2
Government Support for Civilian Technology

This chapter examines several past and current federal programs to support private sector research, development, technology transfer, and adoption. It also summarizes the evidence on foreign governments’ sponsorship of pre-commercial technology development. We begin with a discussion of the rationale for government support of pre-commercial R&D and technology development. The structure of postwar federal support for basic research is then outlined, as well as the history of federal sponsorship of civilian technology development.

Federal technology programs have a long history and a diverse nature (in both structure and outcomes). Based on this history, the factors that appear to contribute to success in government-industry cooperation in civilian technology developments are discussed. This chapter then reviews the strengths and weaknesses of current federal programs to stimulate technology development, as well as programs aimed at the adoption and transfer of new technologies.

An important part of federal investment in technology development, much of which is defense related, involves R&D performed at the federal laboratories and work sponsored by the Defense Advanced Research Projects Agency (DARPA). This chapter accordingly discusses the current and prospective roles of these organizations in a modified federal technology policy. It concludes by presenting a framework for strengthening the capacity of the United States to support private sector technology development and



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The Government Role in Civilian Technology: Building a New Alliance 2 Government Support for Civilian Technology This chapter examines several past and current federal programs to support private sector research, development, technology transfer, and adoption. It also summarizes the evidence on foreign governments’ sponsorship of pre-commercial technology development. We begin with a discussion of the rationale for government support of pre-commercial R&D and technology development. The structure of postwar federal support for basic research is then outlined, as well as the history of federal sponsorship of civilian technology development. Federal technology programs have a long history and a diverse nature (in both structure and outcomes). Based on this history, the factors that appear to contribute to success in government-industry cooperation in civilian technology developments are discussed. This chapter then reviews the strengths and weaknesses of current federal programs to stimulate technology development, as well as programs aimed at the adoption and transfer of new technologies. An important part of federal investment in technology development, much of which is defense related, involves R&D performed at the federal laboratories and work sponsored by the Defense Advanced Research Projects Agency (DARPA). This chapter accordingly discusses the current and prospective roles of these organizations in a modified federal technology policy. It concludes by presenting a framework for strengthening the capacity of the United States to support private sector technology development and

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The Government Role in Civilian Technology: Building a New Alliance commercialization in “pre-commercial” areas. Pre-commercial R&D is a process that generates knowledge and technical information with a capability for application across a wide range of products and processes. It involves R&D before construction of the prototypes for commercial application but after indications of general commercial potential for the R&D work in progress.1 FEDERAL INVOLVEMENT IN RESEARCH AND TECHNOLOGY For much of this century, the federal government has played an important role in the development of civilian, nonagricultural technology. In agriculture, federal and state programs for research and extension (support for technology adoption) date back to the nineteenth century.2 Another source of federal support for civilian technology development has been an indirect one—federal funding of basic research. A major federal role in support of basic research has long been viewed as appropriate. It is recognized that technological progress through innovation, of which basic research efforts are a central part, provides for increases in productivity and economic growth.3 Government financing of research to support technological change stems, in part, from the recognition of the need to compensate for the ineffectiveness of private markets in this area. The economic returns on investments in basic research often lie far in the future. Moreover, the returns on investment in basic research are difficult for the investor to protect and capture with devices such as patents or copyrights. The returns to the investor from basic R&D activity are correspondingly low. The returns to society as a whole, however, can be high, as numerous studies have shown.4 The difficulties in capturing the returns from basic research investments give rise, therefore, to a form of “market failure” in which private returns to the would-be investor are lower than the returns to society as a whole. Without some form of public intervention, market institutions will lead to underinvestment in this type of research activity.5 Federal support for civilian technology development has been confined primarily to support for basic research. Nonetheless, in several areas, the federal government has assumed a more direct role in supporting technology development downstream from basic research. Risk and uncertainty are inherent in any development project and, by themselves do not justify funding of projects by the federal government. Nevertheless, investments in ventures beyond basic research have been justified on the grounds that private firms, in some instances, are not able to “appropriate” or capture sufficient benefits from projects that serve specific missions of federal agencies or the general welfare. Public funds support research and technology development in technologies deemed essential to agency missions; in recent de-

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The Government Role in Civilian Technology: Building a New Alliance cades, this rationale has led to large investments in defense, transportation, and space technologies.6 For historical and political reasons, federal and state funds have also supported a large research, technology development, and extension system in agriculture. With several important exceptions, federal funding of civilian technology beyond the basic research stage is viewed as unjustified. This view of federal involvement in technology has held that public investments simply substitute for the investments that would be made by private firms in the absence of government incentives. Worse yet, it is feared that direct subsidies may distort private investment incentives, leading to the development of costly and commercially unsuccessful technology projects. (The federal Supersonic Transport program is frequently cited as an example of this type of problem.) In sum, because the returns from investments in civilian technology development can be captured by private firms, this theory suggests, there is no market failure, and public incentives to stimulate private activity are unnecessary. Market failure, we believe, is not absent from the stages of technology development that lie “downstream” (i.e., closer to technology development and application) from basic research. Policies based on a framework that denies the existence of market failure in pre-commercial areas employ an unrealistic view of the innovation and technology development process. Basic research rarely yields results that can be translated swiftly and at low cost into commercially remunerative technologies. Moreover, the economic benefits of fundamental advances in R&D do not end at the basic research stage. Instead, investment incentives are often needed in pre-commercial research to improve theoretical understanding, and to test and explore potential technology applications and designs. In many cases, these activities include considerable “basic” research work. Therefore, technological innovation (after the invention of new product or process technologies) is characterized by high risks, high and rapidly increasing costs (indeed, for most technologies, the costs of development and application, as noted in Chapter 1, significantly exceed the costs of the basic research underpinning them), and great uncertainties. Technology, as well as science, moves rapidly across international boundaries, and intellectual property protection does not completely prevent imitation, reverse engineering, or improvements of the basic technology. The returns from many investments in technology development, therefore, are often not easily appropriated by the investor. Moreover, changes in the global economic environment, including improved communications, rapid economic growth and strong technological capabilities overseas, and the importance of foreign trade and capital flows in the U.S. economy, may have further impaired the ability of U.S. firms to capture the returns from investments in technology development, as well as from basic research.

