DEEP

TECH

INDEX

2025

Dr.NimaSanandaji

ECEPR

DEEPTECHINDEX2025

Tableofcontent

4Summary

7Preface:KlasTikkanen

9DeepTechIndex

11Europesurgesindeeptech

NorthAmerica:SantaClaraValley,BostonandNewYorkremaindominant

16buttheworldedgescloser

19

AsiandeeptechisdominatedbyIndia,strengthsincludespaceandphotonics

Youthbenefittwiceasmuchfromthejobcreationeffectofdeeptech

22companies

Leadingdeeptechcountriesinvestinternationallyandhavehigh

25shareoftechnologyexports

27Topschoolsandtopuniversitiesaretherecipefordeeptechprogress

29Taxpolicyandpropertyrightsarekeyfordeeptechstrength

32Deeptechpercapitaranking

34ArtificialIntelligence

36CleanEnergy

38CleanTech

40Biotechnology

42Photonic&Electronic

44Robotic&Communication

46Quantum&Computing

48Pharmaceuticals

50Fintech

52Space&AdvancedMaterials

54References

4

Summary

Europehasagrowingshareoftheworld-leadingdeeptechcompanies,withstrengthsincleanenergy,cleantech,photonic&electronic,quantum&computingaswellasinfintech.

ThelargemajorityofleadingdeeptechcompaniesarefoundinNorthAmerica,withparticulardominanceinartificialintelligence,biotechnology,robotic&communication,quantum&computingandpharmaceuticals.

SantaClaraValleyremainstheworld’sleadingdeeptechcluster.BostonovertakesNewYorkwhichnowranksthird.Londonalsoclimbsandisnowrankedfourth,overtakingLosAngelesonfifthplace.

Asia’sleadingdeeptechhubsareNewDelhi,MumbaiandSingapore.Indiahasfiveurbanregionswithmultipleworld-leadingdeeptechcompanies.Asiahasstrengthsincleanenergy,photonic&electronic,pharmaceuticalsandspace&advancedmaterials.

Africahasstrengthincleantech.NairobiinKenya,LagosinNigeriaandSydneyinAustraliaareimportantdeeptechhubsoutsideofthetopthreeleadingcontinents.

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TheDeepTechIndexanalyseswheretheleadingcompaniesinvolvedindevelopmentandmarketingofdeeptechnologiesarelocated.Weliveinatimeofunprecedentedtechnologicalchange,atwhichsignificantadvancesarerecordedinareassuchasArtificialIntelligence(AI),CleanEnergy,CleanTech,Biotechnology,Photonic&Electronic,Robotics&Communication,Quantum&Computing,Pharmaceuticals,Fintech,aswellasSpace&AdvancedMaterials.ByusingCrunchbase,aleadinginternationalenterprisedatabase,thestudyanalysestheleading50companiesineachfield.Theresultisadatabaseontheleading500DeepTechcompaniesglobally.Thisindexoutlinesbothwherethisinnovationistakingplaceandhowitdiffersbetweenvarioustechnologyareas.Theresultisauniquemapoftechnologicalprogress:

-About67percentofleadingDeepTechcompaniesarebasedinNorthAmerica.WhilemostarefoundintheUS,Canadaalsohousesasignificantshare.TheNorthAmericandominanceisreducedcomparedtolastyear,asthesharehasfallenfrom

72percent.NorthAmericahasparticularstrengthsinthedeeptechareasartificialintelligence,biotechnology,robotic&communication,quantum&computingandpharmaceuticals.Fouroutofthetopgloballyleadingdeeptechregions,namelySantaClaraValley,Boston,NewYorkandLostAngeles,arefoundintheUSA.

-Europe′sshareofgloballyleadingdeeptechcompaniesrisestonearly19percent,upfrombelow14lastyear.Europehasparticularstrengthsincleanenergy,cleantech,photonic&electronic,quantum&computingaswellasinfintech.NoteworthyEuropeandeeptechhubsincludeLondon,Zurich,Eindhoven,StockholmandCambridge.

