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8-284 tile growth of the technology and its market in the LDC. During the early stages, R&D is mostly concerned with quality assurance, trouble-shooting, and customer-oriented service functions. Later, the R&D will be related to manu- facturing and assembly processes, to be followed in some cases by R&D of an exploratory development or even a basic nature. Again the lesson for the AC is that when it sees a given technology, including increasingly sophisticated levels of R&D, slipping to the LDC, it must find new technologies to take its place. Some Concluding Remarks Concerning Multinational Corporations31 The MC and its companion concept, the global market, are under attack at present. It is argued that MC's are responsible for exporting U.S. jobs, draining capital and technology, reducing exports, and acting as neocolonialists. Perhaps here and there and in the short run such arguments are justified; perhaps some jobs, capital and technology are siphoned off in areas where the U.S. is apparently non-competitive. And perhaps some MC's have naively been neocolonialist. But MC's also create jobs, trigger exports, earn revenue, allow U.S.-based firms to compete locally more effectively, and serve in some cases as a pipeline for a reverse flow of foreign technology to the U.S. For the foreign country they are a source of new products, needed know-how and technology, and a breeding ground for developing indigenous leadership. Furthermore, no firm acting as a neocolonialist will long be tolerated these days. Finally, it is apparent that if a "U.S." MC doesn't get the business, someone else's will. There are also larger considerations. Trade and business help break down boundaries, oil the machinery of international relations, and bring people together at the grass roots. Commerce is a natural process, a system for redistributing resources, but one recurring element is protectionism, which seems to ebb and flow in concert with economic fortunes and geopolitical maneuvering. Protectionist measures almost invariably fail in the long run and perpetuate, instead of cure, the ills that caused them to be devised in the first place. Fortunately new natural processes arise to get around such obstacles, today's MC being a manifestation of one of these natural processes. They are well on their way to creating a supranational network for trans- ferring ideas, technology, know-how, and well-being that bypasses official channels which are often cumbersome or ineffective. TECHNOLOGICAL INNOVATION IN THE INTERNATIONAL SPHERE International Comparisons of Technological Prowess Much of the international information on innovations in this report came 3i Based on Patrick R. McCurdy, Chemical & Engineering News, 1, (Nov. 22, 1971~.

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8-285 from major studies of technological leads and lags between the U.S. and other countries undertaken by DEED in the mid-1960's and later. Their main con- clusions for various industrial sectors are summarized in Table 8.65. Perhaps contrary to popular belief, the conclusion seems to be that for the civilian sectors studied very few large gaps appear except in solid-state electronics and computers. It should be noted that major industrial sectors not studied included, for example, military hardware, aircraft, ships, automobiles, ceramics, and wood products; services such as railways, tele- communications, and electricity; and industrial processes such as mining, extraction and- refining. Thus, it would be dangerous to draw overall con- clusions about U.S. leadership or lag in the mid-1960's from these data above. Instead, the data may be taken to show simply that the U.S. is in a competitive world, that others are technologically just as capable, that the U.S. does not have some inherent gift guaranteeing technological superiority, and that the U.S. cannot afford to relax its efforts to "stay in the race". Importantly, though, by whole-hearted commitment, the U.S. can hope to exert some influence on its direction, consistent with benefits for mankind. Some of the conclusions and lessons for U.S. technology that might be drawn from the preceding technological comparisons are: (a) It appears that by and large the results of R&D in MSE outside the U.S. have not been too impressive so far except in certain areas of processing technology. But it is this latter which is growing increasingly important if a country is to keep its competitive edge -- the trend seems to be toward process innovations rather than product innovations. Until recently, the U.S. has generally led in product innovation, particularly in the high-technology, frontier industries. It is all the more understandable, therefore, that other countries have moved to concentrate on process improvements -- there is no sense in inventing the same product twice. If the tendency of the U.S. is to generate new products in order to meet the unique challenge of the U.S. market, the tendency of the Europeans and the Japanese may be to find ways of producing cheaper and better versions of those products. (b) An impressive number of important chemical and metallurgical process have stemmed from Europe in recent years. For example, Italy's Natta tech- nique and Germany's Ziegler process for producing polyethylene, also Germany's catalyzation processes, as well as her methods of producing high purity silicon, are all widely licensed. The list continues to grow and the word d-wide import of these processes covering relatively conventional products tends to balance the export of frontier technologies from the U.S. The proclivity towards process innovation can be an asset, for process innovation is reflected sooner in the economic growth pattern than is the innovation resulting from exploration of the more distant frontiers of technology. It is therefore a more attractive basis of investment where R&D funds are limited. At the same time, this philosophy may not attract the more imaginative investigators, who generally prefer to work on the frontiers of technology where there will be a longer range pay-off.

