This section covers topics concerning the evolution of innovation systems, and information and production disruption. Information and production disruptions are changing the dynamics of innovation and global economic growth. This sections lays out the foundation for strategies and designs for governing that will be explored in the following sections. The citations below are used to define the scale and urgency of the challenges raised by digital technologies, connects the emergence of digital platform clusters, and lays out the subsequent pattern of governance choices.

 

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KEY WORDS:

Innovation, R&D, cluster, first wave, second wave, Korea, chaebol, VC, platform, cluster, transformation, automobile (industry), Tesla, energy (grid), modularity, interoperability disruption, Monsanto, Qualcomm, trusted digital environment, market access, design, agriculture, biomedical devices

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Erik Brynjolfsson and Adam Saunders, Wired for Innovation: How Information Technology Is Reshaping the Economy (Cambridge, MA: MIT Press, 2009), explains how and why innovation capacity matters for long-term relative economic health and growth.

• Erik Brynjolfsson and Adam Saunders explain how and why innovation capacity matters for long-term relative economic growth. The authors argue that innovation comes in booms and busts, and lay out a framework that explains how information  technology is responsible for the recent boom in productivity,  both indirectly and directly.

 

Atkinson and Ezell, Innovation Economics, 2012; Dan Breznitz and John Zysman (eds.), The Third Globalization: Can Wealthy Nations Stay Rich in the Twenty-First Century? (New York: Oxford University Press, 2013).

• The authors, joined by prominent scholars and economists, describe the transformation in the economies of historically wealthy  countries, and discuss the possibilities and potential for economic growth among advanced industrial nations. Atkinson and Ezell include case studies in order to assess the different policy options that governments can put in place to encourage and sustain economic productivity.

 

This synthesis draws on the literature review by Breznitz and Cowhey and on Tai Ming Cheung and Bates Gill, “Trade versus Security: How Countries Balance Technology Transfers with China,” Journal of East Asian Studies, 13, no. 3 (September–December 2013): 457–482. Mercedes Delgado, Michael E. Porter, and Scott Stern, “Defining Clusters of Related Industries,” NBER Working Paper 20375, August 2014, http://www.nber.org/papers/w20375.

• The authors argue that the clusters through inter-industry linkages based on co-location patterns, input-output links, and similarities in labor occupations, are more likely to spur further innovation and drive agglomeration.

 

Mikko Packalen and Jay Bhattacharya, “New Ideas in Invention,” National Bureau of Economic Research, Working Paper 20922, January 2012, http://www.nber.org/papers/w20922.

• The authors propose that inventions that build on new ideas, rather than inventions based on old ideas, are more likely to spur subsequent innovations. Packalen and Bhattacharya postulate that encouraging research and technological advancement based on new ideas is key to further innovation.

 

Rebecca M. Henderson and Kim Clark, “Architectural Innovation: The Reconfiguration of Existing Technologies and the Failure of Established Firms,” Administrative Science Quarterly, 35, no. 1 (March 1990): 9–30, http://links.jstor.org/sici?sici=0001-8392%28199003%2935%3A1%3C9%3AAITROE%3E2.0.CO%3B2-U.

• Architectural innovation is defined as innovation that changes the components of a product, but does not change the architecture, or integration into the product’s system. They often introduce challenges, from within the internal structures of a firm, that are often hard to detect in established firms. However, the new linkages and minor technological improvements that are embedded in the firm’s information-processing procedures and internal structures are destructive to industry incumbents.

 

Steven Klepper, Experimental Capitalism: The Nanoeconomics of American High-Tech Industries (Princeton, NJ: Princeton University Press, 2015), points out that industries like autos were once novel-product innovations that led to clustering.

• Klepper identifies six key industries, such as the automobile industry, that exemplify the high-tech innovation that eventually led to clustering. The author also describes evaluates policy implications to further encourage innovation in the United States’ high-tech industrial base.

 

James Fallows, China Airborne (New York: Random House, 2012). In addition, in many years the U.S. Export–Import Bank extended a significant majority of their loan guarantees to the aircraft and avionics industry. Export–Import Bank of the United States, 2014 Annual Report, accessed January 21, 2015, http://www.exim.gov/sites/default/files/reports/annual/EXIM-2014-AR.pdf.

• Fallows details the China’s modernization efforts to rival the United States’ position as the leading aerospace power. Meanwhile, the U.S. Export-Import Bank took steps to extend and provide loan guarantees to the aircraft and avionics industry, to maintain their competitive advantage.

