Allocating Federal Funds for Science and Technology (1995)

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70 / SUPPLEMENT 4 Supplement 4 Interactions Between Federal and Industrial Funding and the Relationship Between Basic and Applied Research Continuing innovation is the only way to foster long-term economic growth without discovering entirely new resources. Advances in science and technology are essential to innovation, although innovation also involves many additional fac- tors. In the last half century, the federal government’s role has almost always been crucial, and often dominant. The nation has become more dependent on science and technology, and sustaining a robust capacity for research and development is more important than ever. Astronauts have walked the face of the moon and re- turned, and astrophysicists have probed the origins of the universe. The physical sciences have also been the source of innumerable inventions—lasers, microelec- tronic devices, and fiber-optic networks, to name just a few—that have in turn enabled practical applications such as satellite communications, computers, and gains in productivity throughout the economy. Past revolutionary advances in biology—unraveling the double helical structure of DNA in 1953, discovering re- combinant DNA technology in the 1970s—and today’s exploding molecular genetics and integrative biology have just begun to illuminate the immense complexity of life. These fundamentally important discoveries also are linked to the capability to design new drugs and diagnostic technologies in medicine, new approaches to problems in agriculture, and technologies for environmental improvement. The dramatic increase in life expectancy during this century is one indicator of scientific discovery and technical progress. Figure II.11 shows that in 1900 life expectancy at birth, even for the richest people, was only age 55, yet for all but the world’s poorest today it is over 70. Every year during this century, approximately 2 months have been added to life expectancy. The change has been gradual, almost unnoticed in daily life, but fundamentally important. Sanitation, nutrition, transpor- tation, communication, and other technologies have combined with biomedical research and medical technologies to produce this profound demographic shift. In the 5 decades following World War II, the U.S. federal government steadily increased its support for science and technology. As a result, the United States moved into a position of preeminence in virtually all areas. We became the leaders in high-technology industries such as aircraft, chemicals, computers, software, pharmaceuticals, and biotechnology. We developed the most effective system in the world for creating new technology-based businesses. Our National System of Innovation Depends on Complicated Interactions Between the Public and Private Sectors A complex set of institutions and actors contribute to the strength of the U.S. science and technology base. The examples of important discoveries in medicine and in computing and communications technologies depicted in Figures II.12 and 70 70 

SUPPLEMENT 4 / 71 17x20 FIGURE II.11 Life expectancy and income per capita for selected countries and periods. NOTE:“International dollars are derived from national currencies not by use of exchange rates but by assessment of purchasing power. The effect is to raise the relative incomes of poorer countries, often substantially.” SOURCE: Samuel H. Preston, Nathan Keyfitz, and Robert Schoen, Causes of Death: Life Tables for National Populations (New York: Seminar Press, 1972), as reprinted in The World Bank, The World Development Report 1993: Investing in Health (New York: Oxford University Press, 1993). II.13 illustrate how the different parts of our system interact to produce changes that ultimately lead to increases in the quality of our lives. Consider, for example, Figure II.12, which illustrates the steps leading to reductions in mortality from high blood pressure.1 From the 1930s to the 1960s, research funded by private nonprofit groups, the Veterans Administration, and the National Institutes of Health revealed dietary and behavioral risk factors associated with high blood pressure. An early and important step was finding a way to mea- sure blood pressure quickly and cheaply, and to correlate those measures with diseases. Rigorous epidemiological studies confirmed suspected links between high blood pressure, stroke (and later, heart disease), and premature death. Parallel clinical trials demonstrated that treatment for lowering blood pressure prevented stroke, death from heart disease, and cardiac and renal failure. The National High Blood Pressure Education Program, built on these findings, commenced in 1972. Since then, changing social norms, individual exercise and diet decisions, and better medical management have reduced the incidence of hypertension by more than a third, and reduced stroke mortality by over 60 percent,2 a remarkable achievement. For millions of Americans, a broad base of research—spanning the full range from social and behavioral research to molecular biotechnology—has meant the differ- ence between life and death. As epidemiological and behavioral research progressed, a complex web of biological factors also was uncovered through clinical investigations and basic biological research. This line of research was funded predominantly by the federal government, and supplemented by hospitals and private sources. Private pharma- ceutical firms made investments comparable in magnitude to federal funding, but focused on narrowing the search for specific agents and clinical testing to prove their worth. Drugs lower blood pressure by reducing fluid retention (diuretics), by influencing nerve impulses transmitted to the heart and blood vessels (beta-blocking agents), and by reducing resistance to blood flow in small peripheral arteries (cal- 71 

