Executive Summary

BACKGROUND

Government-industry cooperation to achieve national goals continues to make important contributions to the growth of the U.S. economy. New technologies are widely seen as essential to sustain continued U.S. economic growth and a rising standard of living. To unlock the potential of new technologies, substantial private and public investment in research and development is often required, especially to bring promising new technologies forward to the marketplace. The U.S. government has played and continues to play an important supporting role in the development of new technologies, often through cooperative arrangements or partnerships with industry. In some cases, individual partnerships, as in semiconductors, have made major contributions to the resurgence of a key American industry. In other cases, the close interaction of a variety of federal programs over a number of years have contributed to the development of whole new industries, as in the cases of computing and biotechnology.

Despite the importance of these programs, and their interaction with the private sector, there has been little systematic analysis of the operation and impact of this form of government-industry collaboration. To improve policymakers’ understanding of the performance of partnerships, the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) undertook a major review of programs relying on public-private collaboration. The project on Government-Industry Partnerships for the Development of New Technologies was formed under the direction of the STEP Board and is directed by a distinguished Steering Committee. Chaired by Gordon Moore, Chairman Emeri-



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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies Executive Summary BACKGROUND Government-industry cooperation to achieve national goals continues to make important contributions to the growth of the U.S. economy. New technologies are widely seen as essential to sustain continued U.S. economic growth and a rising standard of living. To unlock the potential of new technologies, substantial private and public investment in research and development is often required, especially to bring promising new technologies forward to the marketplace. The U.S. government has played and continues to play an important supporting role in the development of new technologies, often through cooperative arrangements or partnerships with industry. In some cases, individual partnerships, as in semiconductors, have made major contributions to the resurgence of a key American industry. In other cases, the close interaction of a variety of federal programs over a number of years have contributed to the development of whole new industries, as in the cases of computing and biotechnology. Despite the importance of these programs, and their interaction with the private sector, there has been little systematic analysis of the operation and impact of this form of government-industry collaboration. To improve policymakers’ understanding of the performance of partnerships, the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) undertook a major review of programs relying on public-private collaboration. The project on Government-Industry Partnerships for the Development of New Technologies was formed under the direction of the STEP Board and is directed by a distinguished Steering Committee. Chaired by Gordon Moore, Chairman Emeri-