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8-286 Table 8.65 Performance in Originating Innovations (From Gaps in Technology - Review of situation to mid-1960's) l Electronic Computers Europe effective at first. widened since. Semiconductors . U.S. has had strong lead from the start.* Pharmar edit i r ~ 1 Prod ~ or ~ c U.S. assumed leadership and gap has steadily No great performance differences between countries though U.S. has slight edge. Plastics = No important gap between countries in bulk plastics. U.S. has had clear lead in specialized plastics. Iron and Steel No fundamental disparities in technical know-how. Differences in rate of application of new technology for various reasons, but eventual convergence towards a standard appears to be the rule. Machine Tools No major technological gap between countries though varying gaps, plus and minus, for specific machine tools. Nonferrous Metals . . . No gap in Al, Cu. Ni. U.S. leads in Ta and, to lesser extent, Tin. Scientific Instruments . No overall gaps in this diversified sector. Leadership in many countries. U.S. leads in electronic test and measuring equipment. Europe and Japan strong in nuclear, biomedical, process control. Man-Made Fibers No obvious gaps. * In solid-state electronics, the U.S. has remained the technological leader, although its commercialization and marketing position in the field of consumer electronics has been particularly challenged by Japan in recent years. Virtually all the significant new devices and sophisticated processes for making them have emanated and are still emanating from private industry in the U.S. ** However, the following quote by W. H. Dresher in "Metallurgical Engineering in the United States - A Status Report," October 1973, is of interest: "The copper industry ... has turned to foreign-developed processes for a large portion of its new capital investment. The nation's two newest copper smelters ... are both based on European technology. (One) is exclusively European (with a Norwegian electric furnace, a Belgian siphon converter, and a German acid plant) ... (the other) is based on a Finnish flash smelting process."

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8-287 (c) The industrial effectiveness of a country seems to depend upon its capacity to draw on and utilize existing knowledge, wherever it has been generated, perhaps more so than on its ability to generate new knowledge itself. This still requires the availability of scientists and engineers who can absorb, use, and adapt scientific knowledge and new developments. (d) If the Japanese had not been willing to buy their technology and had sought to generate it afresh, both their growth and their balance of payments would have been impaired. On the other hand, if they failed to move into innovative activities at some stage, the failure might also have been infor- mative from an economic standpoint. (e) Identification and understanding of market opportunities are critical for successful innovation. Innovation is stimulated by competition for a certain market. Some General Characteristics of the Innovative System The international data-gathering and comparisons made by the OECD in the mid-1960's led to some conclusions concerning factors that are important for successful innovation. These factors are as applicable today as they were then, even though objectives and markets are changing rapidly. They are summarized below: Essential Components Successful technological innovation is favored by: (a) scientific and technological capability, (b) market demand, and (c) industrial firms responding to the pressures and incentives of competition and profit. "Technology-Push" versus "Demand-Pull" The majority of innovations are initially stimulated by a clear definition of market needs. However, the remaining technology-stimulated innovations are generally more radical in nature and can then lead to many innovations of the market-oriented sort. Differences Amongst Industries In spite of R&D activities being concentrated in relatively few industrial sectors, many other sectors of the economy benefit through being suppliers or customers of the research-intensive industries. However, the latter are not particularly capital-intensive, nor are they relatively big consumers of raw materials. Three factors suggested to explain variations in research-intensity among industrial sectors are: (a) variations in technological opportunity, (b) nature of management, and (c) market opportunities. l

