Is the World Really Flat?
A provocative new book, The Venturesome Economy, argues that the world isn't flat at all, says HBS professor Jim Heskett. But in supporting innovation, does flatness even matter? Readers around the world weighed in with a constellation of viewpoints. (Online forum now closed; next forum begins February 5.)
In supporting innovation, does it matter how flat the world really is? "The world is oval!" (Hujaj Ali Nawazkhan). "[T]he world is flatly circular" (Santhanam Krishnan). "[T]he flattening process, while occurring, is highly uneven in its pace, extent, and effects" (Alex Evans). "It really doesn't matter whether the world is flat or not. Most value is added by the exploiters, not the creators, and that works in both (flat and non-flat) environments" (Gerald Nanninga). These comments, among others, reflected many of the thoughts generated by this month's column.
Bruce Bockmann stated the case for the "flat-worlders" in reminding us that "it is the responsibility of government to support technology in its own country. If government does that, the capital and entrepreneurs will follow ... capital and management seek efficiency, and being close to the technology is efficient." Further, William Halveson pointed out that "CRADA agreements can limit how fast the high level discoveries escape."
Abbey Mutumba, on the other hand, said that "Most innovations now take place at the users' end...." As John Arnott put it, "Entrepreneurship is the motor that gets technology to market." According to Kamal Gupta, "Scientific research and technological innovations create new products, but the top line and bottom line come from entrepreneurial innovations...." Adnan Younis Lodhi added: "With the virtual mobility of global labor insured, only those companies and nations will grow ... that make the best use of entrepreneurial qualities...."
How governments should spend money in support of innovation clearly depends on one's view of just how flat the world is. On this question, those who addressed the issue at all played it quite safely. For example, C. J. Cullinane wrote, "[I]nvest at the basic high school and college level in math and science. Small business should get tax breaks as well." After largely accepting author Amar Bhide's arguments, Kamal Gupta concluded that "governments should fund education in math and science ... Markets will take care of entrepreneurial innovation."
Jay Somasundaram asked whether we are even asking the right question. In his words, "The critical problems of this century are war, massive income disparity, non-sustainable use of resources, and discontent. What we need most is not innovation from the physical sciences ... but innovation from the social sciences."
Is the world really flat when it comes to innovation in the physical sciences? Or is that even the right question? What do you think?
That's the question posed by Amar Bhidé in his new book, The Venturesome Economy. Disputing Thomas Friedman, author of The World is Flat, Bhidé concludes that: (1) it isn't, and (2) arguments by Friedman and others—whom he labels as "techno-nationalists"—fail to recognize how innovation that matters really occurs and aren't always helpful to long-term global or even U.S. development.
Bhidé's conclusions are based on interviews with a large sample of start-up entrepreneurs as well as economic analysis. He's concerned with the complex set of relationships in a three-by-three matrix composed of high/mid/ground-level products and services and high/mid/ground-level know-how—for example, developers of high-level (think microprocessors), mid-level (motherboards), and ground-level (laptop computers) products and services as well as high-level (solid state physics), mid-level (circuit designs), and ground-level (management of a specific fabrication plant) know-how for each product or service (in this case, microprocessors).
His conclusions are, among others, that: (1) it doesn't matter where in the world high-level research takes place, because (2) its findings travel easily and at relatively low cost, but that (3) as one progresses from high-level to ground-level products and services and from high-level to ground-level know-how, ideas travel less easily. The work associated with them is more localized and less exportable. Thus, concerns about "brain drains," the proportion of foreign students studying in U.S. institutions of higher learning, or the likelihood that the U.S. will continue to lose its dominance in the development of new high-level ideas and know-how are overblown.
Instead, Bhidé concludes that the edge in economic development from the "innovation game" comes from the kind of entrepreneurial behavior that adapts and combines high-level ideas and know-how, adjusts them to the needs of particular markets, and actually sells them to willing buyers. Without these capabilities, high-level ideas, as was the case with the development of transistors, can take decades to develop.
Of course, the development of high-level ideas is critical to this process as well, but if it is less and less possible to hoard such ideas, where they are developed is of less importance than where mid-level and ground-level ideas and know-how are applied. The iPod, for example, was an example of purchased (largely non-U.S.) technological innovations combined with Apple design capability and knowledge of the U.S. market, where the vast majority have been sold.
If one agrees with these hypotheses, what does this mean for investments in basic science on the part of any government? Would some of that money be better deployed in supporting education in areas such as marketing and entrepreneurship that fosters entrepreneurial thinking and behaviors, providing credit to entrepreneurs and small businesses, and instituting tax policies that encourage the provision of venture capital? Or is the world really flat? Do the "techno-nationalists" have it right? What do you think?
To read more:
Amar Bhidé, The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World (Princeton: Princeton University Press, 2008).
Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-first Century (New York: Farrar, Straus and Giroux, 2006).