When the cutting edge technology passes you over: The "winner takes it all" (and it ain't your home town)

Cats are territorial creatures. This Kat grew up in a quintessential U.S. industrial town-- Canton, Ohio. Canton is known to most Americans as the home of the National Football Hall of Fame, and history buffs will recognize it as the home of William McKinley, the 25th President of the United States, and the site of the memorial that was erected after his assassination in 1901. But in the broader picture, Canton primarily was once a symbol of US industrial might, at the forefront of the hi-tech of its time, run by what a friend called the “metal-bashing elite”. (Indeed, the broader region of which Canton is a part was, in the early 20th century, the heavy industry version of Silicon Valley, here.) It is cities like Canton, Ohio that The Economist had in mind in its recent article, “In the Lurch”, which discussed the plight of places that “have lost out to globalization.”

Lying at the root of the problem is that the diffusion of cutting-edge technology that once helped define Canton and its ilk is now passing over it. Where the spread of such technology once focused on intra-national transfers, today it is more likely to be characterized by diffusion between market leaders, wherever located worldwide. Local “metal-bashing elites” have been replaced by international “tech-transfer” elites. Those of us in IP take great relish in the international nature of our profession (isn’t that why we attend AIPPI or INTA?). In so doing, we may be making a material contribution to the very phenomenon that is corroding the long-term viability of our own localities.

In less globalizing times, whenever there was more money available than investment opportunities in a given locale, capital and other resources would tend to move to less developed areas. The result was that the diffusion of technology was accompanied by a leveling process both within and between regions, at least at the national level. For sure, the clustering of talents and resources was still important, but in a less globalized world, diffusion tended to first extend within a country before radiating abroad. What changed with globalization was scale and the increased likelihood of “winner take all”, when the entire world is your business oyster and ever-more clustered aggregations of skilled employees are essential.

As the article in The Economist observes:

“An OECD study published in 2015 looked at the way in which productivity gains spread from “frontier” firms operating at the highest productivity levels. Since 2001 new technologies have percolated from leading firms in one country to equivalent firms in other countries more quickly. Globally competitive firms have got better at mastering complex new technologies. And fending off global rivals seems to sharpen the incentives of managers at these firms to copy other successful ones.

But it is a different story within borders. Diffusion of technology from top firms in one country to laggard firms in the same country has slowed down. The authors of the study reckon that a lack of interest in adapting technologies to local circumstances may account for part of this, suggesting that the more the best firms focus on a global (rather than domestic) market, the slower productivity-improving techniques and technologies spread locally. The rise of superstar firms means that fewer places are home to businesses operating at the productivity frontier and that domestic investment is lower than it should be. In less dynamic local markets, nonsuperstars seem neither willing nor able to adopt the best technology.”

While the article goes on to describe how local authorities are trying to deal with this phenomenon, the overall take-away from the report is not overly optimistic.
But it is not just an increasing disjunction at the level of technology between the "winner take all superstars" and all the rest. Local institutions, which might be expected to support the technological needs of local companies, are themselves in a conflicted position. One of America’s greatest achievements is its world-class state universities (think the University of California, Berkeley and the University of Michigan). The problem is that, much like superstar firms, these superstar universities see themselves measured less by their involvement with and contribution to their local communities, and more how they stack up against private competitors, the Harvard, Stanford and Chicago’s of the world.

Remember, a state university is exactly that, an institution whose mission is to make quality education widely available to its citizens and to serve those who fund it, the taxpayers of the state. Against this backdrop, consider the commercial transfer of R&D carried out by such universities. When is the last time that one heard preference being given to entering into an agreement with a local company in the face of a more attractive commercial offer available out-ot-state or even out of the country? [Kat readers who know otherwise are invited to share that knowledge.] The superstar state university and its quest to contribute to excellence in technology becomes part of the local problem. (Kat readers are directed to a piece published this past week on Politico.com about the mission challenges of the University of Michigan in Ann Arbor vis-à-vis its own local region.)

Cats are territorial creatures. When it comes to this Kat’s boyhood territory, the technological landscape is not bright. And this Kat's boyhood territory is not alone.

Photo on upper right by MagAloche is licensed under the Creative Commons Attribution-Share Alike 2.0 Unported license

Photo on lower right by Andrew Home and has been released to the public domain

Photo on left by Richard Peter and is licensed under Creative Commons Attribution-Share Alike 3.0 Germany