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Science Technology and the Economic Future edited by Susan Raymond
Arati Prabhakar
Director, National Institute of Standards and Technology
Based on remarks delivered at the New York Academy of Sciences, May 24, 1995. Dr. Prabhakar is now chief technology officer and senior vice president at Raychem Corporation in Menlo Park, California.
Technology is the most dynamic, non-linear tool that can most fundamentally change the ground rules of economic competitiveness. Education and training, ability to market, and capital all matter. But technology is the only tool that can change the ground rules in all of these other areas.
The Evolution of Technology in Private Industry
To understand the economic environment within which technology functions, one must turn to the evolution of private industry. Often the public thinks of technology in terms of the ability to walk on the moon or conquer polio. These were and are noble roles for technology. But technology has a powerful role to play in ensuring the fundamental health of the nation's private industrial base.
After World War II, American industry represented the majority of the world's manufacturing capacity. Innovation from the United States drove the nature of the world market. In just a few decades, that picture has changed radically. The global economy is fiercely competitive. In many industries, U.S. leadership has ebbed; in others it has remained dominant. But, even when an industry is king of the mountain at the moment, it must constantly run harder and faster just to keep up with competitors. In this way, the marketplace is truly working because it is driving the efficiencies and innovations that lead to new products and rising standards of living.
The premium now placed on innovation has also changed the importance of R&D in private industry. There was a time when an investment in R&D could be paid over many years, even decades, by profitable manufacturing and sales. Today, product life cycles are measured in months, and a week's delay in product roll-out can spell the difference between success and failure in some areas. These more rapid cycles are, in some ways, driven by technology and, in some ways, they have technology as their product.
The dominant theme in industry, however, is that, with technology in such a fundamental role, the process of innovation must be efficient, and the link between innovation and product must be effective. In driving toward these goals, private industry has significantly restructured its R&D activity. The days of centralized, large-scale, basic scientific research in corporate America have passed. Corporate R&D has become more decentralized, more market focused, more closely linked to immediate, continuous needs to meet global competition.
. . . and Lessons from the History of Federal Programs
These realities also call for a reexamination and re-structuring of the federal government's role. At the end of World War II, basic government investments in science and engineering were seen as critical. The result was a world-class university research system that continues to lead the globe in basic research. We also invested very heavily in technologies for national security. This investment in national security R&D was an important factor in shifting the balance of power and ending the Cold War.
It is important to recognize that the success of earlier federal investments took time. The results were not seen in the space of one congressional session or even one presidency. Success required staying-power, a willingness to invest over long periods before palpable results could be seen. After all, the fundamental reason for government programs in these areas is the long-term, broad-based nature of these investments.
A second lesson from past success is the importance of a carefully designed relationship between the government and the technology community. The relationship between the federal government and the university system, or between the Pentagon and its technology development contractors was carefully tailored to the job at hand.
. . . Calls for the Evolution of the Government's Technology Role
The changing environment of U.S. economic competitiveness, and the fundamental importance of technology within that environment and the long-term nature of technology investments, call for an evolution of the federal government's approach to its technology role. There is a need to move our R&D investments in a direction that will be more responsive to the needs of American society, and to do so in partnership with the critical actor in future prosperity—private industry.
The shift that is underway now enables a direct link between federal R&D investments and the economy. This is happening throughout the government, including, but far from limited to, the National Institute of Standards and Technology (NIST). The evolution is not random; it is purposeful, seeking to create the kinds of relationships with private industry that will lead to long-term economic impacts in a very direct fashion.
Resources are limited. NIST represents just one percent of all federal R&D investments, which themselves are smaller in dollar terms than private sector R&D. But NIST's technology programs are an essential bridge between the long-term investments and the frantic pace of the market.
NIST Programs
Measurement Standards
Created in 1901, the then National Bureau of Standards encompassed a series of laboratories that developed engineering and measurement standards to accompany rapid industrialization. That measurement infrastructure was essential. At the turn of the last century, New York City alone used three standard measures for a foot! Obviously, confusion was rampant, and the spread of industrial enterprise was inhibited.
The standards laboratories changed all of that. Today, the measurement standards role of NIST laboratories remains fundamental. The measurement issues, of course, are now about line width on a semiconductor, not the radius of a buggy wheel, but the commitment of NIST to its maintaining the measurement infrastructure is unchanged.
In the last two years, the budget for the standards laboratories has actually risen significantly for the first time in decades. NIST is now in a much better position to ensure that its responsibilities for the measurement infrastructure will be able to keep pace with the emergence of whole new industries and needs in areas such as biotechnology and information technology.
New Technology Partnerships
In addition and, in part, because of NIST's historically close relationships with industry, a series of technology initiatives has also been undertaken. Two examples will illustrate how the government's role is evolving within the new economic environment.
The Advanced Technology Program (ATP) funds projects in companies to undertake important enabling technology investments that have long-term economic importance but are long-term and of higher-risk than companies will fund on their own. Competition is rigorous. Costs are shared with the companies. Awards are made on the basis of recommendations from experts in the business and technical community Competition for the grants is keen: Since 1990, the ATP program has received about 1500 proposals and has made 177 awards.
A second program is the Manufacturing Extension Partnership, which provides small manufacturers with access to technology information and expertise. About half of America's manufacturing capacity is in firms that employ 500 or fewer people. These firms do not have their own R&D capacity, have seldom had to compete internationally, and few have access to new business practices and technologies that would improve efficiency and global competitiveness. The program tries to break down these barriers with information and technical expertise. Costs in this program are shared with state and local government, and assistance takes place not inside the Washington Beltway, but on the shop floor.
Government Versus the Market: A False Dichotomy
Some discussion has taken place in Congress regarding the relative merits of directly supporting technology development and diffusion compared to using tax credits to accomplish the same objectives. The theory is that, given sufficient tax credits, American corporations themselves will make the investments in basic research, university, and small-business partnerships, and in high-risk technology development, and will do so with greater efficiency and more attention to market dictates than will government programs.
A tax-policy-only approach, however, is flawed. If perfect tax policy and perfect regulatory policy could be developed, this still would not resolve the central problem. American companies today must cope with an increasingly fierce competitive environment. The pace of technological change will continue to accelerate. Competition and rapidity are forcing private industry to narrow, not expand, their R&D investments. We have had R&D tax credits for several years, and while this can be a useful financial tool for some companies, there is no evidence that such a policy led to significant changes in corporate R&D investment patterns. More of the same is simply not enough.
Back in Washington, we are living in a world in which there seems to be very little understanding of the kinds of forces that drive technology in the marketplace, and the kinds of dramatic changes that have taken place in the last few decades. We are still discussing science policies in a way that may have been appropriate twenty or thirty years ago. People I speak with in industry cannot believe that Senate and House budget resolutions have proposed eliminating the Department of Commerce, including important programs like our Advanced Technology Program and our Manufacturing Extension Partnership. One proposal would eliminate NIST laboratory efforts, which would be privatized—whatever that means. I don't think that there has been sufficient awareness that programs at NIST have been explicitly designed to recognize the magic of the marketplace and to really reduce barriers to enable industry to succeed in the marketplace.
There are a host of very real issues about the appropriate role of government in funding science and technology. Those questions should be asked, but they ought to be asked about the entire 70 billion-dollar investment. I am convinced that if we ask those questions, and look fairly at the kinds of investments that are being made and the needs of our technology systems, that these types of partnership programs will be a part of a future federal technology investment, even in a period of reduced budgets.
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