Information Technology R&D: Critical

Trends and Issues

February 1985

NTIS order #PB85-245660
Recommended Citation:

Information Technology and R&D: Critical Trends and Issues (Washington, DC:

U.S. Congress, Office of Technology Assessment, OTA-CIT-268, February 1985).

Library of Congress Catalog Card Number 84-601150

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402
Foreword

New computer and communications technologies are obviously transforming

American life. They are the basis of many of the changes in our telecommunications system and also a new wave of automation on the farm, in manufacturing

and transportation, and in the office. They are changing the form and delivery

of government services such as education and the judicial system. Information

products and services have become a major and still rapidly growing component

of our economy.

A strong U.S. research and development effort has, in the past, been the source

of much of this new technology. However, recent events, such as the restructuring of the U.S. telecommunications industry and the emergence of strong foreign

competition for some technologies, have changed the environment for R&D. Consequently, the House Committee on Science and Technology, the House Committee on Energy and Commerce, and its Subcommittee on Telecommunications, Consumer Protection, and Finance asked OTA to conduct an assessment of the current

state of R&D in these critical areas.

In this report, OTA examines four specific areas of research as case studies:

computer architecture, artificial intelligence, fiber optics, and software engineering. It discusses the structure and orientation of some selected foreign programs.

Finally, it examines a set of issues that have been raised in the course of the study:

manpower, institutional change, the new research organizations that grew out

of Bell Laboratories, and implications of trends in overall science and technology

policy.

Information technology research and development in the United States is a

remarkably adaptable system—important changes may already be taking place

in funding patterns, institutional structures, manpower development, and government policies. Hence, the policy issues for Congress are not so much to stimulate change as to remove barriers to productive change, and to monitor and maintain the health of the R&D enterprise in a time of rapid change in an industry

so central to our national economy and security.

OTA gratefully acknowledges the contributions of the many experts, within

and outside the Government, who served as panelists, consultants, contractors,

and reviewers of this document. As with all OTA reports, however, the content

is the responsibility of OTA and does not necessarily constitute the consensus

or endorsement of the advisory panel or the Technology Assessment Board.

 JOHN H. GIBBON S

Director
OTA Information Technology Research and Development Project Staff

John Andelin, Assistant Director, OTA

Science, Information and Natural Resources Division

Fred W. Weingarten, Communication and Information Technologies Program Manager

Project Staff

Donna L. Valtri, Project Director’

Fred W. Weingarten, Project Director’

Chuck Wilk, Senior Analyst

Linda G. Roberts, Senior Analyst

Linda Garcia, Analyst

M. Karen Gamble, Analyst

Prudence S. Adler, Analyst

Jim Dray, Research Analyst

Earl Dowdy, Research Analyst

Lauren Ackerman, Research Analyst

John Williams3

Peg Kay4

Administrative Staff

Elizabeth A. Emanuel, Administrative Assistant

Shirley Gayheart, Secretary

Jennifer Nelson, Secretary

Marsha Williams, Secretary

Renee S. Lloyd, Secretary

Contractors

Myles Boylan J. F. Coates, Inc. Barbara Davies

Russell Drew Sidney Fernbach Michael Goetz

Stan Liebowitz Abbe Mowshowitz Larry Olson

Bruce Owen John Young

‘Project Director from November 1982 to December 1983.

‘Acting Project Director from December 1983.

‘Detailee from the Federal Communications Commission from October 1982 to October 1983.

4Detailee from the National Bureau of Standards, May 1984.

iv
Information Technology Research and Development Advisory Panel

Professor

Geneva Belford

Department of Computer Science

University of Illinois

Steven Bisset

President

Megatest, Inc.

John E. Bryson

Morrison& Foerster

NandiKishore M. Chitre

Director

Systems Planning Division

INTELSAT

Ralph E. Gomory

Vice President and

IBM Corp.

Thomas J. Watson

JohnV. Barrington

Director

Roger G. Noll Chairman

of Economics, Stanford University

Donald McCoy

Vice President and General Manager

CBS Technology Center

1thiel de sola Pool*

Professor of Political Science

Massachusetts Institute of Technology

Paul E. Ritt, Jr.

Vice President and Director of Research

GTE Laboratories, Inc.

Larry W. Sumney

Executive Director

Semiconductor Research Corp.

Victor Vyssotsky

Director of Research Executive Director

Research, Information Sciences

Research Center AT&T Bell Laboratories

Robert E. Wesslund

Vice President for Technology Exchange

COMSAT Laboratories Control Data Corp.

William C. Hittinger George R. White

Executive Vice President Senior Research Fellow

RCA/David Sarnoff Research Center The Harvard Business School

Bruce Lusignan

Director

Communication Satellite Planning Center

Stanford University

Advanced Computer Architecture Workshop

Duane Adams

Consultant

Defense Advanced Research Project Agency

James C. Browne

Department of Computer Science

University of Texas

Alan Charlesworth

Senior Staff Engineer

Floating Point Systems, Inc.

Kent K. Curtis

Section Head, Computer Science

Division of Mathematical and Computer

Sciences

National Science Foundation

Sidney Fernbach

Consultant

Control Data Corp.

Dennis Gannon

Assistant Professor

Department of Computer Science

Purdue University

Robert G. Gillespie

Vice Provost for Computing

University of Washington

David Kuck

Department of Computer Sciences

University of Illinois

*Deceased Mar. 11, 1984
Neil Lincoln

Vice President

ETA Systems,

Roger G. Nell

and Chief Architect

Inc.

Professor of Economics

Stanford University

Paul Ritt, Jr.

Vice President and Director of Research

GTE Laboratories, Inc.

Paul Schneck

Leader, Information Sciences Division

Office of Naval Research

Jacob Schwartz

Director

Division of Computer Sciences

Courant Institute of Mathematical Sciences

Fiber Optics Workshop

Thomas Giallorenzi, Chairman

Superintendent, Optical Sciences Division

Naval Research Laboratory

Michael Barnoski

Consultant

Pacific Palisades, CA

Melvin Cohen

Director, Interconnection Technology

Laboratory

AT&T Bell Laboratories

Anthony J. DeMaria

Assistant Director of Research for Electrical

and Electrooptics Technology

United Technology Research Center

Charles W. Deneka

Director, Optical Waveguide Technology

Corning Glass Works

Charles Kao

ITT Executive Scientist

ITT Corp.

Software Engineering Workshop

Richard A. DeMillo

Professor of Information and Computer

Science

Georgia Institute of Technology

George Dodd

Department Head

Computer Science Department

General Motors Research Laboratories

Burton J. Smith

Vice President

Research and Development Department

Denelcor, Inc.

Harold Stone

Professor

Department of Electrical and Computer

Engineering

University of Massachusetts

Jim Thornton

Chief Executive Officer

Network System Corp.

Kenneth G. Wilson

James A. Weeks Professor of Physical

Science

Newman Laboratory

Cornell University

Herwig Kogelnick

Director

Electronics Research Laboratory

AT&T Bell Laboratories

Henry Kressel

Senior Vice President

E. M. Warburg, Pincus & Co.

William Streifer

Senior Research Fellow

Xerox Corp.

John Whinnery

Department of Electrical Engineering and

Computer Science

University of California, Berkeley

Amnon Yariv

Professor of Electrical Engineering and

Applied Physics

California Institute of Technology

Capers Jones

Manager of Programming Technology

Analysis

ITT Corp.

Brian Kernighan

Head, Computing Structures Research

AT&T Bell Laboratories

vi
Ann Marmor-Squires

Chief Technologist

TRW Defense Systems Group

Robert Mathis

Director

Ada Joint Program Office

Department of Defense

Harlan Mills

IBM Fellow

IBM Corp.

Leon J. Osterwell

Chairman

Computer Science Department

University of Colorado

C. V. Ramamoorthy

Professor of Electrical Engineering and

Computer Science

University of California, Berkeley

Artificial Intelligence Workshop

Bruce Bullock

Vice President

Teknowledge Federal Systems

Marvin Denicoff

Executive

Thinking Machines Corp.

Ewald Heer

Program Manager

Autonomous Systems and Space Mechanics

Jet Propulsion Laboratory

Thomas F. Knight

Assistant Professor of Electrical Engineering

and Computer Science

Artificial Intelligence Laboratory

Massachusetts Institute of Technology

Mitchell Marcus

Member of the Technical Staff

Linguistics and Artificial Intelligence

Research Department

AT&T Bell Laboratories

Ronald Ohlander

Program Manager

Defense Advanced Research Projects Agency

Paul Schneck

Leader, Information Sciences Division

Office of Naval Research

Ben Shneiderman

Professor of Computer Science

University of Maryland

Steve Squires

Software Technology Programming Manager

Defense Advanced Research Projects Agency

Terry A. Straeter

Vice President and Program Director

General Dynamics Electronics

Raymond Yeh

Professor of Computer Science

University of Maryland

Kamron Parsaye

President

Silogic, Inc.

Stephen Polit

Manager of Advanced Development

Artificial Intelligence Group

Digital Equipment Co.

Azriel Rosenfeld

Director

Center for Automation Research

Computer Science Center

University of Maryland

David Waltz

Professor of Electrical Engineering and

Research Professor

Coordinated Science Laboratory

University of Illinois

Patrick H. Winston

Professor of Computer Science and Electrical

Engineering and Director

Artificial Intelligence Laboratory

Massachusetts Institute of Technology

vii
Information Technology Research and Development Federal

Charles Brownstein

Head

Information Science Division

National Science Foundation

Douglas Crombie

Chief Scientist

National Telecommunications

Information Administration

John A. Daly

Special Assistant

Agency for International Development

Craig Fields

Assistant Director for Systems Services

Defense Advanced Research Projects Agency

Clinton W. Kelly, III

Assistant Director, Systems Science Division

Defense Advanced Research Projects Agency

Robert Lovell

Director of Communications

National Aeronautics and Space

Administration

Reviewers and Other Contributors

Robert Ayres

Carnegie-Mellon University

Richard Baxter

British Embassy

Donald S. Beilman

Microelectronics Center of North

Carolina

John Biddle

Computer and Communications

Industry Association

Marlan Blissett

University of Texas

Erich Bloch

Semiconductor Research Corp.

IBM Corp.

Justin Bloom

Technology International, Inc.

Bill Boesman

Congressional Research Service

Jane Bortnick

Congressional Research Service

Paul Bortz

Brown, Bortz & Covington

Martha Branstad

National Bureau of Standards

Robert Powers

Chief Scientist

Workshop

Office of Science and Technology

Federal Communications Commission

John Riganati

Division Chief

System Components Division

National Bureau of Standards

Paul Schneck

Leader, Information Science Division

Office of Naval Research

Elias Schutzman

Program Director

Electrical Optical Communications Program

National Science Foundation

Kenneth Brown

American Enterprise Institute for

Public Policy Research

Glen Chancy

AT&T Bell Laboratories

Gary Coleman

Department of Education

Arthur Cordell

Science Council of Canada

Matthew Crugnale

Gnostic Concepts, Inc.

Beverly Daniel

General Accounting Office

George Dummer

Massachusetts Institute of

Technology

Lauren Erling

ADAPSO

Frank Fisher

Urban Institute

Penny Foster

National Science Foundation

Donald R. Fowler

California Institute of Technology

Peter Fuchs

Harvard University

Osmund Fundingsland

General Accounting Office

Robert Gallawa

National Bureau of Standards

Howard Gobstein

General Accounting Office

Robert A. Gross

Columbia University

Walter Hahn

George Washington University

Glen Hansen

Department of Commerce

Richard Hersh

University of Oregon

Christopher Hill

Congressional Research Service

Joseph Hull

Department of Commerce

B. R. Inman

Microelectronics & Computer

Technology Corp.

VIII
— —

Charles L. Jackson

Shooshan & Jackson, Inc.

Don Kash

University of Oklahoma

Todd LaPorte

University of California-Berkeley

Christopher LeMaistre

Rensselaer Polytechnic Institute

Jean-Pierre Letouzey

French Embassy

Thomas Linney

Council of Graduate Schools

Harold Linstone

Portland State University

John G. Linvill

Stanford University

John Logsdon

George Washington University

Albert Lumbroso

French Embassy

Enrique Marcatili

AT&T Bell Laboratories

Michael Marcus

Federal Communications

Commission

Nick Metropolis

Los Alamos National Laboratory

Charles H. Miller

AT&T

Robert Miller

University of Houston

Robert Morgan

Washington University

In-House Reviewers

Audrey Buyrn, Program Manager

Martha Harris, Project Director

Paul Phelps, Project Director

Henry Kelly, Project Director

John Alic, Project Director

Barry Holt,Analyst

Eric Bazques, Analyst

Joel Moses

Massachusetts Instituteof

Technology

Jane Myers

Patent and Trademark Office

Tom Nardone

Bureau of Labor Statistics

Dorothy Nelkin

Cornell University

WilliamF.Nelson

GTE Laboratories, Inc.

Arnie Packer

Manpower Economist

Paul Penfield

Massachusetts Instituteof

Technology

Robert Pepper

Department ofCommerce

Paul Polishuk

Information Gatekeepers, Inc.

JohnM. Richardson

National Research Council

Michel Robin

French Embassy

Martha G. Russell

University of Minnesota

Grant Saveers

Digital Equipment Corp.

Wendy Schacht

Congressional Research Service

Jurgen Schmandt

University ofTexas

Dan Slotnick

University of Illinois

Ollie Smoot

Computer and Business

Equipment Manufacturers

Association

Bill Stotesbery

Microelectronics &Computer

Technology Corp.

Gregory Tassey

National BureauofStandards

Henry Taylor

Naval Research Laboratory

Al Teich

American Association for

Advancementof Science

William Wells

George Washington University

Irwin White

New York State Energy R&D

Agency

Robert Willard

Information Industries

Association

John G. Williams

Carruthers, Deutsch, Garrison&

Williams

Paul Wilson

AT&T

Paul Zurkowski

Information Industries

Association

ix
Contents

Chapter Page

l. Introduction and Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Z. The Environment for R&D in Information Technology in the

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3. Selected Case Studies in Information Technology Research and

Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

4. Effects of Deregulation and Divestiture on Research . . . . . . . . . . . . . . . . . . . 111

5. Education and Human Resources for Research and Development . . . . . . . . . 139

6. New Roles for Universities in Information Technology R&D. . . . . . . . . . . . . 169

7. Foreign Information Technology Research and Development. . . . . . . . . . . . . 201

8. Information Technology R&D in the Context of U.S. Science and

Technology Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

9. Technology and Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

x
Chapter 1

Introduction and Summary
Contents

Goals for Federal R&D Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Principal Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Nature of Information Technology R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Software as Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Multidisciplinary Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Close Boundary Between Theory and Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Complexity .. .. . . $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. ... ... .

Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advanced Computer Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Software Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........

Fiber Optics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Artificial Intelligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issues and Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Impacts of Telecommunications Deregulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scientific and Technological Manpower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changing Roles of Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Science Policy . ... ... . . . . . . ....... ..

Summary . . . . . . . . . . . . . . . . . . . . . . .. .

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6

7

7

8

8

9

9

11

12

13

14

14

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17

18

19

21
Chapter 1

Introduction and Summary

American society is becoming increasingly

reliant on the use of electronic information

technology, principally computer and communication systems. Economists and social scientists point out that information is a basic resource for society and an important factor of

production for the economy. Information technology provides business, governments, and

citizens with the basic tools necessary to communicate and use information. Furthermore,

the information industry, itself, including both

those that produce electronic hardware and

those that offer information services, is an increasingly important part of U.S. industrial

strength.

Because of this reliance on information technology, public attention has been drawn to the

process of innovation in that field, developing

new technological products and bringing them

to the marketplace. Since research and development (R&D) is generally considered to be a

key element driving innovation (although not

the only one), Congress is concerned with the

general health of R&D in information technologies. Concerns include the effects that

changes in the structure of the U.S. telecommunications industry are having on industrial

R&D, and the implications of new foreign programs intended to challenge traditional U.S.

market leadership in some areas of computers

and communications. OTA examined these

and related questions at the request of the

House Committee on Science and Technology,

the House Committee on Energy and Commerce, and its Subcommittee on Telecommunications, Consumer Protection, and Finance.

Goals for Federal R&D Policy

Currently, public concern with information

technology is focused on its role in promoting

economic competitiveness. However, Federal

interest in promoting R&D and technological

innovation, dating back to the writing of the

Constitution, has always been motivated by ●

several distinct goals, only one of which has

been economic growth. These goals, which

may for any specific technology or program

either complement or compete with one another,

are applicable to information technology.

● Support National Defense: A modem military force is dependent on communications and computer technologies for many

purposes, including intelligence, missile

guidance, command and control, and

logistics. Projected future applications include battlefield management, fully automated weapons, and computer-based artificial intelligence advisors for pilots. The

military importance of information technology is demonstrated by the predominant role the Department of Defense

plays in support of R&D in that field

(nearly 80 percent of direct government

funding in this area is supplied by DOD).

Provide for Social Needs: Government

has always treated the telecommunications system as a basic social infrastructure. One major goal of communication

policymakers is “universal service. ” New

services such as cable television and information services delivered over telecommunication channels can potentially improve the quality of life for American

citizens. For example, OTA, in a recent

report, pointed out the role information

technology could play in improving the

quality of and access to education and

also stressed the need for additional R&D

focused on educational technology. Another

recent OTA report has described the po3
4 ● Information Technology R&D: Critical Trends and Issues

tential benefits of information technology

to handicapped individuals.

● Promote Economic Growth: The information technology industry (those who make

and sell or provide access to communications media) and the information industry (those who use the new technologies

to produce and sell new information services and products) are a growing part of

the U.S. economy. Their economic importance is felt both domestically and internationally. These industries also have an

important indirect effect, in that the technologies and services they produce contribute materially to the economy in such

forms as productivity growth, better

quality of products, and improved managerial decisionmaking. The health of the

information industries depends in part on

their ability to bring forth new products

and develop new applications; this ability,

in turn, depends on R&D.

