While domestic manufacturing industries have undergone considerable change over the past two decades, one thing that has remained consistent is America’s continued leadership in total research and development (R&D) investments. In fact, U.S. manufacturers spent about $500 billion (or roughly 2.8 percent of America’s gross domestic product) on R&D in 2015, well above the levels spent by global competitors such as China, Germany and Japan.1
However, a closer look at the R&D expenditures reveals a troubling pattern. Despite the fact that the U.S. has invested heavily in basic (knowledge-building) and applied (practical application of knowledge) research, China has now surpassed America in expenditures for developmental research, which is the final segment of the R&D value chain in which knowledge is transferred to production processes.2 Germany, Japan, South Korea and other advanced industrial nations are also weighting more of their overall R&D spend toward research commercialization.
Why does this issue matter? Because U.S. companies still lead the world in creation of innovative technologies, but an increasing number of nations are more adept at rapidly integrating these concepts into production and go-to-market processes. That’s a significant lost opportunity, particularly for the globally-competitive aerospace and defense manufacturing sector.
July 10, 2017
1) Choraria, R., Rose, J., and Sirkin, H., “An Innovation-Led Boost for U.S. Manufacturing,” (April 17, 2017) Boston Consulting Group