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The heart of America's innovation challenge lies in the strategy, organization and procedures of the large U.S. corporations. It is the failure of the large U.S. corporation to harness and focus the continuing inventiveness and energy of the individual American that is a core issue for our international competitiveness.
EROSION OF CORPORATE U.S.-PIONEERED MARKETS
In industry after industry American companies have invented and introduced new products or services only to see their leadership position eroded by overseas competitors even in the U.S. domestic market.
Both color TV and VCR technology were first developed and commercialized in the United States; now the U.S. ability to innovate in consumer electronics is confined to a few specialized niches such as highfidelity speakers. Once American auto design and production engineering, styling, and innovativeness were worldclass: now engineering innovations in every market segment are more likely to come from Stuttgart or even Nagoya than from Detroit. U.S. companies molded the tire industry; now most tires on U.S. automobiles are molded by foreignowned companies.
Not only has the U.S. position been decimated in consumer durable markets that we pioneered but we have also been badly hurt in many important industrial markets such as numerically-controlled machine tools and semi-conductors. Figure 1 shows the erosion of U.S. pioneered markets from 1970 to 1987 in five major industries. (Figure 1 omitted)
There are many factors that have contributed to the U.S. fallibilities like laziness and greed as well as higher-level issues of national economic policy. Professor Michael Porter recently attempted to summarize national industrial advance and decline as a four stage process. It begins as factor driven, advances to investment driven, and then advances further to innovation driven. This third stage is the final stage of advance. The fourth stage, welthdriven, represents a decline in development. Japan is clearly at the innovation-driven stage today in many industries from ceramics to optics, while Korea is attempting to make the leap from investment-driven to innovation-driven.
The question is whether the United State is advancing past innovation into declinethe wealth-driven territory first explored by the British. In the wealth-driven era comfort is preferred to competition. Motivation falls, rivalry ebbs, innovation declines. Geographic clusters of progressive firms and their suppliers that provided the core for a dynamic industry...