《《innovation_geography》.pdfVIP

September 20, 2010 Global Markets Institute The new geography of global innovation The new geography of global innovation Douglas Gilman While the United States and Japan remain leaders in innovation, (212) 902-3132 douglas.gilman@ increased competition from growth markets, notably China, suggests a Goldman Sachs Co. changing landscape. Research and development 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 RD investment in China. Measures of RD intensity, or RD investment as a share of GDP, allow for cross-country comparisons of commitment to RD. RD intensity has remained flat across G7 markets during the last decade at 2.1%. In China it has impressively doubled as a share of GDP since 1999, reaching 1.5%, which remains low by international standards. RD investment is driven largely by the corporate sector, which finances more than two-thirds of total RD spending in many countries. Companies in a range of industries, from pharmaceuticals to technology hardware, have exposure to new hubs of global innovation. Pipeline concerns and the role of human capital The new geography of global innovation is critically dependent upon higher education in science and engineering (SE) fields. Student interest in SE is low in G7 countries, suggesting that these markets are likely to have difficulty replacing an aging cohort of native-born scientists and engineers. Reliance on foreign-born skilled labor is set to rise further as the world’s SE skill base shifts toward Asia, notably China, where SE fields represent 40% of all new university degrees awarded (more than two and a half times US levels). New geography demands a policy response Innovation-led productivity growth in the G7 will increasingly require public policies which attract and retain skilled foreign st