 

John R. Graham, Campbell R. Harvey, and Shiva Rajgopal, “The Economic Implications of Corporate Financial Reporting,” Journal of Accounting and Economics, 40, nos. 1–3 (2005): 3–73

• After surveying over 400 executives, the authors find that managers operate with the goal of maintaining predictability in earnings and financial disclosures, and provide voluntary disclosures to both reduce risk and increase reward in their company’s stock prices. Managers are also more likely to take long-term negative consequences over the chance to make within-GAAP accounting decisions that will better manage earnings.

 

International Trade Administration, “The U.S.–Korea Trade Agreement: Opportunities for the U.S. Automotive Sector,” April 2011, accessed January 22, 2015, http://www.trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ian_002590.pdf.

• Disputes, such as the grievances by the United States auto industry about the Korean market, were still present; however, the U.S.-Korea Trade Agreement of 2011 served, in part,  to ease such tensions.

 

Mary Lindenstein Walshok and Abraham J. Shragge, Invention and Reinvention: The Evolution of San Diego’s Innovation Economy (Palo Alto, CA: Stanford University Press, 2013).

• Walshok and Shragge detail San Diego’s transition from a small coastal settlement to a booming city and military hub–emphasizing the role of cultural values and social dynamics in the transformation.

 

See AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994

• This exemplifies the classic analysis of why the Silicon Valley cluster became dominant stresses the stronger social network emerging among the flatter startup structures of California firms.

 

Steve Casper, “The University of California and the Evolution of the Biotechnology Industry in San Diego and the San Francisco Bay Area,” in Kenney and Mowery, pp. 66–96; Lerner on local bias of VCs, p. 68.

• Casper differentiated the networks in which clusters rely on in differing industries, but stress that networking is an integral part of clusters. For instance, he finds that the San Francisco biotech cluster similarly relied more on science networking, but San Diego’s cluster relied more on managerial networking. Both types of clusters rely heavily on research generated by major universities and institutes, but the differing strengths of each region’s venture capital systems leads to different levels of investment directed towards prominent firms versus local firms.

 

Leslie Picker, “Meet the Father of the Modern IPO,” Bloomberg Business Weekly, May 15, 2014. Lerner, pp. 65–75.

• In 2013 dollars, U.S. initial public offerings totaled $1.3 billion in 1980 but reached $150 billion in 2013.

 

William H. Janeway, Doing Capitalism in the Innovation Economy (Cambridge: Cambridge University Press, 2012), pp. 81–84.

• Janeway provides  an insider’s account of the early days of venture capital funding.

 

Arun Rao, A History of Silicon Valley, 2nd ed. (Palo Alto, CA: Omniware Group, Kindle eBooks, 2013).

• Conversely, for the readers interested in more general information, Rao provides a broader history of Silicon Valley as a whole.

 

Peter F. Cowhey and Jonathan D. Aronson, Transforming Global Information and Communications Markets (Cambridge, MA: MIT Press, 2009).

• Cowhey and Aronson’s previous book addresses innovation in information and communication technology (ICT) and how it fuels the growth of the global economy. Cowhey and Aranson argue that continued rapid innovation and economic growth require new approaches in global governance that will reconcile diverse interests and enable competition to flourish. Transforming Global Information and Communications Markets analyzes changes in ICT markets, examine case studies, and consider principles and norms for future global policies

 

Jonathan Sallet, Ed Paisley, and Justin Masterman, The Geography of Innovation: The Federal Government and the Growth of Regional Innovation Clusters (Washington, D.C.: Science Progress, 2009).

• The authors assert that regional innovation clusters are critical in national competitiveness. They argue that innovation policies should be a collaboration between regional leaders and the federal government, emphasizing that the federal government should facilitate the flow of information between regional innovation clusters, and tackle national challenges from within this structure.

 

Wesley M. Cohen, Richard R. Nelson, and John P. Walsh, “Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not),” NBER Working Paper 7552, February 2000, http://www.nber.org/papers/w7552.

• Cohen, Nelson, and Walsh note that these ICT technologies are complementary assets that are appropriately designed for cooperative arrangements among specialists.

 

Asia-Pacific Global Research Group, “South Korea’s “Creative Economy”—6 Strategies,” February 12, 2014, http://asiapacificglobal.com/2014/02/south-koreas-creative-economy-primer-6-strategies/.

