Technology and innovation are the cornerstones of the US economy. Besides maintaining its economic
supremacy, the nation has also guarded its status as a leader in the field of technological advancement.
Continued investment in technology is likely to see this superiority continue. The US spends 2.6% of its
GDP on R&D expenditure, demonstrating its commitment to innovation. However, this is less than that
of other developed nations such as Japan, which spends nearly 3.2% of its GDP. The main body for R&D
funding in the US is the National Science and Technology Council, which carries out and supports
research in wide areas.

In terms of industry and technology, the US made the greatest progress between the end of the 18th
century and the early 20th century. The years following the US civil war (1861–65), often termed as the
second industrialization and the late 19th century and the early 20th centuries witnessed new discoveries
and inventions: the discovery of oil, and the invention of the typewriter, the telephone, the phonograph
and electric light. Automobiles and airplanes also changed the way people commuted. With increasing
demand, new production techniques were devised to make the country more technology intensive, while
the manufacturing industry matured in the post-World-War II era. The next wave of advancements came
during the late 1980s and 1990s with the development of IT, contributing to the unprecedented economic
growth of this period. At the beginning of the 21st century, biotechnology was internationally recognized
for its potential in human and animal health, and related areas. In 2002, the Department of Commerce’s
Bureau of Industry and Security initiated the first comprehensive government assessment of the
development and adoption of biotechnology in the industry.

Research and development
R&D expenditure
There are a total of 477 research and academic institutions and 191 nonprofit biomedical research
institutions in the US as of 2005, according to the National Science Foundation. The US is among the
most technologically advanced nations and leads the world in most of the technological indicators. The
country’s investment in research and development fell by 3.9% in 2009, the first decline since 2002, but it
is expected to rebound slightly in 2010 as the economy gradually improves. After accounting for inflation,
spending on R&D is forecast to rise 1.7% to reach $395.9 billion in 2010 from $382.6 billion in 2009.
Expenditure on R&D grew at an average rate of 2.6% of GDP during 2000–06. The share of R&D within
the private sector and educational institutions has also been witnessing an upward trend, with their share
at 70.0% and 14.0% respectively. The census report states that R&D is one of the most significant factors
for an increase in economic growth and productivity. Almost two thirds of business sector expenditure has
gone into ICT and biotechnology-related industries. However, government R&D expenditure was mostly
directed towards defense. Moreover, funding for basic research increased by over 32.0% during 2001–07.
Nevertheless, there has been a decline in R&D expenditure as a percentage of GDP. To conclude, the US’
leadership position is clear due to the fact that it is home to one third of the world’s scientists and
engineers, and accounts for one third of global R&D expenditure. R&D investment in new medicines and
vaccines by the US biopharmaceutical industry was around $65 billion in 2009, an increase of more
than $1.5 billion from the total R&D investment made in 2008. Pharmaceutical companies spent an
estimated $46 billion on R&D in 2009, while non-pharmaceutical research companies spent an estimated

Outlook After accounting for inflation. economic regulations came to dominate the scene with the advent of capitalism as there were an increasing number of national and state laws aimed at monitoring business activities. Although open competition is followed in most sectors. each presided over by one district judge. the US was governed by the articles of confederation. Moreover.6 billion in 2009. healthier. Following the ratification of the constitution in 1788. but the government's declining share is a matter of concern. the US has to prepare itself for the increasing competition from emerging nations such as China.3% of the government’s R&D budget) and the trend may continue in the next few years. resulting in partial deregulation of many sectors. federal-state relations dominated the Supreme Court's rulings and the federal government was favored at the expense of state governments. Regulatory reforms have been followed in a broad range of industries. in particular the constitutional guarantees of freedom of expression and freedom of religion. The act set up a judicial system composed of the following features: a Supreme Court. Moreover.9 billion in 2010 from $382. This led to an increased reliance on competition to improve efficiency. For decades. consisting of a chief justice and five associate justices. The country follows a federal legal system. As provided by the act. and more productive lives. the US is ranked in third position with respect to ease . with individual state laws alongside federal laws. resulting in increased competition in the economy. Performance Effectiveness According to World Bank’s Doing Business report. there are a few sectors of the economy from which competition policy and law are completely excluded due to their sensitive nature. the congress created two sets of lower courts. Since 1937.$19 billion. expenditure on R&D is forecast to rise 1. and 13 district courts. the regulatory reform that began in the 1970s accelerated over the course of the 1980s. almost all functions of the national government were vested in a single-chamber legislature called congress and there was no separation of executive and legislative powers. In the initial years. the government’s R&D expenditure is currently focused on defense (58. However. the Judiciary Act of 1789 laid the foundation of the federal judicial system. is comparatively less than that of other technologically advanced nations. The supreme law of the US is its constitution. Moreover. LEGAL LANDSCAPE Summary The US legal system was originally derived from English law. the US has been able to maintain its leadership position with respect to innovation and investment in R&D.7% to reach $395. R&D expenditure in educational institutes. Evolution Prior to the adoption of the constitution. though increasing. the Supreme Court has focused on civil liberties. Under the articles. three circuit courts. Pharmaceutical research and biotechnology companies are devoted to inventing medicines that allow patients to live longer. which are making successful forays in technology intensive industries. Increasing R&D expenditure from the corporate sector indicates the innovativeness of the private sector. each comprising two justices of the Supreme Court and a district judge.