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The Government Role in Civilian Technology: Building a New Alliance The argument that federal support should be confined to basic research also overlooks the possibility of market failure in the adoption of new technologies—an important area in which the United States needs to improve its performance, as noted in Chapter 1. The issue of nonappropriability, or the inability of firms to capture economic benefits of investment in basic research—long accepted as the rationale for public support—deals largely with a putative undersupply of that type of research. This view overlooks the fact that the transfer and utilization of new scientific or technological information generally involve significant appropriability problems for private firms. The organization of R&D capabilities in industry rests on the inability of firms to capture the returns of investment in technology transfer and adoption activities, as noted below. Public support for technology development, therefore, may legitimately include a role in supporting its utilization and diffusion, as well as the creation of technological knowledge. In sum, an expanded federal role in supporting pre-commercial R&D and technology, as well as domestic technology adoption, is justified on the grounds that market mechanisms do not promote efficient levels of investment or performance in these areas. Moreover, to improve U.S. performance in technology commercialization and adoption, a better balance between support for basic research and investment in pre-commercial R&D and technology adoption is necessary. Federal Support for Basic Research Government involvement in the development of civilian technologies has a lengthy history and has assumed many forms. Many of the high-technology industries in which U.S. firms are now dominant or strong performers within the global economy benefitted from federal funding of basic research or from defense-related research, development, and procurement programs. Basic scientific research has played an important role in advances in telecommunications, environmental sciences, and many other areas. In biotechnology, the growth of start-up companies and advanced applications in genetic engineering have been made possible in part through federal funding of research at universities and medical institutes. Government funding of scientific research has also contributed both to the physical capital necessary to support the nation’s science and technology base—construction of scientific and engineering facilities, and equipment purchases—and to the education and training of the U.S. work force. The role of the federal government has also included the education of scientific, engineering, and academic personnel employed in government, industry, and universities. As federal funding of research has increased, the number of scientists and engineers has also risen (more than 60 percent from 1977 to 1987 and 8 percent per year in the 1980s).7 Sponsorship of

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The Government Role in Civilian Technology: Building a New Alliance academic fellowships and grants creates incentives for postsecondary students to enter science and engineering fields. The government currently supports, for example, more than 49,000 fellowships, traineeships, and research assistantships for graduate education in science and engineering.8 Federal support for basic scientific research remains important to the national welfare. It must be recognized, however, that an exclusive federal focus on basic research investment in order to sustain U.S. advantages in technology is no longer sufficient. Scientific research is increasingly an international public good. The growth of transnational corporate alliances, the increase in direct investment in the United States and abroad by foreign-based firms, the participation of scientists and engineers from one country in the laboratories of other countries (especially those of the United States), the emergence of new centers of technical and industrial prowess, and the swift dissemination of technological knowledge through advances in information processing and transportation have combined to diffuse new research findings rapidly around the globe.9 The pace as well as the amount of technology transferred through these transnational mechanisms is accelerating.10 The worldwide diffusion of new technical knowledge makes it difficult for U.S. firms to appropriate the benefits of research conducted in other countries. During the 1950s and 1960s the United States was able to translate innovations produced through this complex research system into marketable products with little challenge from commercial competitors. Today, not only are foreign firms more capable of absorbing the output of the U.S. scientific and engineering enterprise, they also challenge U.S. companies by quickly incorporating research results into commercializable products and processes, as well as rapidly adopting new technologies. The openness and accessibility of the global research system and the free flow of information and ideas have contributed to this development. One response to the globalization of basic research is to maintain current federal research investment priorities and attempt to reduce transfer of the results of such research to foreign firms. This is likely to be both ineffective and, ultimately, profoundly counterproductive. The economic benefits and payoffs to U.S. industry and citizens from an exclusive government focus on federal investment in basic research may, we believe, have been reduced in recent years. The appropriate response, however, is not to attempt to restrict foreign access to U.S. basic research. Such an action would harm the global scientific enterprise, as well as reduce the effectiveness of our basic research system and, ultimately, impair the competitiveness of U.S. firms. As a nation, it is likely that the United States has less to gain and more to lose by restricting foreign access to its research system. This is true today more than at any other time in the postwar period. Moreover, in some

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The Government Role in Civilian Technology: Building a New Alliance cases, the United States (including federal laboratories and federally sponsored R&D projects) is less open to the participation of ''foreign'' firms than other industrialized nations and could be subject to retaliation in the future.11 The United States should seek to promote access to publicly funded research projects, both here and overseas. Although post-war U.S. policy has emphasized funding of basic research, the government has acted to aid U.S. firms in commercial technology development and the adoption of new technologies. The next section outlines several examples of federal involvement in private sector activities beyond funding of basic research. As we show, the U.S. government clearly has the capacity to facilitate the commercialization and adoption of new technologies in important high-technology sectors. This success, we believe, indicates the capability of government to act in a manner consistent with support for downstream investments in pre-commercial R&D with a high rate of social return. It also shows federal capability to aid U.S. firms in technology adoption. Government Support Beyond Basic Research In agriculture, public health, computers, and civilian aeronautics technologies, among other fields, investments by federal agencies—the Department of Agriculture, National Institutes of Health, Department of Defense (DOD), and National Advisory Committee for Aeronautics (NACA)—contributed to technology commercialization and the adoption of new technology in private firms. Indeed, in aircraft, high-performance computers, and agriculture, the federal government had a direct role in the creation of industries that today dominate world commerce and generate export surpluses for the United States. Other less successful federal efforts, in areas such as synthetic fuels, provide insights into how to improve the organization and structure of publicly supported programs in civilian technology. The following sections detail lessons learned from past federal programs that can shape future policies and programs. Agriculture The land resources of the United States, its large farm population, and innovations—such as seed drills, reapers, and steel plows—contributed to the success of the nation’s agricultural sector, particularly in international markets in the late 1800s. Progress during the 1900s, however, was shaped by a series of legislative initiatives that provided government funds for R&D and agricultural extension services.12 Many studies of agricultural productivity growth and federal investment have documented a high rate of return from these types of investments in pre-commercial agricultural research and technology.13

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The Government Role in Civilian Technology: Building a New Alliance One important legislative development during this period was the 1887 Hatch Act, which provided funds to the states for agricultural “experiment stations."14 In conjunction with agricultural colleges, the stations formed a system that “extended” agricultural knowledge and research findings to the farmer. The 1906 Adams Act encouraged mission-oriented, basic research at the local level through increased funding of state experiment stations, with the stipulation that they use funds for “conducting original researches.''15 The 1914 Smith-Lever Act provided grants for such activities as farmers’ institutes, demonstration farms, and vocational education. The Department of Agriculture has placed much of its research locally in experiment stations managed by the states.16 County-based agents were essential to dissemination of technology from the federal, regional, and extension laboratories to the local farmer.17 This emphasis on government-sponsored technology extension is unique to agriculture (standing in sharp contrast to the lack of extension programs to support U.S. manufacturing). Agricultural research and extension programs are focused on servicing external “clients” (i.e., which reinforces the link between R&D and commercial markets).18 Extension agents provide both technical information on advances in agricultural technology and assistance with business management. Agricultural extension programs have been a useful, although costly, mechanism for upgrading the technological capabilities of farmers and promoting the diffusion and adoption of new technologies. The agricultural program provides several important lessons on federal involvement in civilian technology development and adoption. The most important of these include (1) the need for a wide diversity of specific projects and flexibility in extension management; (2) the value of a continuing focus on the application of findings and technology adoption that affect a wide range of private sector actors; (3) the importance of a long-term, stable source of funding; and (4) the benefits of wide access to projects among private sector participants. Computers and Microelectronics Federal R&D support was essential to the creation of the U.S. computer and semiconductor industries. The first computers were constructed in military research and development projects during World War II. In the 1950s and early 1960s, government military purchases of semiconductors, largely for use in missile guidance systems, aided the development of the U.S. semiconductor industry. Through R&D and procurement programs, federal assistance to private R&D projects helped to lower production costs through subsidization of manufacturing test and production facilities. In addition, the SAGE air defense program required development of innovations to coordinate multiple computers operating continuously. (Additional contribu-

