The Global Innovation Sweepstakes A QUEST TO WIN THE FUTURE BY Robert A. Manning and Peter Engelke CONTRIBUTING AUTHOR Samuel Klein The Scowcroft Center for Strategy and Security works to develop sustainable, nonpartisan strategies to address the most important security challenges facing the United States and the world. The Center honors General Brent Scowcroft’s legacy of service and embodies his ethos of nonpartisan commitment to the cause of security, support for US leadership in cooperation with allies and partners, and dedication to the mentorship of the next generation of leaders. This report is written and published in accordance with the Atlantic Council Policy on Intellectual Independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council, its partners, and funders do not determine, nor do they necessarily endorse or advocate for, any of this report’s particular conclusions. © 2018 The Atlantic Council of the United States. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Atlantic Council, except in the case of brief quotations in news articles, critical articles, or reviews. Please direct inquiries to: Atlantic Council 1030 15th Street NW, 12th Floor Washington, DC 20005 ISBN-13: 978-1-61977-550-3 June 2018 The Global Innovation Sweepstakes A QUEST TO WIN THE FUTURE BY Robert A. Manning and Peter Engelke CONTRIBUTING AUTHOR Samuel Klein Contents 1 Foreword 79 Mexico: Hopeful Challenger, BY KATHERINE PEREIRA 2 Executive Summary 81 South Korea: From Chaebol to 3 Recommendations Gangnam Style 4 China and the United States 83 Sweden: Innovation Society 5 Other Top-Tier Contenders 7 The Struggling Second and Third 85 Authors’ Bios Tiers 8 Lessons for Innovators 86 Acknowledgments 89 Glossary 9 Introduction: The Global Innovation Sweepstakes 90 Endnotes 12 Method: A World Tour 13 The Sweepstakes 15 Mapping Global Innovation SIDEBARS 17 China and the United States 25 Asia’s Other Giants 23 Assessing Top-Down Innovation 30 Europe: Rising to the Challenge in China 36 Small States, Big Impact by Dr. Yang Gao 41 The Rest: A Global Sample 32 Europe’s Competitive Advantages 46 The Policy Environment in the Entrepreneurial Age 47 Technology Outpacing Governance by Nicolas Colin 51 Intellectual Property 37 Universities in Sweden’s 58 Conclusion: Five Big Questions Innovation Ecosystem for the Future (and Some by Lisa Ericsson and Donnie SC Recommendations) Lygonis 69 SPECIAL SECTION 54 Innovation and Intellectual Global Innovation Profiles Property in Emerging Countries 70 China: Up Close and Personal, by Jennifer Brant BY SAMUEL KLEIN 74 France: Confounding Stereotypes 77 Israel: Place and Flow IV THE GLOBAL INNOVATION SWEEPSTAKES: A QUEST TO WIN THE FUTURE Foreword BY FREDERICK KEMPE eotechnology today is what geopolitics were to the nineteenth and twentieth centuries. A cluster of new technologies—namely artificial intel- ligence, robotics, green energy, and biotechnology, among others—will do more than just transform science. They will determine how we all live and function. Geotech—the race for technological leadership among the world’s powers—will remake the global order. GToday, the world has many innovative places—coun- diverse backgrounds and it is their thinking that drove the tries and cities—that are in a fierce competition for global findings of this report—the second in a two-part series. leadership in tech-based innovation. While the innovation The Council’s Scowcroft Center develops sustainable, non- ecosystem that the United States built after 1945 remains partisan strategies to address the most important security intact, it is at significant risk of erosion as China and other challenges facing the United States and the world. These countries aim for “first mover” advantage in the next round strategies are informed by strategic foresight and forward- of technological breakthroughs. Increasingly, countries looking analysis of global trends—many of which can be around the world recognize that they must lead in tech- found in this report. based innovation if they are to be prosperous and secure in The world is on the cusp of a technological wave that will the future. shape the future of human civilization. Those countries that It is with this realization that twelve months ago the can create cutting-edge technologies—and adapt to those Atlantic Council’s Scowcroft Center for Strategy and Security, technologies at the same time—will realize enormous eco- in partnership with Qualcomm, embarked on a global tour nomic and geostrategic benefits in the decades to come. In of technology hubs to find out which ones are at the cutting that regard, this report comes at a very important time. We edges of tech-based innovation and which are at risk of fall- must realize that while the United States will remain innova- ing behind. tive, the country cannot be placed on auto-pilot if it hopes to Although we could not travel everywhere, our research stay at the top. took us to China, Japan, South Korea, Singapore, Mexico, I hope you will