Technology

U.S. Tops IT Competitiveness; Finland No. 2


The U.S. is first in an annual ranking of 66 countries in IT competitiveness, but it lags in research and development and a high-tech infrastructure

Recession or no, when it comes to running a tech company the U.S. is still the best place to do business, according to a new study released on Sept. 17 by the Economist Intelligence Unit.

Commissioned by the Business Software Alliance, a trade organization that represents the software industry, the study analyzes data on 66 countries around the world to determine which have the most competitive information technology sectors. Now in its third year, it examines such variables as a country's overall business climate; the pervasiveness of its tech infrastructure; the strength and transparency of its legal system; and the availability of a workforce that is both well-educated and technologically literate.

Home to some of the world's most recognizable tech companies, such as IBM (IBM), Oracle (ORCL), Intel (INTC), Apple (AAPL), Hewlett-Packard (HPQ), and Google (GOOG), the U.S. has topped the survey every year, but the country's predominance is vulnerable in key ways. "We see a number of factors where the U.S. is not in the lead," says Robert Holleyman, CEO of the BSA.

For instance, in the all-important research and development category, which accounts for 25% of a nation's score, the U.S. ranks fifth, well behind Canada, which led that category, as well as Singapore and Israel.

Finland Soars in the Rankings

Finland was notable for its second-place showing, displacing last year's runner-up, Taiwan. The Nordic nation of 5.3 million is also the home of wireless-phone giant Nokia (NOK). It rose to second from 13th last year, in part because of a change in the study's methodology. This year the study's authors used data from the European Patent Office showing the actual number of patents applied for and granted within each country per 100 people. Last year the study's authors relied on estimates of the number of IT-related patents granted within a country. That, coupled with strong public and private support for R&D efforts and the overall strength of its business environment, helped Finland skyrocket in the rankings.

Sweden, neighbor to Finland and home to wireless networking concern Ericsson (ERIC), came in third. Taiwan slipped from second to 15th and South Korea, eighth last year, fell to 16th.

And while the drops for Taiwan and South Korea were dramatic, 19 of last year's top 20 remained there this year. The one country that fell out of the top 20 was Austria, which was replaced by Belgium.

Canada, home to BlackBerry maker Research In Motion (RIMM), came in fourth, up two positions from the 2008 survey, thanks mainly to a strong showing in R&D.

U.S. Lags in R&D and Infrastructure

The fifth-place showing of the U.S. in that category is likely to add fuel to the debate about the proper role for government in encouraging, fostering, and funding R&D work. "This ranking shows exactly why R&D is so important a factor, and where the U.S. does not have a lead," Holleyman says.

The U.S. was further down in the rankings for IT infrastructure, where it came in seventh, behind a batch of European countries led by Denmark, Switzerland, and the Netherlands. That's in part due to the low rate of broadband penetration in the U.S. "We have a lot of PCs but we generally have limited access to broadband in this country, and that does a lot to affect our competitiveness," Holleyman says. "Over the next few years as we start to see money from the U.S. stimulus efforts related to broadband, we may start seeing an improvement."

The U.S. fared better in human capital. U.S. universities are still the best in the world at churning out tech-literate graduates in relevant fields, Holleyman says. The survey gave the U.S. a score of 75.6 out of 100, well ahead of the runner-up in that category, South Korea, which scored 58.9. Close behind South Korea were the United Kingdom and China. Holleyman says China is working especially hard to train IT workers in its universities.

The U.S. also led the world in the quality of its legal environment, scoring a 92 out of 100 and besting the nearest rival in the category, Australia. The legal category measured protections for intellectual-property rights and enforcement of cybercrime laws. Belgium, Switzerland, and Denmark rounded out the top five in that category.

Hesseldahl is a reporter for BusinessWeek.com.

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