Introduction

Defense expenditure has been a leading contributor to technological advance and regional growth in the United States from Eli Whitney's first contract in 1798 for muskets with interchangeable parts to the first operational teraflop computer.24 Indeed, the technological landscape of the United States has been shaped in no small part by the requirements of national security and other national commitments. 25 Similarly, universities have been a key source of regional economic growth in the United States, from the Civil War passage of the Morrill Act to Stanford and MIT startups.26

24  

For an informative discussion of the impact of military expenditure on the growth of the American economy, see Geoffrey Perret, A Country Made By War: From the Revolution to Vietnam—The Story of America's Rise to Power. Random House, New York, 1989. For the conditions surrounding the award of the contract to Whitney, see pp. 94-97. The teraflop computer was developed under a collaborative program by Intel, Sandia, and the U.S. Department of Energy. The teraflop is able to complete one trillion calculations per second, one thousand times faster than computers of a decade ago. The teraflops computer's memory capacity is also one thousand times greater than supercomputers of the 1980s. "Sandia and a Revolution in Engineering: A Fact Sheet," Sandia National Laboratories, Albuquerque, N.M., 1997. Available on the worldwide web at: http://www.sandia.gov/RIE/SandiaRIE.htm.

25  

For an overview of the U.S. innovation system and that of 15 other countries, see Richard Nelson, National Innovation Systems: A Comparative Analysis. Oxford University Press, New York, 1993.

26  

See, for example MIT: The Impact of Innovation, BankBoston Economics Department, Boston, Mass., 1997. While the report may overstate the role of MIT alone, the analysis nonetheless highlights the contribution of major universities, such as Stanford and MIT, in the development of clusters of technological innovation and economic growth. On the importance of clusters, See Michael Porter, The Competitive Advantage of Nations. Free Press, New York, 1990.



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--> Introduction Defense expenditure has been a leading contributor to technological advance and regional growth in the United States from Eli Whitney's first contract in 1798 for muskets with interchangeable parts to the first operational teraflop computer.24 Indeed, the technological landscape of the United States has been shaped in no small part by the requirements of national security and other national commitments. 25 Similarly, universities have been a key source of regional economic growth in the United States, from the Civil War passage of the Morrill Act to Stanford and MIT startups.26 24   For an informative discussion of the impact of military expenditure on the growth of the American economy, see Geoffrey Perret, A Country Made By War: From the Revolution to Vietnam—The Story of America's Rise to Power. Random House, New York, 1989. For the conditions surrounding the award of the contract to Whitney, see pp. 94-97. The teraflop computer was developed under a collaborative program by Intel, Sandia, and the U.S. Department of Energy. The teraflop is able to complete one trillion calculations per second, one thousand times faster than computers of a decade ago. The teraflops computer's memory capacity is also one thousand times greater than supercomputers of the 1980s. "Sandia and a Revolution in Engineering: A Fact Sheet," Sandia National Laboratories, Albuquerque, N.M., 1997. Available on the worldwide web at: http://www.sandia.gov/RIE/SandiaRIE.htm. 25   For an overview of the U.S. innovation system and that of 15 other countries, see Richard Nelson, National Innovation Systems: A Comparative Analysis. Oxford University Press, New York, 1993. 26   See, for example MIT: The Impact of Innovation, BankBoston Economics Department, Boston, Mass., 1997. While the report may overstate the role of MIT alone, the analysis nonetheless highlights the contribution of major universities, such as Stanford and MIT, in the development of clusters of technological innovation and economic growth. On the importance of clusters, See Michael Porter, The Competitive Advantage of Nations. Free Press, New York, 1990.

