This proposal is for the Manufacturing Studies Board of the National Academy of Sciences to establish a committee to conduct a study to examine the causes and consequences of the strategic responses by manufacturing firms to increasing international competition. Such strategies include foreign direct investment, outsourcing, joint ventures with foreign firms, licensing agreements, direct investment by foreign companies in the United States, and cooperative R&D agreements. The committee will comprise approximately 25 members who have expertise in general manufacturing, international operations, marketing, labor relations, engineering, research, and finance. This study should provide a comprehensive evaluation of the motivations for and consequences of the strategies used by U.S. manufacturers to remain competitive in the international marketplace. The committee plans to identify trends in the international manufacturing environment in terms of factors such as comparative labor and capital costs, R&D expenditures, and the state, availability, and utilization of advanced manufacturing technologies. The study should determine why corporate managers are choosing different responses to international competition, identify the effects of government policies on their decisions, examine how such decisions may affect the long-term ability of U.S. manufacturers to conduct advanced R&D to innovate and compete effectively, and assess the long-term repercussions of these various strategies on continued U.S. economic, technical, and military strength. Phase I will develop and test the methodology in the domestic arena (involves 3-4 companies and a couple of industries). Phase II will expand the investigation to include additional firms and industries in the domestic arena (involves up to 20 companies and 5- 6 industries). Phase III will be conducted if additional funds become available from other sources. Phase III, if conducted, would compare the pressures and responses of domestic manufacturers to selected foreign counterparts (would involve up to 20 domestic companies, 5-6 domestic industries; up to 20 foreign companies and 5-6 foreign industries; Japan and Europe).
