Innovation in Transportation Proceedings of a Workshop, September 24-26, 1979, National Academy of Sciences, Washington, D.C. (1980) / Chapter Skim
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REMARKS BY CHAIRMEN ON THE SCOPE OF PANEL DELIBERATIONS, PRESENTATION OF BACKGROUND PAPERS, AND DISCUSSANT'S COMMENTS
REMARKS BY CHAIRMEN ON THE SCOPE OF PANEL DELIBERATIONS, PRESENTATION OF BACKGROUND PAPERS, AND DISCUSSANT'S COMMENTS
Pages 45-196
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From page 47... ...
If we imagine absolutely the worst environment for transportation innovation and if we suggest ways for improving that setting, then I think we will have some results that are generally applicable. That is what we will be trying to do, and, of course, the model "worst" environment that was in the back of my mind when I developed this discussion framework is the urban transportation setting.
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From page 48... ...
The governmental setting necessarily includes the federal government, state governments, and local governments -- all those city, county, township, and special purpose districts or authorities that are set up to monitor or to operate transportation. The federal level appears to be the best source of funding for innovative programs, but unfortunately, the federal government is not the real customer for transportation innovation.
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From page 49... ...
So that leaves the independent research organizations that are specially well-organized to handle the RFPs and respond to government proposals. A lot of good work is done in this sector, but that sort of activity does not fulfill the university role of producing young, innovative talent to go into industrial transportation activities.
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From page 50... ...
We begin our analysis of transportation innovation by describing the principal features of transportation activities and characterizing innovation and technology deployment activities. The discussion then narrows to the analysis of the characteristics of the separate modes 50
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From page 51... ...
This analysis will explain the present status of innovation and provide a basis for recommendations to better orient and accelerate innovation and technology deployment activities. Although we will use the extensive literature dealing with the many aspects of innovation processes, our organizing focus is that of industry structure, a focus reflected only in bits and pieces in the innovation literature.
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From page 52... ...
These are simple questions where simple answers do not give insight. Growth Dynamics One useful way to approach these questions is to think of the modes as evolving in a dynamic of physical systems-institutional systems-market systems.
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From page 53... ...
. Each transportation technology form has a growth dynamic.
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From page 54... ...
; there are narrow (e.g., technology is needed for filling potholes) and sometimes suboptimal views of technology needs; some interest in new systems when the technology is well past its growth dynamic, e.g, personal rapid transit; interest in technologies to protect traditional markets, e.g., TOFC and COFC.
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From page 55... ...
,•* systems users claim a right to transportation service, and much of government regulation of transportation service and subsidy, such as that of mass transit, is to offset changes resulting from growth and the new interplay of technology forms.
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From page 56... ...
A preexisting network can restrain or assist the innovation process. It assists because it eases the onus of tying places together by procuring land or terminals.
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From page 57... ...
The ascent and descent rate used then in air traffic control suited to DC-3 aircraft and ill-suited for jets was also pushed aside. On the West Coast, the longshoremen constraint gave way to productive container systems.
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From page 58... ...
o As the market evolves, more and more attention is given to process and product innovations suitable for particular markets. 0 These technologies for market niches are constrained and limited.
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From page 59... ...
Here and in his later work he offers a conceptual model in which an industry is created by radical product innovations. One dominant innovation sets a pattern for a product; then process innovations dominate as ways are sought to produce that predominant type.
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From page 60... ...
These might display relationship of gross to net weight; horsepower per ton moved; velocity, say distance a commodity may be moved overnight; and weight/volume ratios for the filling of vehicles or containers. Data on relationships of this type are displayed in National Transportation Trends and Choices , (U.S.
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From page 61... ...
The camper vehicle fills a certain kind of gap. When sketching gaps for freight transportation, one should also consider functions as well as the comparative advantage of modes, a complex mapping.
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From page 62... ...
In the main, control of the vehicle movement is provided by the driver training and licensing systems. Traffic control is provided by traffic engineers, and the driver's fiscal integrity is warranted by insurance arrangements.
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From page 63... ...
Aircraft are produced by airframe manufacturers, operated and controlled by airline companies and by air traffic control regulations, and use guideways supplied by governments. One outcome of this disjointedness is incremental decision making.
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From page 64... ...
He concludes that "the innovative performance of the transportation sector can best be improved by gradually eliminating economic regulations." While we accept Gellman's remark about distorted and dampened innovation, we do not agree fully with his conclusion. Even without regulation, decisions to purchase equipment would be constrained; they would be incremental and oriented to component goals.
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From page 65... ...
