Paradigm Shift in The Definition of ‘Domestic’: A Global Perspective

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During the era from the beginning of the 19th century to the middle of the 20th century which was driven by negative nationalism and was marked by hostility to other countries and   struggling   to   establishing   superiority   over   them,   state-centred   protectionist economies and the understanding of input-based domestic product was dominant. From 1950s, this understanding gradually left its place to an output-based approach with open economies due to the globalisation of the economy and the world becoming virtually a single   market  as   a  result  of   the  development   of   information   and   communication technologies and the demolition of the protective customs barriers. In the past, domestic goods  meant  goods  that  are  made  within  the  boundaries  of  the  country  by  domestic workers and engineers using domestic parts. Also, national or domestic firms were the ones that produced goods by using domestic parts and labour as much as possible. The goods or firms that realised this at the highest ratio were labelled as the most domestic goods or firms.

However,  as  can  be  seen  from  the  Apple  and  iPhone  example,  there  has  been  a paradigm shift in the definition of domestic products and domestic firms with the spread of globalisation. Now companies see the whole world as the potential production sites, suppliers  and  markets;  they  may  even  establish  their  headquarters  in  other  countries. People  from  all  over  the  world  purchase  stocks  of  publicly  traded  firms,  and  become shareholders  of  world’s  giant  companies.  A  national  company  of  a  country  today  may become  part  of  a  company  of  another  country  tomorrow.  Large  companies  often  take over  other  companies,  license  technology  and  even  merge  with  companies  from  other countries.  Even  rival  companies  initiate  joint  R&D  programs  to  gain  competitive advantage in global competition by reducing the cost of technology development.

The  definition  of  domestic  product  should  not  be  associated  with  domestically produced parts. And strategies for domestic parts should be developed independently by considering global market conditions. Parts that are competitive in the global market by their  quality,  cost  and  certifications  will  surely  be  preferred  in  domestic  goods  due  to these attractive qualities. Forcing  the use the parts that do  not have these qualities just because  they  are  domestic  means  promoting  products  that  lack  global  competitiveness due to low quality and high cost. In addition, employment and developing/producing high value  added  products  should  not  be  mixed  with  each  other.  The  way  to  increase employment is to make domestic and foreign companies prefer to build their production facilities  in  the  country  by  making  the  climate  of  manufacturing  in  the  country  more attractive.

The universal criterion for the welfare and wealth of a country together with the level development is the gross domestic product GDP, which is the total value of the goods and services produced by that country’s economy in a year, and the per capita income, which is calculated by dividing GDP by the population of the country. It is obvious that the more a country produces goods and offers services, the higher its GDP will be. For this reason, countries continually try to increase domestic production and thus GDP by producing the highest value-added goods and offering the highest quality services.

Benefits   provided   by   domestic   goods   and   services   other   than   enrichment   by increasing   gross   domestic   product   can   be   listed   as   follows:   job   creation,   skills (know-how)   accumulation,   continual   technological   development   and   leadership   in technology,   derivative   product   potential,   establishment   of   a   powerful   information ecosystem and innovation chain, reducing foreign dependence on technologies, especially in critical ones, and increasing the ratio of self-sufficiency, full control over products and ability  to  use  them  without  imposed  restrictions,  secrecy  and  national  security,  high prestige  and  moral  superiority,  strengthening  national  pride,  increase  in  the  sense  of belonging  to  the  country  and  greater  enthusiasm for  work,  improvement  in  the  current account  balance  by  providing  foreign  currency  input,  using  domestic  goods  as  an economic weapon, etc.

What  is  desirable  for  countries  is  for  the  people  to  meet  their  needs  by  buying domestic  goods  and  services  and  thus  to  contribute  to  the  gross  domestic  product. Individuals  love  themselves  and  their  interests  first  and  naturally  prefer  the  goods  and services that provide them maximum benefit and whose value/cost ratio is high; that is, those with high quality and low cost. In today’s individual-oriented world, persons turn to products with high value/cost ratio since the feeling of self-interest usually come before the sentiment of national interest. Consequently, countries resort to the use of tax weapon to force people to buy domestic goods and they build high tariff walls around the country. When  this  protectionist  approach  exceeds  reasonable  limits,  it  turns  into  a  mechanism that  provides  unfair  advantage  to  an  elite  minority  in  the  country  and  that  dooms  the majority to low quality products, which adversely affects the development of the country. Since there is no environment for fair competition and no pressure to compete globally in protectionist  economies,  it  is  difficult  for  these  societies  to  come  up  with  globally competitive products. That is, those who  protect domestic  production with  high  tariffs, thinking that they are doing a good thing, actually break their country off the global race unknowingly.

A common way of leading people to domestic goods and services is cultural, and to affect the shopping habits of individuals by using the mechanism of education in favour of  domestic  products.  However,  in  today’s  individual-oriented  world  where  the  whole world has virtually become a village and humanity has moved from the age of childhood to adulthood, these sorts of state-centred approaches usually backfire. The contemporary approach is to device and execute mechanisms that will enable domestic products with high value/cost ratio that could compete all over the world to be produced by domestic companies. This can only be possible by improving the environment of entrepreneurship and innovation in the country and to make it globally competitive.

Unlike animals, human beings are social beings and they need to live together and help  one  another.  For,  to  be  able  lead  a  life  worthy  of  human  dignity,  man  needs hundreds of things from food, clothing and shelter to electricity, means of transportation and  communication.  Since  man  can  produce  only  a  few  things  on  his  own,  he  must exchange  goods  and  services  with  other  fellow  human  beings.  This  is  also  so  for communities  and  countries  as  well.  Countries,  like  communities,  also  need  to  work  in cooperation  and  exchange  goods  and  services  to  lead  a  life  of  high  standard  at  a reasonable  cost.  High  efficiency  and  competitiveness  requires  focusing and  developing expertise.

In  an  ideal  world  that  will  provide  the  most  benefit  to  all  humanity,  each  country determines a limited number of areas in which it can reach critical mass, and maintains a competitive position of global scale by directing its limited resources to those areas. A country that tries do everything through its own manpower and national resources with a protectionist  motive  by  isolating  itself  from  the  other  countries  to  avoid  purchasing foreign goods and services and to reduce foreign dependence to zero will not be able to achieve  a  competitive  position  in  the  world.  Further,  in  this  age  of  information  when everything  changes  and  improves  at  a  fast  pace  and  product  life  is  shortened,  it  will predestine  its  people  to  the  outdated  products  at  high  cost  and  low  quality  and  go backward. North Korea is a case in point.

