Global Sources of American Innovation

Yesterday, we looked at overall trends in U.S. innovation measured by patents. Today, we break out U.S. patents between U.S.-resident and non-resident or foreign inventors patenting in the U.S.

Numerous studies have shown that, over the past two or three decades, the role of foreign scientists, technologists, and entrepreneurs in U.S. innovation has increased. Recent research by AnnaLee Saxenian and Vivek Wadhwa and others finds that anywhere between a third and half of all Silicon Valley start-ups during the 1990s had a foreign entrepreneur or scientist on their core founding team. As I have previously argued, foreign-born scientists currently make up 17 percent of all bachelor's degree holders, 29 percent of master's degree holders, 38 percent of PhDs, and nearly 25 percent of American scientists and engineers. My earlier research shows that Japanese companies - and some European companies as well - chose to locate research labs in the U.S. to access a diverse mix of scientific talent they cannot attract in their home countries.

The graph below shows the overall trend in patenting for U.S.-resident and non-resident foreign inventors between 1980 and 2005. Non-resident (foreign) inventors have just about pulled even with U.S. inventors in patenting, and their rate of inventive activity more or less tracks that of U.S.-based inventors. But here again, even with two dips since 2000, the rate and level of innovation over the past decade remains up.

Clearly, foreign inventors have become a key feature of the U.S. innovation system. Without them the level of innovation would be much lower. Another way of saying this is that the American system of innovation has become increasingly dependent upon non-resident inventors. Foreign inventors patent in the U.S. to secure intellectual property protection in the large U.S. market. Clusters of sophisticated and demanding consumers and end-users help make the U.S. the place to be for high-end innovation, as Amir Bhidé points out in The Venturesome Economy.

While foreign patenting boosts the overall rate of innovation in the U.S., there is a considerable chance that these patented innovations are commercialized and produced off-shore, and thus that the U.S. economy will accrue less overall economic benefit from those technologies. While this is not direct evidence for Mandel's innovation interrupted thesis, it provides a possible mechanism that might limit the commercialization and overall economic impact of innovation in the U.S.