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petitive and innovative performance relied on the robust domestic “R&D infrastructure” comprising industrial, governmental, and university research facilities, much of which had benefited from large federal investments spanning the post-1945 period. U.S. firms and consumers alike also benefited from low-cost imports of some products, such as personal computers and components that were critical inputs for the innovation and restructuring processes described in this volume.

A more recent wave of concern over U.S. competitive prospects in the 21st century combines elements of all of these previous debates. The actions of many U.S. firms (not all of which can be considered multinational by any conventional definition) to “outsource” activities formerly undertaken by U.S.-based professional, scientific, and engineering employees have raised widespread popular concerns over the erosion of employment opportunities in occupations and industries (including many service industries) that formerly were minimally exposed to foreign competition. At the same time, the growth of innovative and manufacturing capabilities in countries such as China, India, South Korea, and Taiwan has raised concerns over new sources of competition for U.S. firms. A 2006 study of U.S. competitiveness and innovative performance phrased these concerns as follows:

… the committee is deeply concerned that the scientific and technological building blocks critical to our economic leadership are eroding at a time when many other nations are gathering strength. We strongly believe that a worldwide strengthening will benefit the world’s economy—particularly in the creation of jobs in countries that are far less well-off than the United States. But we are worried about the future prosperity of the United States. Although many people assume that the United States will always be a world leader in science and technology, this may not continue to be the case inasmuch as great minds and ideas exist throughout the world. We fear the abruptness with which a lead in science and technology can be lost—and the difficulty of recovering a lead once lost, if indeed it can be regained at all. (National Research Council, 2006, Executive Summary, p. 2)1

A central issue in the long debate over U.S. competitiveness that is briefly summarized above is the processes through which industrial firms in the United States and other economies create innovative new products and processes. What has changed in the global and U.S. domestic economies to transform the near euphoria in popular evaluations of U.S. economic and innovative performance during the “New Economy” of the late 1990s to the concerns expressed by


A similar sentiment may be found in Freeman (2005): “But the US will also face economic difficulties as its technological superiority erodes. What is good for the world is not inevitably good for the U.S. The group facing the biggest danger from the loss of America’s technological edge are workers whose living standards depend critically on America’s technological superiority. The decline in monopoly rents from being the lead country will make it harder for the US to raise wages and benefits to workers. The big winners from the spread of technology will be workers in developing countries, and the firms that employ them, including many U.S. multinational corporations” (p. 27).

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