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies tus of Intel Corporation, the Committee includes members from academia, high-technology industries, venture capital firms, and the realm of public policy.1 Recognizing that partnerships are an integral part of the U.S. innovation system, the Committee has taken a pragmatic approach: It has focused its work on the operation and assessments of government-industry partnerships, rather than the broad questions of principle concerning the desirability of government-industry cooperation. While the Committee’s analysis has focused on a variety of current and recent programs, the study has addressed only a limited portion of the cooperative activity that takes place between the government and the private sector.2 The selection of specific programs to review is conditioned by the Committee’s desire to carry out an analysis of current partnerships directly relevant to contemporary policy making. The Committee also recognizes the importance of placing each of the studies in the broader context of U.S. technology policy, which continues to employ a wide variety of ad hoc mechanisms developed through the government’s decentralized decision-making and management processes. In the course of the Committee’s analysis, it became apparent that there are substantial differences in the mechanisms and levels of federal support to different sectors of the American economy, notably in biotechnology and computing. At the same time, the Committee had a strong interest in the growing synergies between biotechnology and information technology and the emerging gaps in funding and training in related disciplines. To address these issues, the Committee organized a series of meetings, including a major workshop and a conference in 1999. The conference brought together academic experts, entrepreneurs, government officials, and others with knowledge and experience in government support for biotechnology and information technology. The conference focused on the nature and implications of emerging trends of the federal research portfolio in biotechnology and information technology, particularly, unplanned shifts in the allocation across sectors of federal funding over the past decade. It further examined historical perspectives on partnerships in this sector, as well as new needs and emergent opportunities in biotechnology and information technology. Finally, it considered steps necessary to ensure that the nation maximizes its return on its investments in research. The conference deliberations—summarized in this volume—are supplemented by a series of commissioned research papers. The commissioned analyses address the most recent trends in federal funding, discuss the different impacts of the intellectual 1   For a list of Committee members, see the front matter of this report. 2   For example, DARPA’s programs and contributions have not been reviewed. For an indication of the scope of cooperative activity, see C.Coburn and D.Berglund, Partnerships: A Compendium of State and Federal Cooperative Technology Programs, Columbus, OH: Battelle Press, 1995; and the RaDiUS database, www.rand.org/services/radius/.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies property regimes, identify emergent needs in biotechnology and information technology, reveal decreases in federal support for computing and to supporting disciplines, and add empirical support to the Committee recommendations. In sum, the Committee’s assessment in this report of new opportunities and new needs in biotechnology and information technology should be seen as an integral part of its overall multi-year review of government-industry partnership programs in the U.S. and abroad. This report thus contributes to the Committee’s broader assessment by providing a comparative perspective on the federal role in these important and increasingly interdependent technology sectors. REPORT FOCUS To address these issues, this report presents the proceedings of the conference, commissioned research on central issues, and the findings and recommendations of the Committee concerning emerging needs and opportunities for partnerships in biotechnology and information technology and related fields. Specifically, the report focuses on: The consequences of post-Cold War adjustments to the federal research and development (R&D) budget in the physical sciences and engineering on one hand, and on biomedical research, on the other.3 The shift in the allocation of federal research funding in recent years. Funding has increased substantially for a few important and promising fields—e.g., biomedicine and computer science—but has decreased in real terms for research in the physical sciences and much of engineering.4 The development of new technologies, which increasingly require collaboration across disciplinary boundaries.5 Furthermore, it reveals that research, now increasingly multidisciplinary, calls new attention to the way it is funded. The implications for research, the development of new technologies, and the impact on U.S. competitiveness given the multidisciplinary nature of research and the “imbalance” of funding across complementary disciplines. The disjuncture between the incentives faced by young academics to 3   See comments in this volume by Congressman Sherwood Boehlert, “Biomedical research is consuming too much of the federal research budget.” 4   See Michael McGeary, “Recent Trends in the Federal Funding of Research and Development Related to Health and Information Technology,” in this volume. 5   See, for example, comments in this volume by Mark Boguski of the National Center for Biotechnology Information (NIH), “One measure of the growth of scientific information is the growth in the MEDLINE database at the NIH’s National Library of Medicine. The data base contains over 10 million articles, and this is growing by 40,000 articles per year—these are peer reviewed articles.”

