National Policies For Developing High Technology Industries

International Comparisons

Francis W. Rushing, Francis W. Rushing

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429712425
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Science & Technology Public Policy
• Index: Politics & International Relations

This book discusses the informatics industry in Brazil, France, India, Japan, Korea, Mexico, Taiwan, and the U.S., as models to examine the role of governments in promoting advanced technology. It considers the long-range policy analysis and evaluation necessary for fostering competitive industry.

1
Introduction: Past Successes, Present Directions, and Future Issues

Carole Ganz Brown
National Science Foundation
Francis W. Rushing
Georgia State University and SRI International

Prologue

Over the past three decades, there has been a growing interest in the nature and scope of government policies to stimulate growth and development through more rapid technological advances and expansion of productive capabilities for both domestic and foreign markets. An early major study in this arena—Technology, Economic Growth, and Public Policy, ¹ written by R. R. Nelson, M. J. Peck, and E. D. Kalachek—focused on U.S. governmental policies to influence technological advance and economic growth; the book was published about two decades ago to address the concerns of public policy makers and scholars, about these issues. More recently, the policies and programs of the United States and other major industrial nations supporting technological advancement in different industries have been studied by these scholars as well as others. Roy Rothwell and Walter Zegveld provide an excellent critical review of this literature in Reindustrialization and Technology.²

Today, interest in government policies supporting technological advance is worldwide and an important part of the current discussion is concerned with "high-technology" industries. In countries throughout the world, technological change in these industries is seen as a driving force in economic development and growth. Government policy is prescribed to explicitly facilitate the progress of these industries.

The stakes are no longer purely economic and domestic and certainly not small. Debate over the viability and desirability of a national industrial policy is often politically and socially charged. High-technology industries are seen as providing the cutting edge for competitiveness and trade performance in the international arena. These industries require global markets to recover costs and create efficiencies, while manufacturing production is increasingly transnational. Yet economic and industrial relationships that are global in character sometimes conflict with national policies which seek to diminish dependency on other countries.

The Project

Responding to the changing environment for developing technology policies, the U.S. Section of the Brazil-U.S. Trade Council, as part of its overall efforts to advance U.S.-Brazil economic and industrial relations, initiated a project to study the roles government can effectively play in furthering high-technology industries. The National Science Foundation's Division of International Programs, which has a long-standing interest in international comparisons of science and technology policies, was a co-sponsor. The project had two major coaponents: (1) the commissioning of eight case studies to serve as the basis for drawing international comparisons and (2) the holding of a two-day symposium for U.S. and foreign government, industry, and academic representatives to discuss the findings of the case studies and to draw international con^arisons.

This volume includes a general overview framework for analysis of the issues, the findings of the case studies, and the major ideas presented at the symposium. The objective of this publication is to contribute to the ongoing debate about the roles governments have played and can play in designing and implementing high technology policies and provide some assessment of the various levels of "success" various strategies have achieved. The authors examine developments in a single high-technology industry—informatics—and focus specifically on the government policies of eight diverse countries—Brazil, France, India, Japan, Korea, Mexico, Taiwan, and the United States. For the purpose of these studies, the informatics industry was interpreted to mean semiconductors, integrated circuits, and computers, including mainframes, minis, and micros, and word processors, and was chosen not only as an illustration but because it merits a great deal of attention in its own right.

As a point of departure for the inquiries, three questions were posed: What do economic and technological indicators show about the development of the informatics industry in these countries? How have government policies been designed to further the informatics industry? What types of government programs and policies have been successful, and what types have been failures, and why? Not unexpectedly, countries varied widely with respect to the availability of data, the scope and clarity of their policies, and the depth of experience and understanding of the factors influencing policy effectiveness. The diversity of focus and approach of the papers in this volume reflect these differences. The comparisons and conclusions of the overview paper illuminate many of the complexities underlying current worldwide debate over these government policies.

