Chapter 6 | Industry, Technology, and the Global Marketplace

Introduction

1 See OECD (2001) for a discussion of classifying economic activities according to their degree of “knowledge intensity.” Like all classification schemes, the OECD classification has shortcomings. For example, KTI industries produce some goods or services that are neither knowledge intensive nor technologically advanced. In addition, multiproduct companies that produce a mix of goods and services, only some of which are KTI, are assigned to their largest business segment. Nevertheless, data based on the OECD classification allow researchers and analysts to trace, in broad outline, worldwide trends toward greater interdependence in science and technology and the development of KTI sectors in many of the world’s economies.

2 In designating these high-technology manufacturing industries, the OECD estimated the degree to which different industries used R&D expenditures made directly by firms in these industries and R&D embedded in purchased inputs (indirect R&D) for 13 countries: the United States, Japan, Germany, France, the United Kingdom, Canada, Italy, Spain, Sweden, Denmark, Finland, Norway, and Ireland. Direct R&D intensities were calculated as the ratio of total R&D expenditure to output (production) in 22 industrial sectors. Each sector was weighted according to its share of the total output among the 13 countries, using purchasing power parities as exchange rates. Indirect intensities were calculated using the technical coefficients of industries on the basis of input-output matrices. The OECD then assumed that, for a given type of input and for all groups of products, the proportions of R&D expenditure embodied in value added remained constant. The input-output coefficients were then multiplied by the direct R&D intensities. For further details concerning the methodology used, see OECD (2001). It should be noted that several nonmanufacturing industries have R&D intensities equal to or greater than those of industries designated by the OECD as high-technology manufacturing. For additional perspectives on the OECD’s methodology, see Godin (2004).

3 Aircraft and spacecraft trends are affected by public funding for military aircraft, missiles, and spacecraft, and by different national flight regulations. Public funding and regulation of drug approval, prices, patent protection, and importation of foreign pharmaceuticals can affect pharmaceuticals.

4 See Mudambi (2008) and Reynolds (2010) for a discussion of the shift to knowledge-based production and geographical dispersion of economic activity.

Patterns and Trends of Knowledge- and Technology-Intensive Industries

1 Data on the health care sector include social services.

2 See Bresnahan and Trajtenberg (1995) and DeLong and Summers (2001) for discussions of ICT and general-purpose technologies.

3 For a discussion of potential economic benefits of the Internet of Things, see Mandel (2013:2–4).

4 In the education sector, countries compete to attract foreign students to study and train. In the health sector, some countries promote “medical tourism” to attract foreigners to obtain medical care that is often cheaper than that provided in their home country.

5 See Jensen (2012) for a discussion of U.S. business services firms helping to build infrastructure in developing countries.

6 This chapter defines the global recession occurring in 2008–2010 and the post-global recession starting in 2011 for consistency of comparing trends across countries. However, the scale and timing of the recession and recovery varies by country.

7 See China Daily (2016) and KPMG (2009) for a discussion of China’s outsourcing of business services to firms in other countries.

8 The testing, measuring, and navigation instruments industry includes medical and optical equipment.

9 Source: The World Bank, World Development Indicators database http://data.worldbank.org/data-catalog/world-development-indicators.

10 China’s government has increased subsidies and support for the public health system, expanded insurance coverage of rural residents, encouraged use of private health insurance through tax breaks to policy holders, and changed regulation and financial support to lower costs of drugs to patients and the public health system. See Cao (2014) and Hsu (2015).

11 See Williamson and Raman (2011) for a discussion of China’s acquisition of foreign companies.

12 China had 18 of its supercomputers listed in the world’s top 500 supercomputers in November 2016 (Top 500, https://www.top500.org/statistics/sublist/).

13 See Watt and Wong (2017).

14 See Industrial Research Institute (2016).

15 See Economist (2013) for a discussion of multinational firms choosing to have more of their manufacturing take place in developed countries.

16 For example, the solar photovoltaic manufacturing industry is capital-intensive. See Goodrich et al. (2013:2813–17) for a comparison of the costs of solar PV manufacturing in China and the United States.

17 See Green (2014) and Tomiyama (2015) for a discussion on the move of electronics manufacturing from China to Vietnam.

18 See PwC (2014) and Indian Brand Equity Foundation (2017) for information on India’s pharmaceutical industry.

19 China is one of the world’s largest exporters of automobile parts. It is now the fourth-largest exporter behind Germany, the United States, and Japan according to AmChamChina (2015).

20 See Donofrio and Whitefoot (2015:23–27), for a discussion of factors that influence the location of plants and suppliers in the automotive and other industries.

