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Periodical
Date
March 26, 2019

Video: Global digital leadership: A two-horse race?

Author
Analyst
+49(69)910-31718
Deutsche Bank Research Management
Stefan Schneider
In the competition for global leadership in technologies like artificial intelligence, most observers see a two-horse race – between China and the United States. But what about Europe? Can it ever catch up to the galloping favorites? It won’t be easy. The digital economy in the United States has big advantages: a large domestic market, a risk-taking investment culture, and plenty of innovative companies and world-class universities. US tech giants were first-movers out of the gates, and used the network effects of the platform economy to dominate not only the US, but many other markets worldwide.

One exception is China. Chinese policies like the “Great Firewall,” which limits foreign internet services, and state support for home-grown companies, have reined in US tech giants and given China a booming digital economy of its own. Chinese companies are now direct competitors with US firms in the fields of artificial intelligence and robotics, as they jockey for market share and talent. 

Europe, meanwhile, has fallen behind. Despite its wealth, qualified workforce and excellent research facilities, Europe lacks its own tech giants. It boasts the world’s second-largest market, but that market is fragmented. New policies that might help the bloc compete globally often falter due to divergent national interests. Venture capital and risk-taking entrepreneurial spirit are still harder to come by in Europe than across the Atlantic. 

And yet, there is hope. Europe has announced major investment packages and launched strategic initiatives like the AI Alliance designed to get the continent back in the hunt. The continent has also pioneered new standards for regulation, data protection and competition. Whether this kind of regulation spurs or slows the data economy is yet to be seen. But in an era of data scandals and consumer insecurity, it is conceivable that “made-in-Europe” data protection could become a valuable brand for the third horse in the race.

 

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