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The Government Role in Civilian Technology: Building a New Alliance tions of the Department of Defense to the computer industry are addressed below in “Government Support of Dual-Use Technology: DARPA.") In fact, between 1945 and 1955, all major computer technology projects in the United States were supported by government or military users, or both.19 Although IBM funded early development work in electronics and computers during the 1940s and 1950s, sales of these products to the federal government generated a significant amount of revenue for the company.20 Direct government support for R&D work, special projects, and studies was received for defense-related purposes at IBM, including programs associated with the B-52 bomber and navigation system. In addition, from 1953 through 1955, 6 of the 18,701 computers (the company’s first-delivered computer) sold by IBM went to government agencies and laboratories. Other projects for the government, such as the SAGE and Stretch programs for the military, helped to advance the firm’s technological frontiers in commercial products, including the diffusion of transistor technology in IBM products. Cray Research, Inc. developed supercomputers by working as a contractor for Los Alamos National Laboratory, which functioned as “the market” by defining specifications and evaluating the quality of machines installed at its facilities. At critical junctures, federal purchases of Cray supercomputers kept the company in business. In addition, extensive government investments in computer networks in the 1970s and early 1980s, reduced instruction set computing, and sophisticated graphics are now bearing fruit in commercial applications. The federal government played an important, direct role in the commercial development of the computer industry. Clearly, much of the success of this involvement can be attributed to government procurement practices, which helped ensure a market for products supported through DOD and DARPA. Nevertheless, early federal support also included pre-commercial R&D and prototype development projects that assisted firms in moving beyond research into technology commercialization in civilian markets. The Biomedical Industry The growth of the U.S. biomedical industry—pharmaceuticals, medical equipment and devices, and more recently, biotechnology—was supported by government funding of medical research and the training of scientists and medical personnel by agencies such as the National Institutes of Health (NIH).21 Collaborative projects in biomedicine established a precedent for the expansion of cooperative R&D programs in subsequent decades. The dominant role of NIH in funding U.S. biomedical R&D evolved through the agency’s wartime programs. Prior to World War II, as part of the Public Health Service, NIH helped develop treatments for then prevalent ailments

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The Government Role in Civilian Technology: Building a New Alliance such as malaria, tuberculosis, and venereal disease. The 1944 Public Health Service Act led to the establishment of new NIH research entities such as the National Heart Institute and the National Institute of Mental Health.22 In 1946, the Office of Research Grants was founded and became the primary grant-making body for medical research in the postwar era. Along with grants initiated by individual medical researchers, which still constitute the bulk of NIH allotments, funds for the construction of medical facilities and graduate and postdoctoral training fellowships were also disbursed.23 Biotechnology Today, the federal government, largely through NIH, the National Science Foundation, and the Department of Agriculture, spends approximately $3.5 billion a year on biotechnology-related R&D. The private sector invests another $2.5 billion. NIH employs 4,184 scientists and physicians, and in 1990 allotted $5.2 billion of its total budget of $7.6 billion for more than 24,000 research grants. NIH spent $1.7 billion on research in biotechnology fields, such as genetics and molecular biology, and process technology work, such as DNA cloning. Funding in the second category rose sharply from $0.2 billion in 1986 to $1.2 billion in 1990.24 NIH laboratories test chemical compounds for use in biotechnology products and processes.25 In addition to NIH support for biotechnology, $195 million per year is spent on the human genome project, which is administered by the Department of Energy (DOE) and the Department of Health and Human Services.26 Several lessons that are evident from close examination of government support for biology may be helpful in redirecting federal science and technology policy. First, current federal policy on biotechnology recognizes that collaboration between firms and universities is essential.27 Cooperation between the private sector and government-supported universities often involves long-term agreements between individual firms and a university. Federal funding of research, particularly of university-industry collaborative projects, has helped support a strong, internationally competitive U.S. biotechnology industry.28 NIH research has led to breakthroughs such as gene therapy, the development of a test for the presence of the human immunodeficiency virus (HIV), and the drug AZT (azidothymidine) for AIDS treatment. The U.S. leadership in biological science has translated into a strong national position in world markets for U.S. biotechnology products.29 Second, NIH is the leading provider of R&D and training to the biomedical industry. Although direct support is primarily for basic research, the close relationship to industry and the short time to product development have blurred the distinction between support for basic research and for pre-commercial R&D. NIH labs have built strong relationships to the health care industry and its management. The links between researchers and in

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The Government Role in Civilian Technology: Building a New Alliance dustrial users are an important element in the biomedical industry’s success in transforming laboratory R&D into commercial applications. Finally, NIH’s historic tradition of decentralized peer review of research proposals has helped provide protection from political interference for the tens of thousands of research proposals examined each year by 139 review councils and panels. From the beginning, the Office of Research Grants emphasized the “integrity and independence of the research worker and his freedom from control, direction, regimentation and outside interference."30 As in other fields, independence from political interference has fostered continuity in research and helped preserve the independence of scientific inquiry and projects. The Civil Aircraft Industry The U.S. government played a strategic role in the development of a civilian aircraft sector. A central focus of this involvement was funding of applied research and construction of aircraft prototypes. The government conducted most R&D in aviation prior to World War II, at which time the growth in military and private sector aviation reduced the governmental role in civilian R&D. From its founding in 1915 to its absorption by the National Aeronautics and Space Administration (NASA) in 1958, the National Advisory Committee for Aeronautics was the predominant government body supporting civil aircraft R&D. NACA was formed during World War I, when biplanes were used for reconnaissance and dirigibles were used in bombing.31 Beginning with work on a new wind tunnel at Langley, Virginia, NACA was responsible for a series of aeronautical innovations that helped foster the establishment of a U.S. aircraft industry. The development of an engine cowl reduced wind drag, research in aerodynamic efficiency assisted determination of optimal engine placement, and a new family of airfoils allowed engineers to test new shapes in wing design. Furthermore, by publishing technical documents on aviation engineering, NACA became recognized as a world-class authority on aeronautics. NACA appropriations through 1940 totaled $81 million (1972 dollars).32 The number of NACA employees did not exceed 100 until 1925 and was less than 300 as late as 1935.33 Experience with federal technology developments in this program shows that significant accomplishments in pre-commercial and applied R&D do not necessarily depend on large expenditures of funds for each research project. Regulatory policies also had an impact on the development of the civil aviation industry. NACA-sponsored discussions on an industry-wide cross-licensing agreement led to the transfer of technology among companies. Under the accord, companies gave up exclusive patent rights that might have served to promote a single firm’s technological dominance.

