4
Government Roles and Priorities

The Federal Role

Discussions of U.S. science and technology policy have tended to focus on the federal government. The forum was intended to develop national goals and action items, so it gave equal weight to other participants in the U.S. research and innovation enterprise, including industry, universities, and state and local governments. Nevertheless, the forum participants recognized that the federal government will continue to be pivotal and that decisions made in the 1990s will probably influence federal policies for years to come. The forum was able to draw on the recent work of several other expert groups who have examined federal science and technology policies in recent years (Branscomb et. al., 1997; Council on Competitiveness, 1996; NAS/NAE/IOM/NRC, 1995).

As noted in chapter 1, a strong federal role in support of science and technology is a relatively recent phenomenon in the United States, dating from the post-World War II period. Defense was the predominant target for science and technology. Substantial amounts also have been spent on research and development (R&D) related to space (especially during the Apollo program), health, and energy. Investments in science and technology not aimed at specific agency missions traditionally have been relatively small. During the 1980s that began to change, as such programs as the multiagency Small Business Innovation Research program, the Advanced Technology Program of the Department of Commerce, the SEMATECH consortium of U.S.-based semiconductor companies and the Department of Defense, and the Engineering Research Centers program of the National Science Foundation were launched. Taken as a whole, however, these



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4 Government Roles and Priorities The Federal Role Discussions of U.S. science and technology policy have tended to focus on the federal government. The forum was intended to develop national goals and action items, so it gave equal weight to other participants in the U.S. research and innovation enterprise, including industry, universities, and state and local governments. Nevertheless, the forum participants recognized that the federal government will continue to be pivotal and that decisions made in the 1990s will probably influence federal policies for years to come. The forum was able to draw on the recent work of several other expert groups who have examined federal science and technology policies in recent years (Branscomb et. al., 1997; Council on Competitiveness, 1996; NAS/NAE/IOM/NRC, 1995). As noted in chapter 1, a strong federal role in support of science and technology is a relatively recent phenomenon in the United States, dating from the post-World War II period. Defense was the predominant target for science and technology. Substantial amounts also have been spent on research and development (R&D) related to space (especially during the Apollo program), health, and energy. Investments in science and technology not aimed at specific agency missions traditionally have been relatively small. During the 1980s that began to change, as such programs as the multiagency Small Business Innovation Research program, the Advanced Technology Program of the Department of Commerce, the SEMATECH consortium of U.S.-based semiconductor companies and the Department of Defense, and the Engineering Research Centers program of the National Science Foundation were launched. Taken as a whole, however, these

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civilian technology programs did not come close to the size of the federal investment in defense, health, energy, or space-related R&D. Just as science and technology policy discussions tend to focus on the federal government discussions of the federal role tend to focus on support of R&D in the budget. Yet the federal government made several other important policy changes during the 1980s that were as important as the launch of new programs involving direct support of R&D. One set of changes was aimed at easing the flow of science and technology from government laboratories and academe to industry. The federal government also instituted a temporary tax credit for industrial R&D, which has been renewed periodically. Finally, a number of changes have occurred in regulatory, trade, and competition policies. The latter changes, taking the forms of legislation and court decisions, have had a major, sometimes unintended influence on U.S. innovation. The court-ordered breakup of AT&T in the early 1980s was one such change. Federal science and technology policy has been politicized highly during much of the 1990s. At the start of the first Clinton administration, several technology programs aimed at enhancing economic performance and leveraging private-sector R&D investments to meet government goals were expanded rapidly. Those programs became a visible target for congressional Republicans seeking to reduce the federal role in the economy after their victory in the 1994 midterm elections. The large continuing federal deficit and the need for austerity heightened the stakes. The situation has changed dramatically in the last year or so. Efforts to eliminate civilian technology programs in recent years have been unsuccessful, although growth has been flat. Although attacks on ''corporate welfare'' resonate among many in the electorate, legislators in both parties appear increasingly open to forging a new bipartisan consensus on a larger federal role in science and technology. Finally, the dramatic improvement in the federal government's fiscal position in recent years appears to have lowered the political heat related to debates over specific programs. What will the emerging consensus on federal science and technology policy look like? Several common themes emerge from the forum discussions and recent reports from various groups. There is broad recognition that industry will play the dominant role in funding U.S. R&D, particularly civilian R&D not linked to particular agency missions. Therefore, the federal government must act more as a partner and facilitator than as a contractor or enforcer. In addition to forging effective science and technology partnerships across agencies, this will involve working closely with industry, academe, and state and local government. In playing the role of partner, the federal government has numerous tools besides direct R&D support, such as extension programs and dissemination of information about global science and technology developments. A continuing challenge will be to restructure the federal laboratories so that they are able to contribute effectively to U.S. innovation in a changing environment.

