up in defense spending by the Reagan Administration. But over the last decade government R&D as percentage of GDP has fallen uniformly. Intriguingly, the private sector share has grown more or less continuously, so that now it stands at about 1.5 percent of the GDP compared with the government's 1 percent. So industry has become the dominant source.

Also, R&D as a percentage of sales by U.S. companies started shooting up in the 1980s from its historic level of just under two percent. This is very significant. What has happened is the increase is concentrated in two areas: information/communications/electronics, and pharmaceuticals/biotechnology. What we have is a transformation in the industrial research base of the United States that seems to have gone relatively unnoticed. Our models of the industrial research process which are based on the chemical and manufacturing industries represent an increasingly small part of what is going on. This shift has enormous implications. For example, we have continuing shortages of skilled people in information technology related areas. Companies are going to India and elsewhere to fill these jobs. Going forward, the players in the U.S. R&D enterprise, including universities, will need to be more agile in this dynamic environment.

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