Collaboration in the Shifting Knowledge Economy

President Richard C. Levin
October 15, 2008
Special Plenary Lecture, World Knowledge Forum 2008, Seoul, South Korea

Chairman Chang, distinguished guests, ladies and gentlemen:

The turmoil in the financial markets over the last year and the diminished political influence of the United States over the last decade have led many to conclude that U.S. economic and political hegemony around the globe is waning. Meanwhile, China and India have emerged as the heirs apparent to join the United States as economic and political superpowers. The growth of Dubai, Mumbai, Singapore, Shanghai, and Hong Kong as the world’s new leading financial capitals have only underscored the shift from West to East of soft economic and political power. It is now the norm, rather than the exception, for companies from the Middle East and Asia to acquire peers and competitors across Europe and the Americas. While banks in the United States and Europe are reeling from the sub-prime mortgage crisis and the U.S. economy moves into a recession, economies across the Middle East and Asia continue to enjoy double-digit growth rates. And sovereign wealth funds from China, Singapore, and the Persian Gulf move to bail out U.S. and European financial institutions from imminent collapse.

To sustain the momentum of their rising economies, however, leaders in both Asia and the Middle East have come to recognize that the advantages that have propelled their rise – the release of low-cost labor from agriculture to industry in the case of Asia, and abundant energy resources in the case of the Middle East – will not persist forever. Eventually, China and India, as well as the oil oligarchies of the Middle East (as Korea and Japan have already learned) will have to compete in the knowledge economy. Hence, they have begun to turn their attention toward the creation of stronger systems of higher education and the development, largely through universities, of stronger national capacities for advanced research.

Since World War II, the United States and Western Europe have figured most prominently in the production and the management of knowledge. Universities in England and the United States have been magnets for the world’s best and most talented students and scholars. Researchers in these institutions contributed to the birth of new scientific fields ranging from high energy physics to molecular biology. Governments (to a measure prompted by Cold War rivalries) promoted scientific research and scientific literacy as national priorities. Private companies, such as Siemens in Germany, and Bell Labs and IBM in the United States, were incubators for breakthrough work in fundamental and applied science, as were government and university laboratories. And Western governments made significant investments in scientific infrastructure, particularly those for high energy physics, resulting in unparalleled facilities such as the nuclear colliders at Brookhaven National Laboratory and Fermi National Laboratory in the United States and CERN near Geneva.

In recent decades, profound economic, political, and social developments around the world have transformed the global knowledge economy. The United States and Europe face an emergent Asia, with China, India, Singapore, Japan, Korea, and Australia rapidly positioning their knowledge enterprises to compete with those of the West in the decades ahead. These countries are making impressive investments in education that are not unlike the scale of investments made by the United States in the years after World War II. These changes represent challenges, as well as opportunities, for new models of collaboration among academia, industry, government, and civil society in the United States, Europe, and Asia.

My remarks this morning draw mainly on the experience of American universities, not because their contributions are unique or more important than those of universities elsewhere. I focus on the U.S. experience strictly because I know it best and can speak from the experience of having served for more than fifteen years as the president of Yale.

For the moment, the United States still dominates higher education and research and development more decisively than it ever dominated the world economy. America may produce 25 percent of the world’s economic output, but it accounts for 40 percent of global spending on higher education and 35 percent on research and development. In 2005, it devoted 2.9 percent of its GDP to postsecondary schooling, while the European Union, Japan, China and India spent less than 1.3 percent. India, for instance, has a yearly budget of about $4.3 billion for higher education, whereas Yale, a single private institution, spends about $2.8 billion. Meanwhile, of the world’s top 20 universities, America has 16, according to the rankings published by Shanghai Jiao Tong University. Newsweek says 15, and the Times Higher Educational Supplement says 12. Particularly in doctoral education, which forms the basis for future generations of the professoriate, American institutions will continue to dominate and attract the best students for the foreseeable future.

Yet, there are signs that U.S. pre-eminence in higher education may be eroding. In the past two decades, thanks to the liberalization of student exchanges in the European Union and aggressive recruiting by Australia and Singapore, the U.S. share of international students has dropped from about half the total in the 1980s to less than one-third today. America’s share of worldwide science and engineering publications declined from 34% in 1995 to 29% in 2005, and its share of publications cited by other scholars declined from 50% to 41% over the same period.

The challenge to American leadership may not be immediate, but it is real. The scale of physical investment in China’s leading universities is staggering; in Shanghai, for example, Fudan, Shanghai Jiao Tong, and Tongji Universities have all developed sprawling new campuses within the past decade. The Japanese and Korean governments are strategically investing in their top research universities to internationalize them and to attract foreign students to their campuses, at a time when their own college-age populations are declining. The Persian Gulf States are starting to spend hundreds of millions on branches of U.S. and European institutions. And perhaps most ambitiously, the Saudis are about to open the new King Abdullah University of Science and Technology with an endowment of at least $10 billion and a capital budget of comparable size.

Catching the United States will not be easy. Harvard, Yale and Columbia are all developing new campuses, and Yale’s capital budget for the next five years alone is more than $3 billion.

