Economists increasingly emphasize the central role of knowledge, particularly R&D and other activities to promote science and technology, in a country's economic success. Information and communications technology (ICT), for example, is widely regarded as a transformative technology that has altered lifestyles and the way business is conducted across a wide range of sectors.
This chapter examines some of the downstream effects of R&D on the United States and the global marketplace. One key area is the creation of knowledge- and technology-intensive (KTI) industries and the diffusion and application of new technologies throughout other industries. Technology-intensive manufacturing and knowledge-intensive service industries have become an important and growing part of the United States' and other economies.
The globalization of the world economy and the vigorous pursuit of national innovation policies by developing countries have led to the rise of new centers of high-technology manufacturing and knowledge-intensive service industries. The United States continues to be a world leader in both, but Asian and other developing countries have become major producers and exporters and are building up their indigenous capability. The rise of these new centers of activity and the increasing fragmentation of production across borders and firms have stimulated foreign investment and trade.
Innovation is closely associated with technologically led economic growth, and observers regard it as important for advancing living standards. The measurement of innovation is an emerging field, and current data and indicators are limited. However, activities related to the commercialization of inventions and new technologies are regarded as important components of innovation indicators. Such activities include patenting, the creation and financing of new high-technology firms, and investment in intangible goods and services.
This chapter is organized into four sections. The first section discusses the increasingly prominent role of KTI industries in regional/national economies around the world. The focus is on the United States, the European Union (EU), Japan, China, and a set of emerging Asian countries/economies (the Asia-9). The time span starts in the early 1990s, roughly from the end of the Cold War, to the present.
The second section describes the global spread of KTI industries and analyzes regional and national shares of worldwide production. It discusses shares for the KTI industry groups as a whole and for particular services and manufacturing industries within them. Because technology is increasingly essential for non-high-technology industries, some data on the latter are presented as well.
The third section examines indicators of increased interconnection of KTI industries in the global economy. Data on patterns and trends in global trade in KTI industries make up the bulk of this section. It presents bilateral trade data to provide a rough indication of the internationalization of the supply chains of high-technology manufacturing industries, with a special focus on the Asian region. The section also presents data on U.S. trade in advanced technology products, examining trends in U.S. trade with major economies and in key technologies. Domestic and foreign production and employment of U.S. multinationals in KTI industries are presented as indicators of the increasing involvement of these economically important firms in cross-border activities. To further illustrate the effects of globalization on the United States, the section presents data on U.S. and foreign direct investment abroad, showing trends by region and by KTI industries.
The last section presents innovation indicators and examines U.S. trade in intangible goods. It next examines patterns in country shares of high-value patents. A discussion of U.S. high-technology small businesses includes data on the number of high-technology small business startups and existing firms, employment, and venture and angel capital investment by industry. The last section also presents World Bank indicators of the knowledge capability of the United States and other major economies, which may have bearing on their current ability and future capacity to innovate.
This chapter uses a variety of data sources. Although several are thematically related, they have different classification systems. The sidebar, "Comparison of Data Classification Systems Used," shows the classification systems used in this chapter in tabular format.