A country is dependent on countries whose products it needs to import no more than the country that needs to export its products for income is dependent on the importing countries. Even the USA and China, the world’s two largest economies, are dependent on other countries to sell products/services. It is clear that, if a city or region in a country resorts  to  protectionism and  tries  to  produce  everything  it  needs  itself  to  avoid  buying products  from  other  cities  or  regions,  that  city  or  region  will  soon  turn  into  economic ruins, and everybody will look for opportunities to leave that city or region.

The wise approach is to rid itself of blind protectionist instincts and to accept the fact that countries always need one another and that they will meet their needs by becoming trade partners. With this realisation, a country needs to take its place in this global race, with international cooperation if necessary, after carefully assessing the areas of highest potential in global competitiveness. Maintaining hope and optimism are essential as they add grit to life and enhance enthusiasm. Fear and pessimism kill enthusiasm and the joy of life. Policies should be determined based on the scenario of peace and friendship, not hostility and war. The contrast between North and South Korea, which is the embodiment of these two approaches, constitute a striking example.

In  today’s  world  with  everything  changing  rapidly,  it  is  essential  to  display  an output-based approach by freeing oneself of the prejudices of the past and by adopting the  sciences  and  the  mind  as  a  guide  when  policies  are  determined  and  decisions  are made in an institution, company or country. It is important to analyse objectively in the light  of  the  latest  information  the  kinds  of  fruits  born  tomorrow  by  the  seeds  of  ideas planted  today,  and  to  make  decisions  accordingly.  In  this  rapidly  changing  dynamic environment, it is essential to be flexible, to make quick decisions and to take calculated risks for competitiveness. This means, effective advancement movements can be realised only by the private sector, not by the state. Therefore, the state should establish a suitable environment  for  the  development  of  new  products  and,  if  necessary,  initiate  support mechanisms,  but  it  should  not  embark  on  the  adventure  of  developing  competitive products under the category of ‘national projects’ itself.

It should not be kept in mind that a product which is not competitive in the global market will not be on demand in the domestic market.

Most  truths  are  relative,  not  absolute.  That  is,  they  depend  on  the  realities  and necessities  of  time.  When  conditions  change,  so  do  the  judgements,  and  many  truths suddenly become false. The truths that are outdated also disappear in time.

To  judge  things  only  with  reference  to  similar  things  and  occurrences  in  the  past without considering the requirements and realities of the current time and to generalise that judgment over all times and places is to bypass the mind and reason, which brings about  bigotry  and  confining  the  mind.  This  is  more  so  in  this  age  when  everything  is changing very fast and is so intertwined.

Many undisputed truths of yesterday are becoming myths of today by the change of circumstances.  Therefore,  it  has  become  necessary  to  develop  an  effective  weighing mechanism  by  which  changing  conditions  and  especially  paradigm  shifts  are  assessed meticulously in the light of sciences and on the scales of reason and logic and profit-loss analyses are made carefully. So, it is no accident that developing the critical thinking skill is a top priority in modern education systems. This basic skill played a crucial role in the converging  of  the  old  continent  from  medieval  bigotry  and  darkness  to  enlightenment, and the transformation of yesterday’s continent of wars into today’s land of peace.

Old paradigm in domestic product and job creation

In this age of knowledge, reason and logic, the goods and services produced in a country should  be judged based on ‘benefit output’ rather than ‘domestic input’ by considering the benefits provided to the residents of that country. Yet, some countries still judge the manufactured goods by the percentage of domestic parts and labour input, and determine incentives by this criterion. The ratio of domestic contribution is calculated by dividing the cost of the final product after the cost of imported inputs is deducted by the cost of the final product, including the cost of imported inputs. The cost of the final product consists of  costs  like  domestic  and  imported  materials,  labour,  energy,  rent,  and  depreciation. Licenses, patents, royalties, consultancy services, etc. received from abroad are included in the context of imported input costs.

This  ‘input’  based  approach  for  parts  and  labour  would  have  made  sense  in  the pre-1950 era, when production was based on assembling and when the added value on the assembled product was not great. However, this approach is not incompatible with the realities of time in this knowledge age when knowledge is the most significant input and routine manufacturing tasks are left to robots. We should face the reality that the whole is bigger than the sum of its parts and that the value of the whole is much higher than the sum of the values of its parts. We need to focus on the whole, not the parts, because of the multiplier effect and the added value in the whole. For example, Turksat 4A and 4B satellites,  which  weighed  7,700  kg  and  which  were  produced  by  Japan’s  Mitsubishi electric company for Turkey cost $571 million. That is, the unit price of $74,000/kg for the satellite is higher than that of pure gold, which is about $50,000/kg. Considering that the materials used in the production of satellites are not expensive, the true value of the satellite comes from the knowledge and skill to manufacture it.

The real value of a product for a country is not related to the percentage of its parts produced in that country or the percentage of the domestic labour, and such approaches should   be   abandoned.   The   modern   approach   necessitates   viewing   the   product, manufacture of parts and employment separately and avoiding artificial impositions that may harm the balance in the market. A country should aim to manufacture products in a way that will ensure the highest added value and competitiveness by using the best parts available  in  the  world  market  without  making  the  percentages  of  domestic  parts  and labour an issue.

If  a  country  is  to  manufacture  parts,  it  should  do  so  by  thinking  big  to  gain  a significant share in the global market instead of thinking small to save the money spent on imported parts. It should also form the infrastructure to improve the parts constantly with  necessary  R&D  investments  and  to  remain  competitive.  For  example,  GE,  CFM, Pratt   and   Whitney   and   Rolls-Royce   firms   do   not   manufacture   aircraft;   but   they manufacture almost all the jet engines of commercial aircraft and they share the market of $25 billion a year.(1)

Also,  the  US  aerospace  company  Boeing  whose  2015  revenues  were  $96  billion, imports most of the parts used in the assembly of its aircraft from other countries, and yet nobody   feels   bothered   by   it.2    Instead   of   trying   to   manufacture   all   components domestically, Boeing and other US aviation companies focus on the parts that they can remain   competitive   globally   and   retain   this   competitive   edge   through   continuous innovation. As a result of focusing, the US exports of aircraft parts reached $56 billion in 2014 (DOT, 2016).

The start of new businesses and the creating of jobs is a desirable thing for a country both  socially  and  politically.  But  job  creation  should  be  considered  separately  from manufacturing  domestically.  It  should  be  remembered  that  the  best  production  site  is often  the  closest  suitable  place  to  the  largest  market.  Therefore,  domestic  companies should not be forced to manufacture goods in the native country to enhance job creation. Instead, with  skilled  workforce  and  proximity  to  major  markets, the country should be made  more  attractive  for  foreign  companies  to  invest  in  and  build  manufacturing facilities. For instance, the Japanese Mitsubishi decided to build a plant that will produce 500,000 air conditioners annually and that will employ 400 people in Manisa, Turkey.(3)

Some  major  Turkish  manufacturers  like  Arcelik  built  manufacturing  plants  in  some Eastern European and African countries for the same economic reason that non-Turkish companies like Toyota, Honda and Bosch built plants in Turkey.

