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4 Foreign Participation in Publicly Funded U.S. R&D The past 10 to 15 years have also witnessed the growth of foreign involve- ment in publicly supported U.S. R&D activities at U.S. universities and federal laboratories.) This trend is less well documented than is the growth of foreign participation in privately funded U.S. R&D, and it has stimulated intense contro- versy. This is because these institutions, the two main pillars of the nation's publicly funded basic research enterprise and a unique source of national com- petitive advantage, are viewed as particularly vulnerable to foreign exploitation. At a time when many elements of the nation's innovation system are per- ceived to be faltering in the face of increasing global competition, publicly funded U.S. basic research capabilities remain internationally preeminent. This is par- ticularly true of those resident in the nation's academic institutions. In an effort to capitalize on this strength, the federal government is trying to enlist the re- search assets of universities and federal laboratories to bolster the competitive- ness of U.S.-based companies in world markets. However, the internationaliza- tion of U.S. industry and the general openness of the nation's basic research enterprise have heightened concerns about losing government-funded intellectual property and its associated economic value to foreign entities. The strength of the U.S. basic research enterprise is due primarily to its scale, its highly decentralized and pluralistic structure (i.e., multiple institutional play- ers with different research agendas), and its openness to the free flow of ideas and talent from throughout the world. Underlying these sources of strength is the fact that most basic research is conducted in publicly funded, noncommercial institu- tions with reward systems that provide powerful incentives for researchers to share rapidly and widely the results of their research. Ironically, these very 90
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PUBLICLY FUNDED R&D 91 sources of strength make the U.S. basic research enterprise relatively easy for foreign nationals to access and exploit (National Academy of Engineering, 1993~. To date, three concerns have driven debate and policy on foreign involve- ment in publicly supported U.S. R&D, whether conducted by foreign firms, gov- ernments, academic institutions, or individual researchers. First, the United States may not receive an adequate quid pro quo for allowing various foreign entities to participate in publicly funded U.S. R&D. Second, some foreign governments appear to deny U.S. researchers reciprocal access to comparable publicly funded research within their borders. Third, some foreign countries do not appear to carry their fair share of the global basic research burden. Faced with these con- cerns, the American public and the Congress have become increasingly willing to restrict foreign access to U.S. government-supported research. This chapter examines the scope and nature of foreign participation in three areas of publicly funded R&D activity: research universities, federal laborato- ries, and federally funded industrial R&D programs and industry-led consortia. It concludes with an assessment of the costs and benefits of this participation. UNIVERSITY-BASED RESEARCH The primary locus of foreign participation in U.S. publicly funded research and development has been the nation's academic research enterprise home to roughly half of the nation's basic research activity. In 1994, American universi- ties and colleges are estimated to have performed $21 billion worth of research and development, or roughly 12 percent of total U.S. R&D performed that year. Also in 1994, academic institutions performed more than 48 percent of all basic research, 13 percent of all applied research, but less than 2 percent of all develop- ment work conducted in the United States. Sixty percent of all academic R&D conducted in 1994 was paid for by the federal government (National Science Foundation, l995b). Foreign entities establish ties with U.S. universities for many reasons. For- eign students, visiting scholars, and company researchers are drawn to U.S. re- search universities to learn about some of the most advanced and creative re- search methods in the world. Foreign governments, companies, and nonprofit institutions establish ties with research universities to gain timely access to new knowledge and technology in particular fields or to engage university-based re- searchers in the solution of particular technical problems. Foreign firms license technology generated and owned by U.S. universities, and their U.S. affiliates look to U.S. research universities for highly trained science and engineering tal- ent.2 Often, foreign firms look upon their investments in U.S. research universi- ties as a way to build goodwill and enhance their reputations in the U.S. research community.3 At the same time, several related factors have encouraged U.S. research uni- versities to solicit more foreign participation in recent years. The nation's indig-
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92 FOREIGN PARTICIPATION IN U.S. RESEARCH ED DEVELOPMENT enous supply of advanced degree students, postdoctoral researchers, and faculty in science and engineering has fallen behind demand, forcing universities to turn increasingly to foreign talent to make up the shortfall. Similarly, the failure of federal R&D budgets to keep pace with the rising fiscal demands of research universities has encouraged these institutions to seek other patrons and clients, including foreigners. Finally, rapid growth in the scope, quality, and accessibility of foreign-based science and engineering capabilities has encouraged U.S.-based academic researchers to seek out foreign collaborators in many fields. Foreign participation in U.S. academic R&D has manifested itself in mul- tiple ways in recent years. These include: · The involvement of foreign students, postgraduates, and visiting scholars and researchers from foreign firms in university research activities; . Collaborations between foreign academic institutions/researchers and their U.S.-based counterparts; · Sponsored and open-ended underwriting of university research by foreign governments, foreign corporations and their U.S. subsidiaries, and foreign non- ~. . . profit Institutions; · The cooperative activities of foreign corporate laboratories operating near U.S. research universities: · Foreign support for the construction of buildings, purchase of equipment, and other in-kind contributions; and · The hiring of U.S. faculty as consultants or advisors to foreign corpora- tions and governments. Foreign Students, Researchers, and Faculty One measure of expanding foreign participation in U.S. university research and development has been the growing dependence of these institutions on for- eign-born graduate students, postdoctoral researchers, and faculty. In 1980, non- U.S. citizens accounted for 12.8 percent of graduate enrollments in U.S. science and engineering fields, 21 percent of all science and engineering doctorate recipi- ents, and a third of all postdoctoral researchers in science and engineering fields at U.S. universities. By 1991, non-U.S. citizens accounted for 23 percent of enrollments, 37 percent of doctorates, and more than half of postdocs working in science and engineering fields (Figure 4.1) (National Science Foundation, 1993a). U.S. engineering schools are particularly dependent on foreign talent (Figure 4.2~. As of 1991, 47 percent of all graduate students, 59 percent of all doctorate recipients, and 69 percent of all university-based postdoctoral researchers in en- gineering were non-U.S. citizens. The extent of foreign participation at the gradu- ate level varies among engineering fields, with significantly more participation in petroleum, mining, and agricultural engineering, and significantly less in aero- space and biomedical engineering, and in engineering science (Figure 4.3~.
