Leveraging Talent for Global Competitiveness: Education, Migration, and Domestic Development
The global economy is witnessing unprecedented opportunities in high technology goods and services. However, with new opportunities the competition for securing new markets and professional talent is also getting more intense. This paper argues that those countries which are best placed to generate and deploy professional technical talent in large numbers will have critical competitive advantage over other nations. Naturally policies to promote scientific and technical talent in the domestic economy will be necessary through appropriate educational infrastructure. At the same time, foreign talent (more often than not expatriate talent) needs to complement domestic talent pool. This has the advantage of not only recouping past national investments on students who went abroad to study but such expatriates are also likely to bring with them global professional contacts and commercial and technical knowledge. To ensure that both domestic and foreign expatriate talent can fully utilize their skills on an expanding basis infrastructure development in the form of science parks, industry clusters, and triple helix institutional arrangements, which include industry, business, and universities must be developed. Finally, for long-term sustainability of international competitiveness domestic economic and social development will be essential. Such a strategy by reducing income and wealth disparity will raise the overall size of the national market and increase national well-being.
The paper is divided into two main parts. The first part identifies the several institutional systems for leveraging such talent for international competitiveness. These include education, foreign-based talent, and their links to other institutions such as government R&D centers, science parks, industry associations, and firms. The second part presents several examples from China and India to illustrate the different ways they are leveraging their talent for global competitiveness and the challenges ahead.
2. New Economy and Globalization
The significance of talent today is largely due to three important macro developments. The first is the emergence of the new economy, which is driven by the services sectors and the growth in information and communication technologies. Economies around the world are undergoing structural shifts away from agriculture and industry, while new kinds of services such as R&D and other knowledge-based activities are exploiting information and communications technologies. The results of such developments have been increasing productivity growth and thus higher economic growth in many. Countries such as China and India are taking full advantage of the new economy in fostering new entrepreneurial initiatives, exports of services, and also technologies that are integral to the new economy.
The second related development is the process of economic integration. With increasing trade and foreign investments by multinational corporations, and business strategies to reduce costs, tap resources, and secure new markets national economies have become enmeshed with each other in multiple ways. In the area of high technology a select number of countries have become very interdependent on each other. Consequently, working together to promote and transfer technology and knowledge has become central to economic development strategies. As multinationals disperse their activities intra-company transfers of personnel are becoming common, while governments are actively seeking to get their expatriate talent back.
The third factor is demographic challenges faced by OECD economies, and paradoxically even populous countries such as China. Most acutely, however, the problem is faced by Western Europe and Japan. Declining fertility rates accompanied by stringent immigration policies have created the specter of labor shortages at all levels. Furthermore, enrollments in science and engineering university programs are either stagnant or declining. In fact many countries are increasingly relying on technical students from Asian countries such as China, India, Taiwan, Korea, and others. This also suggests that future competition for professionals with tertiary education in technical fields suited for high technology industries and service sector is likely to intensify.
3. Mobilizing Talent for Competitiveness
There are various ways by which firms and national economies enhance competitiveness. Cost, quality, resource management, and labor flexibility are some of the ways by which competitiveness is maintained. Today, the demand for human resources has taken on added significance. The availability of a large talent pool (which is different from the well-educated workforce of the industrial age fostered by East Asian economies earlier) provides undue advantage to participate competitively in high technology manufacturing and service sectors. These activities rely on knowledge systems, which are quite dependent on government investments in science and technology infrastructures. There have been several models followed by various countries in promoting science and technology infrastructure and fostering synergy among the institutions involved. For example, many countries in some form or the other adhere to a national innovation system (NIS) model, whereby government and business along with other institutions work together to enhance a country’s technological capability. Similarly, industry clusters, which are agglomerations of firms linked horizontally and vertically and supported by local public and private institutions have been a recent model for urban and regional development in many Asian countries. However, the most germane model for contemporary industrialization based on science and technology has been the triple helix model (THM). Here some elements of the national innovation system are also found since the state is common to both models. But the difference between THM and other models is the importance of universities in THM, which contribute to new knowledge systems by providing critical human resources, in addition to carrying out science and technology-related projects. The institutional interactions between industry and government (NIS) and industry, government, and academia (THM) are assumed to lead to cross-fertilization of new ideas and new modes of organizing knowledge for competitiveness. Science parks and industry clusters are subsumed under these models in an integral way.
One missing element in these models is the role of expatriate talent. Universities are sources of talent in general but the outflows of talent (often seen as brain drain) have plagued many developing countries. Today with new opportunities in the new economy, especially in some of the large Asian countries, the possibility of returning emigrants is much higher. Governments have enacted policies to attract their expatriate talent home and nurture their national high technology industries. Taiwan is a case in point, where the government, among other things, invested in Hsinchu Science Park to bring back former Taiwanese students and entrepreneurs. Expatriate talent from Asian countries can be found in large numbers in the US. These groups are part of global social and professional networks. Hence if the link between major centers of innovation such as Silicon Valley is maintained with the home country of expatriate talent then the benefits of return international migration could be substantial. Again Taiwan is a good example, although both China and India are also good recent illustrations of the benefits of international mobility of technical talent.
From the benefits side for sending countries linkages are important. These are trade and investments, entrepreneurship, knowledge flows, and skill formation. However, there are costs as well. In addition to the losses associated with outflows of talent, there could be distortionary effects of too much emphasis on tertiary technical education. This is where a focus on domestic social and economic development would be important to address problems of poverty, inequality, and uneven regional development. Even China, whose record is far better than many fast growing economies such as India, has substantial challenges ahead. A comparison with some of affluent countries shows that China has a lot to do in the near future. For example, its poorest 10% of income earners get only 1.8% of national income, compared to India’s 3.9%, while its richest 10% get 33.1%, which is the same as Nigeria’s and much higher than India’s. Its rural population is still very large and impoverished. Much needs to be done to alleviate their problems.
