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The creation and adoption of new ideas - in a word, innovation - is a very powerful factor that helps to determine progress of modern economies.Economists trace 30 percent to 40 percent of all U.S. gains in productivity and growth over the course of the 20th century to economic innovation in its various forms. Today, some two-thirds of the value of America's large businesses can be traced to the intangible assets that embody ideas, especially the intellectual property (IP) of patents and trademarks. Promoting and protecting new intellectual property should be a high priority for U.S. policymakers.
Here, we explore some of the ways that the generation of intellectual property in U.S. manufacturing benefits workers and companies. American manufacturing divides fairly clearly into industries that invest heavily in the research and development that generates new intellectual property, and others that do not. The most IP-intensive industries, on a per-employee basis, are pharmaceuticals, communications equipment and semiconductors - especially as compared to industries such as textiles and apparel, food and beverages, or wood products. By several important measures, IP- intensive areas of manufacturing produce relatively much larger benefits, with the most IP-intensive industry, pharmaceuticals and biopharmaceuticals, generating the greatest such benefits.
Today, some two-thirds of the value of America's large businesses can be traced to the intangible assets that embody ideas, especially the intellectual property(IP) of patents and trademarks.
- From 2000 to 2004, IP-intensive manufacturing produced much more value per employee than non-IP- intensive manufacturing - some $181,000 per worker, per year, compared to less than $106,000 - and in the most IP-intensive industry, pharmaceuticals, an average worker produced more than $425,000 in value every year.
- From 2000 to 2004, IP-intensive manufacturing paid much higher wages, on average, than non-IP intensive manufacturing - nearly $51,000 per worker compared to just over $35,000 - and in the most IP-intensive industry, an average worker earned almost $66,000 a year.
- Manufacturing employment contracted sharply from 2000 to 2004, with both IP-intensive and non-IP intensive industries shrinking their workforce, on average, by 15 percent to 16 percent. The one manufacturing area that expanded its workforce was the most IP-intensive: Jobs in pharmaceutical companies increased by more than 8 percent over this period.
- Even as manufacturing jobs contracted overall, science and engineering jobs grew - by about 17 percent in IP-intensive industries, compared to 13 percent in non-IP-intensive manufacturing. Again, science and engineering jobs grew much faster in highly-IP-intensive areas - up nearly 86 percent in pharmaceuticals and 88 percent in computer manufacturing.
These findings reflect the growing role that intellectual property plays in American growth and productivity. Moreover, IP-intensive industries in both manufacturing and services provide much of America's current comparative advantages in the global economy. Government policy must recognize that protecting and promoting the creation and adoption of new products, processes and business methods is critical to the country's future prosperity and growth.