We seek to lessen the risk that component technology may suboptimize. Suboptimization Component-shaped innovation and technology adoption is quite active: improved electronics for aircraft, electronic engine control for automobiles, computer-aided vehicle design, improved insulation for tank cars, improved aggregates for highways, better methods to preserve railroad cross ties, and active or passive sensors for traffic control.
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From page 66... ...
" Was one of the most thorough assessments made of a transportation technology. The study examined where the technology is, how it might evolve, and its associated costs; it treated air pollution and fuel problems.
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From page 67... ...
But to avoid not doing more than is now being done, it would be necessary to spell out what is meant by components and systems and market evaluation. Present-day market evaluations are static; they will, say, compare rapid transit with the automobile and ask how many riders will be diverted.
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From page 68... ...
Using Existing Guideways As noted, a transportation system may be created de_ novo or developed by revitalization of an old system, but in either case it is tied to preexisting market conditions and route structures. The liabilities of preexisting route structures have been mentioned, but preexisting routes can be an advantage.
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From page 69... ...
This suggests that "market pull" gaps may be identified by continually monitoring and evaluating social and economic change. The existing modes are continually searching for markets, and market response from new services suggests another way gaps may be identified.
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From page 70... ...
Interest in systems technologies is sustained when their delivery would utilize existing component technology supply streams -- automated highways and transmission of suspended solids in pipelines, for example. Most proposals embody technology development external to the transportation system, control technology for example.
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From page 71... ...
(Studies, such as those of the National Transportation Policy Study Commission (l979) ^0 using national economic models, are rooted in input/output matrices that take technology and the structure of production as given.
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From page 72... ...
Congressional advocates aligned with modal agencies would also influence the work; consequently, if the work is done in government, it would have to be done externally to the DOT and other agencies committed to existing transportation activities. Congress has supported transportation policy studies on a regular but intermittent basis for several decades.
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From page 73... ...
Technological Innovation: Its Environment and Management. Washington, D.C., l967.
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From page 74... ...
National Transportation Trends and Choices. Office of the Secretary.
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From page 75... ...
30. National Transportation Policy Study Commission.
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From page 76... ...
Some other niches emerge as opportunities for specialized trucks for short-haul activity or for intermodal transfer cranes for handling containerized goods. All of these have emerged in response to important symptoms of weakness in the original transport systems, and they reflect the fact of new market opportunities that seem to have inspired technological change and, upon occasion, bona fide innovation.
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From page 77... ...
I will not dwell on that because I do not want it to be taken out of proportion to some of the other comments that the paper contains. The paper mentions under "Improving Component Innovations" in the section titled, "A Suggestion," that it is important to state dynamic questions and inquire into market adjustments and development paths for a technological system, its institutions, and its markets.
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From page 78... ...
Also the lack of a sense of what we are actually trying to do is a problem of the institutional setting for innovation. People are filling some interesting gaps in rail transportation by inventing bigger cars, wider rail gauge, and more powerful locomotives.
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From page 79... ...
Research projects had been carried through, and a number of young people had gone into the transportation industry. Then with about one-hour's warning, DOT told us that such a process would not be followed anymore, and that they were switching to "mission-oriented research." So the whole operation simply stopped, as the basic source of funds switched to some other type of operation.
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From page 80... ...
That is hardly the way to deal with the places where 80 percent of the population lives, and will continue to live, and which offer market opportunities and are more and more sophisticated and refined about where transportation and innovation might exist. It has to be recognized as a result of a limited and inadequate approach that the setting has not attracted a breadth of vision about these problems equal to the breadth of some of these expectations that people have.
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From page 81... ...
For the purpose of perspective, it may be of some interest to go back to an earlier and more traditional day and to recall briefly the relative roles played by universities, industry, and government in technological innovation. The universities were the fountainhead of research knowledge, producing the new scientific concepts and data that would later become the foundations for advanced industrial products and processes.
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From page 82... ...
One of the position papers is by Lawrence Goldmuntz. It is excellent, and it probes the question of what the government role in transportation innovation should be.
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From page 83... ...
Has this been a desirable trend in contributing to transportation innovation? No doubt our panels will have something to say along these lines.
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From page 84... ...
INTERACTIONS OF GOVERNMENT, INDUSTRY, AND ACADEMIA BY DAVID S POTTER PRESENTER: CRAIG MARKS INTRODUCTION It is generally agreed that innovation -- be it technological, economic, social, or institutional -- is one of the necessary ingredients in the pursuit of progress.
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From page 85... ...
The second section discusses the roles that government has played in the encouragement or discouragement of transportation innovation -- 85
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From page 86... ...
Basic knowledge growing out of academic studies has potentially high application and utility. The automobile industry had its beginnings in the late l800s and early l900s.
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From page 87... ...
