But while continuous innovation should be one of the primary defences of manufacturers in developed countries against low-cost producers, only 26% of the 232 global manufacturing executives surveyed are hoping to improve profitability through greater innovation over the next three years.
Of most concern are manufacturers in western Europe. With the exception of Germany, Sweden and Denmark, western European countries are investing too little in R&D to compete on the basis of innovation and technology.While R&D spending across the EU rose to 1.9% in 2003, this remains behind the US's 2.6%, Japan's 3.2% and the 2.3% OECD average. Italy and Spain, which spend just over 1% of GDP on R&D, are of particular concern and are leaving their industries vulnerable to commoditisation and competition from low-cost producers.
Source: Globalisation and manufacturing
Economist Intelligence Unit (EIU), January 2006
Review by Steve Lodge