As we begin the twenty-first century, many believe that we are also witnessing the start of a new era—one where humankind will increasingly expand its understanding of the building blocks of life, and one which will rely on advanced information technologies to process, analyze, and share the results of such research. This era may well rest on what some call the new economy—that is, an economy where higher sustained growth rates are fed by productivity improvements made possible by the application of new knowledge and new technologies. This state of affairs depends on continued public and private sector investment in productivity-enhancing technologies. It also requires substantial and expanded investment in basic research. Increased allocations of public resources to research, though, are not sufficient; continued progress also depends on government participation in the maintenance of a policy framework that supports the development of new technologies.
Government funding of research—especially university-based research—is an essential part of this framework of support. Policies encouraging partnerships and other cooperative arrangements among universities, industry, and the government have proved, in some cases, to be effective measures to foster the development of new productivity-enhancing technologies.1 Such policies are often related to specific government missions and procurement in sectors such as
health, transport, and defense. In other cases, limited support of promising technologies with widespread applications may be the most appropriate approach.
A TRADITION OF PARTNERSHIPS
The government’s role in supporting the development of new technologies is not new. During the nineteenth century, the federal government had an enormous impact on the structure and composition of the economy. The government played an essential role in developing the U.S. railway network, and—through the 1862 Morrill Act and support for the agricultural extension service—the farm sector.2
This support continued into the twentieth century. In 1901, the federal government established the National Bureau of Standards to help industry. Later, the federal government provided special backing for the development of (what we now call) dual-use industries—such as aircraft frames and engines and radio—seen as important to the nation’s security and commerce. The unprecedented challenges of World War II generated huge increases in the level of government procurement and support for high-technology industries.3 Today’s computing industry has its origins in the government’s wartime support for a program that resulted in the creation of one of the earliest electronic digital computers, the ENIAC.4 Following that war, the federal government began to fund basic research at universities on a significant scale, first through the Office of Naval Research and later through the National Science Foundation.5
During the Cold War, the government continued to emphasize technological superiority as a means of ensuring U.S. security. Government funds and cost-plus contracts helped to support enabling technologies, such as semiconductors, new materials, radar, jet engines, missiles, and computer hardware and software.6
In the post-Cold War period, the evolution of the American economy continues to be marked by the interaction of government-funded research and activities pursued by innovative entrepreneurs. Government support in this period has been essential to progress in areas such as microelectronics, robotics, biotechnology, and the investigation of the human genome. It has also played a critical role in the development of the Internet (whose forerunners were funded by the Defense Department and the National Science Foundation [NSF]).7 Together, these technologies underpin the new economy.
In all, both the federal and local governments in the United States have participated actively in promoting domestic industry in an increasingly global marketplace. Indeed, the U.S. has a remarkably wide range of public-private partnerships in high technology sectors.8 In addition to the cases mentioned above, there are public-private consortia of many types. These can be classified in a number of ways: by economic objective of the partnership—that is, to leverage the social benefits associated with federal R&D activity and/or to enhance the position of a national industry, and by other objectives, including the need to deploy industrial R&D to meet military or other government missions.9
The U.S. economy continues to be distinguished by the extent to which individual entrepreneurs and researchers take the lead in developing innovations and starting new businesses. In doing so, they often harvest crops sown on fields made fertile by the government’s long-term research investments.10
Recently, new Internet-based companies and biotechnology firms have been the source of major innovations. These innovations, and the economic benefit they provide, are based on information technologies that are more powerful and less expensive to use than ever before. These technologies promise to remain a source of substantial growth in the future.
The promise of better health, and the tangible benefits it represents, have prompted federal support for biomedicine. Progress in biomedicine and drug research, the development of diagnostic tools such as magnetic resonance imaging, and the rapidly expanding understanding of the human genome give credence to this promise.