• The six strategies are derived from  three goals of the creative economy plan. Goals include the creation of new jobs and market through creativity and innovation, the strengthening of global leadership among other economies, and promoting creativity within society. Some of the strategies proposed to reach these goals include promoting venture capital firms and SMBs to become leaders in the creative economy, and expanding their science technology industries and ICT innovation capabilities as the foundation for the creative economy.

 

Paul Hofheinz and Michael Mandel, “Bridging the Data Gap,” Progressive Policy Institute, No. 15, 2014, http://www.progressivepolicy.org/wp-content/uploads/2014/04/LISBON_COUNCIL_PPI_Bridging_the_Data_Gap.pdf

• In 2014, U.S. and Korea’s  per capita monthly data usage was roughly equivalent, with the European Union’s averaging less than one-third of the U.S. and Korea’s per capita average. Hofheinz and Mandel note that the gap closes when the use of cosumer videos is omitted from the data usage categories, but Germany remains less than half of the United States’ average data usage. Today, Korea seems to be falling behind, with only 20% of the Korean economy being largely internet-based; however,  the Internet of Things is expected to increase openness.

 

Wonil Lee and Jong-in Choi, “Industry–Academia Cooperation in Creative Innovation Clusters: A Comparison of Two Clusters in Korea,” Academy of Entrepreneurial Journal, August 2013, https://www.questia.com/library/journal/1P3-3325216641/industry-academia-cooperation-in-creative-innovation.

• Lee and Choi assess activation strategies for industry-academia cooperation in creative innovation clusters by comparing two Technovalley initiatives–one created by the regional government, and another by the central government–and found major differences in their methods of research collaboration.

 

Richard Florida, “The World’s Leading Startup Cities” (2015), http://www.citylab.com/tech/2015/07/the-worlds-leading-startup-cities/399623/?utm_source=nl__link1_072715

• This article finds that seven of the top twenty startup locations are found in the United States, with Silicon Valley positioned as the overall leader.

 

Susan Helper, Timothy Krueger, and Howard Wial, Locating American Manufacturing: Trends in the Geography of Production (Washington, D.C.: Brookings Institution, 2012).

• American manufacturing firms are found to be expanding and operating in location-specific strategies, as industries become more aware that regional proximity and geographic clustering is crucial to further innovation. The authors propose a set of “high-road” policies that are sensitive to the geographic differences in U.S. manufacturing, but note that these policies will be easier to implement as manufacturers move towards regionally clustered locations.

 

Autor, Dorn, and Hanson; Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, and Brendan Price, “Return of the Solow Paradox? IT, Productivity and Employment in U.S. Manufacturing,” American Economic Review, Papers and Proceedings, 104, no. 5 (2014): 394–399.

• This study contests the earlier resolves of the Solow paradox may have ignored certain key paradoxical elements of IT-associated productivity increases in U.S. manufacturing. Instead, they find that higher productivity growth is not strongly evidenced in IT-intensive industries, and despite labor growth in IT-intensive industries, output is found to be decreasing. Using U.S. manufacturing firm data, the authors challenge the popular notion that IT is making workers obsolete, and urge the current resolutions of the Solow Paradox to be reexamined.

 

Peter Vanham, “Top Countries for Total Venture Capital Invested,” World Economic Forum, July 28, 2015, https://www.weforum.org/agenda/2015/07/which-countries-have-the-most-venture-capital-investments/

• After the United States, particularly the Bay Area, the next five largest magnets for venture capital in 2014 were China ($15.5 billion), Europe ($10.6 billion), India ($5.2 billion), Israel ($1.9 billion), and Canada ($1.4 billion).

 

Ethan Mollick, “It’s Not Just the Experts: Crowds Can Pick a Winner, Too,” 2014, http://knowledge.wharton.upenn.edu/article/just-experts-crowds-can-pick-winner/.

• The article indicates that crowdfunding exemplifies a wider move towards democratization of entrepreneurship and innovation. The authors suggest that crowdfunding can eventually work in cooperation with the traditional venture capital models; thus, providing a more robust mix of funding option for entrepreneurs.

Andrew McAfee and Erik Brynjolfsson, “Big Data: The Management Revolution,” Harvard Business Review, 90, no. 10 (October 2012): 60–66, 68

• Big data is currently booming as more and more companies understand that data-driven decisions tend to be better decisions, and harness their expanded company and business operations knowledge to improve performance and decision making.  Data-driven companies are more likely to pull away from their competitors as they can more effectively strategize growth based on a data-driven, robust understanding of their business.

