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4 Technological strategies

4.1. The dynamics of technological change
4.2. The technological performances of the US, Europe and Japan
4.3. The effects of military technology
4.4. The technological strategies of corporations
4.5 The case of semiconductors
4.6. The case of telecommunications
4.7. The international technological strategies of governments
4.8 The case of US controls of technology transfer
4.9. The case of the US Strategic Defence Initiative

New technologies are increasingly important factors in defining each country's position in the international division of labour and in the hierarchy of states. In this chapter the dynamics of technological change are briefly reviewed, introducing an assessment of the technological performances of the US, Europe and Japan, and an analysis of the strategies developed in this area by corporations and governments.

4.1. The dynamics of technological change

The roots of technical change are in the operation of firms, with their decisions to research, invest and produce, and in the institutions, government agencies and public bodies that are involved in research, financing and procurement, as well as in other forms of public policy. While the corporations' scale of operation and innovative activity is increasingly international, the public policy issues still maintain a strong national focus.

Technology and the regime of accumulation

Most of the current discussion in this area defines its object as 'high technology.' Such a concept however can be misleading as it implies an identity between technological advances and 'progress' itself. It portrays technical change as a unidirectional advance from a 'low' to a 'high' technology, as defined by a set of indicators of capital intensity, expenditures for research and development, sophistication of engineering and design. Furthermore, 'high technology' is often considered as a specific and separate sector of the economy, losing in this way the perception of the pervasive nature of innovation in the whole of the economy.

A more appropriate concept is that of 'new technologies,' which stresses the variety of possible technological developments at the technological frontier that are made possible by the present 'radical breakthroughs' and their possible applications in the whole of the economy. In fact, new technologies transform traditional industries as well as the 'emerging' ones. Nor is the specific outcome of technological change simply the product of technological factors; social relations, pressures from workers and the civil society, and the technological policy of governments have a strong influence on the direction and outcomes of technical change.

This network of relations results in a specific regime of accumulation, of which the technological system is a part. As Richard Walker has noted, this was the case for the technological systems based around the railroad, the automobile and information flows, but all of them were much more than a 'technology,' and 'none may be said to be the source of growth. In short, it is the pattern of accumulation that is the central thread in capitalist growth, not the technology, labor process or any other single part of the system' (Walker 1985: 244; see also Aglietta 1979; Blackburn et al. 1985).

The relation of new technologies to the regime of accumulation may be summarized in the sequence of steps similar to the 'chain of relationships' proposed by Perez (1983: 366). First, technology, through 'radical breakthroughs' and their pervasive nature, creates the conditions for new forms of production. Second, the economic structure is transformed, with the growth of new sectors, different inter-industry relations and the development of new products, processes and forms of organization. Third, the labour force is reorganized, with changes in the labour process, in the formation, composition and skills of the workforce. Fourth, the social structure is reshaped, with a new wage and social stratification, that leads to a new pattern of demand and form of consumption, but also to new needs, identities, forms of consensus and contradictions. If the changes in the supply side produced by the introduction of new technologies find a match in the changes developing on the demand side, through a balanced transformation in all the four levels, the development of new technologies may offer a path of sustained growth for the economy, leading to a new cycle of accumulation expressed by a particular regime (ibid.). This process unfolds through market relations on an international scale; by its very nature, it transforms the social relations and the division of labour. A country's economy may not be able to match the changes introduced by new technologies, resulting in crises and decline. It can also find its previous specialization threatened, while at the same time discovering new opportunities in the development of new market positions. In this process, the government's technological strategy is the key instrument for intervening in these transformations of the national economy. In a phase of growing internationalization and dislocations, this is an increasingly important element of economic policy.

The questions of how technological change takes place in the economy and how to develop a technological policy are old issues of political economy, that have recently received new interest (Schumpeter 1961; Freeman 1974; Nelson and Winter 1982; Rosenberg 1982). The debate has gone beyond simplistic views of technical change, considered on the one hand as exogenous, a 'black box' supplying new technologies that develop autonomously (the 'technology-push' model), and on the other hand, as produced by the pressure of growing demand that stimulates innovation (the 'demand-pull' effect) (Schmookler 1966; Rosenberg 1982). Recent analyses have suggested a more articulate approach, using concepts and categories that have stressed the nature of the 'paradigm' of a technological system.