By the late part of the 1990s, this belief steadily gained momentum, resulting in major yearly increases in federal funding for biomedical research. This tremendous
Box A: The Central Role of a Positive Macro-economic Policy Environment
The evolution of federal policy geared toward greater support for basic and mission-oriented research after 1945 should not obscure the fundamental importance of the macro-economic policy environment in the United States. Policies of the federal government collectively define and shape the environment in which innovation takes place. For example, federal policies affecting capital formation and corporate governance play important roles in competitive performance.11 The range and diversity of these policies are substantial. They include government policies related to taxation, especially capital gains, fiscal and monetary matters, education and training, trade promotion and expansion, regulatory policies, e.g., for anti-trust and the environment, intellectual property protection, government procurement, and export control.12 These policies can all directly affect the process of innovation, sometimes decisively.13
Institutions also play an important role. Technology development depends in part on the performance of educational institutions and the quality of scientific and engineering research carried out by public and private institutions. Similarly, the breadth and depth of U.S. capital markets affects the availability and cost of capital.14
Firm growth and the ability of the economy to develop, commercialize, and absorb new technologies are all directly affected by the impact of a matrix of national policies.15 These policies in turn condition the impact of the more focused government initiatives reviewed in this volume.
research effort has until recently been spearheaded largely by the National Institutes of Health (NIH). This has raised concerns, even among the NIH leadership, that other areas of promising research, which directly contribute to the development of medical technologies, are suffering from relative neglect.16 The authors of this study believe that sustained scientific and technological advance depends on progress across a broad spectrum of scientific and engineering disciplines.
The federal government has had a long-standing role in fostering scientific and technological progress. Yet, the scope and diversity of this effort is not always fully appreciated by the general public. While support to universities and grant-making institutions—such as that by the NSF and the NIH—is well known, the important role that agencies—such as the Department of Defense and the Department of Energy—play in providing support to diverse academic disciplines and technological developments is less widely understood.
The nation has long held the conviction that new technologies offer the best means of meeting societal challenges whether in the realms of defense, energy, or the environment.17 The substantial federal investment in research and development reflects this conviction. However, some observers believe that the breadth of potential applications of new technologies, their greater complexity, and the rising costs and substantial risks of developing these new technologies, means that a supportive policy framework is necessary to capture their full potential for society.18 They advocate public-private cooperation as an effective means of bringing new, welfare-enhancing, and wealth-generating technologies to the market.19 Cooperative activities among industry, government, and universities are important elements in such a framework.
THE ROLE OF THE STEP BOARD
Since 1991, the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) has undertaken a program of activities to improve policymakers’ understanding of the interconnections between science, technology, and economic policy and their importance to the American economy and its international competitive position. The Board’s activities have corresponded with an increased recognition by policymakers of the importance of technology to economic growth. The new economic growth theory emphasizes the role of knowledge and technology creation, which is believed to be characterized by significant growth externalities.20 A consequence of the renewed appreciation of growth externalities is recognition of the economic geography of development. With growth externalities coming about, in part from the exchange of knowledge among innovators, certain regions become centers for particular types of high-growth activities.21
Some economic analysis suggests that high technology is often characterized by increasing rather than decreasing returns. This justifies to some the proposition that governments can capture permanent advantage in key industries by providing relatively small but potentially decisive support to bring national industries up the learning curve and down the cost curve.22 In part, this is why the economics literature now recognizes the relationship between technology policy and trade policy.23 Recognition of these linkages and a corresponding ability of governments to shift comparative advantage in favor of the national economy provides the intellectual underpinning for government support for high-technology industry.24 Another widely recognized rationale for government support for new technologies exists in cases where a technology is expected to
generate benefits beyond those that can be captured by innovating firms—a phenomenon often referred to as spillovers. There are also cases in which the cost of developing a given technology may be prohibitive for individual companies, even though expected benefits to society are substantial and widespread.25
The growth in government programs to support high-technology industry within national economies—and their impact on international science and technology cooperation and on the multilateral trading system—are of considerable interest worldwide. Accordingly, these topics were taken up by STEP in a study carried out in conjunction with the Hamburg Institute for Economic Research (HWWA) and the Institute for World Economics (IFW) in Kiel.26 One of the principal recommendations for further work emerging from that study was an analysis of the principles of effective cooperation in technology development. These analyses include lessons from national and international consortia, such as assessment mechanisms and modes of cooperation that might be developed to improve national and international cooperation in high-technology products.27 As indicated in the box below, many countries seek to nurture their new technology-based industries in order to capture benefits and anchor them in the national economy.
