In much of the world outside the United States, national governments have implemented comprehensive regional development programs and have taken a central role in the formation of innovation clusters—26 of the 31 European Union countries have cluster development policies at the national level. By contrast, in the U.S., while the federal government has over 200 programs associated with regional development, there has until recently been
“no federal policy on clusters.”1 In general, and with noteworthy exceptions in fields of national security and public health, the federal role in the states and regions has been to dispense a large number of relatively small packets of financial assistance for R&D and to support small business, and to set regulatory policies that define the competitive environment for innovation. Since 2009, however, the federal government has begun to establish and expand new programs explicitly for the purpose of fostering regional innovation clusters.
FEDERAL FUNDING OF SCIENTIFIC RESEARCH AND ECONOMIC DEVELOPMENT
Most of the United States’ basic scientific research is funded by the federal government and conducted by U.S. research universities pursuant to grants and contracts.2 Basic R&D is funded in both established and promising thematic areas are seen as providing the foundation for scientific advance over the long run. The federal government also funds R&D to meet the mission requirements of federal agencies and departments. Much of this spending
1Presentation by Andrew Reamer, Brookings Institution, “Stimulating Regional Economies,” in National Research Council, Growing Innovation Clusters for American Prosperity: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2011.
pp. 52-56.
2National Science Board, Science and Engineering Indicators 2012, Arlington, VA: National Science Foundation, 2012.
Box 5-1
The Federal Role in Economic Development and Innovation The federal government has been active in promoting economic development and innovation since the early days of the nation, manifested in such initiatives as the creation of the Patent Office (1802), the Coast and Geodetic Survey (1807), and early initiatives to improve navigation. Between the 1860s and the 1930s U.S. manufacturers were protected by a high tariff wall intended, in part, to foster new industries. Since World War II, investments in research by DoD, NIH, NASA, DOE, NSF, and other government institutions have given rise to new technologies creating entire new industries and millions of U.S. jobs. Federal funding was critical to the development of the transistor by Bell Labs, the emergence of the semiconductor industry, the development of GPS, and the creation of the Internet, and if anything, the importance of federal support for innovation is increasing. A survey of U.S. innovation concluded
Whereas the lion’s share of the R&D 100 Award-winning U.S.
innovations in the 1970s came from corporations acting on their own, most of the R&D 100 Award-winning U.S. innovation in the last two decades have come from partnerships involving business and government, including federal labs and federally funded research… [T]he federal government is playing a much more supportive and important role in innovation.3
supports development of technologies relevant to defense and national security, which sometimes has little or no near term commercial applicability. The U.S.
national laboratories support research related to national defense, energy security and public health; despite a long history of initiatives to foster increased commercial application of their research results, their impact in the commercial arena has been an ongoing subject of concern on the part of policymakers.4
3Fred Black and Matthew R. Keller, “Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1920-2006,” Information Technology and Innovation Foundation, July 2008, pp. 2-3
4A number of recent reports have concluded that the metrics available to assess the federal laboratories’ performance in technology transfer to industry are inadequate, but that a number of factors inhibit such transfers, including the laboratories’ management, supervision, culture, available resources, mission(s), and location. See National Institute of Standards and Technology, Federal Laboratory Technology Transfer Fiscal Year 2010, August 2012; Institute for Defense Analysis Science and Technology Policy Institute, Technology Transfer and Commercialization Landscape of the Federal Laboratories, June 2011. In 2009, the General Accountability Office conducted a review of technology transfer by the DOE laboratories. It found that “the completeness and accuracy of DOE’s technology transfer data are questionable…One laboratory failed to report complete information on its federal work-for-others agreements for fiscal years 2004 through 2008…[M]ore could be done to ensure that promising technologies are being transferred…DOE’s lack of
The activities of Sandia National Laboratory in New Mexico in engaging U.S. industry suggests the opportunities that exist in expanding the federal laboratories’ role in commercially relevant innovation. Sandia has been involved in corporate research partnerships for over 15 years with companies such as Intel, Lockheed-Martin, Corning, Proctor & Gamble, IBM, and Hewlett- Packard.5 Sandia has collaborated with the state of New Mexico and Los Alamos National Laboratory to create Sandia Science and Technology Park, a public-private partnership which had 30 tenants as of 2012 (some of them spinoffs from Sandia) and accounted for 2,000 jobs in Albuquerque.6 The New Mexico Small Business Assistance program provides tax credits to Sandia and Los Alamos to provide technical support to local businesses, collaboration credited with creating and retraining 1,020 small business jobs in the state.
