Highlights

Key Economic Indicators of National Competitiveness

Key economic indicators show that the U.S. economy continues to be a leading competitor among other advanced economies.

  • Key economic indicators of national competitiveness, gross domestic product (GDP) growth, rising per capita income, and productivity growth, suggest that the United States continues to be very economically competitive. The United States has generally outperformed the European Union (EU) and Japan on these measures during the past two decades.
  • China and India show higher productivity growth and per capita income growth than exhibited by the United States and other advanced economies. Despite these rapid gains, the absolute levels of productivity and per capita income remain far lower for China and India.
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U.S. Technology in the Global Marketplace

The United States has a leading position in the market-oriented knowledge-intensive service industries that are key contributors to economic growth around the world.

  • Market-oriented knowledge-intensive services—business, financial, and communications—are driving growth in the service sector, which now accounts for nearly 70% of global economic activity. Market-oriented knowledge-intensive services generated $12 trillion in gross revenues (sales) in 2005 and grew almost twice as fast as other services between 1986 and 2005.
  • The United States is the leading provider of market-oriented knowledge-intensive services, responsible for about 40% of world revenues on a value-added basis (gross revenue sales minus the purchase of domestic and imported supplies and inputs from other industries) over the past decade. The U.S. world share of value added exceeds world share of both the EU and Asia in all three industries.
  • Asia, ranked third compared with the United States and the EU, has shown a steady rise in its world value-added share over the past two decades. China and India are leading Asia’s increase, primarily in communications.

High-technology manufacturing industries are key contributors to global manufacturing sector growth.

  • Over the past 20 years, the rate of growth in world gross revenue in high-technology manufacturing industries was double that of other manufacturing industries. Asia has the largest high-technology manufacturing industry sector, followed by the United States and the EU, which ranks a distant third.
  • The United States has the single largest value-added world share (35% in 2005) of any country in high-technology manufacturing industries. It is ranked first in three of the five high-technology industries (scientific instruments, aerospace, and pharmaceuticals) and is ranked second in the other two (communications equipment and office machinery and computers).
  • China has made remarkable progress: its world share of high-technology manufacturing value added has more than quadrupled during the past decade. Estimates for 2005 show China accounting for 16% of world value added, making it the third-ranked country globally, just shy of Japan, whose world share in these industries fell sharply from 30% in 1989 to an estimated 16% in 2005.
  • U.S. manufacturing has become more technology intensive, with the high-technology share of manufacturing industries increasing from 14% in 1990 to 24% in 2005. The high-technology share of China and India’s manufacturing industries has also increased, suggesting that manufacturing output in lower-wage countries is also shifting toward technology-intensive goods.
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U.S. Trade Balance in High-Technology Manufacturing and Technology Products

The U.S. trade balance in high-technology manufacturing industries and advanced products has declined.

  • The U.S. world market share of exports by high-technology industries dropped from about 20% in the early 1990s to 12% in 2005, primarily because of losses in export share by U.S. industries producing communications equipment and office machinery and computers.
  • The trend for China has been quite different. China’s share has grown rapidly; its world market share of high-technology industry exports has more than doubled, from 8% in 1999 to an estimated 19% in 2005. Exports by China’s high-technology industries surpassed those of Japan in 2001, the EU (excluding intra-EU exports) in 2002, and the United States in 2003. China has become the world’s largest exporter.
  • The reduction of U.S. industry’s world export share has coincided with the decline in the U.S. trade balance in high-technology manufacturing industries that began in the late 1990s.
  • The historically strong U.S. trade balance in advanced technology products exhibited a similar reduction, shifting from surplus to deficit starting in 2002. The overall U.S. trade deficit is largely driven by U.S. trade with Asian countries, especially China and Malaysia.
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U.S. Royalties and Fees Generated From Intellectual Property

The United States continues to be a net exporter of intellectual property, primarily in manufacturing technology know-how and licensing of computer software.

  • U.S. companies received $33 billion in net revenues generated by intellectual property from affiliated and unaffiliated foreign companies in 2005.
  • The United States ran surpluses in manufacturing know-how and licensing of computer software with unaffiliated companies, largely driven by trade with Asia, the largest purchaser of U.S. intellectual property in these areas.
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New High-Technology Exporters

Indicators that may be relevant to long-term high-technology export potential show that China is the highest ranked among the six large developing economies examined.

  • China is the highest ranked high-technology exporter of the six large developing economies (the other economies are India, Russia, Mexico, Brazil, and Indonesia) according to its composite score in 2007. China was ranked fourth a decade ago, then moved to second in 1999 and first in 2002, overtaking India, the previous leader.
  • Russia is ranked third of the larger developing economies in 2007, although this ranking has fluctuated over the last decade. Mexico, ranked fourth, improved its position compared with past cycles. Brazil, ranked fifth, continued a decade-long decline in its ranking.
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S&E Publications in Peer-Reviewed Journals

U.S. S&E publications in peer-reviewed journals with at least one author from private industry declined in both absolute and relative terms between 1988 and 2005 (a period during which intensified, global competition emerged), and the share of such publications appearing in basic research journals has also declined during this period.

  • Industry’s share of overall U.S. S&E article output declined from just below 9% to about 6% between 1988 and 2005.
  • After peaking at 26% in 1995, the percentage of S&E articles with an industrial author published in basic research journals declined to 22% by 2005.
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Global Trends in Patenting

The United States continues to be the leading source of newly patented inventions compared with the EU and Asia. Asia’s patenting activity is growing rapidly, however, especially in Japan, South Korea, and Taiwan.

  • Inventors residing in the United States accounted for 53% of U.S. patent applications in 2005. Asia, the second-ranked source of U.S. patent applications, more than doubled its share from 13% two decades ago to 29% in 2005, led by growth from Japan, South Korea, and Taiwan. U.S. patent applications from China and India are also growing, although from a low level.
  • U.S. inventors are also the leading source of economically valuable patents known as triadic patents. (Triadic patents include only those inventions for which patent protection is sought in all three major world markets: the United States, Europe, and Japan.)
  • In 2005, the U.S. share of triadic patents was estimated at 37%, followed by the EU (30%) and Asia (28%). Asia’s share of these more important, economically valuable patents has been flat, unlike its rising share of U.S. patent applications.
  • U.S. inventors are the leading source of U.S. patents granted in two key technology areas: (1) information and communications technology (ICT) and (2) biotechnology. Asia is ranked second as a source of U.S. patent grants in ICT and third in biotechnology, and the EU is ranked third as a source in ICT and second in biotechnology.
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U.S. High-Technology Small Businesses

High-technology small businesses are a key sector for developing, adopting, and diffusing new technologies in the U.S. economy. Two types of financing, angel and venture capital, are critical for the formation and growth of high-technology small businesses.

  • High-technology small businesses employed 5 million workers in 2004, one-third of the total high-technology labor force. Service industries account for two-thirds of these workers, and manufacturing employs most of the remainder (31%).
  • Angel investment plays an important role in the formation of high-technology companies. Angel investors financed 51,000 firms with $26 billion in 2006, an 11% increase compared with 2005. The top three technology areas receiving angel investment in 2006 were healthcare and medical devices, biotechnology, and computer software.
  • Venture capital plays a key role in financing young high-technology firms that are expanding. Venture capitalists financed nearly 3,000 firms with $26 billion in 2006, 14% higher than 2005. Technology areas that received the largest share of venture capital investment were computer software (20%), biotechnology (18%), and communications (16%).
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