Executive Summary

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.

TRENDS AND CHALLENGES

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).



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Executive Summary 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. TRENDS AND CHALLENGES 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).

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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). GOALS AND POLICY RECOMMENDATIONS These challenges demand a combined response from the public and private sectors that is more aggressive, coherent, and broadly dispersed

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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. Goal: Foster the timely adoption and effective use of commercially valuable technology throughout the U.S. economy. 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). RECOMMENDATION 1: Catalyze the development of a dense national network of public and private providers of industrial modernization services that is capable of meeting the diverse needs, including training, of 20–25 percent of the nation's small and medium-sized manufacturing companies by the year 2000. Expand the National Institute of Standards and Technology's Manufacturing Technology Centers program and State Technology Extension Program as a first step toward this objective. RECOMMENDATION 2: Support experimentation with a wide range of public and private initiatives at the federal, state, and local levels to increase the quantity and improve the quality of school-to-work transition programs and of job-related training and continuing education for the nation's nonsupervisory work force. RECOMMENDATION 3: Establish a high-prestige national fellowship program, to be administered by the National Science Foundation, for advanced study of the technical and organizational aspects of manufacturing. Structure the program not only for university graduate students and faculty but also for practitioners from industry.

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Goal: Increase civilian R&D investment in the U.S. economy and close emerging gaps in the nation's civilian technology portfolio. 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): RECOMMENDATION 4: Replace the incremental Research and Experimentation (R&E) Tax Credit with a permanent tax credit on the total annual R&D expenditures of a company. Extend the R&E tax credit to cover industry-sponsored R&D in universities and other institutions, and the industrial contribution to R&D performed as part of a consortium that involves government laboratories. RECOMMENDATION 5: Use public procurement, tax credits, accelerated depreciation schedules, regulation, and other demand-oriented policy instruments to pull innovation and increased private-sector investments in technologies expected to yield particularly high returns to U.S. society as a whole. These include technologies that produce environmentally benign and energy-efficient products and services and technologies that reduce the cost of health-care delivery. RECOMMENDATION 6: Experiment aggressively with options for direct federal support of the development and diffusion of a broad portfolio of commercially relevant or promising "infrastructural" and "pathbreaking" technologies. Rely on industry leadership and involvement in project initiation and design, and on significant private-sector cost sharing to ensure commercial relevance. Options include expansion of the Advanced Technology Program and the Small Business Innovation Research program, support of additional private-sector managed industrial consortia like SEMATECH, creation of an independent federal Civilian Technology Corporation, and expansion of the measurement, standards, and testing activities of the National Institute of Standards and Technology.

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Goal: Access and exploit foreign technology and high-tech markets more effectively to advance the interests of U.S. citizens. 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): RECOMMENDATION 7: Stimulate the expansion and institutionalization of U.S. public- and private-sector capabilities for global technological scanning and benchmarking. Most of these activities should be carried out by industry associations or industrial consortia with some sharing of costs and planning responsibility with federal government agencies. RECOMMENDATION 8: Develop a capacity within the federal government for seeding and stimulating international R&D consortia (private-sector, public-sector, or mixed) in areas of recognized foreign technological strength where gains to U.S. participants are expected to be substantial. This is an important subset of the options for direct federal support of commercially promising "infrastructural" and "pathbreaking" technologies recommended above. RECOMMENDATION 9: Improve coordination and cooperation between federal agencies with lead responsibility for domestic and foreign economic policy and agencies with lead responsibility for science and technology policy by (1) rotating high-quality midlevel staff between these agencies, (2) establishing a technology and trade committee of the Federal Coordinating Council for Science, Engineering, and Technology, and (3) making the integration of technology policy with domestic and foreign economic policy an explicit objective of the newly created National Economic Council.

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Goal: Create a strong institutional framework for federal technology policy in support of national economic development, and integrate the planning and implementation of federal technology policy with that of national domestic and foreign economic policy. 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): RECOMMENDATION 10: Establish an institutional focus within the federal government to monitor, harness, and supplement the many existing federal programs and capabilities that currently support, or could support, more effective development, use, and diffusion of technology throughout the U.S. economy. This institutional focus should work for the early incorporation of technological considerations into the formulation and implementation of U.S. economic policy. 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.