72 National Heart Institute Surgeon General's Report on Smoking Established Framingham Study National High Blood Pressure Education Program Diet, Exercise, Smoking, Behavior Johnson Administration War on Cardiovascular Disease Clinical Research Loop Diruetics (HOECHST, ROCHE, MERCK) Diuretics Thiazides (MERCK, CIBA, then WYETH-AYERST, ABBOTT, RORER, LEDERLE) Triamterene (SMITH-KLINE) Spirinolactone Amiloride (MERCK) (SEARLE) β-blockers Propranolol (ICI) Alquist Postulates Receptor Types Others (MERCK, ABBOTT, SEARLE, GEIGY) (20,000,000 Prescriptions) Enzyme Angiotensin Converting Action Angiotensin Types Enzyme Inhibitors of Renin Snake Venom Blocks Renin Formation (ACE Inhibitors) Discovered Captopril (SQUIBB) 1940 Enalapril, Others 72 / SUPPLEMENT 4 (MERCK, BRISTOL-MYERS, CIBA, STUART) Calcium and Muscle Fleckstein and Kaufman Show Calcium Antagonism Contraction Calcium Channel 1883-1913 Verapamil (HOECHST, KNOLL, then LEDERLE, SEARLE) Blockers Nifedipine (MILES, PFIZER) Diltiazem (DOW) Clinical Use for Hypertension 1946 1950 1960 1970 1980 1990 Federal or private nonprofit-funded R&D Industrially funded R&D $1 billion sales (or 20,000,000 prescriptions, for β-blockers) 

FIGURE II.12 Steps in discovering how to prevent and manage high blood pressure. NOTE: Dramatically reduced mortality and disability from stroke and heart disease have followed from better prevention, identification, and treatment of high blood pressure. The top section shows federal programs that laid the groundwork for clinical treatments indicated lower in the diagram. Drug strategies now supplement diet, exercise, and regular medical monitoring as mainstays of medical management. Several different types of drugs are used. The four most common classes are diuretics, beta-blockers, angiotensin converting enzyme inhibitors, and calcium channel blockers, whose developmen- tal history is summarized in the figure. Drug classes are noted along the left margin, and specific agents are noted in the diagram, with the corresponding companies in parentheses. Drug development has been based on a mix of federal and privately funded R&D. The federal government has supported basic biological research, epidemiology, behavioral and social science, and clinical research for decades. Private firms have developed new drugs to reduce blood pressure once it is detected. Often, federally funded research has preceded private R&D, but in several cases, private firms have discovered drugs that were only later found to be useful in lowering blood pressure. Clinical research has been necessary in many ways at many stages, supported by a mix of funds derived from patient services, federal programs, and private-firm investments. SOURCE: Rebecca Henderson, “The Evolution of Integrative Competence: Innovation in Cardiovascular Drug Discovery,” Industrial and Corporate Change (No. 3, Winter): 607-630, 1994; the historical research of Harriet Dustan (University of Vermont), Edward Roccella (National Heart, Lung, and Blood Institute), and Howard Garrison (Federation of American Societies for Experimental Biology); National Heart, Lung, and Blood Institute, National High Blood Pressure Education Program: 20 Years of Achievement (Bethesda, Md.: National Institutes of Health, 1992); and Thomas P. Gross, Robert P. Wise, and Deanne E. Knapp, “Antihypertensive Drug Use: Trends in the United States from 1973 to 1985,” Hypertension 13 (Supplement 1): I-113–I-118, 1989. SUPPLEMENT 4 / 73 73 

