Chapter 5
Recommendations

In the Goals report, COSEPUP (1993) recommended that, for the sake of the nation's well-being, the United States should be among the leaders in all major fields of science, and preeminent in selected fields of national importance. That report also described the need for an appropriate mix of short-term and long-term research: Short-term research is needed to bring us tomorrow's new products and ideas; long-term research is needed to ensure the flow of new products and ideas for the day after tomorrow.

The current report reinforces the Goals report in asserting that research leadership is prerequisite to such national objectives as economic competitiveness, public health, better education, a clean environment, and improved quality of life. It also extends that assertion, however, with the following observation: If the United States is to optimize the returns on its research investments, it must maintain effective mechanisms to capitalize on research—that is, to transform the fruits of research into national benefits.

On the whole, the United States has succeeded both in performing research at very high levels across all major fields and in capitalizing on that research for the benefit of society. U.S. researchers work at or near the forefront of most fields, where they are able to make or contribute to basic discoveries. In addition, a favorable capitalizing environment encourages the extension, application, and utilization of these discoveries and of other discoveries made abroad.

A particular U.S. strength is movement from fundamental breakthroughs to first demonstrations or product applications, as exemplified by the development of monoclonal antibodies and other biotechnology advances, as well as most of the hardware and software technologies underlying personal computers and the Internet. The belief expressed by some in the 1980s and early 1990s that other countries have nimbly leapt ahead of American companies to transform U.S. research breakthroughs into hit products is an oversimplification, according to the working group's investigation. In cases where other countries did succeed in profiting from U.S. inventions, such as semiconductor memory, flat panel displays, and VCRs, this was generally due to their ability to improve existing products or adapt them to meet the needs of new markets. As discussed in other parts of this report, making incremental improvements and creating new markets for existing technology are crucial elements of capitalization and will remain so in the future. However, from the examples examined by the working group, it appears that countries lacking a criti-



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--> Chapter 5 Recommendations In the Goals report, COSEPUP (1993) recommended that, for the sake of the nation's well-being, the United States should be among the leaders in all major fields of science, and preeminent in selected fields of national importance. That report also described the need for an appropriate mix of short-term and long-term research: Short-term research is needed to bring us tomorrow's new products and ideas; long-term research is needed to ensure the flow of new products and ideas for the day after tomorrow. The current report reinforces the Goals report in asserting that research leadership is prerequisite to such national objectives as economic competitiveness, public health, better education, a clean environment, and improved quality of life. It also extends that assertion, however, with the following observation: If the United States is to optimize the returns on its research investments, it must maintain effective mechanisms to capitalize on research—that is, to transform the fruits of research into national benefits. On the whole, the United States has succeeded both in performing research at very high levels across all major fields and in capitalizing on that research for the benefit of society. U.S. researchers work at or near the forefront of most fields, where they are able to make or contribute to basic discoveries. In addition, a favorable capitalizing environment encourages the extension, application, and utilization of these discoveries and of other discoveries made abroad. A particular U.S. strength is movement from fundamental breakthroughs to first demonstrations or product applications, as exemplified by the development of monoclonal antibodies and other biotechnology advances, as well as most of the hardware and software technologies underlying personal computers and the Internet. The belief expressed by some in the 1980s and early 1990s that other countries have nimbly leapt ahead of American companies to transform U.S. research breakthroughs into hit products is an oversimplification, according to the working group's investigation. In cases where other countries did succeed in profiting from U.S. inventions, such as semiconductor memory, flat panel displays, and VCRs, this was generally due to their ability to improve existing products or adapt them to meet the needs of new markets. As discussed in other parts of this report, making incremental improvements and creating new markets for existing technology are crucial elements of capitalization and will remain so in the future. However, from the examples examined by the working group, it appears that countries lacking a criti-

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--> cal mass of cutting edge research in a given field are rarely able to take international science and engineering breakthroughs and proceed directly to successful commercialization. As discussed in Chapter 4, the key elements contributing to U.S. ability to capitalize on investments in science and technology are (1) strong, stable funding for a diverse national portfolio of science and technology investments; (2) a favorable environment for capitalizing, characterized by strong incentives for innovation and free movement of ideas and people; (3) a skilled, flexible science and engineering human resource base; and (4) mechanisms for research and capitalization that support cooperation between academic, industry, and government sectors. In some respects, these recommendations echo those found in other recent reports. COSEPUP is encouraged that this effort will contribute to a growing national consensus on key issues of science and technology policy. Although several of the tasks that COSEPUP identifies will be familiar to those regularly engaged in these issues, they remain critically important for the ability of the United States to capitalize over the long-term. Recommendation 1: The allocation of federal research funding needs to incorporate an explicit and continuing concern for capitalizing on research Assessment U.S. capitalization efforts have benefited from the strength and diversity of the U.S. research funding portfolio over a long period of time. Strong private and public support has allowed the United States to remain at the frontier across all fields. Diversity in terms of missions, funding sources, time horizons and performing institutions has encouraged the development of superior human resources and infrastructure that have contributed to capitalization. Changes in the government and industry funding environment that do not take these features into account may jeopardize the capitalizing process in the future. Action Points 1. The federal government should provide sufficient funding to sustain a strong, diverse portfolio of science and technology investments. A particular current task for the federal government is to act as "funder of last resort" of long-term science and engineering research to compensate for general pressure toward short-term research. The process of discovery is particularly vibrant when basic science and engineering research is conducted in proximity to applied and developmental research. Curtailment of either category reduces synergies and dilutes the intellectual climate. Three specific concerns about trends in federal funding were raised during the workshops. First, the working group was told that universities, industry, or both

