Scientific research by American business is in a perilous state of stagnation, a federal panel said yesterday as it recommended tough steps to strengthen industry against foreign rivals, including action by the federal government.
Many experts have issued such calls to action, but this one is unusual for its breadth and authority. Its author, the National Science Board, is the policy-making arm of the National Science Foundation, a federal agency that supports general science research in the United States and is responsible for monitoring the nation's overall scientific health.
Without saying so explicitly, the panel's report seems to repudiate the laissez-faire approach of the Reagan and Bush administrations, which disdained government involvement in industry research in favor of reliance on market forces.
Lately, the Bush administration has softened its stance on this issue, and Arkansas Gov. Bill Clinton has strongly backed new federal policies to increase industrial innovation.
The National Science Board's 91-page report, released yesterday in Washington, detailed U.S. declines in research spending by business and setbacks in high-technology markets. The report called for a plan in which government would play a leading role in bolstering industry research.
Among proposed federal steps: increasing the money for industrial research, changing tax, fiscal and monetary policies to promote scientific investment and creating federal education programs to train future corporate leaders in the art of fostering innovation.
The report "paints a grim picture," said Dr. Roland W. Schmitt, the president of Rensselaer Polytechnic Institute in Troy, N.Y., and co-chairman of the report panel.
"Implementation of a national technology policy, establishing a rationale and guidelines for federal action, should receive the highest priority," said Dr. Schmitt, a former head of corporate research for General Electric Co.
The situation was especially dangerous, he said at a news
conference, because the erosion of America's industrial edge was steady rather than precipitous, leading to insufficient alarm given what's at stake.
"We're waving a warning flag," he said, pointing to an "emerging risk" that the United States is losing its inventive and competitive edge.
The report, "The Competitive Strength of U.S. Industrial Science and Technology: Strategic Issues," was done by the National Science Board's five-member committee on industrial support for research and development.
In its report, the panel, echoing past alarms, found that American spending on industrial research and development had stagnated in the 1980s and early 1990s, as foreign rivals increased their investments.
In the past three years, it said, six competitors -- Japan, Germany, France, Italy, Sweden and Britain -- significantly increased their support of civilian research so that it cumulatively rose from being 25 percent greater than similar work in the United States to being 34 percent greater.
The report noted that U.S. spending on industrial research slowed from an annual average growth of 7.5 percent in constant dollars from 1980 to 1985 to 0.4 percent from 1985 to 1991.
As a result, it said, many U.S. industries, including computers, factory automation, motor vehicles, metals and electronics, were at risk of decline.
The report, citing a survey of 139 leading high-technology companies, said the main cause of the financial pullback was not federal policy, technology management or the changing global economy, but rather general management practices and external financial pressures.
Corporate labs, it said, were under severe financial stress and were being forced to shift to shorter-term research for existing markets. It found that the huge corporate debt accumulated during the takeovers, mergers and acquisitions in the 1980s had squeezed research but that the top financial pressure was the "growing dominance of institutional investors in equity markets and their demand for short-term returns on their investments."
It added that many top corporate managers lacked the skills and insights to tie technology to business strategy. In summary, the report said the United States "spends too few dollars" on industrial research and makes poor use of the ones it does.
It called for a tax credit for research and development to be made permanent and for a moratorium on a Treasury regulation that induces American corporations to move research overseas.
Perhaps most significant, it called for a sharp reversal of priorities in the overall federal research budget, shifting the focus from the military to the commercial.
About 60 percent of the $70 billion Washington is spending this year on science research goes to the Defense Department and other agencies engaged in military research.
Industry research sponsored by the federal government should be a team effort with businesses that focus on generic, pre-competitive technologies that have many commercial applications, the report said.
The report also called on federal efforts to improve how industry performs its own research.