The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

Synopsis

Many warn that the next stage of globalization--the offshoring of research and development to China and India--threatens the foundations of Western prosperity. But in The Venturesome Economy, acclaimed business and economics scholar Amar Bhidé shows how wrong the doomsayers are.


Using extensive field studies on venture-capital-backed businesses to examine how technology really advances in modern economies, Bhidé explains why know-how developed abroad enhances--not diminishes--prosperity at home, and why trying to maintain the U. S. lead by subsidizing more research or training more scientists will do more harm than good.


When breakthrough ideas have no borders, a nation's capacity to exploit cutting-edge research regardless of where it originates is crucial: "venturesome consumption"--the willingness and ability of businesses and consumers to effectively use products and technologies derived from scientific research--is far more important than having a share of such research. In fact, a venturesome economy benefits from an increase in research produced abroad: the success of Apple's iPod, for instance, owes much to technologies developed in Asia and Europe.


Many players--entrepreneurs, managers, financiers, salespersons, consumers, and not just a few brilliant scientists and engineers--have kept the United States at the forefront of the innovation game. As long as their venturesome spirit remains alive and well, advances abroad need not be feared. Read The Venturesome Economy and learn why--and see how we can keep it that way.

Excerpt

The growing integration of the world's economy in general, and the increased participation of China and India in international trade in particular, raise important questions: Will competition from more than a billion Chinese and Indians reduce wages and imperil the prosperity of the West? What, if anything, is to be done?

Classical economic theories of the eighteenth and nineteenth centuries provide limited guidance. These theories assume that trade takes place between countries with comparative advantages based in immutable natural advantages: It behooves Britain, where it rains a lot, to focus on rearing sheep and shearing wool and to let sunny Portugal grow grapes and make port. Because geographic conditions are fixed, in classical economic theory the woolfor-port trade continues forever. But today the comparative advantage of poor countries derives from their historical failure to use the technological innovations that made the West rich. The impetus for trade between rich and poor countries arises from the differences in their accumulated technological capabilities rather than in their geographic endowments. As Edmund Phelps and I have noted, trade based on differences in technological capabilities can eventually extinguish itself: Openness to trade helps China become more technologically advanced and prosperous; increased prosperity causes wage differentials with the United States to shrink, ultimately making it unprofitable to import cotton from the United States and send back shirts and skirts.

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