Chapter 6:

Industry, Technology, and Competitiveness in the Marketplace


Chapter Background

A nation's competitiveness is often judged by its ability to produce goods that find demand in the international marketplace while simultaneously maintaining-if not improving-the standard of living of its citizens (OECD 1996). Science and engineering (S&E), and the technological developments that emerge from S&E activities, enable high-wage nations like the United States to compete alongside low-wage countries in today's increasingly global marketplace. Although 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, many other parts of the world are closing the gap. (See figure 6-1 and appendix tables 6-1, 6-2, and 6-3.)

This chapter highlights the unique role played by industry within the nation's science and technology (S&T) enterprise as it develops, uses, and commercializes investments in S&T made by industry, academia, and government. Within the chapter, indicators or proxies identify trends that provide measurements of industry's part in the nation's S&T enterprise and, wherever possible, place U.S. activity and standing in the more science-based industries in a global context.

Chapter Organization

This chapter begins with a review of the market competitiveness of industries that rely heavily on research and development (R&D); these are often referred to as high-technology industries.[1]  The importance of high-tech industries is linked to their high R&D spending and performance which produce innovations that spill over into other economic sectors; additionally, these industries help train new scientists, engineers, and other technical personnel (see Nadiri 1993 and Tyson 1992). The market competitiveness of a nation's technological advances, as embodied in new products and processes associated with these industries, can also serve as an indicator of the effectiveness of that country's S&T enterprise. The marketplace provides a relevant economic evaluation of a country's use of science and technology.

U.S. high-tech industry competitiveness is assessed through an examination of market share trends worldwide, at home, and in various regions of the world. New data on royalties and fees generated from U.S. imports and exports of technological know-how are used to gauge U.S. competitiveness when technological know-how is sold or rented as intangible (intellectual) property.

The chapter explores several leading indicators of technology development (1) via an examination of changing emphases in industrial R&D among the major industrialized countries and (2) through an extensive analysis of patenting trends. New information on international patenting trends of U.S. foreign inventors in several important technologies is presented.

The chapter also presents information on trends in venture capital disbursements. Venture capital is an important source of funds used in the formation and expansion of small high-tech companies. This section examines venture capital disbursements by stage of financing and by technology area in the United States and in Europe.

The chapter concludes with a presentation of leading indicators that are designed to identify those developing and transitioning countries with the potential to become more important exporters of high-technology products over the next 15 years.

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[1] In this chapter, high-tech industries are identified using R&D intensities calculated by the Organisation for Economic Co-operation and Development. There is no single preferred methodology for identifying high-technology industries. The identification of those industries considered to be high-tech has generally relied on a calculation comparing R&D intensities. R&D intensity, in turn, has typically been determined by comparing industry R&D expenditures and/or numbers of technical people employed (i.e., scientists, engineers, technicians) to industry value added or to the total value of its shipments.

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