This can result in a narrowing of the scope for possible innovation and can encourage focusing more on reducing risks than on venturesome excursions into the unknown. Automobile industry developments during the period from World War II to the present represent a period of consolidation for some companies and expansion and modernization for others.
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From page 88... ...
Motor vehicle safety standards were established and enforced. The Clean Air Act was passed in l970 and amended in l977.
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From page 89... ...
Furthermore, the availability of new equipment, deemed by transit operators to be needed, has been delayed by six years. THE ROLES OF GOVERNMENT That brings us to a discussion of the roles that government has played in the encouragement and discouragement of transportation innovation and to the development of suggestions for improvements in the government role.
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From page 90... ...
The new GM transit bus designs completed in 197l were designed to be superior public transit equipment, attractive in appearance and economical to operate and maintain. They were designed to respond to the functional demands of the transit marketplace, with many new, advanced design features.
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From page 91... ...
This general policy is expressed in the Uniform Administrative Requirements for Grants-in-Aid to State and Local Governments (OMB Circular A-l02) that stresses reliance on local initiative and declares in favor of a policy of "greater reliance on state and local governments." Despite this statement of federal policy, which has been in effect since l972, DOT for the most part has not allowed self-determination by local agencies and has preempted transit operators' procurement policies and practices.
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From page 92... ...
The findings of a review panel selected by the government completely support the bus manufacturers' decision not to build the Transbus design as sound business judgment based on the problems found in the design. Bus manufacturers and transit authorities alike hope that the recent endorsement by Congress of the life cycle cost concept in the Surface Transportation Assistance Act of l978 will be fully implemented by DOT.
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From page 93... ...
early military development, there was little federal funding. Congress did recognize national interests and exhibited great leadership at a time of real need in developing such programs as the national land grant college program in l862 through the Morrill Act.
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From page 94... ...
receive grants, but such complaints are certainly to be expected and do not detract from my general observation of a well-considered and executed program by these institutions. It also seems, in retrospect, that congressional handling of the budgetary process has given some sense of national need and priorities to these institutions.
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From page 95... ...
But given a healthy economy, there are some specific things that can be done for the transportation industry. Cooperative Automotive Research Program One example is the Cooperative Automotive Research Program (CARP)
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From page 96... ...
I believe that technology development -- the application of the results of basic research-should be left in the hands of industry. Basic research, on the other hand, is a legitimate area for government involvement, and there is a wide range of automotive subjects that would seem to qualify for basic research under government auspices.
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From page 97... ...
The Clean Air Act was written in the middle l960s and was based on healthneeds data that were sketchy at best. And yet, more than a decade later, the body of air-quality-related health data is virtually unchanged.
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From page 98... ...
No matter how good the regulation, however, it results in nonproductive expense, which is inflationary. Although somewhere, somehow, it is assumed that a benefit will be achieved for some segment of our population, the effect of a Clean Air Act, or any other regulation of this type, is to increase the specific cost to the customer.
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From page 99... ...
So far, we have largely dealt with the effects of government actions on innovation within existing industries and technologies. It should be noted that regulations, which usually are enacted to deal with perceived problems within the existing scheme of things, can virtually preclude innovation from directions that were not foreseen at the time 99
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From page 100... ...
It also recognized that the diesel engine, because of its potential contribution toward energy conservation, might require some temporary exemptions from certain provisions of the Clean Air Act -- specifically from the NOX emission requirements -- and included provisions for granting a NOX waiver for diesels. As it turns out, such a waiver probably will be necessary if General Motors is to be able to offer diesel engines beyond the l980 model year.
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From page 101... ...
The paper focuses primarily on the current "state" of this system and the historical background that has led us into the situation in which universities (and nonprofit research institutions) are playing a relatively minor role in the transportation field, in which the conflict between industry and government (especially in the regulatory arena)
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From page 102... ...
. While some of the researchers are excellent, others are not, and the transportation industry does not attract its proper share of the gifted young people.
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From page 103... ...
In order that the reader can better visualize the sorts of things we will be discussing, I would just like to mention the skills in the membership of our panel. We include in our membership people who understand the motor vehicle industry, the railroad industry, the airline industry, and the freight service industry.
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From page 104... ...
INCENTIVES TO INNOVATION IN THE TRANSPORTATION SECTOR BY AARON J GELLMAN PRESENTER: EDWIN HAEFELE SCOPE The present paper considers the process of innovation in the transportation sector over less than the full spectrum of "transportation." Specifically, the paper concerns itself with transport that is actually or potentially produced on a commercial scale; both passenger and freight transportation are considered, with emphasis on intercity transportation even though there will be reference to urban transportation as well.
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From page 105... ...
