I not only enjoyed reading Amar Bhide's The Venturesome Economy, but also agreed with it – no doubt the two are closely related! He uses his research amongst innovative American firms to probe the types of innovation they do, what they need to be able to innovate, and their various links to the global economy. The results lead him to conclude that the US should not only not worry about countries such as India and China 'catching up' in measures of basic scientific research, but should also actively embrace the contribution countries seen as threats can actually make to US living standards through their own innovations.
The book complements Will Baumol's The Free Market Innovation Machine, which dug deeper into the process of innovation by making the distinction between small and entrepreneurial firms which typically are the source of dramatic or disruptive innovations and big businesses which typically make incremental innovations. Bhide points out some other important distinctions. There is a difference between high, mid and low level know-how, and high, mid and ground level products or services. For example, microprocessors are a high-level product requiring high level know-how (solid state physics) and mid and low level (designing the circuits, managing the fab plant), while a motherboard is a mid-level product with its own high, mid, and ground level types of know-how. Only high-level know how requires advanced scientific research, and such research quickly becomes globally available, no matter which countries' universities and institutes originate it. No country, not even the US, can hope to be the source of all the world's scientific knowledge.
Bhide writes:
“Though the expansion of cutting-edge research abroad of course reduces the US share, as long as the United States maintains its capacity to harness high-level know how to improve the performance of its mid-a and ground-level industries, the expansion of global cutting edge research, regardless of where it originates, is a good thing for the United States.” (p255).
On the other hand, most of the innovation in any specific economy is mid and ground level, and rests on the detailed and complex relationships between firms and their suppliers, staff and customers. The kind of tacit knowledge and the interactions between the people involved can't easily be replicated in any other country, and indeed the past candidates seen as 'threats' to the US haven't quite caught up either. The overtaking of one leading economy by another is rare, and China would need to develop the thickets of supply chains and multiple levels of innovation to overtake the US lead. What's more, the mass of innovation doesn't require advanced scientific knowledge, but technical skills. Minting more and more science PhDs is fine if that's what they in fact have, but not if they all plan to do basic research only.
I gather that Bhide also has a new book in the works, due out this autumn. More on this one in due course.
