“crowding in” phenomena with public investments in R&D providing the needed signals to attract private investment.4

The Committee’s study highlights the need to provide support for basic and applied research across a broad range of disciplines, especially in relatively neglected disciplines such as physics, chemistry, mechanical, and electrical engineering. These disciplines underpin continued advances in information technology, a major source of economic growth. They are also essential for continued progress in health. Capitalizing on the nation’s substantial investments in biomedicine requires complementary investments in often seemingly unrelated disciplines supporting information technology.

Partnerships offer a means to integrate the diverse participants in the U.S. innovation system.5 Partnerships provide an institutional structure with financial and policy incentives within which companies, universities, national laboratories, and research institutes can cooperate to accelerate the development of promising technologies.

Partnerships are also a versatile means of achieving pressing national objectives. In times of national need, such as the current struggle with terrorism, partnerships can be an effective means to accelerate the development of the technologies required to meet new requirements for security in areas such as health and transportation. Partnerships have a demonstrated capability to marshal national expertise from industry, government, and universities to help meet national needs.6 Programs such as the SBIR and ATP offer proven mechanisms for ad-


David, Hall, and Toole survey the econometric evidence over the past 35 years. They note that the “findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the ‘experiment(s)’ that the investigators envisage is not adequately specified.” It seems that both crowding out and crowding in can occur. The essential finding is that the evidence is inconclusive and that assumptions about crowding out are unsubstantiated. The outcome appears to depend on the specifics of the circumstance, and these are not adequately captured in available data. See Paul A. David, Bronwyn H. Hall, and Andrew A. Toole, “Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence.” NBER Working Paper 7373, October 1999. Relatedly, Feldman and Kelley cite the “halo effect” created by ATP awards in helping firms signal their potential to private investors. See Maryann Feldman and Maryellen Kelley, “Leveraging Research and Development: The Impact of the Advanced Technology Program,” in National Research Council, The Advanced Technology Program, C. Wessner, ed., Washington D.C.: National Academy Press, 2001.


See Richard Nelson, National Innovation System, New York: Oxford University Press, 1993.


See National Research Council, Making the Nation Safer, The Role of Science and Technology in Countering Terrorism, Washington D.C.: National Academy Press, 2002. This report notes that “for the government and private sector to work together on increasing homeland security, effective public-private partnerships and cooperative projects must occur. There are many models for government-industry collaboration—cooperative research and development agreements, the NIST Advanced Technology Program, and the Small Business Innovative Research program, to cite a few” (p. 359).

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