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News : Innovation Last Updated: Feb 18, 2011 - 5:20 AM

New Geography of Global Innovation: Low student interest in science & engineering a challenge for G-7 countries
By Michael Hennigan, Founder and Editor of Finfacts
Feb 17, 2011 - 6:16 AM

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New Geography of Global Innovation:  A report from the Goldman Sachs Global Markets Institute says student interest in science & engineering (S&E ) is low in G-7 countries, suggesting that these markets are likely to have difficulty replacing an ageing cohort of native-born scientists and engineers.

The G-7 or Group of Seven countries are: Canada, France, Germany, Italy, Japan, United Kingdom, and United States.

The report says while the United States and Japan remain leaders in innovation, increased competition from growth markets, notably China, suggests a changing landscape. Research and development (R&D) spending in Asia surpassed EU levels in 2005, and is likely to overtake US levels in the next five years, thanks primarily to striking growth in R&D investment in China. R&D investment is driven largely by the corporate sector, which finances more than two-thirds of total R&D spending in many countries.

The new geography of global innovation is critically dependent upon higher education in science and engineering (S&E) fields. Goldman Sachs says innovation-led productivity growth in the G-7 will increasingly require public policies which attract and retain skilled foreign students and workers.

In the short term, a more flexible and talent-friendly immigration regime can help developed economies and companies to benefit from the globalization of S&E skills. Longer-term investments in R&D and science education can further enable G-7 countries to remain competitive by rebuilding student interest in S&E fields and by expanding the domestic supply of skilled S&E labour.

Goldman Sachs says that while ambitious government goals for R&D intensity suggest continued growth in R&D spending in China and a relative reweighting of the global total, broader changes in R&D investment are largely driven by the corporate sector in many markets.

Industry finances the majority of R&D investment spending both in the United States and Japan as well as across many growth markets. Industry finances more than 65% of total R&D spending in the United States, 70% of total R&D spending in China, and approximately 75% of total R&D spending in Korea and Japan. Companies driving this shift are those in pharmaceuticals, computer and electronic products, and transportation equipment, as well as those in some professional, scientific, and technical services fields.

Along with a shift in R&D investment the report finds that emerging markets are home to a rising share of global patenting activity, improved high-tech trade balances and strong labour productivity growth, which further affects incentives for R&D investment and employment.

The global dispersion of innovative activity enables companies across a range of sectors to rethink where they operate and invest, making several markets, including China and India, increasingly attractive to corporate R&D investment and employment.

An example of the evolving landscape is provided by the recommendation of a national security panel to President Obama that a purchase of a US company by Huawei, the Chinese telecom company, be unwound.

Huawei is well-known in Europe for its USB modem stick which  is commonly used on laptops for mobile web access.

Huawei is reported to have been founded by a Peoples Liberation Army soldier and in a 2008 military report to Congress, the Pentagon stated that Huawei "maintains close ties" to the Chinese People Liberation Army (PLA).

A Chinese Commerce Ministry spokesman said Thursday the government hopes for a transparent review of Huawei's purchase of US computer company 3Leaf.

"We hope the US security examination laws and regulations can treat a Chinese company fairly, regardless of whether it is publicly traded, state-owned or private, and can carry out a transparent, predictable review," said ministry spokesman Yao Jian.

The New Geography of Global Innovation (pdf)

SEE: also Finfacts articles:

Reverse innovation - - the process of moving technology from developing to developed countries

China’s drive for ‘Indigenous Innovation' and foreign multinationals

"There's a lot of evidence that what US companies do in China or India for example, actually has positive effects on the US economy in terms of jobs, research, sales, production, and investment in the United States," Dr. Laura Tyson, S.K. & Angela Chan Professor of Global Management at Berkeley University said to CNBC in Davos last month. Fred Bergsten, director of the Peterson Institute for International Economics and Sir Martin Sorrell, CEO of WPP also joined the discussion:


At the 2011 CNBC debate at the World Economic Forum in Davos, broadcast on CNBC on Feb, 4,5 and 6,  panelists grapple with how best to tackle global unemployment. Are fast the growing, vibrant markets in the East a threat or an opportunity for the stagnant, mature markets of the West? Panellists demand urgent action and offer solutions to create complementary and equitable jobs in both hemispheres:

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© Copyright 2011 by Finfacts.com

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