American Innovation in the Face of Asia’s Growing Power

On February 9, 2011, NBR hosted National Asia Research Associate Adam Segal (Council on Foreign Relations) at our Seattle headquarters for a private roundtable discussion.

About the Speaker

Adam Segal is the Ira A. Lipman Senior Fellow for Counterterrorism and National Security Studies at the Council on Foreign Relations. An expert on security issues, technology development, and Chinese domestic and foreign policy, he is the author of Digital Dragon: High-Technology Enterprises in China (2003). His most recent book Advantage: How American Innovation Can Overcome the Asian Challenge (2011) provides an analysis of how the United States can succeed in the technological race with Asia. With up-to-the-minute economic and political data, Advantage is a resounding call to tie innovation to larger social goals in an age of global science and technology.

Event Summary

In recent years, the narrative in the United States and many other parts of the world has been that America is losing ground to and will eventually be eclipsed by superior Asian science and technology innovation. Not necessarily so, argues National Asia Research Associate Adam Segal in his new book Advantage: How American Innovation Can Overcome the Asian Challenge. In a thought-provoking discussion with local business executives, entrepreneurs, and policymakers, Segal provided a comprehensive and optimistic overview of the ways in which American innovation has an edge in the global marketplace and how the U.S. can successfully leverage these advantages in the future.

There is no doubt that China and India are catching up with the U.S. when it comes to what Segal calls the “hardware” of innovation—the raw materials and manufacturing component of innovation. Both countries are increasing their spending on science and technology, training more engineers and scientists, applying for more patents, and investing heavily in R&D.

But it is the “software” of innovation—the actual system for generating useful ideas and moving those ideas to the marketplace—that remains underdeveloped in China and India. This is the area in which America retains a distinct advantage. As science and technology globalize, this superiority should play into U.S. strengths and position America to take advantage of these new technology centers. However, Segal cautions that the American system of innovation should also entail openness to foreign investment in U.S. technology centers and utilization of foreign labor in order to continue innovating in the 21st century.

Segal highlighted several structural problems in India and China that may hinder long-term growth. For example, while both churn out an impressive number of scientists and engineers, many of these experts lack strategic thinking and the ability to work together in groups. Both countries, but particularly China, put a premium on design and functionality patents that fail to produce any meaningful breakthroughs in innovation and ideas. Furthermore, both countries struggle with flawed legal systems that fail to protect intellectual property rights.

Segal concluded by saying that the U.S. should not seek to engage in a competition over “hardware”—China and India simply have too large and too cheap of a workforce for the U.S. to outcompete. Rather, America should focus on new firm creation and solidifying the linkages between science, technology, entrepreneurship, universities and the open market that play to U.S. strengths in innovation and creativity. By sticking to these advantages, Segal believes the U.S. can continue to outcompete our competitors in an increasingly globalized and competitive marketplace.

This event summary was written by Lyle Morris, a Next Generation Fellow at NBR.