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The Government Role in Civilian Technology: Building a New Alliance From 1938 to 1978, the Civil Aeronautics Board (CAB), strictly regulated airline fares and market entry by air carriers. These regulatory policies had the effect of constraining market efficiencies while spurring technological innovation, because airlines were forced to compete on the basis of technology as opposed to cost. After World War II, spin-offs from military R&D and transfers to the private sector from military-based research and procurement had a decisive effect on the commercial sector. Manufacturers such as Boeing and General Electric that worked in both the military and the civilian jet-aircraft and jet-engine markets were able to leverage the cost of production and technology development across both areas. NACA's efforts in technology diffusion and encouraging the adoption of new technology through dissemination of technical documents were successful in spurring technological advances in the United States. NACA (and later NASA) also encouraged companies of comparable technical ability to share R&D findings in large joint projects.34 In addition to support for R&D and the adoption of new, innovative technologies in the civil sector, NACA and NASA played a key role in support of the infrastructure underlying the commercial aviation industry. There are several important lessons to be gained from the government's involvement in support of the commercial aircraft industry. First, NACA concentrated on areas of pre-commercial, applied R&D with broad application throughout the industry. Private companies then took the research results and specialized in technology commercialization. Program managers at NACA facilities were not involved in specific decisions on product applications. NACA generally limited its support to "generic, enabling technologies" from which current or future product design programs would benefit. Second, NACA's research efforts were unstructured and minimized over-lapping responsibilities, in contrast to many current federal programs. Research projects were initiated after informal approval from staff supervisors or NACA's executive committee.35 The organization's relatively small size and single location contributed to close staff collaboration. NACA was also able to attract high-quality scientific and engineering talent. Staff was not restricted to narrow technical specialties, which promoted the wide transfer of technical information and expertise. Synthetic Fuels The government's attempt to develop a synthetic fuels industry in the late 1970s and early 1980s is a case study of unsuccessful federal involvement in technology development. In 1980, Congress established the Synthetic Fuels Corporation (SFC), a quasi-independent corporation, to develop large-scale projects in coal and shale liquefaction and gasification.36 Most

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The Government Role in Civilian Technology: Building a New Alliance research, and a strong rationale continues for that public funding. We believe, however, that the almost exclusive focus of federal technology policy on investments in basic R&D should be modified. There is a strong case for extending the federal role beyond the funding of basic R&D. This is true both on economic grounds and because government programs have had some success in the past in stimulating civil technology development and commercialization. A new federal role in support of private technology efforts should be shaped through investments in pre-commercial R&D, as well as projects to increase the rate of technology adoption in U.S. firms. These are the areas, as we have shown, in which the potential exists for great public benefit, and U.S. firms cannot appropriate sufficient economic benefits from private investment. To strengthen U.S. comparative advantages, a reorientation of priorities in the system that provides long-term support for military technology development is necessary. This change would benefit both the nation’s military and its civilian technology infrastructure. Specifically, we believe that the mandate and objectives of the Defense Advanced Research Projects Agency should include the explicit support of dual-use technology to bolster commercialization efforts in the civilian sector. The U.S. approach to stimulating transfer from government laboratories that has characterized technology transfer policies and congressional initiatives over the past decade is misguided. Although the laboratories constitute a significant public good, most of the work at these facilities is unlikely to serve the commercial needs of the civilian sector. The administration should therefore select only a few of the several hundred government laboratories to be involved in technology transfer activities. Changes in the mission and objectives of these laboratories will require significant additional funding and personnel. In the few laboratories with the potential to serve commercial needs, it will be necessary to commit resources, over and above current appropriations, in order to meet technology transfer goals set under this new framework. A strengthened federal role in civilian technology and reorientation of government policies beyond investment in basic scientific research will require more than simply changes in technology transfer policies or additional federal funding for pre-commercial activities. A significant new emphasis is needed on the performance and ability of U.S. firms to adopt new technologies. We have shown that although U.S. performance in technology generation remains strong, the nation’s industries are having increasing difficulty incorporating new technology into the production process, particularly the rapid introduction of incremental improvements in product and process technologies. Better information and analysis are necessary on technology adoption in the United States and overseas, with the goal of providing a basis upon which new federal responsibilities in this area can be determined.

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The Government Role in Civilian Technology: Building a New Alliance NOTES 1.   U.S. Department of Commerce, Advanced Technology Program, Proposal Preparation Guidelines (National Institute of Standards and Technology, Gaithersburg, Md., 1990), 2. 2.   An early study of the returns from investment in agricultural R&D, as well as extension services, found a marginal rate of return on investment in R&D of 53 percent; see Zvi Griliches, ''Returns Expenditures, Education, and the Aggregate Agricultural Production Function,” American Economic Review (1964), as cited in Edwin Mansfield, “Microeconomics of Technological Innovation,” in The Positive Sum Strategy, eds. Ralph Landau and Nathan Rosenberg (Washington, D.C.: National Academy Press, 1986), 308. 3.   Technical change and technological innovation constitute a primary source of economic growth. The contribution of technical change to growth was first examined in the work of Robert Solow, “Technical Change and the Aggregate Production Function,” Review of Economics and Statistics 23 (August 1957):101–108 and Moses Abramovitz, “Resource and Output Trends in the U.S. since 1870," American Economic Review 46 (May 1956). See also Martin N. Baily and Alok K. Chakrabarti, Innovation and the Productivity Crisis (Washington, D.C.: The Brookings Institution, 1988); John Kendrick, “Productivity Trends in the United States,” in Lagging Productivity Growth, eds. Shlomo Maital and Noah M. Meltz (Cambridge, Mass.: Ballinger Publishing Co., 1980); and Edwin W. Mansfield, “Economic Effects of Research and Development: The Diffusion Process and Public Policy,'' in Planning for National Technology Policy, eds. Richard A. Goodman and Julian Pavon, (New York: Praeger, 1984), 104–120, among others. 4.   For estimates of the social and private rates of return on investment in specific innovations, see Edwin Mansfield et al., “Social and Private Rates of Return from Industrial Innovations,” Quarterly Journal of Economics (1977); Robert R. Nathan Associates, Net Rates of Returns on Innovations, Vol. 1 and 2 (Report prepared for the National Science Foundation, Washington, D.C., 1978); and Foster Associates, A Survey on the Net Rates of Return on Innovations, 3 volumes (Report prepared for the National Science Foundation, Washington, D.C., 1978). 5.   For an overview of analyses of the rationale for federal investment and social returns on R&D investment that accompany lack of private sector incentives for investment, see U.S. Congress, Congressional Budget Office, Federal Support for R&D and Innovation (Washington, D.C.: U.S. Government Printing Office, 1984). 6.   For a discussion of these policies, see Harvey Brooks, “National Science Policy and Technological Innovation,” in The Positive Sum Strategy, eds. Ralph Landau and Nathan Rosenberg (Washington, D.C.: National Academy Press, 1986), 119–167. 7.   U.S. Congress, Office of Technology Assessment, Federally Funded Research: Decisions for a Decade (Washington, D.C.: U.S. Government Printing Office, 1991), 3; and National Science Board, Science and Engineering Indicators—1989 (Washington, D.C.: National Science Board, 1989), appendix table 5–17. 8.   National Science Board, Science and Engineering Indicators—1989 , 231. Figures are for 1988. 9.   Thomas H. Lee and Proctor P. Reid, eds., National Interests in an Age of Global Technology (Washington, D.C.: National Academy Press, 1991), 23–24, 27–29. 10.   David C. Mowery and Nathan Rosenberg, Technology and the Pursuit of Economic Growth (New York: Cambridge University Press, 1989), 209–210. 11.   For example, there are restrictions on “foreign participation” in SEMATECH, the National Center for Manufacturing Sciences, federal laboratory R&D programs, and the Advanced Technology Program at the National Institute of Standards and Technology. In Japan, however, there is a current emphasis on the inclusion of foreign multinational corporations and affiliates of U.S. firms based in Japan in Japanese government-sponsored R&D projects. See Chapter 3 for further discussion of this point.

