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A bright light shone on the United States as business executives, academics and policy leaders-including Al Gore-converged on MIT’s glitzy Tang Center for the National Innovation Summit. It was the spring of 1998, and as the country savored one of its best economies ever, Harvard Business School professor Michael Porter sobered the powerful audience by pointing to dangers beyond the horizon.

True, U.S. companies had succeeded brilliantly in getting their houses in order, Porter said. But he and MIT professor Scott Stern were analyzing innovation in 25 nations-and preliminary projections from their “National Innovation Index” were not rosy. Indeed, based on such parameters as international patents filed, R&D spending and share of gross domestic product spent on higher education, it appeared the United States would tumble from the top spot to sixth place by 2005 (see companion article “National Numbers Game”). Porter delivered the news again in January at the World Economic Forum’s annual meeting in Davos, Switzerland. As a summary of the controversial report warned: “All the good macroeconomic news may be distracting us from looming threats to long-term U.S. economic strength.”

The Porter-Stern study addresses vital issues about the future of American competitiveness. But for those interested in predicting future trends in productivity, there’s one lingering problem: The index doesn’t measure innovation.

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