What Must The U.S. Do To Bolster Its High-Tech Industries?

A recent [Department of Defense] report defines technology transfer as the transition of R&D programs from research to application by a user. It begins when an R&D agency shows the users, early in the planning stage of a project, how a technology can be applied to their needs. Based on that definition, there is very little evidence of technology transfer from federal agencies to the industrial sector.... Despite the fact that the U.S. makes major investments in R&D, the results are not reflected in our having a competitive advantage in the marketplace. The first thing to be recognized is that it is not the mission of federally funded agencies to focus on research and development that generate competitive products. That change in focus would require a policy of "market pull," where the product objectives simultaneously take into account both military and commercial product requirements. The present allocation of resources have almost no metrics [measurements] related to the transfer of technology to improve industrial competitiveness. Nor can one expect anything different from what we are getting when, for the most part, people are measured by how effectively they spend money rather than what their efforts have contributed to saving or making money. The differences between the motivation for R&D in government and industry dictate the measurement criteria. Industry spends money to make money. Government resources are primarily being spent in a spirit of discovery, or to develop advanced weapons systems. There is no issue with the importance of both criteria. What is in question is how to optimize both for the best interests of the nation.... Identifying critical technologies is good. Investing resources in technology development is better. Investing in the processes that most effectively exploit technology is best. Changing the environment to encourage partnerships between and among federal agencies, academic institutions, and industries is vital to successful technology transfer and its consequences--the continued economic, political, and military leadership in the next century. Michael Kelly, an electrical engineer, is director of the Advanced Manufacturing Research Center at the Georgia Institute of Technology. Author: Charles DeLisi and Michael Baram The promise of biotechnology is vast: genetically engineered crops able to resist disease and to flourish under extreme conditions, microbes that can decontaminate the environment, diagnostics that can detect genetic diseases in utero, ultra-safe vaccines and drugs accurately targeted against some of our most dread diseases. No one doubts that such medical, agricultural, and environmental promises will be realized, and that advances will occur with increasing rapidity over the next several decades. But biotechnology is important also for its promise of catalyzing national economic growth and well-being. Will this promise also be fulfilled in the foreseeable future? Or will biotechnology join a growing list of other high-tech industries in which the United States serves as scientific pioneer but industrial also-ran? The potential of biotechnology for U.S. economic growth will depend mainly on the transformation of research findings by private firms into products and services. This means that national economic growth will ultimately rely on the actions of industry, rather than the prowess of our universities and other research organizations. Although short-term interventions can be effective, we believe that assuring industrial preeminence in biotechnology and other high-tech fields will require policies that simultaneously and coherently address long-range problems in education, in the culture of U.S. industries, and in the legal framework that governs corporate activities. The educational problems relate to both the quantity and the quality of our future work force. The population of college-age students is declining, as is the percentage of those who choose science and engineering. The obvious solution is to increase the numbers of students from groups currently underrepresented, notably women and minorities. Although this problem should have been addressed a decade ago, only scattered, ad hoc efforts have been made to date. The quality problem is equally imposing, with numerous studies showing that U.S. students know less than their counterparts in other industrialized nations, and that the public is woefully ignorant of even the most basic scientific principles. And there is little evidence of the sort of systematic collaboration of educators, the federal government, and the private sector that is needed to provide lasting solutions to this problem. In a similar vein, new approaches to corporate strategic planning and decision making are needed to address the problems in the industrial culture. For example, Ralph Gomory, president of the Alfred P. Sloan Foundation in New York and former head of research at IBM Corp., has noted that our industries could become more competitive if they gave more attention to the product life cycle and increased the rate at which improved models of the same product are generated. Finding improved ways to transfer technology from scientific insight into marketable products is another important step that must be taken. Those approaches require closer linkages of research, development, and manufacturing, and more careful scrutiny of research developments around the world. While the legal framework for biotechnology is similar in certain respects to that of other high-tech industries, it has stimulated a distinctively complex regulatory structure. That complex structure has led to corporate uncertainties about the cost of bringing new products into the market, and at times has placed U.S. firms at a disadvantage in the world economy. Coherent reforms in regulatory policy are needed to resolve such differential impacts. In addition, biotech firms are also hampered by the ever-present danger of liability from the sale and use of their products in the U.S. These fears have influenced their choice of which products to develop, and how to market them. These regulatory delays and threatened litigation have also closed off potential investment capital and raised the cost of insurance