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American Innovation Dwindles – or Does it?

Gary Shapiro, President and CEO, Consumer Technology Association (CTA)

A recent Bloomberg report chastised the United States for dropping out of the top ten in its 2018 “Innovation Ranking.” According to the study, the U.S. fell from ninth to 11th place – the first time in six years that we weren’t in the global top ten.

Bloomberg’s findings stand in stark contrast to our 2018 International Innovation Scorecard, which evaluates countries on the strength of their innovation economies. According to our research, not only was the U.S. an Innovation Champion (the highest possible ranking), it’s also among the very best in the world in certain categories.

Why the difference?

In part it has to do with a difference in metrics – what elements it takes for innovation to thrive. Bloomberg selected seven categories in which to rank countries, focusing on resources including R&D funding and the number of STEM graduates. We included several of these categories as well, but ultimately looked beyond them to evaluate a country’s political climate, as well as its openness to disruptive new business models and innovations, its tax framework and the overall personal and political freedom granted to its citizens.

We did this because no matter how well-equipped and well-funded a country is, and no matter how highly-skilled its citizens are, if the government resists change, there’s very little that even the most creative, enterprising citizens can do to create new business opportunities.

This difference in emphasis is what led to some of the biggest variances between these two reports. No North American nations are featured in Bloomberg’s top ten, while CTA named both the U.S. and Canada as Innovation Champions, thanks in large part to their openness to self-driving tech and the high levels of freedom they afford their citizens. The Czech Republic and Portugal are also Innovation Champions in our rankings for similar reasons, but these two countries don’t even crack the top 20 on Bloomberg’s report.

The Bloomberg study doesn’t seem to account for the fact that almost every major internet company is U.S.-based. Think of Google, Facebook, Amazon, Microsoft and Wikipedia as examples. More, the U.S. is home to 133 unicorn companies while the next closest nation, China, has 92 unicorns.

This is not to say there aren’t areas of growth for our country. The Bloomberg report rightly points out the importance of a strong education system. The U.S. boasts many of the best universities in the world, but we cannot ignore the need to get more Americans majoring in STEM. We also need a massive overhaul of our immigration system to ensure that the best and brightest from around the world can innovate and create jobs in the U.S.; and we could do more to support homegrown entrepreneurship, which has tapered off in recent years. The U.S. also suffered in the “tax friendliness” category as it was based on 2016 law. The U.S. will rank higher in this category in 2017 thanks to the recently released tax reform, including a dramatic drop in the corporate tax rate to 21 percent from 35 percent.

In addition to methodology, our Scorecard evaluates countries from a uniquely American perspective on innovation. We are a nation of liberty and freedom, and so we scored this. Bloomberg did not. Americans dream, create and innovate. And we are among the most diverse nations in the world – diversity is our strength, another factor in CTA’s Scorecard. Our immigrant nation and individual and political freedoms not only allow us to give our views freely, but also use the internet to create an even larger platform. These are all factors measured by CTA’s Scorecard, but omitted from Bloomberg’s Innovation Index. And as Americans living in a country where innovation is the essence of the American Dream, we want all people around the world to embrace disruptive technologies and experience that same dream.

Gary Shapiro is president and CEO of the Consumer Technology Association (CTA)TM, the U.S. trade association representing more than 2,200 consumer technology companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro