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Foreword
The National Aeronautics and Space Administration asked the Board on Science, Technology, and Economic Policy (STEP) to hold a one-day symposium to review the NASA Ames Research Center's plans to develop a science and technology park. As currently envisaged, the park will include three main elements: cooperative activities with two major universities (the University of California at Santa Cruz and Carnegie Mellon University) for a variety of educational missions; collaborative research with major high-technology industries in close proximity to Ames; and innovative efforts to encourage small business development. The workshop, held on 14 April 2000, brought together a Member of Congress, congressional staff, executive branch officials, representatives from the private sector, university officials, and regional economists to discuss the NASA Ames initiatives. In addition, two papers were commissioned, one to provide an analysis of the development and evaluation of S&T parks and another to review the unique features of the Ames proposal. The Ames S&T park will be an integral part of the 2,000-acre NASA Ames Research Center, located in Moffett Field, California. A description of the park concept, prepared by the NASA Ames Research Center, is included in the report in Annex A.
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Preface
The technology-driven growth that has characterized the U.S. economy over the last decade has reinforced Americans' belief in the value of science and technology. New technologies are understood to be sources of strength for the economy as well as means of addressing national objectives, such as improved health care, a cleaner environment, and the exploration of space. Though less well understood, the government has long played an important role in stimulating scientific and technological advances, and this role has become increasingly important as we begin the new century.
The federal role is as diverse as it is important. The government directly stimulates scientific and technological research through its support of the large federal research agencies, such as the Department of Defense, the Department of Energy, the National Science Foundation, and the National Aeronautics and Space Administration (NASA). Much of this effort goes directly to universities, but some serves as a direct stimulus, translated through various mechanisms and programs, for private-sector activities that directly benefit the national economy and our capacity to achieve national goals.1
1 This report is the second in the Government-Industry Partnerships series to focus on industry collaboration with national laboratories. The first analysis of these cooperative efforts focused on industry-laboratory partnerships at the Sandia National Laboratories. See National Research Council, Industry-Laboratory Partnerships: A Review of the Sandia Science and Technology Park Initiative, Charles W. Wessner, ed. Washington, D.C.: National Academy Press, 1999. The preface of that workshop report provides background information on the policy context of industry-laboratory collaboration, which is relevant to the Ames Research Center initiatives.
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In recent years, adjustments in federal spending patterns have resulted in smaller research budgets for some federal agencies. These agencies have been challenged to meet and even extend mission objectives in the face of tighter budgets. In the case of NASA, agency planners have sought to reach their objectives through a “better, faster, cheaper” strategy that includes simplification, reliability, and versatility.2 In addition to continuing its exploration of space, the federal space agency has also sought effective mechanisms to transfer its rich technological output into innovations of value in the commercial marketplace and to leverage its physical and human resources in new ways.3
The Ames Research Center's plans to develop a science and technology park represent a significant new initiative for NASA. This ambitious undertaking includes three main elements. Current plans call for cooperative arrangements with two major universities for a variety of educational missions, ranging from educational outreach to post-doctoral research. A central element of the initiative is to address common research goals through close cooperation between Ames and leading high-technology companies. In addition, the park will include a substantial emphasis on small business development, through the Ames incubator, NASA SBIR grants, and new approaches to funding for companies with technologies relevant to the NASA mission. These interrelated objectives and the proximity of the Ames Research Center to the technological ferment of Silicon Valley make this a unique chapter in NASA's continued efforts to leverage its resources.
THE ROLE OF STEP
The National Research Council's Board on Science, Technology, and Economic Policy (STEP) was founded in 1991 to improve understanding of the interconnections between science, technology, and economic policy and their importance to the American economy. The Board's activities have corresponded with increased recognition of the importance of support for basic, applied, and developmental research to continued economic growth.4
STEP recognizes that of the major investors in R&D—the federal government and private industry—the federal government has the primary but not exclusive responsibility to provide support for basic research. The government's role is central for at least four reasons: First, the federal government has the capacity to take a long view of research and provide the “patient funding” needed
2 The NASA budget declined for several years; however, for fiscal year 2001 the NASA budget was increased to $14.285 billion, $633 million more than the fiscal year 2000 level.
3 For example, NASA supports a substantial SBIR program totalling approximately $92.1 million in fiscal year 2000.
4 For an informative discussion of different elements of the research process, see Donald Stokes, Pasteur's Quadrant: Basic Science and Technological Innovation, Washington, D.C.: Brookings Institution Press, 1997.
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to put in place the foundations of the next generation of discoveries.5 Second, the federal government is also uniquely placed to support the institutional framework of universities and laboratories to train researchers and develop new principles and processes, which ultimately contribute to scientific and economic progress. Third, the federal government is the primary entity with sufficient resources to make substantial, long-term, inherently uncertain investments in research and development of new technologies. Lastly, federal support for applied research and development also serves the public interest directly by increasing the government's capacity to achieve national missions in areas as diverse as health, public safety, and conservation.
