For the first time in KPMG's global Technology Industry Innovation
Survey, more than half of the respondents believe Silicon Valley will no
longer be the technology innovation center of the world in four years.
Despite all the positive business factors present in Silicon Valley,
an escalating cost of living, questions about diversity and corporate
cultures, high business taxes, an overmatched infrastructure, and
even increasing scrutiny into data privacy and other business practices
are contributing to the perception that Silicon Valley may not continue
to dominate tech innovation in the coming years.
Locations outside the Bay Area are now common choices for new
offices and innovation centers. Headline-grabbing announcements by
several of the tech giants helped push U.S. cities New York, Boston,
Austin, and Washington, D.C., up in the rankings in this year's survey.
New York was voted as the global city most seen as becoming the
leading technology innovation hub outside of Silicon Valley over the
next four years. Other notable risers included Taipei and Paris.
Technology Innovation Hubs 2019 1
Competitors gain on Silicon Valley
2019 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority
to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
New York, U.S.
Beijing, China
Tokyo, Japan
London, U.K.
Shanghai, China
Taipei, Taiwan
Singapore
Seoul, S. Korea
Boston, U.S.
Austin, U.S.
11 Berlin, Germany | 12 Hong Kong, SAR | 13 Washington, D.C., U.S. | 14 Paris, France | 15 Tel Aviv, Israel | 16 Amsterdam, Netherlands
17 San Francisco, U.S. | 18 Bangalore, India | 19 Barcelona, Spain | 20 Los Angeles, U.S. | 20 Chicago, U.S.
3
3
5
8
9
9
2
1
5
7
Cities outside Silicon Valley seen as leading technology innovation hubs over the next four years
Partial list of cities shown. Source: KPMG Technology Industry Innovation Survey 2019
58%
27%
16%
Very likely/
Likely
Not likely/
Not at all
likely
Neutral
16%
27%
58%
Almost six in ten think the technology
innovation center of the world will move
from Silicon Valley in the next four years.
Percentages do not sum to 100% due to rounding.
Source: KPMG Technology Industry Innovation Survey 2019
Neutral
Very likely/
Likely
Not likely/
Not at all
likely
Technology Innovation Hubs
What technology company executives and venture
capitalists should understand about selecting and
investing in emerging global technology incubators
2 Technology Innovation Hubs 2019
Several cities were again named in the top group, although
some changed positions, such as Beijing moving ahead of
Shanghai. Sydney, Toronto, and Shenzhen dropped outside
the top 20 this year.
KPMG's survey reveals the perceptions of over 740 global
technology industry leaders. When these views on the
top ranked cities are juxtaposed with data-driven rankings
from other sources, we can gain additional insight into the
prospects of the technology innovation hubs. The publicly
available indices we explored were these, and observations
on select ranked cities follows:
A.T. Kearney's 2018 Global Cities Report analyzes the
outlook for a city's potential based on 13 metrics across the
four dimensions of economics, innovation, governance, and
personal well-being
The Smart Cities Index by the EasyPark Group uses 24
factors to rank the world's most technologically savvy cities
The Cities in Motion Index from the IESE Business School
at the University of Navarra ranks the world's cities on
sustainability and quality of life based on 83 indicators
across nine dimensions
Mercer's Quality of Living Rankings evaluates 39 factors
affecting a city's quality of living
North America
New York ranked highly with only one outlier result (defined
as a score outside the top 20). The fact that several of the
tech giants are investing billions of dollars into new work
spaces and placing tens of thousands of new positions in
New York support the top ranking in KPMG's survey.
Boston and Washington, D.C., both had outlier scores, but
not as drastic as some of the other cities ranked in KPMG's
survey.
Europe
Berlin performed most consistently, ranking between 11th
and 18th in the KPMG survey and the other four indices.
With no outlying results that all the other cities on the KPMG
list have, an argument can be made that Berlin's potential as
a future tech innovation center is underrated.
