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Entrepreneurship and Workforce Issues*

Entrepreneurship and Workforce Issues*. Martin Kenney Dept. of Human and Community Development UC Davis & BRIE with Rafiq Dossani Stanford University & Martin Haemmig University of Munich. * Presentation prepared for the President’s Council of Advisors on Science and Technology,

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Entrepreneurship and Workforce Issues*

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  1. Entrepreneurship and Workforce Issues* Martin Kenney Dept. of Human and Community Development UC Davis & BRIE with Rafiq Dossani Stanford University & Martin Haemmig University of Munich * Presentation prepared for the President’s Council of Advisors on Science and Technology, Subcommittee on Networking and Information Technology

  2. Shenzhen 1985, 1995, 2004 Kun Chen 2005

  3. Outline • China • India • Entrepreneurship • Conclusion

  4. China

  5. Chinese Challenge • IT equipment manufacturing • Western VC flowing in massively • Some excellent exits • Enormous and growing domestic market for IT products • Chinese attempts to create global standards • Massive increases in R&D investment by govt. and Chinese industry • Large # competent engineers

  6. Chinese Tech Firms (Generalizations) • With the exception of Huawei and Lenovo -- technology is not yet global standard • VC funded firms show little global-class tech • U.S. business model clones (good returns because MNCs need to purchase access) • Firms providing solutions for the underserved domestic market (not IT) • Generally not competitive with India for IT offshoring (though govt. is interested)

  7. Top Venture Capital Firms in China in 2004 and 2005 Source: Zero2IPO various years

  8. India

  9. 2005 -- India IT-Related Employment Growth CAGR 29.8% 18.5% 37.0% Source: NASSCOM 2005 Employee numbers ‘000s Remember US Work Force is 130 million

  10. Processing Services (80Bn) IS Outsourcing (110 Bn) Future growth Focus The Indian IT Services Landscape Direction of Evolution High Value High Volume Network Infrastructure Management R&D Services IS consulting Packaged S/W support & Integration Application development, maintenance and outsourcing (60Bn) Technology & Domain IP Current Strength Training& Education ($50Bn) System Integration H/w support and Network Consulting and Installation (120Bn) Implementation Leveraging current strengths to grow and move up the value chain Source: Indian IT Firm

  11. Employment in India by Selected Large Non-Indian Software Firms Author’s compilation

  12. Infosys, TCS and IBM GS Revenues, 2001-2005 31.6% CAGR 23.4% CAGR 6.3% CAGR Source: Various Annual Reports

  13. Infosys, TCS, and IBM Net Profits, 2003-2005 27.5% CAGR 15.3% CAGR 6.6% CAGR Source: Various Annual Reports

  14. R&D as Percent of Revenue for IBM, MS, Accenture, and TCS, 2005 Compiled by author from annual reports

  15. The Educational Levels of Web Posted Job Descriptions for Intel, HP and Oracle, February 2005 Source: Author’s compilation

  16. A Job at Intel India • CAD Engineer: Hardware Engineering is all about finding solutions. As a CAD (Computer Aided Design) Engineer with the Intel Hardware Engineering team, you'll work on teams designing, developing and implementing solutions. As part of Hardware Engineering at Intel, you'll have the opportunity to be involved from start to finish on the development of world-class innovations.ResponsibilitiesAs a CAD Engineer, you will be involved in developing new very large scale integration (VLSI) CAD tools and methodology solutions for design for testability (DFT) and test generation for high volume manufacturing of next generation microprocessor products. You will be responsible for development, deployment and maintenance of in-house fault simulation and test generation tools. This position will be based in Bangalore, India.QualificationsYou must possess a Ph.D. or Master of Science degree in Electrical Engineering or Computer Engineering with five to ten years of related work experience. Additional qualifications include: Extensive knowledge of Digital Design and Design-for-test principles, digital circuit/fault simulation and automatic test pattern generation. Good working knowledge in developing CAD tools using C++ in a UNIX*/Linux* environment. Excellent experience in a related people management role would be an added advantage. Accessed April 9, 2004 http://appzone.intel.com/jobs/uRequisition.asp?Posting=34339

  17. Entrepreneurship

  18. Entrepreneurship • Venture capital is now globalized (Kenney et al 2006) • Foreign VCs invest in U.S. • U.S. VCs invest abroad • Offshore presence very early in the life-cycle of U.S. startups

  19. ($3.2B) ($0.6B) ($1.4B) ($1.8B) Global VC Direct Investment Flow 2003 USA Europe Israel Asia 88% 81% 86% $6.2b $24.2b $0.42b 71% $2.0b 19% 12% 29% 13% ($5.6B) ($0.8B) ($0.1B) ($0.8B) Source: Martin Haemmig at www.MartinHaemmig.com Compiled from data provided by NVCA/Venture Economics, EVCA, AVCJ, IVC)

  20. Conclusions

  21. U.S. Strengths • Great research universities • Attracting top-notch grad students • Cutting-edge research leading to new products • Best entrepreneurial regions in world • Seasoned VCs, lawyers, executives etc. • Many cutting-edge IT and networking users • Free flow of ideas and knowledge • Strong global connections

  22. Reality • Globalization here to stay • VC/entrepreneurship abroad (Skype, Baidu, etc.) • Offshoring to continue (and pressure on white-collar worker wages) • IT innovation is globalizing • India’s importance in SW will continue to grow • Open source/innovation systems are becoming reality • Ergo, value will be created wherever the bright, capable, driven people are -- capital will be there for them

  23. Policy Responses • Redress the imbalance between life science and engineering/physical sci federal R&D funding • Improve education at all levels • K-12 creates the feedstock for the future • In an open source/innovation knowledge economy secrecy is a heavy burden • Ease visa red tape for bona fide students, scholarly exchange, and high value contributors

  24. Thank You http://hcd.ucdavis.edu/faculty/kenney/

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