We should not scuff companies with high technology but low employment. When the popular photo-sharing company, Instagram was sold to Facebook for $1 billion in 2012, for example, it had only 13 employees. But Kodak, which could not foresee the change in the market and went bankrupt in 2013, had 145,000 employees at some point.(4)

A case study: Apple and iPhone

The  most  striking  example  representing  the  shift  from the  input-based  approach of  the past  to  the  output-based  approach  of  today  in  the  definition  of  domestic  product  and domestic company is Apple whose headquarters is in the Silicon Valley, USA.

As  it  can  be  seen  from  the  label  ‘Designed  by  Apple  in  California;  Assembled  in China’  behind  the  iPhones,  product  designs  and  software  are  developed  by  Apple  in California, but the phones are manufactured by Foxconn company in China. Most parts used in the production of iPhones come from countries outside the USA. For example, processors and chips come from Samsung (South Korea) and TSMC (Taiwan), batteries from  Samsung  and  Huizhou  Desay  Batteries  (China),  cameras  from  Sony  (Japan), screens from Japan Display, Sharp (Japan) and LG (South Korea), flash memories from Samsung and Toshiba (Japan), mixed-signal chips from NXP (Netherlands), Gyroscopes from   STMicroelectronics   (France,   Italy),   semiconductors   from   Texas   Instruments, Fairchild  and  Maxim  Integrated  (USA),  accelerometers  from  Bosch  (Germany)  and Invensense  (USA),  RF  modules  from  Win  Semiconductor  (Taiwan)  and  Qualcomm (USA), and touch ID sensors from TSMC and Xintian (Taiwan).(5)  Also, many of the parts supplied by US companies are manufactured in Asian countries.

The  production  cost  of  Apple  iPhone  6S  Plus  (16GB)  is  $236,  but  its  sale  price  is $749  –  that  is,  more  than  three  times  the  production  cost.(6)   Likewise,  the  additional production cost of the extra capacity 64 GB model is only $17, but the mark up on price of  the  phone  is  $100  –  that  is  five  times  more  than  the  cost  of  the  part.  Apple  is  the leading company in the world in terms of market value ($700 billion) and brand value ($120 billion). Its 2015 revenues were $234 billion, which is larger than the exports of all countries except 20 countries, and the amount of cash it has is $203 billion. It employs 115,000 worldwide.(7)

Now with an output-based rational point of view, let us ask these questions:

  • Is the technology giant Apple, which has its products manufactured in a foreign country by a foreign company with parts most of which made in foreign countries, but which is a source of envy in terms of its prestige, brand recognition and high profitability, a domestic company for the US that needs to be cherished by the USA?
  • Should products whose domestic-part contents are low other than the design and software like the iPhone in the USA be viewed as domestic products to take pride in or as foreign products due to the low rate of made-in-USA parts?
  • Are the ordinary US citizens or the US government happy that the Apple company was founded in the USA, or are they bothered by it?
  • Is the iPhone known as a product of USA or China?
  • Do the citizens of a country wish to have a company that is a technology leader in the world like Apple even if it manufactures its products in a foreign country with foreign parts, or, do they want to have a company that manufactures its products in their country using a high percentage of domestic parts even if it is not competitive in the global arena?
  • Suppose a non-US investor bought the Apple company, moved its headquarters from Silicon Valley to the capital of his country, changed the company language from English to his native language, moved its manufacturing facilities to his country, and went even further to change the company’s name to something in his native language and ordered to use a certain fraction of domestic parts in the products. Should this person be applauded by his countrymen as a great nationalist, or should his sanity be questioned? What if he did this with loans guaranteed by his government?

The  current  state  of  the  once  world’s  leading  cell  phone  manufacturer  of  Nokia  and Blackberry, which were a source of pride for Finland and Canada, show that it is indeed difficult to reach the top, but it is even more difficult to remain at the top, which requires a close follow of the market place and the competition. If Apple had insisted on domestic parts  and  refused  to  use  the  touch  screens  developed  by  Japanese  and  South  Korean companies in their smart phones, would it have dethroned Nokia?

The questions raised above about Apple in the US can also be asked for the AirTies company  of  Turkey  which  resembles  the  Apple  model  in  the  field  of  home  networks. AirTies has its R&D and product design in Turkey, but it has its products manufactured in China like Apple. Founded in 2004, the company has sold 15 million devices so far and  90%  of  its  revenue  comes  from  exports.  AirTies  also  entered  the  US  market  and began  to  install  wireless  in-house  Internet  technology.  Midcontinent  communications, which has over 300,000 subscribers in the US, started using AirTies products.(8)  Just like Apple, AirTies follows the global developments related to parts, and designs its products by integrating the most innovative and competitive parts in the global market, regardless of their origin and focuses its resources on integration and software development. This way it strives to remain progressive and competitive in the global markets.

As  another  example,  the  Legend  electronics  company,  which  changed  its  name  to Lenovo  in  2003,  was  founded  in  China  in  1984  with  a  $25,000  investment.  It  became Asia’s largest computer seller in 1999. After purchasing IBM’s PC unit for $1.8 billion in 2005,  Lenovo  instantly  became  the  3rd  largest  computer  vendor  in  the  world.  Lenovo bought Medion, the German electronics company, for $800 million in 2011, Digibras, the Brazilian   electronics   firm,   for   $148   million   in   2012,   and   IBM’s   server   unit   for $2.3 billion in 2014. Entering the mobile phone market in 2012, Lenovo bought Motorola Mobility, the mobile phone unit, from Google for $2.9 billion in 2014. 58% of the shares of  Lenovo,  whose  headquarters  is  in  the  US  and  whose  official  company  language  is English, belong to individual and institutional investors. Lenovo operates in 60 countries and has 60,000 employees. With revenues of $45 billion in 2015, Lenovo is the world’s largest PC maker and China’s largest mobile phone vendor.(9)

National projects and domestic version products

In  some  developing  countries  like  Turkey,  a  move  has  started  to  produce  almost everything  domestically  to  reduce  the  current  account  deficit  and  to  keep  the  hard currency  paid  for  imported  goods  in  the  country.  As  the  saying  goes,  the  difference between  medicine  and  poison  is  the  dosage.  There  is  nothing  wrong  with  entering  the market as a new comer with existing products like refrigerators, cars and wind turbines and trying to capture a market share. But this should be done after a careful analysis of dominant dynamics and the global markets, the existing relevant infrastructure, resources to  be  allocated,  and  the  required  human  capital  in  areas  where  critical  mass  can  be achieved,  sustainability  of  global  competitiveness  is  possible  and  chance  of  success  is reasonable.  Even  in  cases  with  promising  outlook,  it  is  important  to  prepare  a  sound business  model  with  detailed  plans  from  product  development  to  achieving  targeted market   share,   a   roadmap   with   clearly   marked   milestones,   indication   of   financial resources,  realistic  sales  projections,  assessment  of  competition  environment,  R&D dimension and even the possible national and international cooperation. And the targeted market should be global, not just local, since the true value of a product can be seen when it competes against similar products in the global market. Otherwise, issues of credibility and realism will be raised.

