I recently came across a report written by the Economist Intelligence Unit and sponsored by the Software Business Alliance (SBA) that benchmarks annual IT industry competitiveness in different countries. The study compares the economic environments of 66 countries to assess the extent to which they enable IT industry competitiveness. For me, the key take-away from the results is that while the US still leads in overall competitiveness, a number of other countries are quickly closing the gap. This may not be particularly surprising given the increasing rise in global competitiveness over the past decade, but it is still a very concerning trend to say the least. Technology acts as a huge multiplier of resources, and consequently a huge driver of productivity. The US’s culture and institutional structures have long given our economy the competitive advantage of being able to foster innovation, particularly in the technology sector, at a rate unmatched in the rest of the world. Today, more than ever, this is not an advantage that the US economy can afford to give up.
With that in mind, I think it is important to consider the factors that these economists use to assess an economy’s environment for competitiveness in the IT sector. The six factors used in their framework are as follows:
- Workforce – the supply of highly skilled workers
- Infrastructure – the strength of technology infrastructure
- Openness – the openness and competitiveness of an economy
- Culture – the extent to which a culture embraces innovation
- Legal Regime – the robustness of an economy’s legal protection of intellectual property
- Government Leadership – the extent to which a gov’t balances supporting technology development and allowing market forces to work
While the US is still the overall leader in IT industry competitiveness, we are beginning to fall behind in the following key categories from above: Workforce (shortages of talent); Infrastucture (low broadband penetration compared to Western Europe and East Asia); Openness (our inclination toward protectionism). This trend has scary long term implications, and is something that we need to pay particular attention to in all aspects of our political and economic systems in the years to come.
Good post P and definitely something to keep an eye on.
One book you might be interested in is “Winner Take All: How Competitiveness Shapes the Fate of Nations”. The author tells stories of how the US is losing its competitive edge because our financial system rewards short-term profits, rather than a long-term strategic view on how to maintain long-term global competitiveness.
Basic economic/business theory tells us to outsource parts of the value chain to countries with a competitive advantage in a particular area (i.e. assembly in China) in order to maximize profits. However, if a country is trying to build an industry that is able to thrive long-term and remain competitive, then some of the initial assumptions need to be re-examined.
While the US has already lost the lead for TVs, cellphones, MP3 players, etc., I hope there is an opportunity in the energy technology area for us to learn from past experience.