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--> 3 Public Policy Information Needs Public policies whose purpose is to influence innovation, either directly or indirectly, include R&D support programs, corporate tax policy, intellectual property rights and antitrust enforcement, environmental and health and safety regulation, and economic development programs. Each policy area has its own information requirements, for uses ranging from program impact analysis to the identification of technology trends in particular industries. In addition to meeting public policy information needs, science and technology data contribute to private corporate planning. However specific their information needs, both public and private policy makers need to draw on a set of basic, national aggregate statistics on industrial innovative activity to provide context and benchmarking comparisons. The overlap of public and private interests in better indicators and analysis of research and innovation creates opportunities for public-private partnerships in data collection and dissemination. Jeanne Griffith, director of the NSF's Science Resources Studies Division, observed that the NSF's interest in sponsoring the workshop derived from its legislative mandate to provide a clearinghouse for the collection and interpretation of data on scientific and engineering resources in the United States and to provide a source of information for policy formulation by other federal government agencies. She stated that in this role NSF must be able to identify priorities for data collection and analysis. Are the data, for example, addressing the most pressing policy issues and reflecting important industry trends such as the increasing cross-national R&D investment and collaboration between firms and with universities, the growing importance of service-sector R&D, and the emergence of new industries such as biotechnology, information technology, and telecommunications?
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--> Alan Ladwig, associate administrator for policy and plans at the National Aeronautics and Space Administration, noted that in the agency's efforts to refocus its R&D on cutting-edge science and technology, officials confront the difficulty of measuring the contribution of long-range R&D to the economy and society—a concern compounded by the requirements of the Government Performance and Results Act (GPRA). The workshop participants identified various types of policy-making needs for innovation information, including data for program development, program evaluation, budget allocations between R&D and non-R&D programs and among fields of research, and the development of standards and regulations. A distinction was made between (1) information acquired through a national aggregate statistical program in the area of science, technology, and innovation and (2) information required for program evaluation, program operation, or program development. The first type of information involves developing industry and national aggregate databases that reflect broad trends in industrial innovation, linked to other economic data, and tracking these developments with relative consistency overtime. The second type of information involves more specialized, often industry- or technology-specific, data. The utility of program-specific data is enhanced, however, if linked to more aggregated data and therefore to an understanding of the broader trends. Although this workshop focused primarily on aggregate data, it was recognized that as the economy and policies change and as the understanding of innovation processes evolves, the composition of the national innovation data sets must be periodically revisited. At the same time, policy agendas constitute moving targets. The design or improvement of a system of national innovation statistics should focus on establishing a relatively stable foundation or core set of indicators but with the realization that the meaning of particular indicators may change over time. Collectors and users alike should regard indicator data as a dynamic body of information. At the workshop, several officials of federal agencies with diverse responsibilities described how they perceived their needs for information about industrial innovation. Their comments are summarized in the following. Macroeconomic Policy Tim Brennan, senior economist on the staff of the Council of Economic Advisers, noted that better information on R&D and innovation would inform federal budget decisions regarding the allocation of funds in support of science and technology. To address the basic question of how much the government should spend on R&D and in what areas, information is needed on the benefits and costs of subsidizing R&D and on the market failures that justify government intervention, because private incentives left to themselves will not produce socially optimal results. Markets provide reasonable tests for other activities, but with respect