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--> need to perform more long-term research in several fields, including information networks, some areas of catalysis, computational biology, and semiconductors. In fields where commercialization is advancing rapidly, government agencies may not see the need for long-term research, and industry may have weak incentives to step in. A second concern is that in fields such as materials science there is scant public awareness of the need for technological research and the maintenance of expensive systems on which advanced research depends (COSEPUP, 1998). Declines in basic technological research also are caused by reduced agency budgets. A third concern is that more focused efforts are required to capitalize on research in areas of national importance where strong capitalization pathways do not exist. One possible example is the application of research on cognition and learning to education. Improving capitalization on social sciences research to address U.S. health and social needs may be a fertile area for more intensive study. 2. The federal government, working with the science and engineering community, should continue to develop tools for monitoring and assessing the national science and technology investment portfolio. Evaluations of research funding allocations should recognize the importance of capitalization and seek to identify the long-term contributions of research to meeting national goals, both within specific fields and across the U.S. science and engineering enterprise. In recent years, there has been growing interest in measuring the effectiveness of government agencies and programs in achieving stated goals. One significant manifestation of this trend is the Government Performance and Results Act of 1993 (COSEPUP, 1999). Although early attempts are under way to develop meaningful metrics and tools, such as benchmarking studies, surveys, and quantitative gauges, evaluating the payoffs of long-term knowledge-driven research is inherently difficult. These tools should be sophisticated enough to assess conditions not only in research-related activities but across the spectrum of conditions that influence capitalizing, from human resources and trade policies to antitrust regulations and capital formation. Recommendation 2: Maintain a favorable economic and regulatory environment for capitalizing on research Assessment One of the reasons the United States has been so effective at capitalizing on research is that it maintains a relatively favorable environment of economic conditions, regulatory laws, tax structures, and access to capital. Recently, the capitalizing climate has been especially favorable because of the availability of venture

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--> capital and other forms of private financing to launch science- and technology-based ventures. These interlocked conditions have not always been as favorable as they are today. For example, there was virtually no contribution from venture capital financing before a sequence of regulatory actions two decades ago (see Chapter 3). The magnitude of such discrete actions may seem modest when they are achieved, but their cumulative power is great. This power can be illustrated by the great discrepancies in economic progress achieved by nations that have had essentially equal access to public scientific knowledge (Patel and Pavitt, 1994). As a nation, we should continue to improve our understanding of how the capitalizing process works and to maintain and improve its effectiveness. In the fields that the working group has examined, there appeared to be no general, systemic barriers. Some fields appear to face specific serious capitalization challenges, such as the application of research on cognition and learning in education, which could be examined in more detail through a more focused study. Should the pace of capitalizing falter in the future, the nation will face the challenge of identifying causes and finding solutions, just as private firms learn to pinpoint problems and take corrective steps when they lose market share.1 Action Points 1. Federal and state governments should ensure that individuals and institutions continue to have strong incentives to capitalize on research. This is especially important when research has been supported by public funds. Public policy tools include economic policies, regulations, standards, procurement, taxation, patent and copyright protection, and consistency of funding over time. 2. Universities should continue to review and update policies that affect capitalizing on research. Universities play an important and growing role in the capitalizing process. In some fields, such as the life sciences, this role has been direct and prominent. Yet there is considerable disagreement over how universities can sustain and expand their contributions to capitalization in ways that do not conflict with their core educational mission. For example, some universities have allowed investigators the freedom to own equity in companies, and to share the profits of patented discoveries as sources of institutional income. Institutions may even assist faculty in 1.   Trends that would point to a faltering pace of capitalization in the United States might include (1) the emergence of large, persistent mismatches in the supply of and demand for science and engineering talent across a wide range of fields; (2) a slowdown in the growth of significant U.S. industrial activity based on U.S.-generated science and technology; and (3) increased foreign capitalization on U.S. science and technology without increased U.S. capitalization on foreign science and technology.

