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OCR for page 20
Advanced Technology:
Its Nature and Importance
to the United States
The nation's capacity for technological innovation is an
essential national resource that permeates and strengthens
the entire economy. Advanced technology products and
processes are central to a range of domestic economic
activities and serve to increase productivity. In
addition, advanced technology is vital to the military
security of the United States and, thus, to the defense
of the Western Alliance.
WHAT IS ADVANCED TECHNOLOGY?
Examples of advanced technology industries are extensive,
yet changing. They include microelectronics, computers,
new materials, robotics, telecommunications, aerospace,
and biotechnology. The list of technologies deemed
"advanced" changes over time. A new list may supersede
this one in a decade or two.
Integrated circuit chips perhaps best illustrate
advanced technology's broad impact. Their role is to
process data and signals--and hence information, a
capacity that is critical not only to all scientific and
technological fields, but increasingly to all economic
sectors. Microelectronics has become a primary component
of technological advance.
It is misleading, however, to describe advanced tech-
nology through its products--the computer or the laser.
The essential national resource is the capacity for
technological innovation--the ability to continuously
discover, refine, and produce frontier technologies and
to use those technologies throughout the industrial,
agricultural, and military enterprises.
20
OCR for page 21
21
The Innovation Process
The capacity for technological innovation is manifested
in the innovation process, an integrated complex system.
Competition in advanced technology is not simply a matter
of generating the best ideas. New ideas are only one
essential part--among several crucial components--of what
is necessary for a nation to be technologically competi-
tive. The innovation process includes not only research
and development, but also manufacture, marketing, and
distribution. It may be described roughly in four parts:
Research--whether in a university setting, in research
institutes, government laboratories, or in industry--
generates new scientific knowledge and new ideas for
application. One innovation leads to another by sug-
gesting new directions for further technological invest-
ment. In industry, company interests usually dictate
research; in universities and research institutes,
individual scientists choose whatever scientific leads
they deem both important and capable of attracting
financial support.
Development translates a new discovery or idea into a
usable product aimed at a defined market demand. It
encompasses the steps between research and completion of
the design of a product. It includes a validation phase,
where elements emerge from a research environment to one
having risk low enough to be used in a product, and an
application phase which integrates such elements into a
product design suitable for production. The former
frequently proceeds before the application product is
known, and certainly long before it is defined. The
latter phase, application, occurs after the product is
known. It can include prototype or pilot scale tests on
either product or process. Development responds both to
research results and to feedback from the marketplace.
Manufacturing or production takes the product or
process from a single prototype to quantity production
that promises the consumer reliable Quality and con-
trolled cost. The line between development and manu-
f acturing is expressed in the comment that it's always
possible to make one of anything; regular production
demands reliability, competitive costs, serviceability,
often retooling of the manufacturing plants, setting and
enforcing criteria for suppliers, and more.
Distribution entails marketing, delivery, customer
training, and support services. It addresses the require-
ments of the consumer in using the product.
OCR for page 22
22
The innovation process is a dynamic and intricately
interrelated system: there are interactions and feedbacks
among the four stages. Early efforts in development, for
example, may reveal gaps in basic knowledge that require
the launching of a new research effort, or user experience
with a new product may call for redesign at the develop-
ment level to better adapt the product to consumer needs.
Thus successful innovation is characterized by constant
rethinking, adaptation, and organizational learning; only
rarely is there an orderly, logical process that can be
completely foreseen in advance. Indeed, the difference
between success and failure often depends precisely on
sufficient flexibility and "fast footwork" in changing
course to respond to new information.
WHY I S ADVANCED TECHNOLOGY IMPORTANT
TO THE UNITED STATES?
Advanced technology has been called the n fuel" of the
economy. New technologies--such as microelectronics,
computer-aided design, computer-aided manufacturing,
robotics, and advanced computer capabilities--spark a
surge of economic growth by increasing worker produc-
tivity. Military security relies on pioneering tech-
nologies for defense systems and for verification of
limitations on weapons systems specified in arms control
agreements. Advanced technology is perceived as a strong
part of our national self image: the United States is
thought to excel through "Yankee ingenuity.
