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Strengths and Weaknesses of the U.S. Technical Enterprise In addition to presenting many challenges and opportunities to the United States, the globalization of technical activities has underlined the special strengths and weaknesses of the U.S. technical enterprise. These must be fully appreciated and their interrelationship better understood before explor- ing the policy implications of a global technical enterprise. U.S. COMPARATIVE STRENGTHS The emergence of world-class technical enterprises abroad and the accompanying increase in global competition demand that the United States take greater stock of its areas of strength in order that they may be more fully developed and exploited. In this regard, a short list of the most impor- tant of U.S. national assets should include: a formidable basic research enterprise; a superior advanced technical education system; a vast, techno- logically demanding domestic market; a large, cosmopolitan, and highly skilled technical elite; and an educational system that fosters individual cre- ativity and inventiveness. The National Research Enterprise The U.S. basic research enterprise is unsurpassed. Although the industrialized and industrializing economies of Europe and Asia have expanded their basic research efforts more rapidly than the United States during the last 40 years, the United States retains an impressive, absolute 54
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 55 lead in terms of money spent on basic research, the number of scientists and engineers engaged therein, and the volume and quality of basic research out- put. As Figures 3.1 and 3.2 show, by the late 1980s, the United States was still spending almost as much as Japan, West Germany, France, and the United Kingdom combined on research and development, and had nearly twice as many R&D scientists and engineers as its closest competitor, Japan. Similarly, comparisons of the leading industrialized nations' shares of world patents and scientific literature (Figures 3.3 and 3.4) provide a window on the continuing leadership of the United States in the overall outout of Dure research. . . At the same time, the structure of the U.S. basic research enterprise makes it easily accessible to foreign firms and governments. To begin with, the U.S. university system, which thrives on openness and the free currency of ideas, plays a central role In the U.S. basic research effort. Furthermore, the United States enjoys the world's most extensive and efficient infra- structure for the dissemination of basic research through conferences, tech- nical associations, and technical journals. In short, the very "cosmopolitan" ethos arid commitment to the free flow of ideas that contribute so effectively to the extraordinary vitality and productivity of the U.S. basic research ente~pnse make it extremely difficult for U.S. firms or the United States as a nation to appropriate exclusively the enterprise's basic research product (U.S. General Accounting Office, 1988a,b). 120 100 80 60 40 20 Billions Constant 1982 Dollars ......................................................................................................................................................................................................................................................... . ~ , =~ _ = ~ = tar ~ ~ ~-A_ O' ~ 1961 'G3 '65 '67 '69 , , , , , , , , '79 '81 '83 '85 '87 I I I I I I I r '71 '73 '75 '77 United States ~ Japan France ~ United Kingdom ° West Germany FIGURE 3.1 National R&D expenditures, by selected countries: 1961-1987. SOURCE: National Science Foundation (1988, p. 4).
56 900 800 700 600 500 400 300 200 100 o NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY Thousands ......................................................................................................................................................................................................................................................... ......................................................................................................................................................................................................................................................... .......... ~ .......... .............................................................................................................................................................................................................................. ........... l ~ ~1~1 ~ =1 United States Japan West Germany France United Kingdom FIGURE 3.2 Scientists and engineers engaged in research and development, by country: 1986. SOURCE: National Science Foundation (1988, p. 36). 60 50 40 30 20 10 o Percent Share ........ ......... ......... 5 ~ t _ ~ ~ ~ United States Japan West Germany France United Kingdom FIGURE 3.3 National shares of patents granted in the United States, by country of residence of inventor and year of grant, all technologies: 1988. SOURCE: National Science Board (1989, p. 362).
