Building the algorithm commons: Who discovered the algorithms that underpin computing in the modern enterprise?

Abstract

Research Summary The reach of the modern enterprise relies on the power of information technology (IT) tools such as sensors, databases, and machine learning. But tool improvements must be fueled by increased computing power (e.g., faster hardware) or getting more productivity from existing systems (e.g., through better computer algorithms). New research has uncovered that this second source, algorithm progress, is more important than previously realized—sometimes orders of magnitude more important than hardware—and thus could be an important technological stepping‐stone to give competitive advantage to a country's firms. Analyzing this “Algorithm Commons” reveals that the United States has been the largest contributor to algorithm progress, with universities and large private labs (e.g., IBM) leading the way, but that U.S. leadership has faded in recent decades. Managerial Summary Companies are increasingly tackling problems with big data and sophisticated analysis techniques (e.g., Machine Learning). To meet the increased computational demands of these approaches, the capability of computers must improve. One important technique for doing this is to redesign algorithms, the recipes that computers follow to perform calculations. As a result, firms that develop better algorithms, or get access to them first, can get important advantages over their competitors. This paper shows that it is U.S. corporations and U.S. universities that have produced most of the important algorithm improvements, and thus suggests that better algorithms may have been a source of advantage for U.S. multinationals.

Digitalization and globalization in a turbulent world: Centrifugal and centripetal forces

“…In other words, these technologies enable MNEs to search for, access, and monitor resources in locations and contexts that could otherwise not be integrated in a cost‐effective manner (Awate, Larsen, & Mudambi, 2015). This reduces the chances of having “lost Einsteins” (Thompson et al, 2021), especially in large emerging markets like China and India.…”

“…This conforms to the norms observed in most technological fields (Cantwell & Janne, 2000). However, it is a puzzle that this increasing globalization of algorithm development has been associated with a falling rate of advance (Thompson et al, 2021). This runs against patterns observed in almost all other fields.…”

“…The future effects of digitalization on businesses and society are predicated, to a large extent, on continued increases in the power of information technology. These increases stem from two sources: increased computing power (faster hardware) and greater productivity (better computer algorithms) (Thompson et al, 2021). The distinction between these two sources of advance in information technology is rarely made.…”

“…This is a key component of the faster catch-up observed in the emerging economies of today as compared to those of the 19th century when continental Europe and the United States caught up to the United Kingdom. Thus, the documented slowing of algorithm development is a worrying development (Thompson et al, 2021).…”

“…In third section, we present our formal model, where we assess the impact of digitalization on the centripetal and centrifugal forces that affect MNE organization. In the fourth section, we examine several specific contexts: (a) the algorithms that drive digital hardware and that have been the most important (but much overlooked) driver of the exponential increase in the power of information technology encapsulated in Moore's law (Thompson, Ge, & Sherry, 2021); (b) the implications of digital platforms for foreign market entry modes (Stallkamp & Schotter, 2021); (c) the options and imperatives for firms and policy makers in less developed economies in responding to the global reorganization of value creation enabled by digitalization (Sturgeon, 2021); and (d) the manner in which a shared digital identity can mitigate the Arrow paradox of knowledge sharing within the 3D printing industry (Bouncken & Barwinski, 2021). Finally, in the concluding section, we discuss the role of digital technologies in increasing firm resilience to disruptive shocks and also offer some musings on potential futures.…”