74 / SUPPLEMENT 4 cium antagonists and angiotensin converting enzyme, or ACE, inhibitors). The use of calcium channel blockers came from clinical tests of various compounds that were first made by pharmaceutical firms. Knowledge of how these compounds worked and how they could best be used came years later, mainly through federally funded research. In contrast, the ACE inhibitors were developed by drug companies through a logical progression of discoveries that built on decades of publicly funded research. Private investment was essential, but federal investment was equally important at many stages, both leading and following privately funded research. Almost all the important technical decisions, in both public and private sectors, were made by those educated in research universities and trained at least in part through federally funded research. The story in information technologies involves different agencies and domains of science, but the lessons are similar. 3 Lynn Conway of Xerox and Carver Mead of the California Institute of Technology in the 1970s conceived of “silicon foundries,” where graduate students, their professors, and others could have computer chip designs fabricated into integrated circuits. Their idea won federal support and became the heart of the very large scale integrated (VLSI) circuit program supported by the Advanced Research Projects Agency in the Defense of Defense. NSF joined the program, broadening access to VLSI fabrication services—the foundries. On a parallel track, the network that later became the Internet (first as ARPANet) was used to send designs to the foundries, which then created and shipped the chips, reducing cost and increasing speed. What once took months now took days. The impediments to chip design diminished; graduate students felt free to experiment and innovate; even radical designs for chips became practical. The foundries and other components of ARPA’s VLSI program had spectacular results: a renaissance in computer design, universities creating VLSI programs, the beginnings of three-dimensional graphics, and initial efforts in reduced instruction set computing (RISC), now in use in millions of computers. RISC computing origi- nated at IBM but was adopted only after a period of federally funded research that made its applications readily apparent, at which point several firms in addition to IBM invested in it. Several major corporations grew directly out of the VLSI pro- gram. Decades of federal and industrial investments in information technology led to the creation of the elements—from three-dimensional graphics to windows to local networks—now embedded in the way we work, obtain and share information, and teach our children. The dynamic interactions between federally funded academic R&D and industrial R&D made the United States dominant in information technol- ogy, which strengthened the nation’s competitiveness and also provided advantages in other sectors throughout the economy that depend on information technologies, such as finance, entertainment, communications, education, and transportation (see Figure II.13). As has been detailed in the case of information technology and is evident also in medicine and in many other fields highly dependent on science, the history of innovative development with significant social and economic benefits points to several major conclusions:4 (1) research has consistently generated large payoffs; (2) these payoffs often take years or decades to be realized; (3) while the time from discovery to market may be long, the transition from science to technology is more 74 

SUPPLEMENT 4 / 75 Graphics Sketchpad, Utah E&S, SGL GM/IBM, LucasFilm Arpanet, Internet Networking DECnet, LANs, TCP/IP Ethernet, Pup, Datakit Englebart, Rochester Windows Star, Mac, Microsoft Alto, Smalltalk Berkeley, Stanford RISC IBM 801 Sun, SGL, IBM, HP Mead/Conway, Mosis VLSI design many 1965 1970 1975 1980 1985 1990 1995 Federally funded R&D Industrially funded R&D $1 billion business FIGURE II.13 Technological developments in computing. NOTE: The productive and profitable interactions between federally and privately funded R&D are apparent in this time line of the development of several important computer technologies. These include computer graphics; networks; use of icons, buttons, and other “user-friendly” methods now commonly known as “windows”; reduced instruction set computing (RISC), which simplifies and speeds computer operations; and very large scale integrated (VLSI) circuit design, which has proved crucial to many manufacturing and design improvements. The institutions at which federally funded work was begun are noted along the right margin, as are the companies that developed and eventu- ally commercialized the technologies. In many cases, the federally funded work was conducted at universities, but some was done in industry. Note that privately funded R&D preceded federal R&D in the cases of VLSI and RISC, and yet federal funding was nonetheless crucial in enabling the cre- ation of ideas realized ultimately in commercial applications. SOURCE: Adapted from Figure ES.1 in a report by the Computer Science and Telecommunications Board, National Research Council, Evolving the High Performance Computing and Communica- tions Initiative to Support the Nation’s Information Infrastructure (Washington, D.C.: National Academy Press, 1995), p. 2. sudden; (4) unexpected results are often the most important (e.g., electronic mail and computer “windows” software methods were not the intended products of research programs that spawned them; many drugs used for hypertension were first developed for other purposes); (5) research stimulates communication and interac- tion, with complex interactions between industry and academia; (6) research trains 75 