● Advance Basic Understanding of the

World: Research in computer and communication science has contributed to basic

understanding in fields that transcend

pure information technology. For example, research in artificial intelligence has

led to insights into brain functions and

human thinking and problem solving.

Communications researchers have made

a Nobel Prize-winning contribution to our

understanding of the origins of the universe. The study of computer languages

has both benefited from and contributed

to theories of the evolution and structure

of natural human languages. Similarly, information technology researchers have

contributed to knowledge in such other

fields as fundamental mathematics, logic,

and the theory of genetic coding.

Moreover, computers have become indispensable research tools in many areas

of science ranging from physics and astronomy to biology and social science.

Some scientists now speak of “computational research” as a new, wholly different

form as important to the progress of

knowledge as is experimental and theoretical research.

●

●

Enhance National Prestige: The United

States has always been a world leader in

computer and communication technologies, both in the discovery of new basic

knowledge and in its development into

commercial products. In certain areas of

marketable technology, such as supercomputers (very powerful computers, the

largest and fastest available on the market) or communication satellites, U.S.

firms have in the past held an undisputed

technological lead. Although such technological dominance has nearly disappeared

in most cases and could not have been expected to continue as other nations developed research capability and industrial

strength in information technology, preserving U.S. technological competitiveness and leadership is still an important

public policy goal with implications that extend beyond purely economic advantage.

Support Civilian Agency Missions: Many

civilian Federal agencies need to use advanced information systems to perform

their missions more efficiently or effectively. For example, computers and communication systems underlie the space

exploration programs of the National

Aeronautics and Space Administration

(NASA). Weather researchers working for

the National Oceanic and Atmospheric

Administration (NOAA) and fusion researchers for the Department of Energy

need access to the most advanced supercomputers. Although the support of mission agencies for basic research is limited,

they have funded development and, often,

applied research directed to meeting their

specific needs.

Over the years, these Federal interests have

led to a wide array of policies, programs, and

agencies designed to promote the conduct of

research and development in the United States

and to appropriate its benefits to American

society. Many of them have helped stimulate

the development of computers and communication technologies.

The principal issue examined in this study is

whether those policies, programs, and agencies
Ch. I—Introduction and Summary ● 5

are now adequate and appropriate for advanc- their particular characteristics, and the rapidly

ing information technologies in light of the escalating world competition in producing and

emerging needs of society for these technologies, selling products and services based on them.

Principal Findings

In summary, OTA’s study of information

technology research and development reached

the

●

●

following conclusions:

Information technology is an area in

which the United States has historically

shown great strength, both in basic science and marketed technology; and this

strength has benefited the Nation in several ways. It has contributed to the growth

of a strong economic sector, the information industry. It has contributed to national security. It has stimulated the

evolution of basic science.

Most areas of information technology examined in this study, including microelectronics, fiber optics, artificial intelligence,

computer design, and software engineering, are still in the early stages as technologies. Much improvement in technological capability remains to be developed,

and that improvement will depend on

both fundamental research and technological development. Hence, R&D will be

an important factor in stimulating continuing innovation.

By most measures, U.S. research and development in information technology is

strong and viable; however, those traditional measures may not be realistic guides

to the future needs of the United States

for R&D in these areas. In particular, increasing competition from foreign nations

(in particular, Japan) as well as the growing intrinsic importance of information

technology to the United States, suggest

that more attention should be paid by policymakers to the needs for R&D in information technology. Many of these nations, motivated both by economic concerns

and broader social goals, have developed

●

●

●

national programs designed to foster information technology.

In response to these new pressures, industry support is growing rapidly for shortterm applied research and developmental

work, both within industrial labs and

through support of university work. Industry has generally looked, and still

looks, to the academic community to perform and the Federal Government to fund

the long-term basic research that will

underlie future technological advances.

Universities, traditionally viewed as

centers for basic research, are reexamining their roles with respect to applied research and are forming new types of relationships with industry and government.

State governments, in particular, looking

for stimuli to economic development see

new high-technology industry, including

the information industry, as interested in

being located near strong university basic

research programs. Many states have

formed new organizations within their

universities in order to strengthen research,

focus it toward problems of interest to industry, and facilitate the transfer of technology from the research laboratory to industrial application. With most of these

experiments, it is too early to tell whether

they will be successful in stimulating industrial development and whether they

will have beneficial or negative effects on

the universities.

The Department of Defense is the predominant source of Federal support of information technology research and development, providing nearly 80 percent of

the funding. Although some spillover to

the civilian sector from DOD research can
6 ● Information Technology R&D: Critical Trends and Issues

be expected, its work is predominately

focused on military requirements and cannot be relied on to provide for all civilian

needs. An important issue for consideration by Congress is whether increased

funding by nondefense agencies of longterm research in information technology

is needed to focus more work on civilian

needs.

● There is substantial concern that technical and scientific information flows between the United States and other countries are unbalanced outward. Proposals

to redress that balance focus both on increasing access to foreign information and

on restricting outflows of U.S. information. Policies that would enhance the access of U.S. information scientists to the

work of foreign researchers (through such

vehicles as translation services, travel

grants, and foreign science exchange programs) would help their own work. Such

programs would also help science policy

experts to evaluate the state of foreign

technology more accurately.

Steps have also been taken to tighten

controls over the export of technical information on national security grounds.

In considering such controls, Congress

needs to balance national security considerations against both first amendment

rights and the possible negative impacts

on domestic R&D.

Instruments for scientific research are

growing more sophisticated and are becoming obsolete at an increasingly rapid

pace. As a result, they are more expensive

and yet must be replaced more frequently

if researchers are to keep at the forefronts

of knowledge. In particular, computer

software researchers need access to sophisticated computational facilities and

data communication networks, and those

working on microelectronics need access

to chip processing facilities and computeraided-design tools.

Policies designed to stimulate information

technology R&D need to be evaluated for

possibly significant tradeoffs and external costs in other areas. Some costs are

clear. For example, R&D tax incentives

are a short-term loss of Federal revenues.

Policies designed to draw more highly

trained people into information technology may create manpower shortages in

other areas of research. Devoting educational resources to information technology education and training draws them

away from other areas of need,

when overall resources are not

The Nature of Information Technology R&D

For purposes of this study, OTA defines the price. This high rate of technological

at a time

growing.

improve

term “information technology to refer to electronic hardware that is used to create, communicate, store, modify, or display information and to programming or “software” that

is developed to control the operation of that

hardware. Modern information technology is

based on the microelectronic chip, the largescale integrated circuit that over the last decade has transformed the computer and communications industries through steady and

rapid increase of performance and decrease in

‘merit in microelectronics will continue into the

1990s and probably beyond. Changes in the

information technology products and services

available in the marketplace will likely be as

revolutionary in the next decade as they have

been over the last one that has seen the appearance and growth of such technologies as

the personal computer, fiber optics, satellite

communications, the video cassette recorder,

and two-way cable television. Industry will

compete worldwide to bring these new prod-
Ch. l—introduction and Summary ● 7

Photo credit: Arthur A. Merin, National Magnetic Fusion Energy Computer Center, Lawrence Livermore National Laboratory

The use of computer modeling and graphics to study fusion energy. Outer magnetic surface of four-period helical

axis stellarator (HELIAC)

ucts and services to use, and an important element of that competition will be research and

development.

Information technology has characteristics

that distinguish it from many other areas of

R&D and that affect policies designed to stimulate and direct it.

Software as Technology

“Software,” or programs, are sets of instructions that direct a computer in its tasks. The

term can also refer to information; for example, computer data bases, the information content transmitted over communication lines, or

that contained on a video disk. Because software often can be the most complex part of

an information system, research and development on software is considered to be of equal

importance to research on hardware technology. Yet, to some people, software does not

“look” like technology. The concepts and techniques that underlie programs are intangible,

and their embodiment is usually in a form such

as a list of instructions on paper or a sequence

38-802 u - 85 - 2

of images on a video screen. Research in information technology includes research on both

hardware and software technology, and on the

boundaries between them, for many computational techniques may appear in either hardware or software.

Software as an area of research presents

Federal R&D support with some unusual problems. For example, intellectual property as expressed in software is difficult to protect. It

can also be hard to distinguish between R&D

in computer programming, work which advances the state of software technology, and

using existing techniques to write new programs and maintain old ones—a distinction

that drew particular attention in the debate

over R&D tax credits, for example.

Multidisciplinary Nature

R&D in information technology spans a

wide variety of disparate fields of work. For

example:

• Solid-state physicists work to improve the

performance of the semiconductor devices
8 ● Information Technology R&D: Critical Trends and Issues

●

●

●

●

●

●

that form the heart of modern computer

and communication systems.

Mathematicians study abstract theories

of computation, looking for methods of

faster calculations, for ways to write

error-free software, and to transmit the

maximum amount of information reliably

over communication lines.

Psychologists and brain physiologists

find clues for writing “smarter” programs

that can solve more complex problems.

Linguistic theorists contribute to the design of new languages for programming

computers and build the foundations for

computer programs that can understand

and automatically translate human languages.

Users of computer systems, ranging from

physical scientists to graphic artists, develop new types of software for their applications. In this development process,

they make fundamental contributions to

software technology.

Sociologists, psychologists, and the management scientists search for the most effective ways to design office automation

and decision support systems. Their research ranges from human factors, which

examines direct human-machine interaction, to investigations of organizational

decisionmaking.

A few computer scientists, sociologists,

historians of science, and experts in other

fields, examine the broader questions of

the interactions of information technology with society.

As a result of this breadth of subject area,

relevant Federal programs of R&D support

are distributed among many Government

agencies and among many organizational

parts of those agencies. The National Science

Foundation (NSF), for example, has at least

four divisions, each in a different directorate,

that support research directly related to computers and communications systems. Another

important implication is that manpower programs must be concerned not just with the

supply of “core” computer scientists and engineers, but with a much broader base of researchers and users in many disciplines.

Close Boundary Between

Theory and Application

Both the rapid pace of commercialization

and the intrinsic nature of the technology result in a short time lag between basic research

results and commercialization. Because information systems are so flexible and because

manufacturers are using powerful new design

tools to create new types of computers, less

time is required to implement a new concept.

It may take only a few months for the results

of a basic research project in pure mathematics

to be realized in a commercial software package.

This close relationship between basic research and commercial application, possibly

most closely paralleled by biotechnology, creates unusual and difficult issues for institutions, such as universities, that are traditionally concerned only with basic research

published in the public domain. These issues

include publication policies, intellectual property rights, faculty conflicts of interest, competition with the private sector, and research

priorities. Federal agencies that fund basic research, such as NSF, also find themselves dealing with these issues more frequently.

Complexity

Modem computer/communications systems

are among the most complex technologies ever

assembled by human beings. Computers consist of millions of logical subunits. Computer

programs can contain millions of instructions.

These complex machines, running complex

programs, are then interlinked through communications networks. To be able to understand, predict, and control the behavior of

these technologies requires a powerful theory

of complex processes. No such theory yet exists, although it remains a major goal of computer science.

It is because of this complexity that, even

though computers and communication sys-
Ch. I—Introduction and Summary ● 9

terns are artificial devices—technologies cre- puters. Writing large, complex programs to do

ated and built by human beings-there is basic unusual tasks is a common research methodscience devoted to understanding their behav- ology aimed at understanding basic principals

ior. This science has a strong experimental underlying the structure of problems and

component to it. Many computer scientists software.

and engineers need access to large-scale comCase Studies

Information technology is a broad subject

area. To better understand and describe R&D

issues, four specific areas of technology were

examined in more detail. These case studies

covered both software and hardware and both

computer and communications technologies.

In addition, all four technologies have raised

policy issues in the last few years.

Advanced Computer Architecture

Although computers have increased in sophistication over the years, and individual

models differ from one another in detail, the

higher level logical design, called the “architecture, ” of most commercially available computers is based on concepts that date back a

few decades.

New concepts of computer architecture now

being explored in the laboratory will underlie

two types of innovation: 1) the development

of highly specialized, low-cost computer modules that do specific types of tasks at extremely high speeds; and 2) the future generations

of supercomputers.

Low-cost specialized computers are designed

to perform specific types of computational

tasks very efficiently. When hardware is expensive, as computer hardware has been in the

past, users usually try to allocate its cost over

a variety of applications. Hence, the so-called

general-purpose computer, which performs a

wide variety of computations relatively well,

has been and continues to be the mainstay of

the computer industry. However, most types

of computational tasks have unique characteristics. Since hardware costs have dropped

significantly, new market possibilities have appeared for inexpensive special purpose hardware that takes advantage of these characteristics. The general purpose computer system

of the future may serve mainly as a routing

switch, sending a computing task to the appropriate one of several different specialized processors attached to it.

Supercomputers, the label given to the most

powerful machines on the market at any time,

have received significant press attention lately. Until recently, U.S. firms have been the

only significant marketers of supercomputers.

However, Japanese firms have now brought

out supercomputers that, by some measures,

seem to perform comparably to U.S. machines.

In addition, Japan has embarked on two major supercomputer projects. One is designed

to develop the next generation of high-speed

numerical calculating machines; the other, the

Fifth-Generation Computer Project based on

artificial intelligence theories, is intended to

produce a machine that performs reasoning

functions similar to human thinking processes.

The Federal Government is considering several responses to maintain leadership in this

technology. For example, the Defense Advanced Research Projects Agency (DARPA)

is beginning a “Strategic Computing Program” to develop artificial intelligence capabilities for the needs of the Department of Defense. The National Science Foundation has

embarked on a program intended both to increase their support of computer architecture

research and to put more supercomputer capability in the hands of scientific users. Both
IO ● Information Technology R&D: Critical Trends and Issues

A microprocessor on a chip. This chip contains a

NASA and the Department of Energy have

developed similar plans to increase the advanced supercomputing capability available

to their researchers.

If they were fully implemented, these Federal plans would constitute an important response to the growing need for access to advanced computing resources. Over the last

decade, computing resources available to basic

researchers, particularly in universities, have

steadily fallen behind the state of the art. Although the U.S. computer industry has traditionally led the market in the supercomputer

field, basic researchers in other countries such

as West Germany and Japan may have more

Photo credit: AT&T

entire computer, as powerful as some minicomputers

and easier access to supercomputers from the

United States than their counterparts at

American universities.

In addition to providing access to supercomputers for agency supported researchers, such

Federal procurements would also stimulate

the market for the next generation machine,

a market that has traditionally been small and,

hence, unattractive to computer manufacturers. As the principal user of them, the Federal

Government has always had a major influence

on the supercomputer market. This Federal

stimulus may be particularly important for experimental machines that are based on new architectural concepts. Markets and applications
Ch. 1-Introduction and Summary ● 1 1

for these machines are particularly unpredictable.

Should Congress decide that additional Federal emphasis on computer design is in the national interest, support of basic research should

also be expanded to provide the scientific base

for succeeding generations of advanced architecture computers, large and small. Although R&D on the next generation supercomputers and other specialized architectures is

underway in a few industrial laboratories,

firms participating in this specialized market

tend to be small. Longer term basic research

is usually left to be performed in academic laboratories and receives little industrial support.

Hence, Federal support of basic research can

have significant effect.

In the past, responding to funding limitations as well as the complexity of implementing

computer hardware in a laboratory, agencies

have usually kept basic research in machine

architecture at the theoretical, or “paper and

pencil” stage. This restriction has not allowed

new concepts to be tested as hardware. To

allow such testing, some of these conceptual

level basic research projects need to be funded

at a level that allows them to be carried to experimental and even prototype stages. Microelectronics allows such hardware experimentation to be done more easily and cheaply than

in the past, because prototypes can now be

assembled from chips that form large logical

modules containing thousands of functions.

Software has also been and continues to be

a major problem area. Taking full advantage

of a supercomputer’s speed and power requires

the design of specialized programs. Significantly more research needs to be done on

numerical computational techniques and programming theory for new computer architectures.

Software Engineering

The computer industry has transformed

over the few decades of its existence from being hardware dominant to being software dominant. In the early years, hardware was the

most expensive component of a computer system. Software was often given away free by

computer manufacturers, and the costs of developing custom programs were much less

than the costs of purchasing and maintaining

the machines. The situation is now reversed.

In most cases, costs of developing and maintaining software are now the dominant costs

of creating and operating large computer applications. Although developments in microelectronics have steadily and rapidly reduced

the cost and increased the performance of computer hardware, improvements in the productivity of programmers has come much more

slowly.

Since the limits of cost, reliability, and time

required to create new applications are increasingly dictated by software instead of hardware

considerations, research directed toward improving the productivity of programmers and

designers will have high leverage. “Software

engineering” is the term used to describe this

area of research.

Research in software engineering ranges

widely in content and approach. At one extreme is highly theoretical work directed at de

veloping a fundamental understanding of the

nature of programs and “proving” in some

mathematical sense that they act as intended.

At the other end of the spectrum are behavioral and management scientists concerned with

understanding how people interact with computer systems and how to manage programming projects. Not all research related to

understanding programming and program

behavior is called “software engineering”;

many fields of computer science and engineering contribute.

The Department of Defense, faced with an

annual software expense estimated at $4-$8

billion, supports a large effort in software engineering. DOD has funded the design of a new

programming language, ADA, and a “programming environment” called STARS that

provides a set of automated tools for use by

the program designer. These tools are intended

to be standards, required to be used in the development of DOD software.

Because the economic stakes are so high, researchers at industry centers such as the Bell
12 ● Information Technology R&D: Critical Trends and Issues

Laboratories and IBM’s T. J. Watson Research Laboratories have also been active in

software engineering research. University researchers in software engineering, supported

by Federal agencies, have concentrated on understanding better the theoretical underpinnings of computer programs.

