Changes in Private Investment in R&D and Innovation

The Board conducted a broad assessment of what appear to be long-term changes in the composition, orientation, organization, and location of industrial research and innovative activities in the United States and abroad and their significance for the international performance of firms in different industries. Elements of this study include 1) a review of the government's portfolio of industrial S&T indicators and data; 2) integration of scholarly work on several manufacturing and nonmanufacturing industries (primarily studies sponsored by the Alfred P. Sloan Foundation at various institutions, e.g., computers, semiconductors, pharmaceuticals, banking, trucking, etc.); and 3) conferences on major federal policies such as the influence of domestic and international tax policy on corporate investment.

The last two publications from this project, U.S. Industry in 2000: Studies in Competitive Performance and Securing America's Industrial Strength, were released in June 1999. U.S. Industry in 2000 is a collection of original studies of 11 manufacturing and service industries to determine the sources of improved U.S. industrial performance in the 1990s, in marked contrast to the late 1980s gloomy diagnosis of U.S. industrial decline and loss of technological leadership. In the companion report, Securing America's Industrial Strength, the STEP Board says that analysts in the 1980s mistook the high valuation of the dollar and other adverse economic conditions for signs of long-term structural deterioration. Nevertheless, performance on a variety of measures improved in the 1990s, reflecting changes in private sector strategies, applications of advanced information technologies, and broadly supportive public policies. A new analysis in the report shows in detail the changing composition of federal research support since 1992, when the total federal R&D budget began to fall as part of the effort to reduce the budget deficit. The STEP analysis shows that some fields--electrical and mechanical engineering, physics, chemistry, and mathematics--have suffered along with the budgets of their dominant funding agencies; but others--computer science and materials engineering--have prospered. Data on federal obligations for 26 research fields are included as an appendix to the report and are posted here.

Meeting:

Forum on U.S. Industrial Performance (June 30, 1999)