 

David Warsh, Knowledge and the Wealth of Nations: A Story of Economy Discovery (New York: Norton, 2006).

• This book explains how, as the economic growth theory evolved, it placed more emphasis on the impact of innovation.

 

Tyler Cowen, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better (Boston: Dutton, 2011)

• Cowen argues that the United States has reached a technological plateau, and contends that the U.S. economy had already exhausted their original “low hanging fruit” growth opportunities. However, he is optimistic that economic growth can be achieved again once the country can identify the underlying causes that drove the country to its original growth and economic success, and strategize how to emulate it moving forward.

 

Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, The Princeton Economic History of the Western World (Princeton, NJ: Princeton University Press, 2016).

• Gordon asserts that the development in information and communication technology does not measure up to the success of past achievements, particularly the five Great Inventions that were responsible for economic growth between 1870 to 1970. He argues against the popular optimistic belief that information and communication technology has the potential to generate continuous rapid economic growth.

 

McKinsey Global Institute, Digital Globalization: The New Era of Global Flows (2016).

• The expansion of flows of data and information now generate more economic value than the trade of global goods. Data flows further increase productivity by increasing global participation and creating more efficient markets.

 

Peter F. Cowhey, “Crafting Trade Strategy in the Great Recession: The Obama Administration and the Changing Political Economy of the United States,” in Miles Kahler and David Lake (eds.), Politics in New Hard Times: The Great Recession in Comparative Perspectives (Ithaca, NY: Cornell University Press, 2013).

• The authors assess how economic crises have compelled policy makers to redefine and reinforce interests both at the individual level, as well as within national political parties. Ultimately, the authors find that policy makers now devote more attention to the role of smaller firms in trade policy.

 

Anne Wren (ed.), The Political Economy of the Service Transition (New York: Oxford University Press, 2013).

• The service transition refers to service sectors dominating output and employment expansion, over industrial sectors, the traditional drivers of economic growth. The authors argue that the differences in political economies, and their subsequent political and institutional structures, drive the ultimate impact and procession of the service transition in each economy.

 

“Domino’s Becomes a Tech Company That Happens to Make Pizza,” All Things Considered, NPR, November 4, 2014, http://www.npr.org/blogs/alltechconsidered/2014/11/04/359829824/dominos-becomes-a-tech-company-that-happens-to-make-pizza.

• In 2014 a resurgent Domino’s leveraged its superior IT to jump ahead of its competitors. It even dropped “pizza” from its name.

 

Rainer Lanz, Sébastien Miroudot, and Hildegunn K. Nordås, “Trade in Tasks,” OECD Trade Policy Working Papers, No. 117, 2011, http://dx.doi.org/10.1787/5kg6v2hkvmmw-en

• The authors emphasize that policy makers should manage market distortions, particularly those generated by offshoring tasks, through social and labor market policy measures rather than trade restrictions.

 

Darryl K. Taft, “One-Third of Big Data Developers Use Machine Learning: Study,” eWeek, July 6, 2016, http://www.eweek.com/developer/one-third-of-big-data-developers-use-machine-learning-study.html.

• Machine learning is powerful, but often limited to the prospects of new capabilities. Taft suggests that many predicted benefits of machine learning depend on the developments of new data analytics, such as big data analytics, that far exceed standard statistical tests.

 

Quentin Hardy, “A Small Software Company Sees a Future in Containers of Code,” New York Times, January 13, 2015, p. B2.

• “Containers” are the newest metaphor for packing complex software code into building blocks that can be slipped in and out of different service applications.

 

Kal Raustiala and Christopher Sprigman, The Knockoff Economy: How Imitation Sparks Innovation (New York: Oxford University Press, 2012), pp. 185–191.

• Raustiala and Sprigman study fields where copying is generally allowed or common, and argue that creativity can thrive despite imitation from competitors. The authors assert that allowing the freedom to copy can give rise to increased innovation in industries that are not copyright-focused.

 

Olivier L. de Weck and Darci Reed, “Trends in Advanced Manufacturing Technology Innovation,” in Richard M. Locke and Rachel L. Wilhausen (eds.), Production in the Innovation Economy (Cambridge, MA: MIT Press, 2014), pp. 235–262.