Both public and private policies and practices that tend either to promote or to thwart innovation will be analyzed in the material to follow. Special emphasis is laid upon those incentives and disincentives that promote net beneficial innovation in the transportation field, but those which (happily)
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From page 106... ...
Tables l through l0 provide a comprehensive listing of the incentives and disincentives that might be present in any given process of innovation, be it technological innovation or otherwise. The tables have been developed not just with transportation in mind.
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From page 107... ...
Employer attitude toward failure of an innovation process l07
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From page 108... ...
Increased market share 7. Increased multiple on stock 8.
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From page 109... ...
Risk or fear of "failure" l6. Inappropriate reward structure to promote innovation l09
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From page 110... ...
Labor content "requirements" l3. Inappropriate reward structure to promote innovation ______ 14.
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From page 111... ...
Before considering specific public policies and their relationships to the innovative performance of the transportation sector, it should be noted that the presentation of the incentives and disincentives has employed a "bottoms-up" approach. This is to underscore the primacy of the individual where innovation process and performance are concerned.
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From page 112... ...
Promote favorable government action 7. Increased tolerance of industry-wide cooperation 8.
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From page 113... ...
Strengthened military posture TABLE l0 Disincentives to Innovation That Influence the Nation l. Regulation -- economic, safety, environmental; regulatory process 2.
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From page 114... ...
Nevertheless, there are several specific but broad policy concerns of government that exercise particular and continuing leverage upon transport innovation, and some of these will be the focus of the present discussion. To be considered are selected policies related to the following: & competition o the purchasing function 0 financing 0 public enterprise o antitrust 0 market aggregation 0 identification and amelioration of social or external costs Where appropriate, the opportunity will also be taken to consider various ways in which public and private policy interact to produce incentives and disincentives to innovation in the transportation field.
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From page 115... ...
From Tables l through l0 it can readily be seen that competition, either explicitly or implicitly, represents an important incentive or disincentive to innovation. Not only must government's concern with competition in transportation be related to the innovative performance of those producing and marketing transportation services, but it is necessary to consider the influence of public policies toward competition on enterprises that supply producers of transportation with the inputs they employ.
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From page 116... ...
An excellent case in point concerns a substantial railroad technological innovation of the l960s, the Southern Railway's "Big John" covered hopper grain cars. As part of a well-thought out program to enhance both its traffic and its profits, primarily at the expense of inland waterway carriers, the Southern embarked upon a program to increase materially its share of the market in grain traffic between the Midwest and the Southeast.
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From page 117... ...
For example, consider the railroad supply field. Little concern has been expressed by regulators -- and to the ICC must be added the Antitrust Division of the Justice Department and Federal Trade Commission in this connection -- as far as competition in the railroad supply field is concerned.
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From page 118... ...
The government is itself a major factor in the acquisition of transportation services, and, in some instances, purchases transport equipment and infrastructural components as well. It is reasonable that supplier performance, and public policy towards the purchase of transport equipment, infrastructure, and services be of interest to transportation enterprises and the government.
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From page 119... ...
Yet, it has not often exercised this power to "force" private entrepreneurs to furnish transportation services that, in turn, require such carriers to exploit technological possibilities beyond those already underlying the transportation "end product" being offered and used. There would appear to be some considerable leverage available to the federal establishment in its role as shipper; judicious application of such power to induce net beneficial technological innovation in the transport sector could not help but to be a laudable exercise of public policy and power.
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From page 120... ...
know a great deal more about the process of innovation, and particularly about the private sector's investment decision-making processes, than is now obviously the case, at least as reflected in the Transbus program from start to finish. The necessity of relying upon true performance specifications if the process of technological innovation is to be made more effective in the transportation field cannot be overstressed.
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From page 121... ...
, which specifies, designs to a great extent, procures, owns, and operates several systems essential to the production and growth of air transportation services in the United States. This is a case, not unprecedented, where an agency is both the judge and the jury with regard to the technology and technique being employed.
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From page 122... ...
Financing The availability of financing is often an incentive to the process of innovation; a lack of available financing is always a disincentive. Consequently, the public sector has substantial leverage it can bring to bear on the process of innovation in transportation in general, as well as on specific innovation processes, through the granting or withholding of financial support as may be consistent with public policy.
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From page 123... ...
Still, in many cases public support is absolutely required if the process of innovation is to be completed and market diffusion of products or services generate social benefits in excess of external costs, which is often the case in the transportation field. Again, the Transbus program represents a case in point, which is especially apt since the potential acquirers of Transbus were anticipated to be public enterprises.
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From page 124... ...
