Getting the Most from Tech Investment

A study by Nokia Siemens Networks shows that countries with extensive tech infrastructures aren't taking full advantage for economic growth

by Jennifer Fishbein

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Countries could pump "hundreds of billions of dollars" into their economies by making better use of technology, according to a new report by Nokia Siemens Networks. The company, a joint venture between Germany's Siemens (SI) and Finland's Nokia (NOK), commissioned a London Business School professor and an economic consulting firm, LECG's (XPRT) Global Competition Policy Practice, to study not only the technological infrastructure of 25 countries around the globe, but also how well each country makes use of it.

The findings show that even the most well-connected countries, such as the U.S. and South Korea, have far to go before making the most of their sophisticated technology infrastructures. On a list of 16 "innovation-driven" economies, as defined by the World Economic Forum, the U.S. came out on top but with a score just short of 7 on a scale from 1 to 10.

Some Surprising Results

Korea, the top scorer on last year's Digital Opportunity Rankings (published by the U.N.'s International Telecommunication Union), finished 10th in the Nokia Siemens study. Even Sweden—ranked the world's second-most "network-ready country" in an annual World Economic Forum study last year (BusinessWeek.com, 3/28/07)—rated just 6.83 out of 10 in the Nokia Siemens survey. (The WEF's No. 1-ranked country, Denmark, wasn't included in the Nokia Siemens report.)

The story is similar in developing countries that are investing heavily in info-tech and communications infrastructure but not always taking full advantage of it for economic growth or social progress. India, measured against eight other "efficiency-and-resource-driven" economies, came in second to last, between the Philippines (No. 7) and Nigeria (No. 9). Russia took the top spot with a score of 6.11, followed by Malaysia at 5.82. (The scores of the innovation-driven and efficiency-and-resource-driven economies were determined differently, and therefore are not comparable.)

The study, conducted in 2007 and called the Connectivity Scorecard, reveals that high connectivity does not necessarily lead to innovation, and that all countries could stand to use technology more effectively. Researchers analyzed 25 indicators, including literacy rates, Internet users per 100 people, and mobile subscribers per 1,000 people, to devise the rankings. They also weighted technological usage by businesses, consumers, and governments according to their relative contributions to each country's economy.

Linking Opportunity and Innovation

Ilkka Lakaniemi, head of global politics at Nokia Siemens Networks, compares today's technological revolution with the discovery of electricity in the late 1700s. For about a century, electricity was used solely to replace old power sources, until innovators used it to create the assembly line. Today, while the modern PC has replaced the typewriter and other office equipment, Lakaniemi says, it doesn't always lead to more innovative business processes.

For the up-and-coming efficiency-and-resource-driven economies, better education and gender equality will be key to making the most of investments in connectivity. In India, for example, the literacy rate is 61%, and just 23% of Internet users are women. While the country has produced leading companies such as Infosys Technologies (INFY), the information technology sector is mostly an export industry, says Leonard Waverman, the London Business School professor who created the Connectivity Scorecard. Most Indians lack access to information technology, and the sector accounts for a small share of the national economy.

Despite the relatively low rankings of many emerging countries, some could teach a thing or two to their innovation-driven peers.