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The federal role in science and technology, although subsidiary to industry's, is no less crucial. The federal government will continue to carry the primary responsibility for funding fundamental research in science and technology, including sustaining the infrastructure of institutions and facilities that perform excellent research and play a critical role in educating and training the next generation of scientists and engineers.19 Support of fundamental research and broadly relevant, use-oriented research in a number of engineering and technology fields is of current concern because of cutbacks by the Department of Defense and industry central laboratories in some fields. For example, most of the federal support of university research is now health related, and it will be important to ensure that other fields receive sufficient funding to take advantage of opportunities and produce the human capital needed to sustain U.S. leadership. The federal government also will need to refine mechanisms for funding use-oriented research in partnership with private entities. In principle, government should not fund research that industry would fund on its own or research that would deliver disproportionate benefits to specific companies unless an important non-economic mission is being advanced. A federal government commitment to double science and technology spending within a limited period, which is being debated, could be an important first step toward revitalizing the federal role in promoting science and technology for economic growth. State, Local, and Regional Initiatives One of the truly important developments in the use of science and technology resources in aid of economic development during the 1980s and 1990s was the proliferation of state-sponsored partnerships among government, universities, and the private sector. The states were testing and demonstrating new approaches to link R&D with industry. The ability to capitalize on university resources has evidenced itself over the last few decades in Massachusetts's Route 128 complex, California's Silicon Valley, and North Carolina's Research Triangle Park (RTP). More recently, however, with the advent of severe economic downturns in the former "Rust Belt" states during the 1970s and 1980s, more and more attention was focused on state governments' need to use partnerships between sectors to create new bases for growth. Typical of these programs were Pennsylvania's Ben Franklin Partnership and Ohio's Thomas Edison Program, each designed to use state funds as a catalyst to mobilize university and entrepreneurial resources to create new sources of economic growth and revitalize existing industries. Those pioneering efforts pro- 19   This is not meant to minimize the contributions of other sectors. For example, state and local governments provide most of the funding for construction and repair of science and engineering research space at public institutions. See National Science Board (1998, p. 5-16).

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vided a model for other states, localities, and regions to follow. Today, most states are undertaking some partnership activities in science and technology as are many localities and regions, including metropolitan areas (Coburn, 1995). The states can be divided into several groups. One group includes states in which active government science and technology programs have aided economic development, such as North Carolina, New York, Pennsylvania, and Ohio. A second group boasts strong high-technology growth aided by state spending on infrastructure (e.g., on research universities), where focused programs on innovation have not played as important a role, such as California, Texas, and Massachusetts. A third group includes the states involved in the Experimental Program to Stimulate Competitive Research program, with lower economic growth and less science and technology activity. What lessons can be learned from the experiences of state, local, and regional initiatives? Many forum participants have personal involvement with these initiatives and provided important insights. The case of northeast Ohio was covered in detail.20 Over the past decade and a half, the region has been developing new approaches to harness science and technology for economic growth. The main mechanism is a system of technology intermediary organizations.21 A Technology Leadership Council links these organizations. Several industry-technology areas have been identified as particularly important, including automotive, aerospace, biotechnology, advanced materials, and information technology. The region also has developed several financing vehicles that provide capital for new companies and related infrastructure. Although the precise effect of such efforts is difficult to quantify, several indicators and trends attest to the value of collaboration among government, university, and industry to enhance science- and technology-led growth in regional economies. For example, manufacturing employment in northeast Ohio has stabilized, and the Great Lakes Manufacturing Technology Center receives $5 million in annual project funding from area companies. Incubator tenants in the region have returned state investments in the form of payroll taxes. The northeast Ohio biomedical research base has tripled in recent years, and company formation is improving. Companies launched during the past 15 years are contributing to the regional economy. One important trend that emerged in the discussions is the growing importance of federal funding for state, local, and regional science and technology efforts. For example, in 1985, northeast Ohio's technology intermediaries had a collective annual budget of less than $1 million, of which 58 percent came from 20   This section draws on the presentation by Dorothy Baunach on "The Northeast Ohio Experience" at the forum. 21   These intermediary organizations include the Cleveland Advanced Manufacturing Program, the Edison BioTechnology Center, the Edison Polymer Innovation Corporation, the Great Lakes Industrial Technology Center, and the Ohio Aerospace Institute.