To return to the process of innovation occurring in the market rather than beginning in R§D, it is obvious that much innovation is denied because manfacturers of hardware and infrastructural components see a history of feast or famine with regard to demand even where the results of the innovation process are highly beneficial and attractive to those who must make a purchase decision in favor of the innovation. In many cases, a long history of feast or famine on the demand side has been sufficient to discourage the allocation of private resources to the innovation processes through which transport equipment and infrastructure components would be upgraded technologically.
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From page 125... ...
Yet there is little clamor when support is initiated or is increased for public enterprises, even nonfederal public enterprises. In contrast, great objections are usually raised when financial support to the process of innovation is suggested for private entrepreneurs in transportation.
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From page 126... ...
the performance of public enterprise managers in one geographical setting compared with the performance of those in another. This may require that, as a condition of federal funding, a uniform system of accounts for all the public enterprises in a given field be used -- a concept public enterprise managers will surely resist with all the vigor they possess.
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From page 127... ...
, the innovative drive of the public enterprise manager was initially resisted by airport users. In a way, it is fortunate that the federal government supplies a substantial proportion of the resources required for most public enterprises, including airports, and therefore has the ability to impose certain "standards" with regard to the innovation performance of such public enterprises.
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From page 128... ...
Given the highly personal nature of the process of innovation, it is important to recognize the disincentive to innovation that is present through the scarcity of cases in which public enterprise managers who have borne risk intelligently through support of innovative activity have as a result achieved visible professional and personal success, however measured. Certainly, DOT can afford to spend the limited resources required to gain a better understanding of what constitutes "success" in the minds of those who are prepared to devote themselves professionally to the management of public enterprises in transportation and subsequently to condition its support of public enterprises partially on the establishment of the preconditions in those public enterprises that reflect the professional and personal needs of such managers.
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From page 129... ...
This is largely because the Antitrust Division of the Justice Department will give no assurances that such a move would not be viewed as "anticompetitive" and therefore as a step that would be intolerable to the Antitrust Division. Certainly, if one were to define the market for transport aircraft as being the United States alone, this view of the Justice Department might -- but only might -- have merit.
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From page 130... ...
Under these circumstances, to make demand sufficiently large at a point in time requires some measure of market aggregation -- some measure of cooperation between otherwise competing economic units. While there is explicit market aggregation in certain fields of transport at times, especially where public enterprises are concerned and antitrust considerations are nil, for the most part there is far less market aggregation in the transport sector than is warranted both by the nature of the supply function for much of what is produced in support of transportation production and by virtue of the benefits of reduced cost that accrue as a result of successful, efficient, and timely innovation in transportation.
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From page 131... ...
As was noted earlier, one of the most effective ways to thwart technological innovation is to rely upon design specifications rather than performance specifications when purchasing hardware and software. Surely those concerned with preserving and enhancing competition in the name of antitrust should acquire an understanding of the power of performance specifications to assist them in achieving their stated objectives.
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From page 132... ...
As this case demonstrates, the process can sometimes be subverted and employed explicitly to slow, if not totally discourage, beneficial innovation. Market Aggregation Market aggregation has been experienced in many areas of transportation but has not been the subject of the attention it deserves, especially in the context of the process of technological innovation.
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From page 133... ...
Perhaps because this form of market aggregation has been present for so many years, it is allowed to continue with little or no interference either from antitrust or railroad officials. It is clear, however, that market aggregation in the freight car context has been carried too far in the sense that it has thwarted a number of opportunities for technological innovation that could only have been exploited if there were a departure from established specifications to permit the introduction of new technology even if only on a limited scale initially.
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From page 134... ...
One of them relates to the creation of insurance schemes that reduce, if not eliminate, losses experienced by suppliers and their customers should a transportation technique be found to be socially undesirable at some point after its adoption and diffusion. While the careful drawing of performance specifications and goals to include externalities-producing criteria is a promising means of reducing the risks of both society and entrepreneurs engaged in transportation innovation, and it is quite clear that this can actually be accomplished without discouraging the "golden geese" innovations, the better course is to promote innovation actively but also to develop mechanisms that permit subsequent "recalls" if an innovation turns out to be socially offensive based on actual experience.
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From page 135... ...
economy. I was especially impressed by the author's demonstration of the folly of government procurement policy that focuses on specification of design details rather than on performance specifications.
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From page 136... ...
On the other hand, other segments of the transportation sector continue to be profitable, including airlines, trucking, pipelines, and their suppliers of equipment and other capital goods. And for these, of course, liberalized depreciation would be helpful.
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From page 137... ...
It seems to me that we have gone to the same old well to often with too little to show for our efforts. Surely the fact that virtually no one concedes that either our investment or our innovation needs have been met through tax policy measures of the past must suggest that some innovative thinking is needed at least as much in this area as in any other.
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From page 139... ...