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PUBLICLY FUNDED R&D 100 - 90 - 80 - 70 - O 60- o a) a) 50 - 40 - 30 - 20 - 10 - _ — ~ - O— 1980 1 982 Postdocs Doctorate recipients — Graduate students ,~_ _- 1 1 1 1 1 1 1 1 1 1 1 1984 1986 1988 1990 93 FIGURE 4.1 Foreign postdocs, doctorate recipients, and graduate students in science and engineering fields, 1980 through 1991. SOURCE: National Science Foundation (1993a). 100 - 90 - 80 - 70 - 60 - , o ~ 50- ,,-- a' a) 40 - 30 - 20 - 1 n - - Jr Or Of - Postdocs Doctorate recipients Graduate students 1980 1 982 1984 1986 1988 1990 FIGURE 4.2 Foreign postdocs, doctorate recipients, and graduate students in engineer- ing, 1980 through 1991. SOURCE: National Science Foundation (1993a).
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94 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT Engineering (total) Petroleum ~ a Mining Agricultural Chemical Industrial Metallurgical/Material Electrical Mechanical Nuclear Civil Engineering Science Aerospace Biomedical Engineering (NEC*) * NEC = not elsewhere classified ~~ ~ ~ ~ ~ ~S~: ,~ ~~:~ S ~ ; ~ ; ~~ ~ ~ ~ ~ S~:~ T.~?? · S~ T~ ~ S ~ ~ ~ ~ ~~. , ~ - . . ~T~ ~ ~ ~~ ~S~ ~ .~ ~~ at. . . ~~ ~ ~~ S?.:~ ?:~i~: ITS,, ~ ~ ~~ ~~ ~ ~ ~~ _ . _ _ _ ~ ~ ~ ~ ~ _ ~ ~ ~ i~ _. .~ .. ~? ~ ~ ~~: S: S: Si S.~.~S ~ .. i- /- ~\ S~ S~ ~ ______ ~ 4 ~ i i. ~S ~ i. T ~ . ~~ ~ ~ ~ ~- ~ ~ ~ T? ST ~ i~ -: ~~: -hi- i-- --; ~ ~ 1 1 1 1 1 1 1 [A 1 983 C] 1 990 · 1 991 0 10 20 30 40 50 60 70 80 FIGURE 4.3 Non-U.S. citizens enrolled full-time in graduate engineering programs, percent of total enrollees by field of study, 1983, 1990, and 1991. SOURCE: National Science Foundation (1993a). During the past 15 years, U.S. engineering faculties have experienced similar growth in the level of foreign involvement. In 1975, only 10 percent of engineer- ing faculty under 36 years of age were from other countries. In 1985, the latest year for which data are available, the foreign-born share stood at 50 percent (Na- tional Research Council, 1988~.4 The sudden rise in foreign graduate enrollment, postdoctoral research, and faculty employment is a function of three inter-related developments: the rapid growth of university research activities during the past decade and the resulting increase in demand for research personnel; a rapid increase in American industry's
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PUBLICLY FUNDED R&D 95 demand for science and engineering graduates, mostly those with B.S. degrees; and an absolute decline in the number of U.S.-born science and engineering stu- dents who pursue advanced engineering degrees or academic careers (National Research Council, 1988~. In contrast to the well-documented situation with foreign students, post- doctoral researchers, and resident faculty, little is known about the number, re- search focus, or duration of stay of foreign researchers visiting U.S. universities. Because most U.S. universities are highly decentralized, they do not keep tabs on foreign visitors, unless these individuals have an appointment at the host univer- sity or require contact with the federal government. In 1991, for example, the Massachusetts Institute of Technology (MIT) reported hosting 1,250 foreign scholars, "including professors, visiting scientists and engineers, post-does, re- search affiliates and others" on campus, of whom 91 were paid fully or partially by foreign industrial firms (Massachusetts Institute of Technology, 19911.5 Collaboration between Foreign and U.S. Academic Researchers Another dimension of deepening foreign involvement in U.S. academic re- search is the increase in research collaboration between U.S. academic research- ers and their counterparts abroad in many science and engineering fields. One measure of this growth is the number of journal citations that include the names of both U.S. and foreign researchers (Figure 4.41. Between 1980 and 1991, the share of scientific and technical articles with international coauthorship more than doubled, from 5.2 percent to 11.0 percent. Papers in the earth and space sciences, mathematics, and physics were more likely than those in other fields to exhibit coauthorship. Although no national data are collected on the extent of research collabora- tion between U.S. universities or university-based research centers and their coun- terparts overseas, anecdotal evidence suggests an increase in such linkages (Godfrey, 1991~. For example, in testimony at a December 1993 National Acad- emy of Engineering workshop on the flat panel display industry, Jay William Doane, director of the Liquid Crystal Institute at Kent State University, under- lined the importance of his institution's research collaboration with the Univer- sity of Stuttgart, Tokyo University of Agriculture and Technology, and the Slov- enian J. Stefan Institute to active matrix display research and development.6 Foreign Funding of U.S. University Research Between 1975 and 1994, the share of university research funded by the fed- eral government fell from 67 to 60 percent and that supported by state and local governments decreased from 10 to 8 percent. Over the same period, industry more than doubled its contributions to academic research, from 3 to 7 percent of the total; the share of academic research supported by nonprofit institutions re-
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96 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT 20 - 15 - 10 - 5- O- Mathematics Earth and space sciences '~'x: " \~? ,/~ - _ _ — .' )~- _-- _~- < Life sciences \ ~ I - ,"' ..* , _ .~-- __ Engineering and technbology 4v .. fib - . i. e`' Be, or 4L Physics .~ · ,~ _ I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Chemistry 1976 1981 1986 1991 FIGURE 4.4 Internationally coauthored articles as a percent of all articles, by science and engineering field, 1976 through 1991. SOURCE: National Science Board (1993~. mained virtually unchanged, between 7 and 8 percent, while the contributions by universities themselves increased from 12 to 18 percent (Table 4.1~. Within the context of these shifts, foreign governments, nonprofit institutions, and compa- nies have begun to play a small role in underwriting U.S. academic R&D. Data on foreign funding of U.S. university-based research are scant and dated. Although some public institutions are required by state law to report the receipt of foreign funds, most do not differentiate support obtained from domestic versus foreign sources. Factors that contribute to the haphazard tracking of foreign fi-
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PUBLICLY FUNDED R&D TABLE 4-1 Support for U.S. Academic R&D, Percent by Contributing Sector, 1975, 1980, 1985, 1990, and 1994 1975 1980 1985 1990 1994 Federal government 67.1 67.5 62.6 59.2 60.1 State and local governments 9.7 8.2 7.8 8.1 7.6 Industry 3.3 3.9 5.8 6.9 6.9 Academic institutions 12.2 13.8 16.7 18.5 17.9 All other sources 7.6 6.6 7.2 7.3 7.4 NOTE: Columns do not necessarily total to 100 due to rounding. SOURCE: National Science Board (1993) and data from the National Science Foundation Science Resource Series, National Patterns of R&D Resources series, accessed via the World Wide Web. 97 nancial support include the lack of uniform university accounting procedures, the multiplicity of funding sources and channels, and the decentralized nature of ex- changes between donors and a broad spectrum of university offices, departments, and individual researchers. According to the most recently published survey, foreign-sponsored research stood at $74.3 million in fiscal 1986, or roughly 1 percent of total university R&D expenditures (U.S. General Accounting Office, 1988a).7 An informal inquiry by the National Science Foundation (NSF) found that foreign support of university R&D had not changed as of fiscal 1988 (National Science Foundation, 1990c).8 More recent data collected from leading research universities by the study com- mittee suggest that the foreign share of academic research funding has not grown appreciably since the GAO survey was conducted (Table 4.2~. Also in fiscal 1986, more than half of foreign funds for U.S. academic R&D were concentrated in five institutions: Texas A&M University, Harvard Univer- sity, MIT, Oregon State University, and the University of Wisconsin. Foreign support ranged from 1 to 9 percent of total R&D expenditures at these institutions and averaged 4 percent. In fiscal 1988, three top-20 research universities, Texas A&M, the University of Michigan, and Harvard, reported receiving more than 2 percent of their research funding from foreign sources (National Science Founda- tion, 1990c). Another nine top-20 institutions received between 1 and 2 percent of their research funding from foreign sources. Six years later, in fiscal 1994, the foreign share of total sponsored research at most of the nation's top research universities had not changed significantly.9 In fiscal year 1986, Japanese entities sponsored more university-based R&D in the United States ($9.5 million) than did those of any other foreign country, although the United Kingdom and Germany were also major contributors to U.S. academic research (U.S. General Accounting Office, 1988a). That year, foreign funding of U.S. academic R&D was concentrated in a relatively small number of universities (Table 4.3~.