-SantaClaraValleyistheleadingdeeptechhubglobally.Theshareofthetop500world-leadingcompaniesthatarelocatedinthisregionhashoweverfallenfrom

24percentlastyearto20.4percent,representinganormalizationfromverystrongglobalrelianceonasingleinnovationregion.ItisfollowedbyBoston(6,4%oftop500globaldeeptechcompanies),NewYork(6,0%),London(4,6%)andLosAngeles(3.8%).Comparetolastyear’srankingNewYorkandLondoneachclimbonestep,whileNewYorkandLosAngelesdroponepositioneach.OutsidetheUSA,theleadinghubsincludeNewDelhi(2.0%),Vancouver(2.0%),Mumbai(1.4%),Singapore(1.4%),Toronto(1.2%),Zurich(1.2%),Eindhoven(1.0%)andTelAviv(1.0%).

-Asia′ssharerisesfrom11to11.4percentoftheworld′sleadingdeeptechcompanies,whilethatoftherestoftheworlddeclinesbyasmuch.Asiahasstrengthsinthedeeptechareasofcleanenergy,photonic&electronic,pharmaceuticalsandspace&advancedmaterials.ThecontinentsleadingdeeptechhubsareNew

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Delhi,MumbaiandSingapore.Indiahasfiveurbanregionswithmultipleworld-leadingdeeptechcompanies.Comparedtolastyear,heworld′sleadingdeeptechcompaniesareevenmorefocusedtothethreeleadingcontinents.Africahas1.4percentoftheworld-leadingdeeptechcompanies,comparedto0.6percentinLatinAmericaandOceaniarespectively.

-Deeptechisgraduallyspreadinginternationally.Lastyear,44.4percentofalltheworld′sleadingdeeptechcompanieswerefoundinthetop5regions,nowthisshareisreducedto41.2percent.Lastyear84.6percentoftheworld-leadingdeeptechcompanieswereinregionswithmultipleworld-leadingdeeptechcompanies,whiletheremainingwereinregionswithasoledeeptechcompany.Thisyeartheshareofworld-leadingdeeptechcompaniesinregionswhichhostatleastanotherworld-leadingdeeptechcompanyhasfallento77.8percent.Thisrepresentsagradualglobaldiversificationoftechnologycenters.

-ThehighestshareofdeeptechcompaniespermillionadultsisfoundinLuxembourg(2.17top500globaldeeptechcompaniespermillionadults),followedbySingapore(1.64),Switzerland(1.56),theUSA(1.42),Israel(1.20),Finland(1.17),Canada(1.07),theNetherlands(0.79),theUK(0.79),theUAE(0.63)andSweden(0.61).

-Havingmoreleadingdeeptechcompaniespercapita,islinkedtolowerunemploymentparticularlyfortheyouth.Beingontopoftechnologicalinnovationallowsforthecreationofexport-orientedjobs.Stimulatingdeeptechisthusapowerfultooltoboosttechnologicalprogress,prosperity,andjobsgrowth.Everyadditionalgloballyleadingdeeptechcompanypermillionadultscorrespondstoa0.46percentagepointdecreaseintotalunemployment.Fortheyouththeeffectisnearlydoubleasstrong,aseachadditional-and0,78percentagedecreaseinyouthunemployment.

-Toboostdeeptech,nationsshouldpromoteschoolresults,fostertopengineering&technologyuniversities,lowertaxesonprofitsandcapitalgains,andstrengthenpropertyrights.Thesefactorsarelinkedtohavingahighershareofworld-leadingdeeptechcompaniespermillionadults.Countrieswithmanyworld-leadingdeeptechcompaniestendtoinvestmoreabroad,andadditionallyhavehighershareofhigh-techexports.

