Overview

H.GUYFORD STEVER AND JANET H.MUROYAMA

THE EFFECTS OF TECHNOLOGICAL CHANGE on the global economic structure
are creating immense transformations in the way companies and nations
organize production, trade goods, invest capital, and develop new products and
processes. Sophisticated information technologies permit instantaneous
communication among the far-flung operations of global enterprises. New
materials are revolutionizing sectors as diverse as construction and
communications. Advanced manufacturing technologies have altered long-
standing patterns of productivity and employment. Improved air and sea
transportation has greatly accelerated the worldwide flow of people and goods.
All this has both created and mandated greater interdependence among firms
and nations. The rapid rate of innovation and the dynamics of technology flows
mean that comparative advantage is short-lived. To maximize returns,
arrangements such as transnational mergers and shared production agreements
are sought to bring together partners with complementary interests and
strengths. This permits both developed and developing countries to harness
technology more efficiently, with the expectation of creating higher standards of
living for all involved.
Rapid technological innovation and the proliferation of transnational
organizations are driving the formation of a global economy that sometimes
conflicts with nationalistic concerns about maintaining comparative advantage
and competitiveness. It is indeed a time of transition for firms and governments
alike. This book provides a broad overview of these issues and seeks to shed
light on such areas as the changing nature of international competition,
influences of new technologies on international trade, and economic and social
concerns arising from differences in national cultures and standards of living
associated with adoption and use of new technologies.
The volume is a compilation of papers presented at the Sixth Convocation of the
Council of Academies of Engineering and Technological Sciences held in
Washington, D.C. in the spring of 1987. The convocation brought together about
one hundred leaders in technology from more than twenty countries to discuss
issues of “Technology and the Global Economy.” The program of the convocation
was structured around four objectives:
 identification and discussion of the driving technologies of the current era,
for example, in materials, information, and manufacturing;
 evaluation of how technological advances are transforming industrial
sectors such as telecommunications and construction;
 exploration of how in turn the global economy is affecting technology and
production through such factors as marketing strategies, intellectual property
rights, and financial markets; and
 clarification of regional and national consequences of globalizing industries
for several geographical areas including the Pacific Rim, Western Europe, and
Latin America.
An overall assessment of the issues raised was provided in conclusion by a
panel consisting of Morris Tanenbaum, Wolf Häfele, Sir Robin Nicholson, and
Robert Malpas. On the one hand, their assessment made clear that though most
technological advance occurs in industry, there are too few mechanisms for
exchange of views on international technology and cooperation that involve both
private and public sector representatives in a forum not constrained by the formal
policies and stands of national governments. There is great need for improved
and more open lines of international communication on topics where engineering
and technology intertwine with trade and economic growth.
At the same time, the panelists’ evaluations made clear a hierarchy of four sets
of relationships among technology, technologists, and the societies they attempt
to serve. The first of these includes relationships at the human level, ranging
from professional education to relations between management and labor to the
public’s understanding of the impact of technology on our lives. The second
includes relationships at the institutional level, that is, the impact of technology on
the management of businesses and industries. The third relationship is at the
national level, where public and private interactions determine the use of
technology and possibly a country’s ability to grow economically. The fourth
relationship occurs at the international level. Here information flows, trade
frictions, and alliances characterize technological development, its diffusion,
global competition, and economic advance.
At the human level a key area of change is the invisible contract between a
manufacturing company and its customers and employees. In the factory, we are
seeing a movement away from the expectation that workers should be organized
to fit the technologies and a movement toward networking and
small teams. Wolf Häfele referred to this as the evolution of a higher level of
integration between technology and human relations. This is evident, he said, in
the emphasis on words such as “interface,” “reliability,” and “adaptation” in
describing or explaining some of the new technologies. As a result of this
phenomenon, organizations that pursue single objectives may be less suited for
survival than those that consider a broader range of issues that optimize the
human, organizational, and technological elements.