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 40 30 20 10 o 57 Percent Share United States Japan West Germany France United Kingdom FIGURE 3.4 Shares of world scientific literature, by country: 1986. SOURCE: National Science Board (1989, p. 331). Advanced Technical Education The superiority of advanced technical education in America is recog- nized throughout the world, as attested by persistently large enroll- ments of foreign students in doctoral level engineering and science pro- grams in American universities. U.S. university engineering and science faculties have long educated many of the best and brightest graduate stu- dents from all over the world. Indeed, the attraction of graduate engineering study in the United States is a function of many factors, including the high quality of U.S. university research facilities, the reputation of their faculty and graduates, and the prospect of more rewarding employment in the United States upon graduation, not to mention the drawing power of U.S. political, religious, and social freedoms. The particular strength of U.S. advanced technical education owes a great deal to the fact that U.S. univer- sities have assumed a central role in the nation's basic research enterprise since World War II. As a result, U.S. universities command a large share of the country's total research budget. The Domestic Market The relative scale, homogeneity, depth, and openness of the U.S. domestic market have proven a powerful engine for innovation and its commercialization. In addition to being the world's largest single market
58 NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY with per capita purchasing power greater than all but a few of its trading partners, the U.S. domestic market remains the most technically demanding in the world. 1 Over the past 20 years, the United States has consistently consumed between 40 and 50 percent of world output of high-technology products- more than Japan, France, West Germany, and the United Kingdom com- bined (Figure 3.51. Likewise, comparatively high U.S. per capita consump- tion of technically advanced products such as televisions, VCRs, personal computers, facsimile machines, and cellular telephones also attest to the overall technical sophistication of the U.S. market. Although rapid advances in information and communication technologies have reduced somewhat the technical and organizational advantages of proximity to market in many industries, the sheer size and technology "pull" of domestic demand continue to make the United States an attractive place for firms of all nationalities to design, develop, and market new products, services, and technologies. In this regard, the relative efficiency and size of the U.S. services sector is a major driver of technological advance and inno- vation in both services and manufacturing industries. Accounting for more than 75 percent of U.S. employment and 71 percent of U.S. GNP, U.S. ser- vices industries, which Include transportation, communication, health care, and business services, among others, are the world's largest and most eff'- cient. They are also major drivers of technology development and commer- cialization both as consumers of technology-intensive goods and services and as service providers. Furthermore, the unrivaled scope and dynamism of United States ~4% - Japan 27% ~ ~~ United Kingdom y _ . / West Germany ' / 696 \l Other 1296 /France 6% FIGURE 3.5 Home markets for high-technology products, by selected countries: 1986. SOURCE: National Science Board (1989, p. 373).
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 59 the U.S. venture capital market has made the United States the world's "mecca" of high-tech entrepreneurs more generally.2 Finally, the freedom of the U.S. domestic markets for goods, services, capital, labor, and technology allows productive resources to move more readily from one sector to another in response to changes in demand than they do in most advanced industrialized countries. This allocative efficien- cy along with the relative openness of the U.S. economy to foreign prod- ucts, services, and investment, has contributed significantly to the techno- logical dynamism of domestic markets.3 It should be noted, however, that the openness of the U.S. economy to foreign imports and investment has extended the benefits of the large, homogeneous, technically dynamic U.S. market to firms from competing nations as well as to "indigenous" companies. Information Technology The relative strength of the United States in information technology, especially applications and systems software, expert systems, and artif;- cial intelligence, affords a significant potential advantage in the efficient delivery of sophisticated engineering services. In addition to hosting the world's largest population of computer specialists, the United States has long led the rest of the world in per capita consumption of personal comput- ers, workstations, and software. Currently there are more supercomputers in operation in the United States than in any other country. Furthermore, the United States enjoys a considerable advantage over its competitors in the development and application of expert systems. It is estimated that in 1989 alone, 4,400 expert systems were installed in the United States. In addition, linking these vast hardware and software resources is the world's most extensive, technologically advanced, competitively priced telecommunica- tions system, which includes high-performance networks such as INTER- NET (U.S. Bureau of the Census, 1988; U.S. Department of Commerce, 1989a). This advantage may be partially offset, however, by the relatively easy exportability of software production capabilities to low-wage countries with an underutilized engineering work force. The limited scope and weak enforcement of current international intellectual property laws also make it relatively easy for unscrupulous parties abroad to steal certain types of information technology outright. The Nation's Pool of Technical Talent The size and diversity of the nation's pool of technical talent are unmatched by any of the U.S. trading partners. U.S.-based corporations are