The country has followed the rule of law in all matters including business for many years now. Outlook Effective legal and regulatory frameworks are crucial to the creation of a successful business environment in any country. and the ease with which a business can be formed and operated in the country. 1977. the EPA has focused on key air pollutants that have a significant impact .of doing business. first drafting the Clean Air Act in 1963. Foreign investment is subject to the same rules as domestic capital.000 patents granted by the US Patent Office in 2006. shipping. fishing. certain energy-related industries. The government also restricts foreign acquisitions which may impair national security. and the prevalence of high rates will continue to adversely affect business enterprises. The US has a sound legal framework for business entities and an independent judiciary. to improve its scope. with a mandate to protect human health and the environment. the US is likely to lose out to other countries such as Canada and the EU nations which are vying for a larger share of FDI. ENVIRONMENTAL LANDSCAPE Summary The Environment Protection Agency (EPA) is the leading federal government agency. The US government’s investment in R&D also provides a suitable environment for such practices. communications. Each state also has its own regulating agency. effective and efficient judicial system. and the country sustains a strong regime of intellectual property rights protection and enforcement. it is felt that the country needs to have some structural reforms in place to raise productivity levels and increase employment. The country has an independent. the US government has recognized protection of the environment as an important agenda. The act was subsequently amended in 1970. However. Evolution Prior to the 1960s. Under the Clean Air Act. Although the performance of the country has improved in terms of toxic and greenhouse gas (GHG) emissions. The Clean Air Act of 1963 was the first significant government policy that linked air pollution with public health. almost 50% of the applications originated from a foreign country. and 1990. and dismissing a redundant employee is not cumbersome. Furthermore. No prior approval is needed from the federal government although a few states have specific investment regulations. The non-salary cost of employing a worker is low. Of the 173. US economic policies are generally pro-business and it has a very well developed financial regulatory system. and aviation is restricted. The purchase of real estate is unrestricted. foreign investment in banking. Labor market regulations are also flexible. the country also has comparatively higher corporate and personal taxes. which makes the investment climate positive. with financial markets which are open to competition. environmental issues did not attract major attention either from the public or the government. Since the 1960s. Thus. mining. A high ranking indicates a favorable legal environment for business. which enhances overall productivity growth and employment opportunities. In view of the slowdown in the economy. it has remained an underperformer compared to leading industrial countries. defense contracting. Although businesses in the US can be operated with ease due to minimal government intervention. one of the major dampeners for the business is the high tax rates and the differential federal rates of taxes. but the purchase of agricultural land by foreign nationals or companies must be reported to the government.

The proposal covers around 13. which will give environment planners an accurate idea as to the extent of emissions. natural gas. nitrogen dioxide. this will determine the future course of actions to reduce GHG emissions. sulfur dioxide. In 2009 the EPA proposed the first mandatory national system to report the emissions of carbon dioxide and other gases. buses and other on-road vehicles). ethanol production facilities. An estimated $1. suggesting that a new approach might soon be taken which could impact climate change regulation. worsen air quality and generate heat waves. • The Clean Air Interstate Rule. while in subsequent years the cost is likely to be $127m annually. acknowledging that this will aggravate climate change. Congress is exploring a draft bill for clean energy development which aims to cut carbon emissions by 20% from their 2005 levels by 2020. . The EPA believes that the companies will incur an expenditure of $160m for the first year in order to comply with the reporting requirements.000 ton/yr. and lead. adopted by EPA in 2005.on public health and the environment: ozone. President Obama too asserted in April 2009 that the US was ready to lead the world on climate change. which account for 85–90% of greenhouse gas emissions in the US. • The heavy-duty highway vehicle and diesel sulfur rule (adopted by EPA in 2000 to reduce particulate matter and nitrogen oxide waste from diesel trucks. boosting reliance on renewable sources of energy. This marks a significant change in the position of the US in terms of environmental policy. carbon monoxide. This system includes producers of crude petroleum. by adding $36 billion in new loan authority for a Department of Energy program aimed at accelerating the construction of new reactors. The budget contains an increase of $39 billion in taxes on fossil fuel producers over a period of 10 years. Outlook President Obama’s 2011 budget proposals include various measures for the reduction of greenhouse gas emissions. Besides the Clean Air Act.4 billion will be set aside to help developing countries address the impact of climate change. • The Non-Road Diesel Rule (adopted by EPA in 2004 to reduce particulate matter and nitrogen oxide waste from construction. Furthermore the budget proposes to triple federal support for nuclear energy. natural gas and coal. The EPA has declared carbon dioxide and other greenhouse gases to be a health risk. The EPA is formulating this rule under the Clean Air Act. or any facility with GHG emissions surpassing 25. to further reduce pollutants. • The acid rain program (enacted in 1990 to reduce sulfur dioxide emission from power plants). coal and oil refineries.000 facilities. as well as an end to tax breaks and other incentives for the domestic production of oil. farming. and other non-road equipment). other environmental programs which have had substantial impact on public health are: • The removal of lead from gasoline (adopted by EPA in the late 1970s). reduce deforestation and shift to low-carbon energy sources.