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8-288 Technological advances in materials, automation, and informatics offer considerable opportunities for application in sectors which are not at present research-intensive. If managements in these sectors do not exploit these opportunities they may well be seized by the research-intensive industries. Industrial Structures Both large and small firms play essential roles in the process of technological innovation, and these roles are complementary, interdependent, and ever-changing. They are complementary in that larger companies have tended to contribute most to innovation in areas requiring large-scale R&D, production or marketing resources, whereas smaller firms have tended to concentrate on the production of specialized but sophisticated components and equipment - often with large firms as customers. However, small companies have often made very major innovations, either because large firms have not had effective methods of evaluating and implementing radical proposals, or because major innovations often involve great uncertainties so that even the best managed of large firms may let important opportunities slip through their fingers. The roles of large and small companies are interdependent because small firms are often started by scientists and engineers with previous experience in large firms. Sometimes the establishment of these "spin-off" companies has been actively encouraged by the large organizations. Sometimes it has happened by default. Small science-based firms flourished earlier in the U.S. than in other OECD countries, partly because of a more favorable market and financial environment and also a greater degree of personal mobility. Finally, the roles of large and small companies are ever changing. As a technology matures in one sector, scale factors tend to become more important. But, as one technology matures, another enters a period of growth, thereby opening other and new opportunities for the smaller firms. Hence, there is a need for mobility and flexibility of innovative resources - and particularly skilled manpower and capital - in order to respond to the ever-changing opportunities and requirements of technological innovation. Size of Markets The size and sophistication of the U.S. market has been a key factor in its innovative strength. However, in several instances strong industries in small countries have been able to respond to demands for innovation on world markets. Management of Innovation Technological innovation poses many difficult and sometimes novel problems to management, given the uncertainties and long-time horizons involved, and given the need for communications across disciplinary and functional 1

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8-289 boundaries. Hence, a need arises for "entrepreneurial" organizational forms, with flexible definitions of responsibilities and large possibilities for lateral communication, capable of evaluating and responding to new -- and often unforeseen -- technical and market circumstances; hence, also, the need for commitment by top management to taking risks. Study and teaching specifically related to the process of innovation may be particularly valuable -- for both research workers and managers -- given the difficulties of applying successfully many of the conventional management techniques. Furthermore, the increasingly worldwide competitive and market environment within which technological innovation takes place requires a careful definition of the role of R&D in achieving company objectives: specifically' the definition of the appropriate mix of "offensive", '"defensive" and "absorptive" R&D and strategies. Role of Fundamental Research Universities play a vital role in enlarging the pool of basic knowledge and trained manpower on which industries can draw. Also, strong links exist between national potentials in fundamental research and national strengths in technology. The effective absorption of fundamental knowledge into industry requires fundamental research efforts in industry also, at the higher levels of technological development. The knowledge-transfer process is most effectively done through personal contact and mobility. Fundamental research at the universities is also stimulated by industrial strength in innovation. Governmental Role in Creating a Climate Favorable to Technological Innovation Three key characteristics are identified: (a) the outcome of innovative activities is uncertain, so that risk taking must be rewarded, and individuals and institutions must have the ability to adapt to new and unforeseen situations; (b) innovation often implies uncomfortable change, so that pressures must exist for change and its social costs reduced as far as possible; and (c) transfer of technological knowledge is mainly "person- embodied". These characteristics suggest a number of objectives for government policy, such as: - ensuring industrial competition, as the main pressure for technological innovation; - ensuring equitable rewards for innovations, through the tax and patent systems; - ensuring that regulations, codes, and standards take account of both the social costs and benefits of the innovative process, as well as the flexibility and pluralism required for successful innovation; having active regional and manpower policies to deal with the changes in industrial and skill patterns brought about by technological change;

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8-290 using government procurement to upgrade the technical level of industry, and to couple technology more effectively to overall social needs; encouraging the mobility of scientists and engineers, especially in and out of governmental laboratories; identifying policy measures to encourage science-based entrepreneurship; ensuring continued trade and capital liberalization, thereby heightening the pressures and incentives for technological innovation in all OECD countries, and maintaining a rapid, international spread of the benefits of new technology. A Study of Success and Failure in Innovation Although this in-depth study has so far dealt only with the chemical and scientific instrument industries, its findings might prove to be of more general validity for the field of MSE. Fundamental Features of the Approach SAPPHO was originally conceived as a systematic attempt to test various hypotheses concerning the factors which lead to success in industrial innovation. Many such hypotheses have been advanced in the European and American literature, but few if any have been satisfactorily tested and some are mutually contradictory. A kind of "folk-wisdom" or "mythology" has grown up, which is supported by fragments of empirical work, but lacks a structured foundation. The SAPPHO project was designed to contribute towards the development of a more satisfactory basis for innovation studies by testing a variety of possible explanations, and hopefully eliminating some, while substantiating others. Perhaps the most important single feature of the method was the effort to measure a pattern or profile of successful innovation. Much earlier work had attempted to look at single factors held to be important. While not disregarding the importance of these single factors, the starting point here was the view that successful innovation was a complex process involving the interaction of many factors. The successful innovator needs to get many things right, not just one. In particular the validity of explana- tions exclusively in terms of either R&D power or market power was doubted. The "R&D" explanations were more fashionable in the 1950's, whereas the "market" explanations have become more prevalent recently. It was hypothesized that most successful innovators would have to perform relatively well in both and that the art of innovation management lay in matching the changing requirements of the market with the kaleidoscopic new technical possibilities emerging from scientific advance. *Carried out at the Science Policy Research Unit, University of Sussex, United Kingdom -- Project SAPPHO.

