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[House Prints 110-110]
[From the U.S. Government Publishing Office]

 
                      THE GLOBALIZATION OF R&D AND
               INNOVATION: SCALE, DRIVERS, CONSEQUENCES,
                           AND POLICY OPTIONS

=======================================================================

                            COMMITTEE PRINT

                                 BY THE

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                                MAY 2008

                               __________

                            Serial No. 110-A

                               __________

 Printed for the use of the Committee on Science and Technology. This 
document has been printed for informational purposes only and does not 
represent either findings or recommendations adopted by this Committee.

     Available via the World Wide Web: http://www.science.house.gov

                                 ______

                        U.S. GOVERNMENT PRINTING OFFICE

41-920                         WASHINGTON : 2008
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Washington, DC 20402-0001

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
MARK UDALL, Colorado                 LAMAR S. SMITH, Texas
DAVID WU, Oregon                     DANA ROHRABACHER, California
BRIAN BAIRD, Washington              ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina          VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            FRANK D. LUCAS, Oklahoma
NICK LAMPSON, Texas                  JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
JERRY MCNERNEY, California           TOM FEENEY, Florida
LAURA RICHARDSON, California         RANDY NEUGEBAUER, Texas
PAUL KANJORSKI, Pennsylvania         BOB INGLIS, South Carolina
DARLENE HOOLEY, Oregon               DAVID G. REICHERT, Washington
STEVEN R. ROTHMAN, New Jersey        MICHAEL T. MCCAUL, Texas
JIM MATHESON, Utah                   MARIO DIAZ-BALART, Florida
MIKE ROSS, Arkansas                  PHIL GINGREY, Georgia
BEN CHANDLER, Kentucky               BRIAN P. BILBRAY, California
RUSS CARNAHAN, Missouri              ADRIAN SMITH, Nebraska
CHARLIE MELANCON, Louisiana          PAUL C. BROUN, Georgia
BARON P. HILL, Indiana               VACANCY
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
                The Globalization of R&D and Innovation:

            Scale, Drivers, Consequences, and Policy Options

    This document is being submitted by the staff of the U.S. 
House of Representatives Committee on Science and Technology, 
for the information of and use by the Members of the Committee. 
It has not been reviewed or approved by the Members of the 
Committee and may therefore not necessarily reflect the views 
of all Members of the Committee. This document has been printed 
for informational purposes only and does not represent either 
findings or recommendations adopted by the Committee.

Introduction

    During the 110th Congress, the Committee on Science and 
Technology launched a major initiative directed at better 
understanding the globalization of research and development 
(R&D) and innovation. Four hearings, entitled, ``The 
Globalization of R&D and Innovation,'' were convened to explore 
the scale, drivers, and consequences of the movement of 
science, technology, engineering, and mathematics (STEM) jobs 
and facilities to foreign countries. The hearings focused on 
four themes: the expected economic and technology impacts of 
globalization; the higher education response; the factors that 
attract R&D facilities to particular locations; and the impacts 
on the science and engineering workforce. Expert witnesses the 
magnitude of globalization, its causes, the expected impacts on 
the U.S., and the implications for policy.
    The globalization of R&D and innovation is a significant 
emerging phenomenon that will change how America captures the 
downstream benefits--such as high-wage jobs and technological 
superiority--of its investments in innovation and R&D. In 
addition, the rise of sovereign wealth funds formed by 
countries interested in access to intellectual property and 
intellectual capital from American companies adds a new 
dimension to these questions. These changes require new 
directions in U.S. innovation policy.
    This report, compiled by the staff of the Committee on 
Science and Technology, will summarize the findings from the 
series of hearings and present policy recommendations for the 
Congress to address the mounting challenges of the 
globalization of R&D and innovation to America's economy and 
workforce.

