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New Harvard Study Links Business Travel and Economic Growth

Research finds business travel is key for industries and countries moving knowhow, not just information

New research from Harvard has determined there is a direct link between a country’s incoming business travel and the growth of the country’s new and existing industries. The findings were published in the journal Nature Human Behaviour. 

The research was conducted by the Growth Lab at the Center for International Development at Harvard Kennedy School. The results support the Growth Lab’s hypothesis that moving knowhow – the tacit knowledge accumulated and transferred from brain to brain through a long process of imitation, repetition and feedback – is critical to economic growth

Researchers mapped the global flow of business travel to understand the way business ‘knowhow’ moves and accumulates, providing a key driver for inclusive economic growth.

“We’ve been puzzled by the fact that business travel has been growing faster than world GDP, despite the widespread adoption of alternatives like Skype, FaceTime, e-mail, etc.,” said Growth Lab Director Ricardo Hausmann, who is Rafik Hariri Professor of the Practice of International Political Economy at Harvard Kennedy School. “We posited that maybe there is a difference between moving information and moving brains.

The research also raises new concerns about the economic implications of the international travel restrictions imposed to combat COVID-19. “We obviously never imagined a complete shutdown of business travel, but the paper allows us to delve into the consequences,” Hausmann notes.

Anonymous transaction insights provided by Mastercard were used to map the flow of global business travel. With this information, researchers created a Knowhow Index which ranks countries on incoming and outgoing knowhow. Germany, Canada, the US, UK and Korea are the top sources of knowhow flows, while Austria, Ireland, Switzerland, Denmark and Belgium received the most knowhow.

The team created an interactive visualization that shows the effects of the disappearance of business travelers originating from a specific country. For example, if German businesspeople stopped traveling, the research estimates that Austria, South Africa, Switzerland, Nigeria, Czechia and Turkey would be most affected. Furthermore, global GDP would drop by 4.8 percent.

“According to our study, the world is benefiting enormously by mobilizing the knowhow in brains through business travel. A permanent shutdown of this channel would probably imply a double-digit loss in global GDP,” said Hausmann.

The research also suggests that business travel represents another development divide. “Obstacles to business travel, such as cumbersome visa regimes and long connections, constrain access to knowhow and limit growth opportunities, especially in developing countries,” said Frank Neffke, research director at the Growth Lab.