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Series on PROSPERING IN A GLOBAL ECONOMY Mastering a New Role Shaping Technology Policy for National Economic Performance Committee on Technology Policy Options in a Global Economy NATIONAL ACADEMY OF ENGINEERING NATIONAL ACADEMY PRESS WASHINGTON, D.C. 1993
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NATIONAL ACADEMY PRESS 2101 Constitution Avenue, NW Washington, DC 20418 NOTICE: The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. This publication has been reviewed by a group other than the authors according to procedures approved by a National Academy of Engineering report review process. Partial funding for this effort was provided by the Alfred P. Sloan Foundation and the National Academy of Engineering Technology Agenda Program. Library of Congress Cataloging-in-Publication Data National Academy of Engineering. Committee on Technology Policy Options in a Global Economy. Mastering a new role : shaping technology policy for national economic performance/Committee on Technology Policy Options in a Global Economy, National Academy of Engineering. p. cm. — (Series on prospering in a global economy) Includes bibliographical references and index. ISBN 0-309-04646-7 1. Industry and state—United States. 2. High technology industries—Government policy—United States. I. Title. II. Series. HD3616.U47N24 1993 338.973—dc20 93-3912 CIP Copyright 1993 by the National Academy of Sciences. All rights reserved. Printed in the United States of America
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Committee on Technology Policy Options in a Global Economy HARVEY BROOKS, Cochairman, Professor of Technology and Public Policy, Emeritus, Harvard University JOHN S. FOSTER, JR., Cochairman, Chairman, Defense Science Board H. NORMAN ABRAMSON, Retired Executive Vice President, Southwest Research Institute JOHN A. ARMSTRONG, Vice President for Science and Technology, IBM Corporation ERICH BLOCH, Distinguished Fellow, Council on Competitiveness MICHAEL L. DERTOUZOS, Director, Laboratory for Computer Science, Massachusetts Institute of Technology BOB O. EVANS, Executive Vice President and Managing Partner, Technology Strategies & Alliances HAROLD K. FORSEN, Senior Vice President and Manager, Bechtel Technology Group, Bechtel Group, Inc. WILLIAM G. HOWARD, JR., Independent Consultant, Scottsdale, Arizona STEPHEN J. KLINE, Professor of Mechanical Engineering, Stanford University JAMES F. MATHIS, Chairman, New Jersey Commission on Science and Technology JOHN S. MAYO, President, AT&T Bell Laboratories M. EUGENE MERCHANT, Senior Consultant, Institute of Advanced Manufacturing Sciences JOSEPH E. ROWE, Associate Vice President for Research and Director, University of Dayton Research Institute
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ERNEST T. SMERDON, Dean of Engineering and Mines, University of Arizona ALBERTUS D. WELLIVER, Corporate Senior Vice President, Engineering and Technology, The Boeing Company NAE Staff PROCTOR P. REID, Study Director, Senior Program Officer PENELOPE J. GIBBS, Administrative Assistant MARGERY HARRIS, Administrative Secretary
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Preface In recent years the national debate about technology policy has revolved around the relative roles of government, industry, and universities; of science and technology; and of defense and nondefense agencies. Governmental, academic, and industrial institutions, at the heart of our nation's technological enterprise, are midstream in a profound and sometimes wrenching reexamination of their missions and responsibilities as they seek changed roles in a new and unfamiliar world—a world without a Cold War but with new levels of global economic integration and and technological interdependence. There is a widespread recognition that U.S. economic performance and national security are intimately tied to the nation's ability to adjust its government policies and private-sector practices to a world economy rapidly being changed by transborder flows of goods, services, technology, and capital. This report of a committee of members of the National Academy of Engineering addresses both goals for national technology policy and promising paths along which to pursue those goals. The report reaches back in time to World War II and examines the genesis of our nation's current policies. With that background, and bringing to bear some of the most recent experience and scholarship about how technology is used by successful companies to drive economic growth, the report argues that it is time for the U.S. government to master a new and unfamiliar role in helping the private economy develop and diffuse technology explicitly for purposes of enhanced economic performance. On behalf of the National Academy of Engineering, I would like to thank the cochairmen—John Foster and Harvey Brooks—and the other members of the committee (named on p. iii) for their considerable efforts on this