These investments require a long-term view because the outcomes of basic scientific and technological research are inherently unpredictable. Basic insights that may seem useless in a practical sense often turn out to have immensely valuable applications years or decades after their discovery.6 At the same time, many recognize that the taxpayers have a justified interest in seeing concrete economic and social benefits from this substantial public investment in R&D.7
Indeed, an important premise for economic policy, developed from the work of Robert Solow in the 1950s,8 is that in the right circumstances, the outcomes of research stimulate commercially valuable innovations, and that these innovations
5 As Richard Nelson notes, technological advance involves uncertainty in a fundamental way. The process is full of surprises, and it generally is not possible to predict the outcomes of research programs. R&D statistics and policy discussion often reflect assumptions of a linear model, by which innovation proceeds from fundamental discovery to applied research, and then to development and marketing. However, there is widespread recognition that this model is not adequate to describe the diverse origins and feedback loops of most real-world innovations. See Richard Nelson, “Technical advance and economic growth,” in National Research Council, Harnessing Science and Technology for America's Economic Future, Washington, D.C.: National Academy Press, 1999 (www.nap.edu/html/harness sci tech/ch2.html ) . See also Branscomb's discussion of “basic technological research” in Lewis M. Branscomb and James H. Keller, eds., Investing in Innovation: Creating a Research and Innovation Policy That Works, Cambridge, MA: MIT Press, 1998, Chapter 5.
6 Among many examples are the global positioning system (GPS), the popular navigational tool whose accuracy depends on the discovery by I. I. Rabi in the 1930s of magnetic resonance, which made possible the development of atomic clocks. Basic research played a similar role in optics. See the references to optics research in National Research Council, Allocating Federal Funds for Science and Technology. Washington, D.C.: National Academy Press, 1995, p. 77.
7 For a discussion of the process of innovation and policies to stimulate it, see Branscomb and Keller, Investing in Innovation, op. cit., Chap. 18. See also Lewis Branscomb, "The False Dichotomy: Scientific Creativity and Utility," Issues in Science and Technology, 16(1): 66, 1999. See also Lewis Branscomb, Taking Technical Risks: How Innovators, Managers, and Investors Manage Risks in High-Tech Innovations. Cambridge, MA: MIT Press, forthcoming, chapter 5.
8 Solow found that a small fraction of economic growth could be assigned to labor, and that capital formation accounted for approximately one-third of growth. This leaves a large "Solow residual" that is assigned to technological progress, exogenously determined. More recently, new growth theory has emphasized technology as an "endogenous" factor. Endogenous growth theory postulates several channels through which technology, human capital, and the creation of new ideas enable a "virtuous circle” and feedback to economic growth. See Paul Romer, “Endogenous technological change,” Journal of Political Economy, 1990, 98:71-102. This understanding is critical in attempting to determine the contribution of new technologies (such as information technology) to the growth process and, specifically, to the growth of productivity.
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drive economies.9 This premise underlies the rationale for modern federal investments in R&D, which ultimately serve the public interest in the form of improved products, processes, and understanding.10
A second premise, still unfolding, is that the most powerful fuel for the economy is found in research that underlies high-technology innovations—those that involve highly advanced or specialized systems or devices. The so-called “knowledge-based” fields of research, such as software engineering, wireless communications, biotechnology, and artificial intelligence, all grew out of basic research whose outcomes were unforeseeable. They may prove to be as dominant in the economy of the information age as oil and steel were in the economy of the industrial age.11 According to a recent study by the Milken Institute, the growth of the high-technology sector since the 1990-91 recession has been four times as rapid as that of the aggregate economy.12 This sector plays a major and disproportionate role in the national R&D effort and developing opportunities for economic growth and job creation.
9 The macro-economic environment greatly conditions the returns to these investments. For example, European policymakers have recently wrestled with the failure of a vibrant R&D enterprise to convert research into technological and commercial success. See European Commission, Research and Technology: the Fourth Framework Programme (1994-1998), Brussels, Belgium, 1995, p. 12. The 1995 report cites three features of the European research system to partly explain these weaknesses: the inadequate translation of research results into commercial applications, insufficient investment in research and technology development programs in the fields of education and training, and the fragmentation and lack of coordination in European research efforts.
10 The impact of such programs on international research cooperation and the multilateral trading system are of considerable interest not only to U.S. research agencies but to policymakers around the world. Reflecting this interest, these topics were taken up by STEP in conjunction with the Hamburg Institute for Economic Research and the Institute for World Economics in Kiel in a collaborative project. One of the principal recommendations of the joint report emerging from that study called for an analysis of the principles of effective cooperation in technological development. See National Research Council, Conflict and Cooperation in National Competition for High-Technology Industry, Washington, D.C.: National Academy Press, 1996.
11 See Ross C. DeVol et al., America's High-Tech Economy: Growth, Development, and Risks for Metropolitan Areas, Santa Monica, CA: Milken Institute, July 13, 1999 (www.milken-inst.org ) . The report focuses on the value of output for industries that may be considered high-technology, including manufacturing industries (drugs, computers and equipment, communications equipment, and electronic components) and service industries (communications services, computer and data processing services, and research and testing services).
