A Tech Republic, If You Can Keep It

Pretend it’s the 1950s. Everyone knows the U.S. is losing its edge in technological innovation. Sputnik proves the USSR has overtaken us. Now pretend it’s the 1980s. Everyone in the fifties who thought that was painfully in error, but if you’ve been paying attention, you can see that Japan is clearly resetting the technological frontier. Now it’s 2026, and in retrospect, that 1980s fear was also overblown, but have you heard about China? This time the threat is real. Right? 

As Mehran Gul documents in The New Geography of Innovation, reports of the death of American dominance in technological innovation have been exaggerated. Looking at the data, it is not even close. How many private billion-dollar tech companies were there in 2026? America: 1,720; China: 438; the next eight countries combined: 709. America accounts for seventy percent of the value of the world’s technology firms. 

Are these numbers a relic of past success? What about the future of AI? On this, there is also widespread agreement. Alphabet’s chairman, John Hennessy observes, “[The Silicon Valley] is the center of the next generation of AI companies; there’ll be ones elsewhere, but certainly the Valley probably outnumbers anybody else by a factor of, I don’t know, two, three, four, or five probably?” Ya-Qin Zhang, the “uncontroversial father figure” in the Chinese technology sector reaches the same conclusion: “I think in AI in terms of the fundamental technology and the research, you’ll see contributions from China, but I would say the US is still ahead and will continue to be ahead for many years to come.” 

Why then does anyone believe the U.S. is losing in the technology race? That is what Gul sets out to explore by touring the world to talk with technological innovators. In addition to China and the U.S., he profiles developments in a half-dozen other countries (England, Korea, Singapore, Switzerland, Germany, and Canada). Gul’s punchline is clear: the U.S. easily leads in the “global contest for breakthrough technologies.” Moreover, as becomes clear in the stories Gul tells, the only real threat to American tech dominance is America itself. 

That said, China has reset the landscape in two ways. A decade ago, it became a major source of foreign investment in startup tech companies, both in the U.S. and elsewhere. For a time, the U.S. was the largest foreign source of capital for Chinese tech startups, and China was the largest source of foreign funds for U.S. tech firms. That is no longer true; both governments have curtailed much of the foreign funding, but memories linger of the days when Chinese money was everywhere. Second, the amount and quality of scientific research produced in China has skyrocketed: China now produces a quarter of scientific publications and has surpassed the U.S. in the number of scientific papers in high-prestige journals.  

How did China achieve these gains? It mimicked what was going on in Silicon Valley: “China is different politically,” Gul argues, “but on the economic front, especially in the tech industry, it’s more American than the Americans.” Fast-moving startups, rapidly pushing the technological frontier, run by obsessed individuals hoping to reap stratospheric economic rewards, created a bubble in the middle of the Chinese economy. 

The bubble, however, burst when the tech sector became too large for the government to tolerate. Beginning about five years ago, the Chinese government began curtailing what it saw as the excesses of the hyper-capitalistic tech sector. Chinese companies “learned to their detriment that what can be rolled out quickly can also be rolled back quickly.” It has been an erratic crackdown as the government looks to navigate how to promote technological advance, without all the side effects of the corporate culture which leads to that development. 

The result has been China’s rise relative to the rest of the world outside of America. With few exceptions, breakthrough technological innovation is still primarily happening in the U.S. But China is leading the world in the deployment of breakthrough technologies at large scale. Gul lists well-known examples, none of which were invented in China: 5G, mobile payments, solar power, electric vehicles, industrial robots, and lithium-ion batteries. For each of these, the scale of adoption on the mainland now exceeds the rest of the world combined.  

What about the rest of the world? It is not immediately clear why Gul devotes equal time to the other six countries he profiles. As he notes at the outset of the chapter on Britain, Microsoft alone is more valuable than the combined value of every European tech company. So, if there are lessons to learn, they are not about threats to American technological dominance. 

Switzerland provides the most interesting window into why Gul looks more broadly. A U.N. agency produces the Global Innovation Index using seventy-eight indicators which surprisingly shows Switzerland at the top, with the U.S. at 3rd and China at 10th. It does not “pass the smell test,” Gul argues, but there is obviously something interesting going on in this small country, despite the fact few people could name a single Swiss technology of any sort. 

CERN, the European Organization for Nuclear Research, largely drives Switzerland’s place in the technology world. One of the world’s premier research institutions, it built the Large Hadron Collider, which is “the largest machine made by humanity and as a technical achievement ranks among the most complex pieces of equipment ever built, right up there with the International Space Station and the Hubble Telescope.” Combine that with a highly respected scientific university (the Swiss Federal Institute of Technology), and Switzerland produces an extraordinary amount of important research for a country with a smaller population than that of 11 U.S. states. 

Gul also points to another way in which Switzerland is at the technological frontier: Its rail network is both state-of-the-art and the densest in the world. Gul wryly adds, “Skeptics could perhaps be excused for not getting as excited about trains as the Swiss.” But the story of Switzerland, along with comparable stories from the other countries Gul profiles, points to why there is so much confusion about America’s place in the technological landscape. 

What does it mean to be the leading center of technological innovation? The most common way of defining this question is to ask, “what is the source of the most noteworthy and visible technological innovations?” In that ranking, the U.S. clearly leads, but we need to switch the focus a bit. We can measure technological innovation by funding source, origin of the idea, first production of innovations, or the speed and extent of the new technology’s spread. When a company in Singapore becomes a bigger online retailer than Amazon in Southeast Asia, is this a sign of technological advance? If an innovator splits his time between Seoul and San Francisco, which country should get credit for the technological innovation? Does improving the government’s use of technological tools constitute a significant technological advance? When the question is shifted slightly, the resulting rankings can change quite a bit. 

Where does this leave America? There are measures on which the U.S. is clearly behind other countries (have you used a government website recently?), but if you had to bet on where the next best thing will be developed, Silicon Valley is still the odds-on favorite. Why? What is the reason that despite the technological landscape’s constant upheaval, the U.S. has remained at the head of the pack for decades? 

Gul’s book suggests a two-fold answer. First is the immigration policy. China relies on its native population for the next generation of technological geniuses. With over a billion people, that is not an insignificant pool from which to draw. The U.S., on the other hand, draws from a pool of eight billion people. It doesn’t matter where you are born; if you want to make it big in the tech world, you want to move to Silicon Valley. Immigrants founded over half of the U.S.’s billion-dollar companies and represent two-thirds of the talent in the tech sector. 

Those technological innovators’ desire to live in the United States is related to American cultural norms. Americans have long been gamblers who willingly play high-stakes games to seek immense rewards. Failure carries little shame; success will make you a billionaire. It is a cultural milieu that lends itself to people flocking to the Valley, renting a mattress, and spending sixteen hours a day trying to invent something so exciting that Apple will buy it and make you wealthy. 

The future is thus much less certain than Gul’s analysis of the current situation would suggest. In modern America, immigration and a cultural exaltation of risk-taking leading to high wealth are both under threat. Will America continue to be willing to accept the large inflow of migrants hoping to make it big in Silicon Valley? Will America continue to celebrate the wealthy technological titans who have shaped the world? Given the critiques now coming from both sides of the political aisle on exactly these two things, it is not hard to imagine a future where America sacrifices its technological advantages in the service of reshaping society. But before destroying the sources of American technological dominance, perhaps we should consider what would happen if the U.S. finds itself envying technological advances happening elsewhere. 

James Hartley is professor of economics at Mount Holyoke College.