60 NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY able to draw on a science and engineering "melting pot" that has been enriched by the infusion of a wide variety of cultures, intellectual traditions, and technical practices. The contributions of successive waves of technical- ly trained immigrants from Europe, Asia, and other parts of the world to U.S. science and engineering are everywhere apparent. Naturalized citizens figure prominently among the ranks of U.S. Nobel Laureates, the National Academies of Sciences and Engineering, and other honorary scientific and technical societies. As of the early 1980s, more than one-sixth of the U.S. engineering work force was foreign-born as was nearly one-half of the U.S. engineering faculty under the age of 36 (National Research Council, 1988~. Indeed, there are economic, social, and political costs associated with high levels of ethnic diversity in a single nation. Racial, linguistic, cultural, and religious differences often compound socioeconomic divisions in the United States, making the politics of education, employment, and resource allocation more contentious than they might be in an ethnically more homo- geneous society. Despite these liabilities, however, the committee views the ethnic pluralism of the United States as a major source of strength for the U.S. technological enterprise, as well as for the U.S. political and economic systems. The Cultivation of Individual Creativity and Initiative Despite its many failings, the U.S. educational system and the politi- cal values that undergird it cultivate individual creativity and individu- al initiative to an extent far greater than those of other countries. Although the average math and science scores of American high school stu- dents remain well below those of their counterparts in Western Europe and Asia, the best U.S. high school students continue to win international sci- ence and math competitions (Educational Testing Service, 1989~. Similarly, the best products of U.S. secondary and higher education in technical disci- plines are considered by U.S. competitors to be a determining factor in U.S. leadership in technologies demanding a particularly high degree of individu- al creativity, such as in the area of applications software.4 Building on National Technical Assets Through Globalization It is essential to recognize that the very areas of relative national strength for the U.S. technical enterprise have become increasingly dependent on the influx of foreign talent, technology, capital, products, and competition for their continued vitality and dynamism in recent decades. Examples are the heavy dependence of U.S. university-based research and technical education on foreign-born citizens, and the role that intense foreign competition in the auto industry has played in renewing the technological dynamism of U.S.
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 61 automakers. At the same time, as the preceding discussion suggests, the increasing technological and economic interdependence of the U.S. econo- my has made it increasingly difficult for the United States to capture exclu- sively the technical and commercial returns that flow from particular nation- al technological endowments or strengths. Clearly the United States is nei- ther the first nor the only industrialized nation to face the challenge of rising global technological interdependence. Nonetheless, meeting this challenge is made all the more onerous for the United States by the relative decline in the ability of U.S. citizens to capitalize on their own nation's great techno- logical strengths. U.S. COMPARATIVE WEAKNESSES The intensification of global competition has underlined a number of serious weaknesses in the U.S. technical and commercial enterprise weak- nesses that generally have much more to do with the management, cultiva- tion, and organization of the nation's human and technological resources than with their relative quality or abundance. Among the most important of these liabilities are the uneven quality and limited adaptability of the U.S. work force; the underdeveloped relationship between U.S. industry and U.S. universities; chronic underinvestment in public infrastructure and industrial plant; and the relatively limited aptitude or willingness of U.S. companies (i.e., their managerial and technical leadership) to engage in cross-function al, interfere, or international learning across the full spectrum of technical activities. Failures of the Educational System There are serious problems with the supply, training, and adaptabili- ty of the U.S. work force that are in large part due to failures of the nation's educational system. Most important, public primary and sec- ondary education in the United States is failing to prepare a technologi- cally literate citizenry. Although the best students graduating from U.S. public educational institutions can be considered world class, the share of U.S. students exiting school with substandard educations appears to be sig- nificantly greater than in other nations such as Japan. The failure of U.S. primary and secondary education to train labor force entrants in basic skills is a powerful factor in the disappointing performance of U.S. manufacturing industry in adopting new technologies. Denied a sufficiently literate and numerate general work force, the nation's engineers and scientists are less productive than they could be. Moreover, the uneven quality of U.S. public education erodes the interest and enthusiasm of many superior students who might otherwise have chosen careers in engineering or science.