In fact, an important part of the innovation process was to create, eventually, that demand in the customer world. So that is the IR§D role.
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From page 140... ...
Currently, we have some extra rules. In the case we are considering, in these complex relationships between industry and government in the government procurement process, for good reasons the government negotiates with us generally on our overhead rates.
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From page 141... ...
I am not an expert in transportation at all, so I come here with no preconceived ideas. I did think, though, that I should get some feeling, some perspective, on this vast area that we are talking about -- the national transportation picture.
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From page 142... ...
Once again, that raises in my mind the real questions regarding the role of IR§D, of government procurements, and of government R§D generally with respect to transportation. From the few things I have said, it would be very tempting to draw the conclusion that the relationship is somewhere between small and zero, but that is probably not right.
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From page 143... ...
Our concern here is with those exceptional situations in the transportation industries in which these market pressures are inadequate or inappropriate to provide innovative improvements at a pace perceived to be required by the public interest. The National Transportation System is a classically mature establishment with formidable "risks and incoveniences" to both the supplier and the user of any change.
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From page 144... ...
This paper will reflect on the existing procurement policies of the government and how they might be viewed by potential suppliers of innovative concepts, studies, developments, and products as providing either incentives or disincentives for applying their talents and resources to government-contracted programs. HOW FEDERAL PROCUREMENT POLICIES ARE VIEWED BY POTENTIAL INNOVATIVE CONTRACTORS One of the ways in which the government can give directions to and provide incentives for innovative efforts is through improvement of federal procurement policies and practices, especially in regard to research and development efforts undertaken by industry in support of government objectives.
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From page 145... ...
by some government agencies, and its allowance has become a political issue. The remainder of this paper will enlarge upon the relationship of these procurement policies to the interests of potential contractors in government-sponsored programs, leading to recommendations that would stimulate participation by university and industry innovators.
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From page 146... ...
The complexity of the federal procurement policies is such that the sheer volume and the administrative costs associated with keeping abreast will deter some commercial entrepreneurs from becoming involved with government business. Some of the major differences between commercial business and business under government contracts are as follows: l.
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From page 147... ...
3. In addition to the aforementioned imposition of government controls on the "business" aspects of the enterprise, the would-be government supplier must be aware of the difference he may expect from commercial practices due to the impact of the technical and product acceptance criteria used in most government procurements.
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From page 148... ...
But when effective competition is lacking or when a sole-source procurement is necessary owing to uniqueness of a product or service, prices of government purchases are negotiated on the basis of actual cost plus a "reasonable" profit. In negotiated government procurements the amount of profit must not exceed specified statutory limits, and contract negotiators usually settle for profits significantly below the statutory limits and below commercial profit levels achieved after reinvestment in independent research and development.
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From page 149... ...
The Aerospace Industries Association of America (AIAA) has stated to the Domestic Policy Review of Industrial Innovation that: It is to government's advantage to preserve the independent nature of a contractor's research and development effort.
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From page 150... ...
While industry has learned how to comply with these restrictions, there are serious drawbacks in the present method. The basic concern is that the method really does not recognize IR§D as a legitimate cost of doing business; it implies that IR§D is dispensable when it is not.
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From page 151... ...
0 Recommendations 6 and 7 are selected from those made by the AIM to the Domestic Policy Review of Industrial Innovation.
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From page 152... ...
I certainly agree that such issues as conflict of interest, the recognition of differences between commercial and government business, rights to technical data and intellectual property, and the treatment of Independent Research and Development/Budgets and Programs (IR§D/B^P) are significant and should be addressed by the panel.
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From page 153... ...
Some studies have been completed, and many are now in progress. It is becoming apparent that the innovation process supported by civil agencies is much different from that successfully experienced by those agencies concerned only with obtaining products and services for their own use.
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From page 154... ...
Hopefully, if considered by the panel, they can serve as a springboard for meaningful panel discussion resulting in recommendations to improve the DOT technological innovation process.
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From page 155... ...
But there are, in fact, many very important questions that are being raised about how much is the right amount of federal involvement in R§D in transportation and where it should be spent. Court Perkins said in his welcome that he thought we were clever to narrow down the problem and to avoid generalizing too much about innovation.
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From page 156... ...
One sector involves organizations like NASA and the FAA, who in many ways are their own users; on the other hand, when they are part of a larger system, they have to interact with that system. Certainly, the FAA traffic control system has to work with pilots, airplanes, and the air transportation companies.
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From page 157... ...
Larry Goldmuntz implies this in his paper as he concludes that we ought to put our federal R§D assets where they are appropriate for federal involvement. He stresses air traffic control and surface transportation for a variety of reasons, and he says we ought to get the federal government out of automotive R§D.
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From page 158... ...