7

Preface:KlasTikkanen

-

NordicCapitalencouragesacademicresearchandhasproudlysupportedtheEuropeanCentreforEntrepreneurshipandPolicyReform(ECEPR)since2017.OurinvolvementintheBrainBusinessJobsIndexandtheSuperentrepreneursIndexeshasallowedustoexamineanddecodethegeographyofEurope’sknowledge-intensivejobs.Since2023,ourattentionalsoencompassesthegeographyoftechnologicalinnovation.

Technologicaladvancementhasbeenakeydriverforhumanprogressionsincetheinceptionofcivilisation.Althoughchangeisaconstantthroughouthistory,thecurrentpaceandbreadthofdevelopmentisunprecedented.InnovationswithinAI,fintech,advancedmaterials,andbiotecharerevolutionisingoursocietiesandaffectingourday-to-daylives.Thesetransformativedynamicsformthefoundationofthisstudy.

StudyingDeepTechinnovationgloballyiscrucialformanyreasons.Notonlydoesitofferavaluablemetricfordiscerningkeysocietaldeterminantsandtrajectories,butitalsoearmarksnationssetforfuturereward.Thestudyrevealsacorrelationbetweenefficienteducationalsystems,lowtaxation,robustpropertyrights,andtheprevalenceofleadingtechcompanies.Thisisintrinsicallytiedtoeconomicgrowthandlowunemploymentrates.

Bylookingattheworld’sleadingcompanies,thisindexfollowsthedevelopmentofinnovationglobally.Lastyear,about44percentofalltheworld’sleadingDeepTechcompanieswerebasedinfiveregions.Slowly,therestoftheworldiscatchingup,withtheirsharefallingto41percent.Thisyear,EuropeiscatchingupwhileAsiamakessmallprogress.NorthAmericaremainsdominant,buttheirshareisonthedecline.

Today’slandscapeisbynomeansagiven–itisbothplausibleandratherlikelythatotherregionswillcontinuetobridgethemassivetechnologygapthatNorthAmericahas.Aglimpseintothefuturecanperhapsbeinferredfrombylookingatwherethetopengineeringandtechnologyuniversitiesarelocated.Outofthetop100,27arefoundinNorthAmerica,31inEuropeand32inAsia.

Europe’spositivemomentummayverywellbeatemporaryvariation,butitcanalsorepresentamorelastingshift.ForEuropetobuilduponitsimpressivestrengths,itwillbenecessarytoimplementpoliciesthatgenuinelyfosterandvalueknowledgeandgrowth,underpinnedbyareadinesstoevolveandinvestinthesesectors.

ForNorthAmerica,thechallengeremainstoretainitsstrongworldposition.IndiaistheclearleaderinAsia,withfiveregionshavingafewormoregloballyleadingDeepTechcompanies.Chinahasmassivepotentialforfutureprogress.

Thefutureisnotwritten,itremainstobeseenhowtoday’strendsdevelop.Cultivatinganenvironmentthatfostersthecreationofsuchcompaniesistantamounttolayingthegroundworkforfutureeconomicprogress.Wehopethatthisindexwillbringwithitabetterunderstandingoftheshiftingsandsofthetechnologylandscapearoundtheworld.

KlasTikkanen,COOatNordicCapitalAdvisors,hasledthefirm’stransformationinthepastdecade,includingthedevelopmentofitsstrategy,governance,culture,andoperations.Aspartofthemanagementteam,heservesontheInvestmentReviewCommittee,thePortfolioReviewCommittee,theFairValueCommittee,OperationsAdvisoryBoard,andtheValuePortfolioCommittee.Prior,KlasspentsixyearsatMcKinsey&CompanyasaManagementConsultantandheldseveralseniormanagementfunctions,mostlyasaCFOinPE-orbank-ownedportfoliocompanies.Havingthroughouthiscareerworkedalmostexclusivelywithturnaroundsandcomplexcarve-outs,Klasbroughtextensiveexperiencefromtransformingandbuildinghigh-performingorganizations.HeholdsanMScinBusinessAdministrationandEconomicsfromStockholmSchoolofEconomics.

