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OCR for page R1
Series on
PROSPERING IN A GLOBAL ECONOMY
Foreign Participation in U.S
Research and Development
Asset or Liability?
Proctor P. Reid and Alan Schriesheim, Editors
Committee on
Foreign Participation in U.S. Research ant! Development
`111,
NATIONAL ACADEMY OF ENGINEERING
NATIONAL ACADEMY PRESS
Washington, D.C. 1996
.
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NATIONAL ACADEMY PRESS · 2101 Constitution Avenue, NW · Washington, DC 20418
NOTICE: The National Academy of Engineering was established in 1964 under the charter of the
National Academy of Sciences as a parallel organization of outstanding engineers. It is autonomous
in its administration and in the selection of its members, sharing with the National Academy of Sci-
ences the responsibility for advising the federal government. The National Academy of Engineering
also sponsors engineering programs aimed at meeting national needs, encourages education and re-
search, and recognizes the superior achievements of engineers. Dr. Harold Liebowitz is president of
the National Academy of Engineering.
This publication has been reviewed by a group other than the authors according to procedures
approved by a National Academy of Engineering report review process.
Partial funding for this effort was provided by the Carnegie Corporation of New York and the
National Academy of Engineering Technology Agenda Program.
Library of Congress Cataloging-in-Publication Data
Foreign participation in U.S. research and development: asset or
liability? / Committee on Foreign Participation in U.S. Research and
Development, National Academy of Engineering/Proctor P. Reid and Alan Schriesheim, editors.
p. cm. - (Series on prospering in a global economy)
Includes bibliographical references and index.
ISBN 0-309-05095-2 (alk. paper)
1. Investments, Foreign—United States. 2. Research, Industrial-
United States. I. National Academy of Engineering. Committee on
Foreign Participation in U.S. Research and Development. II. Series.
HG4910.F68 1995
332.6'73'0973—dc20 96-11026
CIP
Copyright @) 1996 by the National Academy of Sciences
No part of this book may be reproduced by any mechanical, photographic, or electronic procedure, or
in the form of a phonographic recording, nor may it be stored in a retrieval system, transmitted, or
otherwise copied for public or private use, without written permission from the publisher, except for
the purpose of official use by the United States government.
Printed in the United States of America
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Committee on Foreign Participation in
U.S. Research and Development
ALAN SCHRIESHEIM, Chairman, Director and CEO, Argonne National
Laboratory
PETER BEARDMORE, Director, Chemical and Physical Sciences Laboratory,
Ford Motor Company
SAMUEL H. FULLER, Vice President of Research, Digital Equipment
Corporation
JOHN E. GRAY, Vice Chairman, Atlantic Council of the United States
KARL E. MARTERSTECK, President, ArrayComm, Inc., San Jose, California
JOEL MOSES, Provost, Massachusetts Institute of Technology
THOMAS J. MURRIN, Dean, A. J. Palumbo School of Business
Administration, Duquesne University
ROBERT M. NEREM, Parker H. Petit Professor for Engineering in Medicine,
School of Mechanical Engineering, Georgia Institute of Technology
C. KUMAR N. PATEL, Vice Chancellor, Research, University of California,
Los Angeles
EDWIN P. PRZYBYLOWICZ, Director, Chester F. Carlson Center for
Imaging Science, Rochester Institute of Technology
MAXINE L. SAVITZ, General Manager, Ceramic Components, AlliedSignal
Aerospace Company
CHANG-LIN TIEN, Chancellor and A. Martin Berlin Professor, University of
California, Berkeley
NAE Staff
PROCTOR P. REID, Study Director, Senior Program Officer
PENELOPE J. GIBBS, Administrative Assistant
. . .
[I!
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Preface
The past 2 decades have witnessed rapid growth in the involvement of for-
eign nationals in U.S.-based research and development. By establishing or ac-
quiring R&D performing companies in the United States, foreign companies have
come to account for a significant share of privately funded U.S. R&D. Similarly,
foreign firms, individual researchers, and students have become increasingly en-
gaged in the publicly funded R&D activities of U.S. research universities and
federal laboratories.