Paris, unranked in KPMG's survey last year, rocketed into
14th place this year and also scored very high ratings in three
other indices. Its one outlier score is not as low as other
cities, putting Paris firmly on the radar as a rising technology
innovation hub.
Asia/Pacific (ASPAC)
Singapore's rankings across all indices were the most
consistent among ASPAC cities. Even the two outlier results
were not that low relative to other ASPAC cities.
Tokyo, Seoul, and Hong Kong all followed similar patterns.
Each ranked well in KPMG's survey and the Cities in Motion
Index. However, their scores fell significantly in the other
three studies.
The remaining ASPAC cities only ranked highly in the KPMG
survey. This suggests there are fundamental metrics that
need to be improved to achieve sustained success as global
technology innovation centers.
2019 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to
obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
City index rankings
City
KPMG Technology
Industry Innovation
Survey 2019
A.T. Kearney Global
Cities Report 2018
EasyPark Group Smart
Cities Index 2018
IESE Business School
Cities in Motion
Index 2018
Mercer Quality
of Living
Rankings 2018
New York
1
2
14
1
45
Beijing
2
47
90
78
119
London
3
3
45
2
41
Tokyo
3
14
69
4
50
Shanghai
5
64
93
57
103
Taipei
5
38
55
Not rated
84
Singapore
7
5
41
6
25
Seoul
8
45
73
7
79
Boston
9*
8
9
21
35
Berlin
11
18
13
11
13
Hong Kong, SAR
12
54
89
9
71
Washington, D.C.
13
24
6
20
48
Paris
14
4
20
3
39
Tel Aviv
15
43
99
72
104
* While tied with Boston, Austin was only ranked in the KPMG survey
Technology Innovation Hubs 2019 3
Tech hubs spur economic
growth
The factors conducive to fostering innovation in or around a
particular geography are well documented. These elements
coalesce into an environment where ideas, creativity, and
collaboration thrive and include:
But why would a city, or even a country, endeavor to become
a technology innovation hub? With the pressing issues that
many urban centers face like transit, crime, homelessness,
climate change, poverty, budgetary pressure, etc., why
should a city devote precious resources towards being a
technology leader? Wouldn't it be easier to let someone
else develop new technology and then leverage it after it
becomes scalable?
The reason, recognized with a 2018 Nobel Prize, is economic.
Paul Romer of New York University received the award
for his contributions to endogenous growth theory, which
postulates that investments in technological innovation, the
knowledge sector, and human capital function as drivers
of long-term economic growth. An increase in the number
of people working in the knowledge sector increases the
number of new ideas. This plethora of new ideas makes
everyone else producing regular goods and services more
productive. And when incremental annual economic growth
compounds over decades, the effect is transformational.
U.S. and China still disruptors
Largely reflective of the survey's city rankings, the U.S. and
China held on to the top two spots in the survey rankings
for countries expected to produce the most disruptive
technologies (23 percent versus 17 percent). However, the
U.S.'s lead shrunk a little bit from last year when the U.S.
garnered an eight-percentage-point difference over China for
the top spot.
The U.K. and Japan were almost tied in last year's KPMG
survey, with the U.K. edging Japan for fourth place. This year,
however, while Tokyo and London tied for third in the city
rankings, the U.K. as a nation created some separation to be
voted in sole position of third. India went from third place to
sixth this year.
Similar to the exercise performed for the cities, third-party
indices can be reviewed to gauge the perceptions in KPMG's
survey against more data-driven analyses. One recent study
is the 2019 Bloomberg Innovation Index, which analyzes
dozens of criteria across seven metrics to rank the world's
most innovative countries.
In their index, Bloomberg ranked the U.S. 8th, China 16th,
the U.K. 18th, Japan 9th, Singapore 6th, India 54th, Germany
2nd, and South Korea 1st. All rankings except Singapore
were different than the perceptions of KPMG's respondents,
some substantially so.