21 Toyota, among others, has located much of the design and production of its minivans and large pickup trucks in the United States because it is home to many of the customers of these vehicles. See Donofrio and Whitefoot (2015:25).

Global Trends in Trade of Knowledge- and Technology-Intensive Products and Services

1 Other business services include trade-related services, operational leasing (rentals), and miscellaneous business, professional, and technical services. These include legal, accounting, management consulting, public relations services, advertising, market research and public opinion polling, R&D services, architectural, engineering, and other technical services, agricultural, mining, and on-site processing (WTO 2016:83).

2 See World Trade Organization, Statistics, Trade in Services (2016).

3 Other business services include trade-related services, operational leasing (rentals), and miscellaneous business; professional and technical services such as legal, accounting, management consulting, public relations services, advertising, market research, and public opinion polling; R&D services; architectural, engineering, and other technical services; and agricultural, mining, and on-site processing.

4 A trade surplus occurs when exports exceed imports. A trade deficit occurs when imports exceed exports.

5 See China Daily (2016) and KPMG (2009) for a discussion of China’s outsourcing of business services to other countries.

6 See IHS Global Insight, World Trade Service database (2016).

7 The U.S. trade balance is affected by many factors, including currency fluctuations, differing fiscal and monetary policies, and export subsidies and trade restrictions between the United States and its trading partners.

8 See Green (2014) and Tomiyama (2015) for a discussion on the move of electronics manufacturing from China to Vietnam.

9 See IHS Global Insight, World Trade Service database (2016).

10 Intra-EU exports of motor vehicles and parts were $421 billion in 2016. EU exports to the rest of the world were $244 billion. Source: IHS Global Insight, World Trade database.

11 See https://en.wikipedia.org/wiki/Automotive_industry_in_China.

12 The U.S. trade balance is affected by many factors, including currency fluctuations, differing fiscal and monetary policies, and export subsidies and trade restrictions between the United States and its trading partners.

13 U.S. exports of motor vehicles and parts to NAFTA (Canada and Mexico) were $68 billion in 2016. U.S. exports to the rest of the world were $54 billion. Source: IHS Global Insight, World Trade database.

Global Trends in Sustainable Energy Research and Technologies

1 The International Energy Agency (IEA) manual states: “The IEA concept of Energy RD&D differs from the Frascati concept of R&D, in that (i) it focuses on energy related programmes only; (ii) it includes ‘demonstration projects’; and (iii) it includes state owned companies…. The energy RD&D data collected by the IEA should not be confused with the data on government budget appropriations or outlays on R&D (GBAORD) collected by the OECD Directorate for Science, Technology, and Industry for the socio-economic objective ‘Production, distribution and rational utilisation of energy’” (IEA 2011:16–17).

2 Energy smart covers a wide range of technologies, from digital energy applications to efficient lighting, electric vehicles, and the smart grid that maximize the energy efficiency of existing energy sources and networks.

3 Small distributed capacity consists largely of installation of solar photovoltaics on commercial and residential structures

4 Bloomberg’s data include investment in renewable energy, biofuels, energy efficiency, smart grid and other energy technologies, CO₂ capture and storage, and infrastructure investments targeted purely at integrating clean energy. Investment in solar hot water, combined heat and power, renewable heat, and nuclear are excluded, as are the proceeds of mergers and acquisitions (which do not contribute to new investment).

5 BNEF (2017). In the first half of 2016, 21% of wind power in China went to waste and 12% of solar power in northern China was curtailed according to the World Resources Institute. See http://www.wri.org/blog/2017/01/china-leaving-us-behind-clean-energy-investment.

6 The PTC and ITC lapsed at the end of 2013, and were reinstated briefly in December 2014. After being unavailable for most of 2015, Congress extended the PTC and ITC for a full 5 years.

7 “Third party” financing has become a popular method of financing residential solar installation in the United States that is less expensive than purchasing a residential solar system. Under this type of financing, a customer can sign a traditional lease and pay for the use of a solar system or a customer can sign a power purchase agreement to pay a specific rate for the electricity that is generated each month. For more information, see http://www.seia.org/policy/finance-tax/third-party-financing.

8 One gigawatt is a unit of electric power equal to one billion watts.

9 BNEF, https://about.bnef.com/clean-energy-investment/. Accessed 28 February 2017.

10 This discussion includes public research, development, and demonstration in energy efficiency, renewable energy, nuclear, hydrogen and fuel cells, CO₂ capture and storage, and other power and storage technologies.

11 See D’Amato, Hamilton, and Hill (2015) for more information on NSF’s classification of clean energy patents.

12 The USPTO initiated a green technology pilot program on 7 December 2009 that expedites processing of some applications related to green technologies. For more information, see http://www.uspto.gov/patents/init_events/green_tech.jsp.