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--> The prominent role of defense expenditure and the American universities in the U.S. innovation system is undergoing a period of considerable change.27 With the increasing pressure on defense and university budgets presenting new challenges to traditional roles, the post-Cold War pressure on research and development (R&D) in the public sector and the realignment of R&D programs in the private sector have tightened R&D budgets and contributed to the expansion of collaborative research and development activities.28 Another element in this changing post-Cold War environment is the debate about the realignment of the missions of the U.S. national laboratories. However, despite the immense changes brought about by the end of the cold war, the traditional mission of Sandia National Laboratories remains paramount. At least for the foreseeable future, the national laboratories will retain major responsibilities for the nation's nuclear weapons stockpile. This task is infinitely more complex in the current test-free environment. To fulfill this unparalleled responsibility, the federal government has made and continues to make substantial investments in the laboratories, which have developed a tremendous store of technology and talent. In their role as a steward of the nation's nuclear weapons programs, the Sandia National Laboratories currently expend approximately $1.3 billion annually and employ over 7,000 people. Laboratories such as Sandia are seen as having unique capabilities, facilities, and equipment, such as the teraflops computer. In many cases, these government assets cannot be duplicated at a reasonable cost, or at all, by private firms. The laboratories are consequently seen as a unique national resource. Just as the laboratories offer much to the private sector, the laboratories themselves recognize that they cannot fulfill their mission in isolation, especially given today's rapid pace of innovation. To remain effective, laboratories such as Sandia and others understand that they must stay abreast of the rapid technological change taking place within the commercial arena. This means building and maintaining ties to the private sector. One means of encouraging this mutually beneficial exchange is the proposal, put forward 27   See D. Mowery and N. Rosenberg, Paths of Innovation: Technological Change in 20th Century America, Cambridge University Press, New York, (pp. 11-12, chapter 2). 28   Ibid. Mowery and Rosenberg suggest that the U.S. R&D system has undergone profound structural change this century, first through "the rapid exploitation by U.S. firms of the 'invention of the art of invention'" pioneered in Germany and, secondly, as a result of the shifting roles of industry, government and universities as funders and performers of R&D. They suggest that the post-war R&D system with its large, well-funded research universities and federal research contracts with industry was internationally unique and is now facing a period of substantial evolution as a result of the changes since 1989 in the international political environment. See also Mowery's recent article "Collaborative R&D: how effective is it," Issues in Science and Technology, 1998, p. 37.

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--> by the Sandia management, to develop a science and technology (S&T) park contiguous with the laboratory in Albuquerque, New Mexico. The Sandia S&T park is to exist as a legally separate entity from the laboratory itself. It is perhaps best viewed as a mechanism, in conjunction with companies engaged in cooperative research and development agreements (CRADAs) with Sandia, to help the laboratory fulfill its mission while also drawing on the unique assets of the Albuquerque region. An undertaking of this scope is inherently complex, and in the case of a national laboratory such as Sandia, there are a number of significant policy issues to be addressed.29 To ensure a complete discussion of the full range of issues relevant to this initiative, the Sandia National Laboratories asked the Board on Science, Technology, and Economic Policy (STEP) at the National Research Council to convene a symposium to discuss the Sandia plan for a S&T park. The STEP Board responded positively to this request in part because Sandia's role in Albuquerque and the S&T park raise a number of policy issues of direct interest to the STEP Board's current review of U.S. government-industry partnerships.30 Foremost among these questions is how best to manage government-industry partnerships to provide for effective exploitation of commercially relevant research, while taking into account the interests of taxpayers and broader U.S. national interests. This includes developing procedures to manage—and balance—the conditions of access by domestic and foreign corporations to technologies and activities that are at least indirectly supported by the U.S. taxpayer. Similarly, developing reasonable and accurate metrics to assess success and failure in a complex, long-term undertaking such as a S&T park is of major interest to the Sandia management. Last, the Sandia S&T parks initiative is one element of Sandia's interaction with the U.S. economy ranging from its extensive supplier networks to its existing partnerships with industry. All of these activities, and the assessment challenges they entail, are of great interest to the Government-Industry Partnerships project as a whole. To consider these and other issues, the STEP Board brought together 29   As David Mowery observed recently, "Managing R &D collaboration between industrial firms and universities or federal laboratories is difficult, and problems of implementation and management frequently hamper the realization of other goals such as collaboration. Collaborative R&D may accelerate the transfer of research results from these public R&D performers to industry, but the devil is in the details. The sheer complexity of the management requirements for R&D collaborations, especially those involving many firms and more than one university or laboratory, may slow technology transfer." "Collaborative R&D: how effective is it," op. cit., p. 40. For a comprehensive view of the "alternative futures," for the Department of Energy National Laboratories, see the "Galvin Report," Alternative Futures for the Department of Energy National Laboratories, U.S. Department of Energy, Washington, D.C., 1995. 30   The origins and goals of the project are described in the Preface to this report.