Advanced Technology and National Security
National defense relies on advanced technology products
for sophisticated military hardware. Technologies used
in defense systems can often be exploited for commercial
purposes. Very-high-speed integrated circuits, digital
telecommunications, and new high-performance materials
all were developed for defense or space purposes yet now
have commercial spin-offs.
New processing and fabrication methods may also apply
to both military and civilian efforts. A goal of the
manufacturing technology program of the Air Force was to
demonstrate that computers can reduce cost in all phases
of manufacturing aircraft and thereby enhance manufac-
turing flexibility. The driving force behind this program
OCR for page 23
23
was the high cost of relatively small production runs
typical of military aircraft, but civilian aircraft
manufacture benefited as welled The Defense Depart-
ment's Very-High-Speed Integrated Circuit Program
(VHSIC) 92 designed to produce electronic devices that
are faster and more reliable than circuits now in use, is
being developed for the military but is expected to have
important commercial uses.3
Military sources of R&D support, however, do carry
some disadvantages for the commercial sector. Classifica-
tions, export controls, and rigid criteria for research,
as well as the drawing away by the military of scientific
and engineering personnel, sometimes inhibit, rather than
promote, commercial developments.
Advantages flow from commercial research to the mili-
tary as well. The military's ability to obtain the tech-
nology and hardware it requires often stems from the
development and production strength that contractor com-
panies have derived from competition in civilian markets.
Healthy competition among companies selling semiconduc-
tors, lasers, commercial aircraft, computers, and other
advanced technology products to a mass market, for
example, sped the development of useful military applica-
tions of these products. The greater the civilian sales,
the lower the per-unit R&D cost for both civilian and
military requirements.
The nation must retain both excellence and self-
sufficiency in military technology. To that end, a
strong domestic technological enterprise is essential.
Advanced Technology and Trade
A U.S. positive trade balance in technology-intensive
products and services contributes not only to employment,
but also to the general health of the nation's economy.
In 1980, advanced technology products showed a positive
trade balance of $31 billion, compared to a deficit of
more than $50 billion for all other manufactured goods.`
The U.S. currently holds the highest market share of
the industrialized countries' exports of high-technology
products. That share declined, however, from 30 percent
in 1962 to 22 percent in 1978 and has increased only
marginally since.S Figure 1 shows that, in absolute
terms, the U.S. trade balance in high-technology products
increased over eightfold from 1962 to 1980. The statistic
is less heartening when compared to the trade balances of
OCR for page 24
24
`,, 70
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CC
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— UNITED STATES
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WEST GERMANY
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Exports A'
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- ~~ I mports
1962 1965 1970 1975 1980 1962 1965 1970 1975 1980
YEAR
YEAR
FIGURE 1 Relative changes in the balance of trade in
high-technology products: United States, Japan, West
Germany, and France, 1962 to 1980.
SOURCE: U.S. Department of Commerce, International Trade
Administration, from U.N. Series D Trade Data, as reported
in "An Assessment of U.S. Competitiveness in High-
Technology Industries, n a study prepared for the Working
Group on High-Technology Industries of the Cabinet Council
on Commerce and Trade, final draft, May 19, 1982.
Japan and West Germany during the same period. Their
positive balances increased more than two-hundredfold and
ninefold, respectively, starting from a much lower 1962
base.
Advanced Technologies--Core
Technologies in the Economy
The benefits of advanced technologies extend beyond the
military and trade spheres to virtually all sectors of
the American economy, including the service sector, manu-
OCR for page 25
25
factoring, and agriculture. Electronics is one core
technology arena in the form of integrated circuitry of
increasingly higher density, digital devices for communi-
cation, an enlarging array of computers, and increasing
sophistication in "user-friendly" software. Another
emerging core technology, embraced by the umbrella term
of biotechnology, includes not only modern-day fermenta-
tion techniques using recombinant DNA methodology, but
also new biological techniques for the manufacture of
hormones and drugs.