Background

    One of the new aspects of globalization is that a larger 
scale and scope of jobs have become newly tradable and those 
jobs are increasingly vulnerable to offshoring. Economists 
estimate that a large share of American science, technology, 
engineering, and mathematics (STEM) jobs is vulnerable to 
offshoring. Vulnerability does not mean that all of these jobs 
will be lost. It does mean that many more jobs will be subject 
to wage pressures from workers in low-cost countries as those 
countries actively pursue those industries. Witnesses at the 
Committee's four hearings provided estimates of expected 
vulnerability and examples of jobs and operations that have 
already moved offshore. However, without better tracking of 
these transfers, it is difficult to analyze the likely impacts 
of the types and numbers of jobs moving offshore.
    Some major U.S. universities have responded to 
globalization by building branch campuses abroad and 
establishing joint ventures with foreign universities. There 
are no good estimates of the scale and scope of all of these 
ventures, but they appear to be relatively small to date. 
However, experts agreed that many major U.S. universities are 
exploring ways to significantly expand abroad, particularly in 
low-cost countries. The decision-making process and criteria 
are unique to each university but two primary purposes underlie 
the moves: serving a rapidly expanding population of foreign 
students who would not come to the U.S. and many of whom have 
job opportunities at multi-national companies operating in 
their home countries; and, offering opportunities for their 
U.S. students a more international experience through study 
abroad and for faculty more international collaboration.
    There are both positive and negative economic effects from 
globalization, but witnesses disagreed about the net effects, 
particularly in the long-term. Three views about the impacts of 
globalization emerged from the hearings. One view is that 
globalization is very beneficial to the U.S. and any resulting 
disruptions--such as job loss caused by offshoring and trade--
are small, mostly benign, and can easily be addressed without 
significant policy change. Another view is that globalization 
will be beneficial to the U.S. in the long run, but the 
disruptions caused by offshoring will be considerable and 
require significant changes in policy, particularly in the 
social safety net for those who are disadvantaged. The final 
view is that globalization is harmful to the U.S. economy in 
the long-term. This view draws a distinction between free trade 
and shifts in productive capacity between countries. Current 
globalization trends are mainly comprised of shifts in 
productive capacity and can be harmful to the country that is 
moving its productive capabilities abroad.
    Another new phenomenon is competition by low-cost countries 
for R&D facility sites. Other countries are targeting R&D and 
innovation facilities and are increasingly successful. The 
criteria companies use for locating R&D facilities are 
multifaceted, including lower costs, talent, and government 
subsidies and incentives. Witnesses also pointed out that some 
governments are requiring companies to place R&D facilities and 
transfer technologies as a condition of market access.
    The witnesses also testified that domestic and foreign 
firms are building up significant levels of STEM workforce 
capacity in low-cost countries. Some of these workers will 
complement American STEM workers while others will use workers 
in low-cost countries as substitutes. Identifying precisely how 
many workers are being displaced remains difficult, but a 
significant share of foreign workers are substituting for U.S. 
STEM workers.