Other countries have also recognized the importance of software engineering. It has been

made an explicit part of the British information technology research program. The Japanese, realizing that software has been a major

weakness in their attempts to be competitive

in the worldwide computer market, are experimenting with what they call “software factories. ” The French have always had strength

in the area of programming, particularly the

theory of programming languages. The Department of Defense language, ADA, was developed in a French laboratory.

Although the potential benefits to the Nation of advances in software engineering are

high, the implications for Federal support are

less clear. Some experts arguing that lack of

fundamental research is not the key bottleneck, point to the failure of designers to apply

existing basic theories and research methodologies to the development of large-scale systems. To do so would require closer industryuniversity researcher interaction and might be

helped by the establishment of some large laboratory facilities to study design problems on

a realistic scale.

Other experts, pointing out that we still lack

the fundamental theoretical breakthrough necessary to develop a true discipline of software

engineering, argue that the problems will persist until such a theory is established. Expanded long-term Federal support of a broad

range of fundamental research on software is

necessary to develop a sound theoretical basis

to programming.

Fiber Optics

The last decade has seen the rapid development of a new communications medium, information transmitted by pulses of laser light

through thin glass fibers. These optical fibers

can transmit far more information than can

copper wires or coaxial cables of the same size.

Since information is transmitted as light, fiber optics are resistant to both electrical interference and eavesdropping. The potential

capacity and economy of optical fiber is such

that it not only will help keep communications

costs down, but, over the long term, it will relieve the growing congestion of the radio spectrum and may ease some of the demands for

satellite communications.

Optical fiber is already used for communication lines between some major cities in the

United States, and a transatlantic cable using

optical transmission will be laid in the late

1980s. By the end of the 1980s optical fiber

will be used heavily in nearly every stage of

the telecommunication systems, from local intraoffice networks to long-distance lines.

Although European firms are also developing capability in fiber optics, the principal

foreign competition has been from the Japanese, whose technology is roughly at a par

with that available from U.S. firms. Since a

large world market for fiber optical hardware

is growing, innovation in this technology is

critical to U.S. competitiveness in telecommunications.

The technology of the fibers, themselves, is

still advancing rapidly along three general

lines: 1) techniques to increase the information

capacity of the fibers; 2) improvements to the

transparency of the glass, which allow longer

distances between “repeaters,” devices that

detect the signals and retransmit them on

down the line; and 3) improved process technologies for manufacturing fibers. Hence, even

though fiber optics is now in the commercial

marketplace, the need for basic research continues and the current state-of-the-art is a long

way from any fundamental limits to this technology.

Applied research and development on fiber

optics, because it is expensive and capitalintensive, is concentrated in a few large laboratories; and, since the economic reward for

technological advance is clear, it is done primarily by industry. However, long-term development of fiber optics will depend on funda-
Ch. I—Introduction and Summary ● 1 3

-

“

l

,.

Photo credit: AT& T

Telephone lines circa 1887. Fiber optics is only the

most recent of many technological developments that

have increased the capacity and shrunk the physical

size of communication lines

mental research in materials and solid-state

electronics. Increased Federal funding of research in universities would achieve the dual

objectives of stimulating fundamental research

and training people at the Ph.D. level in fiber

optics technology. A current lack of trained

research personnel has been pointed out to be

a handicap to progress in this field.

Artificial Intelligence

“Artificial Intelligence (AI)” is a term that

has historically been applied to a wide variety of research areas that, roughly speaking,

are concerned with extending the ability of the

computer to do tasks that resemble those performed by human beings. These capabilities

include the ability to recognize and translate

human speech, to prove the truth of mathematical statements, and to win at chess.

For two reasons public attention has recently focused on an area of AI called expert

systems. First, expert systems are seen to be

the first significant commercialization of 25

years of research in artificial intelligence; and,

secondly, they form the basis of the Japanese

Fifth Generation Computer Project.

An expert system is an “intelligent” computer information retrieval system designed

for use in a specific decisionmaking task, say

medical diagnosis. It stores not only data,

itself, but the rules of inference that describe

how an expert uses the data to make decisions.

By asking questions and suggesting courses

of action, the expert system interacts with a

decisionmaker to help solve a problem. AI researchers now understand this process well

enough to be able to build profitable commercial systems for applications in very narrow

areas of specialization, for example, advising

on repair of telephone cable or diagnosing

pulmonary disease.

Although few computer scientists doubt

that sometime in the next century, people will

interact with computers differently than they

do now and that computers will show behavior

that we would now call “intelligent,” they differ over the nearer term significance of expert

systems. Some maintain that expert systems

represent an interesting and profitable, yet

small, application area. In their view, AI continues to move slowly and is a long way from

realizing the potential predicted for it. Others

argue that expert systems are a model of how

most computing will be done within a decade;

and, hence, that future U.S. leadership in computer science will depend on an aggressive program of research in this field.

The Department of Defense has always been

a dominant supporter of AI research, including work on expert systems. It has funded this

work by establishing and funding large-scale

laboratories at a few academic and nonprofit

research centers. Civilian support is limited.
74 ● Iformation Technology R&D: Critical Trends and IssueS

NSF has steadily supported basic research in

AI, but has done so at a relatively low funding level, and NASA has funded work supporting applications to autonomous spacecraft.

DOD experience suggests that AI research is

best performed in large laboratories with access to largc-scale computing facilities and collections of specialized software. Some areas of

research will begin to require access to specialized hardware and the facilities to design and

build new systems.

This field in particular is experiencing an

acute faculty shortage. The new commercial

excitement in A/I comes after a long period

of relative disinterest by funding agencies. As

a result, there are few researchers and research

centers working in the field, and competition

for limited human resources is sharp. In particular, experienced faculty are being drawn

off campus just as demand for newly trained

graduates is growing rapidly.

The increased public attention and excitement about the promise of AI holds some

dangers to the field. If Federal and private

support is contingent on high expectations for

significant short-term advances, failure to

meet those expectations could result in an

abrupt withdrawal of funding. Yet AI is a very

difficult field of research, just in its infancy.

Much basic science remains to be learned in

AI, and steady long-term support is required

for that learning.

Issues and Strategies

The level and nature of R&Din all fields, including information technology, is influenced

by many social, economic, and political factors

beyond those specifically related to science

and technology. For example, the overall cost

of capital and the general health of the national economy will affect management’s ability and incentives to invest in R&D. Trade and

export policies that affect the access of domestic firms to foreign markets or vice versa will

influence the willingness of U.S. firms to invest in innovation.

Some observers have suggested that senior

corporate managers in many firms have downplayed investment in R&D, which promises

risky and long-term payoffs, in favor of shortterm gains. According to this view, although

these managers may have been reacting rationally in terms of immediate economic incentives and the desires of stockholders, the result of their decisions has been a low rate of

innovation and a long-term loss of competitiveness.

Although these broad factors set an overall environment for R&D decisions, Congress

also deals with several specific policy issues

that directly relate to science and technology.

In this study, OTA concentrated on those direct issues, particularly as they relate to information technology.

Impacts of Telecommunications

Deregulation

During the last few years, the fundamental

structure of the telecommunications industry

has changed. AT&T has been subdivided into

several smaller (although still very large) independent firms. Many telecommunication

products and services traditionally provided

by regulated monopolies are now provided

through a competitive marketplace. Improved

innovation and international competitiveness

in the telecommunications industry is one of

the benefits intended by proponents of deregulation, and OTA expects such increased innovation will occur over the next decade. The

open question is whether that burst of innovation will be at the expense of basic research

that would lay the foundation for future innovation.

However, although technological development should increase, many science policy experts have worried about the impact of deregulation on basic research. In particular, they

view Bell Laboratories as a national scientific

resource and have expressed concern that a

new, competitive AT&T will have decreased
Ch. I—Introduction and Summary ● 1 5

Photo credit: AT&T

Alexander Graham Bell opening the first telephone line to Chicago
16 ● Information Technology R&D: Critical Trends and Issues

commitment to the basic research that has

traditionally marked at least part of the Laboratories’ activities.

OTA found that, although laboratory management will be admittedly more interested in

the contribution of research programs to

AT&T business, short-term effects on basic research will likely be small. In the first place,

most large firms in historically competitive

information technology areas, such as computers, have a history of supporting long-term

research. Furthermore, AT&T senior management has a strong appreciation for the contribution that research at the Laboratories has

made to the growth of the telephone system.

They are unlikely to make a sudden shift in

policy in the foreseeable future. Finally, most

of the areas in which AT&T Bell Laboratories

has particular scientific strength are those

that, although fundamental, are clearly related

to information technology-e. g., solid-state

physics and computer science. Since the line

between basic and applied research in these

fields tends to be particularly hazy, fundamental work is likely to continue to be supported

even were management to adopt a short time

horizon for results.

Long-term prospects for basic research at.

AT&T Bell Laboratories will depend, in part,

on AT&T’s success as a competitor in the computer and telecommunications industry. This

long-term success will depend on many factors

including the regulatory environment, the economic climate, the skill of AT&T management

in operating under new rules, and the contributions made by the Laboratories to innovation.

The divestiture has also introduced a new

and potentially important organization, Bell

Communication Research (Bellcore), to the information technology R&D arena. Bellcore

serves the seven Bell operating companies,

which hold it jointly. It commands the resources of a significant number of researchers

from the pre-divestiture Bell Laboratories.

Bellcore’s relationships with the operating

companies and its research activities are in the

genesis stage at present; thus, some time will

be required to determine its overall contribution to the national R&D effort.

At the same time, the former Bell Laboratories was a major performer of information

technology research in the United States, and

the divestiture in the telecommunications industry is a structural and regulatory change

unprecedented in scale. The impact of this

change on industrywide research including

that done at AT&T Bell Laboratories and Bellcore should be closely monitored by Congress.

Scientific and Technological Manpower

The Federal Government has historically

assumed a role in stimulating the production

of technical manpower in areas of national interest. Policy has focused on increasing both

the quantity and quality of technical graduates, but it has also played an important role

in equity. Federal scholarship and fellowship

programs are vital mechanisms to eliminate

financial barriers to entry into technological

careers.

Information technology is a fast-growing

field of national importance, and Federal policies for developing R&D manpower in information technology may be deemed warranted

by Congress. However, those policies should

be broadly focused rather than aimed at narrow fields of specialization, and they should

be consistent and steady over the long term.

Any policy designed to increase technical

manpower will not take full effect for several

years. The delays are inherent in the education system. They represent both the time it

takes educational institutions to respond by

developing new instructional programs and

hiring staff, and the time it takes for a student to pass through the system. Hence, these

policies should be directed, not to short-term,

but to long-term needs. If addressed to current shortages, Federal programs run the risk

of overproduction by the time they take effect,

for needs may have changed or labor market

forces such as high wages may have already

encouraged adequate new entrants in the field.

Detailed long-term needs for technical manpower are hard to assess in a field changing

as rapidly as information technology. Hence,

projections of future requirements differ significantly from one to another. They do not
Ch. I—introduction and Summary ● 1 7

account well for the appearance of new fields

of specialization, such as the recent emerging

area of fiber optics, nor the sudden growth in

importance of older fields of research such as

artificial intelligence. Thus, policies that deal

broadly with science and engineering manpower in all fields are most likely to be successful.

OTA found that, although some shortages

exist in specific fields, the long-term outlook

is promising. Enrollments at university programs, both at the undergraduate and graduate level have been increasing rapidly, and

educators from some institutions have expressed concern that in a few years there may

be an overabundance of computer scientists

and engineers, at least at the bachelor’s degree

level. Similarly, as competition for admission

to undergraduate and graduate programs grows,

so should the quality of the graduates.

Science education policy also addresses

equity issues. Undergraduate and graduate

technological education is increasingly expensive. Access barriers to high-paying careers in

information technology could become formidable for some parts of society, due both to

cost and poor preparation at the precollege

level. To help offset these barriers, Federal policy may need to address scholarships, fellowships, traineeships, and other forms of direct

assistance to students, as well as the improvement of precollege science education.

Changing Roles of Universities

The United States has traditionally looked

to its university system whenever national

needs called for improved technological innovation and the development of new expertise.

This dependence on the education system,

probably unparalleled in the world, has often

resulted in experiments in institutional structures associated with higher education. The

Morrow Act established the land grant colleges to develop a scientific basis for agriculture and to train farmers in modern techniques. During World War II and after, major

federally funded research laboratories were established in association with universities. Examples include the Lincoln laboratories at the

Massachusetts Institute of Technology, the

Lawrence Radiation Laboratory at the University of California, Berkeley, and the Jet Propulsion Laboratory at the California Institute

of Technology.

Once again, in response to some of the concerns raised earlier in this chapter, many

universities are experimenting with new structures designed with the dual objectives of improving the quality of technical education on

campus and improving the flow of research

results into industrial innovation. In contrast

to many past experiments, these new structures are, by and large, not in response to Federal programs. Rather, many of them respond

to initiatives both from industry looking for

closer ties with academic programs and from

States who see strong academic technical programs as attracting high-technology industry

and, thus, serving as stimuli for economic development.

Some potential issues have arisen, but to

date problems appear to have been or are being resolved to mutual satisfaction by negotiation between the academic institutions and

the industrial sponsors. They include the following:

● How intellectual property rights are distributed among researchers, their institutions, and the industrial sponsors.

● When and under what circumstances research results may be published.

● Who establishes research priorities and

standards of scientific quality.

Over the longer term, other issues will also

become important, such as the overall influence on the directions of academic basic research. Another long term concern is the potential imbalance of campus resources and

attention between science and technology on

the one hand and other important scholarly

fields such as foreign studies, social science,

the arts, or the humanities.

Another question of equity concerns the balance between institutions, themselves. In the

first place, are these programs “zero-sum

games” in which the gains of a few institutions

are mainly at the expense of all the others?

Secondly, although the top research institutions have been able to negotiate arrange-
18 ● Information Technology R&D: Critical Trends and Issues

ments that, in their view, do not threaten their

other academic roles, less influential schools

will have far less bargaining power.

Since many of these institutional experiments are new, it is too early to tell whether

they will be successful in meeting their sponsor’s expectations or whether the negotiated

solutions to the major issues will work. However, it is important that Federal science agencies

two

●

●

watch these developments carefully for

reasons:

Many of these new research institutions

will be performers of federally funded research or will be cosponsors of federally

funded research.

Many of the issues under negotiation between universities and industry, such as

ownership of intellectual property rights

and restrictions on publication are currently echoed as problems in government/

university relationships.

Foreign Programs

Programs in other countries designed to promote innovation in information technology

have received attention in the United States.

These programs have raised both concern

about increased competition in technologies

in which the United States has traditionally

been a world leader, and they have provided

models to those who suggest that the United

States also needs to develop more coherent

programs to foster innovation by domestic industries. Some examples of such programs are

the following:

●

●

The Japanese Fifth Generation Computer

Project is an attempt to move beyond current concepts of computer design to develop an entirely different type of machine

based on artificial intelligence concepts.

The French La Filiere Electronique Program is a five-year national information

technology R&D program with long-term

goals of strengthening the French elec-

●

●

tronics industry and developing technology for social applications.

ESPRIT, is a pan-European program intended to draw together the technical

resources of Europe to focus on R&D in

information technology.

The British Alvey program, constituted

in part as a British response to the Japanese Fifth Generation Computer Project,

is a program of government support for

research and development in semiconductors and computer software.

Regardless of assessments of the specific

prospects for any one program or its implications for U.S. policy, they demonstrate in total

the new competitive world that is developing

in information technology. No longer can the

United States expect to maintain unquestioned technological leadership and unchallenged domination of world markets in information technology. Other nations now see it

in their own interests to build scientific and

industrial strength in these areas and are taking steps to do so. U.S. science and technology policy will need to adapt to take this new

reality into account.

However, the foreign programs being established do not necessarily constitute useful

models for U.S. policies, for several reasons.

In the first place, many of them are too new

to determine success. Secondly, each is tailored to the unique patterns of government/industry/academic relationships as they exist in

country of origin and may not be workable in

the country. Finally, many of these programs

are designed to address particular bottlenecks

to innovation that may exist in the specific

country. U.S. science and technology has a different balance of strengths and weaknesses.

For example, some countries have a lack of

venture capital, others a shortage of scientific

manpower, and still others have strong cultural barriers between business and academic institutions that impede technology transfer.

Information technology R&D is, in many respects, an international activity. For example,

some domestic firms are owned or partially

owned by foreign firms (and vice versa). Many
Ch. I—Introduction and Summary ● 1 9

large computer and communications companies are multinationals that operate laboratories in several nations; and many companies

have agreements to exchange and cross-license

technology with foreign counterparts. Scientists have always viewed basic research as an

international activity. Thus, international conferences, scientific journals, and exchange of

researchers are common.

Programs designed to strengthen and protect technology as a purely domestic resource

need to balance this goal against the natural

limitations posed by this international character. For example, the managers of ESPRIT,

a program designed to stimulate European

technology, must decide whether and on what

basis to admit or deny the participation of

multinationals based, at least partly, outside

of Europe. Companies concerned about what

they may view as stringent controls over technology in one country can simply move their

R&D efforts to their laboratories in other

countries.

Science Policy

Federal programs designed to stimulate information technology R&D exist in the much

broader context of Federal science and technology policy.

Congress needs to ask whether existing

science and technology policy serves the needs

of information technology R&D both in terms

of its unique characteristics and the potential

importance of the technology to the nation.

Similarly, it is important to ask whether policies designed specifically to support information technology R&D are consonant with the

broader scope of science and technology policy.

OTA identified three major sets of policy

issues that, although applicable to a broad

range of science and technology, seem particularly important in the context of information

technology.

