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Who Captures Value in a Global Innovation System? The case of Apple's iPod from Docuticker by Shirl Kennedy Who Captures Value in a Global Innovation System? The case of Apple's iPod (PDF; 58 KB) http://www.docuticker.com/?p=14446 Source: Personal Computing Industry Center, University of California-Irvine So what can we say about who captures the value of innovation, based on this initial analysis? First, the biggest winner is Apple, an American company, with predominantly American employees and stockholders who reap the benefits. If the iPod had been made by Sony or Samsung, the value to the U.S. would be considerably less. Second, the producers of high value, critical components capture a large share of the value. For the 30GB Video iPod, the highest value components are the hard drive and the display, both supplied by Japanese companies. U.S. suppliers provide the two most valuable microchips. Third, trade statistics can mislead as much as inform. For every $300 iPod sold in the U.S., the politically volatile U.S. trade deficit with China increased by about $150 (the factory cost). Yet, the value added to the product through assembly in China is probably a few dollars at most. While Apple's share of value capture is high for the industry, the iPod's overall pattern of value capture is fairly representative. Today, no single country is the source of all innovation and therefore U.S. companies need to work with international partners to bring new products to market. These companies will capture profits commensurate with the extra value they bring to the table. This is simply a fact of business in the 21st century, and the good news is that many American companies are winning this game and continuing to bring significant benefits to the U.S. economy. <...>