76 / SUPPLEMENT 4 people who start new companies, join established firms, and enter crucial positions in industry and government where their technical background enables better man- agement decisions; and (7) research entails risks, so that some objectives are not reached, but new ones—often more important ones—replace them. Practical applications are often impossible to predict from any one scientific discovery that is nonetheless crucial to the ultimate outcome, and the best path to the desired use must adjust continually to surprising sources of new knowledge. Norman Ramsey’s Nobel Prize-winning work in physics was seminal in the develop- ment of atomic clocks that enabled the global positioning system (see Box II.2), magnetic resonance used for medical imaging, and synchrotron radiation used in the manufacture of integrated circuit chips. Yet none of these immensely practical benefits was evident when he did his research. He remarked upon receiving the 1994 Vannevar Bush Award,“I would have had difficulty in justifying most of my research on the basis of future applications either I or anyone else would have foreseen.”5 The government role in supporting the federal science and technology (FS&T) base is crucial in almost all the technologies. In some cases and at some stages, it is the dominant factor. The critical period for federal investment is often, but not always, at the beginning. Federal support for basic science is often necessary, but federal support for applied research and fundamental technology development is also essential. Some new technologies do build logically on scientific discovery arising from federally funded basic science, but private research and development often turn up items that pose questions for science or require a period of govern- ment-supported inquiry before they become appropriate for further development in the private sector. Federal support often comes from different agencies, at different times, and for different reasons. Research and development, and the ensuing innovation system of which they are essential components, depend not only on the basic science supported by the National Science Foundation, but also on mission-oriented research and develop- ment of the National Institutes of Health, Department of Defense, National Aeronau- tics and Space Administration, Department of Energy, Environmental Protection Agency, U.S. Department of Agriculture, Department of Commerce, and other agencies and departments. The Distinction Between Basic and Applied Science Is Often Difficult to Make and Is Rarely Decisive in Defining the Federal Role Historically, the federal government has provided funding for a variety of long- term, high-risk research and technology development programs. In some cases this support is motivated by the need to solve specific problems such as developing a new aircraft, breaking a code, or finding a way to treat specific diseases. The result- ing activity conventionally is described as applied research. In other cases, govern- ment support is provided for pure science. Some projects are clearly applied. Others are clearly basic. Basic research usually is supported in the expectation that it ultimately will link to practical use; applied research usually is intended to address a specific problem, although it can spawn new fundamental inquiry.6 76 

SUPPLEMENT 4 / 77 Some discussions of the differences between basic and applied research suggest that the process must start with basic research in universities, which pro- duces new ideas. In this view, private firms apply discoveries to practical problems and use them to develop commercial products. Sometimes the discovery process works this way, but often it does not. The flow of people, knowledge, and “know- how” between publicly and privately funded research organizations goes both ways, with different net flows at different times. The typical patterns differ among indus- trial sectors and scientific disciplines; there is no one template for innovation. For every case like that of information technology—where academic research in com- puter science and engineering led to the creation of many new firms—one can point to a counterexample like digital electronics, where the development of the transistor in the private sector caused an expansion of solid-state physics in universi- ties. Even when a clear distinction between basic and applied research can be made, therefore, it is often not useful in guiding choices about whether it is a proper subject for federal support. A more severe problem is that most federally funded research is at once both applied and basic. In the standard definition, basic research is the pursuit of knowl- edge without thought of practical application. The first part is true—that science is intended to produce new discoveries—but the implication that this necessarily entails a sharp separation from thoughts of usefulness is just plain wrong. Some- times it is true, but far more often it is not, especially in science supported by mission-oriented agencies. Basic optics is one of the oldest fields in physics. Thirty or forty years ago, it was hard to see what applications it might have beyond lens design for cameras and telescopes. With the unexpected discovery of the laser and its application in fiber-optic communications, optics has turned out to be immensely practical, and is essential to modern telecommunications networks. Louis Pasteur’s career was replete with contributions to basic biology as well as innovations in medicine, beer brewing, wine making, and agriculture. Organic chemistry and analytical chemistry have always been coupled to pharmaceuticals, specialty chemi- cals, and other industrial interests. Basic materials science bears on electronics, instrumentation, aeronautics, and many domains of manufacturing. Gregor Mendel was studying how to improve crops when he discovered the basic laws of genetics, and characterizing DNA’s double helical structure in 1953 led 2 decades later to practical applications through recombinant DNA technology, with impacts not only on biomedical research but also on pharmaceutical manufacturing, agriculture, and environmental remediation. The practical uses of applied research are generally more obvious and direct, but basic research also can have foreseeable practical aims. “There are two kinds of research—applied research and not-yet-applied research.” Nobel laureate Lord Porter, former president of the Royal Society.7 The federal responsibility for basic research is accepted widely. The large social benefits that can come from federal support for specific kinds of applied problem solving and exploratory development are not as well recognized. Histori- 77 

