Here are some highlights from the article:

• Women own 40 percent of private businesses in the U.S., but create only 8 percent of venture-backed tech startups.
• Just 14 percent of Venture Capitalists are women.
• Women outnumber men at elite colleges, law schools, medical schools, and the overall workforce, but are noticeably scarce in the high-tech world.
• Only 18 percent of college students graduating with computer science degrees in 2008 were women—down from 37 percent in 1985.
• Only 1 percent of girls taking the SAT in 2009 said they wanted to major in computer or information sciences.
• Mixed-gender teams have produced technology patents that are cited 26 percent to 42 percent more often than the norm.

• Women have few role models in high-tech.

These are just a few of the key points presented in this illuminating article. I highly recommend the article, because it speaks directly to our country’s decline in innovation and loss of high-tech leadership.

The title of the article is Out of the Loop in Silicon Valley, by Claire Cain Miller. I included a link here.

Innovation creates so many jobs and so much opportunity for our country…it is absolutely key to our long-term success in the global economy, [and patent filings] are a reflection of innovation.”

—David Kappos, Director of the Patent Office

It would be hard to argue with Kappos statement—the U.S. has been a world leader in innovation for decades. Unfortunately, that reign may be coming to an end.

The number of patents filed in 2009 dropped 2.3 percent from the prior year…the first year since 1996 that fewer patents were filed by U.S. inventors year over year.

Yes, you say, but we are in the midst of the Great Recession, and we should expect patent filings to drop. True enough, but it does not explain why U.S. patents (yes, U.S. patents) issued to inventors in foreign nations increased 6.3 percent over the same period.

Here is what Bijal Vakil, partner on White & Case’s intellectual property team, in Palo Alto, CA had to say:

…this trend could spell financial ruin for some U.S. companies. We’ve lost our competitive edge, and other companies from other countries stand to benefit.

I’m about to go and watch the President’s State of the Union speech, where he is supposed to talk about jobs and getting our economy back on track. We’ll see!

But, here’s the real deal—Congress and the Administration can posture and postulate all they want, but if they don’t come up with a plan to get our kids and schools revitalized in the areas of math and science, innovation leadership will soon be taken over by other countries…and where does that leave our high-tech businesses then?

Here are some of the report’s highlights:

• 53 percent of the companies surveyed had offshore manufacturing strategies in place—up from 22 percent in 2005.

• 60 percent of companies with offshore strategies said they have aggressive plans to expand those strategies.

• “Globalization of Innovation” (engineering, R&D, product design, and software development) is accelerating, thus reducing the need for U.S. innovation.

• A domestic shortage of science and engineering talent is a key issue for off shoring projects. Off shoring compensates for domestic talent gaps.

So, the United States is falling further behind the rest of the world in both Innovation and manufacturing. It appears that lack of talent in America is a major cause. Why is that? If we do not have the talents to neither innovate nor manufacture, what is to become of the United States?

What needs to be done to create/develop the talent—and desire—necessary to again make the U.S. the mighty industrial nation it once was?

It is this “…at the expense of Innovation & Adaptation” that has plunged the U.S. down the list of innovative nations. If what Tom says is true–and I believe it is–then it is definitely up to small businesses to be the innovators who brings the U.S. (or any country) back up the list.

Typically, when someone thinks “Innovation,” they immediately think of electronic gadgets, the Internet, social media, Silicon Valley, or any new invention that may change our social status or the future of mankind. Nothing could be further from the truth. Yes, those things mentioned certainly are innovations, but they are not what innovation is all about. Here is Webster’s definition of Innovation: “the introduction of something new: a new idea, method, or device.”

Innovation can, and should be, everywhere…in our businesses, in government, and in society in general. Here is an example of a basic form of innovation:

Justin Esch and Dave Lefkow were having drinks with friends when they came up with the idea for “Bacon Salt.” They quit their successful jobs at a Seattle technology company and set out to perfect their idea. Working out of Esch’s garage, with zero marketing budget, they sold “Bacon Salt” products to 25 states and 12 different countries, and are expanding worldwide as rapidly as they can.

They also continue to innovate by expanding their “Bacon Salt” concept to other products. Their current hot seller on their web site is bacon flavored lip balm…they’ve sold 10,000, and many sales are to repeat customers.

Esch and Lefkow are a worldwide phenomenon, and last year raked in $1.4 million in profit–just from a combining bacon and salt. Not what one would call “high tech.”
(Justin and Dave will appear on Oprah Friday April 24).

How does the U.S. (or any country) develop and promote a culture of creative thinking–Innovation–in jobs; in society; and in the lives of their citizens? It is going to take changes in education, in family values, in governments, and in individual entrepreneurs. Can we do it?

In the same report, the ITIF also presents those things the U.S., or any nation/region, can do to improve competitiveness and innovation. I have capsulized their suggestions as follows:

• Provide incentives for companies to innovate. Incentives should be in the form of robust R&D tax incentives; accelerated depreciation on new equipment; workforce development tax credits; corporate tax structures that make the U.S. more competitive world-wide; and other incentives that encourage businesses to spend more on innovation.

• Encourage high-skilled immigration. The broader the scope of thinking–the better the likelihood of new ideas and innovation. The U.S. is currently sending high-skilled immigrants home, and that is counter productive in the long-term.

• Promote a digital economy. The U.S. is successful in offering new digital devices and services, primarily to the younger generations, but they haven’t been able to make a mobile phone service that doesn’t consistently drop calls. There are thousands of square miles in the U.S. that have no mobile phone service, and thousands more that have only sporadic service. Also, there are more areas in the U.S. without broadband service, than there are with it. Europe and Scandinavia do not seem to have these problems. [A few years ago, I used a mobile phone near the Arctic Circle in Northern Sweden. Today, mobile phones are totally unreliable in my suburban house in the U.S.]

• Support institutions that are critical to innovation. Not just universities that perform research, but also the kinds of institutions and training-centers that foster commercialization of their research. In addition, there should be more support for local economic development, entrepreneurship development, and workforce training.

• Remove regulations and government policies that retard innovation. Small businesses produce 13 times more patents than large patenting firms, yet spend four and a half times as much per employee in compliance of environmental regulations, and 67 percent more per employee on tax compliance than big businesses do. In the U.S., not only does small business receive very little government support, but it also appears that the government is working against small business through overly stringent regulations of small business.

Well, there you are. That’s what the ITIF believes needs to happen to stop America’s slide into oblivion as a leading innovator in the new knowledge-based innovation economy of the world.

I believe all the above items are well and good–and should be done–but they seem to only address the symptoms. The above are things our government can heavily influence, but I believe the reason for America’s demise as the innovation leader goes much deeper.

Commentators to Part I suggested that the root problem is perhaps a cultural and socioeconomic problem. I believe they are right, and I will soon post, as Part III of this series, my views and concerns on the reasons for diminishing innovation in the U.S., along with what I think needs to be done to improve the situation.

I would also like to hear from everyone out there who has a suggestion on how they think we can bring innovation back to the forefront of the U.S.