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8-291 Definitions of "Technical Innovator", "Business Innovator", and "Chief Executive". In the innovation literature, there is a great deal about the critical role of key individuals. Not only "heroic" theories of innovation but also more prosaic accounts emphasize the part played by entrepreneurs, managers, and inventors. For the purpose of the SAPPHO investigation, therefore, an effort was made to distinguish between various key "roles" in the conduct of innovation. Although these roles have been recognized in much of the earlier innovation literature, they are not always identifiable from the formal titles used in firms. The job title may vary a good deal, but it was the role which an attempt was made to identify, defined as follows: (a) "Technical innovator". The individual who made the major contri- buttons on the technical side to the development and/or design of the innovation. He would normally, but not necessarily, be a member of the innovating organization. He would sometimes, but not always, be the "inventor" of the new product or process. (b) "Business innovator". That individual who was actually responsible . within the management structure for the overall progress of this project. He might sometimes be the same man as the "Technical Innovator." He could be the Sales Director, or Chief Engineer. Occasionally, especially in smaller companies, he could be the chief executive for the organization as a whole. (c) "Chief executive". The individual who is formally the head of the executive structure of the innovating organization, usually but not necessarily with the job title of "Managing Director". In every case, there was an identifiable "chief executive", but there was not always an identifiable "business innovator", and quite often there was no identifiable "technical innovator". No effort was made to force individuals to assume these roles if they were not readily identifiable, since one of the objectives of the inquiry was to assess the contribution of out- standing individuals. In order to clarify this, one other category or "role" was distinguished -- "product champion" -- which might sometimes be performed by the same individual as the technical innovator, or chief executive. (d) "Product champion". Any individual who made a decisive contribution to the innovation by actively and enthusiastically promoting its progress through critical stages. Nationality of Innovating Organizations Of the 27 innovations developed outside the U.K., 14 were successes and 13 failures. Of the 31 developed in the U.K., 15 were successes and 16 were failures.

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8-292 Pairs Used The results of the SAP PRO study apply to 29 paired comparisons of successful and unsuccessful attempts to innovate in two industries - chemicals and scientific instruments. Many characteristics of these 58 instances were systematically measured and compared in an endeavor to disclose the patterns of success and failure. The 29 pairs are listed as follows: Scientific Instruments Amlec Eddy-Current Crack Detector Milk Analyzers 3. Foreign-Bodies-in-Bottles Detector 4. Roundness Measurement 5. Scanning Electron Microscope 6. X-Ray Microanalyzer 7. Digital Voltmeters 8. Optical Character Recognition 9. Atomic Absorption Spectrophotomer 10. Electromagnetic Blood Flowmeter 11. Electronic Checkweighing I 12. Electronic Checkweighing II Chemicals 1. Acrylonitrile I 2. Acrylonitrile II 3. Caprolactam I 4. Caprolactam II 5. Ammonia Synthesis 6. Ductile Titanium Extraction of Aromatics 8. Steam Naptha Reforming 9. Extraction of n. Paraffins 10. Urea Manufacture 11. Oxidation of Cyclohexane 12. Hydrogenation of Benzene to Cyclohexane 13. Phenol Synthesis

