Which population matters? Daytime or night time?

Another excellent post from Atlantic Cities.

Which population matters to planners, businesses and service providers? The number of inhabitants only captures part of the picture. New maps capture commuter data to show how cities grow or shrink during the day as people commute in or out for work. For example, Manhattan's population of about 1.5 million doubles to around 3 million every day.

As Emily Badger explains it:

If Manhattan ever needs to evacuate by day during a disaster, the city has to figure out what to do with all 3 million of those people. The city's transportation planners are responsible for every one of them, whether they live in New York or not. And anyone who does business in a service industry on the island – from lunch counters to dry cleaners to department stores – cares a lot more about how many people pass through during the day than who passes out in Manhattan at night. [...] This geography of how populations move on a daily basis should also tell us something about the importance of regional transportation infrastructure. If your city swells in size every day by 50,000 people or more, do you want all of them coming by car?

U.S. high-tech headed for trouble?

The knowledge economy: Is the United States losing its competitive edge? Benchmarks of our innovation future, The Task Force on the Future of American Innovation, Feb 16, 2005
(via John Daly's blog)

The Task Force on the Future of American Innovation has published a bleak picture of America's future in science and engineering. While the United States still seems to be ahead by most measures, the rest of the world is catching up fast.

Here are some of the signs of trouble they're seeing:

Education

The ratio of first university degrees in natural sciences and engineering (NS&E) to the college-age population in the U.S. is only 5.7 degrees per 100. Japan awards 8 per 100, and Taiwan and South Korea each award about 11 per 100.

In 2000, Asian universities accounted for almost 1.2 million of the world’s S&E degrees and European universities (including Russia and Eastern Europe) accounted for about 850,000 S&E degrees, while North American universities accounted for only about 500,000 degrees.

In 2000, about 89,000 of the approximately 114,000 doctoral degrees earned worldwide in S&E were earned outside the United States.

Of course, this doesn't take into account the quality or prestige of American degrees, although this too seems to be declining a bit.

From 1994 to 2001, graduate S&E enrollment in the U.S. declined by 10 percent for U.S. citizens but increased by 25 percent for foreign born students. In 2001 approximately 57 percent of all S&E postdoctoral positions at U.S. universities were held by foreign born scholars.

Workforce

From 1994 to 1998, the number of Chinese, South Korean, and Taiwanese students who chose to pursue their Ph.D.s at U.S. universities dropped 19 percent (from 4,982 to 4,029). At the same time, the number who chose to pursue their Ph.D.s at universities in their own countries nearly doubled (from 4,983 to 9,942). This indicates that these countries are quickly growing their own higher educational capabilities.

Since 1980, the number of S&E positions in the U.S. has grown at almost five times the rate of the U.S. civilian workforce as a whole. However, the number of S&E degrees earned by U.S. citizens is growing at a much smaller rate.

There are rapidly increasing retirements from the S&E field, leading to a potential shortage in the S&E labor market. For example, more than half of those with S&E degrees in the workforce are age 40 or older.

There is increasing global competition in the S&E labor market. Between 1993 and 1997 the Organisation for Economic Development countries increased their number of S&E research jobs by 28 percent, almost twice the 15 percent increase in S&E research jobs in the United States.

Knowledge Creation and New Ideas Benchmarks

The U.S. share of S&E papers published worldwide declined from 38 percent in 1988 to 31 percent in 2001. Europe and Asia are responsible for the bulk of growth in scientific papers in recent years.

From 1988 to 2001 the U.S. increased its number of published S&E articles by only 13 percent. In contrast, Western Europe increased its S&E article output by 59 percent, Japan increased by 67 percent and countries of East Asia, including China, Singapore, Taiwan, and South Korea, increased by 492 percent.

U.S. Patent applications from the Asian countries of China, India, Singapore, South Korea, and Taiwan grew by 759 percent from 1989 to 2001. Patent applications from the U.S. during the same period grew more slowly at 116 percent (though, as with the above, it should be mentioned that the Asian countries started out at a much lower base level).

The U.S. share of worldwide citations is shrinking. Whereas in 1992 the U.S. share of citations was 52 percent, by 2001 it had declined to 44 percent of the worldwide total.

R&D

Collectively, the world’s fastest growing economies are on track to catch up to U.S. R&D investment. From 1995 through 2001, the emerging economies of China, South Korea, and Taiwan increased their gross R&D investments by about 140 percent. During the same period the U.S. increased its investments by 34 percent.

Within the U.S., federal funding of basic research in engineering and physical sciences has experienced little to no growth over the last thirty years. In fact, as a percentage of GDP, funding for physical science research has been in a thirty year decline.

Between 1995 and 2002, China doubled the percentage of its GDP invested in R&D, from 0.6 to 1.2 per-cent. Also, China intends to increase the proportion of science spending devoted to basic research by more than 200 percent, to about 20 percent of its science budget, in the next 10 years. From 1995 to 2002, Japanese businesses increased their R&D spending from 2.12 percent to 2.32 percent of GDP, and European businesses increased their R&D spending from 1.15 percent to 1.17 percent of GDP. U.S. businesses, however, actually decreased their level of spending, from more than 2 percent to 1.87 percent of GDP.

High-tech economy

The U.S. share of worldwide high-tech exports has been in a 20-year decline. From 1980 until 2001 the U.S. share fell from 31 percent to 18 percent. At the same time, the global share for China, South Korea, and other emerging Asian countries increased from just 7 percent to 25 percent.

During the 1990s, the U.S. maintained a trade surplus for high-tech products even as the trade balance for other goods plummeted. But since 2001, even the trade balance for high-tech has fallen into deficit.

