Publisher Council on Foreign Relations Press
Release Date January 1998
The United States is a country of innovators. Its higher education system and entrepreneurs are respected worldwide for their contribution to research and development. Yet in many domains, the United States is no longer technologically well ahead of its competitors. American industries are beginning to exploit offshore research and development capabilities, just as they are already globalizing sales and manufacturing. The ultimate effect of this R & D globalization on the U.S. economy and U.S. industry remains uncertain. But extrapolating from three important trends in the international economy--namely the rise of newly industrializing economies; the restructuring of the American system of innovation; and the globalization of sales and production--it seems likely that knowledge-intensive activities, from basic research to technology-based production, are not permanently anchored in American soil.
High-technology companies are interested in newly industrializing economies as markets for their products and as environments for innovation. In the 1980s, Asian countries surprised the United States by producing electronics of a quality and sophistication so high, with prices so low, that many U.S. producers were driven out of their home market. This ability to make and export technology-intensive products arose as Japan and later Korea and Taiwan transformed themselves from developing countries to rich nations. Other countries are poised to follow suit. China, Indonesia, Brazil, and several East European countries have an educated elite, a desire to enter higher-value-added industries, and to varying degrees policies and institutions in place that may enable them to follow in the footsteps of the East Asian nations and become centers of innovation in their own right. Many countries are, in fact, consciously fostering the growth of idea-intensive, high-value-added industries.