Institutional Focus. —The Federal Government has traditionally and purposefully supported research and development through

several programs administered by different

agencies. Despite occasional calls for centralizing R&D support within a single science and

technology agency, this historical approach

was accepted for two basic reasons. In the first

place, agencies with specific technological

needs were considered to be best suited to support R&D focused on their needs. Secondly,

multiple sources have been considered healthy

for the support of science, since diversity and

redundancy are both important attributes of

scientific research.

The issue of government organization is being reexamined, in the case of information

technology. Arguments in favor of a more centralized and/or coordinated approach are based

both on the changing nature of R&D and on

the challenges posed by new foreign programs

stressing R&D in fields such as microelectronics, computer systems, and communications

technology.

Research is becoming increasingly expensive. Research equipment such as a microelectronic fabrication facility or a supercomputer

can cost several million dollars in capital costs,

plus several hundred thousands of dollars a

year to maintain and operate. Salaries of

research-level technologists are escalating, and

much research in information technology now

requires large teams of different specialists

and technicians. This cost and complexity of

R&D not only may make redundancy and duplication of effort a luxury, but may even make

some types of research impossible to initiate

without coordination of Federal programs.

Some foreign research programs targeted at

specific technologies have claimed successes

in the sense of capturing a world market-the

most notable being the Japanese program for

the so-called “64k” computer memory chip for

computers that stores about 64,000 characters

of information on a microchip. While Japanese

success in this market may be attributed to

many factors, the existence of a specific government program may have been a major influence. Seeing such programs targeted at

selected technologies in Japan and Europe has

led some experts to call for the United States

to respond with a similar approach to domestic R&D.
20 ● /formation Technology R&D: Critical Trends and Issues

Photo credit: NASA

A communication satellite being launched from a

space shuttle. Satellite communication technology

was stimulated by both Federal military and civilian

R&D programs

Such programs, if initiated, would not likely

be restricted to information technology alone,

but would be focused on a wide range of technologies deemed critical. It would be a significant departure from the past approach that

featured multiple government programs of

support for basic research, agency-by-agency

support of applied research based on mission

needs, and, with a few exceptions, private sector support for innovation and product development.

Military and Domestic R&D.–Military

funding tends to dominate the Federal R&D

budget, particularly in the case of information

technology. Such a high level of DOD involvement is not surprising considering the importance of information technology to its mission.

The policy issue is whether the high level of

defense support provides adequate underpinnings for the broad development of civilian

technology or whether a case exists for strong

civilian agency support of R&D.

There is no doubt that past DOD and Department of Energy support of R&D in such

areas as microelectronics and computer design

has been a spur to the entire information technology industry. However, there is evidence

that, as the technology becomes more mature,

military requirements have begun to diverge

from civilian interests. For example, in the

area of supercomputers and very high speed

integrated circuits, there is a significant doubt

that the DOD Strategic Computing and very

high speed integrated circuit programs, although responsive to DOD needs, will also

serve civilian needs. Hence, there may be a

need to boost civilian support in information

R&D.

Influence of International Competitiveness.—The growing concern over economic

issues, in particular, international competitive

ness has led to issues in which attempts to

treat technology as a national resource that

can be held and protected conflict with traditional approaches to science policy.

For example, concern about the international flow of scientific and technical information conflict with the historical science policy

goal of establishing international cooperation

in science and technology. Open publication

of some scientific material has been challenged

on the grounds that the information should be

restricted to the United States. Some have

suggested that the practice of admitting

foreign science students, who comprise a significant percentage of degree candidates in

information technology, conflicts with U.S.

economic interests. Restrictions have been imposed on foreign scholars attempting to attend

U.S. conferences and seminars.

Other policies assume that the United States

does not need to draw on foreign science.

Hence, research project support typically

gives little attention to the potential benefits

of travel by U.S. scientists to foreign research

laboratories and conferences. Unlike the practices of other countries, little support is provided to provide translations and analyses of

foreign research papers and monographs. Yet

U.S. scientists, in general, do not have facil-
Ch. I—Introduction and Summary ● 2 1

ity in some of the significant scientific lan- information scientists do not even have facilguages of today, particularly Japanese. Due ity with traditional scientific languages like

to the weakening of foreign language require- French and German.

ments in some graduate programs, many U.S.

Summary

During the past decade, information tech- to monitor and manage this change. In parnology has grown to major economic and so- ticular, Congress will need to:

cial importance in the- United States and

abroad. The desire to maintain a competitive ●

posture in worldwide markets as well as the

urge to realize potential social benefits of new

computer and communications systems has focused public attention on the process of inno-

●

vation, in particular, on R&D. OTA has found

that, in response to these pressures, the system has been remarkably adaptable. Federal ●

programs are changing rapidly in response to

new perceived needs; science and engineering

enrollments are increasing in response to an

anticipated need for more technological man- ●

power; and universities and industry are

changing their traditional patterns of research

and relationships. The policy problem will be

—

determine and maintain an appropriate

level and balance of R&D support for information technology (including research

on the social impacts of these technologies),

remove unintended barriers to government and private sector R&D efforts,

assure that these changes in the R&D system do not have unintentional side effects

on other sectors or goals of the U.S. system of science and technology, and

assure access by researchers in all disciplines to powerful new computational and

data communication technologies.
Chapter 2

The Environment for R&D

Information Technology

the United States

●

m

●

m
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Concepts for R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

The Roles of the Participants and the R&D Environment . . . . . . . . . . . . . . . . . . . . . . . . 28

Federal Government Role in R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Industrial R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Universities’ Role in R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Conflicts in Perspectives, Goals, and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Measures of the Health of U.S. R&D in Information Technology, . . . . . . . . . . . . . . . . . 43

Information Industry Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

U.S. Patent Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

A Synthesis: The Changing U.S. R&D Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Tables

Table No. Page

l. Federal Obligations for Total Research and Development: Fiscal Year 1984 . . . . . . 28

2, Federal 0bligations for Basic Researching Information

Technology-Related Fields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3. Federa1 0bligations for Applied Research in Information

Technology-Related Fields. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

4. The Top 15 in R&D Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

5. Federal and Department of Defense Obligations for Basic Research,

Applied Research, and Development, 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

6. Federal and Department of Defense Obligations for Basic

and Applied Research by Field, 1983. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

7. Technology Distribution of the Top 50 U.S. Patent

Electrical Categories 1978-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

8. Percentages of U.S. Patents Granted in Information

Technology and in All Technologies, 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

9. Foreign-Origin U.S. Patents in Some Components of Information Technology. . . 49

IO. Foreign-Owned U.S. Patents unselected Telecommunications Classes, 1982 . . . . . . 49

Figures

Figure No. Page

l. Interrelationships in the R&D Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2. Science, Engineering, and Technician Employment

Within High-Technology Industries, 1980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3. Federal 0bligations to Universities and Colleges for R&D Plant . . . . . . . . . . . . . . . 39

4. Estimated Ratio of Civilian R&D Expenditures to Gross

National Product for Selected Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5. U.S. Patents in Information Technology, SIC Codes 357, 365,366,367 . . . . . . . . . 48

6. Share of Foreign Patenting in the United States for the Three

Most Active Countries in Selected Product Fields: 1981 . . . . . . . . . . . . . . . . . . . . . . 50

7. U.S. Patent Activity of 10 Foreign Multinational Corporations, 1969-80 . . . . . . . . . 50
Chapter 2

The Environment for R&D in Information

Technology in the United States

Introduction

“Information technology” is a generic term

for a cluster of technologies (discussed in detail

in ch. 9) that provide automated capabilities

for

● data collection;

● data input;

● information storage and retrieval;

● information processing;

• communication; and

● information presentation.

The information technology industry has become an integral component of U.S. industrial

strength. In common with other high-technologyl industries, the robustness of information technology depends in part on a base of

research and development (R&D). However,

several interacting factors are straining longestablished U.S. policies vis-a-vis research and

development:

●

●

●

●

rising costs and complexity of R&D;

intensive competition for both domestic

and foreign markets;

limited resources; and

accelerating technological advances.

This report describes those factors and examines their effects on the information technology industry and its R&D base, raising

questions both about current policies and

about proposals for improving the competitive

position of the United States in international

information technology markets.

‘The term high technology is used throughout this chapter

to refer to those industries characterized by a high proportion

of R&D expenditures per employee, or a significantly larger proportion of skilled workers than the industry average, and a

rapidly evolving underlying technological base. Thus computers

and electronics are within the scope of this meaning; auto and

steel manufacturing are not, in spite of the recent trend to modernize and automate.

The world’s major countries are coming to

view the development of high technology—

and particularly information technology-as

a key to economic gains, important social objectives, and national defense and prestige.

These countries have adopted national industrial policies in information technology, investing hundreds of millions of dollars in the

hope of achieving preeminence, both in R&D

and in commercial markets. This growth of

foreign competition2

-especially from Japan–

has stimulated a concomitant growth of R&D

in the United States.

The trend toward internationalizing R&D,

manufacturing, and distribution is increasing.

American companies are deciding that technological strength can also be improved by

licensing technology from other domestic and

foreign businesses, by acquiring equity positions in firms with needed technology, and by

establishing R&D and manufacturing operations in foreign countries in order to obtain

access to rapidly changing commercial applications.

Figure 1 shows some important components

of the R&D process and diagrams their interrelationships. The remainder of this report will

focus on those components.

●

●

This chapter describes some of the key

players in the process and discusses some

measures of health of the information

technology industry.

Chapter 3 Presents four case studies, each

dealing with an important element in the

cluster of technologies that comprise information technology.

‘See also ht.ermtiond Competitiveness in EZectrom”cs (Washington, DC: U.S. Congress, Office of Technology Assessment,

OTA-ISC-200, November 1983).

25
26 ● Information Technology R&D: Critical Trends and Issues

SOURCE: Office of Technology Assessment.

●

●

●

●

Chapter 4 discusses the recent divestiture

of AT&T in the context of its potential

effect on the R&D activities of Bell Laboratories.

Chapter 5 considers the availability of ●

trained personnel to the R&D process.

Chapter 6 examines new university-industry institutional relationships and their

changing roles in the R&D environment.

Chapters 7 and 8 focus on some of the exogenous elements: the science and technology policies of foreign governments in

chapter 7; the science and technology policies of the United States in chapter 8.

Chapter 9 describes the technological

underpinnings of information technology,

the directions of key research areas, and

the characteristics of the information

technology industry.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 27

Concepts for R&D

R&D includes a wide variety of activities–

ranging from investigations in pure science to

product development. Because segments of

information technology draw on so many

science, engineering and other disciplines—

computer science, manufacturing, electrical,

mechanical and industrial engineering, physics,

chemistry, mathematics, psychology, linguistics—it is difficult to assign particular efforts

to the general category of information technology.

As defined by the National Science Foundation (NSF), R&D is categorized as follows:3

●

●

●

●

Research is systematic study directed

toward fuller scientific knowledge or understanding of the subject studied.

In basic research the objective is to gain

fuller knowledge or understanding of the

fundamental aspects of phenomena and

of observable facts without specific applications toward processes or products

in mind.

In applied research the objective is to gain

knowledge or understanding necessary

for determiningg the means by which a recognized and specific need may be met.

Development is the systematic use of the

knowledge or understanding gained from

research directed toward the production

of useful materials, devices, systems, or

methods, including design and development of prototypes and processes.

The definitions of “applied” and “basic” research are especially troublesome in a field as

dynamic as information technology, in which

laboratory concepts evolve into marketable

products very rapidly. In the area of artificial

intelligence, for example, the work is often

basic in the sense that it seeks new ways of

understanding complex symbolic processes,

and applied in the sense that much of the work

is directed at prototype applications. This

‘National Science Foundation, FederaJ Funds for Research

and Development Fiscal Yws 1981, 1982, and 1983, Volume

XXXI Detailed Statistical Tables, NSF 82-326 (Washington,

DC, U.S. Government Printing Office, 1982), p. 1.

fuzziness has led to differing judgments as to

which projects are applied and which are basic,

and to confusion in data collection, because the

terms are not applied uniformly by Federal

agencies, industry, or academia.

Apart from the difficulty in drawing a clean

line between basic and applied research, there

is an additional problem in identifying the set

of industries that collectively comprise the information industry. For purposes of this report, we use the term to include electronics,

computer, and telecommunications equipment

manufacturers, providers of computer-based

services, and commercial software developers.

There are, then, two major areas of ambiguity in any discussion of information technology R&D: ambiguities inherent in designating an effort as “information technology” and

ambiguities arising from the overlap of basic

and applied research. Because of this, quantification of R&D efforts in information technology is necessarily approximate and the

numbers cited in this report should be regarded as estimates, not as “hard” data.

One further term, “innovation,” should also

be clarified. As used in this report, innovation

is a process that includes research and development, manufacturing or production, and distribution. 4 The Nation’s innovative capacity

depends on the effective functioning of all

parts of the process. Success in the marketplace requires proficiency in some—not well

understood—combination of those parts. There

are other factors that influence marketplace

success, such as the timing of the introduction

of commercial products, the influence of entre

preneurs, and a variety of government policies.

Thus, while excellence in research and development provides no assurance of leadership

in the commercial marketplace, it may very

well be a necessary (if not sufficient) ingredient

of success.

‘International Competition in Advanced Technology: Decisions for Amen”ca, Office of International Affairs, National Rt+

search Council, 1983, pp. 21-22.
28 ● Information Technology R&D: Critical Trends and Issues

The Roles of the Participants and the R&D Environment

Industry, universities, and Government

(State, local, and Federal) are the three key

contributors to R&Din the United States. The

effectiveness of the Nation’s R&D is dependent on the vitality of each of the participants

and on their interrelationships. Federal support of R&D and Federal policies that maintain a healthy economy encourage industrial

investment in R&D.5 A vigorous industry, in

turn, provides a large Federal and State tax

base, making possible added support for academic institutions. For their part, wellfinanced academic institutions generate welltrained personnel as well as the dynamic knowledge base necessary to fruitful R&D efforts.

In addition to describing the roles of each

of the participants and the environment for

R&D, this section identifies some of the diverse changes taking place in the R&D environment-those already in place, and others

in transition-that may profoundly modify

some longstanding institutional patterns.

Federal Government Role in R&D

The Federal Government plays several key

roles in information technology R&D. As a

major user of information technology products

(about 6 percent of the total automated data

processing market and most of the market for

supercomputers), its requirements are of considerable interest to the industry. As a spon-

‘David M. Levy and Nestor E. Terleckyj, Effects of Government R&D on Pn”vate Investment and %xiucti”w”ty: A Macro

sconomi”c Analym”s, National Planning Association, revised Jan.

5, 1983, pp. 17-19.

sor of research, the Federal Government funds

roughly half of the total R&D carried out in

the United States6 and about two-fifths of the

research by the electrical machinery/communications industry (a key component of the information technology complex). In addition,

the Federal Government itself performs about

$11 billion of R&D7 (table 1) in its own and contract laboratories.

Beyond that, the Government helps to shape

the environment in which private firms make

their R&D decisions. In some cases, this is a

result of deliberate Government policy intended to stimulate (or suppress) industry investment. At other times, the environment is

affected by uncoordinated actions—intended

to serve other purposes-taken by a variety

of Federal entities including the Federal Reserve Board, the courts, regulatory bodies and

a plethora of executive branch agencies including the Departments of Justice, Commerce,

State, and Defense, the National Security

Council, and the Environmental Protection

Agency.

Government Funding of R&D in

Information Technology

The Federal Government provided about 65

percent of the funding in 1982 for R&D in

science and engineering fields in the Nation’s

———— ..—

‘Federal Support for R&D and Innovation, Congressional

Budget Office, April 1984, p. iii.

‘Pmbalde Levels of R&D Exped”tums in 1984: Fomcas t and

Analysis, Columbus Division of Battelle Memorial Institute,

December 1983, p. 1.

Table 1 .–Federal Obligations for Total Research and Development: Fiscal Year 1984 (Estimated)

(millions of dollars)

Extramurala

United States and Territories

FFRDCS

C FFRDCS

C FFRDCS

C

administered administered Other administered Us.

Industrial by industrial Universities by universities nonprofit by nonprofit State and local supported

Total Intramuralb

firms firms and colleges and colleges institutions restitutions governments Foreignd

Total all agencies $45,497.0 $10,969.9 $22,957.4 $1,614.4 $5,270.7 $2,291.9 $1,335.5 $6832 $189.1 $1848

NOTES: aAll organizations outside the Federal Government that perform with Federal funds,

bAgencies of the Federal Government.

cFederally funded R&D centers.

dForeign Citizens, organizations, governments, or international organizations, such as NATO, UNESCO, WHO, performing work abroad financed by the Federal

Government.

SOURCE: “Federal Funds for Research and Development, Fiscal Years 1982, 1983, 1984, ” vol. XXXII, Detailed Statistical Tables NSF 83-319, p. 30
Ch. 2—The Environment for R&D in Information Technology in the United States ● 2 9

universities and colleges.8 Data collected by

the National Science Foundation (see tables

2 and 3) indicate that Federal obligations for

basic research in fields related to information

technology included $103.7 million for computer science and $115.4 million for electrical

engineering in fiscal year 1984. For applied research, funding levels are $145.8 million for

computer science and $568.3 million for elec-

—. . —

8Nationa.1 Science Foundation, Early Release of Summary Statistics on Academic Science/Engineering Resources, Division

of Science Resources Studies, December 1983. Also see Federal R&D Funding The 197585 Decade, National Science Foundation, March 1984, p. 11.

Table 2.—Federal Obligations for Basic Research in

Information Technology-Related Fields

(millions of dollars)

Computer Electrical

Year science engineering Total

1974 . . . . . .

1975 . . . . . .

1976 . . . . . .

1977 . . . . . .

1978 . . . . . .

1979 . . . . . .

1980 . . . . . .

1981 . . . . . .

1982 . . . . . .

1983a 

, . . . . .

1984a 

. . . . . .

