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Innovation in Global Industries: U.S. Firms Competing in a New World - Collected Studies
imity to sophisticated users is an important factor in the decisions of U.S. firms to locate a portion of their innovation-related activities offshore. An important part of the R&D infrastructure that attracts (or retains) investment in innovation-related activities supports user-driven applications in advanced technologies. One of the most celebrated recent examples of investment in such infrastructure was the public investment in the computer-networking infrastructure (originally referred to as ARPANET) that laid the foundations for the Internet. U.S. policy supported public and private investments in the networking technology and infrastructure, and U.S. trade policy encouraged widespread imports and adoption by users of low-cost desktop computing hardware. These policies helped create a large domestic “testbed” for demanding users of computing technology to develop new applications, which in turn helped propel the explosive growth during the 1990s of commercial investment in Internet-related firms (Mowery and Simcoe, 2002).
One contemporary (and closely related) equivalent to the computer-networking infrastructure of the ARPANET and NSFNET is broadband communications technology, which remains less widely available in the United States than in other (notably Nordic) nations (Turner, 2006). Moreover, differences in such access between urban and rural users depress the size of the domestic market for advanced applications developed on this testbed by innovative users. Broadband access is an indispensable foundation for continued growth in the user-driven innovation that now is prominent in many of these industries. In this area, as well as others affecting the viability of user-led innovation, public policy and private investment should support the development of widely accessible testbeds for sophisticated users to develop new applications and business models. Such an infrastructure could support the development of new firms and industries from domestic sources, investments in related fields from foreign firms, and continued innovation and growth in the U.S. economy.
The broader process of economic globalization, of which the restructuring of innovation-related activities is one part, is on the whole beneficial for the United States. Consumers benefit from higher-quality, lower-cost, and more innovative products; employees benefit from the ability to exploit their skills in a global rather than a domestic market; firms benefit from lower costs and economies of specialization through vertical specialization and increased collaboration; and the processes of trade liberalization can have beneficial political consequences for international relations as well. In addition, of course, literally millions of non-U.S. citizens benefit from the expanded economic opportunities in their home nations provided by the process of economic globalization.
Nevertheless, the distributional consequences of trade liberalization and globalization are significant, and, in a democracy, the political effects of worker displacement and flat or declining wages can intensify resistance to trade liberalization. These concerns are affected much more by relocation of manufacturing and services employment, rather than by change in the structure of innovation-