Honolulu: While manufacturing and low-level service jobs in the US are increasingly being moved offshore, it is widely assumed that Research and Development (R&D) jobs are not.
However, Asia's rise as an important location for outsourcing has begun to challenge these ideas.
Dieter Ernst, a senior fellow at the East-West Center here, says Asia's emergence in innovative offshoring not only challenges these ideas but also "the sense of complacency they have engendered".
A newly published study, "Innovation Offshoring: Asia's Emerging Role in Global Innovation Networks", notes that "innovation offshoring is driven by profound changes in corporate innovation management as well as by the globalisation of markets for technology and knowledge workers."
Ernst analyses the forces behind the growing geographical mobility of innovation and shows that "US companies are at the forefront of this trend, experimenting with new approaches to the management of global innovation networks".
He says, "Asian governments and firms are playing an increasingly active role as promoters and new sources of innovation". Hence, innovation offshoring has "created a competitive challenge of historic proportions for the United States".
He notes growing concern that this innovation offshoring could extend to the "hollowing out" of the US economy well beyond the manufacturing sectors. "Some fear that a loss of knowledge worker jobs to Asia may erode the nation's innovative capabilities."
A fear that, Ernst says, could feed a hunger for technological protectionism.
The study highlights ample reasons for the US to be concerned. But Ernst says US should focus on improving the domestic environment for innovation, rather than trying to slow down Asia's progress.
"The simple metaphor - Asia's rise versus America's decline - is clearly misleading. Innovation offshoring does not have to be a zero-sum game," says Ernst.
A central message of the study is that Asia's entry into the innovation equation "creates new opportunities for the US and for US-Asia economic relations".
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Ernst points out that stronger innovation capabilities in Asia create new markets for US firms. More importantly, he adds, "Asia's rise as a source of innovation creates a powerful catalyst for the US to strengthen its innovation system."
"More innovation in Asia does not mean less innovation in the US," Ernst states.
But Ernst emphasizes that "the US needs a new national strategy to ensure that benefits of innovation offshoring are not countered by a creeping longer-term hollowing-out of the nation's talent pool and its production and innovation system."
Ernst recommends that such a strategy should include such elements as improved collection of and access to innovation-related data; addressing "home-made" causes that are pushing innovation offshore; tax incentives (especially for innovative start-ups) and reforming the US patent system to support corporate innovation
It should also provide incentives for US students to study science and engineering; foster management, interpretive, cross-cultural, and other "soft" capabilities, and to encourage the immigration of highly skilled workers.
Ernst sees no immediate threat to US dominance. But he says that in the long-term, "There is a real danger that Asia's rise as an important location for innovation offshoring may challenge US competitiveness in international trade and investment.
"It is thus time to accept that the US no longer is preordained to lead the world in innovation."
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