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BA290G: International Competition and Trade in High Technology

BA290G: International Competition and Trade in High Technology Professor Michael Borrus (office hours 4:15 – 5:15 Th) Professor David Mowery (office hours 2:15 – 4 W) http://brie.berkeley.edu/~briewww/oldpublic/courses/mb/index.html Reader now available Course questions/goals

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BA290G: International Competition and Trade in High Technology

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  1. BA290G: International Competition and Trade in High Technology Professor Michael Borrus (office hours 4:15 – 5:15 Th) Professor David Mowery (office hours 2:15 – 4 W) http://brie.berkeley.edu/~briewww/oldpublic/courses/mb/index.htmlReader now available

  2. Course questions/goals • How has the interaction among gov’t policy, firm strategy, and industry development affected competitiveness? • How have US firms revived or maintained competitiveness? • What are the new elements of international competition in high-tech? • Do gov’ts still matter, or has globalization trumped policy? • Use analytic tools to examine a particular industry/technology/strategy issue.

  3. Topics • Development of US, foreign competition in key high-technology industries (semiconductors, hardware, software, pharma/biotech, aerospace). • Use industry studies to highlight general points & analytic concepts. • Evolving competitive & collaborative relationship among US, Asian firms. • Development of new business models in high-tech. • John Fieber, Mohr/Davidow • James Milstein, Lazard Freres • Eric Schmidt, Google (invited)

  4. Requirements • Class participation • Project (3- to 4-person teams). • Analyze technologies, markets, or firm strategies in the emerging market for homeland security technologies. • IT, biotech, materials, energy, are among the major areas of activity. • One-page description due on Feb. 27. • Outline due on April 10. • Presentations on May 1 & 8. • Writeups due on May 15.

  5. How did we get here? • Why did the US economy shift from noncompetitive in the 1980s to a model of a “new economy” in the 1990s to recession in the 21st century? • What happened in Japan? • What do the shifts in US competitiveness say about the new landscape of high-tech competition?

  6. Experts on the US in 1980s & 1990s • “…American industry is not producing as well as it ought to produce, or as well as it used to produce, or as well as the industries of some other nations have learned to produce…if the trend cannot be reversed, then sooner or later the American standard of living must fall.” (MIT Commission, 1989) • “In recent years, the US economy has grown at a surprisingly fast pace, in a phase of expansion that started nine years ago and constitutes its longest-ever recorded period of sustained growth…US per capita income is now moving even further ahead of other OECD countries.” (OECD, 2000)

  7. What happened in the US? • In high-tech in particular, US firms improved mfg performance, but did not move ahead of performance of foreign firms in semiconductors, other products. • Instead, US firms succeeded in developing new products, new services, and new business models in software, Internet, hardware, biotech, genomics. • Much of the production of new products handled by other, often Asian, firms. • Sources of “weakness” during the 1980s were cited as sources of competitive revival during the 1990s: • Venture capital • New-firm formation.

  8. Key elements of the “new business models” of the 1990s • Vertical specialization • Outsourcing of more & more functions, esp. production. • High rates of new-firm formation. • R&D collaboration among firms; between firms and universities; between firms and public labs. • IP protection and strategy are more important. • Markets for technology often underpin R&D collaboration, vertical specialization. • “Science-intensity” of innovation has increased in some sectors (biotech, IT). • Fed R&D investment an important complement.

  9. Complementary developments in the broader economy & policy • US gov’t policy: • Macroeconomic policy & budget surpluses support lower interest rates, in contrast to the 1980s. • Trade & investment liberalization in global markets. • Domestic & international IPR strengthened. • Sectoral policies (SEMATECH, ATP): Limited in scope and effect. • Huge investment boom through the 1990s propelled IT industry, contributed to a “bubble.” • Restructuring of US R&D system: Roles of universities, industry, gov’t all change in size, scope.

  10. US “resurgence” also reflects the poor performance of Japan during the 90s • Post-bubble collapse exacerbated by policy failures in Japan. • Monetary policy failed to prevent deflation. • Failure to restructure banking system remains a drag on larger economy, preventing restructuring of firms. • Japanese firms failed to exploit new business models. • Entry by new firms much less common than in US. • Vertical specialization much less developed. • Sectoral initiatives (ASET, SELETE): little effect. • Manufacturing competition from China & elsewhere in Asia has intensified.

  11. The post-2000 US economy: “new” or “old”? • 2000-200? US recession is driven largely by a collapse in business investment, which in turn reflects IT investment downturn. • Differs from previous post-1945 recessions, most of which were caused by downturns in consumer spending. • This “new economy” recession resembles the business cycles of the 19th century. • Other “new” elements remain: • US productivity growth remains higher than during 1980s/1970s. • Other elements of the new business models (vertical specialization, IPR, collaboration) remain important. • Relatively high levels of income inequality.

  12. Looking ahead • Post – 9/11 US federal R&D budget may shift toward defense. • “cyber-security” a major focus (Chronicle, 1/21/03). • US macroeconomic policy is reverting to high-deficit, (potentially) higher interest rates, reversing posture of the 90s. • US firms have demonstrated consistent strength in pioneering new technologies & business models, much less strength in maintaining strength against strong competition from other nations. • Many elements of these new business models can be imitated by non-US firms. • What elements of competitiveness are less mobile?

  13. Conclusions & Premises • Predictions of enduring competitive decline and enduring dominance have been grossly overstated. • US: “weaknesses” of the 1980s are cited as sources of resurgence in the 1990s. • Japan: “strengths” of the 1980s are cited as sources of weakness in the 1990s. • US 21st-century “new economy” contains both new and old elements. • The high-technology industries of US, Japan, W. Europe all have developed with substantial assistance and influence of gov’t policies. • True in the future? • Interaction of internat’l competition, public policy and firm strategy has affected new elements of high-technology competition.

  14. Semiconductors: 1/30/02 • Why did the structure of the US industry differ so markedly from those of other nations’ semiconductor industries? • Why & how did US semiconductor firms regain global dominance during the 1990s? • What are the strengths and weaknesses of the “fabless-foundry” model of competition that is emerging in the global semiconductor industry? • What does the “fabless-foundry” model mean for the geographic location of production, design, and R&D? • Why has the 2000-03 downturn been so severe?

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