NA

$26.59

31.02

40.28

42.96

46.22

52.21

67.45

80.25

$103.66

$38.45

47.76

53.08

55.14

57.41

62.03

70,59

78.51

93.63

91,89

$115.38

NA

$79.67

86.16

97.70

104.98

116.80

130.71

161.07

172.14

$219.04

aNatiOna} science Foundation estimates

NA—Not available.

SOURCE National Science Foundation, “Federal Funds for Research and Development, Detailed Historical Tables” Fiscal Years 1955-S4, ” p 275

Table 3.—Federal Obligations for Applied Research

in Information Technology-Related Fields

(millions of dollars)

Computer Electrical

Year science engineering Total

1974 . . . . . . NA $230.79 NA

1975 . . . . . . 239.20

1976 . . . . . . $46.99 244.61 $291.60

1977 . . . . . . 58.34 327.59 385.93

1978 . . . . . . 66.97 375.22 442.19

1979 . . . . . . 63.31 355.84 418.15

1980 . . . . . . 82.38 446.56 528.93

1981 . . . . . . 69.32 478.17 547.48

1982 . . . . . . 103.49 518.56 622.05

1983 . . . . . . 121.18 525.75 646.92

1984a , . . . . . $145.85 $568.33 $714.18

aNatlonal science Foundation estlfnates.

NA—Not available

SOURCE National Science Foundation, “Federal Funds for Research and De.

velopment, Detailed Historical Tables: Fiscal Years 1955-84, ” p 327

trical engineering. These categories alone

amount to $933 million in basic and applied

R&D funding. In addition, there are other

R&D areas related to information technology

—e.g., mathematics, physics, and materials

sciences.

The Department of Defense (DOD), which

has the largest of the Federal agency R&D

budgets, is becoming increasingly dependent

on electronics and computer science. By 1985,

those fields will absorb nearly 25 percent of

the total DOD R&D spending.’ Within DOD,

the Defense Advanced Research Projects

Agency (DARPA) has heavily funded efforts

in artificial intelligence, microelectronics, networking and advanced computer architecture.

No other agency compares with DOD, which

accounts for about 60 percent of the Federal

R&D budget.l0 NSF, for example, accounts for

about 3 percent of the Federal total, with a

fiscal year 1983 appropriations of just over $1

billion” and $1.32 billion and $1.5 billion in

fiscal years 1984 and 1985 respectively.12 NSF

funding, which is heavily weighted toward the

“basic” end of the R&D scale, supports research through grants, scholarships, university laboratory modernization, the establishment of university-based “centers of excellence, ”

and similar programs. Many of the information technology-related disciplines are funded

through NSF programs: communications, electrical engineering, optoelectronics, mathematics, physics, materials research, information

sciences, and so on. These information technology-related fields accounted for over $90

million in fiscal year 1984.

Since 1972, NSF has been the primary Government force in creating university-industry cooperative research centers, providing

some of their startup funds, planning grants,

and advice during their first years of opera-

..__ ——.—.— -

Wited in a speech by Dr. Leo Young, Office of the Under Secretary of Defense for Research and Engineering, DOD, at the

IEEE 1984 Conference on U.S. Technology Policy, Feb. 22,

1984, Washington, DC.

Ioprobab]e Leve]s of R&D Experd”tures in 1984, op. cit.

“Federal Funds for Research and Development, Fiscal Years,

1981, 1982, and 1983, op. cit., p. 25.

lZFi9c~ yea 1985 Nat,ion~ Science Foundation Budget Wtimate to Congress.
30 . Information Technology R&D: Critical Trends and Issues

tion. The centers are expected to become selfsupporting. 13 By the end of fiscal year 1984,

NSF was involved with 20 of these centers and

expects to make awards to at least 10 new

centers in 1985.

A number of the centers are involved with

information technology-related research. For

example:

●

●

●

●

●

Rensselaer Polytechnic Institute’s Center

for Interactive Computer Graphics is doing applied research in computer-aided design (CAD).

North Carolina State University’s Communications and Signal Processing Laboratory is primarily engaged in basic research.

Both basic and applied research is being

performed at the University of Rhode

Island’s Robotics Center.

Ohio State University is doing basic and

applied research in robotic welding.

Georgia Institute of Technology’s Center

for Material Handling is engaged in applied research.

The National Science Board has recommended

broadened NSF support for engineering research, an area long neglected in favor of the

agency’s traditional emphasis on basic scientific research. Congress approved about $150

million for NSF grants for engineering research in fiscal 1985, about 10 percent of the

agency’s total research budget.14 The President’s budget request for fiscal year 1985 calls

for more funding for this purpose, as well as

for establishment of cross-disciplinary engineering centers at universities which would,

among other effects, promote research on computers and manufacturing processes.15 Government funding of engineering equipment

and facilities at universities decreased from

$42 million to $17 million per year between

1974 and 1981,16 but has been rising since

then.

laDoD i9 aISO supporting this program through m $8 million grant, primarily for laboratory equipment.

“’’National Science Foundation Starts to Broaden Support

of Engineering Research, ” The Chronicle of Higher Education,

Jan. 18, 1984, p. 17, and interviews with NSF officials, January 1985.

“Ibid.

16Probable Levels of R&D Expemh.tums in 1984, op. cit.

The Pattern of Government Funding of R&D

in Information Technology

The Federal Government has had a long history of funding R&D in information technology-related fields. It is currently the major

sponsor of those types of information technology R&D in which it has special interests.

These include artificial intelligence, supercomputers, software engineering, and very large

scale integrated circuits (VLSI), all areas in

their technological infancy and with enormous

potential for military as well as commercial applications. There is a long list of related technologies that have been stimulated by Government-often defense or other mission agencies

—sponsorship of R&D including radar, guidance systems, satellite communications, and

many others.

There are some historic examples of intensive Government sponsorship of technological development in areas where the potential

benefit was expected to be great, but the risks

and costs of research were high and therefore

unattractive to industry —e.g., computers,

aviation and communications satellites. One

of the classic illustrations of a successful, major Government contribution to information

technology R&D is in the field of satellite communications. The National Aeronautics and

Space Administration (NASA) (which currently accounts for about 7 percent of the Federal

R&D budget) had the leading role in pioneering technological progress toward commercial

development, accelerating the time frame for

the introduction of this technology, influencing the structure of the U.S. domestic and international telecommunications common carrier

industries, and effecting significant cost savings over the long run.17

In these cases, the Government, through the

undertaking of a number of risky and expensive R&D programs and with extensive private sector involvement, developed a large

pool of baseline technology that served to

prove the feasibility of geostationary satellite

171Mofis Teub~ adEdwud Steinmuller, Government POlicy, Innovation and Economic Growth: Lessons From a Study

of Satelh”te Comrnum”c.ations, Research Policy 11 (1982) 27-287,

North Holland Publishing Co.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 31

communications. These R&D programs were

for the purposes of proving the feasibility of

various technological advances such as geostationary orbiting satellites, electromagnetic

propagation of signals from outer space,

traveling wave tubes, automatic station keeping, and aircraft communications. The NASA

programs initiated to undertake the extensive

R&D included the SCORE, ECHO, and RELAY

programs, the SYNCOM series of launches

that paved the way for Intelsat I, the first

commercial communications satellite, and the

Applications Technology Satellites series. The

costs for the RELAY, ECHO, and SYNCOM

Programs alone through 1965 were over $128

million-an amount that few companies could–

or would—commit, particularly considering

that the feasibility of synchronous satellite

operation was seriously questioned.18

It is also interesting to note that these

NASA programs likely had some important

side-effects on the structure of the U.S. international satellite communications industry.

Because AT&T was the only private company

to have heavily invested its own funds for satellite communications R&D—with focus on

the nonsynchronous TELSTAR system—it is

likely that AT&T would have dominated the

new international and domestic satellite communications services industry. Instead, the

NASA programs, through continuous transfer of technology to, and close interaction with,

commercial firms stimulated the competition

that followed the 1972 Federal Communication Commission’s decision allowing open entry into the domestic satellite communications

services industry.

The market for the supply of satellite communications equipment was also open to competition due to the expertise gained by NASA

contractors. In addition, the international satellite network that evolved is owned and operated by INTELSAT, an international consortium, with the U.S. portion owned and operated by COMSAT, a broadly based private/

public corporation.

1

8

1 bid., p, 277.

Other Federal Government Policies

The Federal Government has many other

means for promoting (or suppressing) private

sector R&D activities including antitrust policy, patent policy, tax credits, technology

transfer from Federal laboratories and federally funded R&D centers, and the promotion

of Research and Development Limited Partnerships (RDLP). Export controls, whether for

national security or political purposes, serve

as a negative influence in promoting private

sector R&D. A major source of corporate funding for R&D, international sales, is lessened,

and the open exchange of technical data is

limited. Six policies intended to promote private sector R&D are reviewed below.

PATENT POLICY

Previous policies assigning Federal ownership of patents based on Government-funded

R&D have been modified in recent years with

the intent to stimulate patenting and commercialization of invention. Public Law 96-517

(1980), which permits small businesses, notfor-profit institutions, and universities to obtain patents based on Government-sponsored

R&D, is intended to encourage universityindustry collaboration and patenting. The

Government’s right to patent ownership was

further reduced by Presidential Memorandum

(February 1983). This memorandum modified

the Federal Acquisition Regulations by extending the concepts of the current law to

allow all Government contractors to retain

patent rights.

There are obvious tensions in this situation,

since it is sometimes argued that the public

should own patents derived from research it

has funded. The counter-argument is that

Government-owned patents tend not to become commercialized and the public reaps no

real benefit from them. For example, Federal

efforts to license its patents have resulted in

a meager 4 percent being licensed, in contrast

with 33 percent for university-owned patents .19

19 Lm~ingFelker, Us. I)epartrnmt of Commerce, Office of

Productivity, Technology, and Innovation, during interviews

with OTA staff, January 1984.
32 • Information Technology R&D: Critical Trends and Issues

Allowing universities and businesses to retain

ownership stimulates commercialization, but

may also have the effect of distorting the

university’s traditional role as a developer of

fundamental knowledge.

TECHNOLOGY TRANSFER

The Stevenson-Wydler Technology Innovation Act of 198020 was an attempt “to improve

the economic, environmental, and social wellbeing of the United States,” through such

means as: establishing organizations in the executive branch to study and stimulate technology; promoting technology development

through the establishment of centers for industrial technology; stimulating improved utilization of federally funded technology development by State and local governments and

the private sector; and by other activities.21

The act has been selectively implemented.

Most of the Federal Laboratories have established Offices of Research and Technology

Applications (ORTAs) which collect and disseminate the results of their respective Laboratory’s research. The Center for the Utilization of Federal Technology, in the National

Technical Information Service of the Department of Commerce, serves as a central clearinghouse.

However, the heart of the act, the Cooperative Generic Technology Program, has never

been implemented. In February 1984, the Secretary of Commerce issued the first report to

the President and the Congress on the progress of Federal activities conducted pursuant

to the Act.22 It appears that much of the work

cited in the Report as “Stevenson-Wydler”

activities would have been performed even if

the act had not existed. For instance, the new

patent policies discussed above and the R&D

Limited Partnership (RDLP) discussed below

were both cited as “Stevenson-Wydler’ initiatives.23

— — —

‘Public Law 96-480.

“For more details see the Stevenson-Wydler Technology Innovation Act of 1980, Report to the President and the Congress

from the Secretary of Commerce. February 1984.

‘

g

Ibid.

“Ibid., p. 4.

The Act has probably had an effect on the

activities of the Federal Laboratory Consortium (FLC). In 1984, the FLC established an

award for excellence in technology transfer

and issued 26 such awards. The Federal Laboratories, however, are mission-oriented; and

no Federal Laboratory has a mission emphasizing the development of commercial technologies.24 Thus, the concept of cooperative generic research laboratories envisioned by the

Act has not been tested.

TAX CREDITS

Tax credits for businesses performing R&D

have been expanded through the Economic

Recovery Tax Act (ERTA) of 1981, which will

expire in 1986 unless extended.25 A key provision of ERTA allows companies to claim 25

percent tax credits for their qualified R&D

costs above their average expenditures for the

prior 3-year period. The law also allows for increased deductions for manufacturer’s donations of new R&D equipment to universities,

and provides a new capital cost recovery system for R&D equipment (modified later by the

Tax Equity and Fiscal Responsibility Act of

1982–TEFRA).

Opinion is mixed as to whether this tax

credit is effective in stimulating R&D investment. One study,26 based on the limited available data, observes that the tax credit may

well be helpful in encouraging increased R&D

budgets. However, a current study finds very

little effect on increased R&D spending due

to the tax credit.27 Battelle Memorial Institute

attributes at least part of the increased industry investment in R&D to the tax credits.28

.—

~ioTA MemormdD, “l)weloprnent and Diffusion of COlllmercial Technologies: Does the Federal Government Need to

Redefine Its Role?” March 1984, p. 26.

“public Law 97-34, August 1981.

‘Eileen L. Collins, An Early Assessment of Thins li&D Incentives Prow”ded by the Econonu”c Recovwy Tax Act of 1981,

National Science Foundation, PRA Report 8307, April 1983.

“preliminary findings of an ongoing study by Edwin Mansfield, financed by the National Science Foundation.

as~obab]e ~ve]s of R&D Expencli”tures in 1984, pp. 2, 11-

12, op. cit.
Ch. 2—The Environment for R&D in /formation Technology in the United States • 3 3

R&D LIMITED PARTNERSHIPS

The Department of Commerce has been prometing wider use of R&D Limited Partnerships (RDLPs), and offers advisory assistance

to businesses in their use. RDLPs are intended

to attract venture capital to commercial R&D

by limiting the potential losses to the venture

capitalists while still permitting them to retain patent rights, if any, and to have prospects for receiving royalties or a subsequent

buy-out by the company. RDLPs are sometimes used for conducting R&D with relatively

short-term payoffs—e.g., 3 to 4 years. The use

of RDLPs primarily affects the segments of

the innovation sequence from prototype through

product development.

During 1982, $275 million is estimated to

have been invested in RDLPs, mainly through

large brokerage houses. In 1983, the amount

is estimated at $490 million; in 1984, it was

$220 million.29 Although these investments

have tended to go for biotechnology, some

have been allocated to information technology

projects in fields such as computers, software,

microelectronics, telecommunications, robotics, and artificial intelligence. The drop in funding in 1984 is believed by investment bankers

to be due to two trends. First, there is a general drop in investor interest in high technology. Second, some investors appear to be

concerned about possible changes in tax laws

that may give less favorable treatment of

R&D tax deductions and capital gains.

ANTITRUST POLICY

There have been administrative proposals

and congressional bills that would limit the

use of the treble damage penalty against companies found guilty of antitrust violations and

establish clearer guidelines for companies considering cooperative research activities.

There have been arguments noting that the

antitrust laws have not had a chilling effect

on cooperative research since they are rarely

ZgData based on interviews by OTA staff with officials from

the Office of Productivity, Technology, and Innovation, U.S.

Department of Commerce, and key sources in the investment

banking community, Jan. 29, 1985.

used. However, until recently businesses have

been exceptionally cautious about such ventures because of concern over litigation.

Some of the questions that arise in considering more liberalized interpretation of antitrust legislation concerning joint research are:

●

●

●

Will U.S. companies, long accustomed to

performing much of their R&D individually, be able to adapt swiftly to a different

mode of operation? What will be the real

commitment to shared research? How will

intellectual property issues be resolved?

Will there be new opportunities for collusion among joint R&D partners that recreate historical antitrust problems?

Will joint R&D dilute the benefits of competition even in basic research? Will small

firms be disadvantaged?

in the closing days of the 98th Congress, the

National Cooperative Research Act of 1984

was passed. The Act eliminates the treble damage penalties in antitrust cases involving joint

R&D ventures when those ventures meet the

conditions of the Act, in particular, by providing prior notification to the Federal Trade

Commission and the Justice Department.

INDUSTRIAL POLICY

An important topic debated in Congress

concerns industrial policy and the appropriate

role of Government in strengthening industry.

One approach would provide an environment

generally conducive to industry reinvestment,

productivity improvements, and increased

competitiveness through tax, antitrust, patent, and other policies. A different approach

would assist selected industries, create a highlevel industry-labor-Government advisory

council, and provide loans and loan guarantees.

Among the issues that surround the debates

are whether the Government could be effective in selecting industries for support; whether

businesses, without further encouragement,

would invest their resources in areas most

beneficial to the Nation’s competitiveness; and

whether foreign national industrial policies

pose insuperable problems for U.S. businesses.
34 • Information Technology R&D: Critical Trends and Issues

There may also be important lessons from the

various foreign experiences with targeted industrial policies, many of which may not be

suitable as models for the United States (see

Ch. 7: Foreign Information Technology R&D).

Industrial R&D

The corporate motivation for performing

R&D centers about the need to maintain or improve market share and profitability for both

the short and long term. For high-technology

businesses in general, R&D plays a critical–

although not singular-role in helping the firm

to sustain or improve its competitive position.

Funding and Licensing of Research

The information technology industry in the

United States spent about $10.8 billion for

R&D in 1983. As is typical of a high-technology industry, the firms in information technology often spend a large proportion of their

sales revenue on R&D—for supercomputer

manufacturers the ratio was nearly 20 percent

in 1982, and it is believed to have been comparable in 1983. In 1983, overall R&D spending by computer manufacturers rose by 19.5

percent; spending by computer software and

service vendors rose by 38.9 percent; and

telecommunications R&D rose by 31 percent.

The importance of R&D to these firms can be

seen from the fact that even during the recent

economic recession they continued to make

substantial R&D investments.

While information technology companies

perform much of their R&D in-house, they also

make use of research originating in universities, other companies, and the Federal Government through licensing and other arrangements for technology transfer. Licensing and

cross-licensing are often used as means of acquiring technology quickly and for recovering

R&D expenses.