He points out that we have had five secretaries of transportation and five UMTA administrators in the last l0 years and that in successive years we have found a real discontinuity, a reversal of decisions that makes any kind of progress in economic-technical development very difficult. We have to, under this organization question, consider the impact of the various modal administrations on technology development.
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From page 159... ...
I, myself, would be very pessimistic about the ability of the federal government to put one together. Then the last issue is, "Would changes in federal regulation, funding arrangement, taxation, or others of the Charpie-like rules help to stimulate transportation technology in industry?
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From page 160... ...
Furthermore, we contend that some fundamental changes in federal policies are necessary to stimulate innovation in transportation that is socially desirable. Many of the ideas and proposals contained herein will prove quite controversial; it is hoped that they will stimulate discussion and provide a basis for specific recommendations to DOT regarding policy changes and areas requiring more detailed investigation.
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From page 161... ...
. An example of a process innovation would be the automation of rail rapid transit trains, which did not create a new service (since it did not alter in any significant way the quality of service or price of an existing transportation mode)
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From page 162... ...
FIGURE l Description of innovations in transportation products or services in terms of price and level of service. Hypothetical example of a new transportation service or mode option for the shipment of parcels between a specific pair of cities.
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From page 163... ...
This conceptualization of transportation technology provides a framework for considering the effect of technological innovations. The set of points in this level of service-usage-cost space that corresponds to the known processes for providing transport describes the current state of transport technology.
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From page 164... ...
Total Cost 0 L Quantity FIGURE 2 Technology described by the relationship between cost and quantity of a particular product.
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From page 165... ...
Cost A Level of Service FIGURE 3 Characterization of transport technology as the relationship between cost, level of service, and usage.
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From page 166... ...
Usage Level of Service FIGURE 4 Technological innovations characterized by changes in the cost-usage-level of service relationship.
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From page 167... ...
. On the other hand, many technological innovations in transportation that embody a new level of service require only modest or incremental extensions of existing technology.
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From page 168... ...
. and the introduction of rapid, guaranteed-delivery parcel services-all of which represent both new transportation services and new processes.
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From page 169... ...
Uncertainty, change, the need for competition, flexible structures, rapid decision making, and being close to technological and market developments, all imply that technological innovation is more likely to flourish in a decentralized and pluristic environment. Thus, government roles in the innovative process, although important, are not determinant.
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From page 170... ...
This involvement of federal government creates many ways in which it can influence the speed and direction of technological innovation in addition to policies related to R§D in general. The ensuing discussion of possible federal policies toward research and development in transportation emphasizes the relatively unique involvement of the government in transportation.
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From page 171... ...
The basic purpose of this would be to anticipate problems far enough in advance that corrective action, whether it would involve technological innovation or other changes to the transportation system, could be taken before the problem becomes damaging to society. It would attempt to assess future requirements for movement and then to determine the extent to which the system will accommodate those needs through its normal processes of adaptation and change.
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From page 172... ...
Unfortunately, many government programs concerned with technology research and development, especially in surface transportation, seem to have been motivated primarily by the realization that a particular form of transportation could be developed to the point where it is technologically feasible, but with little or no regard for whether that technology would in fact create net benefits greater than those associated with the existing l72
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From page 173... ...
The R§D Program Another important issue is what type of R§D program the government should have. A general conclusion that runs through much of the innovation literature is that the proper role of government in R£jD is to extend the frontier of knowledge that is generic to a particular area, but to leave to the private sector the selection of specific technological innovations to be developed and brought into the market.
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From page 174... ...
In general, every effort should be made to provide the bases for alternative technologies, rather than focusing on one approach, allowing the market to decide which approaches will ultimately be used. Also widely accepted is the critical role played by basic research in technological innovation.
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From page 175... ...
Transportation is clearly one such area. Such a program of basic research in transportation would be in addition to the current research programs of the Department of Transportation, which are primarily within the several modal administrations.
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From page 176... ...
Barriers to Innovation A final important area for fostering technological innovation in transportation is the elimination of many barriers to innovation that exist as a direct result of the present form of federal (and other) government involvement in transportation.
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From page 177... ...
Changing habits or regulatory agencies will undoubtedly take many years to bring about, but certainly the change can be accelerated by specific requirements for such agencies to consider the effect of their decisions on innovation, in effect requiring them to produce innovation impact statements as part of their decision process. Another type of regulatory change that would drastically improve the climate for innovation would be to give providers of transportation services much greater latitude for experimentation with new types of services and processes for delivering them.
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From page 178... ...
This, in conjunction with the politicization of key managerial functions (fares, areas to be served, routes, levels of service, and management posture in labor negotiations) , and the monopoly position of most public transit organizations, creates a climate that discourages much innovation.