BOX B. The Benefits of High Technology Industry
Government policymakers have increasingly focused their attention on high technology industry and the new technologies and entrepreneurial activities that generate them. Many believe that this policy focus is justified. A growing body of economic literature argues that the composition of the economy matters and that high technology industries bring special benefits to national economies.28 The attributed benefits rest on a set of interlocking observations:
—National Research Council, Conflict and Cooperation, 1996.
To advance our understanding of the operation and performance of partnerships, the STEP Board has undertaken a major study of programs relying on public-private collaboration for the development of new technologies. The project’s multidisciplinary Steering Committee34 includes members from academia, high-technology industries, venture capital firms, and the realm of public policy. The committee’s principal tasks are to provide overall direction and relevant expertise to assess the issues raised by the project. Rather than address general questions of principle regarding the appropriateness of government involvement in partnerships, the Committee’s charge is to take a pragmatic approach in addressing such issues as the rationale and organizing principles of government-industry cooperation, current practices, sectoral differences, means of evaluation, the experience of foreign-based partnerships, and the roles of government laboratories, universities, and other non-profit research organizations.
The Committee’s analysis has included a significant but necessarily limited portion of the variety of cooperative activity that takes place between the government and the private sector.35 The selection of specific programs to review is conditioned by the Committee’s desire to carry out an analysis of current partnerships directly relevant to contemporary policy making. The Committee also recognizes the importance of placing each of the studies in the broader context of U.S. technology policy, which continues to employ a wide variety of ad hoc mechanisms developed through the government’s decentralized decision-making and management process.
The Committee’s desire to ensure that its deliberations and analysis are directly relevant to current policy making has allowed it to be responsive to Executive Branch and Congressional requests for examinations of various policies and programs of current policy relevance. This includes the White House and State Department request for an evaluation of opportunities for greater transatlantic cooperation—a result of the signature of the U.S.-E.U. Agreement on Science and Technology Cooperation. It also includes the request by the Defense Department’s Under Secretary for Technology and Acquisitions to review the SBIR Fast Track initiative at the Department of Defense. Also included in the Committee portfolio of activities is the assessment of the Advanced Technology Program, requested by NIST in compliance with Senate Report 105–235, and the subject of two reports.36 These intermediate reports on these programs and top-
For a list of Committee members, see the front matter of this volume.
For example, DARPA’s programs and contributions have not been reviewed. For an indication of the scope of cooperative activity, see C.Coburn and D.Berglund, Partnerships: A Compendium of State and Federal Cooperative Technology Programs, Columbus, OH: Battelle Press, 1995; and the RaDiUS database, www.rand.org/services/radius/.
See Senate Report 105–235, Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriation Bill, 1999, and the Report from the Committee on Appropriations to accompany Bill S. 2260, which included the Commerce Department FY1999 Appropriations Bill.
ics have contributed to national policy making and will contribute to the Committee’s final report.37
To meet its objective of policy-relevant analysis, the Committee has focused on the assessment of current and proposed programs, drawing on the experience of previous U.S. initiatives, foreign practices, and emerging areas (e.g., bioinformatics) resulting from federal investments in advanced technologies.38 A summary of the partnerships reviewed by the study is included in Box C.
SUPPORT FOR ANALYSIS OF COOPERATIVE PROGRAMS
There is broad support for this type of objective analysis among federal agencies and the private sector. Among these are the U.S. Department of Defense, the U.S. Department of Energy, the National Science Foundation, the National Institutes of Health (especially the National Cancer Institute and the National Institutes of General Medical Sciences), the National Aeronautics and Space Administration, the Office of Naval Research, and the National Institute of Standards and Technology. Sandia National Laboratories and the Electric Power Research Institute have also contributed. Support has also come from a diverse group of private corporations. The sponsors are listed in the front of this report.
