Gregory Tassey

Standardization in technology-based markets

Abstract The complexity of modern technology, especially its system character, has led to an increase in the number and variety of standards that affect a single industry or market. Standards affect the R&D, production, and market penetration stages of economic activity and therefore have a significant collective effect on innovation, productivity, and market structure. Standards are classified into product-element and nonproduct categories because the two types arise from different technologies and require different formulation and implementation strategies. Because standards are a form of technical infrastructure, they have considerable public good content. Research policy must therefore include standardization in analyses of technology-based growth issues.

The Economics of Science and Technology

This paper provides a non-technical, accessible introduction to various topics in the burgeoning literature on the economics of science and technology. This is an interdisciplinary literature, drawing on the work of scholars in the fields of economics, public policy, sociology and management. The aim of this paper is to foster a deeper appreciation of the economic importance of science and technology issues. We also hope to stimulate additional research on these topics.

The functions of technology infrastructure in a competitive economy

Abstract Governments of industrialized nations play varied but important roles in providing the diverse technology infrastructure that supports a modern, competitive economy. An understanding of the structure and impacts of these roles as well as efficiency differences among alternative implementation schemes is particularly important at this time as competing industrialized nations are revamping their technology infrastructures in response to major shifts in thescope as well as the content of their growth strategies. These shifts in scope can be described as evolutionary changes from single-stage to multi-stage strategies, in that several modes of technology-based competition are simultaneously pursued. That is, whereas an economy may have focused on innovation, manufacturing, high-volume or niche markets, etc. most if not all of these must be pursued together in the future in order to diversify risk and achieve economies of scope. Effective implementation of the more complex multi-stage growth strategy requires a consensus model of the appropriate functions for infrastructure and its institutions. Such a consensus model is necessary to efficiently guide strategic planning in both industry and government. In particular, a conceptual basis is needed for defining the critical interfaces between the government and industry roles, including effective long-range planning, communication, and cooperation. The required technology infrastructure policy model is derived from a microeconomic model of the typical technology-based industry. Existing national strategies have demonstrated the importance of efficiency at the production and market development stages as well as at the R&D stage, but the trend is towards promoting simultaneous efficiency at all these stages. That is, the model and the derived infrastructure functions must cover all stages and interfaces in the technology and related product life cycles.

Cooperative research and development : the industry, university, government relationship

I. The Role Players.- 1. A Typology of Industry-Government Laboratory Cooperative Research: Implications for Government Laboratory Policies and Competitiveness.- 2. Financing Industry-Government Cooperation in Industrial Research.- 3. University-Industry Relations: A Review of Major Issues.- II. National Strategies.- 4. Historical and Economic Perspectives of the National Cooperative Research Act.- 5. Technology Policy and Collaborative Research in Europe.- 6. Joint R&D and Industrial Policy in Japan.- 7. Cooperative Research and International Rivalry.- III. Impacts on Industrial Strategies.- 8. Collaborative Research and High-Temperature Superconductivity.- 9. Cooperative Research in the Automobile Industry: A Multinational Perspective.- 10. Coalitions, Cooperative Research, and Technology Development in the Globalization of the Semiconductory Industry.- About the Authors.

Underinvestment in Public Good Technologies

Although underinvestment phenomena are the rationale for government subsidization of research and development (R&D), the concept is poorly defined and its impact is seldom quantified. Conceptually, underinvestment in industrial R&D can take the form of either a wrong amount or a suboptimal composition of R&D investment. In both cases, R&D policy has not adequately modeled the relevant economic phenomena and thus is unable to characterize, explain, and measure the underinvestment. Four factors can cause systematic underinvestment in R&D-intensive industries: complexity, timing, existence of economies of scale and scope, and spillovers. The impacts of these factors vary in intensity over the typical technology life cycle, so government policy responses must be managed dynamically. In addition to understanding the causes of underinvestment in R&D, the magnitude of the deficiency relative to some “optimum” must be estimated to enable a ranking of technology areas with respect to expected net economic benefits from a government subsidy. Project selection criteria must therefore be based on quantitative and qualitative indicators that represent the nature and the magnitude of identified market failures. The major requirement for management of R&D policy therefore is a methodology that regularly assesses long-term expected benefits and risks from current and proposed R&D portfolios. To this end, a three-stage process is proposed to effectively carry out R&D policy analysis. The three stages are (1) identify and explain the causes of the underinvestment, (2) characterize and assess the investment trends and their impacts, and (3) estimate the magnitude of the underinvestment relative to a perceived optimum in terms of its cost to the economy. Only after all three stages of analysis have been completed can the underinvestment pattern be matched with the appropriate policy response.