Referring to the definition of 'scientific paradigm' by Thomas Kuhn (1962), Giovanni Dosi proposed the concept of 'technological paradigm' as 'a "model", and a "pattern" of solution of selected technological problems, based upon selected principles derived from natural sciences and on selected material technologies' (Dosi 1982: 152). Dosi's example is drawn from the case of semiconductors, where in order to perform a generic task (amplifying and switching electrical signals) a material technology is selected (silicon semiconductors), which uses specific scientific properties, in order to reach some economic maximization of performance (ibid.: 153; Matthews 1985).

Once the 'technological paradigm' is established, a 'technological trajectory' develops, as decisions are made looking for the best possible trade-off between the variables that characterize the paradigm (Dosi 1982; Nelson and Winter 1977, 1982). The new technological outcomes are selected through market relations, government decisions, institutional pressures, social conflicts, through a variety of economic and social interactions (Dosi 1982: 151; Nelson and Winter 1982).

Besides the continuity of technological choices within a given 'paradigm,' there is the cumulative nature of technological change, the use of past experience and the inertia of technological paradigms. This can be summarized by the concept of 'technological accumulation' (Rosenberg 1982; Patel and Pavitt 1985) that accounts for the slow and continuous expansion of knowledge that is often tacit, limited to specific firms and productions, developed not only in research laboratories but also in a wide range of innovative initiatives, often mixed to production activities.

In this view, 'technological accumulation' is parallel to capital accumulation and closely related to the quality of labour used in production. The strength of such an approach is confirmed by the empirical evidence on the distribution of innovative efforts among different activities within industrial firms reported by Pavitt: 'the distribution of costs of innovation - excluding normal investment in plant and equipment - is roughly as follows: research 10-20%; development 30-40%; production engineering 30-40%; market launch 10-20%' (Pavitt 1985: 5), with between 10 per cent and 30 per cent of inputs coming from outside the industry, mainly from universities and public research institutions (ibid.).

This evidence challenges the simplistic view that equates innovative activities with research and development (R&D). Other important factors have a crucial role in innovation and they cannot easily be bought, expanded or reproduced elsewhere. This contradicts the analyses that have emphasized the mobility of new technologies and their informational nature. Raymond Vernon, for example, argued that 'the continued technological change promises to increase the availability and reduce the relative cost of channels by which technical information is communicated across international borders. That prospect could prove to be the most important single factor in shaping the international trade patterns of the 1980s' (Vernon 1982: 145).

Patel and Pavitt have criticized the 'widely held assumption that technology is a form of "information" that has the properties of being costly to produce but virtually costless to transfer and to use (and, by implication, widely applicable in the first place)' (Patel and Pavitt 1985: 6). In fact, the growing transfer of new technologies should not make us forget that the success of their application remains related to the levels of technological accumulation present in an economy and in an industry.

According to Nathan Rosenberg, 'perhaps the most distinctive single factor determining the success of technology transfer is the early emergence of an indigenous technological capacity. In the absence of such a capacity, foreign technologies have not usually flourished' (Rosenberg 1982: 271). In fact, the most rapid technological development was experienced by those countries that already had a minimum level of technological accumulation, that was needed to adapt imported technologies to local conditions and to make appropriate choices among the existing technological alternatives (ibid.). In Rosenberg's view, in European history the ability to assimilate foreign technology has been as important as inventiveness itself (ibid.: 246), while for Japan the key has been its ability to adapt Western technology to the different factor proportions, lowering capital intensity and engineering product and process improvements, a road followed also by the new industrial countries of the Pacific, such as Taiwan and South Korea (ibid.: 271-2).

In Japan a key role has also been played by the government strategy: 'direct foreign investment has been virtually excluded, and advanced technologies have been acquired by relying heavily upon licensing agreements, together with a large civilian R&D effort' (ibid.: 275).