WORKSHOP, CONFERENCE, COMMISSIONED RESEARCH, AND DISCUSSIONS
At its scoping workshop on this topic, the Project Steering Committee decided to focus its attention on the emerging needs, synergies, and opportunities
Box C. Partnerships Reviewed by the Government-Industry Partnerships Study
The NRC study of Government-Industry Partnerships for the Development of New Technologies reviewed a wide range of partnerships. The analysis can be divided into four primary areas: (1) current U.S. partnership programs, (2) potential U.S. partnership programs, (3) industry-national laboratory partnerships, and (4) international collaboration and benchmarking. The analysis of current U.S. partnerships has focused on the Small Business Innovation Research Program, the Advanced Technology Program, and partnerships in Biotechnology and Computing. The review of potential partnerships for specific technologies, based on the project’s extensive generic partnership analysis, has focused on needs in biotechnology, computing, and opportunities for solid-state lighting. The industry-laboratory analysis reviewed the potential of science and technology parks at Sandia National Laboratories and the NASA Ames Research Center. International collaboration and benchmarking studies have included outlining new opportunities resulting from the U.S.—E.U. Science and Technology Agreement and a review of regional and national programs to support the semiconductor industry, focusing on Japan, Europe, Taiwan, and the United States.
between the fields of biotechnology and computing. Special attention, therefore, is directed to the differences and similarities of government support for technology development in biotechnology and information technology, the different uses of intellectual property in these sectors, and the need for investments across different disciplines. This report also presents the Committee’s findings and recommendations concerning the special needs and opportunities in Biotechnology and Information Technology.
The Steering Committee’s fact-finding initiatives include a major workshop, a conference, and the commissioned research presented in this report. The Committee’s deliberations have also benefited from the rich and diverse experience of its members as it developed the recommendations and findings of this report. The responsibility for these findings and recommendations rests with the Steering Committee and not with the individual conference presenters or researchers.
On October 25 and 26, 1999, the Committee convened a conference on Government-Industry Partnerships in Biotechnology and Computing. Conference highlights included remarks from Representative Sherwood Boehlert of the U.S. Congress and NASA Administrator Daniel Goldin. Other senior participants included Tom Kalil, then of the White House National Economic Council,
Rita Colwell of the National Science Foundation, and Marvin Cassman, Director of the National Institute of General Medical Sciences. A complete list of participants is included in Annex B of this volume. The Proceedings section of this volume contains summaries of their presentations and discussions.
Recognition is also due to outside contributors. Grant Black and Paula E. Stephan of Georgia State University, Wesley M.Cohen of Carnegie Mellon, John Walsh of the University of Illinois at Chicago, Kenneth Flamm of the University of Texas at Austin, and Michael McGeary of McGeary and Smith have contributed original research to this report.
Given the quality and the number of presentations, summarizing the papers and conference proceedings has been a challenge. We have made every effort to capture the main points made during the presentations and the ensuing discussions. We apologize for any inadvertent errors or omissions in our summary of the proceedings.
A number of individuals deserve recognition for their contributions to the preparation of this report. Among the STEP staff, John Horrigan contributed to the development of the 25–26 October 1999 conference, and helped to prepare the initial draft of this volume. Sujai Shivakumar contributed to the preparation of the report for publication and played a key role in the review process. The preparation of the report has also benefited from the unstinting efforts of David Dierksheide, McAlister Clabaugh, and more recently, Christopher Hayter. Without their collective efforts, this report would not be possible. Special thanks are also due to Marilyn Baker for her facilitation of the NRC review.
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the NRC in making its published report as sound as possible. Further, it is to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process.
We thank the following individuals for their review of this report: Dr. Maryann Feldman, Johns Hopkins University; Dr. Robert Archibald, College of William and Mary; Dr. Philip Auerswald, Harvard University; Dr. Mary L.Good, Venture Capital Investors, LLC; Mr. George Scalise, President of the Semiconductor Industry Association; Dr. Lewis Edelheit, General Electric; and Dr. William J.Rutter, Chiron, retired. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release.
Maureen Henderson and Gerry Dinneen have overseen the Academies review process for this report. Appointed by the National Research Council, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the National Research Council.
Following this preface, Part I of this report presents an introductory overview of the conference presentations and the papers. Part II elaborates on the new needs and opportunities in Biotechnology and Information Technology. Part III presents the Findings and Recommendations, which are the collective responsibility of the Steering Committee. Part IV summarizes the Conference Proceedings, setting out the views of the conference participants. Finally, Part V presents four related studies, which, though subject to NRC editing, remain the responsibility of the authors.
This report’s goal is to advance our understanding of the new needs and opportunities arising in biotechnology and information technology and to ensure that a strengthened national commitment in biotechnology is not compromised by inadequate investments in the disciplines and technologies required to make that commitment a reality.
Gordon M.Moore William Spencer Charles W.Wessner