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PUBLICLY FUNDED R&D 99 Three fields geology ($16.4 million), agriculture ($11.5 million), and medicine ($8.4 million) accounted for nearly half of all foreign support for U.S. academic R&D in fiscal 1986 (Table 4.4). There were very few similarities in either the research fields funded or the source of foreign support among the top five recipient institutions. An international ocean-drilling research program funded in part by NSF at Texas A&M University received 93 percent of all for- eign support directed to U.S. university-based geology research. Four universi- ties accounted for nearly 80 percent of all foreign-funded research in agriculture, most of which focused on the agricultural research needs of developing countries (U.S. General Accounting Office, 1988a). In fiscal 1986, a little more than a third of all foreign funds for university research came from businesses; the remaining two-thirds came from foreign gov- ernments and nonprofit organizations. Of the top five U.S. recipients of foreign R&D funding, Texas A&M, Harvard, and Oregon State received the majority of such support from governments and nonprofit institutions (99 percent, 95 per- cent, and 78 percent, respectively). In contrast, nearly all foreign support of research at MIT and the University of Wisconsin came from private companies (98 and 89 percent, respectively). Indeed, foreign firms accounted for more than half of all foreign R&D funding at 13 of the top 20 U.S. research universities in fiscal 1986 (Table 4.5~. Foreign Corporate Participation in U.S. Academic R&D The most controversial aspect of foreign involvement in U.S. university R&D centers on the participation of foreign corporations and their U.S. subsidiaries. This is because foreign firms unlike foreign governments, nonprofit institutions, and academic researchers are well equipped to acquire and apply commercially valuable outputs of publicly funded U.S. academic research, thereby appropriat- ing a significant share of their associated economic returns.~° There are five major ways foreign corporations can participate in U.S. uni- versity-based R&D: through company-sponsored research, either in the form of contracts or grants; by working with university patent and technology licensing offices; via university industrial liaison or affiliates' programs; by involvement in university-industry research centers; and through activities in formal or de facto industrial technology parks located near prominent U.S. research universities. Data on the current magnitude, disciplinary focus, and national shares of foreign sponsored research at individual U.S. universities and federal laboratories are fragmentary. Limited survey data (National Research Council, 1994a; Rob- erts, 1995a) and anecdotal evidence indicate that Japanese companies are more diligent than their U.S. or European counterparts with regard to accessing, moni- toring, and drawing upon the research capabilities of these publicly funded insti- tutions.
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PUBLICLY FUNDED R&D 129 what the Japanese classify as basic research is, in fact, more application oriented and proprietary in character than similar research conducted by other advanced industrial economies. Moreover, many believe that the most important basic re- search in Japan takes place within closed corporate laboratories rather than in the more open and accessible publicly supported research institutions (Hicks, 1994; Hicks and Hirooka, 1992~. SUMMARY The participation of foreign individuals and institutions in publicly funded R&D activity in the United States appears to be extensive and growing. Govern- ment surveys of the number of foreign graduate students, postdoctoral research- ers, and other visiting researchers at U.S. universities and federal laboratories document a significant increase in the level of foreign involvement since the mid- 1970s. At the same time, meaningful data on the scope, growth, and nature of foreign institutions' involvement in publicly funded U.S. R&D are fragmentary, dated, and scarce. Available information suggests that foreign institutions account for a very small share (less than 2 percent) of total sponsored research at U.S. universities and federal laboratories, which is concentrated in a small number of U.S. institu- tions. As of the mid-1980s, Japanese institutions sponsored more U.S. univer- sity-based R&D than firms of any other nationality. During this period, most foreign-sponsored research at U.S. universities was funded by not-for-profit in- stitutions and was focused mostly in agriculture, medicine, and geology. Only fragmentary data exist with which to assess the current magnitude, disciplinary focus, and national shares of foreign-sponsored research at individual U.S. uni- versities and federal laboratories. However, limited survey data and anecdotal evidence indicate that Japanese companies are more diligent than their U.S. or European counterparts with regard to accessing, monitoring, and drawing upon the research capabilities of these publicly funded institutions. Foreign participa- tion has been minimal in recently established, federally supported industrial R&D initiatives, such as the Department of Commerce's Advanced Technology Pro- gram. As with U.S. privately funded R&D, the involvement of foreign nationals in R&D sponsored by the federal government carries both risks and opportunities for the United States. The committee believes that the extensive presence of foreign graduate students, postdoctoral researchers, and other long-term foreign visiting researchers at U.S. universities and federal laboratories has, on balance, yielded significant benefits to the U.S. economy and its innovation system. In contrast, the committee believes that short-term visiting researchers have contrib- uted much less to the work of U.S. research universities and federal laboratories, both overall and relative to what the researchers themselves take away. Although the committee could identify various costs and benefits of foreign
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130 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT institutional involvement in U.S. publicly supported research institutions, it was unable to determine the economic impact of this involvement. Through their participation in the research activities of U.S. universities and federal laborato- ries, foreign corporate participants undoubtedly extract more knowledge and in- tellectual property from the United States than they would in the absence of such ties. Likewise, the committee does not doubt that access to U.S. publicly funded R&D activities and institutions has brought extensive benefits to foreign-owned firms and their stakeholders abroad, in some cases at the expense of American firms and their American stakeholders. Nevertheless, there is also considerable evidence to confirm that foreign firms have contributed significant material support, technology, and intellectual re- sources to research universities and federal laboratories. Indeed, many if not most foreign-owned companies that have extensive ties to U.S. publicly funded research institutions appear to be good corporate citizens. For instance, they establish U.S.-based manufacturing and R&D operations that employ Americans, pay U.S. taxes, buy from U.S.