These developments have elicited a mixed response from U.S. policymakers
and the American public. Concerned that unrestrained foreign access to U.S.-
based R&D assets may weaken the nation's technology base, increase U.S. de-
pendence on foreign sources of technology, undermine U.S. military strength, or
shift jobs and profits away from the United States, some observers have called for
public- and private-policy actions to slow or reverse the trend. Meanwhile, oth-
ers extol the benefits of deepening foreign involvement in the nation's technol-
ogy base to the nation's economy and military power, and urge policy actions
designed to facilitate, or at least not impede, the internationalization of publicly
and privately funded R&D.
Thus far, public debate regarding the nature and consequences of growing
foreign participation in U.S. R&D has been highly polarized, driven largely by
anecdotal reports and highly generalized arguments concerning the pros and cons
of free international flows of trade, investment, and technology. The following
consensus report, prepared by a committee of members of the National Academy
of Engineering, seeks to improve public understanding of and policy responses to
growing foreign R&D participation by documenting, measuring, and assessing
v
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Al
PREFACE
the most important modes of foreign involvement in privately and publicly funded
U.S. R&D activity. Based on its findings, the committee proposes specific ac-
tions to minimize the costs and maximize the benefits of this trend to U.S. citi-
zens.
On behalf of the National Academy of Engineering, I would like to thank my
fellow committee members for their considerable efforts related to the project. I
also commend the NAE staff that supported the project for their professionalism
and contributions to the study's success. Proctor P. Reid, Senior Program Officer
with the NAE Program Office, directed and managed the project, helped elicit
consensus among committee members, and drafted much of the report. Penelope
J. Gibbs from the NAE Program Office provided critical administrative and lo-
gistical support for the project. Bruce R. Guile, director of the NAE Program
Office, contributed valued intellectual stimulus to the project during its initial
stages. Greg Pearson, the NAE's editor, was instrumental in preparing the report
manuscript for final publication.
r - -r -~~~~= ~~~~ ~—r—~ ~
I would also like to extend the committee's thanks to all those from govern-
ment, industry, and academia who contributed to the project. In particular, I want
to express our appreciation to those who participated in the fact-finding roundtable
held during the initial stages of the project (see Appendixes) and to others who
briefed the committee.
Finally, I would like to express my appreciation to the Carnegie Corporation
of New York for its generous support of this project and related elements of the
National Academy of Engineering's multiyear program of symposia and commit-
tee studies on technology, trade, and economic growth.
Alan Schriesheim
Chairman
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Contents
EXECUTIVE SUMMARY
1 INTRODUCTION 15
The New Wave of Foreign R&D Participation, 16
Calls for Public-Policy Action, 18
Foreign R&D Participation in Context, 19
THE CONTRIBUTION OF R&D TO U.S. ECONOMIC
DEVELOPMENT 29
Research and Development: A Simplified Taxonomy, 29
The Multiplicity of R&D Outputs, 30
The Political-Economic Logic of Publicly and Privately
Funded R&D, 31
R&D, Innovation, and National Economic Development, 32
How the Benefits of R&D Are Distributed at the National
and International Level, 34
Implications for the Assessment of Foreign Participation in
U.S. R&D, 35
Conclusion, 36
3 FOREIGN PARTICIPATION IN PRIVATELY FUNDED
U.S. R&D 39
The Causes of Growing Foreign Participation, 40
Foreign Direct Investment, 42
v`'
. .
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. . .
Vlll
International Corporate Alliances, 56
Opportunities and Risks, 58
Summary, 81
4 FOREIGN PARTICIPATION IN PUBLICLY FUNDED
U.S. R&D ...............................................................................................
University-Based Research, 91
Foreign Participation in U.S. Federal Laboratory R&D, 112
Foreign Participation in Recent Federal Industrial
Technology Initiatives, 116
The Implications of Foreign Participation in Publicly Funded
U.S. R&D, 1 18
Summary, 129
5 FINDINGS AND RECOMMENDATIONS ..
R&D and Economic Performance, 141
Foreign Participation in Privately Funded U.S. R&D:
Findings, 142
Foreign Participation in Privately Funded U.S. R&D:
Recommendations, 145
Foreign Participation in Publicly Funded U.S. R&D:
Findings, 147
Foreign Participation in Publicly Funded U.S. R&D:
Recommendations, 151
Changing Perceptions and Their Implications, 156
REFERENCES
COMMITTEE AND STAFF BIOGRAPHIES
APPENDIXES
Agenda ............
Particinants
INDEX
CONTENTS
90
..140
.159
.172
181
.183
185
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Foreign Participation in U.S.
Research and Development
Asset or Liability?
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