Nav: Home

Analysis chronicles changes in US investment in R&D

August 03, 2018

The distribution of U.S. investment in research and development (R&D) across countries and industries has undergone a dramatic shift since the 1990s, with R&D becoming less concentrated geographically and growing rapidly in less developed markets such as China and India. The phenomenon of R&D globalization is also distinguished by its concentration in the domains of software and information technology (IT). In this context, a new analysis examines how changes in innovation within firms and a shortage of human capital in the United States in the fields of software and IT have driven U.S. multinational companies to establish and expand new innovation hubs abroad.

The analysis, by researchers at Carnegie Mellon University and Georgetown University, was published as a working paper by the National Bureau of Economic Research. "Our findings support the view that the globalization of U.S. multinational R&D has reinforced the technological leadership of U.S.-based firms in the information technology domain," notes Lee G. Branstetter, professor of economics and public policy at Carnegie Melon University's Heinz College of Information Systems and Public Policy, who led the study. "And that multinationals' ability to access a global talent base could support a high rate of innovation even in the presence of the rising human resource cost of frontier R&D."

The analysis documents three important issues: the growing globalization of R&D, the increasing importance of software and IT to firms' innovation, and the rise of new R&D hubs and the differences in the types of activity done there. The researchers argue that these are not separate issues but are closely related, and that the shift toward increasing reliance on software and IT in innovation is driving multinational corporations abroad in search of scarce talent.

Based on their analysis, the researchers conclude that the United States is experiencing constraints on the supply of human capital in the fields of software and IT, which limit the possibilities for U.S.-based multinational firms to be innovative. Global flows of investment, people, and ideas could help relax these constraints to some extent, they suggest, raising growth, productivity, and consumption possibilities worldwide. However, since the 1990s, the U.S. labor market has become more closed to immigration, which, in some cases, has spurred firms to shift some of their R&D to the places from which they had recruited engineers. Education policies could also expand the supply of IT and software workers in the United States, they suggest.

The authors also document a sharp rise in outbound foreign direct investment focused on R&D at a time when U.S. and other political leaders have assailed such investment for weakening U.S. production, employment, and growth. In contrast, the authors' work suggests that the globalization of R&D by U.S. multinationals will strengthen these U.S.-based firms, by enabling them to continue to innovate in the face of human capital constraints.

"To the extent that the rapidly growing investments in global R&D networks are rational, they provide a new reason for worry that policymakers around the world are rejecting globalization," according to Britta M. Glennon, Ph.D. student at?Heinz College, who coauthored the study. "If a greater globalization of R&D is required to maintain a flow of innovations in the domains where technological opportunity is greatest, then de-globalization could have severe consequences for the future trajectory of growth and living standards."
-end-
The study was funded by the National Science Foundation.

Summarized from a working paper by the National Bureau of Economic Research, The IT Revolution and the Globalization of R&D by Branstetter, LG (Carnegie Mellon University), Glennon, BM (Carnegie Mellon University), and Jensen, JB (Georgetown University). Copyright 2018. All rights reserved.

About Carnegie Mellon University's Heinz College

The Heinz College of Information Systems and Public Policy is home to two internationally recognized graduate-level institutions at Carnegie Mellon University: the School of Information Systems and Management and the School of Public Policy and Management. This unique colocation combined with its expertise in analytics set Heinz College apart in the areas of cybersecurity, health care, the future of work, smart cities, and arts & entertainment. In 2016, INFORMS named Heinz College the number one academic program for Analytics Education. For more information, please visit http://www.heinz.cmu.edu.

Carnegie Mellon University

Related Innovation Articles:

Scaling up search for analogies could be key to innovation
Investment in research is at an all-time high, yet the rate of scientific breakthroughs isn't setting any records.
Why you should be concerned about Oprah Winfrey when introducing an innovation
New research by Bocconi University's Paola Cillo and Gaia Rubera with Texas A&M's David Griffith asserts that the reaction of large individual investors to innovation is an important component of stock returns, their reaction to innovation depends on their national culture, and there is a way to segment large individual investors and pitch innovation to them accordingly.
Responsible innovation key to smart farming
Responsible innovation that considers the wider impacts on society is key to smart farming, according to academics at the University of East Anglia (UEA).
Pillars of academic innovation
Highlights from the Sixth Annual Conference of the National Academy of Inventors, including high-tech solutions to combat child pornography and radicalization materials; groundbreaking programs to promote STEM major retention; and new materials for wearable technology.
Universities drive innovation in the classroom
The current issue of Technology and Innovation, Journal of the National Academy of Inventors ® (19.2) examines innovation from the university perspective, highlighting what the most innovative institutions and educators worldwide are doing to prepare future engineers and industry leaders to effectively manage IP to grow their companies and the global economy as a whole.
How universities are fostering innovation and entrepreneurship
Technology and Innovation 19.1 zeroes in on innovation and entrepreneurship, with a special focus on what universities are currently doing to foster growth in those areas both for their success and the success of the communities and regions to which they are connected.
Shaping the future of health innovation
Future advances in healthcare will be aided by a new £10 million facility -- the National Institute for Health Research Innovation Observatory based at Newcastle University, UK.
Building on the foundations of innovation
The new issue of Technology and Innovation has a special section on the 2016 NAI Conference, including articles on gender and bias in science, the history of the National Academy of Inventors, alternative rubber crops, and the next industrial revolution.
What is innovation, and how can we awaken its dormant traits and cultivate them?
While education may not be able to create innovative traits in individuals, education may improve the ability of individuals to utilize the traits they already possess.
LA BioMed's 4th Annual Innovation Showcase
The Innovation Showcase will be attended by over 300 entrepreneurs, investors, executives from biotech and pharma medical devices companies, legal experts, service providers, prominent scientists, and technology transfer personnel from premier academic institutions.
More Innovation News and Innovation Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Rethinking Anger
Anger is universal and complex: it can be quiet, festering, justified, vengeful, and destructive. This hour, TED speakers explore the many sides of anger, why we need it, and who's allowed to feel it. Guests include psychologists Ryan Martin and Russell Kolts, writer Soraya Chemaly, former talk radio host Lisa Fritsch, and business professor Dan Moshavi.
Now Playing: Science for the People

#538 Nobels and Astrophysics
This week we start with this year's physics Nobel Prize awarded to Jim Peebles, Michel Mayor, and Didier Queloz and finish with a discussion of the Nobel Prizes as a way to award and highlight important science. Are they still relevant? When science breakthroughs are built on the backs of hundreds -- and sometimes thousands -- of people's hard work, how do you pick just three to highlight? Join host Rachelle Saunders and astrophysicist, author, and science communicator Ethan Siegel for their chat about astrophysics and Nobel Prizes.