How to remain the innovation nation

By J.H. Cullum Clark

America has long dominated science and technology. But misguided policies risk squandering that lead.

An engineer gives a tour of Google's Quantum Computing Lab in Goleta, California on September 21, 2022. (Photo by Frederic J. Brown/Getty Images)

The United States’ preeminence in science and technology has long played an underappreciated but vital role in ensuring U.S. economic and geopolitical leadership. But the United States risks squandering this precious asset today through neglect and misguided ideology.

After World War II, the country came to dominate global research and development (R&D) by building the best model for nation-scale innovation the world has ever seen. Before the war, the United States was, at best, a second-tier science power. The Manhattan Project, for example, relied heavily on expatriate European scientists. But between 1947 and 1950, the Truman Administration and Congress, in a series of decisions, adopted one of the most consequential policy objectives in history: to make the United States into the world’s unrivaled science superpower.

It worked for decades, but today the United States is losing ground in R&D. Stagnant federal investment, growing sclerosis within the country’s research system, and the decided turn at many leading universities against objective research and toward ideological activism are undermining America’s leading position in science and technology. It’s time to reverse each of these self-destructive trends. This means raising federal R&D investment as a share of the economy, reforming public universities (and hoping some of the leading private ones will follow), and insisting on renewed commitments to free inquiry and objective research as a condition for federal support for university research.

A winning model

The model the United States adopted after World War II – which drew from the landmark 1945 report Science – The Endless Frontier by Vannevar Bush, Director of the Office of Scientific Research and Development – consisted of four components. First, Congress would fund most basic research at levels far above any other nation through agencies like the National Science Foundation (NSF), the National Institutes of Health (NIH), and NASA. Second, researchers at nonfederal universities and labs would do most of the front-line work, with federal grants awarded through merit-based peer review processes – with little interference from politicians or bureaucrats. Third, grantees could follow their work wherever the science led them, with no censorship from government or university authorities. And fourth, Congress created the world’s best environment for turning discoveries into world-changing products by not just allowing but encouraging innovators to claim patents over their inventions, including those developed through work funded partly by federal grants.

This model gave rise to a division of labor so familiar today that few people realize how remarkable an innovation it was at the time. University scientists generally specialize in basic science – exploring the structures of the physical, chemical, and biological world – and sometimes develop product prototypes. Private sector firms, meanwhile, license these ideas and bring commercial products based on them to market. Today, university scientists in the United States conduct approximately half of all basic (as opposed to applied) research, with a majority of it funded by federal grants. Business R&D often depends on this research. One study by leading intellectual property experts showed that more than 73% of papers cited in private sector patents during a period in the 1990s originated from research at universities. Innovation is becoming even more dependent on university research today as private industry’s engagement with basic science recedes due to the decline of once-great research centers like Bell Labs and Xerox Park.

America’s postwar R&D model has been a resounding success. According to one global ranking, U.S. universities constitute 46 of the top 100 research institutions in the world and eight of the top 10 for the quality of their patenting activity. U.S.-based scientists account for 30% of citations in top-tier scientific journals, according to 2022 data from the NSF. That compares with 20% for Chinese researchers and 21% for all of Europe.

The United States’ commitment to world-leading federal R&D investment is based on the understanding that science is a key public good.

The U.S. model has succeeded because, more than anywhere else, it harnesses the power of both public sector resources and private sector enterprise. The United States’ commitment to world-leading federal R&D investment is based on the understanding that science is a key public good. Without critical public sector resources, private firms would likely underinvest in R&D, since they’re unlikely to reap all the benefits generated by scientific advances. The United States’ competitive, lightly regulated research and commercialization model and its wide-open market for new ideas create much stronger incentives to innovate. These advantages help explain why America’s IT and biotech sectors far outperform their peers in Europe, where a larger share of researchers work for government agencies (and thus lack a profit motive). The U.S. R&D model has allowed the country to develop dominant market positions in countless industries: semiconductors, software, defense, space, natural gas and wind-based energy, biotechnology, and more. Most recently, the U.S. model of publicly funded university research feeding into private sector initiatives created the mRNA-based COVID-19 vaccines, one of humanity’s towering technical achievements.

The U.S. model also undergirds the country’s lead in AI technology – contrary to popular narratives claiming that university research has played little role in this emerging industry. AI innovation has followed a trajectory similar to other breakthrough technologies. As the journalist Cade Metz recounts in his book Genius Makers, researchers at New York University, the University of Toronto, and other institutions did the foundational work that made today’s large language models possible, and companies like OpenAI and Google then led the way in developing commercial applications based on that research.

