"The greatest invention of the 20th century was the method of invention."
Alfred North Whitehead
Inventions often require many intermediate steps and they require investment decisions. The measurement of the impact of innovation came in the 1950s after the development of national income and national production. Economic growth is very dependent upon extracting more productivity from capital and labor (not just having more capital and labor). Sustained high economic growth is also dependent upon a constantly changing product and industry mix. A third key factor is the intersectoral flow of new technologies. Innovations in chemistry, for instance, have had a wide-ranging impact in all other sectors. Finally, international trade in technology has been important since the 1900s, especially stimulated by improvements in transportation and information. This book focuses on the combustion engine, chemistry, electricity and electronics. It also focuses on US conditions, size and resources as well as the institutional flow of innovation. Much of our current development depends upon high incomes in an individualistic society.
Chapter 2 discusses the art of invention and the rules and regulations of government
R & D as well as the role of industry
Corporate R&D was stimulated by the German organic chemistry innovations, especially aniline dyes. GE and Alcoa were early investors in innovation. Labs took over from independents. Steel and meatpacking were expansive, and US Antritrust Laws made diversification necessary. The dominant firms became more dominant and stable. Patent protection and patent limitations also stimulated R&D to consider mergers and acquisitions. U.S. universities, especially public state-funded universities, began to do technology monitoring, basic research and some commercialization. A shift to basic research came with WW II and "Science, the Endless Frontier." Pre-WW II, the federal government spent more on agriculture. Also, they funded about 15% of the total US R&D. After the war, basic R&D spending skyrocketed; also the % of total R&D grew significantly. Almost always more than 50% of the federal government was for defense. U.S universities get a good bit of that money to use, invest and make capital investments in research equipment. Any shifts in the amount of government spending caused a good deal of comment. Healthcare has been especially good at gathering data and improving rapidly through basic research. Industry does the research, but gives far less to universities (7%). Tougher anti-trust laws encouraged conglomerates of unrelated fields within a company. And small firms began to develop and commercialize new products in the 1990s, supported by venture capital. The US has fairly large venture/risk capital resources. There are three key points to consider: small firms commercialize technologies; defense R&D dominated US government spending in the higher-technology sectors, and anti-trust policy set boundaries and limits. These factors may change, and the innovation climate will change with them.
Chapter Three: The Internal Combustion Engine
The internal combustion engine was develop in Germany, migrated to the US, and found a market and products here. It took over in 1905 from steam and electric engines. A non-existing industry in 1900 was the number 1 industry in 1925. The bicycle helped with sheet metal and stamping and the development of rubber tires and roads. Ford's assembly line dropped prices of production and affordability was the key factor to its success. Among the innovations were the following: a) a planned and orderly progression of the commodity through the shop; b) the delivery of work to the workmen; and c) an analysis of the operation so as to divide the task into component parts. Other producers caught up with the method and surpassed Ford because of their attention to the market and style changes. Competition was fierce: 150 manufacturers became just 3. Big changes were brought by competition with Japan in the 1970s. Computers and electronics were placed in cars. In America, a plateau had been reached, and no real change would have come unless there was outside pressure.
The plane is another type of development. It was much benefited by government investment, mail regulations and the wide-open spaces of America. The DC-3 captured technological trade-offs in good balance. Many innovations were made by Ludwig Prandt in the University of Gottigen. Universities were involved in testing - half basic research, and half application. The jet engine caught the US by surprise via the British. It required a huge military investment (70%) and there was some useful spillover, especially with missile and computer technologies, also in metallurgy. Also, computers aided air-traffic control and passenger ticketing. Highly concentrated research was widely diffused. Currently we are down to 2 firms, and even they must be extremely careful as they invest in new airplanes and R&D.
Chapter Four: Chemicals
The chemical industry received most of its starting innovations from (surprise) Germany. The US did not become a significant contributor until the 1940s. Of importance to US development was the rise of the petrochemical industry and the use of US resources in petroleum and natural gas as a "feedstock." Also of importance was the size of the US market - continuous process production made economic sense. By 1914 US sulfuric acid output (a yardstick measure) was as large as Great Britain and Germany combined. Synthetic dyes, by contrast, a field in which many innovations were being made, was dominated by Germany. Germany also pioneered a high-pressure nitrogen fixation process (military and agricultural uses) which the US was initially unable to replicate during wartime. After WWII cheap synthetic ammonium nitrate in liquid form and new fertilizer responsive hybrid seeds made for enormous growth in agricultural productivity. Liquid fuel for internal combustion engines was likewise in high demand. Petrol production was very capital intensive and required continuous process technologies. To stay abreast of new fields, oil companies invested in geophysical techniques. As more oil fields were found, more and more users for oil at all stages were developed. Engineers and chemists began to work together n the 20s and 30s. Eventually fluid bed catalytic cracking became an industry standard continuous process.
