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STANFORD -- Government should pay more attention to potential payoffs to industry in allocating research funds to universities but must let universities and industry do what each does best, say two economists in a new study of the roles American universities have played in stimulating industrial innovation.

American industrial competitiveness is an appropriate goal for government-sponsored research, Nathan Rosenberg of Stanford University and Richard R. Nelson of Columbia University argue. They caution, however, that it would be a "grave mistake to try to move university research significantly closer to the actual development of commercial products and processes," which is more appropriately done by industries.

Two recent developments require a rethinking of the rationale and mechanisms for supporting American university research, the authors write in their study published by the Stanford Center for Economic Policy Research.

"With the end of the cold war, national security, in a military sense, carries much less weight as a rationale," they write.

"In addition, as foreign firms have grown stronger economically and technologically, the rationale of strengthening American competitiveness has been carrying a growing share of the argument for [government] support of academic research."

In their study of how university research has contributed to industrial innovation, they reviewed technology patent holders, and interviews and surveys of industrial leaders. Rosenberg said they found that "in most technologies, there is a well-established division of labor between industry and universities. Industrial firms do design and development work. Universities do research."

Only in a very few fields, Nelson said, are universities an important direct source of new industrial products or processes.

"Biotechnology and a few areas of electronics are exceptions, not the rule," they write.

For the most part, they found university research contributes to technical advance in industry by providing new knowledge and technologies that make industrial R&D more effective, they said.

Most of the research done in universities is basic research, if one uses the term "basic" in the specific sense of aiming for a relatively deep understanding of the phenomena under investigation, they write.

"However, it is a mistake to believe that university research is not guided by a concern with quite practical industrial and human problems," Rosenberg said. "This misperception has been reinforced by a widely accepted definition, employed even by the National Science Foundation, of basic research as research that is conducted without concern for practical applications."

Such a definition, he said, is "not only misleading; it is positively bizarre."

The vast majority of university research is in engineering disciplines; the applied sciences, such as materials science and computer science; and in fields directly connected with health and medicine, such as oncology and pathology, the authors write.

"In all these fields, there is a direct concern with the usefulness of the research findings," Nelson said. "Such findings naturally contribute to the ability of applied researchers in industry to solve practical problems and to create new products and processes.

One of the most significant accomplishments of the American university research system over the past century, the economists say, has been to establish engineering disciplines and applied sciences as respected fields of academic research, not just as fields of professional training.

"The American university system has achieved breadth and depth in these fields to a far greater extent than have university systems in other countries," Rosenberg said. "The competitive advantage of American industry in many fields has flowed directly from the strength of American academic research."

Research in engineering disciplines often has been of a generic nature in that it did not involve industrial innovations, but it led to a deeper knowledge of certain relationships, which, in turn, made it much easier for industry to design new or improved products.

Rosenberg and Nelson cite several examples in their study. One is the propeller tests conducted by W.F. Durand and E.P. Lesley of Stanford between 1916 and 1926. The basic science of aerodynamics had been developed earlier in Germany, but the findings of the Stanford team made decisive contributions to the emergence of the American commercial aircraft industry that became the world leader in the 1930s.

"The Stanford research did not involve the design of aircraft, but it did develop an understanding of how to think about the problem," the authors write. "It involved a better understanding of how to approach the whole problem of aircraft design, which students would later employ in industry-based design facilities."

Actual development of commercial products and processes requires not only scientific and technical expertise but also the ability to make commercial judgments involving trade-offs between cost on the one hand and performance and quality on the other, the economists say.

"Academics are not in a good position to make those kinds of judgments, either by training or by the normal incentives of their professions," Rosenberg said. "Industry is in a far better position."

Enhancement of industrial competitiveness requires a shift in orientation "to be complemented by changes in government mechanisms for setting priorities, to pay greater attention to the needs of industry in the allocation of funds across different fields of university research as well as by greater knowledge and sensitivity to the technological needs of industry on the part of academic researchers," Rosenberg said.

"But it should not involve getting universities into activities that are better performed by private industry.

Even with a new orientation, government will have to continue to be overwhelmingly the major supporter of academic research, Nelson and Rosenberg argue.

In recent years, industry support of basic research in their own laboratories has declined, they say, and it is "unrealistic" to believe that industry will significantly increase its support of basic research in universities.

But it is basic research, albeit largely in the engineering disciplines and applied sciences, that the universities mostly should be doing, they say, and government will have to continue to be the principal supporter of such research.

Copies of their study, "American Universities and Technical Advance in Industry," Publication No. 342, are available from the Center for Economic Policy Research, 100 Encina Commons, Stanford University, Stanford, CA 94305-6072; telephone (415) 725-1874.



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