A  football  team  that  constantly  plays  defence  to  prevent  its  opponent  from  scoring cannot win a game. A team without the courage to play offensively in mid field cannot be a contender and can never rise to a higher league. Similarly, a country with a protectionist policy that aims to keep imported goods from entering the country or to decrease their amount instead of being a contentious player in wisely selected areas of global market and competing globally, will not go anywhere. It will slip backward instead of leaping forward in GDP rankings. Moreover, this protectionist approach that dwells on arousing nationalistic  feelings  rather  than  common  sense  and  reason,  and  which  is  closed  to criticism because it is associated with the love of country, is open to all sorts of abuse. Such approaches that ride on emotions usually benefit not the country, but the individuals or  institutions  that  seemingly  promote  nationalism  but  in  reality,  look  after  their  own interests. It can even be said that a ‘national product’ that has no chance to compete in the global arena with its price or quality cannot even be deemed a ‘national product’ since it will not be embraced by the nationals of that country.

For a country to attempt to produce everything domestically without a rational plan by isolating itself from the rest of the world with a protectionist approach by declaring war  on  imported  goods  is  unwise,  and  its  result  is  self-damage.  Close  the  eyes  to  the realities of the world with such irrational approach will result in the waste of resources and harming the national pride.

As if technology and technological products have nationality, some countries promote national   project   aimed   at   producing   national   products   with   100%   original   native engineering and domestic parts and domestic manufacturing. Despite the flattering names that appeal to blind national pride, these projects imposed from the top do not seem to have much chance of success when compared to the alternative practices in the developed world.  In  today’s  highly  competitive  environment,  global  cooperation  has  become  a common practice regardless of religion and nationality due to high R&D costs and fierce competition  in  new  technology  development.  It  is  very  naïve  to  think  that  a  national product developed in an isolated environment by a homogeneous group of people with limited resources in a long time will be competitive when it is introduced to the market. Considering the fast pace of technology development and the ever-shorter product life, the newly developed national product will be outdated before it is completed.

Even the most technology savvy countries and technology giant companies are racing with each other in recruiting the best talented people and acquiring the most promising start-up companies without putting forward any national reference. In fact, they establish their research centres in places such as Silicon Valley where the most creative brains are and add more power to their brain power. For instance, the dominance of Samsung in the global  markets  is  the  dominance  of  South  Korea  in  the  consumer  electronics  market. And,   the   nationality   of   those   who   design   or   manufacture   Samsung   products   is irrelevant – just like the nationality of the players in a football giant being unimportant. So, many bright and expensive brains from the USA to India, and from China to Turkey, design the future products of Samsung in its R&D centre in Silicon Valley.

It is understandable to attempt to manufacture domestically some military equipment and  strategic parts whose purchase  and use  may be  subject  to  severe restrictions  even when  they  it  may  not  be  economical  to  do  so.  However,  under  well-established  free market  conditions  at  global  scale,  it  is  not  understandable  to  attempt  to  manufacture competitive  commercial  products  like  wind  turbines,  solar  PV  cells  and  electric  car batteries as ‘national product’ from scratch using only native resources.

Case study: two different approaches to developing wind turbine technology

The  difference  between  the  approaches  taken  by  Turkey  and  China  to  acquire  wind turbine technology is striking, and the results of the two approaches are very instructive. Turkey  started  a  ‘national  wind  turbine  project’  (MILRES)  in  2007  with  the  goal  to develop  a  2.5  MW  wind  turbine,  using  totally  native  and  domestic  resources.  To  gain experience and to develop expertise, it was decided to develop and build a 500 kW wind turbine first.(10)  The goal of  the  project  was to  build  the  infrastructure necessary  for  the establishment of a native and globally competitive wind industry with Turkish design and technology,  and  to  rank  among  the  top  five  in  the  world  in  wind  turbine  design, manufacture and sales. Also, it was planned that 25% of the projected 20 GW installed power for the first 10 years would come from domestic turbines. However, as of 2017, Turkey’s  total  installed  wind  power  capacity  reached  only  6  GW  during  this  10-year period, and the planned 2.5 MW wind turbine is non-existent. The only tangible output of this  aggressive  national  project  has  been  a  500  kW  turbine  prototype  whose  future  is uncertain.  During  those  ten  competitive  years,  wind  power  technology  has  developed even further, the 2.5 MW turbines are replaced by much larger ones, and the installation of off-shore wind turbines of up to 9 MW is spreading.

During  the  same  period,  China  took  a  fundamentally  different  approach.  It  did  not make  the  mistake  of  starting  from  scratch  with  domestic  resources  only  and  without giving in to the temptation to the ‘domestic native design’ trap. Realising that there is no point in reinventing the wheel, China formed cooperation with the existing wind turbine manufacturers,  transferred  technology  and  eventually  produced  its  own  turbines  and began marketing them in a competitive manner throughout the world. Today, China has become  number  one  wind  turbine  manufacturer  in  the  world  with  the  highest  market share, leaving the USA, Germany and  the Netherlands behind. Judging from the result that Turkey is non-existent in global wind turbine market while China is a giant, it is easy to see which approach was more rational and which country is enjoying a national pride. Then,  the  following  questions  need  to  be  asked  about  the  ‘domestic  native  design’ approach as a model of innovation:

For products that have reached commercial maturity, how realistic is it to think that, globally competitive products can be develop by starting from scratch and working in a closed circuit while being limited with native brainpower and resources? Is it not a wiser approach to start one step ahead by forming international cooperation or by purchasing a company that has already developed technology and patented it? Was it worth spending 10 years to make a prototype of the native version of a globally available existing product that   improves   continually   in   this   age   of   knowledge   economy   where   continuous development is the rule and shorter and shorter product life is a reality?

