Mastering a New Role: Shaping Technology Policy for National Economic Performance (1993)

Increasing both the productivity and the growth rate of the U.S. economy are priority national goals. The performance of the nation's technology enterprise—its collective capacity for creating, developing, and deploying new technology—is a key factor in the attainment of these goals. The principal challenge facing the U.S. technology enterprise is to work with other elements of the national economy to improve U.S. economic performance. The burden of meeting this challenge lies primarily with private companies operating in competitive markets. However, both state and federal governments must contribute significantly to this mission by stimulating more effective development and use of technology throughout the economy.

This report describes the demands placed on the U.S. technology enterprise as a consequence of changes in the global economy. It proposes a national technology strategy explicitly aimed at advancing national economic development and recommends policies to pursue that strategy.

The competitive environment for U.S.-based companies is being recast by a number of powerful trends:

• The technical intensity of most manufacturing and service industries will continue to grow at an accelerating pace, and commercial technology will become increasingly science-based and interdisciplinary (Chapter 2, pp. 29–31).

• National security's claims on the U.S. technology base will continue to diminish, and national defense capability will become increasingly dependent on technologies developed and applied first in the commercial sphere (Chapter 2, pp. 52–54).

• The current revolution in production systems will continue to transform product and service companies and bring a new level of attention to the optimal use of human talents in the workplace (Chapter 2, pp. 31–40).

• International competition will continue to intensify as world industrial and technological capability becomes increasingly distributed among industrialized nations (Chapter 2, pp. 40–44).

• Local and regional clusters of industrial activity—and their associated human, material, and institutional capabilities—will continue to play a major role in national economic performance and exert a countervailing force to rapid internationalization (Chapter 2, pp. 37–40).

• Internationalization of economic and technological activity will, however, continue, deepening the interdependence of national economies and blurring the distinction between the domestic and foreign policies of nations (Chapter 2, pp. 44–52).

These trends reveal weaknesses in the U.S. technology enterprise that compromise the nation's ability to develop, acquire, and use technology to economic advantage. The most important of these weaknesses are

• Outmoded public- and private-sector management philosophies, organizational frameworks, and human resource strategies (Chapter 3, pp. 69–71).

• Insufficient investment in, and poor quality of, U.S. work force training and continuing education, particularly at the nonsupervisory level (Chapter 3, pp. 71–74).

• Inadequate investment by U.S.-based companies in competitive production processes, plant, and equipment (Chapter 3, pp. 74–76).

• Low civilian R&D intensity of U.S. economic activity and the insufficient breadth of the nation's civilian R&D portfolio, including underinvestment in growth- and productivity-enhancing technologies that are high-risk or whose benefits are difficult for individual investors to appropriate (Chapter 3, pp. 76–80).

• Insufficient awareness of, and interest in, technology originating outside their institutional boundaries on the part of many U.S. companies and federal laboratories (Chapter 3, pp. 80–83).

• Lack of a strong institutional structure for federal technology policy in support of economic development and the segregation of technology policy from domestic and foreign economic policy at the federal level (Chapter 1, pp. 18–20, and Chapter 3, pp. 83–84).

These challenges demand a combined response from the public and private sectors that is more aggressive, coherent, and broadly dispersed

across economic sectors than has been the case in the United States in recent decades. If the country is to reverse its recent competitive decline, it must integrate technology policy with domestic and international economic policy more directly while creating working relationships between government and the private sector. Public technology policies for economic development should be shaped by market forces and should enlist market mechanisms and the capabilities of the private sector to the greatest extent possible. Given the difficulty of the task, and the federal government's relative inexperience in technology policies designed explicitly to foster national economic growth, the U.S. approach to technology policy in this arena should be one of aggressive experimentation and continuous learning. This report identifies four specific goals and makes recommendations for the active pursuit of those goals.

The committee recommends that the federal government focus the nation's effort to (1) improve business practices that drive the development and application of technology, and (2) increase the scope and effectiveness of the nation's investment in its nonsupervisory work force (Chapter 4, pp. 94–97).

If the United States is to remain a leader in the development and commercialization of new product and process technologies, it must take immediate steps to increase civilian R&D investment (business-funded R&D in particular) in the nation's economy. U.S. companies must expand the scope of their R&D activities in areas downstream from proof-of-concept and integrate R&D with design, production engineering, production, and distribution. In addition, the nation must move to bridge widely acknowledged gaps in the development of growth- and productivity-enhancing technologies. Such technologies often fail to attract adequate private-sector investment because they are high in technical risk or their resulting benefits are widely diffused and difficult for individual investing firms to appropriate. These include high technical risk ''pathbreaking" technologies that create new industries or transform existing industries, and low technical risk, difficult-to-appropriate, "infrastructural" technologies that enhance the performance of a broad spectrum of firms or industries.

For these reasons, the committee recommends that the federal government, building on the lessons of recent policy experiments, take the following actions (Chapter 4, pp. 97–99):

All too many U.S.-based firms remain insufficiently aware of, and alert to, the threats and opportunities presented by foreign technical capabilities. This deficiency is compounded by a lack of coordination between technology policy and foreign economic policy.

Therefore, the committee recommends three policy actions. All three are consistent with the objectives of an open world trading system and current U.S. obligations under international treaties and agreements (Chapter 4, pp. 99–101):

The federal government's response to the technology and competitiveness challenges facing the nation's economy and its civilian technology enterprise has been poorly coordinated and inadequate to the task. Although many existing federal programs have been judged successful, they are limited and do not serve as a basis for learning by experience.

To create a strong institutional framework for federal technology policy in support of national economic development, the committee recommends that Congress and the administration take the following action (Chapter 4, pp. 101-103):

Whether it resides in an existing or a newly created agency or department, this new institutional focus should have a leadership role in the highly decentralized federal technology policy apparatus. In addition to any specific programs it may undertake, this new institutional focus should

• Develop and articulate an internally consistent national techno-economic strategy for the benefit of the United States.

• Monitor transnational public and private technology alliances to develop reliable methods of evaluating the benefits and costs of such alliances.

• Analyze the effects of differences in business practices among countries and their consequences for the competitive performance of U.S. companies, industries, and workers, and develop recommendations for (1) unilateral changes in U.S. practices and (2) changes to be negotiated in the practices of other countries to level the competitive playing field.

• Promote the coordination of trade policy, foreign investment policy, macroeconomic policy, tax policy, public-sector procurement, regulatory policy, work force training, technology extension, public technology investment selection, and other elements of U.S. economic and technology policy.