62 NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY Second, the prevailing organizational structure of U.S. manufactur- ing firms and its associated methods of work force organization appear to have impeded the development of a more highly skilled and versatile general work force in many industries. They appear also to have raised institutional barriers to closer collaboration among technical functions within a firm and between engineers and workers on the shop floor. The early development and widespread application of continuous process, mass-production technologies for manufacturing have been hallmarks of U.S. industry since the late nineteenth century. Mass production demanded a high degree of functional specialization of engineering and managerial tasks and a reorganization of the work process into a series of basically unskilled, repetitive activities in service of production equipment that was highly capital-intensive and specialized. Mainly because of the large size and relative homogeneity of the U.S. market, a much greater share of U.S. manufacturers adopted mass production technology and its organizational complement than did their counterparts abroad. As a result, U.S. manufac- turing industries have tended to institutionalize the separation of brain work from manual work to a greater extent than their European or Asian counter- parts. This institutional and organizational legacy, however, has put many sec- tors of U.S. manufacturing at a relative disadvantage to their foreign com- petitors in industrywide efforts to develop new work force management techniques demanded by innovations in product and process technologies of the past few decades. Hence, many U.S. manufacturers may not be as effec- tive as their Japanese and European competitors at exploiting fully the potential skills and knowledge of shop floor workers and fostering commu- nication and cooperation among all segments of a firm's technical and non- technical work force (Cyert and Mowery, 1987; Piore and Sabel, 1984; Stevens, 19861. Finally, U.S. demand for M.S. and Ph.D. engineers promises to con" tinue to outstrip the growth of indigenous supply during the coming decades, thereby increasing U.S. dependence on foreign sources of advanced engineering talent at a time when competition for such talent is intensifying. The share of students graduating from U.S. engineering Ph.D. programs holding permanent or temporary visas has grown dramati- cally since 1970, accounting for more than 50 percent of the total through- out the 1980s (Figure 1.121. Although the precise reasons for the decline in the share accounted for by U.S. citizens are not known, a number of factors are widely believed to be responsible. These include the financial penalty to the graduate student, the perception that university engineering research is sufficiently out of touch with industry to devalue an advanced degree in the eyes of industry, and the lack of faculty encouragement to potential graduate students to pursue advanced study.5
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES Native-born U.S. Citizens / 63 Native-Born U.S. Citizens 81.1:, God:,: \ Non-U.S. / Citizens 4.2% Non-U.S. Citizens 5.2% .' t1 E: C tizens~ ~/ Naturalized 1972 1982 FIGURE 3.6 Composition of the U.S. science and engineering work force, by citizenship: 1972 and 1982. SOURCE: National Science Foundation (1986, p. 40). Fortunately for the United States, foreign-born talent has bridged the gap between domestic supply and demand of advanced-degree engineers in recent years. As Figure 3.6 demonstrates, foreign-born engineers as a share of the total U.S. engineering work force more than doubled between 1972 and 1982. Moreover, as of 1982, the level of educational attainment of for- eign-born engineers employed in the United States was significantly greater than that for U.S. native-born engineers (Figure 3.71. However, if non-U.S. demand for engineering talent continues to expand and more industrializing countries follow the path of South Korea and step up their efforts to repatriate U.S.-trained engineers, it may become increas- ingly difficult for the United States to continue to attract the foreign talent it heeds. In this context, it is also worth noting that U.S., Japanese, and other multinational corporations with subsidiaries in the newly industrialized and more advanced developing countries are currently competing for the same pool of foreign technical talent that U.S.-based firms and universities are trying to attract. The University-Industry Mismatch U.S. university engineering research and technical education are not sufficiently in touch with the needs of American industry.6 Fault for this mismatch must be equally apportioned between industry and universities for not working more effectively with each other to improve engineering curric- ula and to reorient the research agenda of university-based engineering departments more toward the concerns of the nation's commercial engineer- ing enterprise. The heavy reliance of the U.S. university engineering research on public money, which has been channeled predominantly toward
