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5 CONCLUDING OBSERVATIONS ON INDUSTRY AND GOVERNMENT MARITIME R&D This concluding section provides observations on the roles of public and private organizations in accomplishing improvements in technology development and application in the maritime industry. The most significant technology developments and applications in industry have occurred under conditions of a strong market outlook and favorable financial rewards from investment in research and development or capital equipment. Those conditions occurred in the segments of liner ship operating and marine terminals. More recently, shipbuilders have been able to achieve major productivity and management system improvements as the result of the Navy's fleet buildup, which is still underway. Finally, the inland waterways sector achieved dramatic increases in productivity through an investment in towboats, barges, and fleeting methods between the 1940s and 1960s. This investment was supported by an infrastructure provided through the Corps of Engineers, an expanding demand for movement of bulk cargos, until recently, and by heavy regulation of railroads which hampered competition, also until recently. All of these developments were accomplished by the operating corporations in the industry, but the government played important supporting roles in each case--providing the physical infrastructure (Corps of Engineers built and maintained waterways and harbor channels) and the market demand (Navy shipbuilding and Jones Act), and facilitating technology transfer and innovation (Maritime Administration). Incentives for industries to invest in the R&D process are strongest when they give the user a proprietary, competitive edge--e.g., cost reduction on U.S. Navy shipbuilding contracts or service advantages in international container traffic. This is because, for industry, the R&D process involves financial risk, a willingness to~make substantial capital investments, or a willingness to change established management and operating structures and practices. A depressed industry is less likely to take such risks on its own. Investors will support and make use of the R&D process when they believe it is in their business interest to do so. With sustained depressed conditions, the time may soon come when maritime managers are no longer able to justify any investment in the R&D process 31

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32 because of the low level of expected return on investment. Under these circumstances, collaborative, government-assisted R&D may become an increasingly instrumental element to improving or at least maintaining national productivity and competitiveness in the maritime industries. Much of MarAd's R&D effort in recent years has been directed at such collaborative projects with industry. Through the SNAME it has worked with industry to improve U.S. shipbuilding technology. With a coalition of liner ship operators, it is supporting advances in cargo handling technology. MarAd is also working with liner operators as well as U. S . labor unions to facilitate the application of more effective manning practices in U.S. vessels. These efforts have achieved broad national benefits to the industry and the country by facilitating technology transfer and the introduction and application of available technology. As a consequence of these efforts, HarAd is well positioned to continue to promote collaborative R&D within the maritime industries. Additionally, the MarAd should conduct substantially more R&D in support of its own capabilities to promote the U.S. maritime industries. It could focus on operational analysis, for example, to better understand the effects of safety and economic regulation on productivity and competitiveness. Similarly, impacts of structural changes in the maritime industries should be investigated. A particularly promising R&D area would be to provide the technical basis for eliminating or improving regulations that adversely affect the cost-effectiveness of the maritime industries; an example would be analysis of the long-standing international requirement for a dedicated radio operator on board ship and demonstration that the requirement has been made redundant by advances in telecommunications technology. Finally, work performed at the MarAd-owned, contractor-operated CAORF directly supports national requirements in harbor and waterway development. Work performed at CAORF has facilitated the application of simulators to, and improved the cost effectiveness of , waterway and harbor design in the U.S. In this and other ways, the HarAd has sought to strengthen the national capability to maintain and improve the nation's maritime transportation infrastructure and maritime technical capability. Other federal agencies concerned with the maritime industries (e.g., Coast Guard, Corps of Engineers, and Navy) have, in general, directed resources to R&D to meet their own mission requirements. The committee has carefully reviewed technology development and application in the maritime industries and has shown that there are serious concerns for the future. While the U.S. led the world for many years in development and application of maritime technology, it no longer does so. The modest sums available to the MarAd for investment in R&D are insufficient for the creation of new knowledge; they may be sufficient, however, to promote technology transfer. The conclusions of this report, contained in Chapter 1, delineate the roles and activities that industry and government should pursue If

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33 technology development and application in the maritime industries are to be improved in the support of domestic productivity and international competitiveness.

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