At the institutional level, private enterprises are the principal instruments in
many countries for developing and using technology, although governments play
an important enabling role. The task of private enterprises is to be
knowledgeable about the current state of science and technology, to understand
the needs of the marketplace, and then to create technologies, products, and
services that best meet those market needs. Morris Tanenbaum pointed out that
this endeavor embraces many disciplines (basic science, engineering,
production, distribution, marketing, and finance) and individual motivations. Many
participants and observers of the contemporary technological scene propose that
we are going through a period of discontinuous change as the breadth of
technological applications expands and the time scale of change becomes
shorter. For example, markets are becoming more global as transportation and
communication speed the flow of knowledge of new products, and greater
investment is being made in research and development (R&D) as technological
capability has expanded. This process has placed new demands on
organizations as they strive to obtain quick and effective market information and
access, recoup their R&D investment more quickly, and recognize the
importance of sharing technological capabilities. This is particularly true with
regard to the information technologies—the one technology most rapidly
changing other technologies. It achieves its greatest power when it is most
global; where it provides the means to obtain access to the information systems
of other countries and establish arrangements that promote the transfer of
technology.
Government plays a central role in technology issues at the national level.
Technology has now become a part of almost every political discussion as
politicians have realized the impact of technology on world events. Governments
vary in the way they influence and exploit technological changes, for example,
through regulation, procurement, protectionist policies, and support of R&D.
Public attitudes among various countries also differ, and these differences can
affect governmental technology policy. “Given the fact that there is no ‘correct’
way of dealing with technologies which is applicable to all countries,” Sir Robin
Nicholson commented, “each country must find its optimum way depending on its
history, institutions, and public attitudes.” This implies that countries will move
forward at different speeds, creating imbalances among nations. In this respect,
multinational corporations, responsibly managed and sensibly treated by the
countries in which they invest,
and transnational joint ventures serve an important function by promoting global
equilibrium.
From an international perspective, the main issue is to sustain and improve
world growth and improve growth per capita. This breaks down into the problems
of Western Europe, Japan, the United States, Eastern Europe and the Soviet
Union, and the problems of the more and less advanced developing countries.
Robert Malpas noted that it becomes essential for all these players to harness
technology for growth; however, this effort is frequently constrained by
protectionism, concerns about intellectual property, the demands of international
marketing and finance, and, of course, national security. The net result appears
to be that emerging nations, with a few exceptions, have even more difficulty
achieving the growth necessary to close the gap with leading nations. Among the
trends at the international level that can help sustain and improve world growth:
the rebirth of interest in manufacturing, the spread of expert systems which
multiply skills and help in the industrialization process, the acceptance of
multinational corporations, the privatization of various industries, and the
increased interest of governments in technology.
As evidenced by the papers in this volume, these four relationships at the
human, institutional, national, and international levels permeate discussions on
the globalization of technology. In his keynote paper, Simon Ramo maintains that
technological issues lie at the heart of most of the social, economic, and political
issues of today, sometimes causing problems but more often offering possibilities
for their solution. From this perspective, Ramo goes on to make several intriguing
predictions about the role of technology in the future. Particularly powerful
influences on the diffusion of new technological processes and products will be
governments, corporations, national security concerns, and the rate of advances
in scientific research. Technological discovery will become a global rather than
an individual or national endeavor. As a result, new mechanisms will be
developed to facilitate the flow of technology, despite protectionist-nationalist
tendencies to stem the free exchange of information. One of these influences
impeding the flow of technology is national security concerns. Ramo, however, is
optimistic about the direction of the two superpowers, predicting that offensive
forces will be reduced, thereby lessening interference with the flow of advanced
technology and allowing the application of military technologies to peacetime
applications in manufacturing, transportation, and services.
