EU-US Scientometric Bifurcation
Stephen J Bensman
notsjb at LSU.EDU
Tue Dec 9 11:53:37 EST 2014
My recent research into the development of the WWW, academic search engines, and the way they are revolutionizing the scientific information system, integrating social media and science into Science 2.0, made The Wall Street Journal article below of extreme interest to me. This is particularly important as Google Scholar has started a revolutionary way of profiling researchers and what GS defines as serial-type publications into an equivalent JCR. This will seriously alter the way science/scholars will be evaluated. It seems from this article that there may be bifurcation between the "Anglo-Saxons" and Continentals on these matters as in others.
Anyhow I would appreciate your comments on this WJJ article, if you have any.
Stephen J Bensman, Ph.D.
Lousiana State University
Baton Rouge, LA 70803
The Wall Street Journal. December 9. 2014
U.S. Tech Giants Battle Europe's Sovereign States
Discontent on Continent Highlights Battle Over Economics, Culture, Internet Control
Updated Dec. 8, 2014 9:03 p.m. ET
BRUSSELS-From Berlin to Madrid, from London to Paris, U.S. technology companies are in a pitched battle with Europe's sovereign states.
It is a clash that pits governments against the new tech titans, established industries against upstart challengers, and freewheeling American business culture against a more regulated European framework.
And it poses one of the greatest threats to U.S. technology giants since their emergence from garages and college campuses over the past four decades.
First and foremost, the battle is about economics.
Europe's policymakers, accustomed to controlling key sectors of their economies, are struggling to get a handle on the fast-moving newcomers from across the ocean. Growth is weak and government revenues soft, and they see profits that once accrued to European industries from retail to media to taxicabs, being diverted-often lightly taxed-to Silicon Valley. They worry that critical industries such as autos may fall next.
The U.S. firms loom large. The market valuation of five U.S. tech firms- Apple <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=AAPL> Inc., Amazon.com <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=AMZN> Inc., Facebook <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=FB> Inc., Google <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=GOOGL> Inc. and Microsoft <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=MSFT> Corp. -is $1.8 trillion. That compares to $1.3 trillion for all 30 blue-chip companies in the DAX index in Germany, Europe's largest economy.
"Europeans have got everything to lose" from the rise of U.S. technology firms, said Paul Stoneman, emeritus professor at Warwick Business School and a former U.K. antitrust official.
It is also a clash about values: Silicon Valley's default setting of light regulation is colliding with the greater European emphasis on preserving individual privacy.
And perhaps most fundamentally, it is about control of the Internet, the world's common connection and crucial economic engine that is viewed as being under the sway of the U.S. This exploded following the revelations by Edward Snowden of widespread U.S. government surveillance of Americans and Europeans-sometimes via U.S. company data and telecommunications networks.
Since then, Europeans have been striking back, with skirmishes occurring almost daily. A Dutch court on Monday banned an Uber Technologies Inc. ride-sharing service from operating in the Netherlands; British Finance Minister George Osborne last week announced a new "Google tax" aimed squarely at U.S. technology companies; a week earlier, French and German officials called for a public consultation on the behavior of big U.S. tech firms; and the European Parliament has approved a resolution calling for a possible breakup of Google on antitrust grounds. Uber said it would continue to offer the service in the Netherlands. Google declined to comment.
U.S. companies were stunned by a decision from the European Court of Justice in Luxembourg in May that Europeans had an online "right to be forgotten" and have potentially damaging references removed from search results. The U.S. Constitution would appear to prohibit such a provision in the U.S., but Europe's national privacy regulators went further last month, recommending that search engines should apply the ruling to all their websites, not just in Europe.
The headwinds have become a big risk for U.S. tech companies as they look outside their home country to maintain rapid growth. On Wall Street, analysts increasingly talk of regulation as one of the few existential threats to Internet leaders, such as Google, which have been riding a powerful wave of rising Web use.
Bank of America Merrill Lynch analyst Justin Post downgraded Google shares Friday, citing European regulatory risk. The EU's attempt to regulate Google's search results could prevent the company releasing aggressive new products in this area, he said. Google shares are down at least 5% so far this year, after surging more than 75% in 2012 and 2013 combined.
The Web sector has faced problems in other regions before, notably China, which blocks many Google and Facebook services and makes it difficult for other U.S. tech firms to compete with local rivals. But Europe's complaints focus on issues and processes that form an important part of the foundations upon which these companies are built.
Beyond search, Europe's focus on data privacy and its reaction to Mr. Snowden's revelations could limit how much information U.S. tech companies can collect about consumers in the region and how they use it.
This data is the fuel that drives the online advertising and commerce machines that Google, Facebook and Amazon have spent years honing and monetizing. Rising calls for these companies to house such information in local data centers in Europe could make these machines more expensive to run.
"I wouldn't say it's panic. But there's increased urgency among U.S. tech companies to make sure they're on the ground there to explain how their services and products work and how that will benefit users," said Dan O'Connor, vice president of public policy at the Computer & Communications Industry Association, which is funded by and lobbies on behalf of large tech companies, including Google, Microsoft and Facebook.
