Two Interesting Reports

These two recent reports from the Information Technology and Innovation Foundation website are interesting:

1. "Capturing Value in a Global Innovation Network: A Comparison of Radical and Incremental Innovation", Jason Dedrick, Kenneth L. Kraemer, Greg Linden, Personal Computing Industry Center, UC Irvine, September 2007.

This study compares the gross profit margins along the supply chain for iPods and laptop computers. Apple is described as a radical innovator, having found "the right combination of hardware, software and content distribution to have a winning product." HP and Lenovo laptops are described as examples of incremental innovations, building on an earlier radical innovation of laptops. Apple achieved high levels of gross profits "in the formative years of a new technology, when the technology direction is not yet defined'. The "results show that, on average, countries tend to occupy well-defined spaces in global supply chains. The innovative countries innovate, while the other countries nip at their heels and capture a small share of the value created. These relationships are not written in stone, but are slow to change."

2. "The Globalization of R&D and Innovation: How Do Companies Choose Where to Build R&D Facilities?" Robert D. Atkinson, Testimony before the Committee on Science and Technology Subcommittee on Technology and Innovation of the U.S. House of Representatives, October 4, 2007.

Excerpt: "In the last decade the share of U.S. firms’ R&D sites located in the United States declined from 59 percent to 52 percent, while the share in China and India increased from 8 to 18 percent.4 According to a recent survey of U.S. R&D managers, over 60 percent of U.S. companies surveyed are investing in R&D in China, 50 percent in India, and 20 percent in Eastern Europe. Although 65 percent of U.S. companies are increasing their R&D investments in Asia, just 29 percent are doing so in higher-cost Western Europe – the traditional destination for U.S. corporate R&D.5 From 1994 to 2003, R&D performed by U.S. firms outside the United States increased significantly in low-wage nations like Mexico, China, and Malaysia, and also in mid-wage nations like Ireland, Israel, and Singapore (see Figure 1)."