The United States still has the highest overall industrial productivity in the world. However, the rate of productivity growth is higher in some other nations, and the gap between U.S. performance and performance in other countries has been narrowing. Some of this erosion of advantage was inevitable. U.S. industry could not have remained as far ahead of industries in Europe and Asia as it was at the end of World War II. Nor would this have been desirable, given the larger markets created by expanding economies abroad.

As described earlier, the new knowledge resulting from scientific research and development has become a major contributor to industrial success. But new scientific discovery by itself is rarely enough to raise industrial performance. Scientific knowledge must be effectively extended and applied through engineering into successful technologies.

For commercial technologies, the federal government traditionally has chosen to support basic research and mission-driven research and to leave the development and application process largely to industry. In today’s more competitive and technologically interdependent world, this approach may no longer be sufficient. Companies in other countries, sometimes favored by national industrial policies, are equaling and in some cases surpassing U.S. firms in specific areas of industrial technology, which has helped them capture market share and high-paying jobs.1 The federal government increasingly requires strong U.S. industries to meet national objectives in such areas as defense, public health, and environmental protection.2 And many corporate R&D programs are now focusing more on shorter-term objectives with financial returns that the research-performing company can capture rather than on longer-term objectives with less easily captured benefits but where returns to the nation may be substantial. For these reasons, the government should now take a more forceful approach to the development and adoption of technology than it has in the past.

That approach, however, must be channeled. Given the



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