64 NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY B.S. - \ Other 4% - - M.S.~ M.S. 25% \ 29% / Ph.D. \ / 16% \ Native-born U.S. Citizens Other B.S. \ ~~ 4% 49% ' ~ /Ph.D. _~/ 18% Naturalized U.S. Citizens B.S. 38% / \ M.S. \ 29% it\ \ \: Other '''' - - - 1 1% \ ~Ph.D. 32% Non-U.S. Citizens FIGURE 3.7 Educational attainment of U.S. scientists and engineers, by origin of citizenship status: 1982. SOURCE: National Science Foundation (1986, p. 40). defense-related research since the Second World War, has also impeded greater university-industry research collaboration in a number of nonde- fense, commercially significant sectors.7 In recent years, federal budget constraints have forced U.S. universities to look to private sources for a larger share of their rapidly expanding research budgets. This has encouraged engineering and science departments to cultivate closer working relationships with industry. Recent creative ini- tiatives sponsored by a number of state and federal agencies, such as Pennsylvania's Ben Franklin Partnership Program and NSF's Engineering Research Centers, have also helped foster greater industry-university coop- eration in engineering research (National Academy of Engineering, 1989; National Governors' Association, 1988; National Research Council, 1987, 1990; Pennsylvania Department of Commerce, 19881. Despite significant progress during the past five years, however, much remains to be done to exploit the full potential of university-industry partnerships in both research and technical education. The Eroding Economic Infrastructure The chronically low rate of investment in the nation's economic and industrial infrastructure has undermined the productive potential of the U.S. technical enterprise and eroded the nation's industrial base.8
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 65 Chronically low national savings and investment rates have delayed the retraining of the U.S. work force, the modernization of U.S. industry's capi- tal plant, and the replacement or repair of the nation's vital "social capital," that is, transportation, energy, and education infrastructures. Since the mid- 1970s, U.S. real gross domestic investment as a percentage of GNP has been the lowest of the six major industrialized countries shown in Figure 3.8.9 Moreover, while U.S. fixed investment in machinery and equipment as a percentage of GNP has grown slightly during the 1980s and remains on a par with its major West European competitors, at 8-9 percent it is still less than half that of Japan (Figure 3.9~. The causes of this running-down of the human and physical foundations of the nation's technical enterprise are complex and cannot be treated ade- quately within the context of this study.~° The nation's low savings rate and its comparatively high cost of capital, together with the inability of U.S. cor- porate managers to combine effective short implementation cycles with long planning horizons, are among the most frequently invoked explanations. Yet, in a sense, these factors are only metaphors for a range of long-standing, deeply embedded institutional, cultural, and political impediments to invest- ment in the foundations of wealth-generating and productivity-enhancing activities. Without a sustained effort to expand long-term investment in public infrastructure, plant modernization, and work force retraining, the 35 30 25 10 Percent United States Japan _ National Investment West Germany France United Kingdom Canada ~ Private Investment FIGURE 3.8 Gross fixed investment as a percentage of GNP, by selected countries: Average 1975-1987. SOURCE: Organization for Economic Cooperation and Development (1989).
66 25 20 15 10 5 o NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY Percent 1976-80 1981-85 1986 1987 1988. _ United States ~3 Japan HI France ~ United Kingdom HI West Germany FIGURE 3.9 Fixed investment in machinery and equipment as a percentage of GNP/GDP, by selected countries: 197~1988. *January to June. **Figures for Japan exclude public invest- ment. SOURCE: International Monetary Fund (1989, table 17). United States will find it increasingly difficult to leverage its vast technical capabilities for national economic growth and competitiveness. The "Not-Invented-Here" Syndrome The "not-invented-here" syndrome continues to inhibit the learning potential of many U.S.-based industries and thereby undercuts the nation's ability to assimilate and diffuse new technologies and engineer- ing practices in a timely manner. This weakness manifests itself in a vari- ety of "underdeveloped" or "lopsided" relationships, including the interac- tion of technical and related functions within an individual firm (the "mass production" legacy) and the links between industry and university engineer- ing departments. It is apparent also in relations between U.S. firms and their domestic supplier base and between U.S. companies and their foreign counterparts. Intra- and interfirm technical relationships are underdeveloped in the United States. Intense global competition and the shortening of prod- uct cycles have underlined the growing importance of combining the bene- fits of competition with the technological cross-fertilization, economies of innovation, and enhanced organizational learning that can result from coop- eration among material and component suppliers, equipment vendors, and
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 67 system integrators across a range of industries. Whereas private and public actors in Japan appear to have struck a competitive balance between the cre- ative destruction of intense competition and mutually advantageous intra- industry technical collaboration, many of their counterparts in U.S. industry and government continue to take the benefits of technical collaboration and cross-company organizational learning for granted. 