8

DeepTechIndex

Thisindexanalyseswheretheleadingcompaniesinvolvedindevelopmentandmarketingofdeeptechnologiesarelocated.Thestudyfocusesonthefollowingfieldsofdeeptechdevelopment:ArtificialIntelligence;CleanEnergy;CleanTech;Biotechnology;Photonic&Electronic;Robotic&Communication;Quantum&Computing;Pharmaceuticals;Fintech;Space&AdvancedMaterials.

ByusingCrunchbase,aleadinginternationalenterprisedatabase,thelocationoftheleading50companiesineachfieldisanalyzed.Theresultisadatabaseonthe500leadingdeeptechcompaniesoftheworld.WhileCrunchbaseiscreatedmainlyasatoolforinvestorsandentrepreneurs,ithasalsogainedconsiderableacademicinterestinrecentyears.Forexample,Jean-MichelDalle,MatthijsdenBesten,andCarloMenonipublishedastudyin2017fortheOECDonthepossibilitytouseCrunchbaseforresearchineconomicsandmanagement.TheauthorsnotedthatCrunchbaseisattractinginterestfromresearchersindifferentfieldssinceitcontainsuniquedataonthestart-upeco-system.1YuxianEugeneLiangandSoe-TsyrDaphneYuanhavereliedonCrunchbaseforstudyingfirminvestments,withthemotivationthatCrunchbaseisthelargestglobaldatabasewithprofilesfortheincludedcompanies.2RossBrownandAugustoRochahaveusedthedatabaseinordertostudytheactionsofinvestorsduringtheuncertaintycreatedbytheCOVID-19pandemic.3

Thisuniqueindexmakesitpossibletomapoutwheretheadvancedtechdevelopmentoftheworldisoccurring,andhowthisdiffersforeachareaoftechnology.Thisresultsinamappingoftechnologicalprogressaroundtheworld.

1Dalle,DenBesten&Menon(2017).

9

2Liang&Yuan(2016).

3Brown&Rocha(2020).

Robotic&

Communication

ArtificialIntelligence

Quantum&Computing

CleanEnergy

Deep

Pharmaceuticals

Tech

CleanTech

areas

Fintech

Biotechnology

Space&AdvancedMaterials

Photonic&Electronic

10

Europesurgesindeeptech

AkeytrendcomparedtolastyearisthattheshareofgloballyleadingdeeptechcompaniesinEuropeincreasessignificantly.Theshareofworld-leadingdeeptechcompaniesinEuroperisesto18.6percentinthisyear’sindex,asignificantimprovementfrom13.6percentlastyear.AtthesametimethatEurope’sshareincreasesby5percent,thesamedecreaseisvisibleinNorthAmericawheretheshareis67.4percent,downfrom72.4percentlastyear.InAsiatheshareincreasesto11.4percent,upfrom11.Acorrespondingreductionof0.4percentisfoundintherestoftheworld,whichgoesfromhaving3to2.6percentoftheworld-leadingdeeptechcompanies.

Europeancountrieswithgrowthinshareofworld-leadingdeeptechcompaniesincludeLuxembourg,Switzerland,NorwayandSpain.ItremainstobeseenifEuropecanmaintainthisgrowthinshareofworld-leadingdeeptechcompanies,orifthecurrenteconomicworriesinGermanyandotherlargeEuropeaneconomieswillleadtoanagainwideninggaptoNorthAmerica.

11

12

Onagloballevel,thedominanceofUSAindeeptechissosignificant,thatitdwarfsanyothersinglenation.TheUSAhasfully62percentofallgloballyleadingdeep-techcompanies,followedbytheUK(7%),Canada(6%)andIndia(5%).Germany,theNetherlandsandSwitzerlandhaveeachacoupleofpercentageadditionallyoftheworld-leadingdeeptechcompanies.