Summary of Hearings

    On June 12, 2007, House Science and Technology Committee 
Chairman Bart Gordon chaired the first hearing on the 
globalization of innovation and R&D. The hearing explored the 
implications of this trend on the U.S. workforce, the U.S. 
science and engineering education pipeline, competitiveness, 
economic growth, and America's innovation system.
    The hearing witnesses were: Dr. Alan S. Blinder, Professor 
of Economics at Princeton University, Director of Princeton's 
Center for Economic Policy Studies, and Vice Chairman of the 
Board of Governors of the Federal Reserve System from June 1994 
until January 1996; Dr. Ralph E. Gomory, President of the 
Alfred P. Sloan Foundation and Director of Research at IBM 
Corporation from 1970 to 1986; Dr. Martin N. Baily, senior 
fellow at the Peterson Institute for International Economics, 
senior adviser to McKinsey Global Institute and Chair of the 
President's Council of Economic Advisers from 1999 to 2001; 
and, Dr. Thomas J. Duesterberg, President and CEO of the 
Manufacturers Alliance/MAPI.
    The witnesses discussed the implications of the 
globalization of innovation and R&D. They concluded that an 
increasing share of innovation and R&D work is being offshored 
but differed on the long-term implications to the U.S. They 
also pointed out that innovation is much broader than just 
formal R&D activities and cautioned that tracking the trends as 
well as policy remedies should not be too narrowly focused on 
formal R&D. While the witnesses provided a variety of policy 
recommendations, they concurred that significant policy 
responses are needed. They also concurred that passage of the 
America COMPETES Act (P.L. 110-69) was an important and 
significant first step in ensuring America benefits from the 
globalization of R&D and innovation.
    On July 26, 2007, Chairman Brian Baird of the Subcommittee 
on Research and Science Education held the second Full 
Committee hearing on the globalization of innovation and R&D, 
which explored how globalization affects America's 
universities. The U.S. higher education system is a principal 
source of America's preeminence in STEM fields. As STEM 
offshoring increases competition for U.S. STEM workers, 
universities are responding by modifying their curricula to 
help their STEM students better compete. Globalization also 
enables American universities to venture abroad and build 
programs and campuses overseas to serve the growing demand of 
foreign STEM students. The hearing explored the 
internationalization of American universities and the 
implications for America's competitiveness.
    The hearing witnesses were: Dr. David J. Skorton, President 
of Cornell University; Dr. Gary Schuster, Provost and Vice 
President for Academic Affairs of Georgia Institute of 
Technology; Mr. Mark Wessel, Dean of the H. John Heinz III 
School of Public Policy and Management at Carnegie Mellon 
University; and Dr. Philip Altbach, Director of the Center for 
International Higher Education and J. Donald Monan Professor of 
Higher Education at Boston College.
    The witnesses provided expert opinions on the university 
response to the globalization of innovation and R&D. They 
concurred that the American higher education system is the envy 
of the rest of the world, conveying a special advantage to 
America particularly in STEM fields. However, they emphasized 
that other countries have recognized the importance of higher 
education in fostering innovation and have begun to invest 
heavily in their higher education systems. The witnesses also 
testified American universities have begun establishing 
campuses abroad, and said that this emerging phenomenon is 
likely to reshape the nature of the American higher education 
system.
    There are no good data on the scale of university presence 
abroad but the witnesses agreed that establishing a substantial 
presence abroad is part of the strategic plan of nearly every 
major research university. Because the trend is so new, the 
witnesses could only speculate on how this might affect the 
U.S. innovation and STEM workers but they all believed that the 
positives would outweigh the negatives. They asserted that for 
American universities to remain the best in the world, they 
must be able to attract the best faculty and students 
regardless of national origins.
    Dean Wessel acknowledged a potential downside of the 
globalization of higher education, saying, ``As universities 
become more global, we are effectively, if unintentionally, 
increasing the capacity of firms and individuals abroad, to do 
jobs currently done here in the United States.'' He then went 
on to say that he believed that this problem would be small and 
would be easily outweighed by its benefits. The witnesses only 
vaguely described their efforts to improve their curricula to 
