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The West is set to lose the Innovation Arms Race



The West is set to lose the Innovation Arms Race

New research finds that the US, EU & UK will lose all innovation leadership positions by 2029

The Center for Advancing Innovation (CAI) and PatSnap, the world’s leading provider of research and development (R&D) analytics, today unveiled the results of the Innovation Arms Race 2018 report.

The research found that the United States, European Union and the United Kingdom are losing the Innovation Arms Race. The US has already lost its leadership position in global patenting metrics, and unless steps are taken to improve its innovation and commercialisation processes, will lose its leadership positions for all key performance indicators by 2029.

The aim of this report is to provide an insight into the global innovation landscape, and identify the potential opportunities for businesses, government bodies and academic institutions to innovate more effectively, and to capitalise more efficiently on the substantial amount of innovation that has taken and continues to take place globally.

The Innovation Arms Race refers to a number of factors involving innovation across different countries, with the framework assessing key metrics including patent effectiveness, patent efficiency, patent grants per capita and more. While R&D spending continues to increase with an estimated US $2.19 trillion to be spent on R&D globally in 2018, over the past 30 years, the returns on R&D expenditure have decreased by about 65% – meaning for every dollar spent on R&D, there are 65% fewer returns.

Businesses, government bodies and academic institutions know that they have to innovate to remain relevant, find new sources of revenue, push the boundaries of knowledge and science, and differentiate themselves in an increasingly competitive and global marketplace. Yet, there is a vast amount of wasted money in innovation globally, where “waste” is defined as producing no economic value.

In this report, the CAI and PatSnap analysis determined which countries are driving innovation most efficiently and effectively; innovation trends as well as the current and future winners and losers of the global Innovation Arms Race. The report highlights key findings:

  • Patent effectiveness declining in the WestPatent effectiveness is the ability to convert patent applications into patent grants and reflects the quality and uniqueness of patents.  While volume remains high in patent applications, the US, EU and UK are weakening in their ability to convert patent applications into patent grants – or – produce high quality patents.The US, EU and UK have negative or near zero growth rate in producing quality patents for the last 20 years. From 2005-2015, the top five countries in the growth of high quality patents are China, Singapore, Brazil, Israel and India.
  • Patent efficiency needs to improvePatent efficiency is the ability to convert one dollar in R&D spend to a granted patent. This report’s analysis of patent efficiency found that it costs much more for the US and UK than China, South Korea and Russia to produce a high-quality patent that gets granted; both the US and UK produce approximately 600 patents per US $1 billion of research expenditure.
    Switzerland and South Korea hold the top spots for patenting efficiency as of 2015 with 1977 and 1562 patents per US $1 billion respectively. China and Singapore have the greatest improvement in efficiency with a 10% and 18% CAGR, respectively.
  • Research expenditure provides little ROI in the WestWhile the US spends twice as much as each of the UK and EU in research expenditure relative to GDP, R&D spend is not driving GDP growth in the US. In other words, one additional dollar of R&D spend in the US does not drive a corresponding growth in GDP.
  • Asia is dominating innovation metrics and will continue to dominate: East Asian countries are out-performing the US, EU and UK in growth of R&D spend and patent grants. China is reaping the rewards from the increase in R&D spend as it will surpass the US in GDP by 2025. China and South Korea are consistently in the lead regarding a number of performance metrics and are poised to remain in the lead. India, Israel and Singapore are expected to see the highest growth in patents granted through 2035.

Policy dynamics in the West are not the drivers of weakened performance, since competing countries have been able to increase their ability to have patents granted in US and EU patent offices. Furthermore, spending more on R&D in the US, EU and UK is not a solution to innovation, as competing nations are more productive in converting research expenditure to issued patents.

There are a number of potential issues that may be contributing to the West’s decline in innovative effectiveness, including the fact that scientists in the US, EU and UK are incentivised to patent, and therefore it is possible that more patent applications are pushed forward that are not high in quality. Additionally, scientists have little reason to focus on commercialising their patents, leaving many patents left on the shelf and un-commercialised. Moreover, unsuccessful research is typically not published, leading to a waste of R&D resources allocated to repeating failed experiments.

