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Why are all the big tech giants from America?

 






There is a definite bias towards big tech giants being either American or Chinese companies. From America, we have Amazon, Apple, Google, Facebook, and in China, at least Tencent, Alibaba, and perhaps Ant Financial when they IPO.


Unicorn companies (private companies with > Billion dollar valuations) are also predominantly US or China based.


I believe that there are 5 reasons for this.


Free flow of people, technology and capital, which is particularly crucial for technology companies.

The US is the best at this. In spite of the Trump administration, the US continues to welcome educated, talented people from all over the world, and capital is abundantly available.

China is also good at this. It also has notable disadvantages in terms of a lack of transparency and corruption, favoring large, state-owned enterprises and restricting capital when it suits them, but makes up for this by “co-opting” and supporting its national champions as they emerge.

The US has great Universities, but so does Europe and other parts of the world. However, US Universities do a better job of promoting and fostering entrepreneurship.

These advantages are crucial for technology companies, because scaling a small company with a proven, viral business model requires the ability to add resources quickly. The speed at which capital, people and technology can be added to a growing enterprise in the US is unrivaled.

Favorable regulatory/government environments.

Amazon, Facebook, Google, and Uber, Airbnb et al have all benefited tremendously in their early years from “regulatory vacuums” in the US. US regulatory tradition is to investigate after market domination occurs, and to slap a fine on the offending company. We promote an environment where all companies -small and large - can (and do) act and deal with the negative consequences of what they did later, at a cost that is economically justified by the advantage gained.

By contrast, Europe has stronger regulations with protections for citizens versus companies.

In addition to the lack of regulation clarity, China and India have significant issues of political interference and corruption to contend with.

Large markets.

Both the US and China provide large markets for initial growth and experimentation.

In view of market size, the EU should also have large technology giants. It doesn’t because of a very different tradition that values privacy over corporate rights. We see the EU doing better job of safeguarding citizen data from abuse than the US government and agencies.

Global ambitions and capabilities of US and Chinese companies.

The mind set of both groups of companies includes developing unassailable market positions (becoming a virtual monopoly in everything but name) and global expansion.

The fact that we are looking at a narrow 20 year band of economic history.

At one time, the British East India Company dwarfed all its competitors. Economic and geo-political power are often highly correlated. The US, and Britain before it, and China increasingly help local companies with “access to foreign markets”. The world is moving towards multiple “spheres of influence” again, and the make-up of the list of technology giants reflects that.

As other parts of the world “catch” up with the West, we will see more and more Indian and African companies in the Global 100 list.






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