National Interests in an Age of Global Technology (1991) / Chapter Skim
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1. THE EMERGING GLOBAL TECHNICAL ENTERPRISE
1. THE EMERGING GLOBAL TECHNICAL ENTERPRISE
Pages 14-44
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From page 14... ...
The virtual elimination of the twentieth century "technology gap" between the United States and its major trading partners in Western Europe and Japan and the rapid growth in technical competence of an expanding group of newly industrialized nations have greatly intensified international technical and commercial competition. Global competition and the advance of technical convergence, in turn, have been accompanied by a surge in international foreign direct investment and a proliferation of transnational corporate networks and technical alliances that have accelerated the integration of formerly relatively discrete national technology markets and industrial activities.
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From page 15... ...
Indeed, there is little consensus regarding the significance of comparative patent data as there is concerning the accuracy and meaning of international comparisons of R&D spending or scientific and engineering personnel. Yet by drawing on a range of indicators that include measures of a nation's technical inputs (R&D spending, technical work force)
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From page 16... ...
R&D expenditures in recent decades.4 However, from the mid-1970s to the late-1980s, a period of greatly intensified global industrial competition during which the relevance of defense R&D to commercial applications has declined markedly, growth in the ratio of nondefense R&D to GNP for the United States remained relatively flat while that for Japan, the Federal Republic of Germany, and, to a lesser extent, France, experienced significant growth. America's major competitors have also vastly improved the efficiency
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From page 17... ...
inventors increased over the period was "drugs and medicines." Recent changes in national shares of world production, trade, and foreign direct investment in high-tech industries confirm the shift in the technical balance of power suggested by patent data. Between 1975 and 1986, world production of high tech manufactures experienced a sixfold increase and world high-tech trade underwent a ninefold expansion (Figures 1.7 and 1.81.
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From page 18... ...
. 50 40 Thousands of 1989 Dollars ,~~ 30~ i ~ _ 20 ~ [ 3~ 10 1 1 1 1 , 1 1 , , , , 1 , , 1 1 , 1 , , 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 United States ° Japan O West Germany ~ Summit 7 FIGURE 1.4 Gross domestic product per employed person, 1970-1989, purchasing power parity exchange rates.
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From page 19... ...
The sharp expansion of European and Asian outward foreign direct investment during the past two decades offers a striking expression of the enhanced technological competence and confidence of foreign corporations. Since 1973 there has been a fivefold increase in the volume of world foreign direct investment and a significant redistribution in shares of total outward foreign direct investment among the major industrialized countries (Figure 1.9)
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From page 22... ...
_ _ 1975 United States F l~ France 1980 Japan United Kingdom 1986 O West Germany FIGURE 1.8 Exports of high-technology products, by selected countries: 1975, 1980, and 1986. SOURCE: National Science Board (1989, p.
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From page 23... ...
This sea change in the global technological order and the accompanying intensification of international competition have had profound implications for the organization of corporate technical activities across national borders. INTEGRATION OF NATIONAL TECHNOLOGY ENTERPRISES SINCE THE MID-1970s The integration of national technology markets has been gathering momentum since the early 1950s, fueled largely by the postwar expansion of world trade and the growth of predominantly U.S.
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From page 24... ...
foreign direct investment and a proliferation of transnational corporate alliances. In the last decade alone, world foreign direct investment has doubled, growing four times as fast as world trade since 1983 (Figure 1.10~.
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Between 1973 and 1987, as the volume of world foreign direct investment experienced a fivefold increase, the U.S. share of total inward foreign direct investment grew from 9.9 to 25.2 percent.
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From page 26... ...
Although much of this shift in corporate strategy has been accomplished through foreign direct investment and trade, another important instrument for implementing new strategies has been transnational technical alliances among corporations. The reasons for these changes in the way more and more national and transnational companies are organizing and conducting their advanced technical activities are multiple and vary considerably in relative importance from one industry to the next.
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From page 27... ...
companies in the computer, telecommunications, microelectronics, pharmaceuticals, and automotive industries are reported to conduct anywhere from a quarter to a third of their R&D activities abroad.12 Conversely, there is evidence that the surge of foreign direct investment into the United States during the past decade has brought with it significant expansion of U.S.-based R&D activities by foreign transnational corporations. In 1982, in-house R&D spending by the U.S.
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From page 28... ...
As in the case of overseas R&D spending, U.S. companies appear to have taken the lead in building transnational technical alliances.
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From page 29... ...