The symposium, National Policies for Developing High Technology Industries: International Comparisons was held 12-13 September 1985 at SRI International in Washington, D.C. (The agenda and participants are included in this volume in Appendixes A and B.) From the presentations and discussions at the symposium some of the major ideas have been compiled. They are presented here not as summaries of the findings of the individual papers but rather as reflections on all the cases and what, in aggregate, has been learned from this project.

The major ideas discussed at the symposium can he briefly summarized as follows:

1. A strong case was made at the symposium that government policies have played a critical role in the development of national Informatics industries both in success stories (Japan and Taiwan), and in the less successful case of France, which failed to establish a strong national industry. In all the cases, promotion of the industry by the government was by design and supported with resources. Important differences of opinion emerged about whether the United States was an exception to this generalization. What was clear, however, was that with the exception of Japan, national policies had been shaped by the dual objectives of promoting national security and industrial development.

2. In contrasting the country studies, it became clear that the policies and institutions used to successfully advance the development of high-technology industries were extremely diverse. There was agreement, however, that a strong national informatics industry, whether, for example, developed strictly indigenously or with foreign technology, requires a cadre of science and engineering manpower. National policies must take into consideration how this infrastructure requirement of high-technology industries is to be met.

3. Competition, internal or with foreign firms, was also seen as critical to the development of strong high-technology industries. Competition was seen as promoting both technological advancement and production efficiency. Therefore, government policies need to be designed to take advantage of these benefits of competition.

4. Several important differences and similarities among national policies were then identified. Some of the government industrial development strategies were considered "forward building." That is, these policies had focused on existing capabilities in, say, consumer electronics, and had built forward into semiconductors, and subsequently, the range of informatics products. The Japanese government efforts were one example. Another strategy, "backward building," began with incentives for computer production and worked backward through semiconductor suppliers toward producers of advanced integrated circuit technology. Brazil and India, some participants thought, were emerging as examples of this approach. A third strategy, uniquely French, was the efforts of that government to establish national champion companies for computers and for semiconductors.

5. Protective policies of large domestic markets have been successful for some countries, notably Japan. But a focus on export markets also contributed to the development potential of that country. It was suggested that achieving appropriate scale of production and its associated efficiencies are needed to penetrate international markets. (This was the intent of the Japanese policies.) Others thought product quality was an equally important consideration. In all cases protection alone would not have been sufficient to meet international competitive standards.

6. There was general agreement that one proven strategy for public policy was to target an international market niche and develop policies to capture it. It was pointed out that countries—Japan, Taiwan, India—differing widely in size and capabilities have had success with this strategy.

7. Import barriers to foreign technology have always been controversial aspects of national policies to advance industrial development. Symposium participants pointed out that this is not likely to change in today's world. The independence from technological world leaders sought by some countries had meant high opportunity costs in terms of the level and rate of technical advance achieved by these countries. Experience shows that competitiveness in world markets suffers without acquisition of some foreign technology to strengthen national industries at critical stages in their development and to achieve manpower training and production efficiency advantages.

8. What is critical to the formulation of effective national policies is analysis of the benefits and costs of inq>ort barriers (and other strategies) in a broader perspective than, say, hard currency saved from the purchase of foreign technology or domestic jobs created. It was recommended that policy analysis and evaluation should be broad-gauged enough to consider such factors as reduced competitiveness in world markets and lost efficiencies in all domestic industries.

9. Clearly, however, "rational" policy analysis has not always ruled. For example, national pride, as an important non-quantifiable variable, can enter into the process of developing government policies. Here, even when economic costs exceed economic benefits, potentially harmful policies may be implemented.

10. Strategies to develop a strong national science and engineering workforce, incentives to encourage domestic competition, and use of broad-gauged analysis to develop national policies surfaced as some common elements of effective government action to advance national capabilities in high-technology industries.