Protection of Research Results

Leadtimes in research and product development are very important for capturing markets,

recovering R&D expenses, and contributing

to profitability and further R&D investment.

A 6-month leadtime in getting products into

commercial markets can make the difference

between market dominance and substantial

losses. The information technology industry’s

significant investments in R&D, the high mobility of technical personnel, and the increasing internationalization of R&D, encourage

rapid diffusion of technical data and frequent

introduction of new products. These characteristics intensify the need for legal protection

of new ideas and products.

Certain areas of information technology are

especially vulnerable to “borrowing” and the

degree of legal protection available is uncertain. Software, for instance, can be copywriter

but cannot be patented except in certain instances. Policy is being made in the courts, virtually on a case-by-case basis, and the resultant ambiguities satisfy no one. The entire

problem of intellectual property rights has become a matter for national attention.

Industry-University Links

Chapter 6 of this report describes in detail

the relationship of the information technology

industry and the universities. International

competition is causing U.S. industry to become increasingly sensitive to the importance

of academia both as a performer of information technology-relevant basic research and as

a supplier of trained personnel.

The information technology industry is a

major “consumer” of technically trained personnel. As shown in figure 2, the office/computing and communications industries are rivaled only by the aircraft and parts industry

in terms of overall employment of scientists,

engineers, and technicians. According to statistics compiled by the National Center for

Education Statistics,30 some 21,400 electrical,

electronic, and communications engineering

and 25,500 computer and information science

majors graduated in 1982. Within those disciplines, less than 2 percent are unemployed.31

There is some controversy surrounding the

putative shortage of future manpower for information technology research (discussed at

~ONation~ Center for Education Statistics, Survey of Emned

Degrees Conferred, reported to OTA by Dr. Vance Grant, Jan.

3, 1984.

‘

] Congressional Budget Office, Defense Spendeng and the

Economy, Table A-7, p. 59, February 1983.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 3 5

Figure 2.—Science, Engineering, and Technician Employment Within

High-Technology Industries, 1980

(Thousands)

o 20 40 60 80 100 120 140

Machinery, except electrical

Office and computing

Construction and related

General industrial

Metalworking

Other

Electrical machinery

Communication

Electronic components

Electronic industrial appliances

Other

Transportation equipment

Aircraft and parts

Guided missiles/space vehiclesa

Motor vehicles

Other

Instruments

Measuring control devices

Engineering/scientific equipment

Photographic equipment

Other

Chemicals

Industrial organic

Plastic materials

Industrial inorganic

Drugs

Other

-

I

J

 confidentiality rules and/or Statistical reliability data release

SOURCE: National Foundation, Changing Employment Patterns of Scientists, Engineers, and 

 Industries, 1977-80
36 ● Information Technology R&D: Critical Trends and Issues

length inch. 7) but there is certainly no present

oversupply of well-trained R&D personnel nor

is there doubt that industry is dependent on

the university system to produce the manpower necessary to maintain a sufficient level

of R&D.

Industry is both influenced by, and influences, university training programs. In addition to its needs for traditionally trained

graduates, there is a growing need for graduates with multidisciplinary training. For example, companies involved in fiber optic communications require researchers trained in

both physics and electronics-a combination

which is not part of traditional curricula. A

similar situation applies in the “expert” systems field, where a wider range of skills are

needed and broad scientific training is especially valued. These shifting industry needs

place demands on universities to alter their

curricula and to create multidisciplinary institutional structures, and they increasingly

require frequent retraining of professional

technical personnel.

In some cases, information technology firms

requiring special skills not normally produced

by academia have compensated for the shortfall by providing additional cross-training for

employees, by helping selected universities to

develop new curricula, or by furnishing supplemental teaching staff. For example, in 1983

IBM announced that it would make $10 million available to support university researchers and another $40 million earmarked for the

development of curricula in computer-aided design and manufacturing.

Foreign Government Policies

Policies and practices of foreign governments and companies can influence the profitability of U.S. companies or deny them markets, and thus effectively restrict their ability

to invest in R&D. These policies and practices

include pricing exports at below cost in order

to capture larger market share and the advantage of scale, targeting specific advanced technology markets through government-sponsored industrial strategies, creating nontariff

barriers (e.g., discriminatory certification practices), restrictions on foreign direct investments, exclusion of U.S. subsidiaries from

R&D programs funded by the host government, preferential treatment of domestic producers in government procurement, and export credits.32

Jointly Funded Research

Recently, the industry has made what may

be the beginning of a major shift from its traditional pattern of conducting independent R&D,

toward undertaking some joint or cooperative

efforts. There are a number of examples in

which companies are jointly supporting basic

and some applied research through newly

formed cooperative organizations, which rely

heavily on university and corporate researchers. Among these new organizations are the

Microelectronics Center of North Carolina, the

Semiconductor Research Corp., and the Microelectronics and Computer Technology Corp. A

detailed discussion of these arrangements and

the policy issues arising from them is contained in chapter 6.

These cooperative research efforts were

spurred by escalating R&D costs, by a perceived limited supply of science and engineering talent, and by the apparent erosion of information technology industry’s international

competitive position. Some leaders in the industry argue that it has neither the resources

nor the time to continue its established pattern of across-the-board duplicative R&D. This

does not mean that information technology

companies intend to slacken their competitive

R&D work vis-a-vis proprietary technologies.

If anything, the cooperative projects are expected to lead to more innovation and more

competition at the level of the participating

companies.

Cooperative research programs require a

careful distinction between proprietory and

nonproprietory technology. Nonproprietary

technology is made up of:

● generic technology, consisting of scientific and engineering principles that form

32 For mom ~t~g,sInternat.iorlal Competition ~ Adv~~

Technology: Decisions for America, op. cit., pp. 28-37.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 3 7

a competitively neutral technology base

that can be shared by all firms without

reducing the potential benefits for any one

firm; and

● infratechnology, consisting of the knowledge base necessary to implement product

and process design concepts. It includes

such things as basic data characterizing

materials, test methods, and standards.

Like generic technology, the infratechnology is competitively neutral.

The various cooperative arrangements are concerned with the nonproprietary technologies.

Cooperative Government-industry development of nonproprietary technical standards is

a related area important to industry. A recent

example is the cooperative effort of the National Bureau of Standard’s Institute for Computer Sciences and Technology (ICST) and 12

information technology firms in developing

and demonstrating networking technology for

office systems. A similar cooperative project

is aimed at developing networking technology

for the factory floor. These efforts are based

on the development of nonproprietary standards. The programs, which began joint demonstrations in 1984, permit the products of different manufacturers to work together compatibly and therefore expand the market for

them.

In the long term, continued expansion of

U.S. cooperative research activities could have

policy implications for the appropriate amounts

and focus of Federal funds for R&D, for universities’ needs for outside support, and for

invigorating segments of the university research environment—and the potential for

altering the status of U.S. R&D relative to

other nations.

Universities’ Role in R&D

The exceptionally broad nature of the underpinnings of information technology, and the

escalating complexity associated with continued advances based on research, indicate

an increasing role for universities. Major advances in fundamental knowledge are often

the result of decades of dedicated and expensive research-efforts which few commercial

firms would be willing to undertake. In each

of the four areas of information technologies

selected for the chapter 3 case studies (advanced computer architecture, fiber optics,

software engineering, and artificial intelligence), universities have made and are continuing to make valuable research contributions in technologies that the private sector

commercializes.

The intensity and breadth of university research is dependent on a wide variety of factors, ranging from the prestige of the institution, graduate enrollment, ability to retain

qualified faculty and researchers, adequacy of

funding for researchers, adequacy of facilities

and laboratory equipment, affiliations with

major companies, and increasingly on interactions with other researchers domestically and

internationally. It is also dependent on a large

proportion of foreign graduate students– as

many as 50 percent in some universities-particularly in disciplines such as engineering.

The intensity of university R&D is also dependent on the level of funding for research

provided by the Federal and State governments, as well as by industry. About 85 percent of the funding for university and college

R&D came from external sources.33 Federal

and State governments as well as industry

provide funding for research, for scholarships,

for laboratory equipment, and for real estate.

The universities accounted for about one-half

of all basic research expenditures in 1984, with

70 percent of their funding provided by the

Federal Government.

Laboratory Research Instrumentation

and Facilities

During the past few years, problems concerning the obsolescence of university laboratory research instrumentation and facilities,

and a lack of access to supercomputer equipment, have been recognized in many academic

disciplines. This problem is not specific to in-

$~Nation~ &ience Foundation, Early Release Of summ~’

Statistics, etc., table 1, December 1983.
38 ● Information Technology R&D: Critical Trends and Issues

formation technology, but this field is among

those affected. A decline in university research

capabilities could result in a significant decline

in the overall rate of the Nation’s scientific

advance.

One study notes that when the appropriate

instrumentation needed to conduct specific research is unavailable, then research objectives

are altered to match that which is available.34

This source also reports that leaders within

the scientific community have estimated the

cost of updating university research equipment to lie between $1 billion and $4 billion.

In particular, instrumentation with costs between $100,000 and $1 million at U.S. research

universities is reported as becoming obsolete.35

One estimate stated that selected instrument

costs have increased fourfold since 1970.36

Compounding the problem is the fact that

the most up-to-date research equipment has

a short lifetime-only 3 to 8 years.37 Another

study which compared university laboratory

equipment with that of industrial laboratories

found that the median age of university laboratory equipment was twice that of the equipment found in the laboratories of companies

performing high-quality research.38

The same study also noted that until recently, not a single top-line supercomputer

was installed in service at a U.S. university.

A number of foreign universities, however, are

‘—~4TeStim~y of Charles A. Bowsher, Comptroller General,

GAO, before the Senate Committee on Commerce, Science, and

Transportation, Subcommittee on Science, Technology, and

Space, Research Instrumentation Needs of Universities, May

27, 1982.

‘

sObsolescence of Scientific Instrumentation in Research

UniversJ”ties, Emerging Issues in Science and Technology, 1981,

A Compendium of Working Papers for the National Science

Foundation, National Science Board, p. 49.

‘Su”ence, vol. 204 (1979), p. 1365, as reported in Obsolescence

of Sci”entifi”c Instrumentation in Research Um”versities.

“International Competition in Advanced Technology: Decisions for Ameri”ca, op, cit., pp. 47-48.

‘L. Berlowitz, R. A. Zdanis, J. C. Crowley, and J. C. Vaughn,

“Instrumentation Needs of U.S. Universities,” ~“ence, vol. 211,

Mar. 6, 1981, p. 1017, as reported in Obsolescence of Scientific

Instrumentation in Research Um”versities.

equipped with supercomputers.3g In part as a

response, the Federal Government is increasingly sharing its supercomputers with its contractors, many of which are universities. During fiscal year 1984, $6 million was authorized

for NSF to buy access to the equivalent of one

supercomputer for scientific use. This amount

was increased to $40 million in fiscal year 1985

and will contribute to the establishment of six

or seven supercomputing centers nationwide

over the next 5 years. In addition, four U.S.

universities have recently acquired supercomputers.

Further acquisitions of supercomputers by

universities may be curtailed both by financial limitations and by the difficulty of assembling the expert staff needed to maintain the

facilities. Consequences of obsolescence are

likely to include foregone opportunities to perform frontier university research, less-thanoptimal training for graduate students, a continuation of the migration of faculty and new

graduates to industrial laboratories, and a deterioration in the quality of U.S. instrumentation, because university researchers traditionally provide valuable feedback and

innovative improvements to the instrument

manufacturing community.

A number of factors have contributed to the

obsolescence of university laboratory equipment. Among these are the long-term decrease

in Federal funding for R&D plant in universities and colleges since 196540 (fig. 3); an approximately four- to six-fold increase between

1970-80 in the costs of state-of-the-art instru-

— ——— ~gArnOng these me: West Germany’s Max Pl~* Institute

and the Universities of Karlsruhe, Stuttgart, Berlin, and KFA;

Japan’s Universities of Tokyo and Nagoya; England’s Universities of London and Manchester France’s Ecole Polytechnique; and in Sweden, onehalf time access by universities to

a major auto manufacturer’s supercomputer.

40’’The Nation’s Deteriorating University Research Facilities,

A Survey of Recent Expenditures and Projected Needs in Fifteen Universities,” prepared for the Committee on Science and

Research of the Association of American Universities, July

1981, p. 4. This survey covered 15 leading universities and six

academic disciplines.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 3 9

120

100

20

0

1963 1965 1967 1969 1971 1973 1975 1977 1979 1980 19811982

Fiscal year

SOURCE: National Science Foundation.

mentation41; and the short lifetime of stateof-the-art equipment and high maintenance

costs. In addition, during periods of decreased

funding, university laboratory administrators

tend to forego instrumentation purchases

rather than reduce project staffs.42 Further,

until recently, Federal funding for research

projects did not allow for purchase of instrumentation if it was to be shared with other

projects.

Quantification of the Problem

Until recently, much of the information concerning the extent of the obsolescence problem has been anecdotal. However, there are

now a number of initiatives to provide statistical data quantifying its scope and the effect

on specific disciplines. In addition to the need

for suitable data collection, there is a need to

—. ——.—

‘l’’ Revitalizing Laboratory Instrumentation, The Report of a Workshop of the Ad Hoc Working Group on Scientific Instrumentation, ” National Research Council, March 1982, p. 1.

This source estimates a sixfold increase in costs, while others

estimate a fourfold increase.

‘Testimony of Charles A. Bowsher, Comptroller General,

GAO, op. cit.

identify critical areas affected, the trends or

rate of change, and likely influence of new initiatives to relieve the problems.

A GAO investigation into the instrumentation of obsolescence issue found “a tremendous lack of information”: an absence of trend

data on nationwide research equipment expenditures by universities, a lack of consensus on university laboratory needs, and no

comprehensive indexes that would measure

changes in the price of equipment43 44 or the

costs to maintain it. GAO also found that the

rapidly increasing costs for instrumentation

in conjunction with relatively level funding of

basic research (in constant 1972 dollars) at

universities and colleges for the period 1968-

81 combined to have a “large effect on re-

..—

 [GAO testimony].

 illustration of cost escalation is the $100,000 

electron microscope of the 1960s, which could distinguish objects smaller than of a meter. By the scanning transmission electron microscopes had improved the reso- lution by a factor of 1,000, and cost more than $1 million.

(Testimony of Dr. Edward A. Knapp, Director, NSF before the

House Subcommittee on Science, Research, and Technology,

Feb., 1984.)

38-802 0 - 85 . 4
40 ● Information Technology R&D: Critical Trends and Issues

searchers’ acquisition and maintenance of research equipment. ”

A National Science Foundation study45 surveyed the status of university laboratory research instrumentation in 1982 in three major disciplines. The study, when completed in

1985, will provide some useful insights into the

extent of the problem nationwide. The study

polled 43 academic institutions concerning the

condition of their instrumentation in computer

sciences, physical sciences, and engineering

disciplines in order to develop national estimates of the findings. Preliminary data from

the study, which covers equipment with purchase prices ranging from $10,000 to $1,000,000

in use in 1982, may not either confirm or refute

the notion of a serious problem with instrumentation obsolescence in these three fields,

but does seem to demonstrate that the problem may not be uniform. For example:

●

●

●

University officials classified 26 percent

of the research equipment listed in these

fields in 1982 as “not in current use. ”

Some portion of this undoubtedly is obsolete. Seventeen percent of the laboratory

equipment associated with computer science research was obsolete; 24 percent of

the physical sciences and engineering

equipment was obsolete.

One-half of all of the academic research

instruments in the fields surveyed that

were still in use in 1982 were purchased

during the 1978-82 period. Only 12 percent of the computer science instrumentation was purchased prior to 1972, and 78

percent was purchased during 1978-82.

Concerning state of-the-art equipment, 98

percent of the computer science equipment in this category had been acquired

since 1978, compared with 80 percent

of the engineering research equipment.

Eighty-four percent of all of the state-ofthe-art equipment surveyed was listed as

in excellent condition, as compared with

42 percent of all equipment covered by the

survey.

“’’One Fourth of Academic Research Equipment Classified

Obsolete, ” Science Resources Studies Highlights, NSF, 1984.

●

●

The replacement value of all instrumentation in use was estimated at 42 percent

above the original purchase price (almost

matching the inflation rate).

Two-thirds of all research instrument systems in use in 1982 were acquired partly

or entirely with Federal funds.

These preliminary findings indicate the need

to develop data providing a comprehensive

picture of university research instrumentation.

The 43 universities surveyed account for 94

percent of the R&D expenditures in each of

the three disciplines (computer sciences, physical sciences, engineering) covered and had instrumentation inventories that cost nearly $1

billion-a significant portion of which was

funded by the Federal Government. Exactly

how much total funding is needed to equip the

laboratories adequately is not known. However, it is possible to make some very approximate, inferential estimates based on the available data. For example: given an instrument

inventory of $1 billion and assuming that the

equipment has a 4-year lifespan, one-quarter

of the equipment ($250 million current dollars)

would be needed annually to upgrade the

equipment assigned to those three disciplines

in the 43 universities.

Remedial Activities

Federal agencies, State governments, and

industry have begun to address the instrumentation problem. For example, the Department

of Defense initiated a $150 million 5-year program in fiscal year 1983 to fund instrumentation in areas of research in support of its mission. DOD’s University Research Instrumentation Program is based in part on a 1980

study 46 of the instrumentation needs of U.S.

university laboratories to conduct defenserelated research. The pervasiveness of the

problem is illustrated by the estimated 2,500

responses from the academic research community to an initial DOD invitation for proposals

for funding.