improve the competitiveness of U.S. STEM students. This latter 
activity seems to be subsumed by the universities interests in 
expanding foreign presence.
    On October 4, 2007, Chairman David Wu of the Subcommittee 
on Technology and Innovation held the third hearing on the 
globalization of innovation and R&D. This hearing which 
explored the factors companies use to locate their research and 
development (R&D) and science, technology, and engineering 
intensive facilities. Witnesses discussed the policies other 
countries use to attract such facilities, and how to make the 
U.S. more attractive to companies. Firms now have many options 
around the globe when deciding where to locate R&D, design, and 
production facilities. This hearing explored the trends in, and 
factors for, site selections for science, technology, and 
engineering intensive facilities and the policies needed to 
ensure that the U.S. remains attractive for these investments.
    The hearing witnesses were: Dr. Martin Kenney, Professor of 
Human and Community Development at University of California, 
Davis, and Senior Project Director at the Berkeley Roundtable 
on the International Economy, University of California, 
Berkeley; Mr. Mark M. Sweeney, Senior Principal in McCallum 
Sweeney Consulting, a site selection consulting firm; Dr. 
Robert D. Atkinson, President of the Information Technology and 
Innovation Foundation; Mr. Steve Morris, Executive Director of 
the Open Technology Business Center; and, Dr. Jerry Thursby, 
Ernest Scheller, Jr. Chair in Innovation, Entrepreneurship, and 
Commercialization at Georgia Institute of Technology.
    The witnesses testified that while the globalization of R&D 
is not a new phenomenon, but that low-cost countries, such as 
India and China, have recently become able to attract a 
significant share of STEM-intensive facilities and jobs. 
Product localization, government pressure, proximity to key 
customers, lower costs, and supply of high-quality low-cost 
STEM workers are some of the key factors that have attracted 
companies to India and China specifically. There was some 
disagreement of the relative importance of each of these 
criteria, but the witnesses concurred that government data 
tracking the location and function STEM facility investments 
are highly limited. Most believed the commanding lead that the 
U.S. has traditionally enjoyed in R&D investments is being 
challenged in new ways by low-cost countries. They also pointed 
out that the competition from developing countries for R&D 
facilities has ratcheted up competition for advanced technology 
facilities by other developed countries.
    The fourth, and final, hearing was held by Chairman Wu 
before the Subcommittee on Technology and Innovation on 
November 6, 2007. This hearing explored the impact of the 
globalization of innovation and R&D on the American science, 
technology, engineering and mathematics (STEM) workforce and 
students. Witnesses discussed the new opportunities and 
challenges for workers created by globalization, including how 
globalization is reshaping the demand for STEM workers and 
skills. The witnesses also addressed how offshoring is 
affecting the STEM workforce pipeline and how incumbent workers 
are responding to globalization.
    The hearing witnesses were: Dr. Michael S. Teitelbaum, Vice 
President of the Alfred P. Sloan Foundation; Dr. Harold 
Salzman, Senior Research Associate at the Urban Institute; Dr. 
Charles McMillion, President and Chief Economist of MBG 
Information Services; Mr. Paul J. Kostek, Vice President for 
Career Activities of the Institute for Electrical and 
Electronics Engineers-USA; and Mr. Henry Becker, President of 
Qimonda North America.
    The witnesses testified that an increasing number of U.S. 
STEM jobs are tradable and thus vulnerable to offshoring. In 
some cases, that vulnerability has made STEM fields less 
attractive to students and has made incumbent workers more 
pessimistic about future prospects for their careers. Incumbent 
workers are worried about determining whether their jobs are 
easily out-sourced but face a void of information.
    The witnesses said there is no systemic shortage of STEM 
workers and that a policy response aimed at producing more 
scientists or engineers, at least in traditional disciplines, 
is misdirected. Instead, the key is to create a system that 
produces the right kinds of STEM workers at the right times and 
ensures that STEM jobs are attractive. This response to 
globalization would help to address employer complaints about 
not having enough American workers with the right sets of 
skills while avoiding a glut of disaffected STEM workers. The 
witnesses also concluded that education offerings, including 
continuing education and distance learning, have not kept up 
with the needs of incumbent workers and employers.