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The Government Role in Civilian Technology: Building a New Alliance 12.   The Homestead Act of 1862 granted 160 acres of soil to persons settling on and cultivating land for five years. The Morrill Land-Grant Act of the same year gave every state and territory 30,000 acres of public land for each congressional representative. The allotments of land, for use by agricultural and mechanical colleges, spurred the development of a system of land grant colleges that provided the framework for a U.S. research system in agriculture. In addition, a “Commission” (later Department) of Agriculture was established during the Civil War to guide federal investments in agriculture. Outbreaks of Texas fever and pleuropneumonia and European restrictions on the import of U.S. meat suspected of carrying disease prompted Congress to establish a Bureau of Animal Industry within the new Department of Agriculture in the early 1900s. Research conducted by the bureau was instrumental in finding technical solutions for reform of the meat packing industry. 13.   See, for example, Robert E. Evenson and Wallace E. Huffman, “Supply and Demand Functions for Multiproduct U.S. Cash Grain Farms: Biases Caused by Research and Other Policies,” American Journal of Agricultural Economics 71 (August 1989):761–773. 14.   The Hatch Act remains the principal mechanism for federal funding of agricultural research. 15.   Act of 1906 for the Further Endowment of Agricultural Experiment Stations (Adams Act). 16.   Norwood Allen Kerr, The Legacy, A Centennial History of the State Agricultural Experiment Stations, 1887–1987 (Columbia: University of Missouri, 1987). 17.   John S. Wilson, Productivity and Competitiveness: Industrial Extension Services and Technology Transfer Programs in the U.S. (Washington, D.C.: The World Bank), 8. 18.   Richard R. Nelson, ed., Government and Technical Progress (New York: Pergamon Press, 1982), 269. 19.   Kenneth Flamm and Thomas L. McNaugher, “Rationalizing Technology Investments,” in Restructuring American Foreign Policy, ed. John D. Steinbruner (Washington, D.C.: The Brookings Institution, 1989), 126. 20.   Information provided by the IBM Corporation, Armonk, New York. 21.   Prior to the 1950s, federal support of the industry—typically involving collaboration of government, industry, or universities—was essential in medical discoveries. Pharmaceutical companies, the Department of Agriculture, the Rockefeller Foundation, and the Office of Scientific Research and Development (OSRD) pooled resources during World War II to make penicillin, first discovered in 1928, widely available for the armed services. OSRD produced the antimalarial drug quinacrine through an analysis of substances developed by university and pharmaceutical company researchers. During this period, the OSRD Committee on Medical Research awarded $25 million in contracts to universities, hospitals, and companies. 22.   P.L. 78–410. 23.   Stephen P. Strickland, The Story of the NIH Grants Program (Lanham, Md.: University Press of America, 1989), 44. 24.   NIH Budget Office. Figures are for dollars actually spent. 25.   Michael R. Pollard, “Selected Examples of Government and Industry Collaboration in Pharmaceutical Research and Development,” in Government and Independent Collaboration in Biomedical Research and Education: Report of a Workshop (Washington, D.C.: National Academy Press, 1989), 4. 26.   Figures are for fiscal year 1991. NIH’s share of the genome project is $87 million; DOE’s share is $47 million. See “DoE’s Genome Project Comes of Age,” Science (April 26, 1991):498. 27.   David C. Mowery, Collaborative Research: An Assessment of Its Potential Role in the Development of High Temperature Superconductivity (Paper prepared for the Office of Technology Assessment, U.S. Congress, Washington, D.C., 1988), 47. 28.   Industrial Biotechnology Association.

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The Government Role in Civilian Technology: Building a New Alliance 29.   Wendy Schacht, Commercialization of Technology and Issues in the Competitiveness of Selected U.S. Industries: Semiconductors, Biotechnology, and Superconductors (Paper prepared for the Congressional Research Service, Washington, D.C., 1988), 33. 30.   Cassius J. Van Slyke, "New Horizons in Medical Research," Science 104 (December 13, 1946):561. 31.   Roger E. Bilstein, Orders of Magnitude: A History of the NACA and NASA, 1915-1990 (Washington, D.C.: National Aeronautics and Space Administration, 1989), 3. 32.   David C. Mowery, "Federal Funding of R&D in Transportation: The Case of Aviation" (Paper presented at the COSEPUP Workshop on the Federal Role in Research and Development, National Academy of Sciences, Washington, D.C., 1985), 315. 33.   Alex Roland, Model Research, the National Advisory Committee for Aeronautics, vol. 2 (Washington, D.C.: National Aeronautics and Space Administration, 1985), 489. 34.   Mowery, Collaborative Research, 71. 35.   John V. Becker, The High-Speed Frontier, Case Histories of Four NACA Programs, 1920-1950 (Washington, D.C.: National Aeronautics and Space Administration, 1980), 117-118. 36.   Energy Security Act of 1980. 37.   Roger G. Noll and Linda R. Cohen, Economics, Politics, and Government Research and Development (Paper commissioned for a Workshop on The Federal Role in Research and Development, Committee on Science, Engineering, and Public Policy, National Academy of Sciences, Washington, D.C., November 21-22, 1985), 11. 38.   John Deutch, Commercializing Technology: What Should DoD Learn from DoE? (Center for International Security and Arms Control, Stanford University, 1990), 6. 39.   U.S. Congress, Congressional Research Service, "Synthetic Fuels Corporation," Congressional Research Service Review (September 1984), 23. 40.   Hans H. Landsberg, "The Death of Synfuels," Resources 82 (Winter 1986): 7. 41.   Deutch, Commercializing Technology, 5, 8. 42.   This policy contrasted with the production and purchasing subsidies granted synthetic fuels and solar heating, despite the fact that these industries were also at an early stage of technology maturation. 43.   "Systems vs. Technology: DARPA at a Crossroads?" Armed Forces Journal International 127 (November 1989): 71. 44.   Burton I. Edelson and Robert L. Stern, The Operations of DARPA and Its Utility as a Model for a Civilian ARPA (The Paul H. Nitze School for Advanced International Studies, Washington, D.C., 1989), F1-2. 45.   For an overview of DARPA and its role in dual-use technology development, see Mowery and Rosenberg, Technology and the Pursuit of Economic Growth, 137-156. It should be noted that DARPA has had a limited role in microelectronics R&D. Government procurement policies provided primary incentives for the formation of the computer industry in the 1950s and early 1960s, with advanced R&D work playing a much less important part. In the late 1960s and since, DARPA's R&D work has had a major role in new technology, and government procurement has shrunk as a fraction of the industry. 46.   John A. Alic and Dorothy Robyn, "Designing a Civilian DARPA," Optics and Photonics News 1 (May 1990): 19. 47.   DARPA. Figures are direct appropriations for FY 1991. 48.   Edelson and Stern, The Operations of DARPA and Its Utility as a Model for a Civilian ARPA, 6-7, 18. 49.   "A New Government Role in Key Industries," The Washington Post , April 26, 1990. 50.   Carnegie Commission, New Thinking and American Defense Technology (Washington, D.C.: Carnegie Commission, 1990), 24-25. 51.   Ibid., 26.