In scientific research, Ramo reiterates his belief that the expense of conducting
such research, particularly in “big science” areas such as super colliders or in
outer space, and the recognition that such knowledge must be shared to achieve
maximum progress are driving scientists toward international cooperation. Since
the role of government in setting a national direction for technology is so
pervasive, its relationship to the private sector in the
productive use of technology will continue to be problematic. Yet, Ramo argues,
it is only the government that can perform the regulatory functions necessary for
the smooth operation of free enterprise activity that makes use of new
technologies. It is also the government, he says, that will be the primary obstacle
to diffusion of the benefits of technology to world society.
As experts on the costs and benefits of developing technology, engineers are
in a key position to contribute to policy formation of these issues. For engineers
to better prepare themselves for the future, Ramo suggests that engineering
education place more emphasis on the links between engineering and its societal
applications. The result, he says, will be engineers equipped to play a broader
role in influencing government policies and practices regarding technological
advance.
Umberto Colombo’s analysis of technological and global economic issues
emphasizes the impact of the technological revolution on production methods,
types of products, labor markets, and on the importance of manufacturing to the
economy. He compares manufacturing to agriculture—although it will no longer
dominate the economy or provide the majority of jobs, it will continue to perform
an important function even in a service-oriented society. Certain key technologies
are bringing about this transition, both creating new industries and rejuvenating
mature ones, and in the process are changing patterns of development
throughout the world. The rapid spread of innovation makes it imperative that
firms quickly exploit any competitive advantage. Moreover, their increased ability
to operate in the global marketplace rein-forces the importance of cooperative
agreements to advance innovation. Another force driving the trend toward
cooperation is the increasingly scientific nature of technology, which requires that
firms take a cross-disciplinary approach to solving problems. Colombo also
argues that the technological revolution brings about a “dematerialization” of
society, one element of which is that fewer raw materials are now needed to
achieve a particular level of economic output and income generation.
The globalization of technology is being spearheaded by North America,
Western Europe, and Japan. Despite their influence in shaping a new pattern of
global competition, each has unique problems. The United States, though a
leader in developing emergent technologies, is facing the double threat of
enormous budget and trade deficits as well as deindustrialization of traditional
economic sectors. Japan, which has demonstrated enormous success in
commercializing new technologies, has an economy excessively dependent on
exports. Western Europe has the cultural tradition and core of excellent research
groups to facilitate its leadership in the technology arena, yet it lacks the
cohesion necessary to develop strategic initiatives in important sectors.
Colombo optimistically concludes that globalization will bring the emergence of
many small and medium-size multinational firms that will rely on
a network of technology alliances. Governments will provide oversight and
strategic direction. The impact on developing countries will be enormous. With
the help of new technologies, Third World countries can transform their raw
materials and energy into value-added commodities and thereby accelerate
economic development without dysfunctional effects. It is the responsibility of
developed countries, Colombo concludes, to see that this happens.
Though desirable, the alliances proposed by Colombo are not easily
established. As Gerald Dinneen points out in his paper on trends in international
technological cooperation, international arrangements, whether they be
international marketing organizations, joint ventures, or creation of subsidiaries,
are necessary if industries are to get a proper return on investment and remain
competitive. However, the “not-invented-here” syndrome, differences in
standards, lack of protocols for transmission of data, and especially protectionist
sentiment prevent companies and countries from collaborating. Despite these
barriers, Dinneen says, international labs and exchanges of scholars and
students in schools of engineering have been effective mechanisms for fostering
international cooperation.
Presenting the European perspective on technological cooperation, Harry
Beckers comments on the impacts of the dissimilarities in the ways academicians
and business people conduct research as well as differences in R&D support in
the United States, Western Europe, and Japan. Western Europe, he says, faces
the unique difficulties posed by its diversity and nationalistic tendencies.
Nevertheless, there are a number of EEC programs that facilitate international
cooperation among various countries, thereby helping to bring about
“Europeanization” in the technology sector.
