Harvard Business School Survey Reveals Deepening U.S. Competitiveness Problem

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Jan 18, 2012, 09:00 ET

Survey of nearly 10,000 alumni incorporates opinions of global executives in leadership and decision-making roles – 71 percent of whom expect U.S. competitiveness to decline over the next three years

Provides detailed look at factors motivating global firm location decisions; HBS Dean Nitin Nohria calls on business leaders to join dialogue and take actions to improve U.S. competitiveness

Full results available at hbs.edu/competitiveness/survey

WASHINGTON, Jan. 18, 2012 /PRNewswire-USNewswire/ -- Harvard Business School (HBS) today revealed the results of its first Survey on U.S. Competitiveness, which examines the position and trajectory of the United States as a competitive location in the global marketplace. The survey reveals that, while 57 percent see the current U.S. business environment as somewhat or much better than the average advanced economy, respondents are much less optimistic about the trajectory of the U.S. as a competitive location. When asked to assess how the trajectory of the U.S. business environment compares with emerging markets, 66 percent see the U.S. falling behind, while just 8 percent see it pulling ahead. Along with HBS Dean Nitin Nohria, Professors Michael E. Porter and Jan W. Rivkin presented the findings at the National Press Club in Washington, D.C. Porter and Rivkin designed and conducted the survey in partnership with Abt SRBI, a leading research firm.

The survey also examines the desirability of the U.S. as a business location and decisions by firms to relocate existing activities or establish new ones. Of 1,767 cases where respondents had been personally involved in U.S.-related location decisions within the past year, 57 percent considered the possibility of moving existing activity out of the U.S., while only 9 percent considered moving existing activities into the U.S. The remaining 34 percent weighed decisions to set up new activities. Of those offshoring decisions that had been resolved by the time of the survey, the U.S. lost the activity 84 percent of the time. While the country fared better in potential onshoring or new activity decisions (75 percent and 51 percent win-rates, respectively), its overall win record totals just 32 percent.

"The U.S. is losing out on business location decisions at an alarming rate, and those activities being offshored are more job-rich than those coming in," said Porter, the Bishop William Lawrence University Professor at Harvard and head of the Institute for Strategy and Competitiveness at HBS. "However, the U.S. retains its core strengths in a number of important areas such as university education, innovation, and entrepreneurship, which means that we have the resources to reverse this trend. The vast amount of data from this survey highlights the need for business leaders, policymakers, and academics to collaborate on practical ways to make progress."

The survey is part of the School's ongoing U.S. Competitiveness Project, which defines competitiveness as "the ability of companies in the U.S. to compete successfully in the global economy while supporting high and rising living standards for Americans."

"When we were first laying the groundwork for this Project and this survey, we thought long and hard about how competitiveness should be defined, and why it was such an important goal for the nation's future," said Dean Nohria. "We made sure not to focus on job growth or inequality alone, because that ignores the need for healthy wages that will support America's middle class. Adopting a broader definition was paramount in this effort."

Other major findings include:

While the negative view of the future of U.S. competitiveness is widely shared among respondents, different perceptions across groups exist. For instance, respondents between the ages of 40 and 60 are most likely to expect a decline (more than 70 percent thought so) and least likely to foresee a gain (less than 15 percent). Similarly, alumni in America are more pessimistic about the country's future competitiveness than their counterparts outside the U.S.
Of activities reported to have been moved out of the country in the past, 11 percent consisted of 1,000 or more jobs, while only 5 percent of activities considered for movement but retained in the U.S. consisted of 1,000 or more jobs (none moving to the U.S. consisted of 1,000 or more jobs).
Of the 1,005 location decisions about potentially moving out of the U.S., the most common alternatives considered were China (42 percent), India (38 percent), Brazil (15 percent), Mexico (15 percent), and Singapore (12 percent).

The survey also asked respondents about the greatest impediments their firms faced in investing in and creating jobs in the United States. Policy-related factors like regulation and taxes are cited as major factors, along with talent-related issues like personnel cost and immigration issues.

"One of the most important aspects of this survey was its effort to pinpoint the roots of the country's competitiveness problem," said Rivkin, the School's Bruce V. Rauner Professor of Business Administration. "The findings allow us to assess whether individual elements of the U.S. business environment, such as the complexity of our tax code or our K-12 education system, each strengthens or weakens U.S. competitiveness. This provides important insight for leaders who are seeking ways to boost America's long-run prosperity."

Since the Project seeks to inspire action among leaders – especially business leaders – to change the trajectory of U.S. competitiveness, research by HBS faculty and other scholars will continue to focus on key dimensions of U.S. competitiveness, including innovation, manufacturing, entrepreneurship, company location choices, firm governance, local business ecosystems, human capital, K-12 education, fiscal policy, tax policy, capital markets, environmental sustainability, democracy, and international trade. These findings will be presented in a special March 2012 issue of the Harvard Business Review.

Scholars and practitioners contributing to research efforts include Steve Charnovitz, George Washington University; Stacey M. Childress, Bill & Melinda Gates Foundation; Mihir A. Desai, HBS; Daniel C. Esty, Connecticut Department of Energy and Environmental Protection and Yale Law School; Robin Greenwood, HBS; Rosabeth Moss Kanter, HBS; Thomas A. Kochan, MIT Sloan School of Management; Robert Z. Lawrence, Harvard Kennedy School; Josh Lerner, HBS; David A. Moss, HBS; Gary P. Pisano, HBS; Jan W. Rivkin, HBS; Michael E. Porter, HBS; William A. Sahlman, HBS; David S. Scharfstein, HBS; Willy C. Shih, HBS; Richard H.K. Vietor, HBS; and Matthew C. Weinzierl, HBS.

Professors' profiles and abstracts of their research are available at www.hbs.edu/competitiveness.

About Harvard Business School
For more than a century, our faculty have drawn on their passion for teaching, their experience in working with organizations worldwide, and the insights gained from their research to educate generations of leaders who have shaped the practice of business in every industry and in every country around the world. For more information visit Harvard Business School's website.

About Abt SRBI
Abt SRBI, a leading public policy and market research organization, is a subsidiary of Abt Associates, a mission-driven, global leader in research and program implementation in the fields of health, social and environmental policy, and international development. Abt SRBI is headquartered in New York City, with offices in the Washington, D.C. area, Chicago, IL, Cambridge, MA, Fort Myers, FL, Durham, NC and other cities.

SOURCE Harvard Business School