The Conventional Wisdom

There was no debate. The diagnosis was virtually unanimous. Although the U.S. remains the overwhelming leader in technological innovation, its lead is declining. First there was the Japan challenge of the 1970s and 1980s; then the Asian Tigers in the 1980s and 90s; now it is India and China. Both are huge countries with educated populations and demonstrated strengths in different, but complementary technological areas—software development and manufacturing, respectively—with both in the process of building world-class R&D capabilities in critical technologies including IT, pharmaceuticals, nanotech and in many segments of GreenTech—especially around critical, potentially foundation technologies such as lithium-ion iron phosphate batteries.

The high-level prescriptions had been similarly virtually unanimous. First, the U.S. must dramatically increase educational quality and quantity (number of graduates) in all types of technical disciplines (science, engineering, math, IT, or SEMIT). And it should do so at all levels of the educational spectrum, from secondary schools, through trade schools and community colleges, through the leading research universities. Second, the U.S. must dramatically increase the amount of high-level R&D investment—both directly through government spending and indirectly though tax incentives for corporate investment.

The debates had been on the details—how much, which technologies, what should be the level of government involvement, how to accomplish each goal and so forth.

A Radical Rethink

Columbia Business School Professor Amar Bhidé, however, has recently made a heretical argument that fundamentally challenges the conventional wisdom. He argues that not only will the commonly accepted prescriptions not work—they will end up damaging the U.S.’s long-term technological competitiveness. He argues that the U.S. should encourage a proliferation of high-level, global research that results in scientific publications and patents.

He further suggests that rather than encourage our children to grow up to become PhDs, we should encourage them to develop solid foundational SEMIT skills that they can apply to business disciplines. Why? Because high-level scientific information increasingly passes seamlessly across borders and is available at a relatively low cost. The real economic value is created not by the high-level concept, but by the “mass productization” of the concept, the commercialization of the offering and, especially, by its productive use by its customers. Therefore, the U.S. would get a much greater bang for its technological buck by offshoring much of the high-level R&D and focusing domestic efforts on developing, commercializing and applying this technology.

Beyond IT Recommendations

This hypothesis, while running counter to the accepted wisdom, has profound implications. The U.S. must certainly improve our own SEMIT education and all levels through university. Although we must do all in our power to sustain the supremacy of our graduate research programs, we should accept the fact that these programs will continue to be populated largely, if not predominantly by foreign-born students. Contrary to current government policy, we should make it easy and attractive for these graduates to remain in the U.S. while assuming that a growing percentage will find it more attractive to return to their home countries.

As a national priority and corporate necessity, the U.S. must domestically control its overall high-level research agendas. However, some key technology research should not only be allowed, but encouraged to be performed offshore. But while offshore research should be allowed to expand significantly, U.S.-based companies must control their own long-term agendas, either through captive offshore research arms or though close guidance or collaboration with partners.

However, although we should allow growing portions of our basic research to be performed offshore, the U.S. must continue to own a number of other links of the R&D value chain, Our focus, rather than on training huge numbers of pure scientists, should be on training two other types of SEMIT-savvy people:

1. Mid-level solutions engineers that are focused on applying technology to addressing market requirements. These engineers would pick-and-choose among basic research innovations to determine those that are best suited to addressing customer needs and create marketable products.
2. A much larger number of business architects who would tailor these new solutions of the unique requirements of particular companies.

Successful utilization of these new professionals will require new and different training and management programs, and career paths.

Potential Gotchas

Every approach, including this one, has risks. As I see it, there are three particularly big potential pitfalls in relying on offshore sources for basic innovation:

1. A country that develops key “chokehold” technology refuses to make it available to foreign companies;
2. The U.S. is slow to adopt, and therefore loses ground-level leadership in critical applied technologies, such as CleanTech; and
3. U.S. companies focus on applying technologies to the needs of rich, developed markets, and leave the application of technology to emerging companies to other companies—thereby forgoing high-volume markets and allowing non-U.S. companies to build secure beachheads from which they can attack developed country markets.

The good news is that each, as discussed fully in my report,The Impact of Offshore R&D on U.S. Technological Competitiveness, has different levels of risk and each can be proactively remedied.