Vice President, Global Innovation Policy
Stephen Ezell

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Ezell previously worked at Peer Insight, an innovation research and consulting firm, before coming to ITIF. He advises policies focusing on science and technology, international competitiveness and trade.

 
One of the biggest strengths for the U.S. is that we take a bottom-up approach in creating new industries. This is the power to advance innovation and embrace an entrepreneurial spirit.

The U.S. invests close to 540 billion dollars every year in both public and private research and development, which is more than any other country in the world. That money is channeled through universities for the creation of a number of technologies and industries. Google, for instance, got its start with a National Science Foundation research grant.

On the other hand, China takes a top-down approach. Their government follows the Made in China 2025 program which often invests directly to seed new companies.

Since 2002, China has accumulated a goods-trade surplus with the U.S. of almost five trillion dollars. A lot of this surplus has provided China with funds to invest in research and development. China is now the world’s largest exporter of high technology products.

They want to dominate every advanced technology industry. It will be hard for Chinese companies if they stop receiving funding from the government because their competition is non-market based.

Two Improvements Japan Should Make

Japan ranks third in the world in terms of the quality of its innovations. That’s a measure of the quality of the universities and scientific publications in Japan, as well as their global impact on innovation.

One challenge for Japan is that it doesn’t have strong industry-academic partnerships to develop new industries. The average academic researcher in Germany and America receives four times as much funding from industry. One way Japan could strengthen industry-academic collaboration is to introduce a flat tax credit of 20% whenever a company is funding research at a university.

Also, firms like Nokia and Apple became more successful because they could sell their products into a global marketplace. Japan had world-leading phones and the first SMS, but since they were Japan-specific standards, they faced the Galapagos syndrome. Japan needs to promote global standards.

Cooperating With Countries That Value Liberty, Democracy and Capitalism

Japan and America could work even better together. It would be good if we completed a high-standard free trade agreement and expand cooperation in advanced research. It is absolutely vital that we increase our diplomatic and commercial engagement across Asia. We need to work with like-minded countries who believe in the principles of liberty to promote a positive vision of liberal democratic capitalism and push back against China’s ‘Belt and Road’ approach.