Technological development and accumulation however are not a smooth and continuous process. Rather, innovations often develop in 'bunches' and are introduced in the economy with a cyclical trend, that has been associated to the 'long wave' pattern of the world economy (Kondratiev 1979; Freeman et al. 1982; Van Dujin 1983; Mensch 1985). Freeman et al. have stressed the advances in basic sciences, the social and organizational changes that helped the clustering of innovations in the downswings of cycles, the positive effect of technological trajectories on the growth cycle and the social and economic factors that facilitate capital investment in the new leading sectors, while society adapts to the resulting transformations (Freeman et al. 1982: x, 64-5).

These factors, however, have been considered inadequate by Rosenberg and Frischtak (1984) to explain the relation between long waves and innovation. Perez offered a solution outside the narrow economic mechanisms, suggesting a lag between the technological waves and the socioeconomic cycles. Perez argued that while the modes of development of the economy, with given social and institutional relations, move from trough to trough of the long waves, the technological styles go from peak to peak. The recurring imbalance between the potential for technological development and the old social and institutional structure can explain the crisis and the downswing of cycle; growth restarts only when the economy and society adapt to the new technological style (Perez 1983: 358).

In this model, the emergence of a new technological style and the potential of a new long wave of growth is marked by the shift from the previous technological trajectory, with a stable cost structure and incremental improvements, to a new set of radical innovations that produce a dramatic increase of productivity. This is made possible by the availability of a particular input with low and falling costs, unlimited supply, able to pervade all sectors of the economy, and leading to generalized improvements of efficiency (ibid.: 361).

Technology policy

Technology is a natural object of public policy. The aim is first to harness technology for the economic and social goals of government policy; second, to make the best decisions on the alternative options that technical change opens both at the technological frontier and in the application (and import) of new technologies. Third, technology is seen as an element of state power; as Skolnikoff noted, 'historically, science and technology have been seen by governments as a means of serving national interests' (Skolnikoff 1977: p.508). What is to some extent new is the growing role played by technological factors in the restructuring of the world economy and of international political relations, in comparison to other factors - macroeconomic, monetary or financial ones - that have been crucial in other contexts (see also Williams 1984).

The basic economic rationale for technological policy is to increase the efficiency of the domestic economy, where the 'market' by itself does not reach optimal results, as in the case of R&D and innovation. Kenneth Flamm, of the Brookings Institution, has summarized it with the widely held view that 'there are no grounds for believing that the correct amount and type of projects will be undertaken. This theoretical argument for intervention in the market for research is bolstered by an extensive empirical literature which consistently documents social returns to research investment far greater than private returns' (Flamm 1984: 27).

On the other hand, the political rationale for technology policy is that it contributes to the 'national security' and to the technological prowess of the economy; therefore technology, 'in addition to being an instrument of competition between firms, is critical to economic and political competition among nations' (ibid.: 24).

Both the economic and the political rationale lead to increasingly active technological strategies by governments, at the time when technology shows more and more its 'global' nature, that sharply reduces the possibility of national control on technological processes (Skolnikoff 1977: 512; Reich 1987). The emergence of an international scientific community and the global operations or corporations highlight and reinforce the uneven technological development among countries. In this way technology has become a policy issue in international relations, especially in the North-South perspective, playing a role in co-operation and in the debate on the 'New international economic order' (Aseniero 1984).

A major part of governments' technology policy is developed for 'defence' purposes, through the research and procurement of weapons systems, but the development of military technology represents also as a form of industrial policy, supporting national firms in key sectors. However, the nature of military technology remains different from civilian technology for a variety of institutional factors, the mode of financing, the absence of market mechanisms and its very mission: developing new deadly weapons systems.

The different quality of military technology is often ignored in the analyses of technical change, or is treated simply as a separate sector of the economy. However, the size of the effort to develop military technologies in countries such as the US and the UK is so large that its effects on the pattern of innovation cannot be ignored, just as a large military economy has been shown to have an impact on the performance of the national economy (see section 3.5). In section 4.3 we will investigate in detail the effects of military technology. Now let us start with the review of the technological performances of the US, Europe and Japan.

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