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--> top members of the Sandia management, expert regional economists, senior representatives from the private sector, key congressional staff, and leading officials from executive branch agencies. (A full list of participants is included in Appendix B). We were particularly pleased to have Robert Simon from the office of Senator Jeff Bingaman join us to introduce the topic and place the S&T park initiative in the context of broader U.S. S&T policy. While reminding us of the national desire of local authorities to see their localities become poles of self-sustaining growth, Simon also emphasized the key importance of innovation in the growth of the American economy. The symposium itself was divided into four main sessions. The first panel, led by Henry Kelly of the White House Office of Science and Technology Policy, presented an overview of recent experience from North Carolina's Research Triangle Park and the experience of the University of Texas and Austin itself. Dr. Kelly outlined a number of new national needs where the exceptional resources of the national laboratories may be able to make significant contributions, either to U.S. security or to broader national welfare. These could include collaborative research on topics as diverse and important as emerging environmental and health issues, public safety, and enabling information technologies. The next two speakers reviewed the experiences of several S&T parks generally considered to be successful, the Research Triangle Park in North Carolina and two initiatives in Texas, Austin's evolution as a high-technology center and the Houston Area Research Center. Both speakers emphasized the importance of a clear vision, effective leadership, broad-based support, and a sustained financial commitment. In focusing on the well known Texas and North Carolina cases, it was thought that their success would serve as useful models for the Sandia initiative.31 Notwithstanding the success of the parks described by Michael Luger and Jurgen Schmandt, Irwin Feller posed a number of challenging questions concerning the role of federal funds, opportunity costs, and the difficulty of measuring success in an enterprise with the long time horizons characteristic of a S&T park. The second panel, moderated by Thomas Mays, recently of the National Cancer Institute, addressed the key issue of technology transfer from the national laboratories to the private sector and the increasing need for the laboratories to have ready access to innovations generated through rapidly changing commercial technologies. In this session, Albert Narath of Lockheed 31   It is important to note that the term "S&T park" is used expansively here, and that such initiatives can take a number of different forms. Some initiatives may be rather directly tied to universities—often located on university grounds or nearby. Others may be distinct "incubators," that is, facilities that provide support services (e.g., shared office, accounting, laboratory space), which are located in business-park or campus-like settings. The Sandia park's relationship with a national laboratory is distinctive, but by no means unique.

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--> Martin, which operates Sandia National Laboratories, outlined the rationale for the park, and Sandia's Dan Hartley summarized the current park concept. (A more complete statement of the Sandia management's vision for the park is included in Appendix A.) In his comments, Kenneth Flamm cautioned that it is important for the labs to ensure that their CRADA partners are complementary to the core missions of the laboratories. Keeping this and other caveats in mind, Dr. Flamm noted that the S&T park concept could offer an opportunity to transition the laboratories toward more industry-oriented missions. Other speakers emphasized that the prime justification for projects of this type is to facilitate technology transfer with higher social returns for the nation as a whole. The third panel, chaired by Under Secretary for the Department of Energy Ernest Moniz, brought together leading experts in S&T parks as well as representatives of both small and large high-technology companies and organized labor. In his presentation, Dr. Moniz emphasized that the Department of Energy sees public-private partnerships as essential for the development of new technologies and for the maintenance of a high-technology supplier base for the laboratories. Dr. Moniz added that his department is in the process of developing principles for public-private partnerships. He noted, for example, that one principle would be that partnership agreements should benefit both the government and the industry. In the case of the laboratories, their unique knowledge and facilities should be the basis for successful collaboration. He also suggested that partnerships that create a public good, exploitable by many firms, should be encouraged; he added that participation by foreign firms can be appropriate to the extent that their participation provides aggregate benefit to U.S. taxpayers. Dr. Moniz also drew attention to a paradox of public-private partnerships. Partnerships pose risks for the management both in failure and in success. Failed partnerships are to be avoided because they waste federal funds. Yet worthwhile research partnerships necessarily risk failure. At the other end of the spectrum, successful partnerships can be criticized because private sector firms may profit from the success. In addressing metrics for success, Edward Malecki suggested that there are multiple criteria to consider. These include broad categories such as economic success (e.g., attracting firms and generating jobs) and more narrowly drawn categories such as developing entrepreneurial growth and creating a sustainable milieu for innovation, as policy makers in Europe have emphasized. He also underscored the importance of sustained linkages between government, university, and industry. The fourth session, moderated by Clark McFadden, addressed the policy challenges that must be taken into account by this type of initiative. These include issues such as funding and governance, appropriate levels and types of cost sharing and cost recovery, timely and equitable resolution of intel-

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--> lectual property questions, and the sometimes vexing issue of access to the laboratory facilities by foreign firms. Although this is admittedly a broad range of issues to take up in a single symposium, the discussion captured the many operational and policy challenges faced by the Sandia management as they move forward with the S&T park initiative. At this writing, the United States continues to enjoy sustained economic growth, even as prospects for the world economy become less certain. Whatever the immediate future holds, the pressures of global competition will continue to create new challenges for the United States to nurture and sustain growth in regions with quite different economic assets. The laboratories will remain a key element of the U.S. defense infrastructure, and, as such, must deploy the best technologies available. Linking the technological know-how of national laboratories to the commercial sector through a science and technology park represents an innovative approach to meeting these challenges. We hope this summary of the Sandia S&T park proposal contributes to a fuller appreciation of the policy issues raised by this initiative and to a better understanding of the assets and opportunities that the Sandia National Laboratories offer for the Albuquerque region and the nation. CHARLES W. WESSNER