11 The experience of the U.S. semiconductor industry illustrates pointedly how the lack of stable, long-term relationships between suppliers and sys- tem integrators within an industry can contribute significantly to a general erosion of the technological competitiveness of activities both upstream and downstream in an industry's value-added chain (see industry profile in Appendix A). Similarly, the segregation and often faulty quality of communication between various technical, managerial, marketing, and other functions in films continues to deny many U.S. companies the economies of functional integration and cross-functional learning so critical to rapid development and commercialization of innovations (Gomory, 19891. Much of U.S. industry remains unreceptive to, ignorant of, or inca- pable of exploiting foreign technical advances and foreign engineering and management practices. It is commonly assumed that U.S. trans- national corporations are sufficiently attuned to global markets to track tech- nological developments in other countries that might affect the competitive- ness of firms in their industries. Yet the experiences of several large U.S. corporations illustrate that knowledge of foreign technical capabilities is not always accompanied by the wisdom or ability to act on that knowledge. For example, the U.S. materials industry's failure to appreciate the significance of overseas advances in wafer technology during the early 1980s, despite warnings by some of its U.S. customers, soon cost it world leadership in that technology and has ultimately contributed to a rapidly growing dependence of U.S. semiconductor manufacturers on a very limited number of foreign suppliers of wafer technology and product. Even when the tracking of global technology and know-how is per- formed well by U.S. multinational corporations, they frequently fail to transfer the acquired technology, engineering practices, or managerial tech- niques to their own plants, supplier base, or downstream customers in the United States (Mansfield, 19881. NOTES Some industry experts argue that in many sectors, such as microelectronics, Japanese consumers are more demanding of quality, performance, design, and service than American. In 1987 the pool of capital managed by U.S. venture capital enterprises totaled $29 bil- lion, eight times the amount available in 1978. This large venture capital reservoir
68 NATIONAL INTERESTS IN AN AGE OF GLOBAL TECHNOLOGY played a critical role in the phenomenal growth in a number of small high-tech busi- nesses during the 1980s. From 1981 to 1986 alone, the United States experienced a net gain of approximately 30,000 high-tech firms and a corresponding jump in the small high-tech business work force from around 89,000 to 158,000 employees. See National Science Board (1989, pp. 141-145, 363-370). 3. The extremely high mobility of the U.S. technical work force may be a "mixed bless- ing," to the extent that it discourages U.S. employers from investing in the continuing education and training of their employees. See National Academy of Engineering (1988). 4. There is some debate whether a trade-off exists between creativity and discipline, whether the U.S. educational system tends to cultivate creativity at the expense of self- discipline, good work habits, and attention to the details of execution, which may be as important for competitiveness as originality. 5. It is noteworthy that federal support for graduate fellowships began to decline in the early 1970s, coinciding with the decline in U.S.-born enrollments in engineering doc- toral programs. Indeed, in comparison with university-industry relationships in other countries, U.S. universities enjoy relatively close ties with American industry. However, given the fact that U.S. universities play a much more central role in the U.S. total research enterprise than their counterparts do in Asia or Europe, it is that much more critical to the United States that its universities and industry work closely together. 7. U.S. universities frequently accuse U.S. industry of assuming a delinquent "parish- ioner" attitude toward university research financial contributions with little, if any, human capital support or follow-up. At the same time, university-based researchers rebut arguments regarding the industrial relevance of their work by pointing to the growing interest of foreign corporations in areas of U.S. university-based research that have been neglected by U.S. companies; for example, civil engineering and construc- tion research. U.S. industry, on the other hand, decries the academic research community's general disdain for industry-specific research problems. Moreover, by their own admission, U.S. corporations rely much more heavily on gaining access to university research capabilities through the hiring of faculty members as consultants and graduate students as engineers than their foreign counterparts. Moreover, since these indirect "human" transactions tend not to appear on university balance sheets, other more direct forms of support for university research those most often practiced by foreign companies and governments, such as financial, material, and institutional support may overstate the disparity of U.S. and foreign corporate interest in U.S. university research. 8. In a recent article in the New England Economic Review, Munnel (1990) argues that the abrupt drop in productivity growth in all the OECD countries after 1975, despite a con- tinuing high level of R&D investment, could be attributed to the dramatic fall off in public infrastructure investment beginning in the mid-1970s. This suggests that public infrastructure is as important as the knowledge stock in stimulating productivity growth. 9. Available comparative data on investment rates and the cost of capital in different countries do not account for significant differences in accounting procedures among countries, and are therefore believed to overstate international differences. Recent studies have argued that national variations in the way capital is depreciated and the categorization of government expenditure account for at least part of the wide gap between U.S. and Japanese savings and investment rates. See, for example, Hayashi (1989); McCauley and Zimmer (1989).