Core technologies have far-reaching influence upon the
state of the American economy. The rapidly improving
performance and falling costs of these advanced technology
products are key to rising productivity. In 10 years,
productivity in advanced technology industries has risen
5.6 percent, compared to 0.9 percent for business
generally--a sixfold difference.6 In addition, produc-
tivity in mature industries may be increased through the
application of advanced technology throughout the manu-
facturing and distribution processes. Also, seemingly
low-technology industries such as ceramics or glassware
have components that are at the forefront of technical
advance.
The diffusion of advanced technologies throughout the
economy can be subtle. For example, the service sector
in America is growing. Employment in service industries
(banking, health care, insurance, transportation, util-
ities, etc.) between 1940 and 1980 grew from 46 percent
of total employment to 68 percent. 7 Pressured by the
need to improve productivity and to serve a growing
population, service industries draw increasingly on new
technologies: electronic tellers, word processors, and
small stand-alone computers have become commonplace only
a few years after their introduction.
NEED FOR NATIONAL ATTENTION
The advanced technology enterprise has special
characteristics that strengthen its claim to national
attention. Even small companies can be technologically
innovative and economically viable, but a new innovative
product is subject to cumulatively increasing returns to
scale over time, that is, with research and production
experience there is a reduction in average cost. On the
other hand, temporary setbacks, if severe, can cripple
OCR for page 26
26
future efficiency by starving the scientific and tech-
nological roots of the innovation process. It is easier
to stay at the frontier than to achieve it.
Were the United States to lose its capacity to inno-
vate core technologies, it might still benefit from
foreign innovations, just as other countries have bene-
fited from advanced technologies originating in the
United States. It is the innovating country, however,
that has the best access to new technologies and, thus,
the best opportunities to use them. The rapidity of
change in many important technological fields requires
knowledge of technological innovation in progress and
immediate access to new technologies. Without that
knowledge and access, a country's capacity to plan for
new products would lag those of the innovating country.
The effects of such a lag could be felt throughout the
U.S. economy, affecting not only advanced technology
industries, but also others that require the products of
these industries for advancement, including the now
widespread service industries.
ADVANCED TECHNOLOGY AND THE NATION ' S FUTURE
The social fabric of a nation is knitted by its citizens'
common purposes and widely shared beliefs in the integrity
and stature of their country and in the belief in a strong
future. Throughout our history, Americans have believed
in the capacity of the United States to adapt to new cir-
cumstances, to use native skills and resourcefulness--
"Yankee ingenuity"--to create practical objects of
commercial value. That belief endures as a national
assumption that the country will continue to expand tech-
nological frontiers and thus ensure the well-being of its
people. The capacity of Americans to innovate and to
adapt to change is thus important to sustain, as much for
the national optimism, as for the technological benefits
that flow from technological prowess.
OCR for page 27
27
NOTES
See National Research Council, Innovation and
Transfer of U.S. Air Force Manufacturing Technology:
Three Case Studies (Washington, D.C.: National Academy
Press, 1981), pp. 6-18.
2 For descriptions of the scope and goals of the
VHSIC program, see Jim Martin, "Very-High-Speed
Integrated Circuits--Into the Second Generation, Part I
The Birth of a Program," Military Electronics/Counter-
measures, December 1981, pp. 52-58, 71-73.
-
~National Research Council, An Assessment of the
Impact of the Department of Defense Very-High-Speed
Integrated Circuit Program (Washington, D.C.: National
Academy Press, 1982), p. 13.
4 "An Assessment of U.S. Competitiveness," p. 44.
sIbid., p. A-38.
6 Ibid., p. 45.
7 Service sector is defined in the broadest sense to
encompass all enterprises not engaged in the production
of goods. Unpublished data from the Department of Labor,
Bureau of Labor Statistics.
Representative terms from entire chapter:
innovation process
