The Next Step for the Administration for US ... - ACS Publications

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25 The Next Step for the Administration for U.S. Research and Innovation FRANK PRESS

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Office of Science and Technology Policy, The White House, Washington, DC 20510 My assignment i s to discuss "The Next Step for the Administration for U.S. Research and Innovation". That seems to c a l l for a very precise statement. Unfortunately, that's not possible at this time. The reason i s that the long-awaited Industrial Innovation Study, which the President commissioned last year, and which did not arrive at the Executive Office u n t i l the middle of June, i s now i n the f i n a l stage of being prepared for the President. This f i n a l stage i s an essential and c r i t i c a l process -particularly i n the case of such an extensive study, one i n which more than 150 recommendations were generated by the 500 representatives of business and industry, academia, labor, government, and public interest groups who participated i n and contributed to the study. From these 500 were culled 40 to go to the White House. And a select number of these have been prepared by my Office and the Domestic Policy Staff for Presidential review. I cannot discuss these specifically. However, l e t me do what might be the next best tiling. I w i l l broadly cover some of the issues and p o s s i b i l i t i e s raised by the study. This may open up for this panel some pro and con discussion on these. I think i t i s important to start with the reminder that we are talking about industrial innovation. Therefore the focus of our work i s primarily at the level of the firm, and on the various ways that the decision makers i n the country's industrial firms, can be provided with better incentives and opportunities to stimulate innovation. I t i s at this level vrtiere we think new products and processes can best be generated. In our social and economic system this i s where the action w i l l come from, when the conditions for such action are made favorable. I t i s these conditions that are important. A l l the recent talk about the loss of our country's a b i l i t y to innovate i s sheer nonsense. That a b i l i t y — the same ingenuity, imagination, and innovative s k i l l s our people have always had — i s s t i l l present, perhaps greater than ever. I f these elements

This chapter not subject to U.S. copyright. Published 1980 American Chemical Society Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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seem to be i n a temporary latency, i t i s largely because the climate and rewards that stimulate them, have not been present. Some of this was probably to be expected as the country has responded — and as we tend to do, overreacted — to the number of environmental and economic changes that have become apparent during a period of remarkable growth we have gone through. Now the picture i s changing again, and I think we are going to see a surge of new innovation — innovation based on new research, new emerging technologies, new opportunities here and abroad, and new attitudes and action by the government. The innovation study we have been through, w i l l i n part set the tone for this from the government standpoint. Its results w i l l not, and were never expected to be a cure-all. But the study, as I've indicated, has been the basis for a great amount of valuable i n put that, directly and indirectly, w i l l i n i t i a t e change i n Federal a c t i v i t i e s and attitudes. Some of that change — as i n the case of regulatory reform — i s already well underway. More of i t w i l l be forthcoming, both as a result of the innovation study and other Administration i n i t i a t i v e s . I think i t i s important to make another general point about the innovation study. While much work has gone into this study, and there has been much public attention focused on i t , i t must be viewed as only the opening skirmish i n what w i l l be a long battle. We can't solve everytiiing at once — we need to learn, and experiment. No one conceived and plotted the path of our previous innovative gains with any master plan, and i t i s unl i k e l y that this w i l l take place i n the future. Nevertheless, there are certain strategies that seem to be called for. Let me touch on a few of them. The f i r s t has to do with increasing the use of s c i e n t i f i c and technical knowledge. Most of our important innovation today, and into the future, i s going to be of the type based on advanced s c i e n t i f i c knowledge. This w i l l be true i n the case of high-technology products, i n which we excel now but where others are i n hot pursuit of us. I t w i l l also be true i n the case of lower technology products, \diere our advances i n manufacturing processes could help offset lower production costs abroad, reduce resource costs here, and possibly reduce the costs of externalities that have driven up the price of our domestically produced goods i n recent years. We have to advance knowledge and know-how, but we also have to make them more accessible to those who can most effectively put i t to work for us — principally private industry. This requires creating a better flow of information between the government, universities and industry. I t also c a l l s for better intelligence, as to industrially relevant technologies being developed abroad. I t would be a mistake for us to ignore this i n the b e l i e f that vtfiile others have monitored and milked our advances, we have no need to act similarly. There i s not only need, but precedent for doing so. There are numerous examples — some h i s t o r i c — i n which we have borrowed and successfully

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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innovated on the discoveries or inventions of others. We need to be better i n touch with what others are doing, and make this information more accessible here. What role government should play i n this, i n conjunction with industry's efforts and interests, i s a matter that might be considered. Much has been said, and a few efforts successfully made, related to bringing industry and university researchers together. I think we can expect more action along these lines, some of i t perhaps spurred by Federal incentives. But since the universityindustry interface has been the subject of much discussion recently, I don t want to dwell on i t now, other than to emphasize i t s future importance. Another important aspect of the matter of moving information to stimulate innovation deals with what has become known as "generic technology". The concept of generic technology i s that there are certain basic technologies — broad advances that are i n between the basic research, supported largely by government, and the development stage attractive to industry — and that these are the technologies on which firms within an industry build their new products and processes. The creation of such generic technologies i s a high-cost, high-risk proposition. But these technologies underlie major advances i n an industry. And they can have a major impact on the nation's economic growth. The realization of this has led certain countries to go into government- indus try cooperative programs to develop certain generic technologies. These countries are making a conscious and concerted national effort to do directly what we i n this country have done somewhat indirectly, when the government developed a military-related technology that became the basis of a c i v i l i a n technology. The question i s , to what extent can or should this idea be extended — and i f so, how? Is i t as applicable to environment a l , chemical and biological areas, and to a variety of manufacturing processes, as i t has been to aerospace, electronics and computer technologies? Is this a role for the Federal Government to play i n our system? And to what extent i s i t redundant with our current support of many existing F&D programs? There i s a l o t to be considered i n this matter, including anti-trust matters and the element of competition. Let me turn to another strategy — this one involving the improvement of market information — and particularly foreign markets — as a stimulus to innovation. This, by the way, i s one the Japanese have openly chicled us about, pointing out that we need to study foreign markets more assiduously, much as they have done prior to designing and developing products s p e c i f i c a l l y for such markets. While we have exported vhole industries, technologies and management systems, h i s t o r i c a l l y we have never been aggressive exporters of consumer products. In general, our exports have represented a much smaller percentage of our GNP than European f

