Two points of view: Holding the lead in high tech;

              Two Points of View
HoicJinq cne Lead
in Hiqn Teen
R Private Vieuu
by DEAN MORTON /Treasurer;
and MAX DONNER/Research Associate,
American Electronics Association
The importance of technology-intensive industries
to America's economic vitality is increasing as
foreign competitors mount a serious challenge and as
many basic industries undergo a painful restruc­turing.
Against that backdrop, high technology has
been catapulted to the forefront of efforts to revise
our national economic strategy. Well-founded, long-term
strategies will require a much deeper under­standing
of the challenges facing us. We also will
need to identify and enhance the elements of our
national strategy which have contributed to the
enormous success of America's high-technology
industries.
High-technology industries—principally electronics,
biotechnology, and aerospace—grew more than twice
as fast as the national economy in the 1970s. They
are projected to grow at least 70 percent in the next
ten years. Yet, America's market share in world
exports of high-technology goods—a key barometer of
international competitiveness—is declining. That
measure dropped from 38 percent in 1970 to 33
percent in 1980.
Part of the problem—and solution—lies with
American business itself. Historically, many large
firms have been slow to introduce new technologies
or improve their ability to compete in cost or in
quality; small entrepreneurial firms have led the way
in innovation. But only 11 high-tech start-ups have
penetrated the Fortune 1,000. The others often have
lacked the scale and resources to compete globally.
Selling out to large centralized firms has not
improved their ability to manage these weaknesses.
Firms and the government must recognize such
potential weaknesses and consider appropriate
remedies.
To be globally competitive, American firms must
start with innovation. America's entrepreneurial
environment has demonstrated unparalleled success
in producing technological innovations. America's
universities and research institutions have pioneered
hundreds of scientific breakthroughs, which comple­ment
the technological development of entrepreneurial
firms. Market-oriented incentives, such as employee
stock options, tax credits for research and develop­ment,
and generous support for autonomous univer­sity
research, can strengthen America's lead in
innovation.
One approach to spurring innovation is the
research and development cooperative. Starting with
the new Microelectronics and Computer Technology
Corporation, these are being formed to allow small-and
medium-sized firms to share technical talent and
research budgets.
There are major bottlenecks constraining the global
competitiveness of high-technology firms—technical
education, quality, and capital. While the United
States graduates about 13,000 with bachelor's in
electrical engineering and computer science annually,
a 1981 study by the American Electronics Association
shows that the industry needs at least 33,000. The
problem is expected to become more severe as the
industry's need for engineers accelerates and our
capacity to train new engineers stagnates. America's
Ph.D. engineering programs are graduating about 450
new faculty each year, while our universities need
1,000 just to maintain quality and capacity in existing
programs. Moreover, much of the equipment used in
university engineering programs is 20 to 30 years old.
Forward-looking public policies, such as tax credits
for industry donations, can help solve these shortages.
Quality is another important consideration. Innova­tion
has allowed American firms to develop new
foreign markets with their pioneering technologies.
Quality control can preserve those foreign markets
and allow American firms to set the international
standard for quality.
Improving access to capital and lowering its cost
can assist the efforts of high-tech firms to help
themselves. A firm backed by venture capital, or
listed over the counter with strong quarter-to-quarter
earnings pressures, often must compete against multi-