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Introduction
Chapter Overview
Science and engineering and the technological innovations that emerge from research and development activities enable high-wage nations like the United States to engage in today's highly competitive global marketplace. Many of the innovative new products exported around the world, many of the process innovations that have raised worker productivity, and many of the technological innovations that have created whole new industries can be traced back to earlier national investments in R&D. These innovations also make large contributions to national economic growth and industry competitiveness.
An international standard used to judge a nation's competitiveness rests on the ability of its industries to produce goods that find demand in the marketplace while simultaneously maintaining, if not improving, the standard of living for its citizens (OECD 1996). By this measure, the nation continues to be competitive; U.S. industry leads all others in the production of goods, and Americans continue to enjoy a high standard of living (figure 
; appendix table 
).
Faced with many of the same pressures from globalization as the United States, high-wage nations in Asia and Europe also have invested heavily in science and technology (S&T). Over the past decade, South Korea and Taiwan have advanced their technological capacity and increasingly challenge U.S. prominence in many technology areas and product markets. More recently, China, Finland, India, and Ireland have begun to distinguish themselves as producers of world-class S&T.
This chapter focuses on industry's vital role in the nation's S&T enterprise and how the national S&T enterprise develops, uses, and commercializes S&T investments by industry, academia, and government.[1] It presents various indicators that track U.S. industry's national activity and standing in the international marketplace for technology products and services and technology development. Using public and private data sources, U.S. industry's technology activities are compared with those of other major industrialized nations, particularly the European Union (EU) and Japan and, wherever possible, the newly or increasingly industrialized economies of Asia, Central Europe, and Latin America.[2]
Past assessments showed the United States to be a leader in many technology areas. Science & Engineering Indicators 2004 showed that advancements in information technologies (computers and communication products and services) drove the rising trends in new technology development and dominated technical exchanges between the United States and its trading partners. In this 2006 edition, many of the same indicators are reexamined from new perspectives influenced by international data on manufacturing and selected service industries for the advanced nations and trends in biotechnology patenting. Also presented are updates to the Georgia Institute of Technology high-technology indicators model, which identifies developing nations with increased technology capacities as well as recent data on trends in venture capital investments in the United States.
Chapter Organization
This chapter begins with a review of industries that rely heavily on R&D, referred to herein as high-technology or knowledge-intensive industries . Because no single authoritative methodology exists for identifying high-technology industries, most calculations rely on a comparison of R&D intensities. R&D intensities are determined by comparing industry R&D expenditures with the value of the industry's shipments. In this chapter, high-technology industries are identified using the R&D intensities calculated by the Organisation for Economic Co-operation and Development (OECD).
High-technology industries are noted for their R&D spending and performance, which produce innovations that can be applied to other economic sectors. These industries also employ and train new scientists, engineers, and other technical personnel. Thus, the market competitiveness of a nation's technological advances, as embodied in new products, processes, and services associated with high-technology or knowledge-intensive industries, can serve as an indicator of the economic and technical effectiveness of that country's S&T enterprise.
The global competitiveness of the U.S. high-technology manufacturing industry is assessed by examining domestic and worldwide market share trends. (Unless otherwise noted, trends in high-technology industry production are derived from data on industry value added, i.e., the value of industry shipments minus the value of purchased inputs, to better measure manufacturing activity taking place in each country or region.) Only limited trend data tracking gross revenues are available for the knowledge-based service industries. Data on royalties and fees generated from U.S. imports and exports of manufacturing know-how that is sold or rented as intangible (intellectual) property are used to further gauge U.S. competitiveness. Also discussed are indicators that identify developing and transitioning countries with the potential to become more important exporters of high-technology products over the next 15 years.[3]
The chapter also explores several leading indicators of technology development by presenting measures of inventiveness. This is done by comparing U.S. patenting patterns with those of other nations.
Finally, the disbursement in the United States of venture capital, which is money used to form and expand small companies, is examined by both the stage of development in which financing is awarded and the technology area receiving funds (see sidebar, "Comparison of Data Classification Systems Used").
[1] Educating for a workforce so that it can fully participate in an S&T-oriented economy is critical to its success. Three chapters of this report track trends in education: elementary and secondary education (chapter 1), higher education in S&E (chapter 2), and the S&E workforce (chapter 3).
[2] This chapter presents data from various public and private sources. Consequently, the countries included vary by data source.
[3] Other factors (e.g., business cycles, commodity shortages, international financial markets) also affect industry competitiveness but are not discussed in this chapter.