• The authors describe how innovation in manufacturing process technologies, and relevant product design, play a role in the future prospects for manufacturing. They contend that there are seven categories that seem favorable in manufacturing technology innovation and growth. Lastly, the authors find that the subsequent advanced manufacturing industry is highly integrated with products and services, as opposed to traditional manufacturing that is only linearly associated with products and services.

 

Lee G. Branstetter, Matej Drev, and Namho Kwon, “Get with the Program: Software Driven Innovation in Traditional Manufacturing,” NBER Working Paper 21752, November 2015, http://www.nber.org/papers/w21752.

• The authors comment on the increasing importance of software for successful innovation in manufacturing sectors. Geographic location has an influence on a manufacturing firm’s performance as it  relies on the amount of skilled software labor available. The authors found that firms with higher software intensity generate more value per investment in research and development.

 

Ashish Arora, Wesley M. Cohen, and John P. Walsh, “The Acquisition and Commercialization of Invention in American Manufacturing: Incidence and Impact,” NBER Working Paper 20264, June 2014.

• The greater division of labor across innovative firms is found to expand social welfare through gains from trade and specialization; thus, development and commercialization of inventions has lead firms to become more reliant on open co-invention.

 

Eric von Hippel, Democratizing Innovation (Cambridge, MA: MIT Press, 2005)

• As innovation becomes increasingly democratized, Von Hippel encourages manufacturing firms to structure their innovation processes such that it is in open collaboration with user-innovators, and urges policymakers to redesign government policies in a way that encourages user innovations.

 

Daniela Hernandez, “Software Is Still King. Hardware Is Just Along for the Ride,” Wired, July 8, 2013, http://www.wired.com/business/2013/07/software-is-still-king-hardware-is-just-coming-along-for-the-ride/?cid=co9596544.

• Hardware is not a profitable or attractive investment for venture capitalists. This article uses Dropcam as a case study for a successful hardware startup that differentiated themselves as a software-first company, emphasizing that their mission is to provide innovative cloud software and services through their hardware product.

 

Rachel Botsman and Roo Rogers, What’s Mine Is Yours: The Rise of Collaborative Consumption (New York: Harper Collins, 2010)

• Botsman and Rogers assert that collaborative consumption and technology-based sharing communities are redefining traditional approaches to business and consumerism.

 

Lerner, p. 68; Ethan Mollick, “The Dynamics of Crowdfunding: Determinants of Success and Failure,” Journal of Business Venturing, 29, no. 1 (2014): 1–16.

• Lerner and Mollick explore the determinants of success and failure of crowdfunding. They find that  geographic location has an impact on the  underlying drivers that influence success or failure; these include personal networks, types of projects proposed, and successful fundraising. Additionally, block chain technology may further lower the cost and increase the network effects of crowdsourced models.

 

Deutsch Bank Research, Industrie 4.0: Huge Potential for Value Creation Waiting to Be Tapped, May 24, 2014, http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000335628.pdf

• This paper highlights how taking advantage of the progressively interlinked international trade flows, coupled with increased automation and more flexible production structures, is expected to generate significantly higher value added across numerous sectors.

 

Dan Breznitz, “Why Germany Dominates the U.S. in Innovation,” Harvard Business Review, May 27, 2014, https://hbr.org/2014/05/why-germany-dominates-the-u-s-in-innovation/.

• The main driver for Germany’s innovation and economic growth success above major world powers–such as the United States and China–is their innovation policies that target the innovation cycle in its entirety. The key is to focus on employment growth, sustaining worker productivity with relevant job training, and applying technological improvements and innovation to existing industries. Innovation must be generated from widespread productivity gains–rather than the traditional concentration on high-tech production as is the norm in countries such as the United States–by also allocating innovation and growth policies towards the improvement of existing manufacturing industries.

 

AgDNA. https://agdna.wordpress.com/.

• Specialist companies serving world markets, like AgDNA of Australia, are emerging in farm centers around the world.

 

John Eligon, “Tech Start-Ups Find a Home on the Prairie,” New York Times, November 22, 2012, p. A1.

• As more information-intensive sectors develop, tech-startups seek new locations based on areas that are expected to prompt mutually beneficial clusters to further innovation. For instance, the Silicon Prairie News connects entrepreneurs and updates readers on the innovation activity occurring in the area, which further promulgates clustering and is credited for the rapid start-up growth experienced in the region.