-based suppliers and vendors, and import as well as develop technology and know-how that is then applied in this country. U.S. research universities and federal laboratories, in the committee's judg- ment, have generally made good-faith efforts to comply with federally mandated economic performance requirements for foreign company participation in U.S. publicly funded research. Foreign-owned companies are for the most part "cus- tomers of last resort" for U.S. government-subsidized intellectual property. However, the highly restrictive and somewhat inconsistent enforcement of these requirements by some federal agencies has raised questions about how well these requirements serve agency missions specifically and national interests more gen- erally in the increasingly global economy. Aside from this general bias against multinational companies (both U.S. and foreign-owned), the performance require- ments and their underlying political-economic logic serve as a disincentive to potential foreign-owned participants in publicly funded U.S. R&D activity. With regard to mandated reciprocity requirements, it appears that federal agencies have yet to develop effective and credible procedures for establishing compliance or noncompliance. Indeed, in conception as well as implementation, reciprocity requirements appear to be fraught with significant short- and long- term liabilities and hazards for the United States. U.S. government, academic, and industrial researchers seem to have few problems accessing publicly funded research capabilities and activities in aca- demic and government-operated laboratories abroad. Furthermore, access by U.S.-owned companies to government-funded industrial research consortia in Europe appears to be comparable to that extended foreign-owned firms in the United States. Japan, however, has restricted foreign participation in its publicly funded industrial R&D consortia to a greater extent than either the United States or the European Community through its closed, strategic process of project and participant selection.
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PUBLICLY FUNDED R&D 131 Given differences in the organization, scale, and sophistication of publicly funded R&D activities among countries, the value to Americans of greater access to publicly funded foreign R&D is not clear. Nevertheless, lack of reciprocal access may have damaging results. In some cases, it may disadvantage U.S.- owned firms in international competition, with negative consequences for their U.S.-based stakeholders. But its greatest cost to the nation may be the extent to which it offends the American public's sense of fairness, thereby undermining public support for efforts to negotiate remedies to these asymmetries in interna- tional forums. International comparisons of R&D expenditures confirm that most of Amer- ica's advanced industrialized trading partners invest as much if not more of their gross national product in basic research than does the United States. Japan, de- spite recent efforts to expand its basic research capabilities, spends a smaller share of its gross domestic product and only about half as much per capita in this area compared with the United States. The committee believes strongly that the federal government should continue to encourage Japan to assume a role in the global basic research community that is commensurate with its industrial, techno- logical, economic, and diplomatic standing in the world. NOTES 1. In 1994, public funds accounted for 36.1 percent of all R&D dollars invested in the United States 57.6 percent of all basic research funding, 36.6 percent of all applied research funding, and 29.7 percent of the nation's total investment in technology development (National Science Founda- tion, l995b). Data on the scope, composition, nature, and growth of foreign participation in U.S. publicly funded research is more scarce and fragmentary than those on foreign involvement in U.S. privately funded R&D. Accordingly, it is more difficult to assess its importance and consequences for the U.S. innovation system and national economy than foreign participation in U.S. privately funded R&D activity. 2. U.S. affiliates of foreign-owned firms employed 104,500 U.S. residents in R&D activity in 1992 (U.S. Department of Commerce, 1995). 3. For a discussion of the reasons foreign firms become involved in U.S. academic research, see National Science Board (1993), Serapio (1994), Stalson (1989), Massachusetts Institute of Technol- ogy (1991), and U.S. Congress, House (1993). It is instructive to compare the findings of the above-cited studies with those of a National Science Foundation (NSF) report (199Ob), which among other things reported on reasons why U.S. firms invest in academic research abroad. Based on informal inquiries to 21 U.S. multinational com- panies, accounting for more than half of U.S. overseas industrial R&D in 1988, NSF found that the principal reason these firms sponsored research at foreign universities was "to benefit from the work of individual scientists and engineers who are leading, world-renowned experts in their respective fields." The desire to foster goodwill and promote the company's reputation within the scientific community as well as the desire to take advantage of tax laws also were cited as important incentives. 4. These data probably overestimate the share of foreign-born engineering faculty, according to several experts, due to problems with the survey methods used and a lack of information on emigra- tion of foreign-born Ph.D's. 5. The University of Texas at Austin reported 181 international scholars in science and engineer-
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32 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT ing fields for fiscal 1993, roughly 10 percent funded by foreign companies; correspondence from Dale Klein, University of Texas at Austin, to Proctor Reid, NAE, March 17, 1995. 6. Remarks by J. William Doane at the National Academy of Engineering workshop on the flat panel display industry, Committee on Technological Innovation in Small Business, December 7, 1993; correspondence from Doane to Proctor Reid, NAE, March 31, 1995. 7. The U.S. General Accounting Office defined foreign sources as foreign governments and individuals, nonprofit organizations headquartered in a foreign country, businesses headquartered in a foreign country, U.S. subsidiaries of foreign corporations, and joint-venture businesses in which the foreign partner has a controlling interest (U.S. General Accounting Office, 1988a). 8. In 1990, the National Science Foundation Division of Science Resources Studies conducted an informal telephone inquiry into fiscal 1988 levels of foreign funding of U.S. academic research. Division staff contacted essentially the same population of universities that the General Accounting Office had surveyed in 1988. 9. The data collected by the NAE via an informal telephone inquiry looked at foreign-sponsored research as a share of total sponsored research (not total R&D expenditures) at the institutions can- vassed. Not all of the institutions approached were able to distinguish readily between research spon- sored by foreign organizations and that sponsored by U.S. organizations. Moreover, tracking and ac- counting procedures with regard to sponsored research appear to vary significantly among institutions. Representatives from several institutions contacted by the NAE noted that the volume of for- eign awards received can fluctuate, in some cases significantly, from one year to the next. Neverthe- less, multiyear data provided by several of the top 20 research universities show that the foreign share of total sponsored research averaged over 3 to 5 fiscal years (FY) was very close to its present share for the single-FY estimate provided in Table 4.2 for FY 1993 or FY 1994. For example, the foreign share of total sponsored research at the University of Minnesota (FY 1992-94), Stanford and Penn State (FY 1989-93), and the University of Illinois-Urbana (FY 199~94) averaged 0.5 percent or less. At the University of California at Berkeley, the foreign share averaged 1.7 percent for the 5-year period, FY 1989-93. 