Profits matter, though! We need them to pay people to do the research and development, which people will not do for nothing - our dependence on food and shelter makes this necessary. If an American firm absorbs all the costs, but gains none of the benefit, it will not survive as long, meaning the research will also disappear alongside it.
China, on the other hand, can spend those funds elsewhere while also poaching the work of the American firm, which would put them at a great competitive advantage.
Profits aren't necessary for R&D, that's just one model where R&D is funded by consumers through direct purchases. Another model is where R&D is simply funded through taxation and grants. That is the model that medical research is often funded through, and it works well because it allows researchers around the world to help our species overcome disease.
How do you deal with an international free rider problem? If the word collectively agreed to fund research then I would love for all results to be released publicly, but how do you stop countries from free riding off of the R&D from other countries? From a game theoretic perspective it seems that countries who are fully self interested (putting aside notions of fairness/ethics, which I wish would be enough to lead to desirable outcomes but is unfortunately not the case) would clearly choose to just free ride off of the developments of other nations, and reap the fruits of reward while spending that money elsewhere (potentially in ways that could end up hurting the researching country, like the free rider spending it on their military).
Totally good point! Though, that is also quite restrictive. Some of the biggest innovations which change society the most are incredibly weird, out of left field innovations that a governmental or grant program would most likely not fund - just because the nascent idea is too crazy.
You get a lot of money funding weird ideas in VC firms, where the incentive structure (of profit) makes it possible to fund a tonne of ideas, where it is expected that most of the ideas will fail.
This still has the free rider problem at a nation state level. Let's say China invests 100 billion a year in innovation, and makes it all open. France then comes along and says "I don't need to bother with spending on innovation, I'll just use China's legwork, and spend my billion on out marketing china". China would eventually run out of cash for research.
China, on the other hand, can spend those funds elsewhere while also poaching the work of the American firm, which would put them at a great competitive advantage.