 

“Monsanto: Now the Big Data Buzz Hit the Agriculture Industry.” http://seekingalpha.com/article/1729352-monsanto-now-the-big-data-buzz-hit-the-agriculture-industry

• The big data market is appealing due to the unique knowledge that can be derived from big data analytics and associated products. Monsanto acquired Climate Corporation for $930 million in 2013. Climate has data assets that include crops, crop yields, water-holding capacity, and more for million of locations in the United States. These assets can be used to run trillions of weather simulation data points.

 

Ilan Mester. “Engineers Receive $2.6M to Develop Smart Clothes.”

http://www.engineering.com/DesignerEdge/DesignerEdgeArticles/ArticleID/10216/Engineers-Receive-26M-to-Develop-Smart-Clothes.aspx

• Work is in process that could transform another traditional industry—textiles—especially through the manufacture of smart shirts. The ATTACH (Adaptive Textiles Technology with Active Cooling and Heating) project at UCSD develops fabrics that will automatically heat or cool the wearer, potentially saving on heating and air conditioning bills.

 

Quentin Hardy, “Working the Land and the Data,” The New York Times, November 30, 2014.

• This article details a farmer that operates a technology-driven farm. The technological advancements are credited for saving his land in a time when the demise of small farms is seemingly inescapable. This is mainly due to large farms being able to afford technological innovations that increase productivity.

 

Jess Lowenberg-DeBoer, “The Precision Agriculture Revolution—Making the Modern Farmer,” Foreign Affairs (5, no. 3 (May/June 2015): 105–112.

• Precision agriculture is the most recent trend in farming in which farmers utilize innovation technology to collect precise data about their fields, and are able to make more informed decisions on the most effective cultivation strategies per square foot. Naturally, this allows farmers to maximize the value of each harvest; however, the benefits stretch far beyond crop yields alone.

 

420150924. J. Huffstutter and Carey Gillam, “Exclusive: Pivoting after Failed Syngenta Bid, Monsanto to Build Big Data Business,” Reuters, September 24, 2015, http://uk.reuters.com/article/2015/09/24/uk-monsanto-big-data-exclusive-idUKKCN0RO0B420150924.

• Monsanto is offering shareholders a future in big data. Monsanto is transforming its main identity by making plans to position itself as a software, services, and hardware provider that also sells its traditional products. The big data transformation will provide farmers with valuable knowledge that is expected to boost crop yields.

 

Peter Sayer, “German Industry Is Poised to Exploit Rural Broadband,” PCWorld, March 15, 2015, http://www.pcworld.com/article/2897092/german-industry-is-poised-to-exploit-rural-broadband.html.

• After receiving details from farmers, SAP’s prototype Digital Farming app is designed to recommend the timing and actions farmers might take,  making real-time changes as weather and other conditions change. Farmers could choose to accept some or all of the recommendations. The broadband network would almost completely eliminate data clogging and ensure data privacy in accordance with German data protection regulations.

 

Charles Clover, “China: Monopoly Position,” Financial Times, January 25, 2015, https://www.ft.com/content/22704a96-9ff2-11e4-9a74-00144feab7de.

• China fined Qualcomm $1 billion for violating China’s antitrust policies. Qualcomm, having a lot to lose, both in terms of settlement as well as selling prices moving forward,  chose to defend itself. Given that this case happened after the demise of business relationships between China and a string of U.S. tech companies, this was an uncommon response. Ultimately, Qualcomm settled for nearly $1 billion.

 

Mark Scott, “EU Opens Antitrust Investigations into Qualcomm,” New York Times, July 16, 2015, http://www.nytimes.com/2015/07/17/business/international/qualcomm-antitrust-investigation-eu.html?_r=0&mtrref=undefined&gwh=C0EC00D64BADC22FC0CC2C528A7F2FE3&gwt=pay

• EU opened antitrust investigations into Qualcomm, claiming that an investigation would ensue in order to determine whether the company had abused its dominant market position by offering reduced prices to customers that only purchased from them–effectively driving out their competition. This case represented yet another allegation aimed at U.S. tech companies, leading executives to believe that the string of investigations were actually an attempt to boost European competitors’ market position.

 

Mark Hibben, “Qualcomm: Back on Track,” Seeking Alpha, July 21, 2016.

• The China antitrust settlement actually provided a pathway for Qualcomm to improve its collection of licensing revenues there, and allowed the tech company to strategize how to maximize its reach in The Internet of Things.

 

Qualcomm: Taking Artificial Intelligence to a New Level,” Seeking Alpha, May 16, 2016, http://seekingalpha.com/article/3975394-qualcomm-taking-artificial-intelligence-new-level.

