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Senes on Technology and Social Priorities NATIONAL ACADEMY OF ENGINEERING T1 1 ecnnology and Global ~ it, Companies and Nations in the World Economy Bruce R. Guile and Harvey Brooks Editors NATIONAL ACADEMY PRESS Washington, D.C. 1987

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National Academy Press 2101 Constitution Avenue, NVV Washington, DC 20418 The National Academy of Engineenng was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, shanag with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineenng also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineenug. The president of the National Academy of Engineenng is responsible for the decision to publish an NAE manuscript through the National Academy Press. In reviewing publications that include papers signed by individuals, the president considers the competence, accuracy, objectivity, and balance of the work as a whole. An reaching his decision, the president is advised by such reviewers as he deems necessary on any aspect of the material treated in the papers. Publication of signed work signifies that it is judged a competent and useful contribution wormy of public consideration, but it does not imply endorsement of conclusions or rec- ommendations by the NAE. The interpretations and conclusions in such publications are those of the authors and do not purport to represent He views of the council, officers, or staff of the National Academy of Engineenng. Funds for the National Academy of Engineering's Symposium Senes on Technology and Social Prionties are provided by the Andrew W. Mellon Foundation, Carnegie Corporation of New York, and the Academy's Technological Leadership Program. The views expressed in this volume are those of the authors and are not presented as the views of the Mellon Fowldation, Camegie Corporation, or the National Academy of Engineenng. Library of Congress Cataloging Publication Data Technology and global industry. (Senes on technology and social priories) At head of title: National Academy of Engineenng. "Most of the material in this book was presented at a National Academy of Engineering symposium titled 'World Technologies and National Sovereignty' held on February 13 and 14,1986"-Pref. Includes index. 1. Technological innovations Economic aspect~ongresses. 2. Technology and state Congresses. I. Guile, Bruce R. II. Brooks, Harvey. m. National Academy of Engineering. IV. Senes. HC79.T4T428 1987 338'.06 87-7765 ISBN ~309-03736-0 Copyright @) 1987 by the blational Academy of Sciences No part of this book may be reproduced by any mechanical, photographic, or electronic process, or In the fonn of a phonographic recording, nor may it be stored in a retrieval system, transmitted, or otherwise copied for public or private use, without written permission from the publisher, except for the purposes of official use by the United States government. Printed in the United States of America Fan Paining, June l9g7 Second Painting, August 1989 Third Prong, Dumber 1990 Fourth Printing, July 1991 Ash Peg, June 1992 Sixd1 Pdnung, Mark 1993

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Preface and Acknowledgments Many of the strains in today's world lie in the conflict between a global economy that is more and more integrated and a political environment in which national sovereignty is still the dominant motivation. Production and delivery of goods and services is increasingly translational and will become more so as cornmunicadons and transportation capabilities increase and Heir costs continue to decline relative to other costs. Additionally, many new technologies require global markets to recover R&D and initial production costs. Nations are, however, still reluctant to depend on other nations for key manufacturing inputs. The concept of key technologies that each nation feels it must master inside its own boundaries in order to retain its political independence remains a driving force in international economic relations. Additionally, increasing international economic activity has brought Be technological activities of corporations and governments into closer re- lat~onships Han ever before. National independence is becoming more and more problematic in an interdependent world. A wide variety of economic, social, and industrial issues are brought forward by He confluence of new technologies, the high-level international interdependence, and He diverse concerns and activities of nations Lading in world markets. Modern communications and transportation permit wide dispersal and decentralization of design and production, whereas certain production processes seem to require collocation. How are these two opposing influences reconciled, and how do Hey vary by industry? What technology policies-by government or by industry allow He creation . . . adz

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id PREFACE AND ACTION' FDGMENTS of comparative advantage? Does He ability of a nation to handle Be adverse social impacts of increased trading in currently non~aded goods lie in Me integrity of its social programs or In its skis in ~ntemaiiona] negotiation? This volume addresses these questions and a variety of similar ones. The principal focus of this volume is on technologies deployed primarily by private firms for commercial purposes-technologies dial are altering We structure of He world economy arid the locator of venous types of productive activity and on the conflicts Hat arise among national states as a consequence of these shifts. Although the overview and eight chapters in He volume cover a broad range of issues, it is important to mention two issues at die confluence of technology arid sovereignty Hat are not dealt win in this volume. First, Here is little explicit treatment of tech- nologies that are inherently global in character, technologies such as sat- ellite commun~cabons, remote sensing from space, international commercial air travel, and worm oil trade win supertankers. Second, there is no discussion of national second concerns with trade or technology transfer between nations. It is our hope Hat the focus allowed by not dealing u id these two aspects of He global economy yields advantages greater Can the disadvantage of not including these obviously important issues. Most of He material In this book was presented at a National Academy of Engineering symposium tided "World Technologies and National Sov- ereignty" held on February 13 and 14, l9X6. On behalf of He Academy, ~ would like to Hank He advisory committee (listed on page 257) that designed He symposium, and He individuals who participated. ~ would like to offer special charms to Robert A. Frosch, John His, Cyril Tunis, Jesse H. Ausubel, Ronald S. Paul, Mane-Therese Flaherty, Helen B. Junz, and Pierre R. Aigra~n. Win regard to He preparation of the manu- scupt for publication, special Hanks are due to H. Dale I^ngford, the NAE's editor, and to Mar~one D. Pomeroy, administrative assistant In the NAE Program Office. H. GUYFORD STEVER Foreign Secretary National Academy of Eng~neenng

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Contents Overview . ~ e e ~ ~ e ~ ~ e ~ e ~ e ~ 0 ~ 1 Harvey Brooks ant] Bruce R. Guile Innovation and Industrial Evolution In Manufacturing Industries ..16 dames M. Utterback Revitalizing the Manufacture and Design of Mature Global Products .................................................... Alvin P. Lehnerd ............. 49 Capturing Value from Technological Innovation: Integration, S~ateg~c Partnenng, and Licensing Decisions 65 David ]. Teece International Industries: Fragmentation Versus Globalization Yves Doz The Impacts of Technology In the Services Sector James Brian Quinn Coping win Technological Change: U.S Problems and Prospects Raymond Vernon Does Technology Policy Matter? Henry Ergas ....96 119 160 191

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Vet! National and Corporate Technology Strategies in an Interdependent World Economy O Lewis M. Branscornb Symposium Advisor, Committee 0 Contributors O - - - - - - ~ - - - e ~ - - 0 - ~ - - - e - a ~ e Index . . CONTEN7S 246 257 259 261

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1ccnno ogy and (;loba1 Industry

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