In This Issue
Fall Issue of The Bridge on Engineering Partnerships
September 1, 1996 Volume 26 Issue 3/4
The 1996 NAE Annual Meeting symposium focused on cooperation among industry, universities, and government for U.S. technological leadership in the twenty-first century.

Investing in Technological Leadership

Sunday, September 1, 1996

Author: Thomas E. Everhart

Despite lessening federal support, U.S. research universities remain a vital component of the nation's system of knowledge creation and technology transfer.

This symposium is organized on the principle that government, industry, and universities all have a role to play in order for our nation to maintain technological leadership into the next century. As president of an institution that receives considerable research funding from the federal government and student aid from federal and state sources, an institution that sends many of its graduates to industry and interacts with industry significantly in many ways, I certainly subscribe to that view. And while I shall talk from the perspective of the research university, the contributions of other areas of higher education should also be acknowledged. Our country needs, and will continue to need, technicians, who get a fast start in our community colleges. State colleges, private liberal arts colleges, and many forms of adult education also are important to our national well-being. However, the research university uniquely combines graduate education and research with the function of undergraduate education. Properly done, this can enrich both and provide leadership for our nation.

I believe society views educated graduates as the university's most important product--and so do I. However, research--the discovery of knowledge about nature, about society, or about man-made devices or systems--is another vital mission. Indeed, some say it is the university's most important activity. In 1995, universities performed $21.6 billion of research and development in the United States, equal to 12.6 percent of all R&D performed in the nation. The money spent on this research also contributed to graduate education, since most research assistants at universities are paid from grants. Well over half of this expenditure, about $13 billion, was made by the federal government, another $1.6 billion came from state governments, $1.5 billion was contributed by industry, and $3.9 billion was spent by universities themselves (American Association for the Advancement of Science, 1996).

Gauging Return on Investment
Many people have tried to estimate the return on investment from academic research. The chairman of the President's Council of Economic Advisers recently presented data estimating the private rate of return of R&D to be between 10 and 40 percent, while the social rate of return ranged from about 20 to 140 percent (Stiglitz, 1996). Mansfield (1991) has sampled seven industries and estimated that over a 10-year period in those industries, 11 percent of the products and 9 percent of the processes could not have been developed in the absence of recent academic research. An additional 8 percent of the products and 6 percent of the processes required very substantial aid from recent academic research.

New products commercialized by these industries during the period 1982 to 1985 that could not have been developed without academic research had sales in 1985 alone of about $24 billion, according to Mansfield. Products developed with very substantial aid from academic research brought in another $17 billion. Comparable revenues figures for new processes were $7.2 billion (could not have been developed without academic research) and $11.3 billion (developed with very substantial aid from academic research). Thus, the industrial return on academic research was considerably more than what the government invested in the research, and the social return to the country was over double the industrial return. The federal government certainly recouped its investment through taxes paid by these corporations and their employees.

Clearly, academic research is being used in industry to benefit the nation. Although research results are undoubtedly being utilized faster and better than in years past, it is still important to improve the technology transfer process. Key to this are people who know, who have used, and indeed, who may have developed the knowledge being transferred. Graduates are the best way for universities to transfer technology to industry, but there are never enough graduates, so consulting by faculty is a long-standing and successful alternative. By allowing the bidirectional transfer of information, this practice enhances both academia and industry.

Cooperative research is another method of technology transfer that is being used increasingly. Research in universities is generally performed by individual professors and their students. Given this context, cooperative research was viewed initially with suspicion by many faculty, and it still is by some. I have often heard the comment: "Only individuals are creative." However, as faculty have gained experience with cooperative group activities, they have learned that this approach can pay off and that equipment made available to groups of faculty, used cooperatively, can be much more effective than the same equipment available only to a few.

The National Science Foundation (NSF) Engineering Research Centers program is one successful example of how cooperative research can work. The centers, initiated in 1984, were an attempt to broaden the research focus of engineering in academia, to provide students with the opportunity to learn more about systems-design parameters, and to provide significant contact between faculty and students in academia and engineers in industry.

Engineering Research Centers were considered successful enough that the NSF followed a few years later with Supercomputing Centers and with Science and Technology Centers. These have existed or are operating at many universities. The first NSF Supercomputing Center, at the University of Illinois at Urbana-Champaign, was proposed by a group of faculty led by Larry Smarr. It made supercomputing available to faculty and students, not just at Illinois but at other academic institutions as well, and to users from industry. Members of the center developed new software and techniques, particularly visualization techniques, and explored novel applications related to such diverse topics as the physics of black holes and global weather patterns. Possibly the center's most famous student is Marc Andresson, who developed MOSAIC while at Illinois and now is a principal in Netscape.

A recent Engineering Research Center that I know well is the Caltech Center for Neuromorphic Systems Engineering. This center's goal is to endow the machines of the next century with the ability to sense, interact with, learn from, and adapt to their environment (Center for Neuromorphic Systems Engineering, 1996). Several corporations, including General Motors, are interacting with the center. A few applications of the technology being developed, such as fingerprint recognition, traffic monitoring, and engine diagnostics, are already in the process of commercialization.