Choosing government R&D policies: Tax incentives vs. direct funding

A major policy debate continues in many industrialized nations over the rationales for government support of technology development. This debate is unstructured due to the weakness of the underlying economics. Government intervention at any stage in the economic process is based on the recognition of market failure. In the case of technology-based markets, a rather vague allusion to excessive risk is often the best rationale put forward. Real risk/reward ratios are often distorted, leading to underinvestment, but the causes are several and vary significantly in character. As a result of this variance, the appropriate policy response also varies, ranging from varying tax incentives to direct government funding of R&D.

R&D Policy Models and Data Needs

From a policy perspective, the “S” portion of Science and Technology (S&T) is relatively easy to deal with. Basic science is widely recognized as close to a pure public good, which means that massive under investment occurs without government support. This premise has been understood and incorporated into policy since the end of World War II.

Competitive strategies and performance in technology-based industries

Abstract A model is proposed for relating a technology-based firms investments in R&D and marketing to its level of performance. The model is based on a homothetic performance function form that is maintained to best represent unique differences among the competitive strategies of firms or groups of firms within an industry. It also permits explicit estimation of returns to scale with respect to investments in R&D and marketing for the industry as a whole. The empirical analysis strongly supports the existence of a heterogenous competitive structure in a technology-based industry with the returns-to-scale estimates varying among the industries studied. The model implies that desirable increases in competition occur through the interaction of individual firms and possibly strategic groups. It also implies the possibility of less than perfect substitution of resources across competitive strategies within an industry. Thus future models of competition should not be based entirely on size-related measures.

Infratechnologies and the role of government

Abstract Government support of technological change is a complex issue because barriers resulting in underinvestment exist to some degree in most industries, so difficult allocation decisions for limited government resources are necessary. The structure and timing of government support is further complicated because in any one technological area, the nature and severity of underinvestment phenomena vary during the evolution or life cycles of the relevant industries. This paper focuses on the methods and rationale for government support of two elements in industrial technology: generic technology, from which specific products and processes (i.e., innovations) are derived, and “infratechnologies,” which are necessary for the evolution of the generic technology and its applications. Particular emphasis is given to infratechnologies because they are largely supplied by sources outside the industry and have consequently been largely overlooked in previous discussions of industrial policy. A case study of one major source of infratechnology, including quantitative estimates of industry impacts, is presented.

Lessons learned about the methodology of economic impact studies: the nist experience

Abstract Both strategic planning and economic impact assessments must be undertaken to effectively manage government research programs, which are typically implemented through a series of research projects that can occur over extended periods of time. Planning and evaluation have been the focus of Congressional legislation, in particular, the 1993 Government Performance and Results Act (GPRA). Compliance with this Act is driving increased planning and impact assessment activity and is also stimulating greater attention to methodology. Well before GPRA, NIST began conducting economic impact studies as a tool for effective management and for communicating the nature and results of NIST research to its various constituents. Although some of the basic tools for economic impact assessment have existed for some time, NIST has had to adapt this generic methodology along a number of dimensions: selection and application of impact (outcome) measures, integration of qualitative and quantitative analyses into a complete microeconomic assessment of a projects impacts, and interpretation of the results of these analyses in the context of ongoing RandD policy debates.