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The Government Role in Civilian Technology: Building a New Alliance
effect, corporations would have to meet a higher threshold or standard than simply investment in research and development. Moreover, the objectives of the CTC would be to stimulate investments in pre-commercial R&D to bolster the capacity of U.S. industry to commercialize technology. The R&D tax credit, in contrast, does not offer the flexibility of aiding firms that do not engage in R&D: incentives in the tax code are available only to firms that currently perform R&D. In theory, the CTC would operate to encourage at least some firms with limited financial resources that are just beginning R&D work. If increased R&D activity in pre-commercial areas is to be part of a changed U.S. technology strategy, it most likely will be more efficient to allocate funds directly for this purpose, through a mechanism like the CTC. Finally, tax credits have limited potential to affect rates of technology adoption or the diffusion of innovative technologies through specific programs tailored to meet this objective.
Disadvantages of the CTC
One disadvantage of the CTC (and of any similar, new organization) is that it cannot possibly be free of political influences. There would, very likely, be congressional and executive branch pressures on the CTC board and staff to fund projects with significance to political objectives and special interest lobbying. This important potential problem would be eased, however, by the involvement of both Congress and the executive branch in selecting the CTC board, by the lack of annual congressional appropriations, and by independent evaluation of the program content on a schedule such as the one outlined above.
Another potential disadvantage of the CTC (or any other federal program in pre-commercial R&D) involves the uncertainty and risk associated with investment in areas where there are no clear market signals. The type of investments the CTC would make are, by definition, high-risk ventures, and the success or failure of its portfolio would depend, to a great extent, on the wisdom and judgment of the CTC board of directors and staff. A key issue here is how to evaluate the success or failure of projects in which a CTC might invest.
The lack of a large number of commercial products resulting from CTC-funded ventures, even up to the 10-year review deadline, would not necessarily signify failure. In fact, projects funded by the CTC might meet the broad objectives of enhanced flow of information on technologies, speeding the rate of adoption of new technologies, and other benefits of R&D not captured in measurements that account only for commercial payback. The CTC should not be required to show a positive real rate of return on its investments. Zero or slightly positive real rate of return could, however, reduce the need for additional CTC appropriations, which would be a sig-