The new geography of innovation

One of the many interesting features of nanotechnology is that its development is taking place at a time when more and more research is being carried out in the fast developing countries of Asia. The extent of this shift is underlined by a recent piece of research publicised with the headline Western knowledge gap widens with shift to the East. The research, by Robert Huggins and Hiro Izushi, from the Universities of Sheffield and Aston, analysed the destination of the $50 billion invested in R&D by multinationals between 2002 and 2005. They found that 58% of this money was spent in Asia (concentrated in a few locations, such as Bangalore, Hyderabad, and Mumbai in India and Beijing, Guangzhou, Hangzhou and Shanghai in China), 22% in Europe and only 14% in North America. Since North America was the origin of 50% of this money, this prompts the authors to talk about a ” net R&D investment deficit of US$18 billion” for North America (by the same definition, Europe has a smaller deficit of US$3 billion).

This strongly underlines the comment I made below in my article Nanotechnology and visions of the future (part 2): “Even the remaining large companies have embraced the concept of “open innovation”, in which research and development is regarded as a commodity to be purchased on the open market (and, indeed, outsourced to low cost countries) rather than a core function of the corporation.”

8 thoughts on “The new geography of innovation”

  1. More’s the merrier. The more companies, institutions, and countries that engage in innovation; the faster innovation will occur and the faster these developments will reach consummers.

    When it comes to innovation, I do not consider it an “us vs. them” zero-sum game. It is a positive sum game because it China or Japan develops something, it will definitely make its way to the West and visa versa. Also, the increased competition can only accelerate technological innovation.

    The only people who stand to loose in such a decentralized, positive-sum game are all of the parasitic bureaucrats and politicians who are incapable of creating any kind of value of their own (if they did, they would not be bureaucrats and politicians), which are the people we want to go away anyways.

    The globalization of science and technology is a very positive thing.

  2. Kudos to Kurt9 and as always, Richard. I concur that the more the merrier is the correct sentiment indeed. The time has now, and soon to be long past for ingrained self interest to rule the day.
    In the US the response has been to become even more protectionist, not less, exemplified by ‘America Competes’ – []. the restrictions place on the allocation of funding will ultimated hamper, not invigorate innovation.
    This is being mitigated be a few, but growing group of people who see the collaborative potential of the re-emerging World Wide Web, know colloquially around here as the Highway of Light, and are coming together to work in new and innovative ways.
    I have spoken often, and in many venues, of what I see as the UK’s innovation in the public interest, for the public good as a sovereign necessity. What I have observed over the past while is the trend for this to become an overriding ethos within this, that is Nanotechnology, and other areas as well. This can only be a good thing.

  3. Martin,

    Protectionism in the U.S. will not go much further than sound bites for media consumption. The U.S. is a major market for Chinese-manufactured goods. However, China is the market (along with Japan) for U.S. T-bills, which allows the government to run a higher deficit and, yet, maintain lower than otherwise interest rates without producing inflation. Our prime rate is 5.5%. Without the Chinese buying up our T-bills, the prime rate would be around 7-8%, which would put quite a crimp on the FEDs loose monetary policy, thus causing a recession. The Chinese and Japanese buy our T-bills in order to allow the FED to pursue a looser monetary policy than otherwise so that we buy more of their goods. If we implement protectionist measures, the Chinese and Japanese have less incentive to buy our T-bills and the FED must raise interest rates to avoid recession. This, in turn, would cause quite a recession. Especially with the popping of the housing bubble. So, no politician is about to alienate the Chinese as to cause the recession in the U.S.

    Likewise, the Chinese are not about to do anything stupid, like sell all of our T-bills, because this would kill their biggest export market and would, thus, cause huge amount of unemployment in China. Large numbers of unemployed people is the CCP’s biggest nightmare.

    Don’t you love this stuff? We’re (U.S., China, Japan) are all joined at the hip, economically speaking and I think its wonderful. I trust markets way more than I trust any government, period. Any trend that removes power from the later to influence the economy (and technological development), not to mention my personal future, is a very good thing, as far as I’m concerned.

  4. Kurt and Martin, I agree with you that research isn’t a zero-sum game and the growth of research capability in India and China and elsewhere is good news for everyone. What’s interesting about this story, though, isn’t so much the fact that there is so much research spending in China and India, it is that the origin of the spending originates from the USA. Of course, US high technology has for a while depended strongly on the contributions of Chinese and Indian researchers; the difference is that now rather than these researchers moving to the USA to do their work the work is being done, at US expense, in their native countries. One can have different views about whether this shift is good. I can imagine resistance in the USA that these high-paid jobs are being exported to lower wage economies, and one can imagine that Indian and Chinese scientists who wished to immigrate to the USA might regret the decrease in the number of sponsors for H1b visas and green cards. Given that the record of China in respecting intellectual property isn’t brilliant, one might also wonder if this is a good long term strategy for the companies involved. On the other hand, everything that strengthens the research base in these countries is positive for them and the rest of us, and it’s good that people have the opportunity to follow rewarding technical careers in their own countries.

  5. Yes, the outsourcing of R&D on the part of U.S. companies to China and India is indeed an issue. I think one part of this problem is that there exist political ideologies in the U.S. (we call these “right” and “left”) that attempt to hobble U.S. research due to irrational, obsolete belief systems. It is the role of international competition to help eliminate these ideologies as they contribute nothing to the innovation and progress in the U.S.

  6. One of the big issues with this kind of outsourcing is the role of regulators and environmental protections. Such restrictions are rather notoriously absent in China and many other Eastern countries. Who is your ETC group going to sue in China if they start spewing nanodust into the atmosphere as a side effect of some industrial process? How much leverage will western governments and NGOs have over the future course of nanotech development if more and more of the work moves to the East? Not to mention that if this technology ever develops some of its more extravagant potentials then we may not be that comfortable with non-democratic countries playing a leading role in its development. Rather than being sanguine and cheering about the more the merrier, we need to be aware of the considerable potential risks in this trend.

  7. It is precisely because of the existance of such groups as ETC and other NGOs why I like the development of this technology to go on in places like China. Sure, there are possible polution problems with nano-particles, which are being addressed by various people. However, groups like ETC are parasite organization that carry a political agenda that has nothing to do with the potential polution problems. The problem with the whole green movement is that they have been hijacked by leftist and other people with political axes to grind. Many of these people are opposed to nanotech and other technologies even if there are no pollution problems associated with them. I believe that open competition that results from widespread international development is the best way to get around these groups.

    Not only am I happy to see more of this work moving to the East. I have a business selling such instrumentation technology to the East. I wll do every thing I possibly can to accelerate development in the East and make money off of it in the process.

    Anyone who is a afraid of the “non-democratic” countries getting ahead of this technology should work to eliminate any kind of political and other BS that inhibits the development of such technology in this country.

  8. Hi Richard Jones
    I am the editor of the Oxford Concise Dictionary of Geography. I would like to quote you on “the new geography of innovation” in the 4th edition of the dictionary. Is that OK? Is there anything you’d like to add to the text posted? Look forward to hearing from you
    Susan Mayhew

Comments are closed.