A systematic mapping of where the world’s global leading companies in deep tech are located shows that the UK is second best in the world. More importantly, the four dominant deep tech countries all have economic models based on an Anglo-Saxon legal tradition – shows the Deep Tech Index.
Currently Santa Clara Valley by itself hosts a fifth of all globally leading deep tech companies. The region has had a first-movers advantage, since Thomas Edison created the world’s first industrial innovation laboratory there 150 years ago. This massive lead is gradually normalizing, due to rising costs and talent shortage. Other parts of the US, and more importantly other parts of the world, compete with growing deep tech companies.
The USA has fully 62 percent of the world´s leading 500 deep tech companies, a large but falling share. The UK is second best in the world, hosting 6.6 percent of all global deep tech. In the areas of fintech and clean tech, the UK is world leading. Also, in photonic & electronic as well as space & advanced materials, a relatively large share of the world´s leading deep tech companies are found in the UK.
Further 5.6 percent of the deep tech companies of the world are located in Canada and 5.4 percent in India. These four countries which share an Anglo-Saxon legal tradition dominate global deep tech, far surpassing any rivals. Adding in Australia and Ireland, fully 80 percent of the deep tech companies in the world are found in these four nations.
It is astonishing that four out of five world-leading technology companies exist in Anglo-Saxon economies.
The five urban regions with most share of global deep tech companies are Santa Clara Valley, Boston, New York, London and Los Angeles. London is the only top 5 deep tech region outside of the USA. Other leading regions outside of the USA include New Delhi, Vancouver, Mumbai, Singapore and Toronto. These regions all exist in countries with an Anglo-Saxon legal tradition.
Zurich, Eindhoven, Tel Aviv and Stockholm are examples of globally leading deep tech hubs that exist in countries that have a legal tradition other than Anglo-Saxon.
There is a close link between having a high share of globally leading deep tech companies per million adults, and having a high share of the world´s leading top 100 universities in mathematics and engineering. Currently 23 of those top universities exist in the USA, 4 in Canada, 5 in India and 8 in the UK. Further 6 are found in Australia, a nation which is very successful in attracting students from abroad. Combined with an Anglo-Saxon business tradition and competitive taxation, Australia is likely to keep growing with deep tech in the coming years.
The UK and countries that used to be its colonies and therefore have an Anglo-Saxon legal tradition, have a strong lead in knowledge when looking at the university level. They have an even more impressive lead when looking at the level of deep tech company success. While other parts of the world are catching up gradually, this strong Anglo-Saxon dominance can explain why English is the predominant business language.
Historically, the Anglo-Saxon business model has had a strong focus on venture capitalists interacting with entrepreneurial capitalists. This model, popularized today in tv-series such as The Dragon´s Nest, existed in early form already during the industrial revolution. The strong venture capital sector and its interaction with specialized technology firms can explain why countries with Anglo-Saxon legal tradition have such a massive lead in global deep tech.
Already the world´s first entrepreneurs, the tamkãrum of ancient Babylonia and Assyria, had a division between those entrepreneurs who were manufacturers and traders, and those who were investors. This concept existed already some 4 000 years ago, but in today´s modern economy it is Anglo-Saxon countries that do it best. The key is allocating capital to technology development, and keep the funds growing to fund more technology. This form of investment capital is very sensitive to taxation, since so high risks are involved risk and reward have to be balanced. This form of innovation ecosystem ultimately flourishes if the revenues are taxed once they are finalized, not if return from one project is invested in another innovation activity. Building a tax environment conductive to innovation funding remains a challenge for many countries that do not have an Anglo-Saxon legal tradition, and explains the strong continued dominance.
Author: Nima Sanandaji, Director European Centre for Entrepreneurship and Policy Reform
Lead image: by Andrew Bossi; aerial view of London central business district via Wikimedia under CC 3.0 License.
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