Industry and government agencies other than NSF have also supported research at universities. The Integrated Circuit Laboratory at the University of California at Berkeley, founded in the early 1960s and funded by the Air Force, was the first such laboratory in academia. Others, like the Center for Integrated Systems at Stanford, funded largely by industry, have followed. These endeavors have enabled research to be done that could not have been done otherwise, have stimulated the Semiconductor Research Corporation's funding of university research, and have broadened the perspectives of faculty, students, and those in industry. I believe they have strengthened our national research enterprise.

National technological leadership requires contributions from government, industry, and the universities. It will require continued federal government investment in university research to develop knowledge and people who can carry that knowledge and technology to industry. Federal investment in science and engineering university education also has a high payoff for the country, for national defense, for health care, and for technological leadership. And, if the federal government invests in research in science and technology, experience shows that the private sector follows.

Worrisome Projections
What is worrisome are projections of future federal funding for university research. Federal nondefense R&D outlays were 0.8 percent of GDP in 1970, 0.6 percent of GDP in 1980, and are projected to be 0.4 percent in 1997. Outlays for defense R&D are projected to decrease sharply between 1997 and 2002. Total federal research expenditures are also expected to decrease significantly, as the nation moves toward a balanced budget in 2002. Federal support of R&D at colleges and universities is expected to drop slightly, by about 1 percent, over the 1995-1997 time frame, and to decrease sharply by 2002 (American Association for the Advancement of Science, 1996).

Two aspects of this expected funding drop are especially worrisome: First, the decrease in support for university research will reduce the number of graduates who are at the cutting edge of modern science and technology, just as other nations are accelerating their investments in graduate education; second, reductions in federal funds that pay the real costs of facility operation and depreciation, which many universities rely on to modernize laboratories, purchase new equipment, and even to supply matching funds for additional federal research support, will rob universities of the flexibility they need to pursue new and important areas of research.

In short, universities seem to be viewed by many in Washington not as partners in an endeavor to keep our nation strong, but as contractors who can be pushed for price reductions even if it jeopardizes other legitimate functions, such as undergraduate education. Although some in government seem to recognize the dangers of such thinking, the trend toward reduced federal investment in university R&D seems to be accelerating, not abating.

Industry, particularly industry based on technology, must have employees who can understand the importance of research discoveries and how such discoveries can improve business. In many industries, application of new technology to products and processes is essential if corporation expects to stay in front of the competition, at home and abroad. Some corporations earn half or more of their revenues from products introduced within the past 2 years. They try hard to make their own products obsolete; that is how they beat other companies who would compete with them. Properly applied, new technology should enable any corporation to improve profitability over the long term.

What can universities do to retain and strengthen their role as essential partners, with industry and government, in the U.S. R&D enterprise? For one, universities need to become more efficacious in teaching and in research. Improving administrative processes so that faculty and students can spend less time on paperwork and more time on teaching, research, and learning, will become an increasingly important goal.

New Opportunies
I also believe there are new opportunities for universities to improve the way teachers teach and students learn. While there is much to be said for listening and writing down in one's own words a professor's explanations of complex material, there is also much to be said for interactive learning and problem solving, both of which are becoming more possible with the increasing use of powerful desktop computers.

Because nature does not seem to be organized the way university departments are, some universities are improving interactions across disciplines, so that different disciplines can be focused on common research objectives. This can pay off handsomely in both teaching and research. And, of course, providing research opportunities to undergraduates is important. Such experiences help students understand what research is, even if they choose a very different career. Providing opportunities for students to spend time in industry, for example through a summer program, can provide an important counterpoint to their academic experience.

Under our democratic system, policymakers depend upon knowledgeable citizens to educate them about important issues. Members of the National Academy of Engineering have an important role to play in this regard. Members from universities who understand the problems of industry can be particularly helpful by suggesting ways that government can help industry contribute more to the U.S. R&D enterprise. For their part, members from industry can speak more forcefully about the importance of education and university research. Several NAE members from industry have been doing this, and we in the universities thank you. We all should perform our duties as citizens as conscientiously as possible to help keep the United States leading the world in science and technology into the twenty-first century.

American Association for the Advancement of Science. 1996. AAAS Report XXI: Research and Development FY 1997. Intersociety Working Group. Washington, D.C.: American Association for the Advancement of Science.

Center for Neuromorphic Systems Engineering (California Institute of Technology). 1996. Rodney M. Goodman, Director. Annual report, Year Two, Vol. 1, September 1.

Grove, A. S. 1967. Physics and Technology of Semiconductor Devices. New York: Wiley.

Mansfield, E. 1991. Academic research and industrial innovation. Research Policy 20(February):1-12.

Stiglitz, J. E. 1996. Strategies for Long Term Sustainable Economic Growth. Talk to the California Business Higher Education Forum, Stanford University, September 18, 1996.

About the Author:Thomas E. Everhart, a member of the National Academy of Engineering, is president of the California Institute of Technology. This paper is adapted from remarks he made 3 October during the symposium Industry-University-Government Cooperation for U.S. Technological Leadership in the 21st Century, part of the 1996 NAE Annual Meeting.