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--> to innovation, there may be too little investment in areas where the society as a whole would benefit substantially from the results of R&D but where firms cannot appropriate sufficient economic benefits to justify significant commitments of resources. When assessing the economic benefits and costs of innovative activity, economists try to estimate the gains to the economy overall from an additional dollar spent on R&D in a particular area. The policy choice can be posed in any of three forms. First, should the federal budget be increased to pay for more R&D? That is, do the gains from additional R&D exceed the losses, economic and political, from raising taxes or increasing the deficit? Second, within the context of a fixed overall budget, should R&D be preferred to other, non-R&D budget expenditures? That is, do the gains exceed the losses from taking money away from other areas such as law enforcement or Medicaid? Third, given a fixed R&D budget, how much should be spent on R&D in one area relative to R&D in other areas? Measuring how much and what kind of innovation occurs does not reveal whether there is a market failure warranting public support, nor does it indicate the marginal benefits of spending an additional dollar on a particular sector–whether enough resources are going into a particular area. It is therefore important to try to develop new indicators of market failures. Even if market failures cannot be measured precisely, improved innovation data could help determine whether federal support is likely to promote or replace private innovation investment. Antitrust Enforcement Tim Daniels, assistant director for antitrust at the Federal Trade Commission (FTC), reported that in 1995 the Department of Justice and the FTC jointly issued Intellectual Property Guidelines (U.S. Department of Justice and FTC, 1995) outlining the approach both agencies now take in analyzing the competitiveness of markets with high rates of R&D investment and innovation. The guidelines use the terms "technology markets" and "innovation markets" to help identify circumstances in which licensing practices or mergers are likely to retard the development of new products or reduce the number of promising new research projects that are under way. Applying the concept of an innovation market is necessarily a speculative undertaking because it involves identifying the private and public parties undertaking research that may lead to successful commercial products that are not yet on the market. Daniels cited as an example the 1996–1997 merger of Ciba-Geigy and Sandoz pharmaceutical firms. The FTC judged that these two firms controlled key intellectual property assets for the development of gene therapy products generally and in particular applications such as cancer. The Commission accordingly issued a consent decree requiring the firms to license some of their
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--> intellectual property to a third firm and to make some of their intellectual property available to the public domain through compulsory licensing. Any strengthening of the links between the indicia of innovative activity (e.g., patents, R&D spending) and the probability of marketable products would improve the analysis underlying antitrust enforcement decisions. Market-based valuations of corporate R&D portfolios would be helpful, as would indicators of when research is in its initial or mid-term stages. Environmental Regulation Kevin Teichman, associate director for science at the Environmental Protection Agency (EPA), stated that the agency requires and uses information on innovative technology in a variety of ways: Setting standards, Implementing standards, Providing nonregulatory information to consumers so they can make appropriate choices, Assessing international activities that affect U.S. air pollution and other issues addressed by the EPA, Helping plan EPA's research program, and Evaluating the effectiveness of the research program. One example is the requirement of the Clean Air Act that EPA define the "maximum achievable" control technology. This uses a metric of the best 12 percent of existing control technologies available for any given source. The basis for setting the standard in this case is information from an EPA survey of available technologies. Another example of how EPA's research and information dissemination function requires substantial use of data on new technologies and innovative activity is the agency's activities in support of better indoor air technologies, practices, and materials. Survey information on existing and planned technologies plays a large role in EPA's nonregulatory functions. Improvements in national statistics on new technologies and innovative activities of firms as well as the integration of EPA's S&T databases with those of other agencies would provide useful comparative data. Trade Policy Jim Murphy, assistant U.S. representative for Europe and the Mediterranean in the Office of the U.S. Trade Representative (USTR), said that better information on technologies coming into the marketplace would enable USTR to be more
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--> effective in ensuring that foreign markets are open to U.S. products. Better information on specific technologies and improvements in the national S&T data system generally could facilitate common international characterizations of new technologies. Congressional Concerns Tom Weimer, staff director of the Subcommittee on Basic Research of the House Committee on Science, listed several issues of concern to Congress that might be more easily resolved with information on research and innovation: What are appropriate levels of direct R&D support in light of the priority to reduce the federal budget deficit? What relative emphasis should be placed on direct R&D support versus tax incentives for private investment? Should the much-discussed decline of corporate spending for long-term research and the shift toward shorter-term R&D horizons influence the federal R&D portfolio? How should graduate training of scientists and engineers for the private workforce be supported? How should the outcomes of both basic research and technology development be measured to meet the objectives of the GPRA?
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