pressure of international competition, in the production of IT-based goods and services that create economic wealth, jobs, and societal benefits.

A healthy and vibrant IT R&D ecosystem is characterized by the following:

  • The quality and quantity of intellectual property that it generates over time,

  • The economic value of the businesses that it creates,

  • The richness of the goods and services that it produces or enables,

  • The number and quality of the jobs that it creates,

  • Its ability to adapt to changing environmental conditions, and

  • Its ability to collaborate with and compete against other IT R&D ecosystems around the globe.

Precise measurements along these various dimensions are not always practical or available, but a detailed examination of each reveals enough information to allow an educated opinion to be formed about the relative health of the U.S. national IT R&D ecosystem today, relative to the past, relative to other nations, and relative to this nation’s own potential.


The national IT R&D ecosystem is complex, involving many actors and many types of relationships. When well tuned, it produces industry-leading innovative products and services that benefit virtually every aspect of our society and economy and generates returns that substantially justify the enormous financial risks incurred in the early stages of a technology cycle. To be sure, risks and returns are not evenly distributed. Some firms that incur large costs for technology and market exploration and make large investments in infrastructure will succeed (and reap large returns); others will not. Some incumbents will face dislocation costs as new entrants and new products succeed.

The early to mid-1990s—the years immediately preceding the period of interest (1995 to 2007) for this report—was a time of economic expansion led by IT-induced productivity enhancement when the U.S. IT R&D ecosystem was broadly perceived to be very healthy and competitive. To understand how parts of this system could drift out of kilter and how these local disequilibria could impact the output of the system as a whole, one must examine the anatomy of this ecosystem in terms of some of its key elements and relationships, as shown in Figure 1.1.

As Figure 1.1 shows, the ecosystem is populated with a number of actors, ranging from individuals (for example, students and researchers), to institutions (such as industrial and government laboratories), to

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