Corresponding to the committee's areas of expertise, the case studies included technically mature industries such as automotive, construction, electrical apparatus, and petrochemicals, as well as technologically more dynamic industries such as aircraft engines, computer printers, semiconductors, and the emerging industry of biotechnology.~7 Examining each industry's value-added chain, from materials, components, and capital equipment through manufacturing and assembly to distribution, sales, and service, the committee attempted to identify a short list of industry-specific "critical" technologies and to evaluate the relative technical strengths and weaknesses of U.S.-based producers in each industry. Comparison of the recent globalization of technical activities in three industries studied by the committee automotive, aircraft engine, and construction illustrates the diversity of industry experience, while pointing to a number of cross-industry commonalities.
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From page 30... ...
Led by the rapid expansion of Japanese foreign direct investment and the proliferation of transnational alliances and joint ventures by both automakers and their suppliers, the value-added chain of the automotive industry, including more and more advanced technical activities, has become increasingly transnational in organization. The motives behind the surge in Japanese foreign direct investment were essentially the same as those that inspired U.S.
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From page 31... ...
Until the late-1970s, most international trade in construction services was conducted between a relatively small number of international firms located in industrialized countries and governments or private parties in developing or industrializing countries. The industry's technology base, on the other hand, has long been globalized, largely as a result of the highly internationalized nature of the construction equipment industry and international cooperation in construction research.
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From page 32... ...
The primary motives for these changes in the strategies of international construction and engineering design firms were generally to improve market access, to acquire or otherwise join forces with the special technical and managerial capabilities of other firms, and to share costs and risks. Finally, there has been an increase in international cooperation in construction research and development.
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From page 33... ...
The reasons for the historically "national" orientation of the industry's production and technical activities have much to do with the nature of its product, production processes, and markets. First, the sheer technical complexity of this industry's product fostered concentration within the aircraft industry, raised monumental barriers to market entry for any latecomers, and has tended to discourage foreign direct investment.
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From page 34... ...
Second, this redistribution of technical strength has been accompanied by a growing cross-penetration and integration of the national technology base for each industry by way of transnational alliances, foreign direct investment, or the expansion of international trade. Third, in almost all of the industries studied, U.S.-owned transnational corporations appear to have taken the lead in globalizing the industry's technology base, either by developing or acquiring a greater share and range of their advanced technical activities abroad, or by trading technology and know-how for market access more aggressively than their foreign competitors.
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From page 35... ...
Through education of foreign students, the employment of foreign faculty and research associates, and a firm commitment to the free flow of knowledge without regard to national borders, U.S. university science and engineering departments have played a central role in international technology transfer.
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From page 36... ...
; and (3) a prolonged slump in the number of U.S.-born engineers and engineering students deciding to pursue doctoral degrees in engineering or an academic career during the 1970s and early 1980s.
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From page 37... ...
Between 1978 and 1988, the federal government's share of total university research funding shrank from 66 to 60 percent, while the share accounted for by state and local government remained virtually unchanged (down slightly from 8.9 to 8.6 percent)
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From page 38... ...
the participation in university research activities of foreign students, postgraduates, visiting scholars, and research personnel from foreign firms, (2) sponsored and open-ended underwriting of research of foreign corporations and their subsidiaries, (3)
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From page 39... ...
For example, in the pharmaceuticals industry, where patenting is pervasive and seen as an effective competitive weapon, the relative distribution of frequently cited patents among national industries may be a useful gauge of overall technical strength. However, in another industry such as petrochemicals where know-how and trade secrets are valued much more as sources of competitive advantage than patents, patenting may prove a poor measure of relative strength.
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From page 40... ...
manufac turing involved in supplying components, materials, capital goods, and other intermediate products to transnational companies or their first and second tier suppliers is surely considerably greater than trade figures alone would suggest.
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From page 41... ...
. Admittedly, data regarding R&D expenditures say very little about the nature of advanced technical activities of a firm.
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From page 42... ...
company's foreign subsidiary. However, even without attempting the foreign versus domestic distinction, the lack of uniform university accounting procedures, the multiplicity of funding sources and channels, and the decentralized nature of exchanges between donors and a broad spectrum of university offices, departments, and individual researchers, all contribute to make the tracking of foreign support extremely haphazard.
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From page 43... ...
1990. Global Companies and Public Policy: The Growing Challenge of Foreign Direct Investment.
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From page 44... ...
1988b. Foreign Direct Investment in the United States: Operations of U.S.
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