10. This is not to say that the only, or even the most important, reason foreign-owned firms par- ticipate in U.S. university-based research is to acquire commercially valuable intellectual property. Available data suggest that much of the financial and other material "research" support provided to U.S. universities by foreign-owned companies takes the form of outright gifts and grants for which no specific deliverables other than "goodwill" are promised in return. Nevertheless, the fact that a grow- ing number of foreign-owned companies are availing themselves of the relatively free access to the intellectual assets and research activities resident at U.S. universities has led many American observ- ers to question whether the nation loses more than it gains from foreign corporate participation in the U.S. academic research enterprise. 1 1. For example, during the 1991-1992 academic year, Berkeley's College of Engineering hosted 17 visiting industrial fellows from Japanese companies that had provided between $2 and $3 million in research support, mostly in the form of grants or gifts. The fellows' salaries and expenses were paid by their companies. Those sent are typically engineers with M.S. degrees and 5 to 10 years experience in the company's R&D laboratory. (Personal communication between David Hodges, University of California at Berkeley, and William Spencer, SEMATECH, January 20, 1992.) 12. In 1989, Helena Stalson prepared a draft report for the National Academy of Engineering, "Foreign Participation in Engineering Research at U.S. Universities," which was based on interviews conducted at the following eight universities: Carnegie Mellon, Columbia, Cornell, Massachusetts Institute of Technology, Princeton, Rensselaer Polytechnic Institute, University of Illinois (Urbana), and University of Wisconsin (Madison). 13. Correspondence from Marion Lentz, UC Berkeley, to Proctor Reid, NAE, June 14, 1994. 14. The agreement signed by Massachusetts General Hospital and Shiseido Co. Ltd. in August 1989 provides for Shiseido to spend up to $9 million a year over 10 years to support a 100-person skin research center at the hospital's Charlestown Navy Yard facilities in return for rights to commercial-
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PUBLICLY FUNDED R&D 133 ize any discoveries the center makes. (See "Dollars for Science" in the September 10, 1989, Boston Globe.) In 1989, Shiseido established two U.S.-based research centers, the Cutaneous Biology Re- search Center and Shiseido America Technocenter (Dalton and Serapio, 1995). 15. As of 1993, Ciba-Geigy had nine U.S. research facilities working in areas of biotechnology, pharmaceuticals, advanced components, chromatography, resins and plastics, and plant development (Dalton and Serapio, 1995). 16. See Gibbons (1992), Healy (1993), and National Institutes of Health (1994a,b). As of 1993, Sandoz Pharmaceutical employed roughly 180 R&D professionals at its research and manufacturing facility in East Hanover, NJ. The Swiss parent company also had seven other U.S.-based research facilities (Dalton and Serapio, 1995). 17. In 1993, the University of California at San Francisco (UCSF) and Daiichi Pharmaceuticals entered into an agreement to establish a center to study atherosclerosis. In exchange for providing $20 million in research funding over 5 years, Daiichi received first rights to negotiate for exclusive licenses to any drugs developed at the center as well as the right to delay publication of research results until it decided whether or not to apply for a patent. It is noteworthy that UCSF requires foreign sponsors of university research to pay all direct and indirect costs of research for which they are awarded patent rights (Helm, 1994). 18. In her testimony before the House Subcommittee on Regulation, Business Opportunities and Energy of the Committee on Small Business on March 11, 1993, former NIH Director Bernadine Healy noted how the Scripps-Sandoz agreement illustrated potential contradictions in U.S. policy concerning the Bayh-Dole Act and agency implementing regulations. "These global first refusal rights may seem to conflict with some of the policy behind Bayh-Dole, such as the preference for collaboration with small business and the promotion of free competition and enterprise. However, the grant of these global rights may not conflict with the U.S. Department of Commerce regulations implementing Bayh-Dole [37 CFR § 401.1(a)] [which] provide for: '. . . the rights of research orga- nizations to accept supplemental funding from other sources for the purpose of expediting or more comprehensively accomplishing the research objectives of the government sponsored project.' Simi- larly, [37 CFR § 401.7] states that the small-business preference: . . is not intended, for example, to prevent nonprofit organizations from providing larger firms with a right of first refusal or other options in inventions that relate to research being supported under long-tenn or other arrangements with larger companies. Thus, the Scripps-Sandoz agreement illustrates a potential contradiction between what some view as the policy underlying the Bayh-Dole Act and the regulations implementing it. "The Bayh-Dole Act articulates multiple policies and objectives which may prove difficult to reconcile. For example, an action by a nonprofit organization, while clearly advancing one objective of the Act, such as promoting collaborations between commercial and nonprofit organizations, might not advance and may, in fact, appear to undermine another objective of the Act, like promoting free competition and enterprise. Needless to say, application of the objectives of the Bayh-Dole Act requires a balancing of statutory objectives in the overall best interests of the American public. That is the challenge for NIH and other agencies that support research. It would be foolhardy and irrespon- sible for federal agencies to champion open competition at the expense of denying the institutions it supports an opportunity to seek additional research funding. To restrain collaborations between fed- eral grantees and industry simply because the competitive advantage of a given collaboration may not be readily apparent, while simultaneously undermining the best opportunities to rapidly commercial- ize inventions, would also be unwise. In short, we must achieve a balance, remembering that the general intent of the legislation is to promote product development not commercial monitoring." (Healy, 1993). 19. For an informative discussion of the origins and consequences of Bayh-Dole, see Wisconsin BioIssues (1994). 20. The 18 foreign companies granted exclusive licenses included 4 French firms, 3 British com- panies, 2 Swiss companies, and 1 Canadian, 1 Israeli, 1 Finnish, and 1 Japanese company. Five licenses were awarded to one or more unidentified foreign-owned pharmaceutical company(ies). At
