overall economic climate, the 1981 Economic Tax Recov- 

 ery Act included R&D tax credits, accelerated deprecia- 

 tion schedules, and other incentives to stimulate addi- 

 tional corporate R&D investments. More favorable patent 

 and antitrust policies, as well as removal of disincentives 

 in the form of excessive Federal regulations are also likely 

 to stimulate such investments. Many believe that the 

 appropriate Federal role is to support only long-range, 

 high-risk research with a potentially high payoff. Thus, 

 the Reagan Administration is not expected to support 

 R&D programs of an economic subsidy nature except in 

 areas such as defense and space where Government is the 

 sole or primary consumer (pp. 16, 17). 



INDUSTRY-UNIVERSITY COOPERATION 



Increased university-industry cooperation appears to be 

 an important element in strengthening this country's R&D 

 enterprise. Such cooperation can take a number of forms, 

 including contracted research, jointly owned and operated 

 research facilities, and university-based industrial in- 

 stitutes. Cooperation offers industry additional access to 

 long-range exploratory research programs as a source of 

 ideas, knowledge, and basic technologies for future inno- 

 vation. It provides universities with additional sources of 

 research support and gives university faculties and stu- 

 dents access to industrial research facilities and a more 

 realistic understanding of both the needs of industry and 

 available industrial research opportunities. The trend 

 toward greater research cooperation between industry and 

 universities appears to be largely independent of direct 

 Federal intervention. Anticipated increases in university- 

 industry cooperative research during the next 5 years 

 should provide data on the effectiveness of various coop- 

 erative modes and on the need for catalytic Federal sup- 

 port (p. 17). 



THE INTERNATIONAL CONTEXT OF U.S. 

 SCIENCE AND TECHNOLOGY 



During the next 5 years, trends and events abroad, par- 

 ticularly in Western Europe, Japan, and the U.S.S.R., 

 will affect U.S. relations with those countries, the con- 

 duct of American science and technology, and the rela- 

 tionships of science and technology to U.S. domestic 

 concerns. The Federal Government is likely to continue to 

 support international collaborative efforts in science and 

 technology when such collaborations are clearly in the 

 national interest. Issues associated with international re- 

 source management and the global environment will per- 

 sist on the U.S. domestic agenda, as will the perennial 

 problem of how best to use science and technology to help 

 resolve problems related to poverty throughout the world 

 (p. 18). 



INTERNATIONAL COOPERATION 



The industrialized democracies, particularly the Western 

 European nations, share many concerns about likely 

 effects of financial and human resource constraints on the 

 conduct of science and technology. Thus, incentives for 

 cooperative international science and technology pro- 

 grams, particularly large, expensive programs of mutual 

 interest and benefit in such areas as space and high-energy 

 physics that are unlikely to provide any single country 

 with a short-term competitive edge, may well increase. 

 Such cooperation is expected to continue under the aus- 

 pices of official bilateral and multilateral government 

 agreements, through multinational corporations, and 

 through private arrangements between individuals, re- 

 search organizations, and business firms (pp. 18-20). 



INTERNATIONAL COMPETITION 



Domestic policies affecting R&D can have serious im- 

 pacts on U . S . competitiveness abroad. For example , since 

 regulatory policies among the industrialized democracies 

 vary, such American industries as the pharmaceutical 

 industry may be at a disadvantage compared to their 

 foreign competitors. The effects of regulations on interna- 

 tional technology competition need continuing examina- 

 tion, on a case-by-case basis, during the next 5 years. 

 Possible effects on U.S. industry of additional tariff barri- 

 ers or additional high-technology export limitations also 

 need to be examined closely, particularly in view of the 

 vital contributions that R&D-intensive industries are 

 making to the U.S. balance of payments (pp. 18-20). 



SOVIET CAPABILITIES IN SCIENCE AND TECHNOLOGY 



The U.S.S.R. appears to invest a larger fraction of its 

 Gross National Product in R&D and has a higher propor- 

 tion of its labor force engaged in R&D activities than any 

 other nation. Soviet scientists have made impressive con- 

 tributions in several disciplines, and the country has made 

 significant strides in applying R&D in nuclear energy 

 development, civil and military space activities, and na- 

 tional defense. However, the Soviet Union has thus far 

 failed to use its massive R&D investments for fostering 

 innovations in manufacturing industries and for economic 

 growth. Improvements in the productivity of the Soviet 

 labor force have fallen sharply in recent years. The Soviet 

 leadership appears to recognize that with labor, energy, 

 and capital constraints becoming more severe, the coun- 

 try's productivity will have to improve rapidly to meet 

 even its modest economic growth targets; however, Soviet 

 leaders appear unwilling to take the necessary steps to 

 improve productivity. The centrally planned nature of the 

 Soviet economy, the rigid institutional barriers that exist 

 between the R&D and the industrial sectors, and the 



xii 