‘American kmciation of Universities Report to the National

Science Foundation, Scientific Instrumentation Needs of Re

search Universities, June 1980. See also 13erlowitz, et. al., op. cit.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 41

In addition, NSF’s appropriation increased

from $195 million in fiscal year 1984 to about

$234 million in fiscal year 1985 for support of

advanced instrumentation. Some $122 million

in fiscal year 1985 (up from $104 million in

fiscal year 1984) will be allocated to research

instrumentation for individual project grants,

and the remainder for instrumentation for

multi-user regional instrumentation centers

and major equipment in national centers.

The universities are also concerned about

obsolete or inadequate research facilities, or

buildings–which Federal agencies have not

funded since the 1960s. One preliminary estimate of the funds needed to fully upgrade facilities at the Nation’s major research universities is between $990 million and $1.3 billion

per year.47 NSF is leading the interagency

Steering Committee on Academic Research

Facilities (which includes representation from

DOD, DOE, the National Institutes of Health,

and U.S. Department of Agriculture) to address this issue. The committee is expected to

recommend that a study be initiated to clarif y

requirements for additional buildings or modernization programs for the Nation’s academic

research institutions. In addition, the National

Science Board addressed this issue during its

June 1984 session and recommended that funding for facilities become a component of the

fiscal year 1986 NSF budget. It recommended

that NSF conduct pilot programs for R&D facilities construction in three areas of priority

research (large-scale computing, engineering

research centers, and biotechnology), and that

NSF support the Committee by obtaining improved data on the condition of university facilities. The House Authorization bill for the

fiscal year 1984 budget of the Department of

Defense directed that agency to determine the

need to modernize university science and engineering laboratories for national security purposes. Congress has requested NIH to make

a similar determination with respect to its

mission.

47 Adequacy of Academic Research Facilities, A Brief Report

of a Survey of Recent Expenditures and Projected Needs in

Twenty-Five Academic Institutions, National Science Foundation, April 1984.

State Government and Industry Initiatives

Among the various State government initiatives to improve university research capabilities are those of North Carolina, Massachusetts, New York, California, and Minnesota

(see ch. 6).

Industry is also contributing at a significant

level to academic information technology research and education. For example, seven computer vendors alone have made recent commitments to contribute some $180 million in cash

and equipment to universities. One source

“conservatively” estimates the level of donations of computer equipment to higher institutions of education to exceed $100 million in

1982. Among the major contributors were

IBM, Digital Equipment Corp., Apple Computer, Inc., Hewlett-Packard Co., Wang Laboratories, Inc., NCR Corp., and Honeywell,

Inc.

Two other recent examples further illustrate

the trend: Brown University built a $1.5 million computer science facility based on contributions from IBM, Xerox Corp., Gould, Inc.,

and others; the University of California at

Berkeley has commitments of $18 million in

cash and equipment from firms such as Fairchild Camera & Instrument Corp., Advanced

Micro Devices, Bell Laboratories, Digital

Equipment Corp., GE, Harris, Hewlett-Packard, Hughes Aircraft, IBM, Intel, National

Semiconductor, Semiconductor Research Corp.,

Tektronix, Texas Instruments, and Xerox.48

Changing University Role

The role of university research maybe at the

threshold of significant change. Faced with the

increasing expense and risks associated with

research, a limited supply of trained personnel

(especially in needed multidisciplinary skills),

and intensifying competition, U.S. industry is

taking steps to bolster the universities’ role

in the performance of research in information

48These donations are seen as motivated by business strategies, and to some extent, by the 1981 changes in the Federal

tax regulations which provide tax advantages for donations of

new equipment to schools.
42 . /n formation Technology R&D: Critical Trends and Issues

technology. State governments are promoting

their universities’ research capabilities to attract technology-intensive industry.

The National Science Foundation’s support

of engineering research at universities is also

contributing to the change. With a $150 million appropriation for fiscal year 1985, NSF

will increase the range of engineering projects

supported and will help to establish more university engineering centers to promote research on computers, manufacturing processes, 49 and other nationally important technologies. Many of these joint activities are emphasizing strengthened linkages among the

ties, promoting entrepreneurship, and improving the overall scientific and technological

base of State and local communities.60 They

are also serving to add to both the supply and

the quality of degreed professionals, and to

modernize the tools available in participating

university laboratories.

The universities may find themselves in a

position in which they are looked to as critical to U.S. competitiveness in domestic and

world markets, to our ability to maintain technological prominence and to remain reasonably self-sufficient in critical areas for national

security purposes. Undoubtedly, for these and

other reasons—such as the growing need for

life-long education for many professionals–

there will be forces for change in the role of

universities.

Conflicts in Perspectives, Goals,

and Policies

These various participants-academia, industry, and Federal and State governments–

work together in a sort of dynamic balance,

49Nation~&ience Foundation starts to broaden suPPort of

engineering research, The Chrom”cZe of I+@her Education, Jan.

18, 1984, p. 17, and updated by NSF officials, January 1985.

‘For more detailed information, see Technology, Innovation,

and Regional Economic Development, Background Paper No.

2, Encouraging High Technology Development, Office of Technology Assessment, February 1984.

despite some differing perspectives among

participants, and some discords in goals and

policies. For example:

1.

2.

3.

4.

National economic goals for improving

productivity and competitiveness in international markets are supportive of a

healthy information technology industry.

However, productivity improvements are

viewed by some as possibly resulting in

fewer employment opportunities, and

lower job skill requirements and pay

levels.

National science endeavors are fostered

by measures that increase fundamental

knowledge, consistent with university

and scientists’ objectives-including the

sharing of research results internationally—but may be contrary to national security objectives of controlling technology

transfer and industry concerns for protecting research data.

Universities’ and scientists’ interests in

conducting undirected (basic) research

may be in conflict with industry’s and

mission agencies’ need for achieving specific results. The current trend toward increased university-industry collaboration

and toward university patenting may result in more directed university research

and less independence of universities.

U.S. policies toward opening university

admission to foreign students have been

enormously successful, but other regulations encourage emigration of aliens after

graduation, thus depriving U.S. firms and

academic institutions of needed talent.

The most striking observation concerning

the roles of the various participants is that

they are in a state of flux. To date, the directions of the changes appear to be: 1) modified

interrelations among the participants in the

R&D process, 2) a significantly larger role in

research for participating universities, and 3)

a potential strengthening of national capabilities to conduct R&D in information technology.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 4 3

Measures of the Health of U.S. R&D in

Information Technology

There is no single indicator of the health of

R&D in information technology. However, a

combination of indirect indicators can provide

an impression of its overall vigor in the United

States. Indicators of industry growth include

the level of funding for R&D, the availability

of trained personnel, trade balances for information technology exports and imports, and

patent trends. Although the indicators used

are not comprehensive, taken together they

portray a robust industry with significant

growth in sales and investment in R&D. They

also show that these industries account for the

employment of a high proportion of the Nation’s technically trained work force as well

as a substantial proportion of its industry- and

government-funded R&D. Paradoxically, they

provide a varying contribution to the U.S.

trade balance, and a declining proportion of

the total number of information technology

patents granted in the United States.

These indicators, while generally promising

in themselves, provide far less than a complete

picture of the state of health of U.S. R&D in

the information technology industry. Internaational competition in both information technology markets and in R&D is intensifying

and U.S. leadership in many of these areas is

being seriously challenged. Also, as described

previously, aspects of the R&D process are in

flux and it is too early to tell whether the

changes are for better or for worse. In addition, while this report focuses on information

technology R&D, several other factors play

critical roles in U.S. competitiveness. These

include marketing strategies, manufacturing

capabilities, and global macroeconomic and

trade conditions.

Beyond that, as noted earlier in this chapter,

the “information technology industry” is an

ill-defined entity and the available statistics

are often noncomparable. Much of our information is based on statistics pertaining to a

small subset of the Standard Industrial Code

(SIC) for manufacturing companies without

accounting for the significant revenues from

services. One statistical comparison will serve

to illustrate the problem of noncomparability:

In 1982, shipments of all electronic computing

equipment establishments totaled $34.1 billion; in the same year, data processing revenues of the top 100 information technology

companies totaled $79.4 billion.sl

Because of these data inconsistencies the information presented is skewed by the noncomparable databases; and, for that reason, quantifications can only be regarded as approximate.

Information Industry Profile

The review presented in chapter 9 of business statistics for the U.S. information technology industry indicates that this industry

is generally robust as measured in a variety

of ways, and in comparison with U.S. industry as a whole. For example, for the 1978-82

period: sales revenue grew by 66 percent compared with 40 percent for the composite U.S.

industry; profits grew by 36 percent compared

with 6 percent for the composite. Profitsto-sales ratios were about 9 percent v. 5 percent; and the growth in the number of employees averaged 12 percent v. a negative 8 percent.52

Concerning R&D, the information technology industry is also vigorous. R&D expenditures compare very favorably to the composite industry when measured as a percentage

increase over the period, as a percentage of

sales, or in terms of R&D expenditures per employee. This industry accounted for 28 percent

of the total R&D spending by all industries.

51Based on a draft report, ‘l’he Computer Industry ~d ~ntermtiomd Trade: A Summary of the U.S. Role, by Robert

G. Atkins, Information Processes Group, Institute for Computer Sciences and Technology, 1984.

‘

zThese data primarily represent large firms. See table 52 (ch.

9) for limitations.
44 ● Information Technology R&D: Critical Trends and Issues

In fact, a listing of the 15 U.S. companies that

spend the most on R&D—as a percentage of

sales, and in dollars spent per employee-is almost completely populated with information

technology companies such as Cray Research,

Telesciences, Advanced Micro Devices, LTX,

Amdahl, Computer Consoles, and Convergent

Technologies53 (table 4).

The electrical and communications industry

increased R&D budgets by approximately 13

percent in 1984 and 1985. These increases

resulted in large part from R&D on semiconductors and telecommunications. During 1984

and 1985, electrical and electronics companies

plan to accelerate their investment in communications R&D, including work on integrated

power semiconductors and cellular radio.”

Thus, the industry viewed broadly is committed to well-funded R&D.

Comparison of R&D Funding by

Selected Countries

Funding levels for R&D are generally recognized as important to the innovation process, as noted earlier. The United States has

fallen behind two of its major competitors, as

measured in terms of total outlays for R&D

63~ugjne9s week, R&I) Scoreboard 1982, June 20, 1983,

pp. 122-153.

“Science Resource Studies, Highlights, National Science

Foundation, NSF 83-327, Dec. 15, 1983, p. 2, and NSF 84-329,

Oct. 15. 1984.

as a percentage of Gross National Product (excluding expenditures for defense and space) .66

Figure 4 shows that both Japan and West Germany have been outpacing the United States

(as well as France and the United Kingdom)

by this measure for more than a decade. Both

of these countries have relatively small R&D

expenditures for defense and space purposes

as a percentage of GNP—e.g., 2.5 and 5.6 percent in 1981 for Japan and West Germany, respectively, in contrast with 31 percent for the

United States, 29 percent for France, and 30

percent (in 1975) for the United Kingdom.

The Influence of DOD Funding of R&D in

Information Technology

DOD funding for R&D in information technology reflects its growing dependence on this

technology and its reluctance to be dependent

on foreign sources for technology critical to

national security. Defense spending for R&D

generally has ranged from a high of 90 percent

of Federal R&D spending in 1953 to a low of

50 percent during 1976-80, and is expected to

rise to 70 percent in 1985.56

Table 5 shows the distribution of DOD funding for 1983 among basic and applied research,

.-—

66% willi~ c. B~Srn~ U.S. Civilian and Defense R&D

Funding: Some Trends and Comparisons with Selected Industrialized Nations, Congressional Research Service, Library

of Congress, Aug. 26, 1983.

‘Ibid.

Table 4.—The Top 15 in R&D Spending

In percent of sales In dollars per employee

1. TeleSciences. . . . . . . . . . . . . . . . . . . . . . . . . . .......31 .6°/0

2. Policy Management Systems . ..................26.6

3. Fortune Systems . . . . . . . . . . . . . . . . . . . . . ........22.3

4. Management Science America . ................20.8

5. King Radio. . . . . . . . . . . . . . . . . . . . . . .............20.0

6. Dysan . . . . . . . . . . . . . . . . . . . . . ..................19.4

7. Advanced Micro Devices. . . . . . . . . . . . . . . . . . . . . .. 19.4

8. Modular Computer Systems. . ..................17.6

9. ISC Systems . . . . . . . . . . . . . . . . . . . . . ............16.6

10. Computer Consoles . . . . . . . . . . . . . . . . . . . . . ......16.6

11. LTX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.4

12. Ramtek. . . . . . . . . . . . . . . . . . . . . . ................15.6

13. Applied Materials . . . . . . . . . . . . . . . . . . . . . ........15.6

14. Auto-trol Technology . . . . . . . . . . . . . . . . . . . . . .....15.4

15. Kulicke & Soffa Industries . . . . . . . . . . . . . . . . . . . . .15.3

1. Ultimate . . . . . . . . . . . . . . . . . . . . ... ... ... ... ..$37,089

2. Fortune Systems . . . . . . . . . . . . . . . . . . . . . ......19,390

3. TeleSciences. . . . . . . . . . . . . . . . . . . . . . .........18,797

4. Convergent Technologies . . . . . . . . . . . . . . . . . . . . 18,721

5. Activision. . . . . . . . . . . . . . . . . . . . . . ............16,667

6. Cray Research. . . . . . . . . . . . . . . . . . . . . . ........16,467

7. Management Science America . ..............15,563

8. Amdahl . . . . . . . . . . . . . . . . . . . . . ...............15,413

9. Digital Switch . . . . . . . . . . . . . . . . . . . . . .........15,017

10. Policy Management Systems . ................14,677

11. Applied Materials . . . . . . . . . . . . . . . . . . . . . ......14,545

12. Auto-trol Technology . . . . . . . . . . . . . . . . . . . . . ...14,413

13. Computer Consoles . . . . . . . . . . . . . . . . . . . . . ....13,816

14. Network Systems . . . . . . . . . . . . . . . . . . . . . ......13,292

15. LTX . . . . . . . . . . . . . . . . . . . . . ..................13,229

SOURCE: Standard & Poor’s Compustat, Inc., as cited in Business Week, “A Deepening Commitment to R& D,” July 9, 1984, p. 64; and “The U.S. Still Leads the World

in R&D Spending, ” June 20, 1983, p 122
Ch. 2—The Environment for R&D in Information Technology in the United States ● 4 5

Figure 4.— Estimated Ratio of Civilian R&D

Expenditures to Gross National Product

for Selected Countries

2.6 ‘

2.5

2.4 West

1.7

1 France I 1.1

1.0 ,

.9 -1

1961 63 65 67 69 71 73 75 77 78 81 83

Years

and development. DOD spending for basic research accounts for some 13.6 percent of the

total Federal obligations, while applied research accounts for 33.9 percent, and development accounts for 71.3 percent.

Table 6 shows that the DOD R&D budget

dominates some fields of Government R&D

spending for basic and applied research. For

example, in funding for basic research in electrical engineering, DOD accounts for some 69

percent; in computer sciences, 55 percent; and

in mathematics 42 percent. In applied research, the DOD is a major Federal funder for

electrical engineering (90 percent), computer

sciences (87 percent), and mathematics (29 percent). These, as well as others, are disciplines

supported primarily by the DOD R&D budget and that have a central influence on advances in information technology for the Nation.67

There have been many commercially applicable advances in information technology that

have their origin in, or had strong early support from, DOD funded R&D. These include

very high speed integrated circuits (VHSIC),

digital telecommunications, and new high-performance materials. However, there are some

major disadvantages for the commercial sector to DOD funded R&D. Among these are:

security classifications which tend to slow advancements in technology; rigid technical

specifications for military procurements which

have limited utility for commercial applications; and the “consumption” of limited, valuable scientific and engineering resources for

military purposes, which may inhibit commercial developments. This issue is discussed in

more detail in chapter 8.

U.S. Patent Activity

It is generally accepted that patenting is a

measure, even if imperfect, of the effectiveness

of R&D activities. A key observation is that

patenting in information technology is among

571bid.

Table 5.—Federal and Department of Defense Obligations for Basic Research,

Applied Research, and Development, 1983 (Estimated) (millions of dollars)

Total R&D Basic research Applied research Development

Total Federal

Government . . . . . . . . $42,973.8 100 ”/0 $5,765.2 100.0 ”/0 $7,499.7 100.0% $29,708.9 1OO.OO/o

Department of

Defense . . . . . . . . . . . . $24,519.6 57.1 % $ 782.1 13.60/o $2,543.9 33.9 ”/0 $21,193.6 71.30/0

SOURCE: National Science Foundation, “Federal Funds for Research and Development Fiscal Years 1981, 1962, and 1983,” vol. XXXI, Detailed Statistical Tables (NSF

82-326) (Washington, DC: U.S. Government Printing Office, 1982), pp. 174, 179, 181, 183, Percentages calculated from data in the table. As cited in Boesman,

“U.S. Civilian and Defense R&D Funding; Some Trends and Comparisons With Selected Industrialized Nations,” Congressional Research Service, Library

of Congress, Aug. 26, 1983.
46 • Information Technology R&D: Critical Trends and Issues

Table 6.—Federal and Department of Defense Obligations for Basic and

Applied Research by Field, 1983 (Estimated) (millions of dollars)

DOD as a

percentage of

Total Federal total Federal

funds DOD funds funds

Basic research:

Electrical engineering . . . . . . . . . . $103.8 $71.8 69.1 ‘/0

Computer sciences . . . . . . . . . . . . 73.0 40.0 54.8

Mathematics . . . . . . . . . . . . . . . . . . 100.7 42.6 42.3

Applied research:

Electrical engineering . . . . . . . . . . $520.5 $471.2 90.5 ”/0

Computer sciences . . . . . . . . . . . . 91.5 79.4 86.7

Mathematics . . . . . . . . . . . . . . . . . . 48.5 13.9 28.6

SOURCE: National Science Foundation, “Federal Funds for Research and Development, Fiscal Years 1981, 1982, and 1983,”

vol. XXXI Detailed Statistical Tables (NSF 82-326) (Washington, DC: U.S. Government Printing Office, 1982), pp. 73,

75, 79, 82, 98, 101, 104, 109. Percentages calculated from data in the table. As cited in Boesman.

the most intensive of all technologies. U.S. patenting of foreign origin68 in all technologies

has doubled in the past two decades to 41

percent—indicating escalating world competition for U.S. patents in general. A small number of foreign multinational corporations have

a dominant (but perhaps somewhat diminishing) role in the proportion of foreign-origin

U.S. patents. These “multinationals” emphasize information technology patents. The overall picture derived from this review of patent

data confirms the finding reported in chapter

3 that foreign competition in information technology is increasing.