“

LondonistheleadingEuropeanhubofdeeptechdevelopment,with

4.6percentofallgloballyleading

deeptechcompaniessituatedin

thisEuropeancenterforbusiness

andinnovation.Paris,Amsterdam,

Berlin,Stockholm,andDublinare

otherleadingEuropeandeeptech

centers.

“

CleanTech

(Europe&Africafocused)

NorthAmerica40%

Europe34%

Asia12%

Restofworld14%

13

Fintech

(Europefocused)

NorthAmerica58%

Europe28%

Asia12%

Restofworld2%

Quantum&Computing

(NorthAmerica&Europefocused)

NorthAmerica74%

Europe20%

Asia4%

Restofworld2%

14

15

NorthAmerica:SantaClaraValley,BostonandNewYorkremaindominantbuttheworldedgescloser

NorthAmericahasparticularlystrongdominanceintheareasofartificialintelligence,biotechnology,robotic&communication,quantum&computingandpharmaceuticals.Inthesefivefieldsofdeeptech,aroundfouroutoffiveoftheworld-leadingdeeptechcompaniesarefoundinNorthAmerica.

SantaClaraValleyisthedominanttechcapitaloftheworld,withonefifthofallworld-leadingcompaniesoftheworldlocatedhere.Itisaleadingcenterofbiotechnology,asisNewYork.Inpharmaceuticaldevelopment,Bostonisleading,followedbySanDiegoandSantaClaraValleyonthirdplace.ArtificialintelligencedevelopmentiscenteredonSantaClaraValley,followedbyNewYorkandSeattle.

SantaClaraValley,LosAngeles,AustinandChicagoaretheleadingrobotic&communicationtechregions.SantaClaraValley,BostonaswellasVancouverinCanadaarecentersforquantumandcomputingdevelopment.

TheshareofglobaldeeptechcompaniesinNorthAmericahasfallenby5percentagepointssincelastyear,representinganormalization.ParticularlytheUSAbutalsoCanadaremaindominant,butcompetitionisontherise.

Biotechnology

(NorthAmericafocused)

NorthAmerica84%

Europe14%

Asia2%

Restofworld0%

16

ArtificialIntelligence(NorthAmericafocused)

NorthAmerica80%

Europe10%

Asia10%

Restofworld0%

Robotic&Communication(NorthAmericafocused)

NorthAmerica76%

Europe16%

Asia6%

Restofworld2%

17

18

“

SantaClaraValleyisthedominanttechcapitaloftheworld,withone

fifthofallworld-leadingcompaniesoftheworldlocatedhere.

“

AsiandeeptechisdominatedbyIndia,strengthsincludespaceandphotonics

ArelativestrengthofAsiaisinthefieldofspace&advancedmaterials,asfully20percentoftheleadingdevelopersinthisdeeptechfieldarefoundinAsia.Also,inphotonic&electronicnearlyoneoutoffiveworld-leadingdeeptechcompaniesarefoundinAsia.

Cleanenergyandpharmaceuticals,with16and14percentoftheworld-leadingdeeptechcompaniescurrentlyinAsia,areotherrelativestrengths.

Asia’sleadingdeeptechhubsareNewDelhi,MumbaiandSingapore.Indiahasfiveurbanregionswithmultipleworld-leadingdeeptechcompanies,includingbesidesNewDelhiandMumbaialsoBengaluru,ChennaiandHyderabad.

IntermsofdeeptechIndiaisfaraheadofChina.Inthecomingyears,itislikelythatanincreasinglylargeshareofthegloballyleadingdeeptechcompaniesoftheworldwillevolveinAsia,asparticularlyChinaamassestheinvestmentsneededtoachievethis.