Ultimately, however, the reputation of universities is measured by the impact of their graduates and the contributions to knowledge made by their faculties. A rising university can move the first needle more quickly than the second. There is no shortage of smart students in China, India, Japan, and Korea, and there is plenty of potential in the Middle East. But attracting and developing world-class researchers is a slow process. First-rate scholars prefer to work in close proximity to one another, and leading universities are, in effect, simply agglomerations of such people. To build a faculty that includes dozens or hundreds of world-class scholars and scientists takes time. Late nineteenth century “start-ups” like Stanford and the University of Chicago took half a century or more to make it into the ranks of the nation’s best.

Asian universities are trying to establish themselves in ways that recall the American “start-ups” of a century ago. For some time, leading universities in Singapore and Hong Kong have been successful in attracting top scholars from the U.S. and the U.K. to relocate; the leading mainland Chinese universities are now following suit. In 2003, Singapore launched Biopolis to attract the very best life scientists in global industry and academia to its laboratories, and it has rapidly established itself as a credible center for nanotechnology, genomics, stem cell research, and other cutting edge fields in the biological sciences.

The production of talent at rising universities across the East has stimulated the growth of knowledge-based industries. India, for instance, is becoming a major global source of research and development in pharmaceuticals and software, as prominent multinational corporations set up R&D centers in the country, and indigenous firms deepen their technological and innovative capabilities. Pharmaceuticals and biotechnology are particularly driving the research and development boom in India, as Indian firms increasingly invest in drug discovery and translational clinical research.

As the process of strengthening Asian universities moves forward, we are also seeing innovative forms of collaboration. Both Fudan and Peking Universities, for example, have persuaded top scientists from Yale to split their time between labs in China and the West. The Chinese provide abundant space and research staff to support the efforts of Western scientists, leveraging their productivity while at the same time allowing younger Chinese faculty and graduate students to benefit from involvement in cutting edge research. The bet is that over time the younger faculty who work with leading scientists from abroad will develop into world-class scientists themselves. Meanwhile, the productivity of U.S.-based scientists is multiplied significantly.

Such arrangements illustrate why the rise of the rest should be viewed by universities in the U.S. and UK as an opportunity and not a threat. Just like opening the economy to free trade, international collaboration in research is a positive-sum game. There are clear gains from trade, shared by both sides. And beyond the private benefits garnered by Asian universities and their Western collaborators, there are social benefits reaped by everyone, because most of the pre-commercial knowledge produced by basic scientific research is a public good, available to other scientists and engineers worldwide as building blocks in creating useful products and curing disease. A stronger global capability in scientific research benefits all nations.

The same argument can be made about strengthening educational capabilities around the world, in Africa and Latin America as well as in Asia, Australia, and the Middle East. In an increasingly interdependent world, there is a growing consensus among American educators that developing the capacity for cross-cultural understanding must be an essential feature of a twenty-first century education. This educational goal is best attained by providing students with an overseas experience as part of their course of study, and often such experiences consist of spending time at a foreign university. To the extent that educational programs elsewhere improve, the overseas experiences of U.S., UK, and European students will also. Once again, it is not only the private gains accruing to exchange students that matter; better education around the world translates to better-informed citizens and a more productive work force. With open exchange of information and goods, all nations gain. Moreover, because solving the most important problems confronting us – poverty, infectious disease, nuclear proliferation, and global warming – will require international cooperation, better-educated global citizens can only help.

In fact, the development of universities across Asia and the Middle East will make the most pressing global problems more tractable. Solutions to the most perplexing global problems, such as climate change and nonproliferation, require closer collaborations between the institutions of the West and those of the East. To cite climate change as one example, the magnitude of the problem highlights one important fact: the solution must be global. Given current levels of emissions in the U.S. and Europe, and the projected growth of the Chinese and Indian economies, we simply cannot make the reductions required on a global scale without the cooperation of the United States, the European Union, China, and India. If any one of these four economic powers refuses to participate in an international program to reduce carbon, we cannot succeed in stabilizing global temperatures. Any one holdout pursuing a business-as-usual strategy will make the cost of adequate global reduction prohibitive.

Apart from sharing in the benefits of research collaboration and student exchange, how will Western universities respond to the rise of the rest? More ambitious forms of educational collaboration are already emerging. For example, the National University of Singapore has partnered with Duke University and MIT to offer joint degrees in medicine and engineering, respectively. And the University of Michigan has organized with Shanghai Jiao Tong University a program where undergraduate students study engineering for two years in Shanghai and two years in Ann Arbor, which culminates in their earning degrees from both institutions. And Western universities have also begun to experiment with franchise operations, setting up programs in the Middle East, China and elsewhere. Although such programs are likely to be valuable for students in the host regions, there is some risk that they will damage the reputation of the parent institution. In most of the experiments now under way, it is proving a major challenge to sustain a first-class faculty in a remote location. Greater virtual participation by professors on the parent campus may mitigate this risk. In any event, it is likely that the trends toward joint degree programs and satellite programs will accelerate in the years ahead.

More broadly, we should remember that the shift to more widely distributed knowledge creation around the world is a good thing. It strengthens competition but also affords tremendous opportunities for new forms of collaboration. The list of the world’s top 20 universities is likely to change in the years ahead; the National University of Singapore, to name one, is within striking distance, and China’s Peking and Tsinghua Universities will get there soon. Universities in the United States, the United Kingdom, and Europe should welcome the newcomers and recognize that the whole world will benefit from their success.