Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States
Euler Hermes
Objective: Innovation
Research and Development (R&D) is critical to competitiveness and innovation, and the U.S. needs to boost efforts in this sector. For example, the U.S. is beginning to fall behind its global competitors in patent generation. Patents represent the end-product of R&D efforts, which can then be used for commercial purposes and competitive advantage.
▶ The benefits of a strong national R&D program and the resulting growth in the number of patents granted are obvious. Figure 25 below demonstrates that from 1995 to 2012, nations that had a higher average annualized growth rate in the number of patents granted tended to also have a higher growth rate of GDP. Clearly the growth rate of patent issuance in the U.S. at under 5% is insufficient to contribute to robust GDP growth. By contrast, China’s R&D programs are growing the number of patents issued there by a remarkable 22%, resulting in an equally remarkable GDP growth of 10% annually. U.S. industry needs to take this competitive threat seriously if it expects to continue on the path of rein- dustrialization.
▶ The threat appears in other measures of innova- tion as well, such as the absolute number of patents granted in each country. Note in Figure26below that the U.S. and Japan lead this measure with about the same number of patents granted in 2010. But more
26. Patents granted 250000
200000
importantly, the chart clearly shows the rise of China’s R&D programs and to a lesser extent those of South Korea. These countries are rapidly closing the gap with the U.S. and eroding its competitive advan- tage. Even after patent applications are made, the U.S. stumbles. Figure 27 shows the increase or decrease since 1993 in the length of time required for patent approval, by country. Here the U.S. is a serious lag- gard as well. It took more than twice as much time to approve a patent in the U.S. in 2009 as it did in 1993. By comparison, the approval time in South Korea has fallen 40%, and in Japan 20%. U.S. manu- facturing and the economy in general would be well served by improvements in the process of approving patents.
▶ The composition of the increase in patents shows threats and opportunities as well. Table J shows the percentage contribution of each industry to the growth in patents between 1995 and 2008. The first columns show the contribution to total patents gran- ted worldwide, and as might be expected, seven of the top 10 industries are related to electronics, with computers and electrical machinery taking the top spots. The remaining columns show the industry breakout by country. The U.S. contribution by industry is the most highly concentrated with a full 19% in computers. Compu- ter technology is also in the top three in Japan and South Korea, representing significant competition
27. Change in time required for patent approval 150000
20% 40% 60% 80% 100% 120%
100000 50000 0 80 82 84 86 U.S. Japan 88 90 92 94
Europe Korea
96 98 00 02 China Source: World Intellectual Property Organization (WIPO) 04 06 08 10
-60% -40% -20% 0%
U.S. Europe
China Japan
In 2009 in the US it took more than twice as long to get a patent as it did in 1993