Papers on three of today’s most crucial technologies—software, materials
science, and information technologies—illustrate how the nature of the
technologies themselves has created a global environment for research and
applications despite the barriers mentioned above. George Pake describes a
number of key advances in software: architecture of hardware systems used for
software development; advances in writing, editing, running, and debugging of
software; development of different programming languages; and systematic
forward planning and task analysis. The creativity so evident in software
technology today is not in danger, Pake says, despite the trend toward greater
standardization and the possibility that ossification of the development system
could occur in the future.
Pierre Aigrain addresses several provocative questions about materials,
particularly pertaining to the rate at which discoveries are made, the extent to
which applications are found, and the impact of these discoveries on industry and
society. Citing the influence of the market and the continued interaction between
science and materials research, Aigrain predicts that the rapid trajectory of
materials discovery will continue. However, processing
costs, rather than the costs of the materials themselves, prevent materials from
widespread application. The development of superconductors illustrates this
point, and he concludes with a description of the impact these new materials in
particular will have on industry and society.
Lars Ramqvist provides insight on several of the cutting edge technologies that
have had a major impact on information technologies. These include VLSI
technology, computers, software and artificial intelligence, fiber optics, networks,
and standards. In addition, he looks at three main applications of information
technologies—normal voice telephony, mobile telephony, and data
communications—assessing, first, the current state of the art and, second,
projections for the future. Ramqvist concludes that because information
technologies allow for the dissemination of information, and thus understanding,
they will form the basis for a more equitable, humane society.
Hiroshi Inose examines the telecommunications sector from a different angle—
the effect of globalization on the entire industry. Particular technological
advances, for example, the convergence of service modes and the
microelectronics revolution, provide economies of scale but also require rapid
inputs for capital investment. Among the problems and challenges Inose
addresses are the software crisis, or the high cost of developing more
sophisticated and diversified software; structural changes in industry, particularly
in job design and labor requirements; standardization and maintaining
interoperability between systems and equipment; reliability and security of
systems against both external and internal disturbances; and integrity of
information and protection of privacy. Like Ramqvist, Inose views
telecommunications technology as the means to promote mutual understanding
and cultural enrichment worldwide.
Perspectives on the impact of technology on another industrial sector—
construction—are presented by Alden Yates who describes the most significant
trends in the areas of construction-related design, construction equipment and
methods, automation and expert systems, and construction management.
Computer-aided design has, among other things, improved communication
between designer and supplier and speeded up the design development
process. Increases in productivity are being achieved through off-site fabrication
and assembly and robotics. Logistics practices, skill requirements, and labor-
management relations are also changing as a result of these new technologies.
Yates suggests that improved management methods and automation hold the
greatest potential benefit for the construction sector, and that to remain
competitive in the global marketplace, firms must look at their R&D commitments.
In the long run, however, the effectiveness of management will determine
success.
Pehr Gyllenhammar makes a complementary point about the importance of
management practices in his paper on the manufacturing industry. To claims that
the manufacturing sector is on the decline in an increasingly
services-based, information society, Gyllenhammar responds that the
manufacturing industry is adapting to today’s environment. One of the most
influential changes has been the new technologies employed in the automotive
sector, including new engineering materials, computer-aided design, robots, and
microcomputers. These new technologies mean that decision making can
become decentralized and that small-scale manufacturing can be cost-effective.
Another important factor changing the manufacturing industry has been new
demands from employees and customers, what Gyllenhammar refers to as the
invisible contract between them and the corporation. In fact, the new
technologies have brought about important changes in the way work is
organized. Less desirable tasks have been taken over by robots; light, flexible
technologies allow workers to organize themselves so that they command the
technology instead of vice versa; and new materials-handling mechanisms permit
the layout of equipment to fit particular work organizations. The challenge for
managers lies in organizing production so that they can develop their workers
through both technical and leadership training. To accomplish this goal, it will be
necessary for the manufacturing industry to take a longer term perspective and
use “patient capital” rather than striving for a quick return on investment.
