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Knowledge Base Shifts
Sep 2007
SHEFFIELD, England, Sept. 11, 2007 -- The "global knowledge economy" is being dominated by a small, "elite club of regions" in both the advanced and developing world as a result of the rapid shift of investment in research and development (R&D) from North America and Europe to Asia, according to researchers at the University of Sheffield in South Yorkshire, England, and Aston Business School in Birmingham.

"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," said Robert Huggins, a senior lecturer in enterprise and regional development at the University of Sheffield’s management school and a co-director of its Enterprise and Regional Development unit, and Hiro Izushi, a senior lecturer in innovation at Economics and Strategy Group, Aston Business School. Izushi received a doctorate at the University of California, Berkeley, and holds a Nitobe Fellowship for Japanese Social Scientists from the International House of Japan.

Huggins and Izushi are the authors of "Competing for Knowledge: Creating, Connecting, and Growing," published by Routledge this month. They are also the directors of The Centre for International Competitiveness, a network and forum on researching and exploring competitiveness of global economies and businesses.

They said companies in advanced regions -- such as Silicon Valley in the US; Cambridge, England; Ottawa, Canada; and Helsinki, Finland -- are increasingly establishing partnerships and networks with companies and universities in 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 percent of this investment, Europe receive 22 percent and North America 14 percent.

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," they said.

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 percent per year, considerably lower than that achieved in the 1950s or 1960s. While Asia was the dominant destination of R&D investment, North America was the primary source, accounting for 50 percent of the R&D investment, followed by Europe with 28 percent. A a result, North America had a net R&D investment deficit of $18 billion and Europe a deficit of $3 billion.

Huggins said, "As the knowledge required to produce innovations becomes more specialized 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."

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