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project. In particular, I would also like to thank Proctor Reid, the study director, who managed the project and helped elicit consensus among the committee members. Alexander Flax, NAE senior fellow, and Bruce Guile, director of the NAE Program Office, provided their valuable insights to the committee and the study director over the course of the project. Kathryn Jackson, former NAE fellow, contributed to the committee's work during the early stages of project, and several members of the NAE Program Office, past and present, deserve thanks for their help, including Barbara Becker, Penelope Gibbs, Margery Harris, H. Dale Langford, and Annemarie Terraciano. Funding for this effort was provided by the Alfred P. Sloan Foundation and the National Academy of Engineering Technology Agenda Program. ROBERT M. WHITE President National Academy of Engineering
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Contents EXECUTIVE SUMMARY 1 Trends and challenges 1 Goals and policy actions 2 1 BACKGROUND: THE POSTWAR U.S. TECHNOLOGY ENTERPRISE 7 Four distinguishing characteristics of the U.S. technology enterprise 8 The postwar performance of the U.S. technology enterprise in perspective 20 2 THE CHANGING DEMANDS ON NATIONAL TECHNOLOGY POLICY AND STRATEGY 28 Rising technical intensity and the revolution in production systems 29 Toward a technologically multipolar and interdependent world 40 The geopolitical premium on economic strength 52 Conclusion: Weaknesses exposed 55 3 STRENGTHS AND WEAKNESSES OF THE U.S. TECHNOLOGY ENTERPRISE 61 Strengths of the U.S. technology enterprise 61 Weaknesses of the U.S. technology enterprise 67 Conclusion: The need for change 84
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4 A NEW MISSION FOR U.S. TECHNOLOGY 91 Underlying trends and resulting challenges 92 Four goals of a new national technology strategy 93 Recommended policy actions 94 REFERENCES 110 BIOGRAPHICAL INFORMATION ABOUT THE COMMITTEE 122 INDEX 129
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Figures and Tables Figures 1.1 Scientists and engineers engaged in R&D per 10,000 labor force, by country: 1965 and 1989 12 1.2 National shares of world high-tech production and trade, by country: 1970 21 2.1 Rate of issuance of design changes, patterns of U.S. and Japanese auto manufacturers 38 2.2 National R&D expenditures, by country: 1964–1990 41 2.3 Nondefense R&D expenditures as a percentage of gross national product, by country: 1971–1990 42 2.4 Trends in employment of scientists and engineers in R&D, by country: 1965–1989 43 2.5 Shares of global market for high-tech manufactures: 1980, 1987, 1990 45 2.6 Growth in world trade, output, domestic investment, and foreign direct investment: 1975–1991 46 2.7 Ratio of imported to domestic sourcing of inputs, average of manufacturing goods, by country 51 2.8 Number of new transnational corporate technology alliances, by industry: 1980–1989 52 3.1 Basic research expenditures, by country: 1988 62 3.2 Home market share of world consumption of high-tech products: 1988 64 3.3 Distribution of U.S. private-sector expenditure on formal training 73 3.4 Private industry expenditure on plant and equipment as a percentage of gross domestic product: 1972–1990 75
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Tables 1.1 Federal Government Role in the U.S. R&D Enterprise, Shares in Percent 10 1.2 Support for U.S. Academic R&D, Percent Shares by Sector: 1960–1991 11 1.3 National Security's Contribution to the U.S. R&D Portfolio, Shares in Percent 13 2.1 Changing Organizational Patterns in U.S. Industry 33 2.2 Use of New Technology in Manufacturing, Japan and the United States: 1988 39 2.3 Import Share of Domestic Market for High-Tech Manufactures, by Country: 1980, 1986, 1990 46 2.4 Foreign-Controlled Firms' Share of Total Business Enterprise R&D Expenditure, Employment, and Product Shipments in Manufacturing Enterprises in Six Countries 47 2.5 Measures of the Proportion of Foreign Direct Investment in the U.S. Economy 48 3.1 U.S. Competitive Position in Critical Technologies 79 3.2 Government R&D Support by Socioeconomic Objective, by Country: 1989 81 3.3 International Patent and License Transactions, Selected Countries: 1990 83
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Mastering a New Role
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