16 THE FIVE-YEAR OUTLOOK 



development programs, then American managerial prac- 

 tices may have to be reevaluated. A wide range of disci- 

 plines, including those concerned with organizational be- 

 havior and with economics, can contribute concepts and 

 methods by which to conduct that reevaluation. as well as 

 suggesting new and more effective approaches to manage- 

 ment (SSRC-1). 



Furthermore, social science methods can be used to 

 evaluate the impact of factors external to industrial control 

 on the innovation process. Those methods can be used 

 effectively to evaluate such things as the relative costs and 

 benefits of Federal regulations and Federal tax and patent 

 policies, as well as the impacts on innovation of such 

 factors as inflation and energy prices. The findings can 

 then provide a basis for framing appropriate remedial 

 steps (SSRC-1). The more general topic of the use of 

 scientific information in decisionmaking and policymak- 

 ing is discussed in Section E of this Chapter 



THE GOVERNMENTAL ROLE 



There is little that the Federal Government can do directly 

 about the internal factors inhibiting innovation m the 

 industrial enterprise. At most, government can provide or 

 support a forum for further discussion of the problem 

 (AAAS-1; AAAS-2). On the other hand, government can 

 influence those factors that are external to the industrial 

 enterprise and that are within its control. The Federal role 

 in promoting industrial innovation has been a topic of 

 extensive discussion over the past few years and is likely 

 to remain so during the next 5 years. 



There is general agreement about three broad factors in 

 the Federal role in industrial innovation: first, the impor- 

 tance of the overall economic climate and future economic 

 outlook in stimulating (or inhibiting) corporate managers 

 in their decisions about allocating resources to innovative 

 efforts; second, the importance of such indirect Federal 

 incentives and disincentives as lax. patent, antitrust, and 

 regulatory policies on corporate decisions; third, the im- 

 portance of the Federal role in maintaining long-range 

 research and education capabilities in the universities to 

 complement and augment industrial capabilities and to 

 regenerate continually the scientific and technical base on 

 which industrial innovation ultimately rests. 



There is. however, considerable disagreement within 

 this broad area of consensus about the appropriate form 

 and extent of the government role. Some significant 

 Federal actions aimed at improving the climate for innova- 

 tion have recently been taken. The Department of Justice 

 issued, in November 1980, a publication titled. Antitrust 

 Guide Concerning Research Joint Ventures, which sets 

 forth the standards it will use to examine the per- 

 missibility of collaborative research ventures between 

 businesses. Efforts have also been made to facilitate the 

 transfer of research findings from nonindustrial laborato- 

 ries into the industrial setting (ASTR-III). Many studies 



suggest the need for changes in Federal tax policies to 

 increase industrial investments in R&D-related plant and 

 equipment, ■* and the Economic Recovery Tax Act. signed 

 by President Reagan in 1981. contains R&D tax credits, 

 accelerated depreciation schedules and other incentives 

 designed explicitly to stimulate those investments. Legis- 

 lation pending in Congress at the end of 1981 would assign 

 to all private sector organizations (and not just universities 

 and small businesses as at present) the rights to patents 

 developed under Federal R&D funding. 



The question of when the Federal Government should 

 subsidize or otherwise intervene in private sector R&D is 

 also likely to be discussed further during the next 5 years. 

 Such a direct Federal role is generally accepted in those 

 cases where government itself is the primary consumer — 

 for example, in space and. most notably, defense-related 

 industries. Indeed. Federal investments in defense-related 

 research and development frequently stimulate activities 

 that are also likely to have high, long-term payoffs in the 

 civilian sector That is the case in the development of very 

 high speed integrated circuits and research in ultrasmall 

 electronics, artificial intelligence and robotics, and ad- 

 vanced materials technologies (NS). 



Existing Federal programs that provide modest grants 

 to small firms to stimulate innovative research are also 

 given high marks by many industrial scientists, par- 

 ticularly since they allow considerable latitude in integrat- 

 ing research, development, and marketing strategies. 

 Likewise, a modest Federal role in catalyzing university- 

 industry collaborations may be desirable, even though a 

 good many such collaborations are proceeding without 

 Federal support.'" 



There are doubts about the appropriateness of Federal 

 economic subsidies to stimulate specific commercial de- 

 velopments in the civilian sector, and the Reagan Admin- 

 istration's policy is that, in general, such direct subsidies 

 will not be provided, except in the case of long-term, 

 high-risk but high-potential programs in the national inter- 

 est that industry is unable to support. Industry alone has 

 sufficient experience to relate R&D to marketing strat- 

 egies. Since focused Federal R&D support is almost 

 always separated from the market, it is an ineffective 

 device for stimulating specific, near-term commercial in- 

 novations that can compete in the market without sus- 

 tained subsidies. Indeed, focused Federal support on near- 

 term development can even be counterproductive. In the 

 few years that a large Federal energy effort has existed, for 

 example, the push for rapid commercialization has led to a 

 marked shift from long-term research toward short-term 

 results. As a consequence, there has been a decline in 

 radically new ideas and even in the applied research 

 essential to ensure the success of existing projects 

 (NRC-14). Moreover, direct Federal support of industrial 

 R&D is fraught with the difficult problem of proprietary 

 rights. For those reasons, the Reagan Administration has 

 chosen to focus more on indirect means, such as changes 