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The Government Role in Civilian Technology: Building a New Alliance 52.   Edelson and Stern, The Operations of DARPA, 22-23. 53.   Alic and Robyn, "Designing a Civilian DARPA," 21. 54.   Edelson and Stern, The Operations of DARPA, 16. 55.   For specific suggestions on improving technology flow between defense agencies and the private sector, see Carnegie Commission, New Thinking, 24-25. 56.   See U.S. Congress, General Accounting Office (GAO), Federal Research: Small Business Innovation Research Program Shows Success, but Could Be Strengthened, T-RCED-92-3 (Washington, D.C.: U.S. Government Printing Office, 1991); and Small Business Administration (SBA), Testimony of Richard Shane, Assistant Administrator, Office of Innovation, Research and Technology, before the House Small Business Committee, U.S. House of Representatives on the Small Business Innovation Research Program, U.S. Congress, October 3, 1991. Both GAO and SBA will be releasing reports on the SBIR program and technology commercialization in early 1992. 57.   Small Business Innovation Development Act. 58.   Along with NIST, other agencies within the Technology Administration whose functions relate to industrial competitiveness include the Clearinghouse on State and Local Initiatives, the Japanese Technical Literature Program, the National Technical Information Service, the Office of Technology Policy, and the Office of Commercial Policy. 59.   U.S. Department of Commerce, Research, Services, Facilities: National Institute of Standards and Technology (Gaithersburg, Md.: National Institute of Standards and Technology, Technology Administration, 1991). 60.   Section 5131 of the Omnibus Trade and Competitiveness Act (P.L. 100-418) authorized ATP. 61.   U.S. Department of Commerce, Advanced Technology Program, Proposal Preparation Guidelines (U.S. Department of Commerce, Washington, D.C., 1990). 62.   Personal communication from George Uriano, director of Advanced Technology Program, to Ed Moser, Committee on Science, Engineering, and Public Policy, National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Washington, D.C., February 22, 1991. 63.   For the purposes of this discussion, the term federal laboratories refers to all scientific and engineering laboratories operated under contract by the federal government (GOCOs) or under the direct management of the government (GOGOs). The term national laboratories is often used to refer to the Department of Energy's large, multidisciplinary R&D facilities, including weapons laboratories, such as Los Alamos, Lawrence Livermore, and Sandia, and laboratories that focus on basic energy research, such as Argonne, Brookhaven, Lawrence Berkeley, and Oak Ridge National Laboratories. The federally funded research and development centers, operated under contract for the government, span a diverse spectrum from systems engineering and technical assistance, to "think-tank" research organizations. 64.   National Science Foundation, Federal Funds for R&D: Fiscal Years 1989, 1990, 1991 (Washington, D.C.: National Science Foundation, 1991); dollar amount in obligations. 65.   Most development of military systems for the Department of Defense is done by private firms, or COCOs, operating outside the laboratory structure. U.S. Congress, House Committee on Small Business, Subcommittee on Regulation, Business Opportunities, and Energy, Technology Transfer Obstacles in Federal Laboratories: Key Agencies Respond to Subcommittee Survey (Hearing, March 1990), 7. 66.   Defense Science Board, Technology Base Management (Washington, D.C.: U.S. Department of Defense, 1987), 13, 22. 67.   U.S. Congress, Office of Technology Assessment, Making Things Better: Competing in Manufacturing (Washington, D.C.: U.S. Government Printing Office, 1990), 185. 68.   NIH Budget Office. Figures are for 1990. 69.   P.L. 96-517.

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The Government Role in Civilian Technology: Building a New Alliance 70.   P.L. 96-480. 71.   P.L. 96-480. 72.   P.L. 98-462. 73.   P.L. 99-502. 74.   Letter from NASA to Representative Ron Wyden, January 12, 1990, p. 2. 75.   For a detailed discussion of technology transfer legislation passed during the period 1980-1987 see John S. Wilson, Productivity and Competitiveness: Industrial Extension Services and Technology Transfer Programs in the U.S. (Washington, D.C.: The World Bank, 1987). 76.   U.S. Department of Energy, Technology Transfer: A DoE and Industry Partnership for the Future (U.S. Department of Energy, Washington, D.C., 1991), A-7, A-8. 77.   U.S. Congress, House of Representatives, Technology Transfer Obstacles in Federal Laboratories: Key Agencies Respond to Subcommittee Survey (Washington, D.C., March 1990), 1-2. 78.   U.S. Congress, General Accounting Office, Diffusing Innovations: Implementing the Technology Transfer Act of 1986 (Washington, D.C.: U.S. Government Printing Office, 1991), 4-5, 11, 106-107. 79.   For an interesting general discussion of cultural and other factors in technology R&D, see Ralph E. Gomory, "Technology Development," Science, 220 (May 6, 1983):576-580. 80.   U.S. Congress, Office of Technology Assessment, Making Things Better, 189-190. 81.   "Roundtable: New Challenges for the Federal Labs," Physics Today (February 1991), 28. 82.   Ibid., 29-30. 83.   Alan Schriesheim, "Toward a Golden Age of Technology Transfer," Issues in Science and Technology 7 (Winter 1990), 54. 84.   A 1991 survey conducted by the General Accounting Office found that 685 CRADAs had been completed or drafted by 297 research-oriented federal laboratories. 85.   D. Allan Bromley, Director, Office of Science and Technology Policy (Testimony before the Senate Committee on Commerce, Science, and Transportation, Washington, D.C., May 23, 1990), 7. 86.   U.S. Congress, General Accounting Office, Diffusing Innovations: Implementing the Technology Transfer Act of 1986 (Washington, D.C.: U.S. Government Printing Office, 1991), 3-5. Along similar lines, a 1990 report of the House Science, Space, and Technology Committee, for example, found that 61 percent of 180 laboratories surveyed had not received the authority from their agencies to undertake CRADAs, even though four years had passed from the time of the authorizing legislation. Similarly, although the Stevenson-Wydler Act calls for the establishment within each laboratory of a technology transfer office, or Office of Research and Technology Applications, the report found this to be so for only 20 percent of the laboratories examined. U.S. Congress, House of Representatives, Committee on Science, Space, and Technology, Subcommittee on Science, Research, and Technology, "Transfer of Technology from the Federal Laboratories" (Hearing, Washington, D.C., May 3, 1990), 8-9. 87.   For an overview of the history of collaborative R&D, see Center for Social and Economic Issues, Industrial Technology Institute, Solomon Associates, and J. D. Eveland, The Literature of Collaborative Research and Development: An Analytic Overview (Report submitted to the Office of Technology Assessment, U.S. Congress, Washington, D.C., December 18, 1986). 88.   See David C. Mowery, ed., International Collaborative Ventures in U.S. Manufacturing (Cambridge, Mass.: Ballinger Publishing Company, 1988); John Hagedoorn and Jos Schakenraad, Strategic Partnering and Technological Cooperation, (Maastricht Economic Research Institute on Innovation and Technology, The Netherlands, 1989). For an overview of alliances in the semiconductor industry, see, for example, Carmela Haklisch, Technical Alliances in the Semiconductor Industry (New York University, Center for Science and Technology Policy,