In the past, U.S. tech companies would build new products and services and deal with any regulatory and political problems later. But now these companies are trying to tackle such issues ahead of time because the cost of uncertainty in their European businesses is too high, he added. A Google spokeswoman declined to comment and a Facebook spokesman declined to comment. Microsoft did not respond to requests for comment.
The battle raises important questions over whether the Internet will fragment as governments seek to keep data out of Washington's hands. Unless U.S. snooping is reined in, "the movement towards a truncated Internet will be difficult to stop," according to a report published Monday by the Council of Europe.
U.S. companies recognize this as a threat. Earlier this year, Facebook chief executive Mark Zuckerberg <http://topics.wsj.com/person/Z/Mark-Zuckerberg/408> said in a Facebook post that he had called President Barack Obama <http://topics.wsj.com/person/O/Barack-Obama/4328> to express his "frustration" over the "repeated reports of the behavior of the U.S. government," which undermine trust in U.S. businesses abroad. The National Security Agency said a recent report on the agency's alleged use of false Facebook servers was inaccurate.
Both sides invoke higher values. Speaking Monday in support of a proposed tough new European data-protection regulation, French Prime Minister Manuel Valls warned that "democratic values must prevail."
For their part, the tech giants don't hide their ambitions. "We don't wish to be constrained as just ads and search," Google's executive chairman Eric Schmidt <http://topics.wsj.com/person/S/Eric-Schmidt/177> told an audience in London in October. "As long as we're on the right side of producing value for citizens of the world we're on the right side of history."
The stakes are huge: Half of all productivity growth in Europe comes from investment in information and communication technology, according to a report published in March by the European Commission, the EU's executive arm.
"We recognize that innovation improves our lives, but we want a level playing field," said Ramon Tremosa i Balcells, a centrist European Parliament lawmaker from Spain, who backed the resolution calling for a breakup of Google. "We are just reflecting the concerns of European consumers and European enterprises."
The fears often have crystallized around Google, which has been embroiled in a series of dust-ups in France, Germany and Spain over its tax, privacy and copyright policies, as well as a long-running European antitrust probe.
But U.S. tech firms have also been hit. Big American companies are depicted as suffocating local competition while pursuing aggressive tax-avoidance strategies. Amazon and Apple are embroiled in EU investigations over their tax affairs. Uber has fought multiple efforts to shut it down amid accusations it flouts the law in France and other countries by using drivers without professional licenses. Amazon and Apple have denied they received selective tax treatment from governments.
Nicolas Petit, a law professor at the University of Liège in Belgium, said: "The demand for government intervention in the economy hasn't been so high in Europe since the early 1970s."
To some experts, the European backlash is protectionism in a new guise that will only further stifle growth. "Why discriminate against a superior form of service provision?" said Vivek Ghosal, professor at the School of Economics at Georgia Institute of Technology. "It is a problem in parts of Europe due to its regulatory-heavy focus. Protecting cozy jobs seems to be a part of life."
In a letter last month, four senior Senators and Congressmen told European Parliament President Martin Schulz that they were "increasingly concerned by the appearance of a trend...towards discriminating against foreign companies with respect to the digital economy." They urged Mr. Schulz to consider the effect such policies might have on Europe's negotiations with the U.S. over a free-trade deal.
To be sure, battles between established industries and disruptive upstarts have also been playing out in the U.S., where Uber and home-rental service Airbnb Inc. have clashed with regulators over their business models..
And some U.S. firms themselves are exploiting the European tensions to attack rivals. Microsoft has been a driving force behind the antitrust campaign against Google in Brussels, while Oracle Corp. is another member of the Fairsearch alliance that has actively agitated against Google.
Europeans say it's a matter of giving local firms a fighting chance. "We also want existing European companies to have the possibility to develop and do the job," Mr. Tremosa said of online search.
Yet, many problems facing European start-ups are homegrown. Taxes and employment rules are often onerous and the continent suffers a shortage of risk capital in a financial system heavily geared toward bank lending. "The public subsidies for debt are high in Europe and equity is taxed far more heavily than in the U.S.," says Xavier Rolet <http://topics.wsj.com/person/R/Xavier-Rolet/5819> , chief executive of the London Stock Exchange Group <http://www.wsj.com/public/quotes/main.html?type=djn&symbol=LSE.LN> .
For big European companies with clout in Europe's corridors of power, their traditional business-expansion model is threatened. Europe's telecom giants, for instance, lobbied regulators for years to ease price caps and competition rules to allow them to grow. But they are now being challenged by so-called over-the-top players such as messaging service WhatsApp, which use the incumbents' infrastructure to provide lower-cost, high-value alternatives.
Some policymakers worry that the same could happen to key industries such as automobile manufacturing. Under the European model, a car maker like BMW would build out in-house digital networks to run its smart cars. But auto makers worry they may be outplayed if Google develops a better network to run the cars.
"The economic rents of previous incumbents in many local markets are quickly disappearing and giving huge advantages to the best product, service or process," the commission wrote in its March report.
-Alistair Barr contributed to this report.
Write to Tom Fairless at tom.fairless at wsj.com<mailto:tom.fairless at wsj.com>
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