It  is  interesting  that,  at  the  time  it  was  possible  to  purchase  companies  that  had already  developed  wind  turbines  from  for  instance  Germany  with  the  fraction  of  the project budget, and to have the technology and expert manpower right away. It is wise to learn  lessons  from  this  experience  and  to  examine  critically  the  ‘national  project’ approach as an innovation model for global commercial products.

Developments in the automotive industry and national car projects

The  automotive  technologies  in  the  world  have  a  history  of  over  100  years  and  have reached a certain maturity, but major transformations are still taking place in the industry. For example, according to the projections of The Institute of Electrical and Electronics Engineers (IEEE), 75% of vehicles in traffic will be driverless in 2040 (Newcomb, 2012). Driverless cars being developed by Google and several automotive firms will be standard in   the   middle   of   this   century,   and   the   infrastructure   is   expected   to   be   changed accordingly.

More modest innovations are constantly being made. For example, small incremental improvements like replacing the vehicle side mirrors, which create air drag and generate noise, with digital mirrors (video systems) connected to the camera system save fuel by up to 7%. They also improve traffic safety by eliminating blind spots and make parking easier (Quain, 2016).

Each of the world’s leading automotive companies like Toyota, General Motors and Volkswagen  tries  to  maintain  their  competitiveness  in  global  markets  with  an  annual R&D  budget  of  about  $10  billion.  Still,  they  have  difficulty  in  maintaining  their profitability. Many world brand automotive firms have faced bankruptcy by losing their competitiveness  or  have  been  sold  (such  as  Sweden’s  Saab  and  Volvo)  or  merged  by joining forces (such as Japanese Nissan and French Renault).

Electric vehicle market offers opportunities for new players in the sector since it is still in the development stage and has a high growth potential. For example, the publicly traded Tesla Motors, which was established in Silicon Valley in 2003 and produced its first  vehicle  (the  Tesla  Roadster)  in  2008,  rose  to  the  leading  position  in  the  electric vehicles market, thanks to its several pioneering and innovative approaches. The 360-hp model S with 400 km range, whose production started in 2012 and was sold in more than

40 countries, became the first car that received 100 points out of 100 with its impressive performance in the road testing of the consumer reports magazine, which has 7 million subscribers. Model 3, the electric vehicle which Tesla will begin to produce at the end of the   2017,   has   created   an   attraction   with   its   340   km   range   and   $35,000   price. 400,000 people preordered the car by paying a deposit of $1,000 each.

Nissan  Leaf,  which  is  the  first  electric  car  mass-produced  by  standard  automotive companies,  with  a  170  km  range  and  whose  batteries  can  be  charged  to  80%  within 30  minutes  with  the  rapid  charge  system from the  grid, has  sold  an  average of 50,000 electric  vehicles  annually  since  2010  when  it  started  to  manufacture  them.  Hybrid vehicles,  which  have  a  40  km  or  lower-capacity  battery  with  a  small  gasoline  engine, offer  alternatives  to  fully  electric  vehicles  with  their  long  range.  However,  the  failure stories like the one Renault experienced when it started to produce its electric car Fluence in  Turkey  with  an  annual  sale  target  of  20,000  vehicles  but  later  topped  production because  it  sold  only  a  few  hundred  cars  a  year  should  be  examined  carefully  and  the necessary lessons should be learned.

As it can be seen from the student projects in universities, it is not difficult to make electric  vehicles.  The  challenge  is  to  produce  a  vehicle  that  will  be  in  a  competitive position in the global market with its design, style, performance, cost, brand recognition, service and sales network, and customer satisfaction and that will retain its charm with continuous innovation (which necessitates serious R&D infrastructure and a big budget).

Almost  all  leading  players  in  the  automotive  industry  are  planning  to  expand  their product range with electric vehicles and take part in the global race in the near future. For example, Audi aims to start mass-producing its 500 km range electric vehicle that can be charged in one hour in 2018.(11)  BMW plans to increase the capacity of i3 electric vehicle in 2017. Chevrolet is preparing to introduce its 350 km range Bolt EV model.

The governments of some developing countries entertain the idea of developing their own brand of national car. Yet, the industrialists who are well-aware of the challenges of the highly competitive environment and the difficulty of new players entering the global automotive  market  and  capturing  a  market  share.  They  view  this  undertaking  as  a ‘commercial suicide’ because of the high development costs involved and the challenges that lie ahead. Fully electric or hybrid cars seem to be more attractive for these potential new comers since they are still emerging. In that case, developing a battery technology becomes  a  focal  point  since  batteries  have  a  wide  range  of  applications  at  the  global scale.  But  the  ambitious  R&D  programs  in  batteries  in  the  world  involve  broad-based international  partnerships  and  multi-billion  dollar  budgets.  Efforts  to  develop  batteries with limited domestic human resources and modest budgets at a national level appears to be at disadvantage.

A person who forms a football team from the youth in a neighbourhood of a city with a limited budget and claims that he will challenge the football giants of the world may fancy  the  people  in  the  neighbourhood  who  are  unaware  of  the  global  competition  in football, but nobody with a sound mind will take this claim seriously and raise hope or invest in this neighbourhood team.

Despite the advantages of superior performance and low energy costs of the electric vehicles, their main disadvantage is battery related limitations: charge capacity per unit volume,  charge  time,  battery  life  and  battery  unit  costs.  Therefore,  the  focal  point  of research  on  electric  vehicles  is  the  batteries  in  which  electric  energy  is  stored.  As Notebook users may have noticed in the first few years, lithium-ion batteries undergo a loss of capacity after about 5,000 charge-discharge cycles. New research shows that the number  of  cycles  can  be  increased  to  over  100,000  through  innovative  designs  (Thai et al., 2016). Other research shows that the battery capacity per unit volume and hence the distance that can be travelled with a single charge can be increased by up to seven times.(12)  The results of the research at a laboratory environment that enable batteries to be recharged   in   seconds   instead   of   hours   causes   the   industry   view   the   future   with optimism.(13)

Figure 1    Cycle stability for up to 200,000 cycles for symmetrical δ-MnO2  nanowire capacitors (see online version for colours)

Source:    From Thai et al. (2016)

Samsung, which is one of the world’s leading battery manufacturers, is not content with its own research; it follows the innovative developments at the global level and makes the moves that it regards necessary. For example, Samsung invested $18 million in StoreDot, an   Israeli   start-up   company   that   develops   ultra-fast   charging   batteries   by   using bio-organic technology. The goal of StoreDot is to make phone batteries that charge in 30 seconds and electric vehicle batteries that charge in five minutes.(14)  As can be seen, it is  a  strategic  move  for  Samsung  to  invest  in  this  company,  which  has  the  potential  to transform battery technology.