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8-293 14. Accelerated Freeze-Drying of Food (Solid) 15. Methanol Synthesis 16. Acetic Acid Preparation 17. Acetylene From Natural Gas Summary of Main Findings (a) As expected, only a few of the 201 measures which were made for each pair differentiated between success and failure. Most would-be innovators share many characteristics in common, whether they fail or succeed. They almost all conduct organized R&D, form project teams, take out patents, attempt forecasts, and encounter bugs in development. (b) Even where they differ, many of these differences show no consistent pattern. For example, differences in size, formal management techniques, publications policy, scale of R&D department, rate of growth, and incentives are apparently unrelated to success or failure in innovation. (c) The clear-cut differences within pairs which do form a consistent pattern related to success and failure may be summarized as follows: (i) Successful innovators have a much better understanding of user needs. They may acquire this superiority in a variety of different ways. Some may collaborate intimately with potential customers; others may do thorough market research or have the necessary experience of user requirements. But however required, this imaginative understanding is the hallmark of success. (ii) Successful innovators pay much greater attention to marketing. Failures were sometimes characterized by neglect of market research, publicity, user education, and customer problems. (iii) Successful innovators perform their development work more efficiently than the failure ones, but not necessarily more quickly. They get the bugs out of the product or process before it is launched, not after the user complains. They usually employ a larger development team on the project and spend more money on it. This applies even when the successful firm is smaller than the failure one. iv) Successful innovators make more effective use of outside technology and scientific advice, even though they perform more of the work in-house. They have better contacts with the scientific community in the specific area concerned (not necessarily in general). (v) The responsible individuals in the successful cases are usually more senior and have greater authority than their counterparts who fail. In the instrument industry, they have more diverse experience including experience abroad. The greater power of the innovators in the successful instances

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8-294 facilitates the concentration of effort on the scale which is needed and also on the integration of R&D and marketing. (d) An important limitation of the findings must be stressed. The SAPPHO investigators do not know the "universe" of innovations and therefore cannot say how far their sample is representative. They believe it to be so, for the two industrial sectors considered but cannot prove this. Moreover, 29 pairs is still rather a small number of cases from which to generalize. The results showed some differences between the two industries investigated and the pattern of successful innovation in other branches of industry may well differ in important respects. A British View of U.S. Technological Leads and Lags With a few notable exceptions, the British have not been especially aggressive or skillful in technology. An appraisal of the British position, vis-a-vis the U.S. and Western Europe, is presented in Christopher Layton's study, "European Advanced Technology, A Programme for Integration," C1969, PEP). Excerpts -- "-- Pure research accounts for only 5-10 percent of the cost of inventing and developing a product to the production stage. The rest is accounted for by marketing and research and development; -- Larger American size, springing from a larger market, has conferred larger financial resources for marketing and research and development; -- Management skills, and training in them, are a second factor America's technological predominance; an -- The dramatic growth of the U.S. Government's spending on research and development ... has been concentrated in two sectors - aerospace and electronics - where the 'gap' between America and Europe is most pronounced. -- The demand for advanced metals for the space and aircraft industries has advanced the whole science of metallurgy, and played a part in giving the U.S. steel industry - and even the gigantic, but long backward U.S. Steel Corporation - a new lease on life; ~ -- Outside nuclear power, electronics, and aviation, the stimulus of the U.S. Government has been far smaller; -- A whole new range of management techniques - operations research, systems analysis, statistical quality control, and so on - ... have ... been developed in defence and space programmed, and increasingly applied elsewhere; -- Crucial to the dissemination of knowledge in Federal Government programmed has been its open patent policy;

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8-295 -- Perhaps the most decisive difference between U.S. and European practice is the allocation of 5 percent of all government contracts to cover company overheads and 'independent research;' -- A government in which scientists and engineers have top jobs is far more likely to be creative and alert to new scientific ideas ...' -- Mobility of people and ideas has conspired to produce such unique social institutions as Route 128 in Boston ...; -- The initially small, but fast growing advanced technology firm is, indeed, as crucial to the U.S. 'miracle' as the established giant; -- If the small firm plays a key role in invention, the large is essential for mass marketing and production, for development in industries where plant is expensive, and for fast development on a broad front; -- The strength of America's advanced technology.industries lies in the remarkable dialectic between large and small companies, in a ring where the antitrust ringmaster is always promoting competition, and where there is a massive public as well as private market for advanced ideas; -- If the strength of America is its practical men, its skill in carrying out specific tasks, its weakness perhaps lies in the absence of a philosophy Poor policy. It has been called a reservoir of undirected power; -- What distinguishes American support for advanced technology is the pursuit of difficult goals, under competitive conditions, at high speed, and in an economy which already possesses a huge highly skilled labor force and powerful industrial firms; -- West European states spend only a quarter as much as America, and a smaller proportion of national income. Yet their efforts are still divided between 18 different policies and administrations." Views such as these seem to center on the proposition that although the U.~. Alas institutionalized change in the more exotic elements of technology, it Incas neglected to do so in the more prosaic areas which provide the under- pinning of much of the nation's economy, and which ultimately go to pay for the far-out exploits. Why is Japan surpassing us in steel? Poland in coal research? Yugoslavia in shipbuilding? England in plate glass? Sweden in Infusing construction? Germany in automobiles? A U.S. View of U.S. Technological Leads and Lags Up until about 1967 there was a general feeling that the U.S. had an unassailable technological lead over the rest of the world. Since 1967, this view has given way to almost the opposite, that the U.S. is lagging more and more in the technological field. These views have been put in perspective