Gyllenhammar concludes that a viable manufacturing industry is necessary but
not sufficient to solve the problems of unemployment and slow growth.
 The manufacturing industry is also the subject of the paper by Emilio Carrillo
Gamboa; however, he discusses the issue of production sharing as both a result
and a means of globalizing industry. By moving production facilities abroad to
low-wage developing countries, firms manufacturing products that have entered
the downside of the product cycle can maintain a competitive cost advantage.
Mexico, in particular, has become an important production-sharing partner for the
United States because of proximity, demographic factors, and the Mexican
economic crisis which has resulted in lower wage levels that are competitive with
labor costs in the developing countries of Asia and government programs that
support production-sharing.
The maquiladoras, or production sharing sites, have been the subject of debate
in Mexico for a number of reasons: the benefits of foreign-owned assembly
services are not extended to the rest of the economy, the maquiladoras do not
absorb traditional unemployment, and they are too vulnerable to swings in the
U.S. economy. In addition, some of the plants have been criticized for their poor
working conditions. Nevertheless, the author contends that they are an important
source of income, employment, and foreign exchange, and proposes that the
production sharing offers significant economic opportunities if the competitive
advantages of Mexico as a production-sharing site are improved and assembly
activities are more closely linked with the domestic economy. Carrillo Gamboa
acknowledges the objections to offshore production sharing but suggests that its
economic and political advantages far outweigh the disadvantages.
Further discussion of specific regional issues concerning technology’s impact on
development is provided in papers by Jan Kolm (Pacific Rim), Enrique Martin del
Campo (Latin America), and Ralph Landau and Nathan Rosenberg (United
States). In his paper on the consequences of globalizing industry in the Pacific
Rim, Kolm uses a theoretical construct based on the technological complexity of
goods and the product cycle to describe some general trends in the region’s
economic development. For example, gross national product (GNP) has
increased rapidly due to the globalization of industry, and export-driven
economies have helped the Pacific Rim nations overcome the disadvantages of
scale and the shortage of foreign exchange. Kolm asserts that progress in the
region is likely to continue, considering that there are suitable gradations of
development, ample raw materials in the region as a whole, and a populace that
has demonstrated its ability to cope with technological change. The focus of the
paper then narrows to an examination of the problems and challenges facing the
major groupings of Pacific Rim countries: the Association of Southeast Asian
Nations (ASEAN); the newly industrializing countries, in particular, the Republic
of Korea; Australia; and the United States and Japan. Despite their diversity and
the impediments they have faced in their industrialization, Kolm contends that
technology transfer has been less problematic in the Pacific Rim than in other
countries of the world, a sign of hope that competition can coexist with
cooperation.
 Enrique Martin del Campo deals specifically with the influence of technology on
development in the Latin American and Caribbean countries. Shifts in economic
strength and investment patterns influence the developing countries and make it
imperative for them to develop strategies for growth through improved
technological and entrepreneurial activity. Martin del Campo suggests that the
region’s technology strategy must combine development of both advanced and
intermediate technologies, linkage of smaller and large enterprises, and diffusion
of technological development through many sectors.
Because the economies of the region, like most developing countries,
participate in the international sphere through foreign trade, competitiveness in
foreign markets is crucial. The rate of innovation, the ability to apply advanced
technology, the degree of capital investment, use of natural resources, and the
existence of technological support services all affect the competitiveness of Latin
America in foreign markets. Two major factors, however, hamper economic
growth in Latin America. First, investment is curbed by an economically
depressed environment, and second, global demand for the region’s traditional
exports is weak. Any plan to remedy these problems would require a strong
technological component, including development of local capabilities in
technology, internal and external transfer of technology, strategic projects that
integrate science and technology, and government policies that support scientific
and technological endeavors.