In  2012,  the  US  Department  of  Energy  gave  a  five  year  ‘super-efficient  battery’ development project with a budget of $120 million to a consortium whose annual R&D budget   is   around   $1   billion,   consisting   of   four   national   laboratories   under   the coordination  of  Argonne  national  lab,  five  leading  universities  like  the  University  of Chicago, and four large industrial partners that are known for their innovativeness like Dow chemical.(15)  In addition, it allocated a budget for the participation of 120 researchers about the development of battery technology in the project on a regular basis.

The  energy  consumption  of  a  vehicle  is  proportional  to  its  weight,  and  one  of  the most effective ways of driving longer distances with the same amount of fuel is to reduce the  weight  of  the  vehicle.  This  necessitates  reducing  the  battery  weight  for  the  same amount of charge in electric vehicles. Acting upon this principle, the US Department of Energy launched Battery500 project, with a five year term and $50 million budget, in a consortium led by Pacific Northwest National Laboratory (PNNL) including five national laboratories and five universities, with Tesla Motors and IBM in the advisory board. The objective of the project is to increase the specific energy per kilogram of the battery from the current value of 170–200 Wh/kg to the value of 500 Wh/kg, that is, almost triple it, and, to enable the production of smaller, lighter and cheaper (under $100/kWh) battery packs.  In  a  parallel  work,  with  a  similar  consortium  with  broad  based  participation,  a 350 kW direct current fast-charge project that will enable the battery with 360 km range to be charged fully in less than 10 minutes continues (Hall, 2016).

To give an idea about the global competition in electric vehicle that is taking shape: Mercedes-Benz   plans   to   spend   $4   billion   annually   on   the   development   of   green technology, including electric vehicles. Mercedes plans to introduce its 500-km-capacity electric vehicle this year, and aims to sell 100,000 electric vehicles per year in 2020.(16)

Ford plans to spend $4.5 billion in the next five years on hybrid and fully electric vehicle R&D (Naughton, 2015). In this context, the 250 km range Ford focus that can be charged in 30 minutes will be developed, and 13 new electric and hybrid models will be added to its fleet. Even rival automotive giants Toyota and BMW collaborate in the development of next-generation battery in order to obtain an advantage in international competition. Such cooperation disturbs only the rivals.(17)

Unlike other national projects, it is a correct step to start work by purchasing design and intellectual property rights from a company of global brand and by abandoning the idea of ‘domestic and original design’ in the domestic car project; and this approach is a better  and  more  accepted  model.  However,  design  is  only  one  stage  of  the  process  of having a successful commercial product; if not all stages are completed successfully, all efforts  will  be  wasted.  In  this  regard,  China’s  approach  to  be  a  global  brand  in  the automotive industry instantly by purchasing an existing global brand is much better than to  start  from  the  scratch  or  to  purchase  just  designs  of  some  vehicle  models.  China’s Geely   Automotive   company   purchased   Volvo   car   company   of   Sweden,   which   is well-known for building sturdy cars, in 2010 for $1.8 billion. This way, Volvo, which has been  a  Swedish  national  brand  since  1927,  suddenly  became  a  Chinese  brand.(18)  Thus, China did not only own the design and patents of the vehicles, but also active production plants,  skilled  labour,  accumulation  of  years  of  engineering  as  well  as  manufacturing know-how, brand recognition, sales network and customers. In addition, Geely also set up  three  new  factories  in  China  and  started  to  produce  and  market  Volvo  in  China. Meanwhile, it is designing a new sports utility vehicle (SUV) with its current engineers for  the  US  market.  China  bought  several  automotive  companies  along  with  Volvo  in Europe with the same approach.

Malaysia  started  the  Proton  brand  ‘national  car  project’  adventure  in  collaboration with Japan’s Mitsubishi company in 1983. Countries that aspire for a national car should study  the  national  car  experience  of  Malaysia  carefully  with  its  pros  and  cons  and  the burden this national project placed on the state to avoid costly mistakes. The high cost brought on the people of Malaysia who wanted to own cars due to the high taxes imposed on imported vehicles and their parts so that Proton would succeed in the domestic market should also be investigated. Despite all protective measures that violated the free market conditions,  the  sales  of  Proton  plummeted,  and  it  was  unable  to  pay  its  debts  to  parts suppliers  as  of  March  2016,  Proton  was  at  the  brink  of  bankruptcy  and  it  is  trying  to survive  with  the  $500  million  bailout  package  given  by  the  Malaysian  government  on condition  that  it  would  develop  a  new  convincing  business  model  and  it  would  renew itself.(19)

Instead of taking a pride in their national car, today Malaysia is discussing whether Proton, whose weekly sales dropped by 95% from 4,000 to 200, should be continued to be supported by the taxes paid by the people. To avoid a similar discussion years later, countries  that  aspire  for  a  national  car  should  make  careful  calculations  and  objective analysis before entering the automotive sector since even the world’s best known brands often  come  to  the  brink  of  bankruptcy.  Instead  of  committing  themselves  to  a  specific sector for emotional reasons, they should also consider sectors with a higher chance of success – like Taiwan which has become a global player in electronics today by entering and investing in the semi-conductor and electronics industry years ago, and India which focused on software and virtually became the world’s software house.

With internet-of-things, everything from electric grids to household appliances, and even  cities,  are  becoming  ‘smart’,  and  the  automotive  industry  is  no  exception. World automotive giants who clearly see how the future is shaped are in a tight race worldwide to hold the competitive edge in the future automotive market of smart self-driving cars. Therefore,  they  are  recruiting  the  best  researchers  in  the  field  of  artificial  intelligence, robotics, sensors, control systems and software which form the infrastructure for smart vehicles.  They  also  purchase  the  appropriate  start-up  companies,  establishing  research centres, entering partnerships and forming strategic alliances worldwide.

For example, Toyota does not limit itself to the R&D infrastructure in Japan regarding driverless  vehicles.  It  virtually  scans  the  world  with  radar  continuously  monitoring  all developments in this field and makes strategic moves when it deems necessary. In this content,  Toyota  established  an  advanced  projects  laboratory  in  2015  in  Silicon  Valley where most creative minds in the world are, with a budget of $1 billion to accelerate the R&D in the areas of driverless vehicles and artificial intelligence. After working together with  Stanford  and  MIT,  two  leading  technical  universities  in  the  USA,  Toyota  entered collaboration with the University of Michigan in this area and expanded its R&D base.(20)

Further,  Toyota  hired  all  employees  of  Jaybridge  Robotics,  an  MIT-based  spin-off company in the field of artificial intelligence in the US, which equipped Toyota with a huge  accumulation  of  knowledge  to  be  used  in  driverless  vehicles.  Other  automotive companies are doing similar things. It is clear that an automotive company that does not follow the developments in the world and that cannot position itself strategically, will not have a place in the world of the future.