• This article summarized that Qualcomm made its first machine learning SDK available to OEMs, market opportunities are growing at a CAGR of 18% for the next five years, and its Zeroth platform and neuromorphic computing initiative is expected to be a main driver of growth as it capitalizes on these market opportunities.

 

Joshua Gans, The Disruption Dilemma, 2016.

• Gans first seeks to reestablish the initial definition of disruption in business terms. He identifies two kinds of disruption: demand-side, which occurs when successful firms focus on main customers and do not properly account for potential innovations or entrants that target niche demands; and supply-side, which occurs when companies focus on existing processes without developing new ones. The author outlines methods in which business leaders can handle disruption, given logistical constraints.

 

Samantha Masunaga and Mike Freeman,” Qualcomm prepares for a future beyond

smartphones with $38-billion purchase of NXP Semiconductors,” Los Angeles Times, October 27, 2016, http://www.latimes.com/business/technology/la-fi-tn-qualcomm-nxp-20161027-story.html.

• Qualcomm purchases NXP Semiconductors as part of its strategy to expand its leading market position and leading technology across new opportunities and channels. This was a response, in part, to their smartphone growth opportunities being exhausted.

 

Andrew Ward, “Roche Agrees Digital Disease Monitoring Push with Qualcomm,” Financial Times, January 30, 2015, p. 15.

• Qualcomm also created a joint venture with Roche and a joint investment fund with Novartis, furthering their differentiation and expansion objectives.

 

David Evans, Andrei Hagiu, and Richard Schmalensee, Invisible Engines: How Software Platforms Drive Innovation and Transform Industries (Cambridge, MA: MIT Press, 2006).

• The authors investigate the business dynamics and strategies utilized by firms that recognize and embrace the power that software platforms have as drivers of innovation.

 

Natasha Lomas, “Handshake Is A Personal Data Marketplace Where Users Get Paid To Sell Their Own Data”

https://techcrunch.com/2013/09/02/handshake/

• This article outlines how companies such as Handshake are aiming to create a marketplace for personal data, where individual users can be approached by companies directly, rather than the traditional approach in which internet companies are able to profit off user data while users are kept in the dark.

 

Jesse Perla, Christopher Tonetti, and Michael E. Waugh, “Equilibrium Technology Diffusion, Trade, and Growth,” National Bureau of Economic Research, Working Paper 20881, January 2015, http://www.nber.org/papers/w20881.

• The authors find that opening to trade, or adopting new technologies that is already employed by other firms, increases growth, facilitates quicker technology adoption, and increase export opportunities and foreign competition.  However, they note overall welfare is not explicitly enhanced as  a firm may be forced to reallocate labor away from production and lose its ability to differentiate products.

 

Office of the Press Secretary, the White House, Fact Sheet: President Obama Announces New Actions to Further Strengthen U.S. Manufacturing Building on the Recommendations from the Final Report of the President’s Advanced Manufacturing Partnership, “Accelerating U.S. Advanced Manufacturing,” October 27, 2014.

• The new actions to further strengthen U.S. manufacturing, as recommended by the AMP, emphasizes three key channels that support U.S. manufacturing. These include enabling innovation, securing talent visibility and acquisition, and improving the business climate. Therefore, the actions include investing in emerging manufacturing technologies, training workforce in middle-class manufacturing jobs, and facilitating the adoption of new technologies by small manufacturers.

 

Stephen J. Ezell, “Ensuring the Trans-Pacific Partnership Becomes a Gold-Standard Trade Agreement,” Information Technology & Innovation Foundation, August 2012, http://www2.itif.org/2012-ensuring-tpp-gold-standard-trade-agreement.pdf.

• The TPP was designed, in part,  to combine two key drivers of innovation: market-based free trade and robust intellectual property rights. Ezell emphasizes that the TPP must address intellectual property rights issues such as trade secrets and protections of certain industry innovations, as he identifies the TPP as a potential template for future trade agreements that are more comprehensive than current WTO-based trade agreements.

 

Australian Department of Foreign Affairs and Trade.  http://dfat.gov.au/trade/agreements/tpp/summaries/Documents/intellectual-property.pdf.

• The TPP was also envisioned to establish stronger enforcement mechanisms than current WTO-based trade agreements. The agreement also requires criminal penalties for theft or exposure of trade secrets, using hackers as an example.