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The Government Role in Civilian Technology: Building a New Alliance     1986) and Nicholas S. Vonortas, The Changing Economic Context: Strategic Alliances Among Multinationals (Center for Science and Technology Policy, Rensselaer Polytechnic Institute, Troy, New York, 1989). 89.   The evidence on whether or not the NCRA has promoted R&D ventures is inconclusive. See U.S. Congress, Congressional Budget Office, Using R&D Consortia for Commercial Innovation: SEMATECH, X-Ray Lithography, and High-Resolution Systems (Washington, D.C.: U.S. Government Printing Office, 1990) for a discussion of the NCRA and its impact on the formation of joint ventures. 90.   For an overview of SEMATECH, see U.S. Congress, Congressional Budget Office, Using R&D Consortia; U.S. Congress, General Accounting Office, Federal Research: SEMATECH's Efforts to Strengthen the U.S. Semiconductor Industry (Report to the Committee on Science, Space, and Technology, U.S. House of Representatives, GAO/RECE-90-236, Washington, D.C., September 1990); U.S. Department of Commerce, Advisory Council on Federal Participation in SEMATECH, SEMATECH 1990 (A Report to the Congress, Washington, D.C., May 1990); and U.S. Congress, General Accounting Office, Federal Research: SEMATECH's Efforts to Develop and Transfer Manufacturing Technology (Fact Sheet for the Committee on Science, Space, and Technology, U.S. House of Representatives, GAO/RCED-91-139FS, Washington, D.C., May 1991). 91.   Personal communication from Rebecca Racosky, manager for government relations, NCMS, October 3, 1991. 92.   Personal communication from Lee Kennard, chief of business integration, Mantech program, Department of the Air Force, U.S. Department of Defense, October 2, 1991. Figures are for FY 1991. In FY 1990, Mantech funding for NMCS totaled $8 million. 93.   There have been no independent reviews of NCMS progress in meeting the consortium's objectives. Information available through telephone interviews with NCMS personnel, congressional staff, DOD officials, member companies, and other R&D organizations, presents a mixed assessment of progress to date at NCMS. Apparently, small manufacturers that typify the U.S. machine-tool industry delegate only limited staff resources to tasks associated with NCMS projects. NCMS, like other collaborative R&D ventures, continually works to balance the desires of member companies to target research to specific company needs, against the goal of producing and disseminating R&D results useful to other member firms. Indeed, officials of several member companies contacted for information about NCMS report benefits from NCMS projects to in-house R&D objectives. They cite especially the leveraging of internal R&D resources in projects in support of manufacturing technology, such as a computer-integrated factory, next-generation controllers, and improved manufacturing techniques for fabrication of printed wiring boards. 94.   For an overview of the ERC program, see National Science Foundation and American Association of Engineering Societies, The ERCs: A Partnership for Competitiveness, Report of a Symposium (Engineering Centers Division, Directorate for Engineering, National Science Foundation, Washington, D.C., March 1990); and National Academy of Engineering, Assessment of the National Science Foundation's Engineering Research Centers Program (Washington, D.C.: National Academy of Engineering, 1989). 95.   See, for example, Barry Bozeman, Albert N. Link, and A. Zardkoohi, "An Economic Analysis of Joint R&D Ventures," Managerial and Decision Economics 7 (1986):263-266, as cited in David C. Mowery, "Collaborative Research: An Assessment of Its Potential Role in the Development of High Temperature Superconductivity (Report prepared for the Office of Technology Assessment, U.S. Congress, Washington, D.C., 1988), 4. 96.   See, Richard J. Samuels, Research Collaboration in Japan (Massachusetts Institute of Technology, Cambridge, Mass., 1987), 36; and U.S. Congress, Office of Technology Assessment, Making Things Better. 97.   For a discussion of the ERA system and its history in Japan, see Samuels, Research Collaboration in Japan.

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The Government Role in Civilian Technology: Building a New Alliance 98.   Jonah D. Levy and Richard J. Samuels, The MIT Japan Program (Paper prepared for the Conference on Oligopolies and Hierarchies: Strategic Partnerships and International Competition, Fondation de Royaumont, Asnière-sur-Oise, France, April 20-23, 1989. Available from Center for International Studies, MIT, Cambridge, Mass.), 32. 99.   Fumio Kodama, "Rival's Participating in Collective Research: Its Economic and Technological Rationale" (Paper presented to the NISTEP International Conference on Science and Technology Policy Research, Shimoda, Japan, February 2-4, 1990), 8-9. 100.   See Richard R. Nelson, High-Technology Policies: A Five Nation Comparison (Washington, D.C.: American Enterprise Institute, 1984), 48-50. 101.   For an overview of collaborative R&D in Japan see reports of the National Research Council, Office of Japan Affairs, including R&D Consortia and U.S.-Japan Collaboration: Report of a Workshop (Washington, D.C.: National Academy Press, 1991). 102.   This section draws on interviews conducted in Tsukuba, Science City, Japan in July 1990 by the project director. Included in the discussions were officials of the Optoelectronic Technology Research Corporation and Optoelectronics Technology Research Laboratory. See also The Japan Key Technology Center, Program Prospectus (Tokyo, Japan, 1989), and Key Technology for the 21st Century, Program Description (Optoelectronics Technology Research Laboratory, Tsukuba, Science City, Japan, 1990). 103.   Interview by John S. Wilson, National Academy of Sciences, with Takeshi Furutani, Deputy Director, Electronics Policy Division, Ministry of International Trade and Industry and other MITI staff, Tokyo, Japan, July 1990. For an overview of resources devoted to research and development in Japan through Japan fiscal year 1987, see 1988 Survey of Research and Development in Japan, January 11, 1989, National Science Foundation, Tokyo Office, Tokyo, Japan. See also National Science Foundation, Tokyo Office, JFY 1988 R&D Budget of Japan's Ministry of International Trade and Industry (MITI) (Tokyo, Japan, 1989) for a description of MITI projects in basic R&D. 104.   G. J. Hane, Government-Promoted Collective Research and Development in Japan—Analyses of the Organization Through Case Studies (Washington, D.C.: Pacific Northwest Laboratory, Battelle Memorial Institute, 1990), 2-5. 105.   Data provided by the Japan Key Technology Center, Ark Mori Building, Akasaka, Minato-ku, Tokyo, Japan. 106.   Interview with Izui Hayashi, Director, Optoelectronics Technology Research Laboratory, Tokyo, Japan, by John S. Wilson, National Academy of Sciences, July 1990. 107.   See, for example, National Research Council, Learning the R&D System: Industrial R&D in Japan and the United States (Washington, D.C.: National Academy Press, 1990). 108.   For an overview of U.S. and Japanese spending on R&D and technology development, see National Science Foundation, The Science and Technology Resources of Japan: A Comparison with the United States, NSF 88-318 (National Science Foundation, Washington, D.C., 1988). 109.   See Mowery and Rosenberg, Technology and the Pursuit of Economic Growth, 227. 110.   Roy Rothwell and Mark Dodgson, "Technology Policy in Europe: Trends and Impacts," in Science, Technology, and Free Trade, eds. J. de la Mothe and L. M. Ducharme (London: Pintner Publishers, 1990). 111.   Official Journal of the European Communities, Council Decision of April 23, 1990, no. L 117/28. 112.   Delegation of the Commission of the European Communities, Important Progress for European Community Research (May 18, 1990), 1. 113.   An evaluation of ESPRIT appears in John A. Alic, Cooperation in R&D (Paper prepared for the Office of Technology Assessment, U.S. Congress, Washington, D.C., 1988). 114.   Rothwell and Dodgson, "Technology Policy in Europe," 2. 115.   Glennon J. Harrison, European Community: Issues Raised by 1992 Integration (U.S. Congress, Congressional Research Service, Washington, D.C., 1989), 100.

