Introduction

The idea that the United States won the Second World War only to lose the subsequent economic war is widely repeated in popular and professional press. Business Week (June 15, 1990, p. 35) begins the lead article in its special issue on “Innovation; The Global Race” with a story on the paintings in the corridors of Pentagon that depict the great American battles. The plaque commemorating the last global war reads, “World War II, 1941–”; the missing date, it is suggested, is prophetic of the continuing epic struggle for economic leadership. Fortune (December 2, 1991, p. 56) argues in its cover story that America is not innovating fast enough for global competition just when innovations are more important than ever.

What is this global technological competition that America is in danger of losing? Hardly three decades ago, the United States had the highest standard of living and an enviable growth rate. Its firms had a dominant share of the world market, selling cars, computers, heavy machinery, office and photographic equipment, and televisions. As foreign firms acquired the technology to compete with American firms – through licensing, imitation, or innovation – many US firms were forced to concede market share, to quit a particular line of business or even go out of existence. The resulting restructuring imposed considerable hardship on certain sections of the population at the very time when the general public was noticing a slowdown in the growth rate of the standard of living.