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies specialize in particular disciplines as against the industry need for knowledge workers able to work across disciplinary boundaries.6 The disjuncture between exponentially accumulating information and linear research frameworks geared to generate knowledge. The highly localized nature of processes of technological innovation, even as information technologies have facilitated communication and collaboration across distances.7 The role of small firms, particularly in the biotechnology sector, in enhancing the accumulation of both basic knowledge and the technology and in the advancement of early stage product development for the industry. The different tools of federal government support for the development of new technologies.8 Issues related to industrial competitiveness of the U.S., particularly in regard to declining federal investments in key sectors of the nation’s R&D enterprise.9 The need for policymakers to possess better information on the magnitudes, distribution, and mechanisms for federal support of R&D.10 The Committee’s core findings and recommendations from this study are summarized below. The “Findings and Recommendations” section of this report presents them in full. FINDINGS AND RECOMMENDATIONS In light of the key role that the computing and biotechnology sectors will play in America’s economic well-being and security in the twenty-first century, the Committee finds that there is, in essence, insufficient understanding of needs and opportunities inherent in the increasingly multidisciplinary nature of research. This is evidenced in: 6   See, for example, comments in this volume by Marvin Cassman, “There will always be only a few people sufficiently trained in physics and biology to perform experiments in both fields at a high level. It is more important…to have an adequate number of people conversant in the language of the two disciplines so that a meaningful collaboration can occur. Training such people is feasible, though it will take time to produce such trained individuals.” 7   See, for example, remarks by Edward Penhoet and Wesley M.Cohen in this volume. 8   See, for instance, remarks in this volume by Gordon Moore, who notes that “flexibility and timing are critical elements to successful technological development. A government contract takes a long time to negotiate, and often the goal is obsolete by the time the contract is completed.” 9   In this regard, see comments by Kenneth Flamm, Gordon Moore, and Wesley M.Cohen in this volume. 10   See, in particular, remarks by William Bonvillian, of the office of Senator Joseph Lieberman in this volume.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies Increased federal funding, in recent years, in the area of biomedicine, combined with Reduced federal funding (in real terms) for research and training in the physical sciences and much of engineering.11 Importantly, these changes in funding for science and engineering have not been the product of national debate or conscious policy. Rather, they reflect the overall impact of separate efforts by individual agencies to come to terms with post-Cold War R&D expenditure reductions.12 Support for innovation requires an understanding of the complementarities and synergies in biotechnology and computing research. Investments across seemingly unrelated disciplines are necessary to meet the research challenges of the future. While current U.S. investments in research—especially in biomedicine—show great promise, capturing their full potential requires complementary research investments in information technologies, where the federal support has recently waned.13 Partnerships across disciplines and between universities and companies, although often challenging to implement, are increasingly required to capture the full potential of current investments in biotechnology.14 Regular and more timely review by industry, the scientific community, and the federal government can draw out the implications of the recent decline in federal funding for non-defense research in the physical sciences and engineering, and address possible solutions.15 11   For recent analysis of federal research funding, see National Research Council, Trends in Federal Support of Research and Graduate Education, Washington, D.C.: National Academy Press, 2001. 12   Ibid. p. 4. 13   Ibid. pp. 2–5. See also the research paper prepared for this volume by Kenneth Flamm, “The Federal Partnership with U.S. Industry in U.S. Computer Research: History and Recent Concerns.” 14   See presentations by Marvin Cassman, “Exploring the Biotechnology Revolution,” and Edward Penhoet, “The View from the Biotechnology Industry,” in this volume. 15   The recent study by the STEP Board, cited above, and conducted in parallel with this research, recommends, that (A) “the White House Office of Science and Technology (OSTP) and the Office of Management and Budget (OMB), with assistance from federal agencies and appropriate advisory bodies, should evaluate the federal research portfolio, with an initial focus on fields related to industrial performance and other national priorities and a recent history of declining funding”; (B) “Congress should conduct its own evaluation of the federal research portfolio through the budget, appropriations, or authorization committees”; and (C) “for the longer term, the Executive branch and Congress should sponsor the following types of studies: (1) in-depth qualitative case studies of selected fields, taking into account not only finding trends across federal agencies and non-federal supporters and international comparisons but also subtler differences in the foci, time horizons, and other research characteristics that are obscured by quantitative data; (2) studies of agency research portfolios and decision making to understand the reasons for shifts in funding by field and the extent

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies New technological opportunities exist in a variety of related research areas involving biomedicine, and advanced computing, and require expanded cross-disciplinary instruction and research. Strategic supplementary investments in R&D and appropriate patent protections—needed to realize these opportunities—point to a unique federal role.16 The history of the U.S. biotechnology and computing sectors illustrates the value of such strategic federal support. The U.S. venture capital market, while large and well developed, is not a substitute for long-term government support of scientific and technological research.17 Federal patent policy has a significant impact on innovation in biotechnology and computing.18 In all, the Committee recommends the consideration of a variety of measures to address specific gaps and to realize historic opportunities. These recommendations include: Developing an alert system to identify critical needs in important disciplines. Fostering interdisciplinary competence in fields such as bioinformatics. Increasing support and training for interdisciplinary graduate students. Exploring unresolved questions about research partnerships. Reviewing the impact of patents on technological progress. The Findings of this report are elaborated in the Summary of Findings (Part III) below and are further documented by four original research papers commissioned for this report (Part VI). This report’s goal is to advance our understanding of the new needs and opportunities arising in the Biotechnology and Information Technology fields and to ensure that a strengthened national commitment in biotechnology is not compromised by inadequate investments in the disciplines and technologies required to make that commitment a reality.     to which the health of individual fields and interrelationships among fields are taken into account; and (3) studies of methodologies for allocating federal research funding according to national rather than merely departmental criteria and priorities.” 16   Glue grants, to support initiatives—such as the Berkeley Health Initiative—can help address this need. See the presentation by Edward Penhoet and the analysis by Paula Stephan and Grant Black in this volume. 17   See statements by prominent venture capitalists, including David Morgenthaler, in National Research Council, The Advanced Technology Program: Assessing Outcomes, Washington, D.C.: National Academy Press, 2001, pp. 108–112. 18   See the paper by Wesley Cohen and John Walsh in this volume.

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