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134 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT least five of the foreign firms of known nationality have affiliates of parent companies with manufac- turing or R&D facilities in the United States (U.S. General Accounting Office, unpublished data). 21. Correspondence from Joel Moses, MIT, to Proctor Reid, NAE, June 14, 1994; correspondence from Jean Fort, UCSD, to Proctor Reid, NAE, April 3, 1995; correspondence from Homer Neal, University of Michigan, to Proctor Reid, NAE, April 4, 1995; correspondence from Robert Nerem, Georgia Institute of Technology, to Proctor Reid, NAE, February 7, 1995. 22. See, for example, the testimony of Susan D. Wray, director, Office of Patent, Copyright and Technology Licensing, University of Florida at Gainesville in U.S. Congress, House (1993). 23. Since a foreign firm could participate in more than one university's industrial liaison program, the number of foreign firms participating is probably less than the 499 reported (U.S. General Ac- counting Office, 1992, p. 17). 24. It should be noted that neither the National Science Foundation nor the National Institutes of Health guidelines for universities and other recipients of federal research support address the issue of whether industrial liaison program members should be given advance access to research results. 25. Foreign participants in the University of California at Berkeley's industrial liaison programs pay fees twice as high as those submitted by U.S.-owned firms. MIT charges foreign-owned firms roughly 30 percent more than it does U.S.-owned firms. 26. This section draws heavily on University-lndustry Research Centers in the United States by Cohen, Florida, and Goe (1994). 27. Seed money for these centers has been provided to a select group of universities by the spon- soring federal agency with the expectation that the host institutions will raise matching funds from industry, state and local governments; and internally. 28. See, for example, discussion of the efforts by state governments to attract foreign direct in- vestment and associated economic activity to their jurisdictions in Feller (1994) and Kayne (1992). 29. Data are from the NSF ERC Database. Proctor Reid, NAE, phone conversation with Lynn Preston, Engineering Education and Centers Division, NSF, December 1, 1995. Stalson's (1989) found that foreign participation in ERCs and other university-industry re- search centers at the eight universities she surveyed was relatively modest with only limited participa- tion from European firms in basic chemical and power engineering research. Moreover, it appeared that a number of European industrial commitments to these centers were "inherited" when European firms acquired participating U.S. firms. 30. Remarks by William Gear, President, NEC Research Institute, and Knut Merten, President and CEO, Siemens Corporate Research, at the NAE roundtable on foreign participation in U.S. re- search and development, November 9, 1993. 31. These findings, in turn, are consistent with the tendency of Japanese companies to acquire externally developed technology by way of licenses. See Chapter 3, pp. 56, 66-67. 32. The 10 multiprogram labs of DOE are: Argonne National Lab, Brookhaven National Lab, Idaho National Engineering Lab, Lawrence Berkeley Lab, Lawrence Livermore National Lab, Los Alamos National Lab, Oak Ridge National Lab, National Renewable Energy Lab, Pacific Northwest Lab, and Sandia National Laboratories (National Research Council, 1994a, p. 90). 33. National Research Council (1994a) and unpublished data provided to the study committee by the National Institutes of Health. 34. The 1986 Federal Technology Transfer Act authorized CRADAs between government-oper- ated laboratories and industry. Under a CRADA, a private organization provides personnel, equip- ment, and/or financing for a specified R&D activity that complements the mission of its federal laboratory partner. CRADAs include provisions for the allocation of rights to intellectual property resulting from the cooperative research. In 1987, Executive Order 12591 directed agencies to del- egate authority for entering into CRADAs to their respective laboratories, and contained guidelines for the granting of intellectual property rights under these agreements. In 1989, the National Com- petitiveness Technology Transfer Act extended authority for negotiating CRADAs to contractor-op- crated government laboratories. See Committee on Science, Engineering, and Public Policy (1992).
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PUBLICLY FUNDED R&D 135 35. Correspondence from Wanda Bullock, NIH, to Proctor Reid, NAE, April 4, 1995; correspon- dence from Robert Petit, ORNL, to Proctor Reid, NAE, April 10,1995; correspondence from Stephen Lake, ANL, to Proctor Reid, NAE, April 10, 1995. 36. See the Stevenson-Wydler Technology Innovation Act of 1980 (P.L. 96-480) as amended by the Technology Transfer Act of 1986 (P.L. 99-502) and the Advanced Technology Program Act of 1989 (P.L. 101-189), and Executive Order 12591. For further discussion of the reciprocity provisions of these and other recents acts of law, see Schwartz and Caplan (1993). 37. Proctor Reid, NAE, phone discussions, March 8, 9, and 31, 1995, with David Edgerly and Bruce Mattson, NIST, Office of Technology Services. NIST is currently reviewing its implementa- tion of the economic performance requirements of the Bayh-Dole Act and CRADA legislation. 38. The automobile industry's "umbrella" CRADA with DOE stipulates that the R&D will be done in the United States and that manufacturing for the first 2 to 3 years will be done predominantly in the United States and will continue in the United States where practical thereafter. 39 In 1993, DOE modified its modular CRADA agreement to offer would-be private sector par- ticipants the option of either accepting the "sample U.S. competitiveness language in toto" or agree- ing "to provide specific economic benefit to the U.S. economy under one or more criteria [eight in total] of the U.S. competitiveness work sheet." The sample U.S. competitiveness language states: In exchange for the benefits received under this CRADA, the Parties therefore agree to the following: A. Products embodying Intellectual Property developed under this CRADA shall be substan- tially manufactured in the United States; B. Processes, services, and improvements thereof which are covered by intellectual Property developed under this CRADA shall be incorporated into the Pc~icipant's manufacturing facilities in the United States either prior to or simultaneously with implementation outside the United States. Such processes, services, and improvements, when implemented outside the U.S., shall not result in reduction of the use of the same processes, services, or improvements in the United States; land C. In the event that it is not feasible to meet the requirements of A. and B., a plan for providing net benefit to the U.S. economy is attached in Document B [the U.S. competitiveness work sheet]. If a would-be participant chooses option C, it "must furnish a description of specific economic or other benefits to the U.S. economy which are related to the commercial use by Participant(s) of the technology being funded under the CRADA and which are commensurate with the Government's contribution to the proposed work." The benefits criteria set out in the U.S. competitiveness work sheet include: 1. Direct or indirect investment in U.S.-based plant and equipment. 2. Creation of new and/or higher-quality U.S.-based jobs. 3. Enhancement of the domestic skills base. 4. Further domestic development of the technology. 5. Significant reinvestment of profits in the domestic economy. 6. Positive impact on the U.S. balance of payments in terms of product and service exports as well as foreign licensing royalties and receipts. 7. Appropriate recognition of U.S. taxpayer support for the technology (e.g., a quid pro quo commensurate with the economic benefit that would be domestically derived by the U.S. taxpayer from U.S.-based manufacture). 8. Cross-licensing, sublicensing, and reassignment provisions in licenses that seek to max mize the benefits to the U.S. taxpayer." (U.S. Department of Energy, 1993, pp. 56-57, 86.) Whereas a DOE laboratory can move directly to receive approval of the CRADA joint work statement from its regional operations office if the would-be participants accepts the sample U.S. competitiveness language, the laboratory must receive approval first from its operations office or DOE headquarters of the participant's alternative statement of specific economic benefits to the U.S. economy before it can proceed with the joint work statement. (U.S. Department of Energy, 1993). In the DOE modular CRADA, intellectual property is defined as "patents, trademarks, copy- rights, mask works, protected CRADA information [generated information which is marked as being
