Generic Policx Issues 15 



the pharmaceuticals industry has. on balance, been in the 

 public interest (NRC-Obs.). 



In addition to imposing the need for such defensive 

 research in industry. Federal regulations add to uncertain- 

 ties on the part of corporate managers about whether 

 products resulting from investments in R&D can be mar- 

 keted at competitive costs, or even at all.* Although few 

 would suggest that industries should not be regulated at 

 all, there is reasonably strong sentiment that Federal reg- 

 ulatory policies can and should be made more efficient 

 and selective, thereby reducing some of the costs of meet- 

 ing regulatory requirements and encouraging greater in- 

 vestment in long-term R&D (NRC-14). The President's 

 Task Force on Regulatory Relief, chaired by the Vice 

 President, is expected to make recommendations to im- 

 prove the rational bases for establishing regulatory 

 priorities. 



FACTORS INHERENT IN AMERICAN MANAGEMENT 

 CHARACTERISTICS 



Investments in long-term R&D programs clearly depend 

 on the willingness or propensity of industrial managers to 

 make those kinds of investments. However, current man- 

 agement practices, at least in some industries, notably 

 metallurgy and automotives, may bias against making 

 long-term investments (NRC-Obs.). The automotive and 

 aircraft industries have already modified their products 

 both to increase fuel efficiency and to reduce energy used 

 in production. But it is clearly difficult for industries 

 facing severe financial problems to increase their invest- 

 ments in long-term R&D (NRC-14). Moreover, as argued 

 by Abemathy and Rosenbloom (AAAS-2) and by Prewitt 

 (SSRC-1), industrial reward systems for high-level execu- 

 tives can have a negative effect on long-term R&D, since 

 rewards or bonuses to executives frequently are based on 

 short-term profits, which encourages a short time hori- 

 zon. Long-term investments in new and perhaps risky 

 technologies, as well as costly retooling of existing ma- 

 chinery to accommodate new technical advances, have 

 little immediate payoff, a condition that does not lead to 

 reaping immediate rewards. 



It also has been argued that investment in long-term 

 technological development demands a certain basic un- 

 derstanding of the technical base of the industry and that 

 American recruitment and selection practices for high- 

 level managers in some industries often are coun- 

 terproductive for long-term innovation investments. Man- 

 agers in those industries are selected for their managerial 

 or business skills and may have little appreciation of the 

 technical base of the company. Therefore, they are less 

 likely to appreciate the need for long-range research and 

 development programs (AAAS-2). In contrast, in other 

 industries where top managers frequently have scientific 

 and engineering backgrounds (such as the information 



and chemical industries), the rate of technological innova- 

 tion continues to be reasonably high. The problem of lack 

 of technical expertise among managers is compounded by 

 those high-level executives who move from one business 

 to another fairly often and do not have time to learn about 

 the industry's technical base (AAAS-2). The situation is 

 different in some other industrialized countries, most 

 notably Japan, where business personnel frequently stay 

 with a single company for long periods of time, perhaps 

 for their entire careers, and managers often are sophisti- 

 cated about the company's technologies and technological 

 capabilities (AAAS-2). 



To the extent that these arguments are valid, they sug- 

 gest that some of the responsibility for lagging innovation 

 in the United States lies with American management 

 culture. Rettig suggests that some of the counterproduc- 

 tive management practices are also increasingly evident 

 among Federal program managers, who are unwilling to 

 invest Federal funds in long-term, potentially risky proj- 

 ects. That provides a challenge to both the private and the 

 public sectors in the coming years to reevaluate and, 

 perhaps, change some of their managerial philosophy 

 (AAAS-1). 



SOME REMEDIAL APPROACHES 



Having suggested, first, that there is a lag in American 

 industrial innovation and, second, that some of the causes 

 of lagging innovation are related to current patterns of 

 industrial research and development activities and invest- 

 ments, reasonable questions include: What can be done? 

 By whom? 



CONTRIBUTIONS OF THE SCIENCE AND TECHNOLOGY 

 ENTERPRISE 



Since the total innovation process begins with the genera- 

 tion of ideas, providing additional basic concepts and 

 methods is one way that science and technology might 

 contribute to overcoming the lag in American industrial 

 innovation. However, this is not the stage of the innovation 

 process where the most dramatic problems lie; there does 

 not seem to be a dearth of innovative ideas. Rather, the 

 critical problems seem to lie more heavily in the later 

 stages of the innovation process — in the stages of develop- 

 ing those seminal ideas and converting them into marketa- 

 ble products and processes (NRC-Obs). 



In addition to providing increased capacity for innova- 

 tion through improving the innovation process, science 

 and technology activities can have an impact upon the 

 factors both internal and external to industrial control that 

 presumably are contributing to the current lag in Amer- 

 ican industrial innovation. If, for example, one cause of 

 the innovation lag is an unwillingness of managers to 

 invest in long-term and potentially risky research and 



