Generic Policy Issues 1 1 



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FIGURE 5. Company R&D Funds as a Percent of Net Sales: 1979, 



Source: National Science Foundation, Division of Science Resources 

 Studies. 



carried out in private industry is as "'basic" as the researcii 

 typically conducted in universities. Nevertheless, indus- 

 trial research is aimed ultimately at producing or improv- 

 ing a marketable product, rather than at a deepened or 

 refined understanding of some aspect of the physical or 

 manmade universe. This industrial objective can and does 

 act as a mechanism for filtering and directing research. 



There is a second, essential, distinguishing characteris- 

 tic of industrial research that is intimately related to the 

 first: industrial research laboratories, unlike university or 

 government laboratories, are part of a system that includes 

 development, engineering, manufacturing, and market- 

 ing activities. With the exception of a few industries, such 

 as some aerospace and defense-related industries that sell 

 most of their output to the Federal Government, industrial 

 firms depend for their survival on their competitive posi- 

 tions in the marketplace. Thus, allocations for research 

 laboratories typically are based on the judgment, by cor- 

 porate management, of the likely long-term market return 

 for research investments (AAAS-2). 



Since the mid-1960s, R&D activities in many industries 

 have shifted away from what has traditionally been called 

 basic research toward very specifically defined programs 

 geared more to the solution of short-term problems 

 (NRC-14). Some of the apparent shift away from long- 

 term basic research in industry may be due to problems in 



distinguishing basic and applied research in industrial 

 settings.'^ However, there is a strong consensus that cor- 

 porate management has been increasingly concerned with 

 short-term profits at the expense of long-term investments 

 in projects that are high risk and have long payback times 

 (NRC-14; AAAS-2). Edward David has noted that in 

 medium- and large-size firms that can afford centralized 

 research laboratories, there is almost always a struggle 

 between those who believe that research should serve the 

 interests of marketing and production and those who 

 believe that the potential of new technologies ought to 

 have a large influence over marketing goals. That opposi- 

 tion between short-range and long-range perspectives has 

 been inherent in industrial research since the 19th cen- 

 tury.'" But, during the 1970s, as profit margins decreased 

 for many industries and, in some cases, all but vanished, 

 there began a strong trend toward reducing long-term 

 research investments (NRC-14). 



There are many who believe that the trend away from 

 long-term investments in research in some industries has 

 been a primary contributor to the erosion of U.S. leader- 

 ship in some critical industries (NRC-14; AAAS-2). 

 While the President's economic policy is designed to 

 encourage greater private sector investments in R&D, 

 resources for industrial R&D are expected to continue to 

 be somewhat constrained during the 1980s. The amounts 

 available will depend on several factors, including the 

 likelihood that the legal and regulatory climate will not 

 unduly impede the transition from R&D to commercial- 

 ization. The specific effects of those factors will differ 

 among industries. But overall, there is likely to be in- 

 creased emphasis on selecting and justifying high-quality 

 research efforts and on placing priorities on the selection 

 of long-range efforts. '^ 



Because they are less capital and energy intensive than 

 many other industries, considerable R&D growth is antic- 

 ipated in the next 5 years in those areas of the electronics 

 industry dealing with microprocessors and minicomput- 

 ers, data communications equipment, and integrated cir- 

 cuits. Advances in computer capabilities should permit 

 appreciable productivity increases in other manufacturing 

 industries, including the automotive, aircraft, chemical, 

 and pharmaceutical industries. In the capital-intensive 

 automotive and aircraft industries, research aimed at more 

 energy-efficient products that also meet mandated regula- 

 tory standards will very probably be emphasized. The 

 possibility of rising energy prices is certain to stimulate 

 research in the energy-producing industries. Research in 

 the chemical industry is likely to focus increasingly on 

 improving process economics, reflecting rising costs for 

 raw materials and energy, rather than on developing new 

 products as in the past. The pharmaceutical industry is 

 expected to benefit from the explosion of fundamental 

 knowledge in biochemistry, molecular cell biology, im- 

 munology, and neurobiology. That increased understand- 



