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The Atlantic Century: Benchmarking EU & U.S. Innovation and Competitiveness

Five countries—Singapore, Sweden, Luxembourg, Denmark, and South Korea—outperform the United States in international competitiveness and innovation, according to The Atlantic Century: Benchmarking EU & U.S. Innovation and Competitiveness released on February 24th by the Information Technology and Innovation Foundation (ITIF) and the European-American Business Council (EABC).

Several developing nations are lagging behind in the transition into globally competitive, innovative economies with India, Mexico, and Brazil the bottom three ranked countries of those analyzed, in reverse order. Although economic competitiveness is not a given for Europe with Cyprus and Greece finishing 4th and 5th from the bottom, respectively.
The unprecedented geographical freedom afforded to firms due to advanced transportation and communication technologies and the corresponding rise of global competition is well known. Less well known is which countries have taken advantage of these technologies and global opportunities and which have fallen behind.

The Atlantic Century assesses global competitiveness and innovation by ranking 36 countries along with the European Union and NAFTA region based on economic structure, policy and performance across 16 indicators. Although it is by no means an exhaustive study, the report shines a light on high-performing countries in diverse areas of innovation.

The United States leads Europe in 13 of the 16 indicators, including knowledge (higher education and number of researchers); innovation (corporate and government R&D and scientist publications); information technology (IT investments, e-government and broadband); overall business climate; entrepreneurship (new corporations and venture capital), and productivity.

Although the United States ranks higher than Europe, the trends are moving in the opposite direction. Since the beginning of the decade the EU-15 has made significantly more progress in the 16 indicators as a whole than the United States (although the EU-15 ranks 29th overall). In fact, the United States ranks 40th behind every other country and region, in terms of progress.
The lack of progress in the United States in the face of growing international competition is worrying yet not entirely surprising. While other countries have created national innovation strategies the United States seems to have rested on its laurels. For example, the European Union’s Lisbon Agenda has expanded government support for R&D faster than the United States, and Asian nations such as China, Singapore, and Japan (ranked 1st, 2nd, and 10th in terms of change, respectively) have invested in robust tax R&D tax credits and IT infrastructure.

Some argue the rapid progress of the European Union and China, for example, are no threat to U.S. leadership (although according to our report, the United States has already lost its title as the most competitive nation) because the United States still remains, and will remain, head-and-shoulders above other countries. Yet according the analysis in the Atlantic Century if U.S. progress continues at such a lackluster rate and other nation’s improvement continues the EU-15 will become more competitive than the United States by 2020 and China will do so by 2031.

The United States and Europe unambiguously led the 20th century global economy, yet it is unclear whether or not their leadership will remain throughout the 21st century. Advanced Asian nations such as Japan and rapidly advancing nations like China are catching up. What is clear is that U.S. competitiveness is not driven by economic destiny. Instead, in the past U.S. leadership was due to policy makers recognizing the changing economic landscape and the need for innovative national strategies in response.

If the 21st century is to be another “Atlantic Century” a similar approach is needed today.

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