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--> negotiating agreements with industry. At the same time, excessive faculty involvement in off-campus activities may weaken the institution's teaching and basic research functions. Approaches that work in one field or institution may not be appropriate in another setting. Recommendation 3: Regard the education and training of scientists and engineers as an essential ingredient for capitalizing on research Assessment It goes without saying that discovering new knowledge depends on human resources—well-educated scientists and engineers. It is less apparent that those same scientists and engineers often play equally important roles in capitalizing on research—developing it, applying it, transforming it into applications of value to society. The study has shown that the ability of superior talent to move across sectoral and disciplinary boundaries has contributed greatly to U.S. ability to capitalize. The universities that educate and train scientists and engineers thus have a double duty: to educate and train not only those who will have careers in research, but also those who will become entrepreneurs, managers, consultants, investors, or policy makers. Universities also can play a more active role in helping students to prepare for these roles. In recent reports, COSEPUP (1995, 1996b) discussed the steps that universities and faculty can take in this area and developed specific suggestions on implementation. The apparent simultaneous shortage of skilled people in the emerging area of bioinformatics and the glut of new Ph.D.s in the life sciences is one example of a current mismatch. Universities, working with the federal government and industry, need to develop ways of responding to emerging human resource needs while maintaining their traditional strengths. Action Points 1. Universities, cooperating with science and engineering societies, government, and industry, should develop better mechanisms to recognize signals of manpower shortages or gluts, and communicate this information to students. Such signals include the simultaneous underutilization of well-trained people in established fields and shortages of well-trained people in emerging fields. Students, especially early in their careers, need current information and projections to make wise choices about the course work and other learning experiences they require. In the past, efforts to predict supply and demand of scientists and engineers have not been very successful. Mismatches between supply and demand in science and engineering labor markets cannot be eliminated, but it should be possible to reduce them.

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--> 2. Enhance diversity in funding mechanisms for advanced science and engineering education, and develop ways to measure the effects of alternative approaches. To a large extent, a student's activities are determined by the kind of support received. Research assistantships support students by employing them to work in the research program of the advisor. Although many students benefit from this close association with a single advisor, others would benefit from more autonomy in choosing courses, research projects, and perhaps off-campus internships. Federal agencies should continue recent efforts to adjust their funding mechanisms to encourage more innovative approaches to advanced science and engineering education in universities. 3. Industry, universities, and government must recognize the importance of lifelong learning for the nation's science and engineering human resources. Recommendation 4: Build stronger partnerships between academia, industry, and government Assessment As more businesses turn to partnerships to supply new techniques and knowledge (see Chapter 3), the transfer of technology needs to be as seamless as possible. A major strength of U.S. research and capitalization on that research has been the flow of people and ideas between universities, industries, and government. Nearly all of the successful examples of capitalization examined by the working group have depended on the collaboration of scientists and engineers who have diverse perspectives, time frames, and talents, and who represent the whole web of public, private, and educational institutions. This web has become far more complex in recent years, as many large corporations reach outside the firm to rely on universities, suppliers, and subcontractors as sources of research. Similarly, technology-oriented start-ups that are too small to support basic research programs often depend on close contacts with university researchers. Yet, it is necessary to have realistic expectations about partnerships. For example, government-industry partnerships cannot be expected to substitute for either the government's responsibility to serve as funder of last resort across all major fields or the responsibility of individual companies to make the research investments that will enhance shareholder value over the long-term. Nevertheless, experiments with partnerships over the past 10 years have yielded positive examples and lessons. Action Points 1. Governments, industries, and universities should continue to experiment with partnerships and consortia, work to lower barriers,

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--> and evaluate programs so that lessons can be incorporated into future collaboration. The overarching goals of partnerships should be to conduct mutually beneficial research, invigorate education, and capitalize on research for the benefit of society. Partnerships should focus on precompetitive work, leaving product development to the private sector. Industry should share costs and take the initiative in research directions. Examples to be emulated include the Semiconductor Research Corporation and the Data Storage Systems Center [see discussion in Chapter 2]. 2. State and federal governments can help to arrange new partnerships. Now that the role of the federal government as guaranteed purchaser has diminished, it has the opportunity to create a new role as facilitator, funder, collaborator, and information resource for both industry and academia. It can make long-term investments in a "knowledge-based infrastructure"—the capacity of the entire system of private entrepreneurship, human resources, investment, and advancing frontiers of technical knowledge. State governments increasingly are able to deliver technology and training services (e.g., through community and technical colleges) and, more generally, to assist in technology diffusion and utilization. Through local networks, they often can play an effective role in integrating training and education.