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Commentary: German firms show overseas expansion can boost innovation
Globalisation encourages slot ออนไลน์ innovation, or so the conventional wisdom goes. But emerging evidence suggests that this assumption, like so many economic shibboleths, must be rethought.
The conventional wisdom is based on a 1991 study by Gene M Grossman and Elhanan Helpman, which showed that, by creating larger, more integrated markets, globalisation bolstered efficiency, encouraged specialisation, and strengthened incentives for profit-seeking entrepreneurs to invest in research and development (R&D).
The result was an increase in the global rate of innovation.
Yet recent research on China’s global impact indicates that the relationship between globalisation and innovation is not so unambiguous. On one hand, Nicholas Bloom and his colleagues find that greater competition from China has contributed to an increase in patents in Europe.
On the other hand, David Autor and his colleagues point out that the “China shock” has reduced the innovation rate in the United States.
What explains these divergent outcomes? One possible answer lies in changes to the manufacturing sector.
THE MANUFACTURING FACTOR
Manufacturing is traditionally where most innovation happens. But in rich countries – in particular, the US – manufacturing as a share of output and employment has been declining for decades, as multinational firms have moved labour-intensive production to lower-wage economies, such as China or Eastern European countries.If innovation happens where production takes place, it makes sense that China’s rise as a manufacturing powerhouse would be correlated with falling innovation in a country like the US.
THE EXAMPLE OF GERMANY
From 1990 to 2001, Austrian subsidiaries in Eastern Europe employed five times as many people with academic degrees, as a percentage of staff, as their parent firms did. They also had 25 per cent more research personnel working in their labs.Likewise, German affiliates in Eastern Europe employed three times as many workers with academic degrees, and 11 per cent more researchers, as their parent firms did.
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