Business travel plays vital role in economic growth, according to ITU researcher

As a thought experiment Associate Professor of Computer Science at the IT-University, Michele Coscia, theorized that global GDP would drop significantly if business travel on a global scale ceased – now the global COVID-19 shutdown has proven his theory in practice.

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Written 24 November, 2021 07:51 by Theis Duelund Jensen

Last year, Associate Professor of Computer Science at the IT-University, Michele Coscia, published a paper in the prestigious Nature Human Behaviour journal that he had completed as part of his post-doc at Harvard University. The paper, entitled “Knowledge diffusion in the network of international business travel” relies on network analysis and among other things aggregated, anonymized data from Mastercard to conclude on the effects of business travel on a given country’s GDP.

As an interesting thought experiment, Michele Coscia and his colleagues theorized a scenario in which global business travel came to a grinding halt in order to see how that would affect the global GDP. In light of the global pandemic, Michele Coscia and his colleagues’ research findings have gained renewed interest in the media and was recently featured in Forbes as well as The Economist.

“It is interesting to see our theory in light of the global COVID-19 shutdown,” says Michele Coscia who has a background in Digital Humanities and completed his PhD in Computer Science at University of Pisa in 2012. “The effect of the pandemic is within the parameters of the paper, and our estimate is very close to the actual drop in global GDP.”

Know-how and know-who
The aim of Michele Coscia’s research is to determine the role of knowledge transfer in economic growth and ultimately answer the question, why do industries in some countries, given the same access to materials and physical components, perform better than the same industries in other countries?

“In reality, businesses rely on a number of components that are not as easily transferable as goods and commodities,” says Michele Coscia referring to the knowledge needed to successfully establish a business. “In our article, we label these ephemeral components ‘know-how’ and ‘know-who.’ If for instance, your business produces cars, you need more than physical components. You need car industry insight, and you need marketing acumen to reach consumers.”

We live in a golden age of communication. Virtual platforms have enabled online meetings across the globe, so why are we not seeing a greater effect of knowledge transfer? According to Michele Coscia that is because physical meetings are vital to the process of knowledge dissemination.

Using aggregated and anonymized data from Mastercard’s corporate issued credit cards, Michele Coscia and his colleagues were able to analyse the impact of business travel on specific industries. “If a country is the destination of a lot of people working in IT, we assume this country is accumulating knowledge about IT. We then project the increase in IT market strength based on the accumulation of knowledge, and compared to the actual GDP figures, the theorized increase matches reality,” says Michele Coscia.

Sustainability pros and cons
Pre-shutdown estimates describe business travel as a trillion-dollar industry and judging by the research it is a practice vital to economic growth. At the same time, air travel is a major contributor to CO2 emissions on a global scale. Does the study’s conclusion in reality leave us between a rock and a hard place? Does economic growth on a global scale undermine efforts to create a sustainable world?

Michele Coscia admits that this is a problem, we have to consider. However, there are ways to offset the negative impact of business travel. Most business travel is restricted geographically meaning that knowledge transfer from one Western country usually goes to another Western country. In that sense, very few countries outside of the Western world are able to capitalize on knowledge generated in the West.

“What I am interested in as a researcher is to find ways to ensure growth in third world industries and economies,” he says. “If we use business travel to improve the economies of poorer countries outside of the West, then I think it is a price worth paying. If we can use knowledge transfer to develop sustainable technologies in third world countries and, for instance, close up coal mines and replace them with solar panels or wind turbines, then that’s well worth the effort.”

Ultimately, Michele Coscia’s hope is that his research can be used to make the world more inclusive. “In a sense, my work is another hint at the fact that developing countries are struggling to catch up, not because they are not able to do certain things, but because they are excluded from the network of knowledge transfer.”

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