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Survey Show U.S. Lead in Innovation is Shrinking
Sep 22, 2010
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A recent McGladrey survey of manufacturers and distributors shows that company and leadership commitment to innovation is high, but also show signs that U.S. dominance is beginning to wane.

52% percent of respondents rank product development as their top innovation activity in 2010. Rapidly bringing a product from concept to market is the biggest challenge to innovation.

“While U.S. companies are clearly committed to innovation, according to the Manufacturers Alliance, within the last decade, R&D spending in emerging Asian economies has outpaced U.S. growth by at least a two-to-one margin,” said Tom Murphy, executive vice president of manufacturing and wholesale distribution, RSM McGladrey. “The modest 2.8% increase forecasted by R&D magazine for U.S. companies isn’t nearly enough to outpace consistent double-digit increases in China and emerging Asian nations.”

Murphy said changes in government policy could provide an immediate boost to innovation investment. For example, the current U.S. R&D tax credit expired at the end of 2009, and it is unclear whether Congress will renew the program before the November mid-term elections. The lack of a permanent credit, which provides immediate write-offs for various research-related expenditures, is a disincentive for U.S. companies to make long-term R&D investments.

“Globally, many national governments are taking aggressive action to spur innovation,” said Murphy. “In its 2009 Science, Technology and Industry Scoreboard, the Organization for Economic Co-operation and Development (OECD) reported a sharp rise in the number of countries offering refundable R&D credits or tax deductions. In the European Union, Spain offers the largest overall subsidy, while France provides R&D tax assistance to companies regardless of size. As a result of such active international programs, the U.S. R&D tax credit fell to 17th place on the OECD list last year.”

In addition to spurring private investment, a strong, permanent R&D credit will help U.S. companies overcome the critical innovation barrier of “speed to market” – a challenge to innovation noted by 38% of survey respondents.

McGladrey’s 2010 Manufacturing and Wholesale Distribution National Survey asked leaders of U.S.-based manufacturing and wholesale distribution enterprises to provide perspectives on the current state of their companies and industry and their strategies for sustaining or growing profitability in the coming year. Participants responded to questions pertaining to current business conditions, domestic and global business strategies, cost structure, technology initiatives, operations, and other issues. C-level executives from 1061 companies participated. The survey was conducted from Mar. 2, 2010 to Apr. 5, 2010.

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