the Department of Energy's (DOE) attempt to develop alternative energy demonstration programs during the late 1970s.

There were many problems associated with DOE efforts in renewable and alternative energy R&D. One reason that attempts to support new energy technologies were less than successful was that the government assumed all costs associated with the R&D projects. A strong link to private sector R&D agendas and commercial markets was missing. These and other initiatives demonstrate that in order to avoid subsidizing technologies with little chance of success in the commercial marketplace, federal programs must include cost sharing.

A legitimate concern is whether cost-sharing arrangements will merely subsidize industry's lower-priority technology development projects. There is that risk. The provision of a stable, multiyear federal contribution, as well as collaboration between several firms under federal sponsorship, however, should encourage longer-range projects that now tend to suffer from the short-term horizons of corporate management.

Cost-sharing requirements strengthen the link between R&D and commercial applications. Several federal R&D programs now include cost-sharing provisions: Cooperative Research and Development Agreements between federal laboratories and industry; the Commerce Department's Advanced Technology Program (ATP); and the Small Business Innovation Research (SBIR) program, administered by the Small Business Administration, for example.

Principle 2: Industry Involvement in Project Initiation and Design

The long-term objective of extending the government's financial commitment to pre-commercial R&D is to enhance U.S. productivity and raise its standard of living. To do this, support for R&D should be closely linked to commercial markets, as well as being in areas with the potential for wide industrial application. Projects to stimulate collaborative R&D ventures funded through government-industry partnerships should be proposed and structured by industry. The private sector should be responsible for technical designs and the building of research agendas in any expanded federal program in pre-commercial R&D. SEMATECH and the National Center for Manufacturing Sciences, for example, were created in large part due to industry-led efforts to initiate the projects and to design the research frameworks. To the extent that these efforts are successful, early private sector proposals for technical design of the R&D work and control over the projects will have helped to ensure that success.

Allowing private market signals to act as the signal for government action increases the possibility of success in high-risk R&D projects. Industry is in close contact with private markets, much more so than govern-

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