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OCR for page 393
Detem~nants of
Innovative Activity
KEITH L. R. PAVING
Central to policies for promoting the contribution of technical
change to economic performance are the relative technological po-
sitions of various countries, the determinants of these positions, and
the effects of government policy.
In other chapters in this volume, Paul A. David, N. Bruce Hannay, and
Daniel I. Okimoto, though different in their style and approach, come to
some of the same important conclusions. First, each recognizes the diff~-
culty indeed the impossibility—of making statements about the sources,
determinants, and impact of technical change that are valid for all economic
sectors. Second, each stresses the importance of technological activities in
national economic performance, even if Hannay and Okimoto concentrate
on innovative leads and logs as important determinants of international com-
petitiveness, whereas David emphasizes the contribution of the diffusion of
innovations to national productive efficiency. Third, each recognizes that
both innovation and diffusion depend on having technological skills firmly
embedded within companies.
The three authors also show that further progress should and can be made
in beginning to answer three questions central to the development of policies
to promote the contribution of technical change to economic performance:
1. What are the relative technological positions of various countries, as
reflected in the level and composition of their innovative activities?
2. What are the determinants of the level and composition of those achv-
ities?
3. What are the effects of government policy on those innovative activities
and the effectiveness of their economic exploitation?
393
OCR for page 394
394
KETTH L. R. PAVIIT
RELATIVE TECHNOLOGICAL POSITIONS OF VARIOUS COUNTRIES
I have been both puzzled and alarmed at the apparent inconsistency of
analysis and commentary published in Western Europe, Japan, and the United
States on the relative technological levels of the three regions. The Economist
(1984), for example, published a 10-page analysis, entitled "How Europe
Has Failed: Europe's Technological Gap," in which it said Hat Western
Europe was falling behind both the United States and Japan in the devel-
opment and exploitation of advanced technology. More recently, reports
appearing in the Japanese press have pointed to inadequacies in Japanese
performance in advancing fundamental technologies (see, for example, Japan
Times, 19841. To complete a fully inconsistent picture, a cover story ap-
peanug in Business Week (1985), entitled "America's High-Tech Cnsis:
Why Silicon Valley Is Losing Its Edge," stressed the increasingly unfavor-
able U.S. trade balance in all categories of electronics products.
If space were not a constraint, it would be possible to spell out the empirical
and methodological weaknesses of these three reports and to suggest how
their conclusions might be reconciled. It would also be possible to speculate
about the degree to which they either consciously or unconsciously promote
special interests. Thus, The Economist has a very explicit ideological axe to
grind, arguing that-Western Europe's technological backwardness reflects
too much financial regulation, subsidy, and protection compared win the
greater flexibility, entry, and exit of the United States and (apparently) Japan.
On the other hand, the two other reports could be seen as special pleadings
for more subsidies, but precisely in the United States and Japan, which The
Economist claims behave otherwise.
I draw somewhat different conclusions from the almost simultaneous ap-
pearance and apparent inconsistency of the three reports. First, they reflect
an increasing public awareness in all three regions of the importance of
technology to industrial competitiveness, living standards, and jobs. Second,
they reflect the contemporary fact, shown quantitatively by Harvey Brooks
(in this volume), that there are now three regions of the world competing
with almost equal per capita technological resources along the world tech-
nological frontier. Under such conditions, the picture of relative technological
leads and lags across countries is bound to be a complicated one, with
considerable variations across sectors and across time.
This is another reason why the analyses of Hannay and Okimoto are so
valuable. They have made international comparisons at the sectoral and even
subsectoral levels. It is gratifying that they come to broadly similar conclu-
sions.
But we can and should be able to measure more precisely and systematically
the sectoral patterns of technological advantage in different countries and
regions. The pioneering work of die National Science Board (1983) and
OCR for page 395
DETERMINANTS OF I3JNOVATWE Ably
395
National Science Foundation has laid the foundation for more accurate com-
pansons in the future. At the Science Policy Research Unit of Sussex Uni-
versity, studies based on statistical data on R&D activities, patenting, He
diffusion of major innovation, and scientific publications and citations (Mar-
tin et al., 1984; Pavitt, 1984a, 1984b) have led us to conclusions that both
reinforce and extend those reached by Hannay and Okimoto:
There was significant stability in sectoral patterns of national techno-
logical advantage between the mid-1960s and late 1970s, which reflects He
cumulative nature of the development of technological skills.
2. In addition to electronics and aerospace, the United States has a relative
technological advantage, upstream and downstream of its abundant raw ma-
ter~al endowments, in agriculture and oil. (Such U.S. technological strength
in and around agriculture is consistent with the analysis by Ruttan, in this
volume.)
3. Japan is relatively strong technologically in motor vehicles, in addition
to electronics, and Here is also evidence of a significantly increasing Japanese
share of the world's published scientific papers and citations. On the over
hand, chemicals, in addition to aerospace, shows up as a sector of relative
technological weakness. We would certainly benefit from an analysis of this
sector by Okimoto.
4. Western Europe, on the other hand, is relatively strong in chemicals
and in production engineering and related capital goods, including robotics
and other aspects of electronics-related production. It is weak in consumer
and office electronics and in components. Tank of "Europess~rnism" or
"Eurosclerosis" must be based on this particular, rather than on any general,
technological wetness. It therefore reflects, if only implicitly, the expec-
tation that office and consumer electronics and related components will offer
greater market opportunities in the future than the sectors in which Western
Europe is relatively strong.