Committee Findings

    The globalization of innovation and R&D is increasing in 
scale and scope. It is a major structural shift making 
significant impacts on the key components of the U.S. science 
and engineering enterprise, and as a result it has important 
implications for the economy and national security. Many of the 
developments are still unfolding, making it more difficult to 
predict their impacts. For instance, only very recently have 
low-cost countries, such as India and China, been able to 
attract innovation and R&D facilities. In response, top U.S. 
research universities are beginning a new aspect of 
internationalization by planning and building branch campuses 
abroad, often in low-cost countries. These are both radically 
new types of structural changes to the U.S. research enterprise 
and no one is able to model or predict their likely effects.
    Policies focusing on improving U.S. science and engineering 
workers, education, and investments are critically needed to 
respond to the globalization of innovation and R&D. Witnesses 
at the Committee's hearings agreed that the data currently 
collected are woefully insufficient and inadequate to help 
policy-makers, the private sector, educators, and individuals 
make good decisions. The shifts are happening very quickly 
putting a premium on timely data.
    There was some disagreement at the hearings about the 
potential future scale and the scope of offshoring of science 
and engineering jobs. In his research, Alan Blinder estimates 
that most STEM jobs are vulnerable to offshoring. Others, such 
as Ashok Bardhan and Cynthia Kroll from the University of 
California, Berkeley, have found similar results. Martin Baily 
said that while he agrees that an increasing share of STEM jobs 
will become vulnerable, believes that the number of jobs 
offshored will be smaller and speed of the transition will be 
relatively slow--enabling U.S. workers ample time to adapt.
    There is also disagreement among experts about the 
characteristics of the jobs that will be vulnerable to 
offshoring. Dr. Baily asserts that lower wage, lower skill jobs 
as well as jobs that are easily automated are most vulnerable. 
Dr. Blinder asserts that there is no correlation between 
vulnerability and wage or skill level, but rather that other 
characteristics like whether a job requires face-to-face 
contact are more important. Other witnesses point out that many 
very high-skill R&D jobs are in fact moving or are being 
created in China and India. The characteristics of vulnerable 
jobs are critical to identify since educators and workers are 
being advised to focus on less vulnerable occupations and 
skills. However, they may be making bad bets if the model they 
are using for decision-making is inaccurate.
    There was also contention about globalization's expected 
effects on the U.S. economy and workforce. Globalization is 
often confused with theories of free trade. The shifts in the 
production of goods and delivery of services overseas often 
result in changes in productivity in sending and receiving 
countries. These productivity changes are not necessarily 
benign and can actually harm the sending country. They are not 
the same thing as free trade. The witnesses disagreed about 
whether the effects would be harmful or helpful to the U.S. as 
a whole but did agree that some workers and firms would be 
harmed. As a result, all supported increasing the safety net 
for workers with programs to improve unemployment insurance, 
retrain incumbent workers, offer trade adjustment assistance, 
and ensure portability of health and pension insurance. They 
also agreed that greater investments in K-12 education and R&D 
would be helpful, but some felt that this was insufficient 
saying that much more needed to be done to attract and retain 
high-wage jobs.
    The U.S. remains an attractive place to perform R&D and 
innovation. It has many attributes--top research universities, 
a talented workforce, and a large consumer market--to attract 
and retain R&D and innovation work. But some witnesses, 
including Ralph Gomory, asserted that the globalization of 
innovation and R&D is rendering obsolete the conventional 
notion that investments in R&D lead to localized spill-over 
benefits. Others suggested that the U.S. should be focusing 
more efforts on assimilating innovative technologies developed 
overseas, though some disagreed with this premise. They instead 
asserted that the localized (or national) payoff from R&D 
investments will continue to be large and increasing those 
investments should be a centerpiece of U.S. policy.
    Many countries are using policies to attract R&D and 
innovation work and there is clear evidence that these 
activities are moving to low-cost countries. U.S. 
multinationals have been rapidly ramping up their engineering 
and R&D ventures in India and China. The type of work does vary 
by country, however. Witnesses testified that the R&D in China 
tended to be more oriented towards product localization, 
developing products for the local Chinese market whereas the 
R&D in India tended to be focused on reducing costs and time-
to-market for products intended for the global market. The 
conceptualization and design of new products, strategic 
research planning, and product roadmapping has mostly remained 
in the U.S.
    The current status and expected trends in offshoring of 
jobs vary based on occupation, skill set, industry sector, 
intellectual property regime in the destination country, and a 
myriad of other factors. For instance, the information 
technology services sector has built up very substantial head 
