Comments on Johannes Bauer, Learning from Each Other. Martin Fransman JETS and School of Economics University of Edinburgh

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1 Comments on Johannes Bauer, Learning from Each Other Martin Fransman JETS and School of Economics University of Edinburgh

2 What can Europe Learn from the US about the Platform, Content, and Applications Layer of the ICT Ecosystem? Performance Indicators 1. Number of global ICT companies in the FT Global 500 (by market cap) 2. Most visited websites by country

3 A Simplified Model of the New ICT Ecosystem Output of innovative goods and services (from all three layers) Final consumer Global trade Layer 3 Cont. & App. Providers Financial Markets Layer 2 Converged Networks Regulation Global trade Layer 1 Networked elements Standardisation

4 ICT Companies in the FT Top 500 from the US, Japan, Europe and East Asia (Korea, Taiwan and China) Layer Total number of companies III 9 II 18 I 29 Number of companies by region US 6 Japan 2 Europe 1 US 5 Japan 3 Europe 8 East Asia 2 US 12 Japan 9 Europe 6 East Asia 2 Source : M. Fransman (copyright), calculated from FT Top 500, 2006

5 Top 5 Websites by Company The Top 5 Most Popular Websites by Country Japan yahoo.co.jp google.co.jp fc2.com mixi.jp youtube South Korea naver.com daum.net yahoo.com cyworld.com nate.com China baidu.com qq.com sina.com.cn sohu.com 163.com US yahoo.com google.com myspace.com msn.com youtube Germany google.de ebay.de google.com yahoo.com youtube France google.fr skyrock.com msn.com yahoo.com live.com Italy google.it yahoo.com google.com msn.com youtube UK google.co.uk yahoo.com google.com msn.com ebay.co Sweden google.se msn.com blocket.se youtube.com google.c Netherlands google.nl hyves.nl msn.com live.com youtube Brazil orkut.com google.com.br msn.com uol.com.br yahoo.c Russia mail.ru yandex.ru rambler.ru vkontakte.ru google.r South Africa google.co.za facebook.com yahoo.com google.com msn.com

6 Explanations for US success in Layer 3 1. The US had early-comer advantages since both the PC and the Internet emerged in this country. Network effects and dynamic increasing returns cumulatively reinforced these advantages. 2. The US venture capital industry has been particularly effective, their contacts and connections being as important as their provision of capital. 3. US universities have been unparalleled in terms of their ability to provide skilled person-power, commercialise research, and incubate entrepreneurs (e.g. the founders of Yahoo and Google came from Stanford University. 4. Entrepreneurship for many reasons has flourished in the US system.

7 So what can Europe learn from the US? I leave this question for discussion time. However, Learning from Each Other is the title of Johannes Bauer s rich and insightful paper. What light does he throw on our question? Essentially, the paper is a methodological tour through the various ways that are harnessed in the attempt to learn lessons from other countries. More specifically, the paper focuses on the pitfalls and limitations in the attempts to derive lessons.

8 Pitfalls and Limitations Here are some of the conclusions: The Political Process Policy decisions are influenced by stakeholder strategies and the political process. Intervention that works well in one national context may fail in another. (p. 7) Disagreement regarding study conclusions e.g. design of unbundling remains a subject of intense controversy the effects of unbundling on investment are contested. (p. 11) Inconsistency between indices based on service baskets e.g. indices based on a basket of service components yield widely differing numbers and rankings of nations. Sets of indicators also can be inconsistent e.g. OECD, ITU, Economist s E-Readiness Index, World Ec Forum, LECG/Nokia Siemens. Conclusion: rankings of countries in these indices vary, sometimes considerably. (p. 15/16) Correlation between LECG and OECD rankings is low suggesting the two might measure different aspects of broadband. (17)

9 Static versus Dynamic Performance Criteria Static efficiency refers to system performance given the technology, assessed by prices and productivity. (p 18) Dynamic efficiency refers to the performance of the system over time assessed by variables such as investment in new technology or innovation in new services. conditions under which static efficiency is maximised typically differ from those that maximise dynamic efficiency. (18) E.g. Unbundling will ease market entry and create investment incentives for new entrants but reduce investment and innovation incentives for incumbent players. (18)

10 Use of Models Data and observations do not speak by themselves they need a narrative. (19) There are four modes of causal explanation: 1. Analogies and metaphors 2. Case studies 3. Non-parametric statistical analysis 4. Parametric statistical analysis 5. Qualitative comparative analysis (19) However, none of the methods is particularly strong in modeling dynamic interaction processes with many feedbacks. (23)

11 Countries have both strengths and weaknesses Example: the US Did well comparatively in Internet services and innovations and 1G wireless. But lost leadership to Europe in 2G/GSM With 3G leadership moved to Asia. This suggests a more humble view of how effective government and other stakeholders can be in steering the communications sector in a particular direction. (26)

12 And the conclusion? Meaningful indicators are difficult to design and it is necessary to clearly understand their strengths and limitations. (27)

13 So, can Europe learn lessons from the US in Internet platforms, content and applications? Answers please!