In a longer-term outlook from First Round Capital, 57 percent
of venture-backed startup founders believe the U.S. will (still)
be the center of the tech world in 10 years, while 39 percent
said China.1
1 First Round Capital, State of Startups 2018
A pipeline of skilled talent
Urban locale that attracts Millennials
Positive demographic trends
The anchor of a research-intensive university
An established base of tech parks or accelerators
A history of successful start-up exits
Favorable regulatory environment
Generous tax and other government incentives
Available investment funding
Modern infrastructure, including high-speed bandwidth
2019 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority
to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Partial list of countries shown. Percentages do not sum to 100%. Source: KPMG Technology Industry Innovation Survey 2019
Countries that show the most promise for disruptive
technology breakthroughs
Japan
6%
Singapore
5%
India
5%
Germany
4%
4%
South Korea
Israel
4%
Netherlands
4%
United States
23%
17%
China
U.K.
9%
Some or all of the services described herein may not be permissible for KPMG audit clients
and their affiliates and related entities.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act
upon such information without appropriate professional advice after a thorough examination of the particular situation.
2019 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm
has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG
International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
About the research
The 2019 KPMG Technology Industry Innovation Survey, now in its seventh year, included responses from over 740
global leaders in the technology industry. Twelve countries were represented and 76 percent of the respondents were
C-level executives. The online survey was conducted from December 2018 to January 2019.
Contact
Tim Zanni
Global and U.S. Technology
Sector Leader
KPMG LLP (U.S.)
tjzanni@kpmg.com
Alex Holt
Global Media & Telecommunications
Sector Leader
KPMG LLP (U.S.)
alexanderholt@kpmg.com
The global sports halo effect
As innovation decentralizes, there has never been a better
time for global sports to showcase new technologies. Even
if a city or country isn't widely regarded as a year-in-and-year-
out tech innovation hub, it can attain this notoriety from the
halo effect of hosting a global sporting event such as the
Olympics or football World Cup.
Going back to 1964, the Tokyo Olympics were dubbed the
"scientific Olympics" due to advanced electronic automatic
timing, satellite and color broadcasting, and other innovations
that were unveiled for the first time. This technology
showcase in front of a worldwide audience helped launch
Japan into a global leadership position in timing equipment,
wristwatches, consumer appliances, and electronics.
In more recent examples, the first "social media World Cup"
occurred in Brazil in 2014 after engagement records were
shattered. The 2018 PyeongChang Olympics ushered in 5G
networking, autonomous vehicles, and virtual reality. Buzz
is already building around the 2020 Tokyo Olympics that are
expected to feature facial recognition and drone security
technology and 5G-enabeled high-definition streaming
capabilities.
For more insight on how global sporting events as well
as their ecosystems can help accelerate awareness and
mass adoption of emerging technologies, read KPMG's
Tech & Sports article series.
Next steps
Even in the digital age, location still matters. When looking to
acquire a company; enter into a joint venture; or build a new
HQ, satellite office, or R&D center, companies should assess
the local environment, including:
Is there a pipeline of skilled talent in the market?
Is this talent pool supplemented by a research-intensive
university or other innovation labs?
Are the long-term demographic trends favorable?
Is the locale attractive to millennials, who already comprise
the largest segment of the U.S. workforce2 and may
constitute up to 75 percent of the global workforce by
2025, according to various reports?
Is the prevalent culture of the new locale synergistic with
the corporate headquarters?
Is the infrastructure state-of-the-art, including available high-
speed bandwidth?
Is the mass transit system viable?
Is the regulatory and tax environment favorable to
technology companies?
Is the cost structure of setting up shop and growing a
business in the new locale consistent with the overall
corporate plan?
Are both public and private investment funding available?
2 Richard Fry, "Millennials are the Largest Generation in the U.S. Labor Force," Pew Research
Center Fact Tank (April 11, 2018)
4 Technology Innovation Hubs 2019
kpmg.com/socialmedia