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8-296 recently by H. Brooks;32this concluding section is based on his analysis of five propositions which are directly pertinent to the role of MSE as well as to the broader arena of science and engineering. These propositions are analyzed in terms of bygone perception' and the likely situation, as follows: (a) The Technology Gap Bygone Perception - There is a technology gap between Europe and the United States, and this gap is steadily widening to the latter's advantage. Current Perception - Europe and, most visibly, Japan and overtaking us in the export of high-technology products, and many European and especially Japanese products are displacing their American counterparts in world markets. At the same time these nations are showing an even more evidently superior performance in low-technology industries, whose exports are taking `'ver U.S. markets. Likely Situation - It is clear that tile technical and economic inferiority Of 1urope in the early post-World War II period was unnatural and was certain to be overcome when favorable social and economic conditions returned there. What we are seeing, in fact, is the emergence of an increasingly inter- national science, technology, and economic system in which the very concept of superiority and inferiority has less and less meaning. Other industrialized nations most likely will continue to close the gap, but will approach a common asymptote with us -- that is, reach the same approximate level -- rather than pass us on a steeply rising curve. (b) Space-Defense Spin-Off Bygone Perception - The technology gap is primarily the result of large U.S. governmental expenditures for research and development in defense, space, and nuclear energy. Current Perception - The concentration of our R&D effort in a narrow range of sophisticated technologies for defense and space has diverted innovative talent and energy as well as venture capital away from industry and from public needs other than defense and national prestige. CThe spin- off effect has been greatly exaggerated.) Likely Situation - The current diagnosis of the impact of space- defense R&D on innovation in the rest of the economy is probably essentially correct. The United States is long overdue for a period of "catch-up" in other areas, a change in priorities toward civilian technology. 32 Harvey Brooks, "What's happening to the U.S. lead in technology?", Harvard Business Review' Vole 50, page 110, 1972. . l

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8-297 (c) Support of Basic Research Bygone Perceptions - The U.S. technological lead is accompanied by, and in part due to, its superior performance in virtually every significant field of basic science. Current Perceptions - Although the U.S. still enjoys a lead in many areas of basic science, it is disappearing fast as the Federal Government withdraws its support of graduate training and research. Likely Situation - In basic research we are dealing with an international- ized system, in which knowledge and talent move with ever-increasing freedom. Not surprisingly productivity in science correlates closely with GNP, and the U.S. contribution to world science will tend to decline proportionately as its share of world GNP declines. (d) Graduate Education Bygone Perceptions - A prime source of the lead in science is our superior system of graduate education combined with the system of graduate education combined with the system of research grant support of individual professors, in which projects are chosen on the basis of open, competitive evaluation by committees of scientific peers in the same or closely related fields. The project grant system has fostered a creative scientific entre- preneurship which stimulates greater originality in science and more rapid identification and exploitation of potential applications of basic science. Current Perceptions - Both inside and outside academic ranks, there is serious disenchantment with the system of graduate training in science. Industry sees it as too narrow, too specialized, and too remote from the real- world problems with which technical people in industry must cope. Many students and the public see graduate education as irrelevant to the most pressing problems of the modern world and the system itself as self-serving and "elitist", designed to exploit students and the public purse for the greater personal glory of professors. Likely Situation - The superiority of U.S. graduate education over European has probably always been exaggerated. Despite the criticisms, the U.S. system is probably basically healthy. It is actually highly adaptable and is adapting to new priorities, but the time lag produces a feeling of . . crlsls . (e) Manpower Situation Bygone Perceptions - The U.S. is experiencing a severe shortage of scientists and engineers in almost every category, leading to a continuing and even an accelerating immigration of foreign scientists, engineers, and doctors. Current Perceptions - In almost all fields of science there is a surplus of Ph.D's which the academic institutions should have foreseen. At will grow