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the state government and 41 percent from industry and foundations. In 1997, the collective annual budget of a larger group of organizations was $57 million; 60 percent came from the federal government, 22 percent from state government, and 18 percent from industry and foundations. In 1995, the White House Office of Science and Technology Policy created a task force to recommend ways of improving the state-federal science and technology relationship, with particular regard to maximizing the economic benefits of greater cooperation. The task-force report called for presidential leadership to create a truly national, as distinct from federal, science and technology policy, taking into account the roles and contributions of states, localities, and the private sector (State-Federal Technology Partnership Task Force, 1995). It specifically recommended that a high-level mechanism be established to involve the states in policy development; that each state fashion its own science and technology strategy; that a national strategy be implemented to catalyze private-sector investments in technology; and that special emphasis be given to using technology to promote excellence in manufacturing. Out of those recommendations came the creation in 1996 of the U.S. Innovation Partnership (USIP) by agreement between the White House and the National Governors' Association. USIP is intended to serve as the policy-making mechanism to foster coordinated development of national science and technology policies. At the same time, the State Science and Technology Institute, based in Columbus, Ohio, was formed to provide a focus for activities at the state level and a clearinghouse for the exchange of information on best practices and experiences among state officials and with their federal counterparts. As the time-honored laboratories of democracy, state governments can play an increasingly important role in the effort to capitalize on our vast science and technology resources. The progress made during the past decade in furthering coordination between federal and state programs is promising and should be capitalized on to the greatest possible extent. One possibility is a program of matching grants to industry-university partnerships with local and state governments to harness science and technology for economic development. USIP could play a key role in undertaking such a program, which might be supported by federal, state, and local funding. Foreign Government Policies and Partnership Efforts The discussion of the global context in Chapter 3 provides some comparative information on science and technology policies in the United States and other developed countries. In assessing trends in U.S. government policy, note that other countries and regions are focused on harnessing science and technology for economic growth (Government-University-Industry Research Roundtable, 1998a). One example of a successful foreign government-university-industry initia-

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tive discussed at the forum is the Hsinchu Science-Based Industrial Park in Taiwan (HSIP).22 HSIP was founded in 1980 to attract investment in high-technology industries. Taiwan's government has since invested over $520 million in land acquisition and infrastructure. The park capitalizes on the proximity of Chiao Tung University, Tsing Hua University, and the Industrial Technology Research Institute. HSIP includes factories, laboratories, and residential areas. As of 1996, there were 203 companies operating in HSIP, of which 36 were foreign owned and 167 were domestically owned. Many of the companies were founded by returning expatriates. Park tenants had combined revenues of over $11 billion in such industries as semiconductors, computers and peripherals, telecommunications, optoelectronics, precision machinery, and biotechnology. HSIP firms invested over $500 million in R&D in 1996. Of the 54,806 people employed in HSIP, 59 percent possessed at least a junior college or technical college degree. By 2006, the number of companies and the number of employees in the park are expected to double, and the total value of goods is expected to increase to $58 billion and R&D expenditures to $2.5 billion. The government has acquired additional land for expansion. The HSIP model is seen as so successful that the government is taking steps to build a similar science-based industrial park in southern Taiwan. HSIP is an outstanding example of the initiatives that foreign economies are pursuing to promote science- and technology-based growth. HSIP's focus on the generation of jobs and revenue, including the specification of goals to be reached over a 10-year time horizon, is striking. Perhaps the closest U.S. analogy to HSIP is RTP in North Carolina. It was founded in 1959 and almost 40,000 people work there. About three-fourths of the 133 organizations in RTP are doing research-related business. 22   Most information was obtained at the HSIP World Wide Web site, at www.sipa.gov.tw. See also Mathews (1997).