Engineers assemble fusion reactor components at the Massachusetts Institute of Technology Plasma Science & Fusion Center in Cambridge, MA on January 25, 2023. (Photo by Joseph Prezioso/Getty Images)

Ideas travel best at short distance

The pivotal role played by R&D leadership in powering the United States’ economic growth reflects a core truth about innovation: Ideas travel best at short distance. As studies by the Stanford University economist Nicholas Bloom and other researchers have shown, successful knowledge transfers from universities to the business sector disproportionately occur close to where the technology is invented – in other words, companies tend to invest in ideas emerging close to home. One reason for this phenomenon is that innovation often results from intense exchanges of ideas among researchers, which work best through face-to-face interactions.

The close connection between R&D and prosperity is particularly evident in U.S. cities. A new George W. Bush Institute-SMU Economic Growth Initiative report shows that metropolitan areas with high concentrations of university R&D far outperform most other U.S. metros in business R&D spending, education levels, and incomes – including for people who don’t have a college degree. This means investing in research universities across the country and their nearby surrounding innovation ecosystems is a vital component of renewing America’s leadership in science and technology as well as reinvigorating distressed regions of the nation.

Countries that underperform the United States in science are invariably much less wealthy as well. Some countries – notably China – have reached middle-income status by imitating or stealing technology developed in more advanced economies, but none has ever caught up with the world’s wealthiest societies by using this strategy. Countries that have been successful in entering the ranks of the world’s advanced economies in recent decades – like South Korea, Taiwan, and Israel – have moved beyond imitation to cutting-edge homegrown innovation in fields like semiconductors, network technology, and cybersecurity.

U.S. technological dominance is also the foundation of U.S. geopolitical leadership, both because it has generated a consistent edge in defense technologies like unmanned military aircraft, quantum cryptography, and antimissile systems, and because it ensures the prosperity on which the United States’ ability to project power depends.

Self-inflicted threats

Despite this glittering record, the United States now risks weakening its leadership in innovation – or losing it altogether – as a result of three self-inflicted challenges. First among these problems is a weakening commitment to basic science. Federal R&D funding as a share of GDP has fallen from a high of 1.86% in 1964 to 0.71% in 2023. One key reason for this decline is that federal spending on Social Security and Medicare, plus interest on the national debt, is crowding out vital investments in science. The United States now devotes 2.7% of GDP to R&D (economywide, not just federal public sector spending), compared with 4.3% in South Korea, 4.1% in Israel, 3.6% in Japan, 2.9% in Germany, and 2.1% in China, according to World Bank data.

The CHIPS and Science Act of 2022 offered a chance to reverse the slide in science investment, but Congress declined to take up the opportunity. Individual members proposed a doubling of the NSF budget by 2028 from the 2022 level, but both parties agreed to delete this provision from the relevant appropriations bill, citing higher spending priorities elsewhere in the federal budget. Consequently, the CHIPS legislation will direct more than $50 billion to manufacturing subsidies for favored industries – notably semiconductors and green technologies – but will provide virtually no bump to science research. To make things worse, the Biden Administration’s 2024 budget submission would reduce science investment relative to the current year.

A second challenge facing U.S. leadership in science is that academic research – in general and around the world – is becoming ever narrower and more focused on reconfirming existing knowledge rather than on transformational breakthroughs. According to L. Rafael Reif, an electrical engineer and the former President of MIT, “The entire innovation ecosystem is becoming more shortsighted and cautious.” In a 2023 study published in Nature, Michael Park (an ecologist at the University of Minnesota) and colleagues studied 25 million academic papers published between 1945 and 2010 and 3.9 million patents issued from 1976 to 2010. They found that the share of papers and patents they deemed “disruptive” – meaning they transformed scientific understanding and laid the foundation for world-changing innovation – had declined considerably over that period.

Sclerotic academic departments often encourage promising young researchers to play it safe and stick to low-risk projects.

Falling rates of disruptiveness aren’t due to a scarcity in low-hanging fruit, the authors argue. The problem, they suggest, is that academic incentives now encourage narrow, incremental research. For example, critics charge that sclerotic academic departments often encourage promising young researchers to play it safe and stick to low-risk projects before getting tenure, diluting their potential contributions during what can potentially be the most productive time in a scientist’s career. To make matters worse, the federal peer review process has reinforced this trend by becoming less supportive of high-risk proposals, according to the physicist James Langer.

The third and most existential challenge facing the United States today is a growing turn against free inquiry and scientific objectivity at many of the country’s premier universities. More and more areas of biology and other fields are becoming off-limits in academic departments and professional journals, according to high-profile scientists from Harvard Medical School and the University of Chicago. Pursuing biology projects that might produce results inconsistent with reigning theories on gender, race, and social injustice, for instance, has become an increasingly fraught undertaking. Journal editors are lowering scientific standards for papers that support reigning ideological propositions. And administrators at University of Pennsylvania’s Perelman School of Medicine, to cite one example, are currently working to reduce the amount of science in the medical curriculum to make room for ideologically driven content, one former associate dean alleged in 2023.