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8-298 steadily worse throughout the 1970's unless drastic steps are taken to curtail graduate programs and discourage students from entering graduate work -- or perhaps even higher education. Likely situation - The present "surplus" of scientists and engineers in the U.S. is the product of the coincidence of several factors: the cutback in research-intensive space and defense activities, the economic recession, and the financial crisis of higher education. While there is little chance of a return to the shortages of the 1950's and 1960's, the present surplus will probably work itself out through expansion of the career opportunities considered appropriate for Ph.D's, stabilization or a slight contraction of the output of graduate schools, and a relative reduction of the salary levels of scientists and engineers to bring supply and demand into better balance. At the same time, the rapid expansion of European higher education is likely to lead to similar "surpluses" there within a few years. H. Brooks' study is very relevant to the questions of civilian vs. defense R&D and of high technology vs. low technology. Quoting from the same article: "There is considerable evidence in support of the notion that the deterioration of the U.S. trade balance reflects a comparative deterioration of the U.S. trade balance reflects a comparative deterioration in its technological performance, particularly in the more mature low-technology industries. Furthermore, this deterioration has been going on for some time. '~he U.S. government is beginning to act on this hypothesis, responding by a step-up and expansion of direct and indirect subsidy of industrial research. Then Secretary of Commerce, Maurice Stans made a clear statement of this new policy in 1971 to the Science and Astronautics Committee of the House of Representatives: 'The magnitude of the problem is such that we cannot rely upon normal forces to maintain our advantage in technology. We are at the forefront in many technological areas. The costs of breaking new ground in some of these areas are high -- higher than private companies or perhaps even private consortia are able to justify because the risks are so great. We have recognized this fact in space, defense, and atomic energy areas. Other trading nations have recognized it in the area of civilian R&D and have taken steps to assist technological development. If we are to maintain our advantages in this area we must first of all accept the idea that it has become a proper sphere of government action."' And again from Brooks: "The technical challenges presented by space and defense programs ware often much more interesting than those of civilian industry and attracted more than their share of the best talent and the best-trained people, quite apart from salary. The result was to overprice the innovation process in these programs, which caused the lag in civilian technology and the gradual deterioration in our advantage over competitors. It is not surprising that the lag particularly affected the low-technology or mature industries, whose innovative investments tend to be most sensitive to economics." And further: "Full utilization of the current R&D volume, redeployed for civil purposes, would imply an enormous expansion in growth or transition to a much

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8-299 more research-intensive style of doing things in both the private and the public sectors. But this transition may require a long learning period before research can be really productive. Just such a long transition period was necessary in the military field, where in the pre-war period the military mind was synonymous with technical backwardness. '~he Federal Government's civilian R&D activity is expanding at a high rate, but it starts from such a small base that it can compensate for only a small percentage decrease in the space-defense areas. Growth is slowed by the different mix of skills needed. The effective utilization of research in a new area of application requires the rather slow and painful creation of new institutional mechanisms and linkages between technical people and ultimate users, linkages that are not assured by the mere generation of the appropriate science" (but require more emphasis on engineering). And referring to students: "As a group the potential scientists are apparently highly inner- directed and respond only marginally for example, by shifting from biology, or from physics to mathematics) to external influences." Brooks concludes: "I believe that the United States is experiencing only a few years earlier some of the forces and trends that will become worldwide among industrialized countries: saturation of the population able to undertake science and technology, competition of social welfare and other public expenditures for the government budget, increased public preoccupation with the side effects of technology, disenchantment with science on both the right and the left of the political spectrum, and increased preoccupation of society with equality rather than excellence. "Furthermore, the scientific system is increasingly international, so that the very concept of national superiority in science or technology is obsolescent. It will be harder and harder to tell who is ~ahead' or 'behind' as frontier science is conducted in multinational institutions like C.E.R.N. and as technology is introduced and diffused by international corporations that will become truly multinational and identify less with particular home countries. "The United States will never again enjoy its enormous superiority of the first half of the 1960's, but neither is it about to be overtaken dramatically by Europe or Japan. Rather, we are all approaching a common asymptote, which will probably represent a condition of slower growth' both in science and in the economy at large, than we have been accustomed to in the recent years."

OCR for page 284