Western knowledge gap widens with shift to the East

Researchers at the University of Sheffield and Aston Business School have found investment in Research and Development (R&D) is rapidly shifting from North America and Europe to Asia, resulting in a small elite club of regions, in both the advanced and developing world, that are dominating the global knowledge economy.

In the new findings published today (4 September 2007), the researchers found that companies in advanced regions such as Silicon Valley in the US, Cambridge in the UK, Ottawa in Canada and Helsinki in Finland, are increasingly establishing partnerships and networks with companies and universities in fast-developing Asian regions.

They found that of the US$50 billion invested by multinational companies in R&D projects around the world between 2002 and 2005, Asian economies received 58% of this investment, with Europe receiving 22% and North America 14%. The majority of the investment in Asia is concentrated in a very small number of locations such as Bangalore, Hyderabad, and Mumbai in India and Beijing, Guangzhou, Hangzhou and Shanghai in China.

While Asia was the dominant destination of R&D investment, North America was the primary source, accounting for 50% R&D investment, followed by Europe with 28%. This resulted in North America having net R&D investment deficit of US$18 billion and Europe a deficit of US$3 billion.

According to the authors of 'Competing for Knowledge', Dr Robert Huggins, of the University of Sheffield's Management School, and Dr Hiro Izushi, of Aston Business School, the key impact of this global redistribution of knowledge is that many regions in North America and Europe are losing out and the competitiveness gap between these locations and the elite regions is becoming even wider.

The research also shows that companies in advanced economies are finding it increasingly difficult to create innovations resulting in market-leading goods and services. For example, between 1996 and 2006 productivity growth resulting from innovation in the United States amounted to only 1.5% per annum, considerably lower than that achieved in the 1950s or 1960s.

Dr Huggins said: "As the knowledge required to produce innovations becomes more specialised and located in new locations around the world, companies are having to ensure that they are closely linked and aligned with these new sources wherever they may be. Since China is now the second highest research spender it is increasingly likely that it will feature more prominently as one of these new sources."

Notes:*

'Competing for Knowledge: Creating, Connecting, and Growing' by Robert Huggins and Hiro Izushi is published by Routledge.

Dr Robert Huggins and Dr Hiro Izushi are the Directors of the Centre for International Competitiveness. For more information, please visit www.cforic.org

ENDS