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The Government Role in Civilian Technology: Building a New Alliance 116.   Glenn J. McLoughlin, The Europe 1992 Plan: Science an Technology Issues (U.S. Congress, Congressional Research Service, Washington, 1989), 14. 117.   Kirkor Bozdogan, The Eureka Initiative in Europe, Implications for Technology Policy in the U.S. (Massachusetts Institute of Technology, Cambridge, Mass., 1990), 5. 118.   National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Finding Common Ground: U.S. Exports Controls in a Changed Global Environment (Washington, D.C.: National Academy Press, 1991), 227. 119.   Rothwell and Dodgson, "Technology Policy in Europe," 8. 120.   Ibid., 24. 121.   Ken Guy, Paul Quintas, and Michael Hobday, Evaluation of the Alvey Software Engineering Programme (Science Policy Research Unit, University of Sussex, Falmer, Brighton, Sussex, United Kingdom, 1990). See also Ken Guy and Paul Quintas, Alvey in Industry: Corporate Strategy and the Alvey Program (Science Policy Research Unit, University of Sussex, Falmer, Brighton, Sussex, United Kingdom, 1989). 122.   Guy, Quintas, and Hobday, Alvey Software Engineering Program. 123.   See, for example, Maryellen R. Kelley and Harvey Brooks, The State of Computerized Automation in U.S. Manufacturing (Center for Business and Government, JFK School of Government, Harvard University, Cambridge, Mass., 1988); National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Technology and Employment: Innovation and Growth in the U.S. Economy (Washington, D.C.: National Academy Press, 1987); Technology Management Center, The Use of Advanced Manufacturing Technology in Industries Impacted by Import Competition: An Analysis of Three Pennsylvania Industries (Philadelphia, 1985); and David C. Mowery, "The Diffusion of New Manufacturing Technologies," in The Impact of Technological Change on Employment and Economic Growth, eds. Richard M. Cyert and David C. Mowery (Washington, D.C.: National Academy Press, 1987). 124.   Mowery, "The Diffusion of New Manufacturing Technologies." 125.   U.S. Department of Agriculture. Federal figures are appropriations for FY 1991. 126.   For an overview of state technology extension services, see Robert E. Chapman, Marianne K. Clark, and Eric Dobson, National Institute of Standards and Technology, U.S. Department of Commerce, Technology-Based Economic Development: A Study of State and Federal Technical Extension Services, NIST Special Publication 786 (Washington, D.C.: U.S. Government Printing Office, June 1990). 127.   Figures are for 1988. Marianne K. Clarke and Eric N. Dobson, Promoting Technology Excellence: The Role of State and Federal Extension Activities (National Governors' Association, Washington, D.C., 1989), 5, 8-9. 128.   For a more detailed description of GTRI and other state-based programs in industrial extension, see John Wilson, Productivity and Competitiveness: Industrial Extension Services and Technology Transfer Programs in the United States (Washington, D.C.: Industrial Development Division, Industry and Energy Department, Policy, Planning, and Research, The World Bank, 1987). 129.   Procedures for the Selection and Establishment of NIST Manufacturing Technology Centers, Part 290, Title 15 of the Code of Federal Regulations, as published in the Federal Register (September 17, 1990), 8. 130.   U.S. Department of Commerce, National Institute of Standards and Technology, NIST Manufacturing Technology Centers Program: Questions and Answers, (U.S. Department of Commerce, Washington, D.C., June 17, 1991), 3. 131.   Letter of Samuel Krammer, Chairman MTC Review Panel to Dr. John W. Lyons, Director, National Institute of Standards and Technology, September 19, 1991. For additional information on the MTC program, see National Institute of Standards and Technology, The Manufacturing Technology Centers Program: A Report to the Secretary of Commerce by Visiting Committee on Advanced Technology (Gaithersburg, Md.: NIST, 1990).

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The Government Role in Civilian Technology: Building a New Alliance 132.   Source: U.S. Department of Commerce, National Institute of Standards and Technology. 133.   Source: U.S. Department of Commerce. Figures are for funds appropriated for grants in FY 1991. 134.   There is evidence, however, that extension activities have conflicted with the demands of topflight scientific research. The decentralized, extensive, and "user-friendly" structure of the agricultural research and extension services has made it difficult for federal policymakers to redirect and improve the quality of agricultural research, especially in cutting-edge areas such as biotechnology. An integrated research and extension organization in agriculture may have important costs, therefore, as well as some important advantages. 135.   Mowery, "The Diffusion of New Manufacturing Technologies," 498. 136.   See Gerald P. Dineen, "Trends in International Technological Cooperation," in Globalization of Technology: International Perspectives , Proceedings from the Sixth Convocation of the Council of Academies of Engineering and Technological Sciences (Washington, D.C.: National Academy Press, 1988). 137.   David C. Mowery and Richard M. Cyert, eds., Technology and Employment: Innovation and Growth in the U.S. Economy (Washington, D.C.: National Academy Press, 1987), 43. 138.   Ken Flamm, "The Changing Pattern of Industrial Robot Use," in The Impact of Technological Change on Employment and Economic Growth , eds. R. M. Cyert and D. C. Mowery (Cambridge, Mass.: Ballinger, 1988).

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The Government Role in Civilian Technology: Building a New Alliance 3 A New Strategy to Facilitate Government Support of Technology This report has examined the changing environment for research and technology development, with particular emphasis on the role and responsibility of the federal government in R&D and technology policy. In addition, the previous chapters provide an assessment of the strengths and weaknesses in current federal programs to assist industry in civilian technology development, transfer, and adoption. As we have seen, the economic and technological environment in which private firms develop and commercialize new technologies has been altered in a fundamental manner since World War II. Over the past 25 years, the world economy has changed dramatically. It is characterized by improved communication systems, the international flow of capital and trade, the rapid diffusion of information and technology across national borders, and advances in technology utilization. All of these factors have improved the capacities of firms outside the United States to commercialize products and services. The United States continues to exhibit great strength in technology, especially in the generation of new and innovative products and processes. U.S. performance in technology commercialization, however, is being challenged more strongly than ever before as a result of improvements in the capabilities of foreign firms. We believe, therefore, that the federal government needs to promote a higher rate of technological performance in the United States. We should build on the nation’s strengths in research and advanced technology. It is sensible and appropriate to capitalize on U.S.