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2 THE ROLES OF INDUSTRY AND GOVERNMENT IN THE R&D PROCESS3t In the United States, there appears to be a general consensus that the private sector is the preferred sponsor of business activity. As a corollary, it is concluded that the government should refrain from direct participation, or sponsorship of economic enterprise, other than in exceptional circumstances. However, in certain areas,the exceptional circumstances appear to be sufficiently prevalent as to dim, if not to obscure, the principle. Certainly, in the maritime industries, the complexities of government versus private sector roles are especially pronounced. The U.S. maritime industry as it exists today (similar to maritime industries of other countries) only partially resembles a market driven economic entity either in its relationship to the U.S. government or to its international competition. In general, industrial sponsorship of research and development is governed principally by the expectation of financial gain. There is an observable coupling between business conditions and the funding of these efforts with the short-term financial needs of the business frequently receiving priority over the long-term expectations of the research and development. Historical experience demonstrates that the government's role in sponsoring R&D is important in three areas: 1. Where the government requires technology to execute its statutory or constitutional responsibilities. Defense is, of course, an obvious and well-understood example. 2. Where the general public benefit or impact on the public in terms of safety and environmental quality is great and no other sponsorship could be expected. The sponsorship of basic research in universities through the National Science Foundation and the National Institutes of Health is an example. The accomplishments in this area *The term "R&D Process" refers to the creation and beneficial application of technology. A lexicon of related terms appears in Appendix C. 7

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8 are very significant and indeed can be said to be the envy of the world. 3. Where the beneficiaries are numerous, but small and otherwise incapable of systematic research and development sponsorship. Agriculture is the classic example of this class of research and development. From time-to-time, the government has chosen to define a role for itself in other areas. Energy R&D has been a recent example that was based on the perception of an immediate, significant, and socioeconomically damaging energy shortage. The program included major efforts at both technology creation and application. When the shortage failed to materialize, the government revised its policy. Today, only the higher risk portions of the technology creation still are being supported, and these at steadily decreasing levels. Similar decreases in government support for the R&D process are taking place in many industries, including the maritime industries. Under certain circumstances, collaboration in the R&D process is desirable. Collaboration among industrial companies is appropriate when the benefits of the R&D process are spread across an industry or the costs or risks are higher than individual companies can bear. Government and industry collaboration is appropriate and desirable where there are compatible goals in the broad national interest. This is particularly true where international competitive or national security issues are directly involved. Most observers agree that the U.S. aerospace industry owes it international preeminence to massive U.S. government-sponsored R&D and procurement. Table 2 summarizes the respective roles of industry and government in the R&D process by establishing a spectrum of types of proprietary and collaborative arrangements . In the past one hundred years, the U.S. merchant marine, in total or in part, has been requisitioned to carry out U.S. foreign policy in four major armed conflicts and numerous smaller actions. Furthermore, the competitive performance of U.S. industries, including the maritime industries, in global competition is an important factor in the overall health of the U.S. economy and hence affects our national security. For these reasons it is appropriate for the MarAd, the agency charged with encouraging the maintenance of the U.S. maritime industries, to encourage the development and application of most cost-effective technology by industry and the conduct of most productive operations. An important means of accomplishing this has been and continues to be sponsorship of R&D in partnership with industry.

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