Rosemarie Truman, Founder and CEO of CAI said, “The Innovation Arms Race analysis illustrates that the US, EU and UK need to be more focused and strategic in converting R&D dollars into impact and outcomes.  In particular, it is critical to maximise the returns on past R&D investment by commercialising innovation sitting on the shelf. The US licenses only 0.3% of federally funded inventions out. If we could get 1% more inventions out a year, the value at stake is $1.5 trillion to the US economy alone.”

Ray Chohan, SVP, Corporate Strategy at PatSnap, said that “despite recent obstacles to globalisation, innovation continues to become more relevant to technological progress, and in return – economic progress. While the West has – to a significant extent – pioneered technological breakthroughs in the past, it is being held back by legacy processes and technology when it comes to innovation and turning it into economic gain. Much of the growth and efficiency we’re seeing in R&D in APAC is being supported by companies leveraging new technologies and processes with the aim of streamlining their R&D investment.”

The findings presented here are a snapshot of the complete findings – the full Innovation Arms Race Report can be downloaded for free at the following address:

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UK seeks G7 consensus on digital competition after Facebook blackout



UK seeks G7 consensus on digital competition after Facebook blackout 1

LONDON (Reuters) – Britain is seeking to build a consensus among G7 nations on how to stop large technology companies exploiting their dominance, warning that there can be no repeat of Facebook’s one-week media blackout in Australia.

Facebook’s row with the Australian government over payment for local news, although now resolved, has increased international focus on the power wielded by tech corporations.

“We will hold these companies to account and bridge the gap between what they say they do and what happens in practice,” Britain’s digital minister Oliver Dowden said on Friday.

“We will prevent these firms from exploiting their dominance to the detriment of people and the businesses that rely on them.”

Dowden said recent events had strengthened his view that digital markets did not currently function properly.

He spoke after a meeting with Facebook’s Vice-President for Global Affairs, Nick Clegg, a former British deputy prime minister.

“I put these concerns to Facebook and set out our interest in levelling the playing field to enable proper commercial relationships to be formed. We must avoid such nuclear options being taken again,” Dowden said in a statement.

Facebook said in a statement that the call had been constructive, and that it had already struck commercial deals with most major publishers in Britain.

“Nick strongly agreed with the Secretary of State’s (Dowden’s) assertion that the government’s general preference is for companies to enter freely into proper commercial relationships with each other,” a Facebook spokesman said.

Britain will host a meeting of G7 leaders in June.

It is seeking to build consensus there for coordinated action toward “promoting competitive, innovative digital markets while protecting the free speech and journalism that underpin our democracy and precious liberties,” Dowden said.

The G7 comprises the United States, Japan, Britain, Germany, France, Italy and Canada, but Australia has also been invited.

Britain is working on a new competition regime aimed at giving consumers more control over their data, and introducing legislation that could regulate social media platforms to prevent the spread of illegal or extremist content and bullying.

(Reporting by William James; Editing by Gareth Jones and John Stonestreet)


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Britain to offer fast-track visas to bolster fintechs after Brexit



Britain to offer fast-track visas to bolster fintechs after Brexit 2

By Huw Jones

LONDON (Reuters) – Britain said on Friday it would offer a fast-track visa scheme for jobs at high-growth companies after a government-backed review warned that financial technology firms will struggle with Brexit and tougher competition for global talent.

Finance minister Rishi Sunak said that now Britain has left the European Union, it wants to make sure its immigration system helps businesses attract the best hires.

“This new fast-track scale-up stream will make it easier for fintech firms to recruit innovators and job creators, who will help them grow,” Sunak said in a statement.

Over 40% of fintech staff in Britain come from overseas, and the new visa scheme, open to migrants with job offers at high-growth firms that are scaling up, will start in March 2022.

Brexit cut fintechs’ access to the EU single market and made it far harder to employ staff from the bloc, leaving Britain less attractive for the industry.