Domestic parts and products in aviation industry

Brazil’s Embraer company, which is the world’s third largest aircraft manufacturer after Boeing and Airbus and which is in tight competition with Canada’s Bombardier company in  the  medium  size  regional  aircraft  market,  was  founded  in  1969  by  the  Brazilian government.  The  company  that  was  privatised  in  1994  employs  19,000  people.(21)   The total revenues of Embraer, which also sells aircraft parts and provides ground services, was $6.2 billion in 2013 (DOT, 2016). The Embraer-based aviation manufacturing sector of Brazil has a wide range of products, and its revenues reached $7 billion in 2013.

Embraer’s  main  rival  in  the  regional  aircraft  market  is  the  Bombardier  Aerospace company,  which  was  established  in  the  Canadian  province  of  Quebec  in  1989.  Its revenues were $10.5 billion in 2014 and it employs 34,000 people. Bombardier entered the  aircraft  manufacturing  sector  in  1989  by  purchasing  Northern  Ireland’s  Short Brothers   aircraft   manufacturing   company,   which   was   in   bankruptcy,   and   Learjet company,   which  produced  business  jets  in   Kansas  in  the  USA   and  was  also   in bankruptcy, in 1990. Then, it purchased de Havilland Aircraft of Canada, which was the Toronto  unit  of  the  Boeing  company  in  1992.  With  these  strategic  purchases  of companies, Bombardier became a world brand in the aviation sector in a short time with already  certified  wide-ranging  products,  patents,  skilled  manpower,  brand  recognition, production  plants  and  sales  network.  It  has  sold  about  2,500  regional  airplanes  and 3,500 business jets so far (DOT, 2016). Learjet continued its production in its plants in the USA after being acquired by the Canadian Bombardier.

The  first  Bombardier  C-Series  airliner  with  110–135  passenger  capacity,  whose certification was received after a long and expensive ($4.5 billion) development process that  started  in  2004,  was  bought  and  put  into  service  in  June  2016  by  Swiss  Air. However, the competition in this passenger capacity range experienced with Boeing 737 and Airbus A318 models causes the aircraft to be sold below cost which makes reaching profitability difficult.

106 of the total of 172 medium size commercial aircraft in service in Canada in 2014 were  made  in  Canada  and  the  remaining  ones  were  made  by  the  Brazilian  competitor Embraer, which shows the global character of the aircraft market. Similarly, out of the total 5,300 aircraft the European-based Airbus company sold to the whole world, it sold

2,000 aircraft to North America, where a world aerospace leader like Boeing is located. Taking  into  consideration  the  size  of  the  market,  Airbus  established  a  factory  with  an annual production capacity of 50 aircraft with an investment of $600 million in Alabama, USA. It delivered the first A321 aircraft manufactured there to American Airlines in May 2016.(22)

70% of the parts used in Embraer regional aircraft are of the US origin. The ratio of the  US origin parts  in  Airbus  aircraft  is 40%  (in some  models of A380  models  with a capacity  of  530  passengers,  it  is  51%).(23)   That  ratio  is  53%  in  Canada’s  Bombardier C-Series aircraft. When the parts imported from other countries are considered, it seems that  the  ratio  of  the  domestic  parts  in  the  aircraft  that  are  a  source  of  pride  for  those countries is a small fraction. But not much attention is paid to this ratio, and the aircraft manufacturers view the number of supplying companies and their global diversity as a ‘wealth of resource’. Most parts used in Boeing aircraft (for example, 65% of the parts used in Boeing 787) come from out of US. However, this does not overshadow the fact that Boeing with annual revenues of $96 billion and 160,000 employees is a US company and Boing aircraft are US products.(24)  No matter where Boeing aircraft are manufactured and no matter from which countries the aircraft parts come from, Boeing’s success and prestige  are  regarded  as  the  USA’s  success  and  prestige.  Likewise,  the  Airbus  aircraft produced in the USA will be recognised as a European brand and the success and prestige of these aircraft will belong to Europe despite the label ‘made in USA’ on them. This is like  it  is  not  important  how  many  foreign  players  there  are  in  a  football  team  that becomes a champion in an international tournament. After all, the cups the team wins and the pride it brings in belong to the entire country.

Given  that  Boeing  787  has  2.3  million  parts,  the  importance  of  having  a  broad domestic and foreign supplier chain for the aircraft companies can be appreciated better. Boeing  works with  5,400  suppliers  for  commercial  aircraft  and  buys  750  million  parts from  them  annually.  This  supply  chain  employs  500,000  people.(25)   The  competition among parts suppliers feeds innovation, and enables the aircraft manufacturers to obtain higher quality innovative products at lower costs. Thus, a significant proportion of R&D costs and risks are undertaken by the parts manufacturers, and this enables the aircraft companies  to  focus  on  integration  of  competitive  products.  In  addition,  international agreements are signed to maintain a fair competitive environment at global scale among parts manufacturers, and domestic subsidy programs that may lead to unfair competition are closely monitored.

The quest of HondaJet, the seven seat private business jet that belongs to the Japanese automaker  Honda  that  makes  Honda  Accord,  which  is  among  best  selling  cars  in  the USA and has good brand recognition and trust, is a highly instructive example that needs to be studied carefully by those who plan to enter a global competitive market with a new product.(26)   The  HondaJet  adventure  started  30  years  ago  and  received  the  production certification  from  FAA  (US  Federal  Aviation  Administration)  in  July  2016.  HondaJet stands out with competitive features like being the fastest, quietest and most fuel-efficient in the small-cabin business jet class in the annual $6 billion market that includes Cessna (USA) and Embraer (Brazil).(27)  60% of the demand for this type of aircraft comes from the USA and Canada. Honda Aviation Company was founded in 2006 in the US, not in Japan, due to the strategic advantage provided by being close to the market. The work started at Mississippi State University in the USA with a model built under the leadership of an engineer who was sent from Japan in the 1980s. It continued with the first test flight in  2003  and  certification  was  received  from  the  EASA  in  Europe  in  May  2016.(28)  The business jet lists for about $4.5 million and has already received more than 100 orders. HondaJet plans to produce 60 aircraft annually. Honda formed a joint venture with GE Aviation, a manufacturer of aircraft engines in the USA, to build small jet engines. These engines also are being sold to retrofit jets by other aircraft-makers.