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Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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countries or Japan. Perhaps this was because our domestic markets have been more lucrative. In any case, much of our exporting i n the past has been based on the notion that others had needs paralleling ours, or would aspire to the products we used. But this has held only to a certain extent — perhaps long enough to deceive us today. Despite the fact that much of the world has sought to emulate us, there are cultural differences and changing needs that we have overlooked. We simply have not done our homework on the physical and psychol o g i c a l needs of a changing world. There i s no reason, however, why a l l this cannot be corrected. And when one considers, among other things, the huge growth potential of the developing world over the coming decades, and i t s future market p o s s i b i l i t i e s , there should be incentive for such a correction. So, just as we need an improved system of ascertaining and assimilating foreign science and technology information, we need a similar effort devoted to foreign market information. To what extent this should involve the government working with the private sector, and the mechanisnis and approaches that might be used, are important considerations. One aspect of improving domestic marketing information has to do with the Federal market and i t s p u l l for innovation. Changes i n the ways i n which the Federal Government purchases goods and services can have a significant effect on industrial innovation. There i s evidence indicating that Federal purchasing procedures that spur competition on the basis of product performance, encourage firms to develop new products and processes. This not only benefits the government, but i t can benefit the consuming public When the effect leads to improved and innovative products for the c i v i l i a n market place. There are other ways that Federal practices can spur broader innovation, and we are considering them. (Patent procedures, small business incentives, new institutional arrangements, automotive i n i t i a t i v e s , etc.) Let me conclude with some b r i e f comments on one more approach, or strategy, that i s c r i t i c a l to improving innovation. Just as important as providing various incentives for industrial innovation, i s reducing the disincentives to the innovation process. It i s no secret that, i n general, industry views as one of the major disincentives to innovation, the vast and complex Federal regulatory regime that has evolved over the past decade or so. I hope i t i s no secret also, that the Admini s t r a t i o n i s attuned to industry's views on this, and that regulatory reform has been one of i t s major efforts. I won't attempt to review a l l the elements of this. As you know, they have focused on reducing the complexities, uncertainties, and administrative burdens associated with understanding and complying with regulation. They have also focused on achieving a better balance between the economic costs and benefits associated with regulation.

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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In addition, I think we are now seeing a new philosophy being pursued, particularly with regard to environmental, health and safety regulation. I t i s one that recognizes that the desired goals of such regulation might best be achieved through an incentive-oriented approach. Such an approach, rather than coimianding that specific technologies be applied to achieve the specific standards, allows the industry to choose i t s own paths to achieving the same end results. In the case of a i r pollution that may involve something l i k e the "bubble approach" EPA has introduced, i n which a plant can set i t s own effluent release from each point source as long as the plant's total effluent release complies with a Federal standard set for the entire complex. A similar approach can be applied to health and safety regulation, i n which broader, more overall goals are set and companies allowed to seek their own means of compliance. One of the important things to recognize regarding this approach to regulation, i s that i t provides new incentive to industry to innovate. It takes some of the repressiveness and uncertainty out of regulation, and r e l i e s more on market forces to achieve the desired goals i n environmental quality, health and safety. In short, we feel there can be a new regulatory climate created through regulatory reform — reform that not only reduces complexity and uncertainty, but that i s innovationoriented. Such regulation, rather than having a repressive effect on industry, and on the country's economy as a whole, could, with the proper mdustr^-government cooperation, become a stimulus to innovation. We need to turn regulation around this matter. We must do this because i t i s important to reconcile our need for economic growth, and the new environmental and social goals our people now aspire to. There are many who w i l l claim we can't have i t both ways — we must l i m i t economic growth, or we must s a c r i f i c e the so-called "quality of l i f e " goals. Perhaps i n the extreme this i s true. But i n the r e a l world we can progress along both lines. We have i n the past, and we can i n the future. One key to doing this i s placing more emphasis on our human resources — on providing more support and incentive to those individuals and groups i n our society T^IO are at the forefront of advancing knowledge, pursuing new ideas, and moving them out into world. And we have to combine these resources better, with the physical resources of our government and industry. This c a l l s for many changes of attitude and a new level of cooperation among the various elements of our society — between government, industry, the u n i v e r s i t i e s , small businesses, labor and other sectors. I think such changes are taking place, though perhaps not as rapidly as many would l i k e . But I believe you w i l l see the desire for such changes — along with some practical attempts to

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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achieve them — reflected i n the Administration's "next steps for innovation". We hope, and believe, that others w i l l respond accordingly. I f we can a l l p u l l together, there i s no reason why we cannot p u l l ahead i n industrial innovation, and i n a l l the innovation we need to r e v i t a l i z e America's leadership i n the world. 1979.

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RECEIVED November 13,

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.