78 / SUPPLEMENT 4 cally, a large fraction of federally funded research has been directed at applied problem solving and fundamental technology. For example, when the Department of Defense funded the creation of computer science as a new academic field, it accurately anticipated real national security needs. Government support for the development of new problem-solving tools and technically trained people differs from the support for basic physics provided by the National Science Foundation, but it nonetheless has profound effects on fulfilling national needs, sustaining our economy, improving our way of life, and contributing to all areas of scientific inves- tigation. Government Has Traditionally Supported Enabling Technology and Education There is no reason to abandon the historical balance between support for science on the one hand and enabling technology on the other. Industrial funding builds not only on basic research, but also on federally funded R&D aimed at govern- ment functions. The productivity of industrial R&D depends on a balanced federal R&D portfolio that spans a broad range of applications. A strategy that focuses federal support unduly on basic science risks losing the benefits of applied research supported by mission agencies, which historically have been important in generat- ing public benefits. That is one reason that the committee did not distinguish be- tween basic and applied research when defining the FS&T budget. In the division of labor between the public sector and the private sector, the private sector ultimately will be responsible for the final stages of commercial application and product development. On this there is no disagreement. Because of its efforts in these areas, the private sector will provide more support for applied research and technology development than the federal government does now or could at any time in the foreseeable future. But there can be confusion about the federal role in supporting applied research versus its funding of commercial technol- ogy development in industry, whether through individual firms or in consortia. This is an area of active controversy that the committee addresses in Part I of this report. It is important to point out here that the debate about federal funding, or subsidies, to industry is conceptually different from that about federal support for basic versus applied research for public missions, to foster enabling technologies, and to educate leaders in science and engineering. A distinction between “basic” and “applied” generally is not useful as the decisive criterion that defines a proper federal role, except when the application area is an existing commercial market where industrial applied research usually will predominate. Federal leadership is indeed essential for basic research, because industry does not support it except in a limited way and under unusual circum- stances such as near-monopoly positions that are now rapidly disappearing.8 Five decades of history make clear that the federal government is positioned uniquely to support the training of people and the development of new technologies that are not specific to a particular product or service. Private firms, responding to forces that operate through the market, will determine what specific products and services result and will support their final development and commercialization. 78 

SUPPLEMENT 4 / 79 The government also must maintain a core of applied scientists whose work serves as a bridge between the problem-solving efforts of private firms and the research efforts of basic scientists. Government can and should sustain those areas of science and technology that support inherent government missions, such as national defense, technical standards setting, regulation, or public health. In these areas, publicly funded scientists and engineers can take a discovery—such as a new class of high-temperature superconductors—out of the laboratory of a private firm and move it quickly onto the agenda for inquiry in basic physics. Or they can take a new technology and use it—applying it to nuclear waste cleanup, developing vac- cines for U.S. troops headed abroad, or defining the exact length of a meter or a second with the greatest precision available at the time. Federal funding for science and technology development also helps educate and train not only those scientists and engineers who continue on to perform re- search and development in both the public and private sectors, but also those whose work involves making technically informed management decisions about corporate strategy and finance. The history of technological advance throughout this century points to an abiding truth: “The primary function of universities is to give students the intellectual underpinnings to contribute as professionals in our society.”9 Federal Support for Basic Research Continues to Be Essential Just as government support for applied science and technology development remains a wise investment, so also is continuing investment in basic science essen- tial to future innovation and progress.10 Innovation now occurs too rapidly for one player to wait until another’s job is done. Research and development are not sepa- rate, serial activities, but parallel and interdependent. New knowledge is most useful to people and institutions that see it first and can exploit it quickly, and that have ready access to those who discover it. The ability to identify technological opportunities emerging from research is now a principal factor determining success in many industrial sectors. The increased importance of science in high-growth areas of the world economy puts a premium on strong linkages between science and technology, and makes innovation far more difficult without a strong indigenous science base. This circumstance underscores the importance of federal support for the science and technology base as the main source of “patient capital” that builds knowledge and supports all firms. Continuing federal support for basic research is the foremost recommendation of those in industry itself.11 Today, the product cycle is contracting in high-technology sectors throughout the world. Software applications may be replaced after a year or two, and a com- puter model every three or four years. Private firms are driven by short-term market needs and demands for quick returns on science and technology investments. They must focus on improving existing products. Communications and computing were once the province of monopolies and near-monopolies that no longer exist because of federal policy and international competition. With a few exceptions, such as pharmaceuticals where patent protection is strong, support for science and technol- ogy that will not return benefits quickly is becoming more difficult to justify in the 79 