12 Ibid.
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Box A. Benefits of High-Technology Industries
High-technology industries bring special benefits to national economies. These industries are associated with innovation, which means they tend to gain market share, create new product markets, and use resources more productively than traditional industries. They also perform larger amounts of R&D (spending over 10 percent of revenues on research, vs. 3 percent for more traditional industries). This high level of expenditure also creates positive spillover effects that benefit other commercial sectors. A substantial economics literature underscores the high returns of technological innovation, with private innovators obtaining rates of return in the 20-30 percent range and spillover (or social return) averaging about 50 percent. There are also positive spillover effects to other commercial sectors through the generation of new products and processes that lead to productivity gains and new opportunities. For example the surging capabilities and falling costs of new technologies based on semiconductors have enabled new methods of manufacturing in steel, automobiles, and aerospace, and major advances in consumer electronics and even agriculture. Consequently, high-technology industry in many regions is seen as a major source of national economic growth in all of the major industrialized countries. In particular, high-technology firms are valued as creators of high value-added manufacturing and high-wage employment. —National Research Council, Conflict and Cooperation, 1996, p. 34. |
PROJECT ORIGINS: EXAMINING PARTNERSHIPS
The growth in government programs to support high-technology industries raises new challenges and opportunities for NASA and the other researchintensive federal agencies. NASA is challenged to “do more with less” in the face of a declining budget and a strong desire on the part of the government to make the most productive use of its resources. At the same time, the space agency has opportunities to combine its technological assets with its considerable experience in creating partnerships with private firms to capitalize on the value of these assets. These activities have encouraged NASA, and other agencies, to explore new models for government-industry partnerships.
Reflecting the interest of policy makers in this topic, the STEP Board initiated the project on “Government-Industry Partnerships for the Development of New Technologies,” which has benefited from broad support among federal agencies. These include the U.S. Department of Defense, the U.S. Department of Energy, the National Science Foundation, the National Institutes of Health, the Na-
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tional Cancer Institute, the National Institute of General Medical Sciences, the National Aeronautics and Space Administration, and the National Institute of Standards and Technology, as well as a diverse group of private corporations listed in the front of the report. To carry out this analysis, the STEP Board has assembled a distinguished multidisciplinary steering committee for governmentindustry partnerships, listed in the front of this report. The Committee's principal tasks are to provide overall direction and relevant expertise to assess the issues raised by the project. At the conclusion of the project, the Steering Committee is to develop a consensus report outlining their findings and recommendations.
As a basis for the consensus report, the Steering Committee is commissioning research and convening a series of fact-finding meetings in the form of workshops, symposia, and conferences as a means of both informing its deliberations and addressing current policy issues affecting government-industry partnerships. As the project progresses, the Steering Committee is making recommendations and findings on major elements of its work, particularly in response to requests from participating agencies. This report can therefore be seen as both an input into the broader Academy assessment of partnerships and as a contribution to national policy making.
ACKNOWLEDGEMENTS
A number of individuals deserve recognition for their contributions to the preparation of this report and for their willingness to serve as reviewers. On behalf of the STEP Board we would like to express special recognition to Henry McDonald, Director of Ames Research Center; William Berry, Deputy Director of Ames Research Center; Carolina Blake, Chief of the Commercial Technology Office, Ames Research Center; Robert Norwood, Director for Commercial Development and Technology Transfer, NASA Headquarters; and Diana Hoyt, Senior Policy Analyst, NASA Headquarters. Their interest and commitment to an objective assessment of the Ames S&T Park initiative was crucial to the success of this review. Similarly, special recognition is due to David Audretsch, Ameritech Chair of Economic Development and Director of the Institute for Development Strategies, Indiana University; and Michael Luger, Professor of Public Policy Analysis, Planning, and Business and Founding Director of the Office of Economic Development at the University of North Carolina at Chapel Hill; for their many valuable insights. We also wish to thank Alan Anderson for his role in the preparation of the draft manuscript for this volume. Among the STEP staff, special recognition goes to David Dierksheide and McAlister Clabaugh for their support of the meetings at NASA Ames Research Center and their care in preparing and editing the manuscript for publication. Their enthusiasm and interest were essential for STEP to meet NASA's request for a review of the Ames initiatives.
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures ap-
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proved by the NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: Dr. Kathryn L. Combs, University of St. Thomas, St. Louis; Dr. Albert N. Link, University of North Carolina at Greensboro; Dr. Edward J. Malecki, University of Florida; Mr. John C. McDonald, MBX, Inc.; Mr. Thomas F. Widmer, Thermoelectron, retired; and Dr. Robert H. Wilson, University of Texas at Austin. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by Alexander H. Flax of the Washington Advisory Group. Appointed by the National Research Council, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.
Charles W. Wessner
