19 October 2011

Advantage: How American Innovation Can Overcome the Asian Challenge

Adam Segal, Advantage: How American Innovation Can Overcome the Asian Challenge (New York: W. W. Norton & Company, 2011).

As the United States struggles to emerge from recession, India and China’s continued robust growth is the subject of much interest and concern. In his new book, Advantage: How American Innovation Can Overcome the Asian Challenge, Council on Foreign Relations (CFR) Senior Fellow Adam Segal analyzes Asia’s technological rise, questions assumptions about the United States inevitable decline, and explains how America can preserve and improve its position in the global economy by optimizing its strength of moving ideas from the lab to the marketplace.

Segal explains that Asia’s growth has been fueled by its “hardware of innovation”—growing middle classes that will eventually outstrip the spending power of Americans, a cheaper labor force, more students studying to become engineers, and increased money pouring into research and development.

However, Segal maintains the region lacks a “software of innovation”—a cultural, social, and political framework that enables and sustains new idea generation. As an example, he cites a survey conducted by China Daily that found sixty percent of graduates with doctorates admitted they had copied someone else’s work. “A member of the Chinese Academy of Sciences, a president of a university, and a member of the Chinese Academy of Engineering were involved in prominent plagiarism cases, and all kept their jobs.”

India’s main problem, he writes, is a decrepit educational system. “A 2007 government study rated two-thirds of [India’s eighteen thousand colleges and universities] and found that 90 percent of the degree-granting colleges were poor or middling quality.”

Through his research, Segal concludes the United States has an advantage over Asia in the realm of the software of innovation. “In America, your ideas can make you rich. Intellectual property is protected, and individual scientists are able to exploit their breakthroughs for commercial gains,” he writes. “It is time to realize that software in its most expansive sense offers the most opportunities for the United States to ensure its competitive place in the world.” The challenge is “to recover a culture of innovation that was driven underground, overshadowed by sexy credit default swaps and easy spending.”

Drawing the connection between national security, trade, and innovation, Segal notes “For the United States, the basic equation is simple: economic strength and national security depend on innovation, innovation thrives only with openness, thus policies must defend and nurture openness.” Foreign policy decisions should reflect this, especially with regard to foreign investment in the United States and immigration access for scientists and entrepreneurs.

Within the United States, Segal stresses that “cities and regions need to think about where this comparative advantage lies, and how they can best develop collaborative networks that support innovation. And while no single overarching strategy can be applied across the country, the federal government has a large role to play through the use of research support, tax incentives for venture capital investments, collaborative R&D schemes, and the joint development of intellectual property.” He cites Maine and Arizona as examples of economies that are forming partnerships among universities, government, and businesses, embracing emerging technologies, and welcoming investment from around the world.

Segal offers six principles for encouraging U.S. innovation:

The software of innovation must be open and collaborative. To this end, the country needs to improve its policies on the flow of money and talent into its borders.

The software of innovation must be secure and stable. “The creation of new knowledge is far more important to the security of the country than the defense of any technological lead, real or imagined, it currently possesses.”

Risk remains essential. “While risk takers drive change and growth, it is not risk for risk’s sake that makes their contribution so important. Rather it is that risk takers generate new knowledge and companies.”

There are no grand strategies, just local fixes. “We need an upsurge of small start-up companies to reenergize the economy and to ground innovation locally, as the big technology companies become more global and less national.”

Americans must all feel they have a stake in “user-driven” innovation. Policymakers should work to “spread the pain of adjusting to change” and demonstrate how openness will improve lives.

The United States must be tightly linked to science and technology hotspots in the rest of the world. It should turn its existing “vast web” of collaborative connections into “a smart grid for the global system of innovation.”

Segal argues that the emergence of India and China does not mean the end of American economic and technological power. Instead, the United States should now leverage its many advantages.

To order, visit www.cfr.org/advantage_book/



“A well-reasoned antidote to gloomy views of American decline.”

Joseph S. Nye Jr., Harvard University, and author of The Future of Power

“A fascinating, intelligent, and ultimately optimistic exploration of one of the key challenges in American economic and security policy.”

Ira Stoll, editor, FutureOfCapitalism.com, and author of Samuel Adams: A Life

“This lucid, stimulating analysis shows why America’s open, multicultural society can make a significant contribution to innovation in the decades to come…”

—Publishers Weekly

“A must for policymakers.”

—Kirkus Reviews

Adam Segal is CFR’s Ira A. Lipman senior fellow for counterterrorism and national security studies. An expert on security issues, technology development, and Chinese domestic and foreign policy, Segal currently leads study groups on cybersecurity and cyber conflict as well as Asian innovation and technological entrepreneurship. Previously, Segal was an arms control analyst for the China Project at the Union of Concerned Scientists. He has been a visiting scholar at the Massachusetts Institute of Technology’s Center for International Studies, the Shanghai Academy of Social Sciences, and Tsinghua University in Beijing. Segal is the author of Digital Dragon: High-Technology Enterprises in China. He also writes for the blog, “Asia Unbound,” on CFR’s website, www.cfr.org.


For the publication cited, see Lyle J. Goldstein and Andrew S. Erickson, eds., China’s Nuclear Force Modernization, Naval War College Newport Paper No. 22, 2005.