globalization of R&D
... a small and reversible production line enhancement, to high with the irreversible implementation of an enterprisewide information system. In terms of competitiveness, just as a local innovation can remove efficiencysapping bottlenecks from a wide range of related business processes, so can the same business processes amplify any negative effects. Detailed maps of the business processes related to an investment have been recorded both before and after implementation to allow identification of where process versus technology benefits actually arises. These observations are used to construct a framework for investment appraisal that links local enhancements to process performance improvements experienced by the customer. In addition to providing a benchmark for future competitive enhancements of the technology/process, the standardized maps may also help the transfer of technologies across, and between, organizations Innovation competitive advantage Innovation is the means by which enterprises create wealth. Enterprises that learn how to integrate innovation into strategy, and strategy into the process of innovation, will gain a competitive advantage and optimize the enterprise's creation of wealth. Innovation in marketing is also essential. Therefore business really has only one basic function -- innovation. Innovation is the basis of all competitive advantage. Innovation is the means by which enterprises anticipate and fill customer needs. Innovation is the way that enterprises utilize technology. Innovation endows resources with a new capacity to create wealth or creates a new resource. Innovation results from the enterprise's way of implementation of new ideas, of turning the creative concepts of its members into realities. It can cause change or it can exploit change. Systematic innovation which exploits change is generally the most effective. Strategic innovation is the purposeful and organized search for changes, and the systematic analysis of the opportunities and threats such changes might offer for the creation of wealth. Firms have motivated globalization of R&D Lower costs Fewer regulatory barriers Access to markets and technology Business location Public attitudes Tax relief Globalization R&D Major Benefits to the United States It has four main benefits to US Better Products in the United States More, Not Fewer, American Jobs U.S. Tax Revenues Shareholder Value The product cycle theory Raymoond Vernon’s theory of the international product life cycle explains trade from the perspective of the firm. Theory dates from the 1960s, a period when, owing to the size and prosperity of the American consumer market, a new consumer product was likely to begin life in the US. Net exporter Time New product Mature product Phase 1 Phase 2 Phase 3 Phase 4 Net importer Phase 1—all production in US, and export to many countries Phase 2—production stared in Europe, US exports to less-developed countries (LDCs) Phase 3—Europe exports to LDCs, US exports to displaced Phase 4—Europe exports to US Phase 5—LDCs exports to US Innovation may occur in the rich OECD countries, but his does not explain why production should. The factors required for a good vary through its life-time that is argued. Initially, as new goods are being developed and first sold, there is considerable uncertainty over both their production and marketability. This must be met by flexibility, which requires considerable inputs of skilled labor and proximity to the market in order to receive and respond to customer reactions. Since these are the same factors as stimulate innovation, there is a locational link between innovation and production: new goods will be produced and exported by the rich and large economies. As the product matures, its basic technology and functional specification become standardized (although peripheral product differentiation may still be rife), making flexibility less important. World demand grows, making large-scale production feasible, and production costs become significant—especially if, as is usual, other, similarly endowed, countries are able to imitate the innovation. These changes tend to shift comparative advantage away from innovating countries, which are typically high-cost locations, towards other relatively wealthy, capital-abundant, countries. Hence physical capital replaces human capital as the intensive factor, and the innovating country may well switch from exporting to importing the good. The final stage occurs when technology and specification become wholly standardized and universally known. Thus comparative advantage finally shifts to the low-wage, labor-abundant developing countries, which eventually become net exporters. Since the USA was, during the 1950s and 1960s, the archetypal innovator note that with international investment the whole of the cycle could take place under the auspices of a single firm. R&D activities in UK Table 1 The industrial structure of R&D in 1962-1963 (% of total) UK USA W.Germany Japan (1962) (1962) (1963) (1963) Aircraft 35.4 36.3 --- --- Vehicles and machinery 10.3 15.6 19.2 12.7 Electrical machinery and instruments 24 25.5 33.8 28 Chemicals 11.6 12.6 32.9 28.3 Metals 4.1 2.6 6.6 9.7 Sources: Freeman and Young (1965), quoted in Freeman (1979). The UK’s research and development effort is now proportionately well below that of many countries, but during the 1950s and 1960s, when her trade performance was already strongly in decline, Britain was second only to the USA. However, in a sense that was the very problem. The sectoral break down of UK research and development was almost identical to that of the USA, whereas her competitors, especially West Germany and Japan, have a completely different structure (Freeman, 1979). While the latter concentrated on ‘commercial’ sectors, by far the largest expenditure in the Anglo-Saxon countries was on aircraft, much of it military (see table 1). Hence Britain failed in certain sectors almost by default. The USA with its huge resources captured most of the advances, and reaped great economies of scale from its large domestic market. International R&D activities: Trade and Development There are two parts of world trade in a monopolistic competition model. It will be two-way trade within the manufacturing sector. This exchange of manufactures for manufactures is called intraindustry trade. The remainder of trade is an exchange of manufactures for food called interindustry trade. 1. Interindustry trade reflects comparative advantage. The pattern of interindustry trade is that Home, the capital-abundant country, is a net exporter of capital-intensive manufactures and a new importer of labor-intensive food. So comparative advantag...