Brazil, China, Singapore, Israel and India have been hailed as the most effective patenting nations between 2005 and 2015. The US-based Centre for Advancing Innovation, a non-profit that aims to accelerate tech transfer, and intellectual property analytics and management platform PatSnap have produced The Innovation Arms Race 2018 report – but it is bad news for the US and the EU, which both appear to be losing the game.
The US had already lost its leadership in global patenting metrics and the report predicted that the country would lose its leadership across all key performance indicators by 2029. Ray Chohan, senior vice-president for corporate strategy at PatSnap, said: “Despite recent obstacles to globalisation, innovation continues to become more relevant to technological progress and, in return, economic progress.
“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 are seeing in R&D in Asia-Pacific is being supported by companies leveraging new technologies and processes with the aim of streamlining their R&D investment.”
Indeed, the money going to research and development activities across the world continued to increase. As Rob Lowe, chief executive of innovation management software producer Wellspring Worldwide, recently noted in a keynote speech at the UIDP26 conference, the global annual market for R&D dwarfed everything else, with even alcohol and tobacco accounting for only $120bn. The Innovation Arms Race 2018 report put the figure for R&D at $2.19 trillion in 2018.
Yet money does not equate to success. The returns on R&D expenditure, the report stated, had actually decreased by about 65% over the past three decades. While not all research and development can lead to a usable product or service, it is worrying that so much of it has no economic value whatsoever.
Part of the problem was a declining ability in the western world to turn R&D into effective patents. Although the number of applications remained high, the US and the EU had both been struggling to turn these applications into granted patents. Both sides of the Atlantic had experienced negative or zero growth rate in this aspect over the past two decades – getting left behind by the five nations cited above.
The report looked at the UK separately from the other EU countries, but it was similarly bad news. In 2015, the UK and the US produced only 576 and 611 patents respectively per $1bn of research expenditure. The rest of the EU (872) was slightly ahead, being more cost-effective than China (812) but less than Russia (1,032). If you combine UK and EU figures, Europe makes it into third place.
Despite the bad news for its European neighbours, Switzerland led the pack with 1,977 patents granted per $1bn of expenditure. South Korea recorded 1,562 and landed in second place. China and Singapore were catching up fast – they achieved respective compound annual growth rates of 10% and 18%. China, the report forecast, would outpace the US for R&D expenditure and patent grants by 2025, with India, Israel and Singapore expected to experience the highest growth in patents granted through 2035.
This, too, proves that more money does not guarantee better outcomes. The US was spending twice as much as the UK and the remainder of the EU on research relative to gross domestic product (GDP), but was failing to generate any GDP growth from its investment.
The report said policy dynamics in the western world were not to blame, but claimed the US and the EU were unwittingly prioritising quantity over quality, incentivising scientists to apply for patents even if their research may not be of a high enough quality. The patents that were granted were often not commercialised due to a lack of resources, and failed research was not publicised, meaning the same mistakes were made over and over again. Gross domestic expenditure on R&D needed to be spent more efficiently to generate more innovation.
How that could be done was beyond the scope of the report, but some statements hinted at a possible solution – increasing commercialisation resources. There is hardly a point in producing patents when inventions are left to gather dust in an archive.
Rosemarie Truman, founder and chief executive of the Centre for Advancing Innovation concluded: “The US licenses out only 0.3% of federally-funded inventions. If we could get 1% more inventions out a year, the value at stake is $1.5 trillion to the US economy alone.”
And you could justify a lot of commercialisation activities with a $1.5 trillion return. It seems almost incomprehensible that decision-makers in the west are not bouncing on such numbers.
Rosemarie Truman will be speaking at the GCV/GUV Venture Houston conference on November 8-9. See details