Silicon Valley, greater Boston, San Diego and Austin that have been magnets for the world’s brightest and most visionary innovators, technology entrepreneurs, and investors face greater competition from dynamic new commercialization zones, such as Taipei, Shanghai, Helsinki, Tel Aviv, and Bangalore.

The world of innovation itself is undergoing radical change, calling into question America’s ability to benefit fully from U.S. science and technology leadership. In today’s world, knowledge, money, and people flow across borders with ever-greater speed and ease, often through open collaborative innovation networks linking corporations, researchers, investors and institutions. The good news is that this opens genuine opportunities for international collaboration that can help solve global health, environment, and energy challenges, as well as enable companies to accelerate product development.

But the globalization of innovation capacity is also undermining traditional assumptions that have guided U.S. policymaking for the past six decades. In particular, it no longer follows that discoveries and inventions flowing from research conducted by America’s universities, corporations and national laboratories will naturally lead to products that are commercialized and industrialized on U.S. shores. Although the U.S. federal government remains the biggest sponsor of basic research, spending some $148 billion on public R&D in 2011, traditional trading partners and emerging economies are concentrating their energies on translating new technologies from every available source into industrial applications and job-generating industries. In some cases, nations are using the resources of the state to induce U.S. companies to manufacture their innovations locally and transfer proprietary technologies while giving homegrown champions privileged access to their domestic markets. In other cases, companies produce offshore because they conclude the United States simply lacks the supply chain capacity, technical skills, and the right investment climate for high-volume manufacturing. As a result, the U.S. is finding it increasingly difficult to capture the economic value generated by its tremendous public and private investments in R&D.

The United States urgently needs to adjust to the new great game [or challenge] of 21st century global competition. Just as the 2007 National Academies report Rising Above the Gathering Storm was a call to arms that urged the U.S. to increase investment in R&D, education, and other inputs into the innovation system, this report argues that far more vigorous attention be paid to capturing the outputs of innovation — the commercial products, the industries, and particularly high-quality jobs to restore full employment. America’s economic and national security future depends on our succeeding in this endeavor.

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