Sandia’s Entrepreneurial Separation to Transfer Technology program allows its scientists to apply for “entrepreneurial leave” to help expand or start-up a company, with a guarantee of re-employment upon return (for whatever reason) within two years. Between 1998 and 2012, 138 scientists and engineers left Sandia and Los Alamos to found companies, starting up 91.7
There is no central clearinghouse or coordinating mechanism with respect to federal R&D spending, which is administered by numerous
government agencies in a manner that is sometimes contradictory or duplicative.
At the same time, the disaggregation of federal research spending accords innovators with multiple possibilities for securing federal funding. The notion of a national industrial policy or innovation strategy has been debated for decades,
overarching goals—including a consensus on what activities constitute technology transfer—and reliable performance data have left DOE’s laboratories and program offices to chart their own course, most often with mixed results.” GAO, Technology Transfer: Clearer Priorities and Greater Use of Innovative Approaches Could Increase the Effectiveness of Technology Transfer at Department of Energy Laboratories, June 2009, pp. 19-31. Dr. Eric Isaacs, Director of the Argonne National Laboratory in Illinois, recalls the case of a promising new material developed “very quickly” in the laboratory but which took 19 years to develop into practical applications in the automobile industry. Eric Isaacs, “The Federal Laboratory Contribution,” National Research Council, “Building the Illinois Innovation Economy: Summary of a Symposium,” June 28-29, 2012.
5Sandia initially collaborated with Goodyear on computational simulation technology that Goodyear needed to improve its tire design and production processes. The relationship flourished and Goodyear now uses Sandia simulation tools to design many types of tires. Goodyear fully funds the program and has invested over $40 million in it. J. Stephen Rottler, “Sandia National Laboratories as a Catalyst for Regional Growth,” National Research Council, Clustering for 21st Century
Prosperity: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2012.
6Jobs in the Science Park pay salaries that are twice as high as the Albuquerque average. Ibid.
7Ibid. Solar equipment maker Emcore acquired MODE, a company founded by Sandia scientists in 1996 to develop photovoltaic applications for satellites. Emcore moved its headquarters to Sandia’s Science Park and continued to license technologies from Sandia. As of 2012, having grown substantially, it employed 350 people. Emcore receives assistance from Sandia’s small business assistance program.
Box 5-2
A Groundbreaking National Laboratory-University Partnership The University of Chicago and the Chicago-based Argonne National Laboratory have launched collaboration—the Institute for Molecular
Engineering—intended to redefine the engineering discipline. The Institute is building a new engineering program “across the boundaries of two very large institutions,” which “transcends disciplinary boundaries from the outset.” The new institute will treat various engineering fields—electrical, mechanical, chemical—at the most basic (e.g. molecular) level. The program will bypass traditional departmental structures and draw on multiple competencies, including the synthesis of new materials, synthetic biology and biological engineering, computational modeling, molecular-scale imagining, and micro- mechanics. Many of the faculty members will also have appointments at the Argonne National Laboratory. Incentives will be provided to encourage collaborations with industry.8
and the government has actively fostered key sectors, but the idea of industrial policy remains controversial, reflecting a widespread aversion to government planning, free market beliefs, and a reluctance to “pick winners and losers” in industry or between states and regions.9 Federal promotion of innovation in industry has been carried forward under the guise of assistance to small business and through mission-related programs by federal departments that support research and often directly impact actors in the commercial arena.10 Federal regional economic development policies have “evolved in a wildly ad hoc,
8Matthew Tirrell, “Building an Institute for Engineering Innovation at the University of Chicago and Argonne National Laboratory,” in National Research Council, Building the Illinois Innovation Economy: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2013. The Argonne National Laboratory is also partnering with the University of Kentucky in the Kentucky-Argonne Battery Manufacturing Research and Development Center, where R&D is being undertaken with respect to the fabrication of state-of-the-art lithium-ion cells and new cell chemistries. The Center plans to develop manufacturing lines for batteries. A spokesman for the project said that his goal is “to re-establish the United States as a world leader, not only in materials and development but in manufacturing technology and capability [in
batteries].” The project has received $10 million in funding from NIST and $4 million from the state of Kentucky to fund construction of a 36,000-square foot laboratory for advanced batteries. Ralph Brodd, “The Kentucky-Argonne Battery Manufacturing R&D Center,” National Research Council, Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities—Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2012.
9See generally: Otis, Graham, Jr., Losing Time: The Industrial Policy Debate, Cambridge Ma:
Harvard University Press, 1992.