for U.S. biotechnology firms. There are concerns that the Human Genome Project may fall victim to this uncertain industrial climate. This federally funded research program to map the chromosomal locations and structure of all human genes is capable of exerting a profoundly positive impact on the U.S. economy in two ways: as a means to engage industry in developing the knowledge, instrumentation, and techniques needed to map and sequence human genes; and as an engine for the identification and cloning of genes that could generate vast quantities of new biologicals and drugs to promote human health. However, it is far from certain that those promises will be turned into reality. A recent survey of U.S. biotech firms found that a majority of them do not expect the Human Genome Project to have a positive impact on commercial biotechnology by the end of the decade. Their attitude reflects a deep skepticism that the country will succeed in removing the hurdles to industrial growth and economic competitiveness that stand in the way of these biotech firms. What can be done to improve the chances that the U.S. biotech industry will remain healthy in the decades ahead? One important step is to improve the linkages among education, research, and commercial development. Another necessary step is the implementation of basic reforms that would make the regulatory process more coherent and predictable. These changes will not be easy. They will require strong and committed political leadership. Fortunately, within the origins of the genome project itself lie lessons that could be applied to solve tomorrow's problems as well. When the project was first proposed, in the mid-1980s, the technical problems were identified and a schedule for meeting specific objectives was agreed upon. The solutions to these problems were far from obvious, but the schedule was invaluable in retaining a focus on what needed to be accomplished, and when. We believe that a similar schedule is needed to address the economic problems facing the biotech industry. Such a plan, along with a strong commitment to achieve whatever time frame is adopted, is essential in the realms of both politics and science. We urge Congress to take the lead in this endeavor. Such action could also lead to unprecedented benefits for the nation's economy and the health of all humanity. Charles DeLisi is a professor of biomedical engineering and dean of the College of Engineering at Boston University. Michael Baram is a professor of law and director of the university's Center for Law and Technology. What we propose is not an industrial policy. Our proposals are designed to favor a vital national capability--the creation and application of new technology. The whole technical complex is involved in this process, including basic research, technology development, and the embodiment of technology in the design and production of commercially usable products.... Some policy broader than simply the support of federal mission agencies must drive our national technology investments. With the singular exception of agriculture, government is paying inadequate attention to the diffusion of government-generated technology to the people and firms that can make best use of it in the economy. The government needs an effective mechanism or process by which it can decide when it is appropriate to support or aid technological development, and when that support should come exclusively from the private sector. For example, the Bush administration believes that it is appropriate for the federal government to support "pre-competitive, generic technology." But what does this statement mean in operational terms? What are the criteria for deciding which technologies to emphasize? Which departments and agencies should undertake technology support? Where is the proper boundary between government action and private initiative? Should government support be contingent upon the rapid dissemination of results to accelerate adoption? If so, how can incentives for private development investments be maintained? There must be a government decision-making structure to address these questions, and then to get beyond rhetoric to build effective programs. The government must also have an assessment and evaluation capability regarding the national technology base and the ability of firms to contribute to and draw on that base. This report centers on changes in government organization and decision making that are needed to improve its contribution to economic performance. These changes take place within an overall strategy that takes full account of the global nature of modern industrial technology. The following mechanisms are needed in the executive branch to develop and implement effective government technology policies: A structure for formulating, developing, reviewing, and evaluating federal programs and initiatives for technology, and for oversight and review of key programs; Analytical support for that structure that is competent in both economics and technology, and can assess likely long-term developments as well as respond to issues of the moment; A top-level decision-making process that will use the analyses effectively in reaching sound and timely policy and program decisions; Mechanisms for assuring funding allocations to implement key science and technology programs approved by the Congress; Effective execution, management, and coordination of key programs by the appropriate departments or agencies. . . . Ultimately, the willingness of the [Bush] administration to move from the organizational status quo in the area of technology policy depends upon (a) its assessment of the seriousness of the domestic situation and the international threat, and (b) its view of the extent to which government technology policies will really make a difference in U.S. economic performance. At present, there is no high-level mechanism for assessing the nature and seriousness of the problems and developing policy options to address them in cooperation with the private sector. The federal government must recognize that an international competition for technological industrial leadership is now under way, and effective technological transfusions take a very long time. The preceding is an excerpt from "Technology and Economic