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When Innovation Goes Global

Hand holds a lab beaker with a globe inside

The arc of discovery is moving abroad. While markets crashed in the United States and Europe, creditor countries like China focused deeply on investing in growing their crop of trained scientists and engineers, attracting research and development firms, and becoming the new hotbed of life sciences innovation. According to Tomasz Mroczkowski, Kogod international business professor, the life sciences industrial complex — the amalgam of pharma, biotech, health care, and computational sciences firms that will dominate the twenty-first century business landscape — is shifting to nations like China, India, and South Korea.

Mroczkowski sees this is as a good thing.

Perfect Storm for Knowledge Outsourcing

Already the life sciences industry is estimated at $1 trillion and is seen by most observers as a key area for future growth. Combining medical research for animals and humans, energy, food development, and other industrial applications, life sciences R&D is more complex, more difficult, more challenging, and some argue, more impactful on everyday life than R&D in computers or IT.

In Mroczkowski’s new book, The New Players in Life Science Innovation: Best Practices in R&D from Around the World, the scholar details how this vital industry is finding a new home throughout Asia and in nations new to innovation like Brazil. In short, “we’re witnessing a new phase of innovation, an expanded universe of global research and development.”

The U.S. financial meltdown corresponded with a globalization of R&D, one where Western countries are no longer the only players. As investment dollars shrank in the West and increased abroad, cost pressures began driving Western pharmaceutical and other life sciences companies to collaborate with other nations. “Emerging economies are moving at least twice as fast as the West, they are able therefore to sustain higher levels of R&D spending, just as we cut back,” explains Mroczkowski. “If this continues for 10 years, we’re going to be outspent.”

While Asian nations currently have a smaller stable of scientists and engineers overall, by 1990, Asian students receiving bachelor’s degrees in engineering exceeded those of the United States and European Union combined. Several Asian nations, like Japan, South Korea, and Taiwan, now match or exceed Western levels of 24-year-olds who hold their first university degrees. In the past decade, Asian countries have surpassed the United States in the total number of doctoral students receiving degrees in science and engineering.

These shifts are no accident. In 1988, China began its Torch program, an effort to link science and industry, create tech markets, and promote academic entrepreneurship. The government invested in innovation support centers for entrepreneurs, high tech industrial zones, and reforms to higher education to expand university and graduate study programs.

India long had an independent nuclear energy sector, space development, medical education, defense research, and agricultural systems to improve crop yields and increase diversity. But due to patent laws that favored national industry, for decades, Indian industry relied in large part upon technology transfer from more developed countries. Since the nineties, numbers of Indian Institute of Technology schools have been founded to better train the next generation. Says Mroczkowski, the success of IT outsourcing to India in the 1990s positioned the nation as credibly able to leapfrog into the knowledge economy. India’s acceptance of global intellectual property rights in 2005 means that the private sector, not government-driven science, could be a key driver of innovation.

R&D Graveyards

While China and others expand research and development, there is already a risk that Europe will become a “graveyard of pharma labs.” One study commissioned by a French pharmaceutical industry association estimated that 32,000 jobs may be at risk between 2005 and 2015 unless new policy responses are adopted.

Large companies like Lilly have outsourced most of their pharmaceutical functions. Merck has closed many of its R&D labs in Europe and in recent deals, will partner with Indian companies Orchid and Ranbaxy for novel drug development. An openness to trade and investment and respect for international intellectual property regulation are making moves like these cheaper and more efficient, and are creating a climate for global innovation. Writes Mroczkowski, “More efficient division of labor among countries and regions and the new efficiencies thus gained should result in accelerated scientific discovery and innovation and new and better products and processes for the world.”

The Big Switch

What has been described as the growing knowledge economy in developing countries marks a true about-face. According to Mroczkowski, developing countries with low levels of per capita GDP were once advised to absorb foreign technology as efficiently as possible, rather than spending scarce national resources to develop and acquire knowledge themselves. This trend has reversed to such an extent that a World Bank 1999 World Development Report suggested that “knowledge has become perhaps the most important factor determining the standard of living — more than land, than tools, than labor.”

In China, for instance, the overarching goal to make the country “innovation oriented” means that innovation itself is seen as replacing exports as a growth engine. As Mroczkowski writes in New Players in Life Science Innovation, for most of human history the measure of a nation’s power and control was once a measure of how much territory fell under its sway. But the battles and power struggles of this century will be about knowledge and technology. Smaller nations without physical resources will be able to command great wealth with the right technological and economic paradigms.

The Innovation Network

While the United States leads the trend for global outsourcing, says Mroczkowski, “the U.S. remains and, I think, will remain for a long time, the most attractive high technology market, the best destination for R&D, innovation and universities.” There are also huge advantages to American companies partnering in India and China, and many European as well as Chinese and Brazilian companies are and will be coming to the United States. The increased global collaboration, to Mroczkowski, is a win for scientific advancement.

Above and beyond that, translating into real investment dollars, global competition in technology sectors keeps demand for new knowledge increasing continually. Given the latest development tools and communications technologies, business management can now flow easily across time zones, while at the same time very different teams of scientists can draw on accumulated knowledge and simultaneously play to their individual strengths.

Mroczkowski doesn’t believe “innovation is something you can keep in one place.” Instead, he thinks that “innovation is in the network. The bigger that network is — if it’s a global network and it can collaborate and exchange information — that’s going to give us some really new kinds of exciting innovations.”