Co.Design

Infographic of the Day: Does the U.S. Waste Money on Innovation?

This infographic by accounting firm Grant Thorton purports to show how efficient 30 different countries are at innovation. How? Simply by showing the ratio between patents granted in a country, and the total R&D expenditures there.

Thus, the bigger the box in each country, the more innovation (as measured by patents) it gets for every R&D dollar:


[Click for larger version]

So for the U.S. it looks really, really bad. Even though we grant more patents than any other country in the world, we also seem to simply throw money at the problem of innovation—and in the long run, that can't be good for our own economic competitiveness.

But hold on. Once you start thinking more deeply about the chart, you realize there are perhaps some more interesting things going on. And while the U.S. picture in innovation looks troubling, it's not for the reasons you might think.

Let's start with one thing that's probably not going on. The chart could simply be an indicator of how hard it is to get a patent in each country—if it's harder to get a patent in the U.S. than anywhere else, of course our expenditures look like they're less efficient. That's because we don't give out patents to every ridiculous new bike bell or boom box. But in actuality, the patent process for most of the countries on the list are roughly equivalent—the U.S., Western Europe, and Japan have comparable patent processes. And South Korea rejects about the same percentage of patents as we do.

Let's move on to something a bit more subtle. Note that South Korea pools its R&D into consumer electronics—and companies such as Samsung and LG are among the world's most frequent patent filers. The U.S., meanwhile, invents a decent amount of CE technology—but we also spend ridiculous amounts of money in biotech and pharmaceuticals. These are infamously expensive to research: Unlike say, cell phones, where $1 billion in research might yield literally hundreds of patents, $1 billion in pharma research might be just enough cash to bring a single drug to market (with just a handful of patents). And the U.S. is far and away the world leader in biotech and pharma research.

Is that a good thing? Absolutely not. U.S. biotech companies have long known that the lion's share of pharma profits lie in selling innovations back into our own bloated, wasteful, and irrational health care market. Indeed, inefficiency is one reason there are huge pharma profits to be had in the U.S.: Our system frequently spends hundreds of dollars on prescriptions for new, brand-name drugs that no more effective than older ones costing pennies on the pill.

Innovations raise a country's global competitiveness only if they ultimately lead to more exported products. Spending a ton of money on drugs we sell to ourselves isn't going to make our economy more dynamic.

It's indeed troubling that we spend so much money on research that can't readily be turned into world-beating products. So we should worry about the chart above—but just not for the obvious reasons.

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5 Comments

  • Bruno vanPottelsberghe

    Apparently the author has a very poor knowledge of patent systems. The numbers are biased and cannot be used in any way to compare countries' innovation performance, and the conclusion he draws are wrong. For instance (I have no time to go into more details), the South Korean and Japanese patent applications are much smaller in terms of claims or pages than US patents. This is due to the fact that in Japan and South Korea sashimi (or salami slices) patents are filed, whereas in Europe and USPTO, broader patent a filed, with much larger scope of protection. This is for instance witnessed the fact that South Korean or Japanese applications in Europe and the USA generally merge 3 to 7 of their own priority patents. In other words the counts should be divided at least by 3 for these two countries. For more information, cf. the following paper: http://econpapers.repec.org/pa...

    Bruno van Pottelsberghe, Professor at Université libre de Bruxelles

  • Andrea Larson

    This analysis reminds us not to pay too much attention to statistics when we don’t know what’s really behind them, what the numbers actually represent. I’m less concerned (although indeed I am concerned about it) about U.S. innovation; we need innovation to emerge from all parts of the world, and faster, to create new products, processes, and technologies to address the collision between economic growth demands, population explosions, energy needs, and material demands: the arena now referred to as sustainability innovation. While this article focused on technology, don’t forget social innovation. At one point in time, our university systems were considered innovative; and innovation takes place in financing mechanisms and innovation processes across firms.

  • Sean

    Innovation as a function of patent-to-R&D dollars?

    How are those R&D dollar amounts being computed, for this graphic?

    For another thing: Wouldn't that be a bit like measuring a school's performance, as based exclusively on a ratio of "number of science fair projects produced, in year X, by students at the school" over "amount of funds granted to school, in year X"?

    Thirdly, how many patents produced in a nation A may have involved research and previous innovations developed in a nation B, for any A or B being nations with patent infrastructures? If we were to really be strict about the nationalization of patents, perhaps we should count out all patents involving X-ray machines, when counting the number of patents, today, in any nation but France - considering the crucial work of Pierre and Marie Curie, respectively from France and Poland, presumably doing their research while living in France. Innovation is not so simply a national product.

    I understand that any qualitative R&D features would be hard to pin down for a graphic. I just think it's a fallacy to assume that a number-of-patents ranking could correlate either directly or exclusively to something so broad and subjective as innovation.

    I'm all for the brass tacks, though. Good day.

  • SURESH KUMAR

    Measuring innovation based on patenting activity may mislead since patents are leads to innovation only if they are licensed for use and a majority just remain on the shelves unutilised for what seems to be an eternity.Moreover,a large part of the knowledgebase and new knowledge based on research may not even be patentable though it leads to industril and social innovation,particularly in developing countries

  • Darja Gartner

    hi guys!
    Thank you for this wonderful map of The New World Powers in Innovation.
    I just believe there is a mistake in Slovenia's position on the map (and color as well). Slovenia should be placed above Croatia and should appear in orange color (if I am not mistaken.)