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strategy and business
 / Winter 2004 / Issue 37(originally published by Booz & Company)


Europe: Old World or New?

This is becoming a major concern for European leaders. The tools for understanding and making changes in innovation and development are very poor today. We don't understand the mechanisms that link research, innovation, and economic growth. The discussions around these subjects are too blurred.

Former Schneider Electric chairman and CEO Didier Pineau-Valencienne
This is an area where we, as business leaders, can really help support Europe. Private industry, through its global network, can support our politicians and industrial leaders in achieving this goal. Right now, it is just a written commitment among politicians. Instead of complaining, instead of fighting them, join them. Agree with them that this is a challenging target. We can work in this area and go together with Brussels. We don't have to love bureaucrats, but we do have to deal with them in a positive and constructive way.

S+B: When you talk about finding ways to collaborate to spur innovation and growth, what are you imagining?

Napolitano: One problem we can collaborate on is to stop the "brain drain" to the United States. We have a tremendous brain drain, because the circumstances and opportunities for the most talented researchers are far better in the United States. That's going to create problems for European companies, particularly in the pharmaceutical and life sciences industries, where we have many leading companies.

Banerji: There is a window of opportunity right now, involving the rather restrictive immigration policies in the U.S. and the impact on higher education. The retention rate of foreign Ph.D.s in U.S. corporations is about 30 to 40 percent. But changes in immigration policies there are making it more difficult for them to get into graduate programs or stay in jobs. Europe has not taken advantage of it at all, and continues to lose share in higher education.

Meier: Another idea is focus on certain industries in certain cities, and bring together research and investment money to do something.

S+B: In the 1980s, there was a big debate in the United States about industrial policy. People grew excited looking at Silicon Valley and its growth around Stanford University, and about Research Triangle Park and its growth around Duke, and asked, "How can we invent these kinds of clusters elsewhere?" There were several conscious efforts to do so, most of which failed. What the U.S. decided is that attempts to engineer industrial policy centrally rather than organically can be a waste of money.

Habbel: There's a big discussion of the same thing in Europe, about whether we should have industrial policy. Yet if we look at the development in Munich, and throughout Bavaria, that has not happened by chance. There was an active Bavarian industrial policy behind it.

Van Wachem: The redevelopment of the Irish economy, too, was the result of active policies involving taxes and other factors.

Arne Wittlöv, former group executive vice president of Volvo
Spurring Entrepreneurs

S+B: Ireland is an excellent example of how the New Economy became real in Europe. Is there a legitimate public sector-private sector role in driving that forward throughout Europe?

Mensing: I have a bit of a contrarian view. For a while, I was very much in love with the new companies and new technologies that were being created around the beginning of 2000. We were all bashing traditional companies. But when the dust settled, I found that Holland was left with no new companies. Every company that was created during that boom disappeared or was acquired, and now we're back admiring Unilever and Philips and the traditional companies.

The same is true throughout most of Europe. We do have SAP, which was created in Germany and thrives, but there are only a handful of new companies that have been created in this economic boom, and we're back admiring the old. And I'm asking myself, "Why is that?" My feeling is that the Schumpeterian theory of creative destruction is very much alive in the States, but doesn't really work in Europe. We've got to find a balance between the new and the traditional things.

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