The Innovation Deficit

Disregarding software and much hyperbole (not necessarily mutually exclusive), one might think that recent times have been an innovation desert. This is the opinion of Newsweek’s Michael Mandel who believes that the lack of innovation over the past decade may be responsible for America’s economic situation.

There’s no government-constructed “innovation index” that would allow us to conclude unambiguously that we’ve been experiencing an innovation shortfall. Still, plenty of clues point in that direction. Start with the stock market. If an innovation boom were truly happening, it would likely push up stock prices for companies in such leading-edge sectors as pharmaceuticals and information technology.

Instead, the stock index that tracks the pharmaceutical, biotech, and life sciences companies in the Standard & Poor’s (MHP) 500-stock index dropped 32% from the end of 1998 to the end of 2007, after adjusting for inflation. The information technology index fell 29%. […]

Consider another indicator of commercially important innovation: the trade balance in advanced technology products. […] In 1998 the U.S. had a $30 billion trade surplus in [life sciences, biotech, advanced materials, and aerospace]; by 2007 that had flipped to a $53 billion deficit. […]

A more indirect indication of the lack of innovation lies in the wages of college-educated workers.

via @jakeybro

Somewhat related: this week the 2009 State of Innovation Summit was held in Washington DC. “Commentary” from John Wilbanks (runs the Science Commons project at Creative Commons) and from Bioephemera’s Jessica Palmer.