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Asia, the Pied Piper of global R&D

September 05, 2007 07:24 IST

Researchers at the University of Sheffield and Aston Business School have found that 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, which is dominating the global knowledge economy.

In their findings, which were released today, the researchers found that companies in advanced regions, including the 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 the fast-developing Asian regions.

They found that of the $50 billion invested by multinational companies in R&D projects around the world between 2002 and 2005, Asian economies received 58 per cent of the investment, with Europe receiving 22 per cent and North America 14 per cent. 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 per cent of R&D investment, followed by Europe with 28 per cent. This resulted in North America having net R&D investment deficit of $18 billion and Europe a deficit of $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 US amounted to only 1.5 per cent per annum, considerably lower than that achieved in the 1950s or 1960s.

 "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," said Dr Huggins.

BS Reporter in New Delhi