Ithaka Life Sciences - Blog

Ithaka Life Sciences Ltd (Ithaka) is a provider of business advisory and interim management services to the life sciences sector.

Monday, 24 August 2009

Sources of Innovation

Biotech, like other technology based industries, is driven by innovation, much of it coming from universities and research institutions; but have you ever wondered who the innovators are? A fascinating article entitled “Give me your scientists.........” appeared in the March 7th 2009 issue of The Economist (http://www.economist.com/businessfinance/displayStory.cfm?story_id=13234953).
According to the US census of 2000, around 47% of the PhD scientists and engineers in the US are immigrants. Immigrants accounted for two thirds of the net addition to America’s stock of such workers between 1995 and 2006. The Economist article cites a study by William Kerr, an economist at Harvard Business School, who used name-matching software to identify the ethnicity of each of the 8m scientists who had acquired an American patent since 1975 (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1316942).
The share of all patents given to scientists of Chinese and Indian descent living in America more than tripled, from 4.1% in the second half of the 1970s to 13.9% in the years between 2000 and 2004. Nearly 40%of patents filed in 2005 by Intel were for work done by people of Chinese or Indian origin.
The same paper also demonstrated that when the US federal government increased the number of skilled people allowed in under the H-1B visa programme by 10%, total patenting increased by around 2%. This was driven mainly by more patenting by immigrant scientists. Surprisingly, even patenting by native scientists increased slightly, rather than decreasing as might have been expected. It seems as though immigrants stimulate native innovation, perhaps because ideas feed off each other.
Another paper cited in the same Economist article looked at whether emigration from the developing world harms the originating countries’ capacity for innovation. This paper (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1320838) examined data on the patents cited by scientists working in India in their applications to America’s patent office. The authors conclude that proximity does matter: Indian patent applicants refer to research by scientists in India much more often than they cite work by those elsewhere.
So, having many scientists leave India may harm innovation there. But Indian researchers also refer to scientists of Indian origin in America more than very similar work by scientists with whom they do not share ethnic ties. A scientific diaspora may give countries of origin a leg-up in terms of access to the latest research, mitigating some of the problems of a “brain drain”. Also, given the tendency of many scientists to return to their native country at a later stage in their career, then innovation may flow back to the country of origin in due course.
What are the implications of this research for the UK biotech community? On the one hand, it may suggest that we should be encouraging more foreign scientists to come and work in the UK in order to stimulate innovation here (an interesting angle given the prominence of certain xenophobic factions in the recent local and European elections). It may also suggest that we should be less concerned about the perceived “brain drain” of UK scientists to the US; in the long run this may benefit UK innovation.

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