Industry, Technology, and Competitiveness in the 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) almost twice that of Germany and equal to nearly 40 percent of U.S. GDP.
- Comparisons of general levels of labor productivity, measured by GDP per employed person, again show that other parts of the world are quickly closing in on the U.S. lead position. For over 40 years, labor
productivity growth in the United States generally trailed that in other countries. In 1960, U.S. GDP per employed person was twice that calculated for most European nations and four times that calculated for Japan. As of 1995, the gap has closed
significantly, with labor productivity rates in many European nations nearly equal to that achieved in the United States. Productivity growth in Japan appears to have slowed down some since the early 1990s.
U.S. Technology in the Marketplace
- The United States continues to be the leading producer of high-tech products, responsible for about one-third of the world's production. While its margin of leadership narrowed during the 1980s when Japan rapidly
enhanced its stature in high-tech fields, by 1995 U.S. high-tech industries regained world market share lost during the previous decade.
- The market competitiveness of individual U.S. high-tech industries varies, although each of the industries maintained strong-if not commanding-market positions over the 15-year period examined. Three of the four
science-based industries that form the high-tech group (computers, pharmaceuticals, and communications equipment) gained market share in the 1990s. The aircraft industry was the only U.S. high-tech industry to lose market share from 1990 to 1995.
- U.S. trade in technology products accounts for a much 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, preliminary data for 1996 show a larger surplus than in 1995. Between 1990 and 1995, the U.S. trade surplus in software technology doubled. During that same period, trade in aerospace
technologies consistently produced large-albeit declining-trade surpluses for the United States.
- 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 exceeded $3.3 billion in 1995, up from $3.0 billion in 1994. Japan is the largest consumer of U.S. technology sold as intellectual
property; South Korea is the second largest customer.
International Trends in Industrial R&D
- In 1994, for the first time ever, more than 100,000 patents were issued in the United States. This record number of new patented inventions caps off what had been several years of steady increases that began in
1991. In 1995, the number of new U.S. patents granted again topped 100,000, with the final count reaching 101,419. U.S. inventors received 55 percent of the patents granted in 1995; this continues a general upward trend in the proportion of new
patents granted to U.S. inventors that began in the late 1980s.
- Foreign patenting in the United States continues to be highly concentrated by country of origin. In 1995, two countries-Japan and Germany-accounted for over 60 percent of foreign-origin U.S. patents. The top five
countries-Japan, Germany, France, the United Kingdom, and Canada-accounted for 80 percent. Several of the newly industrialized economies, notably Taiwan and South Korea, have dramatically increased their patent activity since the late 1980s.
- 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, photocopying, and-more recently-computer technologies. German inventors continue to develop new products and processes in technology areas associated with heavy manufacturing industries. Inventors from Taiwan and
South Korea 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 neighboring countries (Canada and Mexico) and in distant markets such as Japan,
Hong Kong, Brazil, India, Malaysia, and Thailand.
- International patenting in three important technologies-robot technology, genetic engineering, and advanced ceramics-underscores the inventive activity by the United States, Japan, and Europe. Based on an
examination of national patenting in 33 countries during the 1990-94 period, Japan and the United States lead in overall technological activity in these areas. Although South Korea's share of international patent families was lowest overall for the
countries examined, it made an impressive showing in each of the technology areas.
Venture Capital and High-Technology Enterprise
- The pool of venture capital managed by U.S. venture capital firms grew dramatically during the 1980s as venture capital emerged as an important source of financing for small innovative firms. In the 1990s, the
venture capital industry experienced a "recession" of sorts as investor interest waned and the amount of venture capital disbursed declined. But this slowdown was short-lived: investor interest picked up in 1992, and disbursements began to rise
- Software companies attracted more venture capital than any other technology area. In 1995, venture capital firms disbursed a total of $3.9 billion, of which 20 percent went to firms developing computer software or
software services. Medical and health-related companies were second with 14 percent.
- Very little venture capital actually goes to the struggling inventor or entrepreneur as "seed" money. Over the past 10 years, money given to prove a concept or for early product development never accounted for more
than 7 percent of total venture capital disbursements and most often represented 3 to 4 percent of the annual totals. In 1995, seed money accounted for 6 percent of all venture capital disbursements, while money for company expansion garnered 42
- As in the United States, venture capitalists in Europe are attracted to young, small, fast-growing companies in need of capital and management expertise. Europe now has venture-capital-backed investments all across
the continent, including investments in many of the transitioning countries in Central and Eastern Europe.
- While computer-related and biotechnology companies in the United States garner the lion's share of U.S. venture capital, the types of firms attracting venture capital in Europe are less technology intensive. Europe
has long held a reputation for excellence in industrial machinery and equipment, fashion, and leisure products (e.g., sporting goods). These same industries are among the top recipients of European venture capital.
- European venture capitalists, like their American counterparts, direct only a small portion of capital disbursements as seed money or startup capital. Investments for expanding an existing company's productive
capacity, helping a company add a new product line, or enabling a company to acquire an existing business-later stage investments-account for about 85 percent of European venture capital disbursements.
New High-Tech Exporters
- Several Asian economies seem headed toward future prominence as technology developers and a greater presence in global high-tech product markets, when a model of leading indicators is applied. Taiwan and South Korea
seem best positioned to enhance their stature in technology-related fields and their competitiveness in
high-tech markets. Malaysia and the Philippines scored surprisingly well in many areas and could be the next Asian "tigers," although the model suggests that their technological foundations are still less developed and narrower than those found in
either Taiwan or South Korea. Recently, several Asian nations have faced turmoil in their banking systems and capital markets. It is unclear how these developments will affect Asian economies and their science and technology capabilities.
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