Space&AdvancedMaterials

(Asiafocused)

NorthAmerica68%

Europe12%

Asia20%

Restofworld0%

19

Photonic&Electronic(Asia&Europefocused)

NorthAmerica56%

Europe24%

Asia18%

Restofworld2%

CleanEnergy

(Europe&Asiafocused)

NorthAmerica58%

Europe22%

Asia16%

Restofworld4%

20

21

Pharmaceuticals

(NorthAmerica&Asiafocused)

NorthAmerica80%

Europe6%

Asia14%

Restofworld0%

“

Asia’sleadingdeeptechhubsareNewDelhi,MumbaiandSingapore.Indiahasfiveurbanregionswithmultipleworld-leadingdeeptechcompanies,includingbesidesNewDelhiandMumbaialsoBengaluru,Chennaiand

Hyderabad.

“

Youthbenefittwiceasmuchfromthejobcreationeffectofdeeptechcompanies

Muchofglobaleconomicdevelopmentiscurrentlylinkedtotechnologicalprogress.Deeptechcompaniesarealreadytodayplayingakeyroleintheeconomyandarefurtherdevelopingthosetechnologiesthatwillbemarketdominatinginthecominggeneration.Companieshighupinthebusinesshierarchytendtoplayanimportantroleinattractinginvestments,stimulatingexports,andjobgrowth.Whiletechnologicallyadvancedcompaniesthemselvesdoofferjobopportunities,theyalsofosteremploymentindirectly,throughsubcontractors,andbystimulatingthelocalserviceeconomy.Deeptechcompaniesoftenselltheirproductsandtechnologiestoothercompaniesinthesamecountry,andthuspromotethetechnologicaladvancementoftheoveralleconomy.

Thesefactorscanexplainwhythosecountriesthathavemoreworld-leadingdeeptechcompaniespermillionadults,alsotendtohavelowerunemployment.Onegloballyleadingdeeptechcompanymorepermillionadults,islinkedto0.46percentagepointslowerunemployment.Thisisthefindingofaregressionanalysisofthecountriesintheworldwhichhostatleastonegloballydominantdeeptechcompany.

Inaworlddrivenbytechnologicalchange,beingontopoftechnologicaldevelopmentallowsforexport-orientedjobstogrow,whichinturnstimulatesotherformsofjobgrowthinthelocalmarket,asdemandisdrivenup.Stimulatingdeeptechisadvantageousfornationalgovernments,inordertoboostthetechnologicalprogressoftheirrespectivecountries,tofurtherprosperity,butalsotofosterjobsgrowth.Thelinkfortheyouthisevenstronger,asonegloballyleadingdeeptechcompanymorepermillionadults,islinkedto0.78percentagepointslowerunemployment.Inparticularthelaboroutcomeofyouth,whichstrugglemoretoenterlabormarkets,arelinkedtodeeptechsuccess.Thosecountriesthatareontopoftechnologicalprogress,arebestsuitedtooffertheyounggenerationgoodconditionsonthelabormarket.

22

“

Thosecountriesthatareontopof

technologicalprogress,arebestsuitedto

offertheyounggenerationgoodconditions

onthelabormarket.

“

23

24

Leadingdeeptechcountriesinvestinternationallyandhavehighshareoftechnologyexports

Twoimportanteconomiccharacteristicsofcountrieswithsuccessindeeptechrelatestoexportsandinternationalinvestments.Firstly,thosecountriesthathaveahighershareofworld-leadingdeeptechcompaniespermillionadultstendalsotohaveahighershareofhigh-techgoodsamongsttheirgoodsexports.Whilethereisvariation,oftenthosecountrieswhichsucceedindeeptecharebenefitingfrombeingabletorelymoreongoodsexportsthatarehighupinthevaluechain,atypicalcharacteristicofhigh-techgoods.

Thisenableshighervalueproductionperemployee,resultinginhigherprosperitypercapita.Additionally,morejobshighuponthevaluechainarecreated,whichcreaterippleeffectsviaindirectjobcreation.

