Is U.S. innovation on the skids?

It would be hard to exaggerate the angst that has gripped the U.S. in recent weeks as markets have continued to churn and assets have melted. But the headlines that have made us dread picking up the newspaper mask a long-term problem that may shape the nation's future even more than Uncle Sam's unprecedented efforts to rescue the economy.

By most measures, the U.S. has been in a decade-long decline in global technological competitiveness. The reasons are many and complex, but central among them is the country's retreat from long-term basic research in science and technology, coupled with a surge in R&D in countries such as China.

[ Learn more about how the financial crisis is affecting IT and the high-tech industry, plus what IT can do to help, in InfoWorld's special report. And for the latest in government IT news and issues subscribe to InfoWorld's Government IT newsletter. ]

R&D has two components, of course, and published figures showing a rise in "research and development" hide a troubling trend. Companies still spend billions annually on development, typically aimed at the next product cycle or two. But the kind of pure research that led to the invention of the transistor and the Internet is declining as companies bow to the pressure to improve quarterly and annual financial results.

To take but one example, Bell Labs , which was founded as AT&T Bell Laboratories in 1925, helped "weave the technological fabric of modern society," as its Web site claims. Its "top 10 innovations," according to parent company Alcatel-Lucent, include the transistor, data networking, cellular telephony, digital switching, communications satellites and Unix. Although Bell Labs continues to innovate in most of those areas, all of the top 10 had their origins in the 1970s or earlier.

In January 1982, Time magazine reported, "With 22,500 people on its payroll (3,000 of them Ph.D.s), 19,000 patents and an annual budget of $1.6 billion, Bell Laboratories is a mighty engine of research and development. It is possibly the finest, and certainly the largest, private operation of its kind anywhere."

But beginning with its reorganization during the 1984 breakup of AT&T, Bell Labs has become steadily more focused on advanced development rather than pure research. On Sept. 4, New Jersey's Star-Ledger newspaper reported that Bell Labs was disbanding a group of scientists doing basic research in areas such as material science and device physics. The paper reported that Research Director Gee Rittenhouse had said that "the team was going to have a hard time integrating its research into product development."

Washington Watch
The change in focus from long-term research to shorter-term development in the private sector has been mirrored in the government. While federal funding for "R&D" has not declined overall and has in fact increased since the early 1990s, it has been more and more focused on the short-term needs of government.