (BMI) said that worldwide spending on research and development was beginning to recover from recession, although the availability of private sector and government money for research will vary across the globe.

“Reflecting recent trends, prospects for R&D funding vary by region, with the US expecting R&D growth to track GDP growth, Europe contemplating fiscal austerity that may restrict investment for several years, and most Asian countries maintaining strong financial commitments to R&D,” Battelle said.

Total global spending on R&D is anticipated to increase 3.6% in 2011 from 2010 to almost $1,200bn (€912bn), according to a study that Battelle conducted in cooperation with R&D Magazine.

“With Asia’s stake continuing to increase, the geographic distribution of this investment will continue a shift begun more than five years ago,” Battelle said, referring to the shift of R&D resources to Asia.

However, the US still dominates absolute spending at a level well above its share of global GDP, the report said.

But while the US still spends more on R&D than any other nation, China continues to move up fast, and in 2011 it is expected to surpass Japan to take the second-place spot behind the US in total dollar spending on R&D, the study said.

US public and private sector funding for research and development totalled $395.8bn in 2010 and is forecast to increase by 2.7% next year to $405.3bn.

Next year, China is expected to spend $153.7bn on R&D, well behind the US total but for the first time pulling ahead of Japan, where research and development funding was forecast at $144.1bn for the new year.

While the US and Asia continue to make strong investments in R&D, Battelle cautioned that EU research and innovation faces critical fiscal challenges.

“Among the global research communities, the state of R&D in the EU is the most concerning,” the report noted. “Challenged by weak economies in Greece, Spain and Ireland, Europe is struggling to recover from the recession and to cut deficits, which in turn affects government support of R&D.”

Lower R&D spending by governments and the private sector pose significant long-term concerns, Battelle said.

“The scale and significance of research and development in Asia continues to grow, with implications for the rest of the world,” the report says.  “Experienced researchers are becoming harder to find in the US and Europe, as Asian emigrant scientists return to attractive opportunities at home.”

At the same time, said Battelle, industrial, academic and even western government R&D organisations are increasingly establishing and supporting substantial R&D facilities throughout Asia to take advantage of lower costs and larger pools of skilled scientists and engineers.

“Most US and European Fortune 1000 companies already have multiple R&D centres and manufacturing sites throughout Asia, and they direct increasing shares of R&D budgets accordingly,” Battelle said.

Battelle president and chief executive Jeffrey Wadsworth warned that trends in Asian - and especially China’s - R&D spending and education funding for the sciences could further close the distance between China and the US as the leading R&D nation.

“Now second only to the US in R&D funding, China is realising the benefits of an unprecedented investment in education,” Wadsworth said.  “As a result, highly skilled workers will substantially boost China’s annual GDP growth rate for a generation, to a level of more than $120,000bn by 2040.”

Wadsworth said that the US needs a positive and sustainable change in so-called STEM education funding for scientific, technology, engineering and mathematics disciplines.

China’s investment in these areas is yielding great results, and the rest of the world would be wise to follow a similar course,” Wadsworth said.

“Underinvestment in STEM education, when coupled with a huge number of retiring ‘Baby Boomer’ scientists and engineers, is creating a national ‘innovation crisis’ for the US and other nations in the years to come,” he added.

The Battelle study concludes that “These factors could make it more difficult for the US to maintain its historic lead in the development and economic leverage of innovation, even as it invests as much on R&D as its next four global competitors combined”.

Battelle is the world’s largest independent R&D organisation.  It manages seven national laboratories for the US Department of Energy and the Department of Homeland Security.

($1 = €0.76)

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By: Joe Kamalick
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