11. Symposium participants further observed that more traditional national policies with reliance on government subsidization of domestic industry and market reserved to these companies were less likely to work in the future. Past national success stories, such as that of Japan, relied heavily on the willingness of the United States to leave major markets open to foreign competitors while accepting restrictions imposed by other nations on U.S. participation in their domestic markets. This is less likely to happen in the future especially in light of the increasing tendency of U.S. high-technology companies to request action against foreign firms when "unfair" practices are sighted. It was also noted that U.S. willingness to consider trade restraints to offset foreign government industrial subsidies and other non-tariff barriers discussed under GATT, has already destabilized the world trading order. Questions were already being raised in several countries about the Viability of subsidized or protected markets as government strategies in view of more aggressive U.S. economic behavior.

12. Participants predicted increasing conflict between countries in the future if trade barriers, both tariff and nontariff, are not controlled or modified. It was pointed out that some countries had already changed their approaches. Japan is opening up its markets to some extent. India and Mexico are liberalizing constrictive technology import policies. On the other hand, Brazil has become more restrictive.

13. The discussants agreed that the demonstrated benefits to all parties from transfers of technology and the growing cost-sharing advantages of international joint-ventures are also likely to undermine national efforts which rely on direct subsidy and market reserve policies.

Finally, the symposium participants discussed the importance of each nation's attempting to understand the circumstances and objectives of the national policies of other nations. All trading parties should seek ways of reducing areas of conflict by proposing alternative paths to the same objectives, while exhibiting patience as the domestic environment gradually changes or alternative policies are being designed and implemented. Each country, however, will have to adhere to the premise that international economic interaction can work toward the mutual benefit of all parties. Confrontation, they said, and direct action by countries to open up the markets of other nations could make political acceptance of change in national policies more difficult, and could, in the longer-run, raise the level of conflict and thereby threaten loss of, or failure to capture, the economic benefits each party seeks. Efforts toward cooperation seem a rational course for each nation to pursue its own interests and those of the world economy. The conference ended on this theme.

Epilogue

The important policy issues raised by the papers in this volume and discussed at the symposium appear to be major forces that are going to be around for a long time. Observations made at other recent policy forums tend to confirm that a protracted period of tensions—between technological self-sufficiency and interdependence, between nationalism and global development of technology, between strategies seeking political acceptance and strategies emphasizing economic realities—can be expected.

A February 1986 U.S. National Academy of Engineering symposium—World Technologies and National Sovereignty— emphasized the conflicts resulting from today's high level of international technological interdependence and the diverse political concerns of nations trading in world markets.

Arranged by the Center for Science and Technology Policy of New York University, a two-day international conference-—Technical Cooperation and International Competitiveness-was held near Pisa, Italy on April 2-4, 1986 to discuss the boundaries of international technical cooperation under today's conditions of worldwide competition. Most recently, the 1986 National Science Foundation Conference on Industrial Science and Technological Innovation took as a major theme the tensions between cooperation and competition in the global economy.

Current trends in the United States and other industrial countries also portend a future in which advancing national policies that are effective and not conflictive will continue to be difficult. For instance, in the United States heated debate is going on about the problems concerning U.S. collaboration in high-technology with other countries. Harvard University's Robert Reich recently observed that Boeing is giving away its aerospace technology in a proposed joint venture with Japan; and he advised that these sorts of joint ventures should be barred.³

In April of 1986, the Reagan administration announced plans to intensify pressure on U.S. trading partners to protect American copyrights, patents and trademarks. Among other things, the special tariff preferences now given to developing countries would be limited, in cases where these governments do not take steps to safeguard U.S. intellectual property.

There are also signs that U.S. corporations and those of Japan and Europe may be rethinking their global corporate strategy. Kenichi Ohmae, the managing director of McKinsy & Company'8 Tokyo office, recently concluded that multinational corporations are increasingly retreating from developing regions in response to barriers such as tariffs, local content laws and ownership requirements on foreign companies. The new global enterprise will be involved in fewer countries, he concludes.⁴

Other forces are emerging which have the potential to positively affect the future of national policies in technology and economics. Some of the major ones are:

a) New foundations will emerge for high-technology leadership primarily through the important changes now going on in how to view competitiveness. Traditionally, competitiveness was seen to depend primarily on effective marketing strategies. But this has been changing dramatically as a result of recent major tech...