The review published on Friday and headed by Ron Kalifa, former CEO of payments fintech Worldpay, set out a “strategy and delivery model” that also includes a new 1 billion pound ($1.39 billion) start-up fund.

“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.

Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.

The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance, all mean the sector’s future in Britain is not assured.

It also recommends more flexible listing rules for fintechs to catch up with New York.

“We recognise the need to make the UK attractive a more attractive location for IPOs,” said Britain’s financial services minister John Glen, adding that a separate review on listings rules would be published shortly.

“Those findings, along with Ron’s report today, should provide an excellent evidence base for further reform.”


Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.

“It’s a question of knowing who to call when there’s a problem,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.

A UK fintech wanting to serve EU clients would have to open a hub in the bloc, an expensive undertaking for a start-up.

“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” Swinburne said.

The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).

“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.

($1 = 0.7064 pounds)

(Reporting by Huw Jones; editing by Jane Merriman and John Stonestreet)


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G20 to show united front on support for global economic recovery, cash for IMF



G20 to show united front on support for global economic recovery, cash for IMF 3

By Michael Nienaber and Andrea Shalal

BERLIN/WASHINGTON/ROME (Reuters) – The world’s financial leaders are expected on Friday to agree to continue supportive measures for the global economy and look to boost the International Monetary Fund’s resources so it can help poorer countries fight off the effects of the pandemic.

Finance ministers and central bank governors of the world’s top 20 economies, called the G20, held a video-conference on Friday. The global response to the economic havoc wreaked by the coronavirus was at top of the agenda.

In the first comments by a participating policymaker, the European Union’s economics commissioner Paolo Gentiloni said the meeting had been “good”, with consensus on the need for a common effort on global COVID vaccinations.

“Avoid premature withdrawal of supportive fiscal policy” and “progress towards agreement on digital and minimal taxation” he said in a Tweet, signalling other areas of apparent accord.

A news conference by Italy, which holds the annual G20 presidency, is scheduled for 17.15 (1615 GMT)

The meeting comes as the United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies going despite COVID-19 lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new variants of the coronavirus mean the future of the recovery remains uncertain.

German Finance Minister Olaf Scholz warned earlier on Friday that recovery was taking longer than expected and it was too early to roll back support.

“Contrary to what had been hoped for, we cannot speak of a full recovery yet. For us in the G20 talks, the central task remains to lead our countries through the severe crisis,” Scholz told reporters ahead of the virtual meeting.

“We must not scale back the support programmes too early and too quickly. That’s what I’m also going to campaign for among my G20 colleagues today,” he said.


Hopes for constructive discussions at the meeting are high among G20 countries because it is the first since Joe Biden, who vowed to rebuild cooperation in international bodies, became U.S. president.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too – factory activity in China grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, and in Japan fourth quarter growth slowed from the previous quarter with new lockdowns clouding the outlook.

“The initially hoped-for V-shaped recovery is now increasingly looking rather more like a long U-shaped recovery. That is why the stabilization measures in almost all G20 states have to be maintained in order to continue supporting the economy,” a G20 official said.

But while the richest economies can afford to stimulate an economic recovery by borrowing more on the market, poorer ones would benefit from being able to tap credit lines from the IMF — the global lender of last resort.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by then U.S. President Donald Trump.

Scholz said the change of administration in Washington on Jan. 20 improved the prospects for more IMF resources. He pointed to a letter sent by U.S. Treasury Secretary Janet Yellen to G20 colleagues on Thursday, which he described as a positive sign also for efforts to reform global tax rules.

Civil society groups, religious leaders and some Democratic lawmakers in the U.S. Congress have called for a much larger allocation of IMF resources, of $3 trillion, but sources familiar with the matter said they viewed such a large move as unlikely for now.

The G20 may also agree to extend a suspension of debt servicing for poorest countries by another six months.

($1 = 0.8254 euros)

(Reporting by Michael Nienaber in Berlin, Jan Strupczewski in Brussels and Gavin Jones in Rome; Andrea Shalal and David Lawder in Washington; Editing by Daniel Wallis, Susan Fenton and Crispian Balmer)


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