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From page 179... ...
EPILOGUE This paper has approached the question of federal policies on technology R§D and to stimulate innovation in transportation from a rather broad perspective. It has focused on questions of the proper purpose and scope of the DOT R§D effort, its relationship to other organizations involved in the provision of transportation equipment, facilities, and services, and its relationship to other governmental policies in transportation, such as economic regulations.
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From page 180... ...
Economic Regulation and Technological Innovation: A Cross-National Literature Survey and Analysis . 3 vols.
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From page 181... ...
While the distinction between demand-pull or technology-push may be useful to analyze technological innovation, both are frequently necessary to introduce innovation into the marketplace. Successful innovation depends on knowing when each approach should be emphasized and when one might make a transition from one approach to another and which institutions to go to to make sure that each approach has a reasonable chance to make its contribution to the introduction of innovation into transportation.
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From page 182... ...
While all these programs are complex, and while capsule criticisms are sometimes glib, the thrust of this small sampling is correct: DOT has not stimulated innovation successfully. DOT STIMULATION OF INNOVATION IN AUTOMOTIVE TRANSPORTATION -- WHERE IT IS NEITHER CUSTOMER NOR USER The proper federal role in transportation innovation should vary significantly from mode to mode.
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From page 183... ...
There have been some minor and mostly unsuccessful federal research and development efforts in support of the automotive environmental and safety regulatory programs. For example, DOT's Research Safety Vehicle program and EPA's, then ERDA's, and now DOE's support of automotive power systems that might satisfy the requirements of the Clean Air Act and be fuel efficient have not successfully achieved their objectives.
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From page 184... ...
The criteria for additional federal support, however, should include joint private/ public sector funding, project selection and supervision, as well as full disclosure and public ownership of results. Perhaps an automotive equivalent to Electric Power Research Institute (EPRI)
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From page 185... ...
DOT STIMULATION OF INNOVATION IN AIR TRAFFIC CONTROL -- WHERE IT IS A CUSTOMER BUT NOT A USER Government involvement in air traffic control, where the government is its own customer, is and should be different from federal involvement with automotive innovation. While the users of airways are mostly in the private sector, they utilize a federally operated air traffic control system and must comply with its procedures and safety and equipage regulations.
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From page 186... ...
Could an organization or process within FAA -- perhaps as an extension of the present Airport Task Forces -- integrate the various components needed to improve airport capacity on a site specific basis? One last example deals with upgrading the air traffic control process in centers and terminals.
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From page 187... ...
As one can see from this abstract of user comments, FAA has had difficulty completing programs in a timely way owing to money limitations and the long and burdensome process of obtaining approvals for technological developments through FAA, DOT, OMB, and the Congress. DOT STIMULATION OF RAILROAD INNOVATION -- WHERE IT IS NEITHER CUSTOMER NOR USER The Federal Railroad Administration (FRA)
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From page 188... ...
program was overly ambitious, troubled with unrealistic cost estimates, late deliveries and management problems. ACT incorporated in its subsystems several important technological innovations which, when proven, are likely to be adopted by transit properties.
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From page 189... ...
One expression of this was the formation in l976 of the Advanced Transit Association (ATRA) -- a group of urban planners, transit technologists, and transit operators who felt that APTA represented transit system operators but not necessarily individuals who used transit systems or urban planners.
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From page 190... ...
Thus UMTA has evidently failed to stimulate innovation where other countries have succeeded. CONCLUSIONS AND RECOMMENDATIONS It is clear that transportation innovation has not prospered under DOT management.
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From page 191... ...
Innovation seems to do better with federal stimulus where the federal government is the customer -- air traffic control -- and least well where the government is neither the user nor the customer -- the automotive industry. Recommendation: Deploy R§D assets where it is more appropriate for federal involvement in technological development, that is from the automotive industry to air traffic control, for example.
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From page 192... ...
Thus a climate supportive of all steps in the innovation process is essential. It is the role of management, whether in industry, government, academia, or other institutions to insure the perpetuation of such a climate.
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From page 193... ...
Also, knowledge of valid user needs and wants, as they relate to various modes or combinations of modes, and to the opportunities for innovation in these, seems to be in need of improvement. Both private and public sectors need to develop better capabilities in these areas.
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From page 194... ...
Control of inflation is an essential step. Elimination of confiscatory tax policies, and the adoption of policies favoring savings and investment are needed to fuel vital steps of the innovation process.
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From page 195... ...
But it provided basic technology of great sophistication, which the industry then incorporated into advanced designs, which led to aeronautical predominance for America. Industry, academia, and government working together produced superior basic technology, and through its application, innovation.
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Key Terms
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