DETERMINANTS OF NATIONAL PATTERNS
OF TECHNOLOGICAL ACTIVITY
It is important for bow analysis and policy to improve not only our mea-
surement of the level and composition of innovative activities, but also our
understanding of He determinants of international differences. IN this context,
it is interesting to note Hat in discussing the nature and determinants of
lapan's relative technological strengths and weaknesses, Okimoto does not
mention the one determinant that would occur immediately to most econo-
m~sts, and the importance of which in inducing patterns of technical change
in agriculture has been underlined by Ruttan, namely, the relative price of
factor inputs.
OCR for page 396
396
KEITH L. R. PAV177.
Perhaps this is not surprising in a country that was installing and improving
state-of-the-art production technology in the 1960s, when wage levels were
well below those prevailing in North America and Western Europe. I have
argued elsewhere that, in modern manufacturing, technology is localized in
firms, differentiated in nature, and cumulative in development (Pavitt, 1984a).
As Atkinson and Stiglitz (1969) have pointed out, under such circumstances
technological choice in firms reflects not only relative factor costs, but also
skills accumulated through past technological activities, together with ex-
pectaiions about future technological and market developments. In comparing
U.S. and Japanese strengths and weaknesses in electronics, Okimoto rightly
stresses the importance of differences in the nature of both accumulated
technological skills and markets. He says less about factors likely to influence
the formation of technological expectations and, in particular, We nature and
quality of technological skills possessed by management. He also says little
about differences in the efficiency win which accumulating and f~rm-specific
skills are transferred into profitable investment opportunities. In this volume,
there are two models for such transformation: innovation planning in large
firms and the creation of new technology-based fins. I suggest that we also
need to learn a great deal, through systematic empirical analysis, about the
nature of the organizational and evaluation procedures in established Grins
that are most conducive to the exploitation of innovative opportunities, in
both primary and related-product markets (Pavitt, 1984c).
If we were successful in identifying such procedures, there would be a
further challenge to David and other economists studying technology dif-
fusion: how to analyze and explain not just the diffusion of specific inno-
vations but the diffusion of skills, strategies, and structures capable of
maintaining a continuing stream of successful innovations and imitations. I
would argue that He rates of diffusion of such characteristics are too slow
in market economies. Further evidence about them would be valuable for
corporate and public policy, as well as for theory.
Ebb~:CTS OF GOVERNMENT POLICIES
Space does not permit me to begin to discuss government policies for
technology and innovation. I shall instead restrict myself to some comments
on the way in which they are perceived in many analyses of technology and
international competitiveness. There is He suggestion slight in some of the
National Academy of Engineering studies summarized by [Iannay in his
chapter and much stronger in other chapters that governments in Western
Europe and Japan are either cleverer than the U. S. government in promoting
technical innovation, or more unscrupulous, or both. This is a natural ten-
dency in a county that, as Hannay points out, has seen a continuous decline
in its relative technological position. It happened in my own country, En-
OCR for page 397
DFTERMINAlITS OF INNOVATIVE AC~VEIY
397
gland, when, at the end of the nineteenth century, Germany began to overtake
us in ~ndusmal technology and competitiveness (see Landes, 1969:3281. A
related characteristic of such decline Is complaints that foreigners are stealing
discovenes, inventions, and innovations. This probably reflects an inability
or unwillingness to commit large and patient resources beyond (relatively
cheap) discoveries, inventions, and innovations in order to maintain a con-
tinuous technological lead.
In any event, Okimoto points out gently and firmly Mat the role and
effectiveness of We Japanese government in promoting innovation has not
been as great as many Westerners claim. In Western Europe, I would argue
similarly, governments are not more intelligent or unscrupulous in promoting
innovation than the U.S. government. After all, We percentage of industrial
R&D financed by government is higher in We United States Can in nearly
all other non-Co~nmunist counmes. Arguing over which county has We mote
in its eye, and which has We beam, is not a fruitful activity. Instead of
blaming the foreigner, We proper basis for policy should be humility and
introspection.
REFERENCES
Addison, A., and J. Stiglitz. 1969. A new view of technological change. Economic Journal 78:573-
578.
Business Week. 1985. Amenca's high-tech crisis: Why silicon valley is losing its edge. March 11:44
50.
Econo~rust. 1984. How Europe has failed: Europe's technology gap. November 2~30:99-110.
Japan Times. 1984. Report pushes basic research in science technology fields, December 19:3.
Insides, D. 1969. The Unwound Prometheus: Technological Change and Development in Western
Europe from 1750 to the Present. New York: Ca~nbndge University Press.
Martin, B., J. Wine, and R. Turner. 1984. The writing on the wall for British science. New Scientist,
1429 (November):25-29.
National Science Board. 1983. Science Indicators, 1982. Washington, D.C.: National Science
Foundation.
Pavitt, K. 1984a. Intemational Pattems of Technological Accumulation. To be published in Pro
seedings of the Prince Berd1 Symposium on Strategies in Global Competition.
Pavitt, K. 1984b. Technology in Westem Europe. To be published in R. Mayne, Western Europe.
London: Frederick MBller.
Pavitt, K. 1984c. Technology, Innovation and Strategic Management. Paper prepared for Workshop
in Strategic Management Research, Brussels, June 1984 (to be published in workshop proceedings).
OCR for page 398
Representative terms from entire chapter:
western europe
