Innovation and
technology
Creates economic
growth
Accounted for
approx. 68% growth of the U.S.
Technology – the
knowledge of how to combine resources to produce goods and services
Product
innovation – the development of new or better products
Create new
markets
Personal
computer
ATM (cash)
machines
Pharmaceutical
products
Process
innovation – the development of more efficient, lower-cost
production techniques
Robotics
Managerial
innovations
Governments foster
research
Subsidizes
research in universities or research institutes
Allows firms to
create a consortia for research
Antitrust Laws
Protect
intellectual property
Patents,
trademarks, and copyrights
The product life
cycle
U.S. firms invent
new products
Develop products
for the home market and export to foreign markets
Japan, Asian
tigers, or China
Improve the
products or reduce production cost
They begin to
produce products
The export low
cost products to the U.S.
Success if
innovation is a standardized production
Example
Laptops made in
China; widely accepted
China's dragon
CPU; not accepted
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The Three
Perspectives
The liberal view
– property rights are fundamental to the functioning of a market
system
Property rights
Rivalry – one
person using a property excludes other people
Excludibility –
people who did not pay for the resource can be prevented from
using it
Create
incentive to use resources efficiently
Public goods –
knowledge, innovation, and inventions
Nonrivalry –
one person consuming or using the good does not preclude another
form using the same good
Excludibility –
non-paying people cannot be prevented from using the resource
Free riders
will consume product and not pay for it
Intellectual
property rights
Trade-off
An innovator
is granted monopoly power
Research
costs money
Allows
innovator to recoup its costs
Expands
knowledge that could lead to more knowledge
Scientists
build upon the idea that leads to more discoveries
Creates
spillover effects
Intel
located a chip making plant in Costa Rica
Country has
rising class of computer programmers
Patents –
protects an invention for 17 years
Copyrights –
protect the expression of an idea, not the idea itself
Protects
books, movies, and ideas
Includes
software and databases
Prevent the
unauthorized reproduction, distribution, and sale
Protection
lasts for the life of the author plus 50 years
Trademarks –
a sign, logo or names registered by a manufacturer to identify
its goods
Protection is
usually granted for ten years
Renewable
Benefits
High quality
and reliability
Reduces
search costs
Promotes
quality standards
Encourages
repeat purchases by consumers
Mercantilists –
knowledge is a source of national wealth and power
Technological
advance countries
Closely guard
their own technology
Prevent other
countries from adopting technology
Dominate the
international markets
Countries must
Avoid
technological dependence
Acquire
foreign-owned technology
Not fall behind
in technology
Structuralists
create dependency on the rich industrial countries
Industrial
countries maintain their technological advantage over Third World
countries
Create
monopolies
Extract profits
from Third World countries
Third world
countries cannot adopt technology because of protection of
patents, trademarks, and copyrights
Deepens
dependency
Piracy is
widespread
U.S. music,
movies, and software are pirated
Windows 7 was
released on torrent websites several days before the official
release from Microsoft
Countries have
different rules – creates enforcement problems
U.S. Patent Law
– the first to file gets patent
Other countries
– the first to develop gets patent
Examples
U.S. patents
for animals, the white mouse in 1988
Patent for the
process
Other countries
– cannot patent life
Weak intellectual
property rights
Free riders can
use knowledge
Insufficient
resources would be devoted to R&D
Fewer new and
lower-cost products would be available to consumers
Foreign firms
have lower development costs, since they copy the technology
Then foreign
firms can underprice the U.S. firms
Difficult to
control information
The internet
allow information to be passed around the world in seconds
U.S. is
aggressive for protecting intellectual private rights
U.S. was a later
comer and signed the Berne Agreement in 1989
U.S. can impose
trade sanctions against countries that have wide-spread piracy
WTO can also
help protect property rights
Preserves
technological superiority
U.S. may have
gone too far
Scientists and
computer programmers avoid the U.S.
Illegal to talk
about encryption and decryption technologies
Smart cards
DVDs
File formats
are protected – MP3, MP4, etc.
Old
established firms go after new companies that have similar “too
similar” products
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