China now rivals the U.S. as a destination for foreign capital and in 2003 largest foreign direct investment (FDI) in the world with $53.5 billion flowing into the country. Investment in U.S. businesses, meanwhile, dropped from $314 billion in 2000 to $30 billion in 2003 and $91 billion through the first three quarters of 2004.

From 1989 to 2001, U.S. high-tech output doubled, growing from $423 billion to $940 billion, but China’s high-tech output shot up more than 8-fold, from $30 billion to $257 billion.

Industry

NANOTECHNOLOGY
Asian countries are investing significantly in nanotechnology, and may have already surpassed the U.S. China has also been investing heavily in nanotechnology and already leads the U.S. in some key areas. In recent surveys, China ranked third, after the U.S. and Japan, in worldwide nanotechnology patents and publications.

AEROSPACE
From 1998 through 2003, the balance of trade in aircraft — for years one of the strongest U.S. export sectors — fell from $39 billion to $24 billion, a loss of $15 billion, reflecting increased sales of foreign-made commercial aircraft to U.S. carriers.

BIOTECHNOLOGY
China is making rapid progress in biotechnology. The production value of the biotechnology industry throughout the country was 200 million yuan ($24 million U.S.) in 1986. In 2000, the figure reached 20 billion yuan ($2.4 billion U.S.). The output value of China’s pharmaceutical industry was 200 billion yuan last year, with an annual growth rate of 20 percent in each of the previous five years.

Unfortunately, the authors didn't have access to numbers from India for most topics.

Knowledge seekers

Knowledge Seeking and Location Choice of Foreign Direct Investment in the United States, Wilbur Chung and Juan Alcacer, 2002

In the latest Knowledge@Wharton newsletter, Wilbur Chung and Juan Alcacer present the hypothesis that foreign direct investment (FDI) is not purely cost or market driven. Companies acquire firms, engage in joint-ventures and set up green fields ventures for access to unique knowledge - not just to cut cost or gain access to markets.

(The academic paper can be found here.)

While such seekers have historically been characterized as technology laggards trying to catch up with market movers, more recently scholars have embraced the idea that leaders, too, invest abroad as they seek to broaden or deepen their knowledge.

The study covers FDI in the United States (by state and by economic region).

Not surprisingly, they found that knowledge seeking is most prevalent among foreign companies in R&D-heavy industries such as pharmaceuticals, semiconductors and electronics. In fact, they found that drug makers are twice as likely to seek knowledge abroad as companies in any other industry.

Where were knowledge seekers most likely to invest? R&D-intensive areas. 'Many investments, 32% of the sample, fall into four major metropolitan areas: New York City, San Francisco, Los Angeles and Chicago,' the researchers write. In contrast, a region of the United States known mostly for agriculture - the Dakotas and Idaho - had no investments during our investigation period.'

It seems obvious that a European biotech company would conduct R&D in the US, that a knowledge seeker in pharmaceuticals would set up shop near Boston, or that a company seeking state-of-the-art IT knowledge might invest in operations in Silicon Valley. But what about the opposite direction? The column mentions GE's new research and development lab for medical systems in China. The lab focuses on product development tailored to emerging economies. Is this a unique example? (GE does seem to be a pioneer as far as spreading R&D globally goes...)

K@W concludes that leading regions in the knowledge industry should be wary about inviting foreign firms and giving them tax-breaks or other incentives.

Traditionally, investments from foreign firms have been celebrated by holding press conferences and ribbon-cutting ceremonies, as South Carolina and Alabama did when they landed BMW and Mercedes. But if Chung is right, these investments may not always be unalloyed victories. 'If many foreign firms enter seeking new knowledge, [productivity] gains may not accrue, and a nation's technological uniqueness might be more quickly replicated,' he and Alcacer point out in their paper. Of course investments from foreign firms may still bring benefits such as more jobs and spin-off economic activity as, for example, suppliers spring up near the foreign firm's new plant.

This sounds much like an absurd reversal of the current outsourcing debate - we don't want our firms to invest abroad because that means we'll lose our jobs (even though our firms will be more competitive), but we don't want foreign firms to invest here because that means we'll lose our competitive knowledge edge (even though we'll get more jobs).

Besides, the argument doesn't hold. Knowledge doesn't diminish by being shared - and if foreign firms invest in US high-tech clusters, this strengthens the competitive advantage of those clusters by increasing their innovative churn. Many of a cluster's advantages (labour pool, social networks, proximity to leading research labs/universities etc.) don't travel well.

To be fair, Chung and Alcacer acknowledge the importance of place in other parts of the discussion, and the 'threat' to American competitiveness is only vaguely alluded to in a generalized statement in their academic paper.

An objection to Chung and Alcacer's research - and to the notion of knowledge seeking via foreign expansion, in general - might be that investing abroad is a costly way to learn. After all, patents and technical manuals are widely published, and newly graduated scientists and engineers are eager for jobs.

But Chung argues that this objection misconstrues the nature of knowledge. 'Knowledge can be broken into a codifiable piece - the stuff you can write down - and a tacit piece,' he explains. ... Consider eating at a restaurant, he says. 'You don't really experience it unless you go there yourself. You can have someone tell you about it. You can order takeout from the restaurant. You can buy the cookbook. But to get the full benefit of the experience, you have to go there.'

Think about it: Which advantage is eroded more easily - an emerging economy's lower labor cost, or the United States' R&D and innovation prowess? (Doubters may want to read Thomas Friedman's recent op-ed.)

By all means, negotiate IPR protections when entering alliances and joint-ventures, but don't get paranoid about foreigners transferring their money and their researchers here.