count in low-cost countries in a short period of time, while 
the pharmaceutical industry has been slower to do so.
    India and China are aggressively pursuing R&D and 
innovation based investments and jobs and have been successful 
at attracting a number of companies. Policies vary across 
countries, but some examples include tax incentives, capital-
oriented grants, export subsidies, and maintaining an under-
valued currency. Also, China particularly uses governmental 
pressure, either informally or by tying a firm's access to the 
market to technology transfer or the establishment of an R&D 
center in the country. A few hearing witnesses, including 
Robert Atkinson, identified these practices as mercantilist and 
unfair trade. The witnesses alleged that most of the instances 
of forced technology transfer and licensing are done through 
informal back-room negotiations rather than formal policies. 
Multinational firm executives will not speak publicly about 
these coercive tactics because they fear retribution and 
retaliation. However, there are some documented instances of 
forced technology transfer in the electric power, automotive, 
and aircraft sectors. In a recent report prepared for the Small 
Business Administration (SBA), one of the witnesses, Charles 
McMillion, describes some of these instances. In the electric 
power sector, McMillion cites a Wall Street Journal story about 
General Electric being required ``to form joint ventures with 
the state-owned Chinese power companies. GE was also required 
to transfer to their new partners technology and advanced 
manufacturing guidelines for its `9F' turbine, which GE had 
spent more than a half billion dollars to develop.'' 
\1\,\2\ His report also cites aviation industry 
experts David Pritchard and Alan McPherson, who conclude that, 
``There is no doubt that suppliers are expected to transfer 
technology to their Chinese out-sourcing partner or offshore 
facility that will be utilized for China's mission to develop 
its own large commercial aircraft (twin-aisle).'' \3\ In the 
automotive sector, ``since 2004 China requires that each new 
auto production facility be accompanied by a new or expanded 
R&D center.'' \4\
---------------------------------------------------------------------------
    \1\ Charles W. McMillion, ``China's Soaring Financial, Industrial 
and Technological Power,'' project report prepared for U.S. Small 
Business Administration, p. 9, September 2007.
    \2\ ``China's Price for Market Entry: Give Us Your Technology, 
Too--GE Shares Generator Plans To Win $900 Million Deal; Gray Area in 
WTO Rules Kathryn Kranhold, The Wall Street Journal, February 26, 2004, 
as cited in McMillion.
    \3\ Charles W. McMillion, ``China's Soaring Financial, Industrial 
and Technological Power,'' project report prepared for U.S. Small 
Business Administration, p. 31, September 2007.
    \4\ Ibid, pp. 37-38.
---------------------------------------------------------------------------
    The U.S. higher education system is a principal source of 
America's preeminence in STEM fields. As STEM offshoring 
increases, the response by higher education is critical. The 
July hearing explored two types of responses by American 
universities. First, what are the universities doing to modify 
curricula to help their STEM students better compete 
internationally? Second, how American universities are 
globalizing by building programs and campuses overseas to serve 
the growing demand from foreign students? The witnesses 
described some efforts targeted at curricula changes for 
domestic STEM students, but there was great interest by 
American universities to establish overseas branches and 
programs. The university representatives agreed that by 
becoming more global, the universities would become more 
competitive, raising standards and quality, and all students 
would reap benefits from a faculty that was more globally 
oriented and opportunities to study abroad.
    There was also a strong consensus that the globalization of 
American universities is just beginning and is almost certain 
to grow rapidly as many top U.S. research universities seek to 
be global institutions. Data on how many American universities 
have branch campuses and programs abroad are poor.
    The motivations for globalizing are manifold, and the 
actual decision-making is highly customized to a company's 
situation. However, U.S. national and/or local interests are 
only an indirect part of the equation. While it would be ideal 
if the globalization of universities yields better outcomes for 
the U.S., especially the STEM workforce, the potential impact 
has not been studied nor is it considered a critical decision 
point. Mark Wessel, a witness at the July hearing, did discuss 
possible detriments to U.S. students saying, ``As universities 
become more global, we are effectively, if unintentionally, 
increasing the capacity of firms and individuals abroad, to do 
jobs currently done here in the United States.'' He went on to 
say that he believed that the net benefits would far outweigh 
any costs.
    Incumbent STEM workers and students are concerned that 
globalization will negatively affect their career prospects. 
There is widespread support for improving K-12 science and math 
education, but significant disagreement about whether there is, 
or will be, a shortage of U.S. STEM workers. However, there is 
no evidence that U.S. STEM shortages, if they exist, are 
causing firms to offshore work. Incumbent STEM workers are 
concerned that policy is overly focused on the pipeline and 
hasn't spent enough time addressing under-utilization of 
incumbent and experienced workers.