These trends have already had measurable consequences. In 2010, 39% of citations in top-tier journals could be attributed to U.S.-based researchers. By 2022, only 30% of the research in these most prestigious journals came out of the United States. Meanwhile, China’s share rose to 20% in 2022 from 12% in 2010, NSF data shows. Underinvestment in R&D has almost certainly played a large role in the slowing of U.S. productivity growth since the 1970s, many studies show. It also helps explain why the United States is losing its advantage over China in military technology, according to analyses by the RAND Corporation and Sweden’s Defense Research Agency.

President Joe Biden arrives at the groundbreaking ceremony of the new Intel semiconductor manufacturing facility in Johnstown, Ohio on September 9, 2022. (Photo by Gaelen Morse/Getty Images)

Renewing U.S. R&D leadership

Sustaining U.S. leadership requires reversing these developments. Congress should increase research investment to levels that prevailed in the late 20th century. In 2005, a blue-ribbon panel of technology executives, retired military leaders, and other experts recommended in a report that Congress double the federal R&D budget as a share of GDP to about 1.4%. A 2018 task force convened by the Council on Foreign Relations proposed 1.0% of GDP – 50% higher than the present figure. Greater investment in research would likely cause a reacceleration in innovation and economic growth, the Bush Institute-SMU report shows. There is a strong relationship between research spending at individual institutions and measures of innovation like patents issued to researchers at those institutions, revenues from licensed technologies, and citations of faculty research papers in patent filings by businesses. This correlation suggests that more spending would deliver commensurate increases in innovation. Marginal returns on R&D investment, moreover, remain high in South Korea, Israel, and other innovation-minded countries. And classic work by the economist Edwin Mansfield, updated by Bush Institute-SMU research, found that U.S. academic R&D investment has produced a long-term return to society of more than 20%.

Federal, state, and local policymakers should also do what they can to promote blue-sky, transformational research aimed at society’s greatest challenges. Congress should mandate that grantmaking agencies increase their funding of bold, high-risk science and report regularly on progress. To reduce the negative effects of groupthink – in which a single skeptical member of a peer review panel can often sway the committee to reject high-risk proposals – agencies should set aside a substantial share of funds for grants that one or two members of a review committee can approve, perhaps by using a “golden ticket” to allow proposals through without a panel consensus. (The Bill & Melinda Gates Foundation employs this method in its grant-selection committees.)

The creation of a new Advanced Research Projects Agency for Health within the NIH in 2022, with a mandate to fund “transformative,” high-risk medical research and a $2.5 billion grant budget for its first three years, was a positive step toward more federal funding for blue-sky science. Congress should seek similar changes in the rest of the NIH and in non-health-care programs as well. Congress can also promote innovation by augmenting funding streams supporting the commercialization of new technologies invented at universities, perhaps through a competitive grant program supporting innovative technology transfer operations and university-wide startup ecosystems.

State governments, which control universities that conduct a majority of academic R&D, should change promotion and tenure policies to increase incentives for scientists to pursue high-risk projects, and they should encourage the creation of research institutes like the Broad Institute of MIT and Harvard (a multidisciplinary health-focused research organization), which sit outside traditional university departments and are therefore able to counter the effect of academic siloing.

Local governments should use their land-use and taxing powers to promote urban innovation districts – places that bring together researchers and entrepreneurs to accelerate new technologies. America’s fast-growing innovation districts are succeeding as engines of economic development, as first-of-its-kind data in the Bush Institute-SMU report show. Policymakers should support their expansion.

Finally, Congress needs to recognize that the growing shift at universities away from free inquiry and toward ideological dogma poses a clear and present danger to U.S. prosperity and global leadership. Legislators should make a commitment to free inquiry, objective research, and nondiscrimination against politically unorthodox researchers a condition of all federal research grants. One possibility would be for state legislatures to direct higher education regulatory authorities to develop statewide standards defining what it means to maintain a commitment to free inquiry and objective research and periodically to determine whether their states’ universities meet these standards. Congress could then require federal funding agencies to restrict research grants to institutions in good standing.

Like the saying “war is too important to be left to the generals,” America’s research universities and the vital work they do are too important to be left to the academic administrators. It will likely take external pressure from elected officials to reverse the disastrous trend toward ideological activism and conformity on U.S. campuses.

Innovations like AI and CRISPR gene-editing technology hold the promise of vast improvements in human well-being and opportunity. They also offer a path to renewed U.S. leadership in science, economic growth, and geopolitics – if the United States cares to take it.

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