80 / SUPPLEMENT 4 private sector, because stockholders cannot see the immediate benefits of R&D expenditures. While the time from discovery to market has not shortened nearly as much in pharmaceuticals as in software or other sectors, drugs now are replaced more quickly once they enter the market because new agents are discovered that have stronger action or fewer side effects, and generic drugs are introduced quickly after a patent expires. Pharmaceutical firms have concluded that survival depends on increasing the pace of innovation, introducing more products in less time, and data show that strong connections to basic research performed outside the firm, as well as strong R&D capacity within it, predict success in discovering new drugs.12 Phar- maceutical executives report that their products depend more on federally funded science than any other industrial sector, and patent statistics bear this out.13 Thus even in a sector where private firms’ R&D investments are high, and encompass some basic research, the federal role remains vital. In the 1970s and 1980s attention turned to the dramatic technological ad- vances made in Japan. Success there depended on improving technologies discov- ered elsewhere more than on Japanese science. The Japanese postwar strategy followed the “technology first” strategy pursued with equal success by the United States early in this century. In light of Japan’s economic success and U.S. history, some observers began to question why U.S. taxpayer dollars should support basic research at all. The case histories tracing drug discovery and advances in computing and communications show that it can still take decades before the practical uses of knowledge arising from disparate fields become apparent. But once commercial opportunities are apparent, it is a flat-out race from the laboratory to the market. A “technology first” strategy falters as the time scale from discovery to application shortens, as the stock of untapped but freely available existing knowledge is de- pleted, and as many nations attain technological expertise. As one analysis of links between patents and citations to scientific literature noted,“The areas which are leading the industrial growth of the West are just those areas that are very science intensive, and it is hard to imagine sustained industrial growth in any country with- out a strong competence in the scientific fields which so closely underlie these modern technologies.” 14 Successful nations must not only build and sustain a firm technological base, but must also in the future make new discoveries and translate them into new technologies. Such achievements require a broad and deep base of science and technology, comprising not only those performing it but also those who monitor and use it. Those with foresight, even in Japan which now lacks a substan- tial science base, have recognized that neglect of science is a potentially fatal weak- ness in life on the technological frontier.15 “Until now Japan has depended primarily on foreign nations for the creative activities that generate the knowledge and technology for innovative products. . . . [F]rom now on Japan will have to create, ahead of other nations, knowledge and technology that will lead to new prod- ucts and markets.”16 80 

SUPPLEMENT 4 / 81 Today, Japan, several European countries, and many emerging nations can take advantage of new discoveries, a position the United States occupied alone several decades ago. Other nations have built technological capacities that rival, and in some areas surpass, those in the United States. They have strong education systems and pursue national policies to foster innovation. But none can match the breadth and depth of U.S. science and the fluidity with which results and people move back and forth between the university and the private sector. Federal science and technology, and its connections to a robust private sector, are among this nation’s most important comparative advantages. Government Support for Scientific and Technical Public Goods Is Central to Creating National Economic Advantage Federal funding—for basic research, applied research relevant to government missions, development of technology, and education and training in universities— encourages new firms to enter high-technology areas. Applied academic research funded by the federal government has helped produce many small high-technology firms. Students and professors move from the university to existing small firms. Sometimes they start new firms. Often they join well-established firms and rise through the ranks to make critically important decisions. New firms may grow into industrial giants or be swallowed by larger firms that incorporate their technologies. Patent rights for new discoveries derived from federally funded research go to the research institutions, giving them financial incentives for commercial application. Sun Microsystems and Silicon Graphics among computing companies, and Amgen and Genentech in biotechnology, did not exist 15 years ago. All were started from a base of academic science. Today they are major firms in their respective industries. These and other successes well up from the science and technology base supported by the federal government, which fosters competition and helps introduce new firms that champion emerging technologies. A fear that the benefits from federal support for university research will flow immediately to foreigners is misplaced. History suggests instead that where re- search takes place has a direct effect on where it is put to use. The high-technology firms clustered along Route 128 in Massachusetts, in the Silicon Valley in California, in suburban Maryland, and in Austin, Texas, all congregated around major federally supported university or government research centers. If industrial use and centers of capital were the decisive factors, the foremost centers for biotechnology and computer firms should have located instead near Tokyo, Frankfurt, Paris, London, or New York City. 81