Issues and Policy Recommendations

Ensure That America's Capacity to Innovate Is Fully Funded
    There was consensus that the types of programs authorized 
in the America COMPETES Act are a significant and important 
step towards ensuring America's continued competitiveness in 
the face of rising competition in STEM intensive sectors.

        1. LFully fund the America COMPETES Act to ensure the 
        U.S. is investing sufficiently in science and 
        engineering research, and STEM education from 
        kindergarten to graduate school and postdoctoral 
        education.

Unleash America's Best and Brightest Minds to Address the 21st Century 
        Competitiveness Challenge
    There is consensus that America faces major challenges to 
its capacity to innovate and its leadership in STEM sectors. 
These challenges, which will be difficult to address, are still 
evolving. They will require long-term, sustained, and wide-
ranging responses from workers, companies, and the government. 
Programs need to be established to bring the best and brightest 
minds to help America navigate through these uncharted waters.

        1. LThe National Science Foundation should establish a 
        program studying the globalization of R&D and 
        innovation and its effects on the America's capacity to 
        innovate. The program will be interdisciplinary in 
        nature and oriented towards policy effects. A symposium 
        presenting results to policy-makers could be convened, 
        with the program drawing lessons from the International 
        Economic Policy Research conducted in 1981. Close 
        collaboration between researchers and policy-makers 
        would be required.

        2. LA Presidential Advisory Commission to provide 
        advice on the implications of the globalization of R&D 
        and innovation should be considered. The Commission 
        would convene a symposium covering the current state of 
        knowledge within three months of its establishment. 
        Commission membership would include an equal 
        representation of leaders from STEM worker groups and 
        labor unions, business, and universities. It would have 
        authority to order research studies and papers as 
        needed, convene meetings, and issue interim or special 
        reports at the Commission's discretion. A final report 
        from the Commission could provide policy-makers with 
        recommendations for action.

Collecting Additional, Better, and Timelier Data
    There is a consensus that poor data has severely limited 
analysis of the globalization of innovation and R&D, thus 
hindering appropriate public and private responses. To remedy 
this situation, the National Science Foundation could work with 
the appropriate agencies within the Departments of Labor and 
Commerce to begin collecting additional, more timely data on 
the globalization of R&D and innovation. The broad-based effort 
would include a number of new initiatives.

        1. LThe NSF Science Resources Statistics (SRS) Division 
        should augment existing data on multinational R&D 
        investments to include detailed STEM workforce data. 
        This data could track the STEM workforce for 
        multinational companies in the U.S. versus other 
        countries. Details should include occupation, level of 
        education, and experience. These data will be reported 
        on an annual basis and in a timely manner such that the 
        data are from the most recent fiscal year reported by 
        the companies.

        2. LThe NSF SRS Division should also collect detailed 
        information on how much and what types of R&D and 
        innovation activities are being done overseas.

        3. LThe NSF Social, Behavioral, and Economic Sciences 
        (SBE) Directorate should institute a research program 
        identifying the characteristics of jobs that make them 
        more or less vulnerable to offshoring. The program 
        would include a study of estimating the numbers of jobs 
        that have been lost to offshoring.

        4. LThe NSF SRS Division should approximate the extent 
        of U.S. university globalization. It could then track 
        trends in university globalization.

        5. LThe NSF SBE Directorate should identify the impacts 
        of university globalization on the U.S. STEM workforce 
        and students and institute a research program 
        identifying and disseminating best practices in 
        university globalization.

        6. LThe Government Accountability Office (GAO) could 
        conduct a study to identify the amount and types of 
        U.S. Government procurement that are being offshored.

        7. LThe Department of Commerce could implement 
        recommendations from prior studies and reports to 
        improve its collection of trade in services data.

Creating Better Career Paths for STEM Workers
    STEM offshoring has created a pessimistic attitude among 
students and incumbent workers about future career prospects. 
The U.S. needs new programs to create better career paths for 
STEM workers including improved continuing education, a 
sturdier safety net for displaced workers, improved labor 
market and career information, an expanded pool of potential 
STEM workers that better utilizes workers without a college 
degree, and improved rates of successful re-entry into the STEM 
labor market after voluntary and involuntary absences.

        1. LThe National Science Foundation should create a 
        program to improve the adoption and use of low-cost on-
        line education targeted at incumbent STEM workers. The 
        program would coordinate with the appropriate 
        scientific and engineering professional societies. The 
        pilot program could assess the current penetration 
        rates of on-line education for STEM workers and 
        identify barriers to widespread adoption.