New feedstocks led to new work in polymer fundamentals, and that, in turn, became the basis of plastics, effecting a huge transformation in the 20th century world during wartime. Making synthetic rubber was another urgent wartime goal, achieved in 1943. The US government gave minimal patent restrictions in the area of polyethelene so chemical processes could be widely distributed in US firms. Stereoregular polymers are now used every day by pretty much every one in the world. After WWII, synthetic fibers based on coal and petrochemicals were developed (Wallace - "neurotic spells of diminished capacity" - Carrothers, DuPont c.f. American Genesis for that specific quote) and parlayed, among other things, into women's stockings, fire hoses, curtains, tires and so on. A final category of importance is pharmaceuticals. Once again German companies and products led the way. Massive WWII penicillin production brought chemical engineers to pharmaceutical plants and changed the whole industry. US government support for biomedical R&D reached 2/3 level by 1965. Private industry has begun to assume a larger share of R&D spending in recent years. Molecular biology and the breathtaking diversity possible in the biotechnology enterprise have led to a field full of start-ups and a flurry of acquisitions. But some pharmaceuticals, like Dow, can find themselves hampered by the basic R&D.
Chapter Five: Electric Power
Like other industries, electricity was affected by US national resources - for example, places with narrow and swift river valleys, e.g. California. Also important was the university-corporate R&D programs at Stanford, MIT and UC Berkeley. Urban households were supplied with electricity between 1910 and 1930 after the Rural Electrification Administration in 1935. Lighting was the primary use of electricity, but during the 1920s, labor saving devices gained a power source in electric motors. Consumers for these devices were created by rising incomes. Household life changed forever - no more servants, no more daily shopping trips. Looking ahead, the cell phone outstripped sales by an order of magnitude (b/c of dropping prices) and perhaps changed the quality of life. Industrial applications were equally important, most particularly in steel making. Mini mills and electric furnaces allowed the use of scrap. Cheap electricity also allowed for bauxite mining and bauxite allowed aluminum to become a major material in beverage cans (and, of course, planes.) Electric motors restructured factories and increased productivity, up to a point. Environmental effects created by mining and by ?risking high pressure generating units placed limits on what kinds of efficiency could be attempted.
Chapter 6 - The Electronics Revolution
Bell Telephone Labs - and communications bottlenecks - led to key developments in electronics. Three big industries emerged: computers, software and semi-conductor components. Important breakthroughs were sparked by the transistor and the computer. In 1949 AT&T was looking to replace repeaters and relays and had a big investment in solid state physics lab. They also wanted to avoid a US government lawsuit, so they held an open "symposium" and allowed other companies to license their semi-conductor patents. Texas Instruments was the first producer of a commercially successful transistor. Next came the integrated circuit in 1958 (also from TI). Many transistors were gathered on a single device, which the military made immediate use of in missile guidance systems. Demand for the microprocessor of 1971 had shot through the roof by 1976 in both government and commercial use. Because of high federal funding in the post-war semi-conductor industry, unlike the pre-war situation, big firms did the R&D and small firms commercialized the products. Dominant players were later entrants in the field: Fairchild and Intel) but they were also predominantly B2B sales. Although big military R&D contracts went to big and small, older and newer firms, generally the small and new were the pioneers, but technology diffusion was rapid in every case.
The computer also had some Cold War ?backers and universities had a big part. The military built computers (as did Babbage) to figure out firing tables for artillery. Computers began to have stored and alterable programs in 1944-45. Not until the IBM 650 were enough similar computers in the marketplace to provide incentive for general software development. Early support of academic use (giving universities computers and time and money) trained future customers and users. Federal R&D expanded as well during the 50s and 60s, often in the university context, encouraging new firms to enter the market. Important trends are the drop in computer component prices, the rapid extension into many applications, and the increasing cost of software. One application was real-time chemical and petroleum refining processes. Mini computers caught up and surpassed mainframes for adaptability. The 1971 microprocessor was a breakthrough like the IBM 360 - a "small general purpose solution to diverse applications." Microprocessors entered cars, watches, home appliances - the new PC market. PCs, in particular, created the software and computer services industries. There were 4 stages: 1) no software, then software languages 2) independent software companies for standardized computers 3) explosive growth in the PC market 4) desktop networking products. Again, Department of Defense money was crucial and anti-trust legislation has been important to keep diversification flowing. Development still proceeds along bottlenecks but resources are less important. A good university system with a fair number of graduates already in place and a general industry-university-government complex has become standard practice. As a point of comparison, state governments did more funding of electricity while the federal government did more funding of (defense-related) semi-conductors.
Chapter 7 - What makes for innovation?
2) the ability to exploit resources through rapid re-alignment
3) a large sized domestic market, middle class and standardized
4) the American scale is better for the global scale
5) Fordism - progressive (dis)assembly lines
6) intersectoral flows
7) anti-trust laws which allow and encourage R&D
8) healthy technology base, heavy government investment (post WWII in America)
US exceptionalism? Yes, in the sense of unique conditions but no in the sense that change is constant, and we have no privileged position at the top of the heap.