Performance: Organizing the Executive Branch for a Stronger National Technology Base," a report of the Carnegie Commission on Science, Technology, and Government (September 1991). The pace of technological progress is a prime driving force in our increasingly global economy; clearly, advances in technology are a key to the continuation of both the military and the economic power of the United States. What is not so apparent is the proper course for governmental policy toward technology, especially its use in the private sector. . . . The Carnegie Commission report raises important questions and makes some good points. However, it is fundamentally wrong in urging a larger role for government in which the public sector has little capability and in ignoring the responsibilities that belong to government.... It is difficult to identify any significant benefit from changing the way that the executive branch and the Congress traditionally budget mission-oriented R&D. The Department of Defense and the requisite defense committees of the Congress are in the best position to determine how much and what kind of R&D is needed to carry out the national defense mission. Ditto for the departments of agriculture, transportation, and so forth. There is no need for a "master plan" of total federal R&D. NASA should not expand its activities just because some official in the White House is anxious to support technology.... Past experience with government trying to force technological innovation is not comforting. The billions of dollars that the federal government wasted in the abortive attempt to develop a commercial synthetic fuels industry was part of a vain effort to reduce our dependence on imported energy. Unfortunately, it is only the latest example of the basic failure of industry policy efforts that extend back to the days of the Reconstruction Finance Corp. scandals in the 1950s. Thus, it is easy to answer the question `How would the government decide which industries, technologies, and projects to support?' On the basis of experience, government will favor politically powerful firms, which usually means older, labor-intensive companies. Over the years, these firms have invested substantial amounts of resources in improving their presence in Washington. Moreover, these firms are the `squeaky wheels,' suffering the most from competitive forces. New and growing firms may be economically strong, but they usually are politically weak. They possess neither a record of extended financial contributions to political candidates nor a detailed knowledge of lobbying techniques nor a large group of agitated employees/voters. The result is a very uneven contest that favors old-line business over new enterprises and old technology over new.... What should be the role of the Defense Department in promoting commercial competitiveness? The answer is zero. The Pentagon should reduce the obstacles to its procurement of state-of-the-art products available in commercial markets. The commission urges DOD to subsidize technology because it is an important user. But there is no limit to that line of reasoning. The military market basket ranges from missiles to mittens, from ground support equipment to golf balls.... Some urge the Commerce Department to invest more heavily in a technology base. A federal civilian bureaucracy determining which areas of technology to support is only marginally better than having the Pentagon do it. Murray Weidenbaum is director of the Center for the Study of American Business at Washington University in St. Louis. He was chairman of the Council of Economic Advisers during the first term of President Reagan. Advanced manufacturing technology is essential to the national welfare. And new advances in manufacturing technology are changing the dynamics of competition.... Today the trend is toward shorter product life cycles and segmented markets. Speed, variety, and quality are the key determinants of manufacturing success. Instead of hiring experts to predict what people will buy, companies today can observe what sells and adjust their output accordingly. Some Japanese manufacturing executives and academics boldly anticipate a time when it could take no more than three days between the time a customer identifies precisely the kind of car he or she wants, and its delivery. Beyond improved productivity, improved quality, and lowered costs, advanced manufacturing reduces the time, cost, and difficulty of introducing new products and making incremental product improvements. Thus, it contributes to the innovation process. The ultimate goal is for industry itself to take the necessary steps to achieve manufacturing excellence. S. 1330's approach is essentially to focus on visible, concrete laboratory-type technology programs to make this happen. But the committee should not lose sight of, or exhibit diminished support from, the important initiatives going on here in the Technology Administration [in the Commerce Department] that focus on the business aspects that complement the technology aspects. Because these proposals represent a substantial commitment of personnel and resources, I must emphasize that our priority is the in-house programs at the National Institutes of Standards and Technology [NIST]. That priority must not be compromised.... But even if money were not a key issue, there are other reasons not to proceed with legislation at this time. A requirement that agencies devote a specific portion of their R&D budgets to advanced manufacturing is unacceptable. And some provisions, like an expansion of the Manufacturing Technology Centers program, proceed too quickly, before the completion of an evaluation of the program. The challenges to manufacturing competitiveness are real. And there are ideas in S. 1330 that are imaginative. Indeed, in future years, if fiscal constraints are eased and our current priorities for NIST's programs and facilities are assured, we would certainly consider appropriate administrative and legislative changes. Robert M. White is the first permanent undersecretary of commerce for technology. A physicist, he is a former vice president for research at Control Data Corp. in Minneapolis.

What Must The U.S. Do To Bolster Its High-Tech Industries?

Interested in reading more?

Become a Member of