        2. LThe U.S. Department of Labor could work with the 
        appropriate scientific and engineering professional 
        societies to create a pilot program for continuous 
        education of STEM workers and to re-train displaced 
        mid-career STEM workers. The program could complete an 
        assessment of the specific needs of STEM workers and 
        the barriers to meeting them. This assessment would be 
        made through a survey of STEM workers and scientific 
        and engineering professional societies.

        3. LThe NSF SRS Division should issue a report on 
        improving the dissemination of STEM labor market 
        signals, and begin reporting these data on a periodic 
        basis. The report will assess the current state of 
        labor market signals, and ways in which they may be 
        distorted. The focus of the report would be on how 
        workers and students receive information on the current 
        and future prospects for specific STEM careers. The 
        report will include the appropriate data from existing 
        Department of Labor collections.

        4. LThe National Academies could form a study panel to 
        identify opportunities in STEM careers for students who 
        do not go to college. This study would identify how 
        many workers enter STEM careers without formal college 
        degrees and the barriers for additional workers, 
        without college degrees, to enter STEM careers. It 
        could also recommend ways to overcome those barriers.

        5. LThe National Academies could identify effective 
        strategies for displaced STEM workers to more easily 
        re-enter the STEM workforce. STEM workers are more 
        likely to leave the workforce, voluntarily and 
        involuntarily, for extended periods of time.

        6. LThe Congress could extend Trade Adjustment 
        Assistance to services workers since many STEM workers 
        work in the services sectors.

Improve the Competitiveness of the Next Generation of STEM Workers
    As universities globalize and multinational firms take the 
latest tools and technologies to STEM workers in low-cost 
countries, American STEM workers must find new ways to compete. 
They can compete by finding new opportunities and niches in the 
types of jobs and tasks that will remain geographically sticky 
to the United States. Those opportunities and niches for 
American STEM workers need to be identified. Entrepreneurship 
and innovation training have been identified as a comparative 
advantage for American STEM workers that are yet to be fully 
exploited.

        1. LThe National Academies could form a study panel to 
        identify the types of curricula reforms that are needed 
        in response to globalization. The goal would be to 
        ensure that U.S. STEM students graduate with the best 
        skills to compete in the world.

        2. LThe National Academies could also form a study 
        panel to examine best practices in teaching innovation, 
        creativity and entrepreneurship to STEM students.

        3. LThe National Science Foundation should encourage 
        expanded study abroad opportunities for STEM students 
        to improve their ability to work in global teams and 
        foreign language skills.

Review University Technology Commercialization Efforts
    Witnesses pointed out that the statutes governing 
university technology licensing are outdated, inhibit 
university-industry collaboration, and need to be reviewed and 
revisited. As other countries invest more in their research 
universities, companies will have greater opportunities to 
partner with them. To ensure that U.S. universities are 
competitive, government policies on university technology 
licensing such as the Bayh-Dole and the Stevenson-Wydler Acts 
should be reviewed.

        1. LThe National Academies could study the role of 
        university technology licensing to inhibiting or 
        accelerating the commercialization of technologies 
        supported by federally funded research. The study would 
        identify the various policies and practices that 
        universities use to negotiate their technology 
        licensing agreements.

Establish Tax and Trade Policies That Put the U.S. on Equal Footing for 
        Attracting High-Wage STEM Jobs
    U.S. tax and trade policies currently discourage 
investments in high-wage STEM jobs by companies. Changes should 
be made to tax and trade policies to improve America's ability 
to recruit and retain R&D and innovation facilities.

        1. LThe U.S. Government could increase and extend the 
        Research and Experimentation tax credit. The U.S. has 
        fallen from first to 17th in its generosity amongst 
        OECD countries.

        2. LThe Department of Commerce could investigate 
        ``unfair'' trade practices such as linking market 
        access to a country with technology transfer, 
        undervalued currencies, and theft of intellectual 
        property.

        3. LThe U.S. Government could reform the tax system to 
        favor the creation high-wage jobs and disfavor the 
        creation of low-wage jobs.

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