Measuring the U.S.-China Innovation Gap:

Initial Findings of the UCSD-Tsinghua Innovation Metrics Survey Project

Peter  Cowhey  Tai  Ming  Cheung  

with  Eric  Anderson      

July  9,  2013  

Current Innovation Metrics Mismeasure Actual Innovation

•  Most  common  metrics  are  inputs  and  acAviAes,  not  outputs  (R&D  expenditures,  patent  output,  number  of  STEM  graduates,    journal  citaAons)  

•  Magnitude  of  impact  innovaAon  inputs  have    on  commercial  innovaAon  varies  across  industries  

Innovation Activities

Innovation Outputs

Innovation Environment

New Survey to Measure U.S.-China Innovation

•  For  each  industry,  survey  answers:  – What  is  the  gap  in  innovaAon  between  the  United  States  and  China?  

–  At  what  rate  is  Chinese  innovaAon  catching  up  to  the  United  States?      

•  Includes  quesAons  on  innovaAon  environment  –  DomesAc/internaAonal  financing  and  talent,  government  regulaAon,  collaboraAon,  geography  

Survey Demographics •  Web-­‐based  survey  administered  from  May-­‐June  2013  •  Received  68  U.S.  responses;  23  China  responses  •  China  sample  less  IC  design  experience  than  U.S.  sample  

–  China  average  9  years;  U.S.  average  22  years  

Correcting for Cross-Country Differences

•  Concern  that  US  and  China  sample  may  approach  term  “innovaAon”  with  different  concepts  and  definiAons  

•  Created  scenarios  depicAng  varying  levels  of  innovaAon  to  correct  for  bias  

•  This  report  only  uses  respondents’  assessments    of  their  own  country  

 Methodology  used:  h_p://gking.harvard.edu/files/gking/files/vign.pdf  

Survey Results: Innovation Level

•  AcAviAes  of  5  most  leading-­‐edge  IC  design  teams  – 67%  of  US  experts  rate  US  innovaAon  high  – 81%  of  Chinese  experts  rate  China  innovaAon  low  

Chinese Experts’ Assessment of China’s Innovation Gap

•  China’s  most  innovaAve  IC  design  teams:  –  Average  49  months  to  current  fronAer  –  Average  57  months  to  advancing  fronAer  –  35  percent  of  Chinese  experts  say  China  will  never  catch  up  

U.S. Experts’ Views of Innovation Gap

 

“China  will  catch  up  in  about  4  years  Ame.  There  is  nothing  that  moves  fast  enough  in  most  IC  design  spaces  that  is  so  unique  that  it  can’t  be  overcome,  as  long  has  you  have  enough  money  to  pour  into  it.”  

-­‐-­‐Execu've  Vice  President  of  Engineering,    Fabless  Semiconductor  Company  

 “The  duraAon  of  IC  design  development  depends  on  the  number  of  engineers  ‘thrown’  at  a  problem.    Owing  to  costs,  companies  in  India/China  can  reduce  cycle  Ames  if  they  perceive  it  is  needed.”  

                     -­‐-­‐Associate  Professor,  Integrated  Circuits    

 

Survey Results: Innovation Obstacles

•  U.S.  three  largest  obstacles:    venture  capital,  qualified  talent,  foreign  compeAAon  

•  China  three  largest  obstacles:    weak  IP  protecAon,  qualified  talent,  lack  of  high-­‐quality  IP  

Survey Results: Government Impact

•  Chinese  view  industrial  policy  as  posiAve,  But  only  22%    rate  it  highly  posiAve  

•  Both  U.S.  and  China  have  balanced  view  of  public  services    (i.e.  tax  and  business  administra'on,  customs  services,  immigra'on      processing,  public  infrastructure)  

Conclusion: Policy Implication •  Fair  consensus  that  China  is  4-­‐5  years  behind;    

substanAal  view  that  it  will  never  catch  up  •  Biggest  problem  for  the  Chinese,  in  their  own  view,    

is  intellectual  property  •  China’s  industrial  policy  is  viewed  as  posiAve  but  not  as  

highly  posiAve—not  the  crux  of  their  compeAAve  advantage  

•  Conclusion:  Devote  more  resources  to  IP  protecAon  and    fewer  resources  to  subsidized  R&D  

•  Need  to  extend  survey  to  other  sectors  and  conAnue  to    refine  measurements  

•  Survey  provides  measure  of  innovaAon  gap  at  leading  edge,  which  may  differ  from  gap  at  trailing  edge  

FYI: Limitations and Potential Mismeasurement

•  Conceptual  limits:  –  InnovaAon  definiAon  includes  products  and  processes    but  excludes  markeAng  and  organizaAonal  methods  

–  Survey  focuses  on  leading-­‐edge  innovaAon,  capturing    the  fronAer  but  not  measuring  the  whole  industry  

–  InnovaAon  inherently  a  dynamic  concept—likely  to  vary  within  IC  design  subsectors  

•  Survey  Response  risks:  –  Low  survey  response  rates  of  ~5%  could  mean    non-­‐representaAve  sample  

–  Pretested  quesAon  wording  but  experts  may  sAll  differ    in  interpretaAon  (i.e.  by  subsectors)