Technology

Technology plays a major role in international business today. It impacts in myriad ways the internal mechanisms of globalization, the operations of international trade and commerce, and the relative competitiveness of small- and medium-sized firms (SMEs), multinational enterprises, countries, and multinational regions. Indeed, understanding global business today requires an appreciation of the nature and workings of technology in the 21st century.

Technology is a broad concept that refers to the means by which humans can control and adapt to their environment. The two general categories of technology are products and processes; the former are meant for final consumer markets and the latter provide the means to make the products. Technology needs to be distinguished from science: whereas science looks to expand knowledge of how the universe operates, technology is concerned with practical applications useful in the real world to do work more rapidly and efficiently. Consequently, technology is closely related to engineering, and the productivity that technology via engineering creates.

Technological Change

Technological change refers to the advance in the state of the art of making products and the carrying out of processes. There are different types of technological change, depending on the degree of change involved; that is, incremental or radical. Incremental technology change is generally perceived as modifying, refining, and improving an existing technology platform. It consists of relatively minor changes to an existing technology. The results of incremental change, when cumulative, are often significant. Cumulative technological change may take place within the research and development (R&D) department or may occur on a daily basis on the plant floor by departmental employees in the course of everyday business.

Radical technology, in contrast, introduces completely new designs that depart fundamentally from existing practice and platforms. In the modern corporation, radical technology is often the product of the R&D department and requires creative experimentation and out-of-the-ordinary insights. Incremental and radical innovation generally take place within novel economic and organizational contexts; incremental change generally remains tied to established applications and markets and operates within familiar organizational structures and networks; radical change often opens up new markets and displaces existing products and companies from their market position.

Nylon ushered in the age of synthetics that toppled natural fibers from their preeminent position; jet propulsion replaced propeller aircraft; steel replaced iron; electrification replaced steam power; and so on. This process is famously described by the economist Joseph Schumpeter as the “winds of creative destruction.” In recent decades, radical innovation often proves difficult to achieve for larger, established firms, with their complex and relatively rigid organizational structures. Since the 1980s, radical innovation has become centered in the small start-up firm, which often licenses intellectual knowledge from universities, and obtains support from a large and specialized venture capital community. Larger firms increasingly capture innovation through acquisitions of small, innovative enterprises.

In reality, the distinction between incremental and radical technology change is not always clear, especially in assessing their relative impact on an economy. The significance of individual, truly radical technology—such as the assembly line and the [Page 1556]atomic bomb—cannot be denied. However, over time the cumulative effect—technical, economic, and even social—of incremental innovation can be equally, if not more, important. Recent studies suggest that the bulk of the aggregate economic benefits to society derived from the introduction of new technologies are realized only during the often lengthy product and process improvement stages, when incremental modifications are made to the initial dominant design.

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