Thinking solely in national terms is an anachronism in an increasingly global economy, argues the author of "The Work of Nations." An excerpt.
Are foreigners buying up America's technology? Should we be concerned? When foreign money and strategic brokerage are added to Ameri can problem-solving, the result may be better for Americans than before.
Consider three small American high-tech companies that were purchased by foreigners in 1989: After a 12-year, $200-million effort to become the world's leader in photovoltaic technology, Arco Solar (a subsidiary of Atlantic Richfield) was sold to West Germany's Siemens; Atlantic Richfield did not want to continue investing in Arco Solar without more assurance that big profits were imminent. International Fuel Cells Corp. of South Windsor, Conn., the world leader in fuel-cell technology, was sold to Japan's Toshiba and Tokyo Electric, after its parent, United Technologies, refused to sink any more money into it. And Materials Research of Orangeburg, N.Y.--a semiconductor-equipment firm--was sold to Sony after Wall Street's best offer was still well below the firm's book value.
Clearly, there are no grounds for blaming the West Germans or Japanese for making these purchases since the American owners were eager to sell. Should these transactions then trouble us? While they surely exemplify the shortsightedness of American finance and strategic brokerage, we should be clear about who gains and loses by them.
Look closely at Arco Solar, International Fuel Cells and Materials Research, and what do you find? Groups of American problem-solvers--scientists, inventors, technicians, marketers--who have been accumulating potentially valuable insights about how to produce highly efficient solar energy, fuel cells and semiconductor equipment.
By acquiring them, the foreign-owned firms did not destroy this cumulative learning. That would have wiped out the value of these investments. Nor did the foreign firms enslave these Americans and ship them back to West Germany and Japan.
These problem-solvers had no intention of leaving the United States, and the potential value of their learning continues to reside in their heads.
The only thing that has changed is that most of the money they need to pay for their laboratories and equipment and the fabrication and testing of their inventions--and their salaries--now comes from West Germany and Japan. And, importantly, it comes with fewer and less urgent demands for short-term profits. After Sony bought Materials Research, the American president of the company finally felt free to pursue long-term research.
To be sure, West German and Japanese investors will share in whatever profits these gadgets bring in. Further, it will be a few German and Japanese strategic brokers at the center of these webs who help find people around the world to manufacture, market and distribute the inventions.
But to view these transactions as losses of U.S. technology is to indulge in vestigial thought. The primary value in these technologies lies in the skills and insights needed to create and refine them. These skills and insights are still American.
That some of the profits now go to investors and strategic brokers outside the United States should not cause Americans great alarm. American investors and strategic brokers are simultaneously working the other side of the same street, combing the world for good investment prospects and opportunities to contract with people of all nations to solve new problems, as well as to undertake high-volume, standardized production.
What, then, does it mean to "lose" American technology? Not what is commonly supposed. New inventions are constantly disseminated around the world from U.S. laboratories in the form of blueprints, codes, specifications and instructions. They reach design engineers in Rome, fabricators in Kuala Lumpur, assemblers in Hong Kong and markets in London as fast as they reach St. Louis.
This is true regardless of who--Japanese, West Germans or Americans--"owns" the firm: Strategic brokers working with Arco Solar, International Fuel Cells and Materials Research will ship the inventions to whoever around the world can produce and market them cheapest and best. New information quickly becomes part of worldwide webs.
What remains behind are the skills and insights necessary to continue to invent. These are a nation's key technological assets. They are lost only if insufficiently nurtured and developed. In these three cases, had foreigners not stepped in to provide financing and brokering, the accumulated learning might well have been squandered.
To claim that corporate nationality is becoming irrelevant is emphatically not to argue that, in the global economy toward which we are rapidly heading, national economic interests have ceased to exist or ceased to matter. The distinction is important. The Japanese, South Koreans, Taiwanese, West Germans and Dutch, among many others, are acutely aware of their national economic interests--though they continue to invest beyond their borders.
In doing so, each nation is striving to enhance the well-being and security of its citizens. Each is trying to increase the potential value of what their citizens can contribute to global webs of enterprise.
Such an ambition should not be regarded as a threat to the well-being and security of Americans. On the contrary, these efforts add to the total wealth of the world. America should pursue the same worthy goal.
1991, by Robert B. Reich. Reprinted with permission from Alfred A. Knopf, Inc.
BOOK REVIEW: "The Work of Nations: Preparing Ourselves for 21st-Century Capitalism," by Robert B. Reich, is reviewed on Page 2 of today's Book Review section.