Is Technological Innovation the Main Source of All Economic Development and Change? How Might Differing Research and Development Systems Influence the Performance of Major Nations

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Introduction

Technological innovation has come to be regarded as a central factor upon which success is contingent (Dodgson and Bessant, 1996: 3; Schumpeter, 1943: 83). Not only has it been considered a promise for generating competitive advantage but it has also been prescribed as a remedy for a broad range of managerial problems such as intense competition, globalised marketplace and technology fusion (Eris & Saatcioglu, 2004). Since the middle of the 20th century many theorists have explored the issue of technological innovation and how it influences performance on the national, industry and firm level. This report will firstly, compare the R&D systems of the USA, UK, Germany, Japan and China and then analyse the automobile and semiconductor industries in relation to these systems to show that technological innovation is not the main source of economic development.

Technological innovation
Various definitions of technological innovation have been devised as part of existing theories. In addition, technology and innovation are often used interchangeably. Throughout this report, however, technological innovation will be regarded as the usage and knowledge of tools, techniques, crafts or methods in terms of new products and processes (Porter, 1990; Nelson, 1993). Further, a distinction between four types of innovation is provided in Table 1 as they will be referred to as part of the discussions below (Freeman, 1987 in Dicken, 2003). Table 1: Categorization of Technological Innovations (Freeman and Perez, 1988 in Koen, 2005:361)

Economic development
There is an important distinction between economic development and economic growth. Economic growth is defined by Malecki (1997:13) as “increases in populations within a specific area, or increases in the quantity or the value of the goods and services produced in a local economy”. This is usually measured in terms of gross national product (GDP). In contrast, the term economic development encompasses all the above elements; however it also involves qualitative measurements of improvement in the quality of life (Malecki, 1997). This can be measured by looking at the changes in terms of “health, affluence, freedom and environmental sustainability” (Malecki, 1997:13). In this report, the concepts of economic growth and development will be used interchangeably.

Different R&D systems
USA
The origins of the U.S. R&D system dates back to the nineteenth century where innovations in “transportation, communication and production technologies” (Nelson, 1993:31) enabled the formation of large scale manufacturing plants that together were labelled as the “American system of manufacturers” (Rosenberg 1972 in Nelson, 1993:) Among this system of manufacturers was Ford Motor Company that through the innovation of assembly-line mass production aided the growth of the U.S. economy (Nelson, 1993). Interestingly, the advancements that were made in the U.S. economy were not dependent on formal scientific research as the production operations at the time relied on mechanical skills. Further, the pre-war system was characterised by the establishment of in-house laboratories in large manufacturing factories that employed scientists and research staff leading to a greater need to educate and retain highly skilled professionals (Nelson, 1993). The post-war U.S. R&D system is characterised by the significance of three sectors: industry, universities and federal government. In terms of industry, the emergence of small firms during the post-war period was influential in the development of “microelectronics, biotechnology, robotics and computer hardware and software” (Nelson, 1993:29). Consequently, this led to the U.S. becoming the leader in a several high technology markets (Nelson, 1993). In addition, an increase in federal funding, during the post-war era, in support of university research, has led to the transformation of several U.S. universities into becoming some of the best in the...
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