as a product, and many parties thus have the opportunity to incorporate the results into their thinking. Such innovations effectively “raise everyone’s boat” in the same way as do government investments in bioscience, health care, and other strategically important scientific disciplines.29 In contrast, incremental research and product development can be performed in a way that is more appropriable. It can be done under wraps, and it can be moved into the marketplace more quickly and predictably.

Although individual industry players may find it hard to justify research that is weakly appropriable, it is the proper role of the federal government to support this sort of endeavor.30 When companies create successful new products using the ideas and workforce that result from federally sponsored research, they repay the nation handsomely in jobs, tax revenues, productivity increases, and world leadership.31 Long-term research often has great benefits for the IT sector as a whole, although no particular company can be sure of reaping most of these benefits. Appropriability also helps to explain why the companies that have tended to provide the greatest support for fundamental research are large companies that enjoy dominant positions in their market.32

Start-ups represent the other end of the spectrum. A hallmark of U.S. entrepreneurship, start-ups and start-up financing have facilitated the development of high-risk products as well as an iconoclastic, risk-taking attitude among more traditional companies and managers in the IT business. But they do not engage in research.33 Thus, start-ups are notable for two reasons: first, although start-ups at least temporarily attract some researchers away from university-based research, they place them in a position to spearhead innovation, often based on their university work, and second, notwithstanding the popular labeling of start-ups as “high-tech,” they apply the fruits of past research rather than generating more. In both respects, government funding plays a critical role in building the foundations for these innovative commercial investments.


Much of the government-funded research in IT has been carried out at universities.34 Between 1976 and 2009 federal support constituted roughly two-thirds of total university research funding in computer science and electrical engineering.35 Among the important characteristics of universities that contribute to their success as engines of innovation are the following:

•   Universities can focus on long-term research, a special role of universities that IT companies cannot be expected to fill to the same extent.36 (Universities’ ability to carry out such research depends, of course, on federal and other sources of funding for research with a long time horizon.)

•   Universities provide a neutral ground for collaboration, encouraging movement and interaction among faculty through leave and sabbatical policies that allow professors to visit industry, government, and other university departments or laboratories. Universities also provide sites at which researchers from competing companies can come together to explore technical issues.37

•   Universities integrate research and education, a conjunction that creates very powerful synergies, ensuring that students are involved in projects where knowledge is being discovered, not only studied, and providing an educational foundation for the continuous learning that is so important in a fast-moving field like IT.38

•   Universities are inherently multidisciplinary, and university researchers are well situated to draw on experts from a variety of fields.39 Despite cultural barriers to cross-disciplinary

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