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Chapter 6. Industry, Technology, and the Global Marketplace

Introduction

Chapter Overview

Policymakers in many countries increasingly emphasize the central role of knowledge, particularly R&D and other activities that advance science and technology, in a country's economic growth and competitiveness. This chapter examines the downstream effects of these activities on the economies of the United States and its major competitors in the global marketplace.

Knowledge- and technology-intensive (KTI) industries in both the service and manufacturing sectors are a major focus of the chapter. These industries are considered to have a particularly strong link to science and technology. In many cases, these industries develop technological infrastructure that diffuses across the entire economy. Information and communications technology (ICT), for example, is widely regarded as a transformative "platform" technology that has altered lifestyles and the conduct of business across a wide range of sectors. Industries that are less knowledge and technology intensive, however, remain very important in the world economy and therefore receive some attention in the chapter.

The globalization of the world economy involves the rise of new centers of KTI industries. Although the United States continues to be a leader in these industries, developing economies, especially in Asia, have vigorously pursued national innovation policies in an effort to become major producers and exporters of KTI goods and services. Advances in science and technology have enabled companies to spread KTI activity to more locations around the globe while also maintaining strong interconnections among geographically distant entities.

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 (HT) firms, and investment in intangible goods and services.

In recent years, innovations aimed at developing improved technologies for generating clean and affordable energy have become increasingly important in both developed and developing countries. Clean energy has a strong link to science and technology. Like ICT, energy is a key element of infrastructure, the availability of which can strongly affect prospects for growth and development. For these reasons, the chapter pays special attention to energy technologies.

Chapter Organization

This chapter is organized into five 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 the Asia-8—India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand—which are included because of their substantial activity in KTI production and trade and growing trade ties with China. The timespan is from the early 1990s, roughly 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-HT 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 HT manufacturing industries, with a special focus on Asia. 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 fourth section presents innovation-related indicators. Using a new classification system, it examines country shares in patents granted by the United States in various technologies. It next examines patterns in country shares of high-value patents. It presents innovation-related data on U.S. industries from the National Science Foundation's new Business R&D and Innovation Survey. A discussion of U.S. HT small businesses includes data on the number of HT small business startups and existing firms, employment, and venture and angel capital investment by industry.

The last section presents data on clean energy and energy conservation and related technologies, which have become a policy focus in developed and developing nations. They are knowledge and technology intensive and thus are closely linked to scientific research and development. Production, investment, and innovation in these energies and technologies are rapidly growing in the United States and other major economies.

Data Sources, Definitions, and Methodology

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.