Is the U.S. in Danger of Becoming Second-Rate in High Tech?

 

Updated Aug. 4, 2012

An entrepreneurial scholar, Dr. Scott Shane, ostensibly believes the United States has surrendered its global lead in technology. Dr. Shane is a professor of Entrepreneurial Studies at Case Western Reserve University in Cleveland.

He was prompted to publish his analysis in Small Business Trends, following a speech by then-Secretary of Commerce Gary Locke, the former governor of Washington state, who is now Ambassador to China.

“America’s innovation engine is not as efficient or as effective as it needs to be, and we are not creating as many jobs as we should,” he quoted Mr. Locke, who spoke in introducing the President’s new National Advisory Council on Innovation and Entrepreneurship.

“A study by the Information Technology and Innovation Foundation looked at the progress at innovation that 40 countries made over the past decade,” wrote Dr. Shane in the publication. “The U.S. came in dead last. That is, whether they were ahead or behind us at innovation in 1999, the 39 other countries examined gained ground on us over the past ten years.”

He added U.S. entrepreneurs were at the top of their game in 1999.

“Other studies also show our less-than-stellar innovation performance,” he asserted. “A recent report by the Organization for Economic Development and Cooperation (OECD) looked at the per capita rate at which inventors in 38 nations filed for triadic patents – patents for the same invention filed in the United States, Japan, and Europe. The data shows that, in this event, we’re out of medal contention in eighth place, well behind countries like Switzerland, Japan, and Sweden.”

He cited more OECD data.

“Looking at two measures – the share of companies less than five years old that file patents and the share of patents that went to companies under the age of five – across 13 industrialized countries, the United States came in third, after Norway and Denmark,” wrote Dr. Shane. “While a respectable showing, it’s not where we need or want to be.”

He indicates the number of U.S. patents continue to drop. In 2001, he states 25.9 percent of patents were held by small tech firms. But the share of patents decreased to 19.9 percent by 2009.

“The number of deals made, capital invested, and exits are all down from their levels back in the mid 1990s, before the Internet bubble hit,” he pointed out.

“Venture capital accounts for less of U.S. economic activity than that of many other countries,” he worries. “…in 2008, the U.S. invested a smaller share of its gross domestic product in venture capital than ten OECD countries, and a larger share than only twelve of them.”

A widely acclaimed Los Angeles consultant sheds more light on the decrease in the U.S. VC activity: “Venture capital in the U.S. is more conservative and more limited now than it has been, even before the dot com bubble,” explains Joey Tamer, a strategic consultant to entrepreneurs in software, Internet, technology and digital media.

“And the U.S. Patent office has advised at least one of my technology clients to expect a response sometime in the next six years,” adds Ms. Tamer.  “So, if venture capital and patent awards are the measures used, these reports may generate some concern.”

Seattle attorney Joe Wallin, a partner at Davis Wright Tremaine, says “Congress appears hostile to entrepreneurialism and entrepreneurship,” which naturally means public policy is part of the problem.

“Our Congress has demonstrated an hostility to startups and venture capital, and has tried to pass laws which would have effectively destroyed the startup industry in America,” adds Mr. Wallin.

Indeed, as a strong advocate, he was one the players who was instrumental in helping to get a change in the 2010 financial regulatory law. One component of the original bill would have been hostile to the angel investment community. (For an explanation, see this article: Why Startups Get a Reprieve from Financial ‘Reform’.)

In addition, the most-read topics on this Web site have been the 50+ public-policy articles. Most entrepreneurs are tired of being hamstrung. (As a business-performance consultant, no entrepreneur has ever contacted me to praise public policy. But I’ve had countless businesspeople complain about government or ask me to help them in public affairs and policy).

Math and science education needs a boost. High school drop-out rates of 50 percent aren’t acceptable, but this is not necessarily a criticism of education although there are many underperforming teachers and schools. More importantly, a child’s attitudes are generally formed by the age of six.

This means parents need to encourage their kids to learn at the earliest possible age, to get more involved with their kids’ education at school, and to encourage math and science studies when feasible.

To promote personable responsibility in education, parents and kids apparently need a positive role model, such as a political leader with vision and the inspirational capabilities of President John F. Kennedy. It was JFK, who inspired the best in America’s youth in his brief presidency – everything from 50-mile hikes for physical fitness to the Peace Corps for volunteerism.

But for now, Ms. Tamer sounds a valid note of optimism over America’s high-tech regression.

“On the other hand, entrepreneuring is deeply embedded in the American culture as a positive, even heroic, endeavor,” adds Ms. Tamer. “And many of our most successful entrepreneurs are starting their fifth and sixth companies, and are now only entering their 40s, and so have a long productive and inventive life ahead of them.”

Therefore, Mr. Locke, who indirectly started this discussion, is correct in his assessment, and I extend my congratulations to Dr. Shane for an astute commentary. His message needs to be repeated over and over and over.

Mr. Wallin raises a good point about public policy. Public policy should be encouraging economic development, not looking for ways to inhibit it. Parents need to get involved with the education of their children.

And to Ms. Tamer’s point about the big delays in the U.S. Patent office, six years is unconscionable.

In other words, leadership is badly needed to facilitate entrepreneurial growth – along with Ms. Tamer’s continued optimism about our entrepreneurial capabilities.

Then, let’s get more positive news from the entrepreneurial scholar.

From the Coach’s Corner, here are four resource links: 

Joey Tamer’s Web site – www.joeytamer.com

Joe Wallin’s Web address  – www.dwt.com/People/JosephMWallin

Dr. Scott Shane’s bio – Case Western Reserve University

“It’s what you learn after you know it all that counts.”

-Harry S Truman

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.