10Wendy H. Schacht, “Industrial Competitiveness and Technological Advancement: Debate Over Government Policy”, CRS Report to Congress, March 13, 2012, pp. 41-43.
idiosyncratic and uncoordinated fashion.”11 Ginger Lew of the National Economic Council recalled in 2011 that she had met with a group of community leaders from the Pacific Northwest who were pursuing federal energy grant money:
They showed a mind-boggling diagram of 23 program offices they had to apply to, coordinate with and manage. They talked about how there were in the second year of this particular journey to get access to federal dollars, all related to this particular topic and this same issue.12
In 1993, in a departure from the traditional federal approach, the Clinton Administration called for a national commitment to technology
development in the context of a broader national economic strategy emphasizing the development of new products, industrial processes and services by the U.S.
private sector.13 The Presidency of George W. Bush diverged from this approach, favoring more traditional promotional tools such as federal support for basic research and tax incentives. Federal support for private sector technological development was curtailed.14 In early 2009, President Obama declared an intention to double the budget of the most important science agencies, as identified by former President Bush, over a 10-year period. The Obama stimulus package enacted in 2009 allocated an additional $7.6 billion to scientific research, and additional funds to directly support green technologies such as renewable power generation, bio-fuels, green buildings, and electric vehicles.15 The government provided financial support to promising companies across a spectrum of technologies, without perhaps sufficient attention to the growth of demand for their products.16 At the same time, the government actively intervened to support the banking sector and recapitalized the automobile industry.
11Karen G, Mills, Elisabeth B Reynolds and Andrew Reamer, Clusters and Competitiveness: A New Federal Role for Stimulating Regional Economies, Washington, DC: Brookings Institution, April 2008, p. 24.
12Presentation of Ginger Lew, “Regional Innovation Clusters,” National Research Council, Clustering for 21st Century Prosperity, op. cit.
13William J Clinton, and Albert Gore Jr, Technology for America’s Economic Growth, A New Direction to Build Economic Strength, February 22, 1993.
14Wendy H. Schacht, “Industrial Competitiveness and Technological Advancement: Debate Over Government Policy”, CRS Report to Congress, March 13, 2012, p. 4.
15The American Recovery and Reinvestment Act of 2009 is commonly referred to as the "stimulus"
or the "stimulus package. See <http://www.recovery.gov/About/Pages/The_Act.aspx>.
16National Research Council, Building the U.S. Battery Industry for Electric Drive Vehicles, Progress, Challenges, and Opportunities, op. cit.
The National Science Foundation (NSF)
NSF is a government agency that supports basic research and education in non-medical fields of science and engineering. It is a funding agency without its own laboratory network—“all of the [federal] money that comes in, goes out—primarily to universities—to support basic research in science and
engineering, as well as educational activities.”17 Its annual budget is $7.5 billion.
While its emphasis is on basic research, it supports teams of university-industry researchers who explore potential applications and funds numerous translational research programs, which affect state and local economic development. Leading NSF initiatives include:
Industry- University Cooperative Research Centers (I/UCRCs)
These centers are located at or near universities with strong research capabilities in engineering and information technology, and engage companies such as Corning, Kyocera, BASF, Ceradyne, and Kennametal.
Engineering Research Centers (ERCs)
These centers involve thematic industry-university R&D in a broad range of fields, including bioengineering, earthquake engineering, advanced manufacturing technologies, and power electronic systems.18
Materials Research Science and Engineering Centers (MRSECs)
These centers support research of a scope and complexity that would not be feasible under traditional funding of individual research projects.
According to NSF, “MRSECs are university-based, and undertake an
interactive, interdisciplinary approach to materials research and education while fostering active cooperation among university-based researchers and those concerned with the application of materials research in industry and elsewhere.”19
The Science and Technology Centers (STCs)
“STCs conduct world-class research through partnerships among academic institutions, national laboratories, industrial organizations, and/or other public/private entities, and via international collaborations, as appropriate.
They provide a means to undertake significant investigations at the interfaces of disciplines and/or fresh approaches within disciplines.”20
17NSF doesn’t directly run any laboratories, but it funds a number of central facilities (NCAR, LIGO, etc.) through contractors.
18Thomas Peterson, “The NSF Role in the Innovation System”, in National Research Council, Building the Illinois Innovation Economy: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2013.
19Access at <http://www.mrsec.org/mrsec-program-overview>.
20Access at <http://www.nsf.gov/od/oia/programs/stc/>.