Ralph Landau and Nathan Rosenberg review the impact of technological change
on U.S. economic growth. They cite several key influences on such growth,
including technological innovation, high capital investment rates, and increased
training of the total work force. The authors conclude that U.S. economic policies
are not conducive to innovation and capital formation, and they propose
strategies to ensure continued economic growth.
One change that poses both opportunities and difficulties is the rapid diffusion
of technology to other countries. As a result, the exploitation of new technologies
is no longer an exclusive strength of the United States. The maintenance of a
high-wage economy will depend on the ability of U.S. firms to compete in
international markets, particularly in manufacturing because of that sector’s
contribution to GNP, foreign trade, and national security; its purchases of
services; and its productivity increases and consequent contribution to the overall
economy.
Landau and Rosenberg also focus on the role of government in creating a
favorable environment for business decision making. Policies that encourage
personal savings from which investments could be made, reduce the budget and
trade deficits, and support a long-term financial climate are essential. However,
because U.S. business interests and government do not work as closely as they
do in some other countries, Japan, for example, this goal may be difficult to
achieve. If the United States is to remain competitive, increases in productivity
must be sustained, and this will happen only if training, management, and
investment in manufacturing and services are part of public and private
strategies.
In the volume’s final paper, Hajime Karatsu reminds us of some fundamental
points about the role of technology in improving the quality of life. Technology is
instrumental to economic growth, and as a result, economic strength is no longer
a function of a nation’s size and population, as it was before the industrial
revolution. Although some will argue that technology is the cause of the problems
resulting from industrialization, Karatsu describes how technology has been used
to provide solutions to some crucial problems—the oil crisis and pollution—in his
own country, Japan. Although not explored in his paper, one issue Karatsu’s
point raises is the extent to which technological decisions operate in concert with
other strategic policies. For example, Japan’s pollution problem, and that of many
other industrialized countries, has been solved in part by the export of the
pollution-causing industries to other nations.
Karatsu supports his views on the importance of technology to economic
growth by commenting that Japan’s methods of applying technologies have
allowed it to achieve a 1986 GNP of $2.3 trillion, or 11 percent of the world’s
economic activity. One characteristic of Japanese methodology is that new,
advanced technologies are applied in practical and simple ways that can be
easily commercialized. He cites as an example the use of carbon fiber in
golf clubs and fishing rods. This practice contrasts with that of the United States,
where advanced technologies are frequently applied to complex products in the
defense industry. A second aspect of Japanese practices in commercializing new
technologies is their attention to incremental changes and improvements in
product and process. Karatsu concludes by stressing the importance of
technological cooperation so that standards of living can be improved worldwide.
The papers in this volume reflect a diversity of national perspectives on the
impact of cutting-edge technologies on the individual, industry, and society;
appropriate means for harnessing technology to facilitate economic growth for all
nations; and the roles that should be played by institutions and governments in
the emerging global economy. Nevertheless, agreement on several key issues is
apparent: First, technology will continue to fuel economic growth and rising
standards of living around the world. Indeed, technology’s influence is pervasive,
for it shapes trade patterns and policies, employment, and even relations among
nations. A second area of consensus centers on the important role to be played
by the engineering community in facilitating international technological
advancement. As mentioned by Stephen Bechtel in his introduction of the
keynote speaker at the convocation, “…we (engineers and technologists) can
only benefit by being more attuned to the factors that influence each country’s
technological interests and capacities.” Although this process is frequently
constrained by national competitiveness concerns, Bechtel asserts that it is only
through increased cooperation that nations remain competitive. “A nation’s
strength as a participant in the world economy is derived in part from its ability to
adjust to rapidly fluctuating economic conditions and technological change.
Cooperation provides access to regional and national trends in technology,
thereby benefiting individual nations as well as the international engineering
endeavor.” Indeed, industrial competition can be a source of creative tension for
the world economy when viewed within the larger global framework of
cooperation directed at improving the quality of life for all.

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