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136 FOREIGN PARTICIPATION IN U.S. RESEARCH AND DEVELOPMENT protected CRADA information by a party to the CRADA] and other forms of comparable property rights protected by Federal Law and other foreign counterparts." With the permission of their re- gional operations office, DOE laboratories may work with a more narrow definition of intellectual property that includes only patents, trademarks, copyrights, and mask works. 40. See, for example, the Energy Policy Act of 1992 (42 U.S.C. §13525), and the Technology Administration Authorization Act (15 U.S.C. §278n) in the American Technology Preeminence Act of 1991 P.L. 102-245. 41. For a company to be eligible to receive financial assistance under the Act, the DOE secretary must find "that the company's participation in the Program would be in the economic interest of the United States, as evidenced by investments in the United States in research, development, and manu- facturing (including, for example, the manufacture of major component or subassemblies in the United States); significant contributions to employment in the United States; and agreement with respect to any technology arising from assistance provided under this section to promote the manufacture within the United States of products resulting from that technology (taking into account the goals of promot- ing the competitiveness of United States industry), and to procure parts and materials from competi- tive suppliers." 42 U.S.C. §13525 Energy Policy Act of 1992, Sec. 2306 Limits on Participation by Companies. 42. "General Electric has circulated a paper implying that the Swedish-Swiss ABB should not be allowed to participate [in the advanced gas turbine programmed because its home governments do not protect intellectual property rights . . . The paper also suggests that if ABB were involved in the programme, it would use the fruits of the research not to create employment in the U.S. but to strengthen its technological capacity in Europe." (Financial Times, 1994) 43. AlliedSignal Corp. protested Oak Ridge National Laboratory's selection of a Japanese and a French firm in a conservation procurement for advanced ceramic manufacturing technology. How- ever, DOE refused to obtain information to make a finding under Section 2306. "Lack of DOE action and inconsistent application of the law has been the subject of Congressional correspondence from Senate and House authorization and appropriations committees." (Correspondence from Maxine Savitz, AlliedSignal Corp., to Proctor Reid, NAE, June 2, 1994; Inside Energy, 1994.) In response to criticism that it lacked a clear and consistent implementation strategy for these eligibility requirements, DOE submitted a statement of policy guidance for public comment in Febru- ary 1995. (Federal Register, 1995) 44. The Technology Administration Authorization Act of 1991 includes "buy American" provi- sions (15 U.S.C. §278n) that prohibit the use of funds authorized under the legislation to procure components manufactured in a foreign country whose government unfairly maintains a procurement policy discriminating against U.S. products or services. 45. Telephone discussion between Connie Chang, Advanced Technology Program, NIST, and Proctor Reid, NAE, February 24, 1995. 46. Ibid. 47. Two U.S.-based ocean carriers, American Automar Inc. and Great American Lines Inc., are also participants in the Bath Iron Works TRP. The Japanese and Canadian participants will transfer commercial shipbuilding technology to Bath. (Defense News, 1993; Journal of Commerce, 1993) 48. "ARPA Technology Reinvestment Project, section 2.2.2. 'Guidelines for Assembling a Team of Eligible Participants.' In general, an 'eligible firm' as defined by legislation is a company or other business entity that conducts a significant level of its research, development, engineering, and manu- facturing activities in the United States. A firm not meeting this test may still be an 'eligible firm' if its majority ownership or control is by United States citizens. In addition, a foreign-owned firm may be an 'eligible firm' if its parent company is incorporated in a country whose government encourages the participation of U.S.-owned firms in research and development consortia to which that govern- ment provides funding, if that government also affords adequate and effective protection for the intellectual property rights of companies incorporated in the United States. Determination of eligibil- ity of firms in this last category [foreign-owned firms] will be made by the Secretary of Commerce as
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PUBLICLY FUNDED R&D 137 mandated by 10 U.S.C. 2491(9). No prior certification of eligibility will be issued or accepted, and the burden of establishing eligibility will ultimately rest on the proposer." (Advanced Research Projects Agency, 1993) 49. William Spencer, executive director of SEMATECH, announced on October 5, 1994, that SEMATECH would no longer seek a DOD subsidy. (Corcoran, 1994) 50. See Committee on Science, Engineering, and Public Policy (1992); Issues in Science and Technology (1994); testimony by S. Richard Deininger, Director of SEMATECH's National Re- source Program, before the NAE study committee, November 9, 1993; and Grindley et al. (1994). 51. The issue of foreign participation in the U.S. Display Consortium, like in SEMATECH, is primarily a political one. Both consortia represent a public-private response to an onslaught of for- eign competition. As such, it is politically very difficult to open them up to foreign participation, even though there may be some technological advantages to doing so. Note that the Microelectronics and Computer Technology Corporation, a privately funded consortium, is trying to expand its funding and technology base by recruiting foreign-owned firms. Proctor Reid, NAE, phone discussion with Peter Mills, CEO, U.S. Display Consortium, February 1994. 52. For data on sources of funding for foreign doctoral candidates in science and engineering, see National Science Foundation, 1993a, Table A-21, pp. 94-96. 53. These are the very subgroups targeted by the National Research Council (1988) study as the greatest potential source of U.S.-born engineers in the coming decades. 54. See "Foreign Nationals Change the Face of U.S. Science," Science (261), 1993, pp. 1769- 1775. 55. See note 6, above. 56. To be sure, contributions by foreign alumni to U.S. universities are a small fraction of those by U.S.-born alumni. Considering the countries of origin of the majority of foreign-born engineering students and faculty the People's Republic of China, Korea, and India this should come as no surprise. Nevertheless, there are numerous examples of foreign alumni generosity. For example, in gratitude for kindness shown by a professor in the mid-1950s, Gordon Wu of Hong Kong has en- dowed a $1.5 million Sollenberger chair at Princeton University, having earlier financed construction of a Gordon Wu Hall at the university. The Mogami Geotechnical Laboratory at Cornell University has been endowed by a former student and Japanese national who now teaches at Kyoto University (Stalson, 1989). 57. See the comments of Dr. Gerard Mourou, director of the National Science Foundation's Cen- ter for Ultrafast Optical Science at the University of Michigan, on the contributions of two large foreign sponsors, Fujitsu and Thomson, to the center's basic and long-term research program (U.S. Congress, House, 1993, pp.l02-103); testimony of John Wiley, University of Wisconsin, before the NAE study committee, November 9, 1993 (Wiley, 1993); and the comments of federal laboratory representatives in U.S. General Accounting Office (1988b) and National Research Council (1994a). 58. Of the 17 foreign-owned firms involved in industrial affiliate programs at the Georgia Institute of Technology, 16 are known to have U.S.-based manufacturing and R&D operations (Correspon- dence from Robert Nerem, Georgia Institute of Technology, to Proctor Reid, NAE, January 1995). Of 102 foreign-owned members of Stanford University's industrial liaison programs, 34 have U.S.-based manufacturing and/or R&D facilities (Correspondence from Marianne Meredith, Stanford, to Proctor Reid, NAE, April 7, 1995). 59. In at least two instances, foreign companies have replicated technologies developed by U.S. federal laboratories, thereby denying U.S.-owned firms opportunities to exploit first-mover advan- tages. The two examples cited most often in this context include the KEVA code (developed by Los Alamos National Laboratory), used to model the workings of the internal combustion engine, and the laminar-flow clean room concept (developed by Sandia National Laboratory), used in microelectron- ics manufacturing. (National Research Council, 1994a) 60. See, for example, p. 107 above, Wiley (1993), and U.S. Congress, House (1993). 61. Some observers have questioned whether most university technology licensing offices are
