The Innovation System of the United States

Milthon Lujan Monja

Updated on:

Photo of  Drew Graham on Unsplash
Photo of  Drew Graham on Unsplash

The United States is among the leading countries in the world when it comes to innovations. However, what are the strengths of the United States’ Innovation System?

Many countries seek the answer to this question to promote their national innovation systems, which help in the creation of businesses and national economic development.

Today, we summarize the research conducted by Robert D. Atkinson (2020) on the national innovation system in the United States. It is a country that leads in innovation but paradoxically lacks explicit innovation policies. You can find the link to the original publication at the end of this article.

In his article titled “Understanding the U.S. National Innovation System, 2020,” Atkinson describes the historical evolution of the national innovation system in the United States, how it is organized, and the challenges it faces. It provides a valuable insight into a system of innovation admired by many.

According to Atkinson, an innovation system encompasses more than just the elements directly related to promoting science and technology. It also includes economic, political, and social institutions.

Triangle of Success in the Innovation System

One way to conceptually organize all the factors that determine innovation in a nation is to think of a triangle of success in innovation, as highlighted by Atkinson. It includes the following:

Factors of the business environment

  • High-quality executive management skills
  • Strong adoption of information and communication technologies (ICT)
  • High levels of entrepreneurship
  • Robust capital markets and a conducive flow of capital for innovative and productive investments

The business environment consists of three general factors: market and company structure and behavior, the system of business financing, and related social and cultural factors that affect business operations.

Trade, rate, and regulation environment

  • A competitive and open trade regime that involves serious efforts by the government to protect local businesses against foreign mercantilist practices
  • Support for competitive markets
  • Processes that make it easy to launch new businesses and introduce innovations to the market
  • A robust patent system and protection of intellectual property (IP)
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Government policy plays a powerful enabling (or hindering) role, particularly through broad areas of trade, fiscal, and regulatory policies that shape the innovation environment.

Innovation policy environment

  • Generous support for public investments in innovation infrastructure (including science, technology, and technology transfer systems)
  • Financing for sectoral research partnerships among universities, governments, and industries
  • Corporate tax code changes to stimulate innovation and investment in ICT, including R&D incentives and incentives for capital and software equipment, among others
  • Innovation policy refers to policies specifically designed to stimulate technological innovation, as opposed to other policies that shape the overall innovation environment.

In summary, an innovation system is built on a competitive business environment, a strengthened market, and innovation policies.

Knowledge Flow Systems

Innovation Clusters

Regional planners have long understood the concept of innovation clusters. However, it was Michael Porter who popularized the notion of clusters in the 1990s.

The emergence of high-profile clusters such as Silicon Valley and North Carolina’s Research Triangle Park (RTP) lent credibility to the idea that innovation clusters can drive innovation and growth.

Atkinson highlights that federal government funding has played a key role in the development of some U.S. innovation clusters. However, explicit cluster innovation policies have mostly been the purview of states and sub-state regions.

Industrial Collaboration Systems (with Academia and Research Institutes)

The United States has a highly developed and successful system of collaboration between research institutes and industry. Universities like MIT, Cal Tech, and Stanford serve as models for the rest of the world.

“There is no single reason for the success of the U.S. collaboration between academia and industry; instead, several factors influence it,” notes Atkinson.

One factor is culture. A long tradition of pragmatism has dominated in U.S. universities, leading them to view collaboration with industry not as something that taints the purity of basic research, but rather as something useful that can advance knowledge.

The U.S. system has created a more competitive environment where universities innovate and compete to work with industry. Additionally, U.S. universities are much less hierarchical than universities in other nations.

Finally, in many states, state and local governments encourage and support public universities in their efforts to work with industry.

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Technology Import and Export

Partly because the U.S. economy is so large and generally at the forefront of technological development, there have been few explicit policies aimed at importing technology.

The general policy approach has been to welcome foreign direct investment due to the technology transfer it brings.

Regarding technology export, there are few restrictions on exporting U.S. commercial technologies to other nations unless these technologies have potential benefits for current or potential military adversaries.

Technology Diffusion and Adoption

In the U.S., several policies and programs are related to technology diffusion and adoption. For example, for over a century, the U.S. Department of Agriculture has supported a system to help farmers and ranchers adopt the best production technologies.

Human Capital System

K-12 Education/Training

The U.S. K-12 education system operates at the state and local level, with thousands of local school districts. Unlike many countries, the U.S. has not established federal control over the K-12 system.

A characteristic of the K-12 system is the greater diversity of school types. Since the 1980s, the growth of charter schools (publicly funded but privately operated) has been significant, and many of these schools have unique pedagogical approaches.

Higher Education

The U.S. higher education system is diverse and distributed. States administer public universities and colleges, while private universities are funded through tuition fees and donations.

“Due to COVID and the increase in online learning, the U.S. system may move more towards massive open online courses (MOOCs) with a significant increase in higher education productivity as more students take more classes online,” Atkinson points out.

He highlights the growing participation of foreign students in master’s and doctoral programs in science, technology, engineering, and mathematics (STEM) fields at U.S. universities, reflecting the world-class quality of these institutions.

Skills/Technical Training

In the U.S., skills/technical training is largely considered the responsibility of the private sector. As such, there is no national system for employer-based vocational training.

It is essential to emphasize that there is a federal function (through the Department of Labor) focused mainly on helping disadvantaged individuals develop skills.

Immigration Policy

The U.S. has relied on highly skilled immigration to support its innovation system. At least eight studies have examined the role of immigrants in launching new businesses, and all conclude that immigrants are key players in this process, creating between 15 and 26 percent of new high-tech sector businesses.

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Evolution in the Future of the Innovation System

Atkinson highlights that the United States does not have a coordinated national system of innovation policies, reflecting the belief that it is best to leave innovation to the market, and that the role of the government, to the extent that it exists, is to support the “input factors,” such as knowledge creation and education.

However, Atkinson says this may be changing in response to the economic, technological, and military challenge posed by China. In fact, national innovation systems are evolutionary, not static.

The United States has significant strengths in several areas, including managerial talent, business use of ICT, and cultural factors like demanding customers and a collaborative culture.

Conclusion

Atkinson states that as nations compete to win the global innovation race, none has it all right yet, although some are getting close.

“While some nations like Japan and much of Europe have strong innovation policy systems, many suffer from limited regulatory and commercial environments,” Atkinson said.

He concludes that the challenge for the United States in the future is whether it can make the necessary changes in an innovation system to meet the new competition.

Reference

Robert D. Atkinson (2020). “Understanding the U.S. National Innovation System, 2020”. Information Technology & Innovation Foundation.

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