Industry, Technology, and the Global Marketplace
International Economic Comparisons
- The U.S. economy continues to rank as the world's largest, and Americans continue to enjoy one of the world's higher standards of living. Japan's economy was less than 18 percent of the U.S. economy in 1960 and trailed several European economies. By 1970, it had grown to be the world's second largest economy, and in 1989, Japan had a gross domestic product (GDP) twice that of Germany and equal to nearly 40 percent of U.S. GDP. The latest data (through 1996) show a strong U.S. economy outperforming other advanced industrial countries since 1991.
Comparisons of general levels of labor productivity, measured by GDP per employed person, show other parts of the world increasing labor productivity faster than the United States. For more than 40 years, labor productivity growth in the United States generally trailed that in other countries. As of 1996, the gap had closed significantly, with labor productivity rates in many European nations nearly equal to that achieved in the United States. In 1960, U.S. GDP per employed person was twice that calculated for most European nations and four times that calculated for Japan.
U.S. Technology in the Marketplace
- The United States continues to be the leading producer of high-technology products, and is responsible for about one-third of the world's production. During the 1990s, U.S. high-technology industries regained some of the world market share lost during the previous decade. Its margin of leadership had narrowed during the 1980s when Japan rapidly enhanced its stature in high-technology fields.
The market competitiveness of individual U.S. high-technology industries varies, although each of the industries maintained strongif not commandingmarket positions over the 18-year period examined. Three of the four science-based industries that form the high-technology group (computers, pharmaceuticals, and communications equipment) gained world market share in the 1990s. The aerospace industry was the only U.S. high-technology industry to lose market share from 1990 to 1997.
U.S. trade in technology products accounts for a larger share of U.S. exports than U.S. imports; it therefore makes a positive contribution to the U.S. overall balance of trade. After several years in which the surplus generated by trade in technology products declined, this trend was reversed during the mid-1990s. Between 1990 and 1995, trade in aerospace technologies consistently produced largealbeit decliningtrade surpluses for the United States. Since then, U.S. exports of aerospace technologies and electronics have outpaced imports leading to larger trade surpluses in 1996 and 1997 before narrowing in 1998.
The United States is also a net exporter of technological know-how sold as intellectual property. Royalties and fees received from foreign firms have been, on average, three times those paid out to foreigners by U.S. firms for access to their technology. U.S. receipts from licensing of technological know-how to foreigners were about $3.3 billion in 1997, down slightly from $3.5 billion in 1996. Japan is the largest consumer of U.S. technology sold as intellectual property, and South Korea is a distant second. Together, Japan and South Korea accounted for 56 percent of total receipts in 1997.
International Trends in Industrial R&D
- In 1998, nearly 148,000 patents were issued in the United States. The record number of new patented inventions capped off what had been years of increases. U.S. inventors received 54 percent of the patents granted in 1998. Although the 1998 share represents a drop of 1 percent from the previous year, the proportion of new patents granted to U.S. inventors has generally risen since the late 1980s.
Foreign patenting in the United States continues to be highly concentrated by country of origin. In 1998, two countriesJapan and Germanyaccounted for nearly 60 percent of U.S. foreign-origin U.S. patents. The top four countriesJapan, Germany, France, and the United Kingdomaccounted for 70 percent. Both South Korea and Taiwan dramatically increased their U.S. patent activity in the late 1980s and, in 1998, were awarded more U.S. patents than Canadahistorically one of the top five foreign inventors patenting in the United States.
Recent patent emphases by foreign inventors in the United States show widespread international focus on several commercially important technologies. Japanese inventors tend to concentrate their U.S. patenting in consumer electronics, photography, andmore recentlycomputer technologies. German inventors continue to develop new products and processes in technology areas associated with heavy manufacturing industries, such as motor vehicles, printing, advanced materials, and manufacturing technologies. Inventors from South Korea and Taiwan are earning an increasing number of U.S. patents in communications and computer technologies.
Americans successfully patent their inventions around the world. U.S. inventors received more patents than other foreign inventors in both neighboring countries (Canada and Mexico); but also in distant and diverse markets, such as Japan, France, Italy, Brazil, India, Malaysia, and Thailand.
Venture Capital and High-Technology Enterprise
- The pool of venture capital managed by venture capital firms grew dramatically during the 1980s as venture capital emerged as an important source of financing for small innovative firms. Both investor interest and venture capital disbursements continued to grow through 1998. In the early 1990s, however, the venture capital industry experienced a "recession" of sorts as investor interest waned and the amount of venture capital disbursed declined. This slowdown was short-lived, however, and investor interest picked up in 1992, and disbursements began to rise.
Software companies attracted more venture capital than any other technology area. In 1998, venture capital firms disbursed a total of $16.8 billion, of which more than one-third went to firms developing computer software or providing software services. Telecommunications companies were second with 17 percent.
Very little venture capital actually goes to the entrepreneur as "seed" money. During the past 10 years, money given to prove a concept or for early product development never accounted for more than 6 percent of total venture capital disbursements and most often represented 2--4 percent of the annual totals. In 1998, seed money accounted for about 4 percent of all venture capital disbursements, while money for company expansion was about 56 percent.
Following are some trends based on the various indicators of technology development and market competitiveness examined in this chapter:
- The United States continues to lead or be among the leaders in all major technology areas. Advancements in information technologies (computers and telecommunications products) continue to influence new technology development and to dominate technical exchanges between the United States and its trading partners.
- Asia's status as both a consumer and developer of high-technology products has been enhanced by the technological development taking place in the newly industrialized Asian economiesin particular, South Korea and Taiwanand in emerging and transitioning economies, such as China, Malaysia, and the Philippines. Despite its current economic problems, Asia's influence in the marketplace seems likely to expand in the future as other technologically emerging Asian nations join Japan as both technology producers and consumers.
Beyond these challenges, the rapid technological development taking place around the world also offers new opportunities for the U.S. science and technology (S&T) enterprise:
- For U.S. business, rising exports of high-technology products and services to expanding economies in Asia, Europe, and Latin America are already apparent in the U.S. trade data and should grow in the years ahead.
- For research, the same conditions that create new business opportunitiesthe growing global technological capacity, the relaxation of restrictions on international businesscan lead to new opportunities for the U.S. S&T research community. The many new, well-funded institutes and technology-oriented universities surfacing in many technologically emerging areas of the world will further scientific and technological knowledge and lead to new collaborations between U.S. and foreign researchers.