Cobalt Aircraft company, which was started in Silicon Valley in the USA in 2005 by an  aircraft  engineer  and  entrepreneur  who  was  born  in  France,  is  developing  350-hp single-engine, five seat small aircraft for private and business trips. The Co50 Valkyrie model  whose  list  price  is  $595,000  is  expected  to  be  launched  in  2017.  This  private aircraft,  which  appeals  to  amateur  enthusiasts  of  flying  and  whose  flight  range  is 2,650 km can fly at a speed of 460 km/h.(29)  The aircraft has already received pre-orders worth $50 million from enthusiasts in the USA and many other countries.(30)

As  it  can  be  seen  from  HondaJet,  Co50  Valkyrie  and  similar  experiences,  the  first priority in  entering  the market with  a new product in aviation  is to analyse the market well  and  to  be  in  the  closest  position  to  the  market  by  giving  people  confidence.  Of course, it is important in marketing for the new product to have competitive features that distinguishes  it  from others. To  be  close  to global  certification  organisations  like FAA and  EASA  and  to  be  in  work  together  with  them  at  every  stage  from  building  the production plants to the flight tests provides an advantage in the global market to instill confidence.

The human body is composed of food that the person eats; and the saying ‘a person is what he eats’ is true to a certain extent for the body. However, the real value of a person is  indexed  on  the  value  of  what  he  does,  not  the  value  of  his  body  itself.  A  Japanese person  with  a  Japanese  ID  is  a  100%  native  citizen  of  Japan  even  if  all  his  food  and drinks come from abroad. All achievements of this person (the Nobel prizes he receives, the championship trophies he wins, the patents he owns, etc.) are also credited to Japan, not to the country where his food comes from. The achievements of a person who has relinquished his citizenship and became the citizen of another country will belong to this country. Einstein and many other scientists of European origin who migrated to the US made significant contributions to the scientific and technological development of the US. Bulgarian-born  Naim  Süleymanoğlu,  who  became  a  Turkish  citizen  and  competed  on behalf of Turkey in weightlifting won gold medals for Turkey.


The first thing that needs to be done to increase the welfare and wealth in a country, to elevate its prestige and to make the people of that country take pride in their country is to adopt reason and science as the guides and to act in accordance with the necessities and realities of time with a critical point of view instead of epic feelings that are closed to criticism. It is necessary to establish a mechanics in this context and always to keep in mind the following general principles:

  • Self-sufficiency is a utopia for a country and insistence on this dream brings about inefficiency, poor quality, decline in competitiveness, and impoverishment. Countries need one another to maintain their welfare and to improve it further. Even the USA and China, the world’s two largest economies, are dependent on other countries to sell products/services. This is so much so that a product or service boycott (as Russia applied against Turkey) can be used as a weapon which can cause serious damage to the economy of the boycotted country.
  • A product that cannot be competitive in the global market with its price and quality cannot remain competitive in the domestic market either, and it will disappear from the market in time. Therefore, to attempt to manufacture all products domestically will not bring about making the market domestic; but rather, it will hand over the market to foreign products since domestic products will no longer be competitive.
  • Imposing high tariff walls to support domestic production and thus to force people to buy domestic goods is to doom people to high-cost and low-quality products and to rid the higher standard of living they deserve. This will erode the sense of belonging of the citizens to the country, increase xenomania and inferiority complex, and compel people to seek a better life in other countries.
  •  In this age when products do not know national borders and technology advances in dazzling speed, it is necessary for a country to determine the areas/products/services for which it can be competitive in the global arena after a careful analysis, and to focus its activities in those areas instead of attempting to manufacture everything domestically. Effective and efficient use of existing resources and being competitive necessitate this. Those who try to do everything cannot do anything economically, and cannot become competitive in anything. Also, they cannot improve and sustain what they do since they cannot allocate sufficient resources.
  • In an environment in which technology advances rapidly and product life decreases just as fast, R&D has a vital importance. R&D is a global phenomenon, not a national phenomenon. As in football, the best R&D is carried out with the best brains regardless of nationality and in the best R&D environment in the world. An R&D program that is not sustainable and competitive at a global scale is like no R&D program since a technology that is not on par cannot develop competitive products or services. Even if it does, it cannot sustain them.
  • Science, technology and technological goods have no nationality. For a country to isolate itself from the world to develop competitive ‘fully native and original technology is simply to lose contact from reality, which will probably result in a waste of time and resources. It is important to be output-based rather than input-based. Technology belongs to the firm that owns its intellectual property IP, no matter who develops it, and to the country that the firm belongs to (until it is purchased by a firm in a different country). The same is valid for products and services.
  • Alternative innovation approaches like buying companies instead of developing a product from the scratch, taking part in international cooperation and even opening R&D centres in foreign countries have become necessary to maintain the competitive edge in the globalised world. The closed nationalist model used in some countries to develop national products should be reexamined critically based on outputs, and should be made more effective and efficient by utilising alternative innovation approaches. Trying to reinvent the wheel causes only a loss of time and resources.
  • There is no such thing as 100% domestic parts in products in the globalised world. To force manufacturers to use a minimum certain percentage of domestic parts in a product is to inflict a heavy blow to the global competitiveness of that product and to impair its marketability. The strategies of developing/manufacturing parts by a country should be developed independent of the domestic products by considering the global market conditions. The parts that are competitive in the global market due to their quality, cost and certifications will be preferred in domestic products anyway.
  • Job creation and developing/manufacturing high-technology products should not be mixed with each other and should not be put into the same basket. Domestic and foreign companies can be persuaded to build manufacturing facilities in a country and create jobs by making manufacturing attractive in that country. High-tech firms can manufacture high added value goods with a small number of employees. The economy should be allowed to flow in its natural course. Imposing direct or indirect conditions for the creation of certain amount of jobs or the use of certain percentage of domestically manufactured parts may close the door of the country to high tech companies and lose them to other countries.
  •  The most domestic or national product of a country is one that is made by a company belonging to that country and provides the highest benefit to the people of that country regardless of the ratio of the domestic parts used and the country in which it is developed or manufactured. Likewise, the most domestic or national company is the one that belongs to that country and provides the highest benefit to the people of that country regardless of the ratio of the domestic parts it uses and the country where the manufacturing plants and research centres are established. The benefits provided to the people covers a wide range from increasing the gross domestic product to know-how development, from decreasing the current account deficit to contribution to the innovation ecosystem, and even overjoying the people with national pride as the world leader in a product or technology, like world championship in football.

(Source: Int. J. Research, Innovation and Commercialisation, Vol. 1, No. 2, 2017)


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