find this report as thought-provoking as I the United Arab Emirates, Saudi Arabia, Israel, Sweden, and did and that it will help you understand and lead the way in France. We met with roughly two hundred individuals from today’s global innovation landscape. Frederick Kempe President and CEO Atlantic Council THE GLOBAL INNOVATION SWEEPSTAKES: A QUEST TO WIN THE FUTURE 1 Executive Summary BY MATHEW J. BURROWS Director of the Foresight, Strategy, and Risks Initiative, Scowcroft Center for Strategy and Security, Atlantic Council he world is on the cusp of an unprecedented technological revolution, one that will have far-reaching social, economic, and geostrategic consequences. This tech revolution will change the way we live, work, manufacture goods, fight wars, and communicate. What is unfolding is a convergence of tech- nologies, the melding of the digital with the real economy, in a synergy of artificial intelligence (AI), big data (the cloud), robotics, biotech, advanced manufacturing, the Internet of Things (IoT), nano-engineering and -manufacturing, and Tover the horizon, quantum computing. How the United States and other major actors posi- This report seeks to answer the fundamental questions tion themselves as innovators and adaptors of emerging raised by the unfolding technological revolution. It fol- technologies will determine their economic fate and geo- lows an earlier one focused solely on US innovation that strategic standing. And while the United States remains at was also produced by the Foresight, Strategy, and Risks the top of the global tech-innovation hierarchy, its position (FSR) Initiative of the Atlantic Council’s Scowcroft Center is in real jeopardy. Several nations are fast approaching. for Strategy and Security in partnership with Qualcomm. In this century, the world’s most advanced countries will The first report saw a United States that was losing its be those best positioned to create and adapt to new and edge and recommended actions to help to shore up US disruptive technologies. Whoever ends up on top will reap leadership. tremendous gains. Those who do not will fall behind. The This report, which moves onto the global level, is by the authors of this report believe that countries fall into one same authors of the previous one—FSR’s Robert Manning of three general categories: those countries on the cutting and Peter Engelke—with Samuel Klein. The research was edge of tech-based innovation, those that easily adapt to conducted using a similar methodology of visiting inno- and absorb new technologies, and those that are lagging. vation hubs and speaking with people on the ground. These categories are not mutually exclusive—some coun- For this second report, the authors visited ten countries tries straddle categories—but the gaps between leaders and conducted telephone interviews with scientists and and those on the bottom rungs will grow larger. technologists in other nations. They read hundreds of sec- The key recommendations in this report deal not just with ondary publications and consulted numerous data sources. the potential problems between states, but also address The country visits allowed the authors to meet with a some of the inequities that are growing within societies diverse range of people across multiple points on the inno- due in part to emerging technologies. The entire world has vation ecosystem compass: entrepreneurs; government become more prosperous than ever before; the digital revo- officials (at local and national levels); venture capitalists; lution has played a key part in this development, accelerating owners of incubators, accelerators, and co-working spaces; the rise of China and other emerging markets. However, academics and university administrators; and local tech- technology has increased income inequalities. Women and innovation “thought leaders.” Altogether, the authors spoke minorities are grossly underrepresented in tech firms and with roughly two hundred people around the world, usually jobs. Will emerging technologies, such as AI, be different? off-the-record to get the most uncompromised views. The Will inequalities widen further? How will the geopolitical interviewees’ insights drive this report’s findings, and a few landscape, indeed the global order writ large, change if China of the interviewees contributed essays that are featured in replaces the United States as the world’s innovation leader? this report. 2 THE GLOBAL INNOVATION SWEEPSTAKES: A QUEST TO WIN THE FUTURE Eighth-grade students explore DNA extraction with US Army scientists. Recommendations Inclusion: Governments should encourage participation Restarting negotiations for a US-EU Transatlantic Trade and in the technology sector by women and girls, ethnic and Investment Partnership (TTIP) accord that adopted similar religious minorities, and lower-income groups, providing digital commerce provisions would be a big step toward incentives to firms to recruit more people from these groups setting global rules.