presentation by João Castro and Susana Beira Lisbon . 5 th March 2005

1. Explaining Industrial Leadership David C. Mowery and Richard R. Nelson pages 359 - 382 presentation by João Castro and Susana Beira Lisbon . 5th March 2005

2. SUMMARY I explanations for industrial leadership in these seven industries II factor endowments, institutions, and industrial leadership III the role of domestic market demand in industrial leadership the locus of industrial leadership: firms, sectors, of the nation-state? IV V the evolution of industry structure VI lessons and implications for public policy 1

3. explanations for industrial leadership in these seven industries I 2

4. explanations for industrial leadership in these seven industries I 3

5. factor endowments, institutions, and industrial leadership II . not always natural resources played an important role . domestic universty system important, but not with the same intensity in the different sectors . domestic avaibility of capital . venture capital (leadership Vs enduring leaders) . universty links important if they are proactive, close to firms needs BUT! SO! leadership vs maintain the leadership 4

6. the role of domestic market demand in industrial leadership III Domestic markets tend to dominate the sales of firms in the early development of most of these industries U.S. Department of Defense supported the early growth of American firms in computers, semiconductors, and software Medical products industries→ high profitability→ few explicit government controls on health care costs (vs highly regulated markets in most Western European nations) Exploiting their domestic market required that firms innovate →major effects on the growth and structure of demand Even in a world where markets are global, large domestic markets provide an invaluable “springboard” for firms seeking to enter new industries or seize new technological opportunities 5

7. the locus of industrial leadership: firms, sectors, of the nation-state? IV firm factors leadingfirms were established many years ago high rates of turnover among “dominant firms” 6

8. the locus of industrial leadership: firms, sectors, of the nation-state? IV 1. the environment, and what firms do to environment matter 2. firms often exert significant influence on industrial-level supporting institutions and policies 3. “sectoral support systems” – the sources of industrial leadership resides in structures intermediate beteween nations and firms IMPORTANT IS! 7

9. the locus of industrial leadership: firms, sectors, of the nation-state? IV Germany chemical industry, also invented the industrial research and pioneered in providing technical consulting services the American Defence Department is crucial to the R&D development in semiconductors, computer and software American firms interaction as an industry develops, the firms themselves may play a powerful role in molding their institutional environment examples – Kaiser Wilhelm Gesellschaft US policies on intellectual property rights industrial influences on supporting institutions US pharmaceuticals industry supports growth in the NIH budget, the Dod supports semiconductors and computers firms regional concentration biotechnology - Seattle, San Francisco, San Diego and Boston; Rhineland machine tools firms – Milwaukee; south-western Germany computer, software, semi conductors – “Silicon Valley” sectorial innovation systems 8

10. the evolution of industry structure V “dominant design” theories . industrial evolution has involved the progressive opening of new segments on market demand, for which existing “dominant designs were poorly suited “dynamic capabilities” . these long-term leaders have maintained their technological and capabilities in the face of significant change in underlying basic technologies “punctuated equilibria” . numerical control for the machine tools industry . development of petroleum for the chemical industry . the antibiotics for the pharmaceutical industries . integrated circuit, microprocessor for the semiconductor industry 9

11. the evolution of industry structure V ? 10

12. lessons and implications for public policy VI lessons for sectoral policies policies . much R&D infra-structure is sector-specific . a number of regularatory policies are sector specific . anti trust policies are neither framed by nor targeted on specific sectors . the policies associated with the development of a strong industry vary significantly from sector to sector (in scope, kind and impact) . governement regulations have significant influences in phamaceutical and medical firms development... ....more recently with environmental regulations . defense-related procurement in France and Great Britain proved to be a much less efective catalyst for industrial leadership 11

13. lessons and implications for public policy VI generic policy principles 12