Thosecountriesthathaveahighershareofworld-leadingdeeptechcompaniespermillionadultsalsotendtoinvestmoreinternationally,astheytypicallyhaveahighershareofgrossdomesticproduct(GDP)innetoutflowofforeigndirectinvestments.Thisisagainnottheonlydeterminantfactor,othercharacteristicsalsosetcountriesapart,butgenerallyspeakingthosecountriesthataresucceedingindeeptechtendtobenetinvestorsinotherpartsoftheworld.Onereasonisthatworld-leadingdeeptechcompaniesofteninvestinternationallythroughtheirexpansionprogress.Anotheristhatnationswithdeeptechsuccessareontopoftheglobalvaluechainandthereforehavethefundsforinternationalinvestment.

25

26

Topschoolsandtopuniversitiesaretherecipefordeeptechprogress

Knowledgeplaysakeyroleintechnologicaldevelopment,thisisshythosecountriesthathaveahigherscoreintheinternationalPISA-results,alsotenddohaveahigherconcentrationofdeeptechcompanies.Stimulatinggoodschoolresults,throughteacher-lededucationwithfocusonmathematics,engineering,science,andtechnology,fromearlyage,isasoundrecipe.ThismakesitpossibletoclimbinPISA-resultsandparticularlyencouragethoseskillsthataremostrelevantfordeeptechdevelopment.

Whilethequalitybasiceducationisimportant,eliteuniversitiesplayakeyroleindeeptechdevelopment.Theconcentrationofdeeptechcompaniespermillionadults,iscomparedtothenumberoftop100universitiesinengineering&technologypermillionadults.Itisfoundthatthosecountrieswhichhaveahigherconcentrationoftopuniversitiesinengineering&technologyalsotendtohavemoredeeptechcompaniespercapita.

Thosecountrieswhichhaveabundancetalentinmathematicsandtechnology,combinedwithcompetitivetaxesandstrongprivateproperty,arelikelytocontinuegrowingwithdeeptechprogress.

“

Whilethequalitybasiceducationis

important,eliteuniversitiesplayakey

roleindeeptechdevelopment.

”

27

28

29

Taxpolicyandpropertyrightsarekeyfordeeptechstrength

Whatpoliciessetsapartthosecountriesthathaveahighconcentrationofdeeptechcompaniespermillionadults?Threekeyelementsidentifiedarepropertyrights,taxesonprofitsandtaxesoncapitalgains.

Tobeginwith,theytendtohavestrongprivatepropertyprotection.Deeptechdevelopmentrequiressignificantinvestments,inimmaterialandmaterialgoods,andtheseinvestmentsthereforetendtofocusonthosecountrieswheretheprotectionforprivatepropertiesarestrongest.

Anotherrelevantpolicyfieldistaxes.Whiletaxesareneededtofundbasicresearch,infrastructure,welfare,ruleoflaw,andotherpublicgoods,hightaxestendtocrowdouteconomicactivity.Moreprecisely,countrieswithhightaxestendtoalsohavehighlevelsofpublicexpenditure.Highlevelsofpublicexpenditurecrowdsoutprivateexpenditure,whilehightaxescrowdoutprivatesectorinvestmentsandactivity.Thiscanexplainwhythosecountrieswhichhavelowertaxesonprofitsandinvestmentstendtohaveahigherconcentrationofdeeptechcompaniespermillionadults.

Already700yearsago,theTunisianeconomistandsocialscientistIbnKhaldunlaidthefoundationsfortheunderstandingthatstatesoften,inconnectionwithexpansiontowardshighertaxlevels,createddisplacementofwork,investmentandtalent.Anexpandingpublicsectoratsomepointthroughexcessivetaxationcrowdsouteconomicactivityintheprivatesector,shrinkingthetaxbase.ArthurLafferthendevelopedthetheoryfurther,inthefamousnapkinsketchduringadinner.TheresultistheLaffer-Khalduncurvewhichshowsthelinkb