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138 FOREIGN PARTICIPATION lN U.S. RESEARCH AND DEVELOPMENT adequately funded and staffed to negotiate effectively with corporate partners U.S. or foreign in the best interest of the United States. In testimony before the House Subcommittee on Science on October 28, 1993, Robin Frank Risser, CEO of Picometrix Inc., made the following observation regarding his company's participation in the University of Michigan's Center for Ultra-Fast Optical Science: Our biggest area of concern surrounds background technology which might have been available for exclusive licensing by Fujitsu had USL and Picometr~x not paid particular attention to this area. I believe this to be a problem area. University researchers often operate in an environment where there are significant bamers to constructively reducing inventions to practice by filing patent appli- cations. Patent budgets at the University of Michigan are small compared to the amount of research. As a result, it is usually difficult to patent many background discoveries prior to entering into a research contract with a foreign company. Since foreign companies usually obtain options for exclu- sive licenses on patents "conceived or reduced to practice" during the term of the agreement, this means that they could reach back to obtain exclusive rights to background technology that they did not really fund. In my opinion, this occurrence could be substantially reduced if patent budgets were substantially increased, faculty were better educated, and other battlers to patenting were reduced. Perhaps requiring that a percentage of federally funded research and development be set aside for foreign and domestic patents is appropnate. (U.S. Congress, House, 1993, pp. 60-61) 62. See, for example, Stalson (1989), Massachusetts Institute of Technology (1991), U.S. House of Representatives (1993). 63. See discussion on pp. 114- 117 and notes 36 and 40, above. 64. Although U.S.-industry contacts with foreign universities are widespread, actual U.S. corpo- rate funding of foreign university research is small compared to industrial R&D spending. Compa- nies supported foreign university research at about the same rate that they support R&D in U.S. universities (i.e., roughly 1 percent of total company-funded R&D, or, by NSF's (199Ob) estimates, $50 million to $100 million per year). The U.S. companies surveyed indicated that the principal rationale for establishing linkages with foreign universities was to benefit from the work of world-renowned scientists and engineers. Other reasons given included fostering good will and promoting the company's reputation in the host country's scientific community. 65. See, for example, the program announcement for NSF's (199Sc) Division of International Programs as well as the U.S.-Japan Manufacturing Fellowship Program administered by the U.S. Department of Commerce, which was launched during the final year of the Bush Administration. U.S. Department of Commerce (1993b). 66. Correspondence from Helen Donoghue, Second Secretary, Science and Technology, Delega- tion of the European Communities, Washington, D.C., to Proctor Reid, NAE, May 18, 1994. 67. Ibid. 68. Very little information is available on the specific requirements individual European nations impose on would-be foreign participants in their national R&D programs. For information regarding the policies of several OECD countries, see Organization for Economic Cooperation and Develop- ment (1992b). In late 1993 and early 1994, the U.S. Department of State conducted a survey of U.S. access to publicly funded research abroad as part of an ad hoc interagency working group chaired by the Council of Economic Advisors. The findings of the survey confirm that the formal policies of individual EC member states with respect to international access to national R&D programs are, for the most part, consistent with those of the European Community proper. However, some survey re- spondents indicated that, in some cases, national practices vis-a-vis foreign-owned firms were more restrictive than their formal policies would suggest. Proctor Reid, NAE, discussions with Anthony Rock and Gary Couey, U.S. Department of State, March 14, 1995. 69. The High-Speed Civil Transport "Piper" project was designed from the outset to include for- eign collaborators (National Research Council, 1994b). 70. See note 42, above. 71. The rationale for extending national treatment to multinational firms is essentially the same as that underlying the U.S. commitment to free trade and free investment: They offer the most effective
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PUBLICLY FUNDED R&D 139 route to economic growth and rising living standards for all nations. Moreover, the United States remains the world's largest source of foreign direct investment. U.S.-owned multinationals account for a majority of U.S. exports and depend increasingly on foreign markets. The U.S. commitment to the principle of national treatment is manifested in bilateral and multilateral investment treaties it has negotiated with other countries, and the federal government's official negotiating position within the Organization for Economic Cooperation and Development (OECD), General Agreement on Tariffs and Trade (GATT), and most recently, the Asian-Pacific Economic Cooperation Forum. The United States and its trading partners have negotiated exceptions to national treatment in areas concerning national security and public order. Investment treaties and OECD code have also listed specific excluded sectors; these vary somewhat from one agreement/ treaty to another. Despite these inconsistencies and exceptions, the U.S. commitment to national treatment has been strong and has clearly contributed to a movement in this direction at the interna- tional level. Federal R&D programs that condition national treatment on foreign-government (non-for- eign-owned firm) compliance with/or application of U.S. laws and standards undermine U.S. efforts to push national treatment in international forums. As recent developments in the EC suggest, U.S. moves toward reciprocity in this and other areas of so-called domestic policy may encourage other nations to introduce similar requirements. The consequences of this for the United States in the long term, if not more immediately, could be costly (Graham and Krugman, 1995). 72. While there has been legislation put forward in the European Parliament that would introduce similar reciprocity "conditional national treatment" requirements in EC programs, it has not yet be- come law. See European Parliament (1994).
Representative terms from entire chapter: