The West is losing its leading position in Innovation Arms Race, notes new report

New research from The Center for Advancing Innovation (CAI) and PatSnap — a provider of R&D analytics — has revealed that the West is starting to lose its position as leaders in the Innovation Arms Race.

The Innovation Arms Race 2018 report was aimed at providing an insight into the global innovation landscape, and identifying the potential opportunities for businesses, government bodies and academic institutions to innovate more effectively and capitalise more efficiently on global innovations.

Referring to a number of factors involving innovation across different countries, with the framework of assessing key metrics including patent effectiveness, patent efficiency, patent grants per capita and more, the report has demonstrated that the US has already lost its leadership position in global patenting metrics. Additionally, it was highlighted that unless steps are taken to improve the country’s innovation and commercialisation processes, the US will lose its leadership position for all key performance indicators by the year 2029.

Despite there being an increase in R&D spending over the past 30 years return on investment has decreased by about 65%. Therefore, action needs to be taken to efficiently and effectively drive innovation forward in order to avoid economic wastage.

In assessing which countries are driving innovation in the most effective and efficient way the CAI and PatSnap found the following:

• Patent effectiveness declining in the West: Patent effectiveness is the ability to convert patent applications into patent grants and reflects the quality and uniqueness of patents. While volume remains high in patent applications, the US, EU and UK are weakening in their ability to convert patent applications into patent grants - or - produce high quality patents.

The US, EU and UK have negative or near zero growth rate in producing quality patents for the last 20 years. From 2005-2015, the top five countries in the growth of high quality patents are China, Singapore, Brazil, Israel and India.

• Patent efficiency needs to improve: Patent efficiency is the ability to convert one dollar in R&D spend to a granted patent. This report’s analysis of patent efficiency found that it costs much more for the US and UK than China, South Korea and Russia to produce a high-quality patent that gets granted; both the US and UK produce approximately 600 patents per US $1 billion of research expenditure.

Switzerland and South Korea hold the top spots for patenting efficiency as of 2015 with 1977 and 1562 patents per US $1 billion respectively. China and Singapore have the greatest improvement in efficiency with a 10% and 18% CAGR, respectively.

• Research expenditure provides little ROI in the West: While the US spends twice as much as each of the UK and EU in research expenditure relative to GDP, R&D spend is not driving GDP growth in the US. In other words, one additional dollar of R&D spend in the US does not drive a corresponding growth in GDP.

• Asia is dominating innovation metrics and will continue to dominate: East Asian countries are out-performing the US, EU and UK in growth of R&D spend and patent grants. China is reaping the rewards from the increase in R&D spend as it will surpass the US in GDP by 2025. China and South Korea are consistently in the lead regarding a number of performance metrics and are poised to remain in the lead. India, Israel and Singapore are expected to see the highest growth in patents granted through 2035.

A number of potential issues were identified as contributing factors to the decline in innovative effectiveness in the West. These include the fact that scientists in the US, EU and UK are incentivised to patent, and therefore it is possible that more patent applications are pushed forward that are not high in quality. Additionally, scientists have little reason to focus on commercialising their patents, leaving many patents left on the shelf and un-commercialised. Moreover, unsuccessful research is typically not published, leading to a waste of R&D resources allocated to repeating failed experiments.

“The Innovation Arms Race analysis illustrates that the US, EU and UK need to be more focused and strategic in converting R&D dollars into impact and outcomes,” emphasized Rosemarie Truman, founder and CEO of CAI. “In particular, it is critical to maximise the returns on past R&D investment by commercialising innovation sitting on the shelf. The US licenses only 0.3% of federally funded inventions out. If we could get 1% more inventions out a year, the value at stake is $1.5 trillion to the US economy alone.”

“Despite recent obstacles to globalisation, innovation continues to become more relevant to technological progress, and in return — economic progress,” summarised Ray Chohan, SVP, Corporate Strategy at PatSnap. “While the West has — to a significant extent — pioneered technological breakthroughs in the past, it is being held back by legacy processes and technology when it comes to innovation and turning it into economic gain. Much of the growth and efficiency we’re seeing in R&D in APAC is being supported by companies leveraging new technologies and processes with the aim of streamlining their R&D investment.”