The National Institutes of Health (NIH)
The National Institutes of Health, which is part of the U.S. Department of Health and Human Services, is by far the most important federal entity supporting research and development in the life sciences. NIH conducts research in its own substantial laboratories, but most of its funds are allocated through its Extramural Research Program in the form of roughly 50,000 competitive grants to over 300,000 researchers at Universities, medical schools and research organizations in the U.S. and other countries. NIH also awards grants to small businesses through the Small Business Innovation Research (SBIR) program.21
NIH grants have a very substantial impact on local economies.
Organizations in California alone received $3.33 billion in biomedical-related financing from NIH in 2011.22 In 2012 NIH awarded $392 million in grants in the state of Florida to 52 public and private organizations. NIH support has helped to foster Medical City, a partnership involving the University of Florida, the Sanford-Burnham Medial Institute and other organizations in a research collaboration at Lake Nona, Florida.23 Sanford-Burnham has received $52 million from NIH since starting operations at Lake Nona in 2009. Medical City has become a “magnet for scientists and research groups and clinics across the region,” enabling Medical City to become a “leading biosciences cluster in Florida.”24
The National Institute of Standards and Technology (NIST) Founded in 1901, the National Institute of Science and Technology (NIST), now a part of the Department of Commerce, is a non-regulatory federal agency tasked with promoting U.S. industrial competitiveness through
measurement science, standards, and technology. In the words of NIST Director, Pat Gallagher, NIST has become “industry’s national laboratory. With the decline of the corporate laboratories created over a century ago, NIST now performs many of those functions.” NIST is currently organized into six mission-oriented operating units—national user facilities, the center for nanoscale science, the center for neutron research, and technology laboratories
21National Research Council, Venture Funding and the NIH SBIR Program, C. Wessner, ed.
Washington, D.C.: The National Academies Press, 2009.
22“California Biomedical Industry Still the Biggest, Despite Tight Financing, Report Says,” Alameda Times-Star January 8, 2013.
23Access at <http://learnlakenona.com/medical-city/>.
24“Growth of Bioscience Research Depends on Continued Funding,” The Orlando Sentinel March 5, 2013.
for engineering, information technology, and measurement sciences.25 NIST offers a number of programs promoting innovation:
Manufacturing Extension Partnership (MEP)
MEP is a program to support small and medium-sized U.S.
manufacturers through a network of manufacturing extension centers located in all 50 states and Puerto Rico. In all the MEP program has approximately 60 centers with about 370 field location and total of about 1,400 non-federal staff.
The MEP centers are operated by independent organizations rather than MEP itself, and are co-funded at an annual level of about $300 million with one-third supplied by the federal government and the remainder by state and industry sources. The MEP centers provide services and expertise to small and medium sized enterprises (SME) to improve manufacturing processes, supply chain positioning, exploitation of new technologies, application of information and techniques, and manpower training. MEP is best known for promoting “lean manufacturing” and efficiency, but is currently implementing programs to promote new products and innovative processes.26
The Technology Innovation Program (TIP)
NIST’s Technology Innovation Program (TIP) was derived from, but not identical to the Advanced Technology Program, which ended in 2007.27. Its mission was to support research and innovation in areas of critical national need.
TIP grants, typically $3 to $5 million, supported precompetitive technology development by small and medium companies, with a focus on manufacturing technology. Thematic areas of critical national need included civil infrastructure, energy, healthcare, water, sustainability, complex systems and networks, and manufacturing (advanced robotics and intelligent automation).28 The program never gained broad support in the Congress and was effectively ended in 2011.
25Phillip Singerman, “Reviving Manufacturing: The Role of NIST,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2013.
26For a review of the program, see National Research Council, Strengthening American
Manufacturing: The Role of the Manufacturing Extension Partnership, C. Wessner and P. Shapira, eds., Washington, DC: The National Academies Press, forthcoming.
27The Advanced Technology Program (ATP) was designed to foster early-stage technology development by companies that might otherwise not be funded. Kristina Johnson, the U.S.
Undersecretary of Energy, was previously a co-founder of ColorLink, a company formed in 1995 and sold in 2007. She indicated that the only reason ColorLink survived for 12 years was that it received a $2 million, three-year grant from ATP to develop the process to make 3-D glasses worn in movie theaters. “Without that staying power, we would have died in the Valley of Death.” Kristina Johnson, “Building a Clean Energy Economy through Accelerated Innovation,” NRC, Clustering for 21st Century Prosperity: Summary of a Symposium, op. cit.
28For a review of the Advanced Technology Program, see National Research Council, The Advanced Technology Program: Assessing Outcomes, C., Wessner, ed., Washington, DC: National Academy Press, 2001.