U.S. TECHNICAL ENTERPRISE: STRENGTHS AND WEAKNESSES 69 10. The National Academy of Engineering Committee on Time Horizons and Technology Investments has explored several important aspects of this topic. The committee's find- ings are expected to be published in the spring of 1991. In his most recent work, Michael Porter (1990) offers a valuable warning against the anticompetitive, or collusive, potential of corporate alliances and consortia, and pre- sents a strong case for ensuring that competition is not compromised by such initia- tives. For all their success at combining competition with cooperation, the Japanese have been repeatedly criticized for the excessively or "collusively" tight linkages between Japanese firms within certain industries that effectively prohibit foreign companies from participating in all-Japanese value-added chains. See, for example, Prestowitz (1988). REFERENCES Cyert, Richard M., and David C. Mowery, eds. 1987. Technology and Employment: Innovation and Growth in the U.S. Economy. Washington, D.C.: National Academy Press. Educational Testing Service. 1989. A world of differences: An international assessment of mathematics and science. Report No. 19-CAEP-01. Princeton, N.J.: Educational Testing Service. Gomory, Ralph. 1989. From the 'Ladder of Science' to the product development cycle. Harvard Business Review (Nov-Dec):415-421. Hayashi, Fumio. 1989. Is Japan's- saving rate high? Federal Reserve Bank of Minneapolis Quarterly Review (13)2: 3-9. International Monetary Fund. 1989. World Economic Outlook, Washington, D.C.: IMP. Mansfield, Edwin. 1988. The speed and cost of industrial innovation in Japan and the United States: External vs. internal technology. Management Science (34)10: 1157-1168. McCauley, Robert N., and Steven Zimmer. 1989. Explaining international differences in the cost of capital. Federal Reserve Bank of New York Quarterly Review (Summer):7-28. Munnell, Alicia H. 1990. Why has productivity growth declined? Productivity and public investment. New England Economic Review. (Jan-Feb):3-22. National Academy of Engineering. 1988. Focus on the Future: A National Action Plan for Career-Long Education for Engineers. Washington, D.C.: National Academy Press. National Academy of Engineering. 1989. Assessment of the National Science Foundation's Engineering Research Centers Program. Prepared for the National Science Foundation. Washington, D.C.: National Academy of Engineering. National Governors' Association. 1988. State-Supported SBIR Programs and Related State Technology Programs. Center for Policy Research and Analysis. Prepared by Marianne K. Clarke for U.S. Small Business Administration, Washington, D.C. February. National Research Council. 1987. The ERCs: Leaders in Change. Commission on Engineering and Technical Systems. Washington, D.C.: National Academy Press. National Research Council. 1988. Foreign and Foreign-Born Engineers in the United States. Office of Scientific and Engineering Personnel. Washington, D.C.: National Academy Press. National Research Council. 1990. Ohio's Thomas Edison Centers: A 1990 Review. Commission on Engineering and Technical Systems. Washington, D.C.: National Academy Press. National Science Board. 1989. Science and Technology Indicators 1989. Washington, D.C.: U.S. Government Printing Office. National Science Foundation. 1988. International Science and Technology Update: 1988.
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