4. Some Models in Action in Leveraging Talent: China and India
In this section we look at some of the ways by which both China and India are trying to leverage their talent for national growth and development. We begin with the evolution of the triple helix model in India. In the post World War II period, the Indian government, much like the Chinese government, led the science and technology infrastructures. The relationship between public universities and industry was weak. Over time with market reforms some of the links between universities, state, and business have been strengthened. However, the global success of the Indian software industry suggests that the international links between private industry and foreign business have become very critical to its growth and development. Even for China the market reforms and multinational investments have established new kinds of international partnerships in science and technology industries that rely on Chinese technical talent. Without the active involvement of both governments this would not have been possible. For example, the Indian government in Bangalore has many key research institutions. These along with many universities and software business firms, both foreign and national, have given rise to a very dynamic industry cluster. Similarly, the various technology clusters found in Beijing and in Shanghai are a testimony to Chinese government’s initiatives in promoting new industries.
The expansion of the Indian IT cluster has been also possible by the return flows of expatriate Indian technical talent. The formation of professional networks such as The Indus Entrepreneurs (TiE) in Silicon Valley with its many chapters in India has contributed to epistemic communities. As economic and professional opportunities have increased in India, many expatriates are returning home, either to start new business on their own or on behalf of their employers in the US. Recent estimates suggest that 30-40% of Indian IT professionals going abroad are returning home.
One way we can visualize the deployment of talent is to examine a difficult market such as Japan’s, where outsourcing of software development is still not popular. However, both Indian and Chinese firms are engaged with the Japanese IT industry. Because Japanese businesses prefer face to face interactions, they prefer more foreign talent to be present on-site. This has the effect of temporary or longer term migration of foreign professionals to Japan. Consequently, Indian professionals learn about new technologies and specific Japanese market conditions, which through epistemic communities are relayed back to India at the company and industry levels. Similarly, many Japanese companies are outsourcing software from China, especially from Dalian and Shanghai. This has been possible partly due to the presence of Chinese technical students in Japan, who either remain in Japan as employees or return home to work for Japanese companies in China. However, the Indian business model for software development is different from the Chinese one as it is largely export oriented and reliant on the US market. An early start, the availability large English-speaking technical pool, and new global opportunities allowed the Indian industry to flourish.
The availability of professional talent in both China and India is due to not only national educational infrastructures designed to support tertiary education for industrialization but also because of educational opportunities overseas. One could make the argument that precisely because of good domestic training many students leave for further education abroad. There is some form of brain drain no doubt but the impact of outflows of talent is limited to the large and expanding educational infrastructure in both China and India. Hence, with growing opportunities at home both Chinese and Indian professionals find returning home attractive. When government incentives are provided such return migration is likely to become a reality.
A combination of factors and institutional linkages can mobilize talent effectively for technology spill-overs, university spin-offs, and cluster dynamics. These are market growth, infrastructure, talent, triple helix-type institutions such as government research institutes, universities, and business. Publicly funded science and technology parks with a variety of multinational links, including overseas talent are equally crucial. In the case of the Chinese software industry we have evidence of university spin-offs. This has been a result of home market growth, migration of students and professionals overseas, and subsequent return of some of them. China has been an important source of technical talent for major economies such as the US and Japan, while India has been the most important source for the US with little participation in Japan. Nevertheless both countries are increasing their international engagement generally.
Leveraging talent for international competitiveness is possible today because of the demographic problems arising in most OECD economies. Japan is a classic example. What is of concern is the stagnation of overall technical student enrollments in Japanese technical colleges, even as some fields of study such as substance engineering, architecture, design engineering, and interdisciplinary systems-related are on the rise. The question that Japan must face is how can it obtain the necessary talent to support and sustain its successful high technology industries? Relatedly, could China and India leverage this development to their advantage?
Thus far the engagement of Chinese software companies with Japan is not very high, though it is the most important participant with 62% share of Japan’s foreign outsourcing compared to US’ 10% and India’s 8%. Nevertheless, China stands a good a chance to leverage its talent further (see Figure 4). It has built up a sizeable science and engineering workforce of over two million, which rests on over 1,700 colleges and universities. There were 6 Chinese universities that were ranked in the top global 200. Nearly three-quarters of a million Chinese students study abroad, with many of them returning home. The social networks continue to be strengthened with more than 50,000 Chinese professionals in Silicon Valley, who also have contacts with businesses in China and other parts of Asia. Such interplay between domestic efforts and global connections are seen in the form of increased R&D budgets and rising share of China’s scientific publications.
It is evident that the future evolution of the global economy will rest on the availability of highly trained professionals. Already there are shortages of such talent in various economies due to declining fertility rates, immigration controls, and relative decline in enrollments in science and engineering fields. For some countries such as China and India, this can be seen as a historic opportunity to leverage not only their large growing markets but also the educational infrastructure they have built up over the years for industrial development purpose. However, focusing merely on tertiary technical education is inadequate since large numbers of their population continue to face employment and educational barriers. Concern for domestic development must be made a top priority so that even greater numbers of students have the access to higher education and well-paying employment. Addressing inequality in both countries should take the highest priority for ensuring that such rates of growth are sustained. With both countries still major sources of students and professionals for OECD economies suggests that they could leverage their domestic economies to bring some of them back. This would be of considerable advantage in not only promoting domestic innovative capability but also engender dynamic relationships with multinational clients and overseas centers of innovation. National innovative capability will continue to demand fine tuning the triple helix institutional arrangements such as the relationships between industry, universities, and government research institutions. Science and technology parks in this milieu of institutions can also contribute to global competitiveness.