U.S. Patent Data

The top 50 electrical patent categories

(ranked by actual numeric growth in the number of patents) received 8,139 patents during

1978-80 time period (table 7). Within these

categories, semiconductors and circuits accounted for 48 percent and computers 15 percent, respectively. In the computer category,

General Purpose Programmable Digital Computer Systems was the most active, as in previous years, receiving 632 patent documents.

Miscellaneous Digital Data Processing Systems received the second largest number of

5aThe coUtV origin of a patent is determined by the country of residence of the first named inventor.

Table 7.—Technology Distribution of the

Top 50 U.S. Patent Electrical Categories 1978.80

Percent of

Ranked by actual file growth categories

Semiconductors and circuits . . . . . . . . . . . . 480/o

Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ”/0

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ”/0

Total number of patents in the

50 patent categories . . . . . . . . . . . . . . . . . 8,139

SOURCE: Tenth Report, Technology Assessment and Forecast, U.S. Patent and

Trademark Office, U.S. Department of Commerce, November 1981,

pp. 16, 24

patents in the electrical category, with 548

patent documents.59

Solid-state devices, integrated circuits, and

transistor categories together account for 24

of the 50 categories in the total ranked by actual growth from 1978 to 1980.60 The percent

growth in the number of these patents generally ranges from about 40 percent to 59 percent.61 Solid-state devices account for 8 of the

11 highest growth entries. Lasers, laminagraphy, and fiber optics are also among the

information technology segments included in

the high patent growth entries. The two subclasses of fiber optics inventions show patent

5Tenth Report, Technology Assessment and Forecast, Patent and Trademark Office, U.S. Department of (knmerce, No

vember 1981, pp. 14-18.

‘Actual growth is the numeric increase resulting from additions to the patent copies (including cross-reference copies) to

the file in the 3-year period 1978-80, Ibid p. 11.

“Percent growth, as used by the U.S. Patent and Trademark

Office, is computed by dividing the actual growth for the 3-year

period exarnined (1978-80) by actual growth for the 8-year period

(1975-80), and multiplying by 100. Ibid., p. 11.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 4 7

growth rates of over 70 percent. The listing,

in fact, is composed almost exclusively of information technology inventions. Computer

technology patents showed growth rates of

over 70 percent for the 1978-80 period, well

above the average of 46 percent for all technologies during the same time period.62

There are reasons for caution against generalizations concerning the use of patent statistics—e.g., variations in the importance and

the degree of “invention” of different patents;

the propensity (or absence of it) of some companies, and perhaps countries, to patent as opposed to using other alternatives-e. g., trade

secrets, or lead times in the market place; the

cost factor as a disincentive to patenting, as

well as concern for antitrust allegations based

on patent dominance; rapid technological

change (making patents of limited value); differences in the scope of patent categories that

may give a misleading impression of substantial amount of patenting activity in a broadly

scoped subcategory or vice versa.

Nevertheless, the evidence shown above

clearly seems to support the observation that

the level of patenting for information technology in the United States is vigorous and may

be indicative of extensive R&D in this field.

Foreign-Origin U.S. Patents

In 1973 the U.S. Patent and Trademark Office (USPTO), began detailed documentation

of foreign-origin patent activity through its

Office of Technology Assessment and Forecast (OTAF). One of OTAF’s reports,63 which

is cited extensively in this section, provides

useful background and many important findings on foreign patenting in the United States.

Among the findings are:

1. Because patents obtained in the United

States convey no protection in other countries and vice versa, inventors tend to patent in more than one country, and espe621 bid., p. 22-26. etIbid., SW for ex~ple, Section I, Part IV— “Most Foreign

Active Patent Technologies, ” pp. 27-32, and Section II, Patent Trends: Foreign Multinational Corporations Patenting

Trends in the United States, pp. 33-46.

2.

cially in countries that represent large

potential markets. As a consequence, U.S.

patent statistics tend to mirror trends in

technological activity worldwide.

Although foreign-origin patenting in all

technologies averaged only 20 percent of

the total U.S. patenting for the years

1963-66, the percentage share has continued to increase, reaching 40 percent of the

total for the year 1980, and 41 percent for

the 1981 to mid-1983 period.

Figure 5 illustrates the long-term decline in

the number of U.S.-origin information technology patents granted in the United States between 1968 and 1981, and the relative leadership position of Japan compared to France,

West Germany, and the United Kingdom. It

is not clear as to why the total number of U.S.

patents has declined steeply between 1971 and

1980, but the U.S. Patent and Trademark Office advises that except for Japan, the trend

was worldwide during that period. (Note that

in 1979 a shortage of funds at the Patent Office limited the number of U.S. patents

granted, artificially lowering the total for that

year).

As shown by table 8, the share of U.S.-origin

patents decreased from 79 to 58 percent of the

total during 1968-81, while the share of Japanese-origin information technology patents

granted in the United States increased from

3 to 19 percent.

The two “top 50” electrical category lists

noted earlier reveal a significant proportion of

foreign-origin U.S. patents in the high patentgrowth categories. Fifty-four of the entries in

both lists show the percentage of foreign origin to exceed the average of 38.5 percent for

all technologies for 1978-80. This is not surprising, since the high-growth patent subclasses

are pursued by companies in all of the developed countries.

Table 9 shows the percentage of foreign-origin U.S. patenting in patent category groupings dealing with some components of information technology. Three of the five category

groupings examined (two in fiber optics and

one in television) show foreign-origin patenting
48 . /nformation Technology R&D: Critica/ Trends and Issues

Figure 5.–U.S. Patents in Information Technology, SIC Codes 357, 365, 366, 367

14,000

12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

1968 69 70 71 72 73 74 75 76 77 78 79 80 81

Years

SOURCE: U.S. Patent and Trademark Office, Office of Technology Assessment and Forecast.
Ch. 2—The Environment for R&D in Information Technology in the United States ● 4 9

Table 8.—Percentages of U.S. Patents Granted in

Information Technology (IT) and in All Technologies (ALL), 1981

United States Japan West Germany United Kingdom France

Year IT ALL IT ALL IT ALL IT ALL IT ALL

1968 . . . . . . 79 77 3 2 5 6 4 4 3 2

1981 . . . . . . 58 60 19 13 8 10 4 4 4 3

1982 . . . . . . NA 59 NA 14 NA 9 NA 4 NA 3

NA—Not available

alnformation Technology (IT) here in~l”de~ Slc Codes 357, Office Computing and Accounting Machines; and 365-367, communication Equipment and Electronic Components.

SOURCES The Office of Technology Assessment and Forecast, US Patent and Trademark Office, All Technologies Report,

1963-June 1983, and Indicators of the Patent Output of US. Industries (1963-81). IT numbers were calculated from

data developed with assistance from the National Science Foundation, Science Indicators Unit.

Table 9.— Foreign-Origin U.S. Patents in

Some Components of Information Technology

Percent

foreign origin

Title 1/81-6/83

Light transmitting fiber, waveguide, or rod . . . 48.2°/0

Laser light sources and detectors . . . . . . . . . . 50.6°/0

Color and pseudo color television . . . . . . . . . . 52.8°/0

Active solid-state devices, e.g., transistors,

solid-state diodes . . . . . . . . . . . . . . . . . . . . . . 40.80/o

General-purpose programmable digital

computer systems and miscellaneous

digital data processing systems . . . . . . . . . . 34.9°/0

NOTE The percent foreign origin IS determined by dlwding the total number of

U S patents granted between January 1981 and June 1983 to foreign.

resident Inventors by the total patents granted in the same time period,

and multlply!ng by 100

SOURCE Off Ice of Technology Assessment and Forecast, Patent and Trademark

Off Ice, U S Department of Commerce

to be significantly higher than the average of

41 percent.

Table 10 shows that in selected telecommunications categories, the Japanese share of

foreign-owned U.S. patents ranges from 38 to

56 percent. For all categories of telecommunications, Japanese residents received 45 percent of the foreign origin U.S. patents from

1980-83.64 Figure 6 depicts the shares of U.S.

patents for communications equipment and

electronic components among Japan, West

Germany, and the United Kingdom.

These findings are consistent with comments

from OTA workshop participants concerning

the growing intensity of foreign competition

in R&D. The statistics no doubt understate

the level of foreign ownership of U.S. patents,

since they do not take into account patents of

U.S. origin that are controlled by foreign interests, e.g., patents issued to U.S. residents

or companies that are foreign-owned or foreign-controlled, or the inclination of foreign

multinational corporations to patent in other

countries (see section below on Foreign Multinational Companies). Even understated, however, the intensity of foreign influence over

U.S.-patented technology” is clearly significant. By way of providing perspective, it

‘Patent Profiles: Tekcomnnmications, Patent and Trademark

Office, Office of Technology Assessment and Forecast, U.S. Department of Commerce, August 1984, p. 15.

b51bid., p. 4.

Table 10.—Foreign-Owned U.S. Patents in Selected Telecommunications Classes, 1982

Percent foreign Percent Japanese Percent Japanese

of total of total of foreign

Telephony. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43% 17 ”/0 390/0

Light wave communication . . . . . . . . . . . . . . . . . . . 53 ”/0 20 ”/0 380/o

Analog carrier wave communications . . . . . . . . . . 43 ”/0 240/o 560/o

Digital and pulse communications . . . . . . . . . . . . 40 ”/0 160/0 38%

Telephony–Class 17911 R.l AA: IAT.1 FS, 1 H-1 MF, 1 MN.l SS, 1SW.106, 108 R-I9O

Light wave communications–372/43-59 & 75, 357/17 & 19, 455/600-619, 370/1.4, 350/96.1-96 34

Analog carrier wave communlcat!ons—455/ l.355

Dlgltal and pulse communication (excludes I!ght wave, Includes error detection and A/D & D/A conversion) —375/all subclasses; 371/1-6 & 30-71, 178/all subclasses,

340/347, AD347, AD.347 SY, 332/9 R-15, 329/104.109

SOURCE Reports prepared by Off Ice of Technology Assessment and Forecast for publication In late 1964
50 ● Information Technology R&D: Critical Trends and Issues

Figure 6.–Share of Foreign Patenting in the United

States for the Three Most Active Countries in

Selected Product Fields: 1981

Communication equipment

and electronic components

SOURCE: National Science Board, National Science Foundation, Science

indicators—19S2, 1983.

should be noted that some other countries

have an even higher percentage of foreignorigin patents, e.g., Canada, 93.4 percent; the

United Kingdom, 84.2 percent; France, 67.6

percent. Japan has 16.6 Percent.66

 Patent Statistics, 

4,000

3,500

3,000

2,500

2,000

Foreign Multinational Corporations

Another important OTAF finding concerns

the role of foreign multinational corporations

(FMNCs) in patenting. Taking into account

the relative annual sales of the 10 major FMNCs

and their ranking among the “Fortune 500”

companies, OTAF has found a strong correlation between ranking by patents and sales level.67 A comparison of the 10 FMNC's patenting with total U.S. patenting for 1969-80 is

shown in figure 7.

In addition to noting that the FMNC's ownership of U.S. patents has recently (1980) leveled off to about 5.5 percent, the OTAF study

observes that:

●

●

The 10 FMNCs own or control, on the average, 4.7 percent of all U.S. patents

granted each year.

The extent of the 10 FMNC's ownership

of U.S. patents doubled from 1969 to

1976–although the rate of increase had

diminished to near zero by 1980.

 Op. 

Figure Patent Activity of 10 Foreign Multinational Corporations, 1969-80

7.0%

6.00/0

5.0%

4.0%

3.0%

0

1969 70 71 72 73 74 75 76 77 78 79 80

Years

SOURCE: Tenth Report, Technology Assessment and Forecast, Patent and Trademark Office, U.S. Department of Commerce, November p. 
Ch. 2—The Environment for R&D in Information Technology in the United States ● 51

● More recently, (1979-80) the percentage an indication of the concentration of foreignof U.S. patents granted to the 10 FMNCs

has begun to decline in proportion to total

foreign origin U.S. patents suggesting a

diminished role in ownership of U.S. patents for these particular FMNCs.

The trend, while changing, shows that about

one in every eight U.S. patents of foreign origin

is owned or controlled by only 10 FMNCs68—

owned U.S. patents by a few multinational

firms.

These statistics further confirm the testimony of OTA workshop participants concerning growing foreign competition in information technology R&D, and the observation

that other countries have developed national

policies and programs that target information

—.—. —— 6aIbid. ((_J’I’AF Study), P. 40.

A Synthesis:

technology.

The Changing U.S. R&D Environment

Some measures, such as investment in R&D

and growth in profits, indicate that R&D in

U.S. information technology is vigorous. Other

measures, such as competition in advancedtechnology products and foreign ownership of

U.S. patents, indicate a less robust situation.

Thus, although information technology research and development is making marked advances, it is—at the same time-undergoing

pressure from foreign competition. In response

to the pressure, the participants in the R&D

process are initiating a variety of changes.

These changes are discussed in later chapters

of this report.

Industry continues to invest heavily in information technology R&D–an indication of

its belief in R&D’s importance to competitive

ness. The increasing costs of R&D are making new institutional arrangements such as

joint research ventures and closer ties with

universities more attractive. However, industry experts recognize that although R&D is

necessary to competitiveness it is not sufficient to ensure it; other components of the innovation process are also important to maintaining competitiveness in international trade.

Universities are encouraging new institutional arrangements with industry, and the importance of their role in the R&D process (particularly in performing basic research) maybe

growing. There are widespread problems relating to both the quantity and quality of university equipment and facilities for conducting information technology R&D, although

these conditions may be improving. Some

State Governments have become active in

helping their universities to improve research

capabilities and in encouraging universityindustry pairings (see ch. 6).

Finally, the Federal Government has adopted

policies intended to encourage private sector

investment in R&D and to facilitate the transfer of technology from Government to industry. The Federal Government’s (especially

DOD’s) expenditures for information technology R&D are growing rapidly and continue to

have a strong influence on the direction of

technological development in some information technology areas.
52 ● information Technology R&D: Critical Trends and Issues

Observations

Some useful observations can be made based

on the changes taking place in the U.S. R&D

environment. First, the growth in foreign

competition-whatever its effect on U.S. jobs

and trade balances for the long term—is stimulating R&D investment, as shown in chapter

9. There has probably not been a time since

the turn of the century when new products and

product improvements have been marketed in

such rapid succession as has been the case

with information technology, nor a peacetime

era when R&D had such a central role in the

affairs of nations.

Second, the U.S. information technology industry is facing a “new world” of foreign competition. The intensive level of targeted and

well-funded foreign competition is not likely

to decline in the foreseeable future. Each of

our major competitors’ governments believe

in the central importance of information technology as an essential ingredient for achieving economic, social, or national security goals,

as well as the penalties-in terms of worsening trade balances and job losses—associated

with falling by the wayside in the competitive

race. As a consequence, they have established

national policies and programs to enhance

their domestic industrial position.

Third as foreign competition has inexorably

strengthened in the post-World War II era, the

broad margin of error that the United States

once enjoyed has essentially vanished.

The long-term effects of several factors—national industrial policies, nontariff trade barriers (e.g., prohibiting the import of certain

products or services, incentives for industrial

innovation, interest rates, export controls—

will determine the winners and losers, as nations maneuver to remain competitive. The

United States will need to find ways to monitor its position relative to international competitors and to refine its policies as needed to

keep in step with the changing global R&D environment.
Chapter 3

Selected Case Studies in

Information Technology Research

and Development
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Case Study 1: Advanced Computer

Architecture . . . . . . . . . . . . . . . . . . . . . . 55

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Changing Computer Architecture . . . . . . 56

Computer Architecture R&D . . . . . . . . . . 57

Critical Areas of Research . . . . . . . . . . . . 63

Manpower . . . . . . . . . . . . . . . . . . . . . . . . . . 65

International Efforts.. . . . . . . . . . . . . . . . 65

Case Study 2: Fiberoptic Communications 67

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Advantages . . . . . . . . . . . . . . . . . . . . . . . . . 67

Commercialization Trends . . . . . . . . . . . . . 69

United States R&D..... . . . . . . . . . . . . . 71

Directions of U.S. Research . . . . . . . . . . . 73

Research in Japan . . . . . . . . . . . . . . . . . . . 74

Case Study 3: Software Engineering . . . . . 75

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Introduction . . . . . . . . . . . . . . . . . . . . . . . . 75

Software R&D Environments . . . . . . . . . . 76

Content and Conductor Software

Engineering R&D...... . . . . . . . . . . . . 79

International Efforts in Software

Engineering R&D...... . . . . . . . . . . . . 85

Case Study 4: Artificial Intelligence . . . . . . 87

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Introduction . . . . . . . . . . . . . . . . . . . . . . . . 87

Artificial Intelligence R&D

Environments . . . . . . . . . . . . . . . . . . . . . 89

Content and Conduct of Artificial

Intelligence R&D . . . . . . . . . . . . . . . . . . 96

Foreign National Efforts in Artificial

Intelligence R&D . . . . . . . . . . . . . . . . . . 105

Tables

Table No. Page

11. Major Federal Advanced Computer

Architecture R&D Projects . . . . . . . . . . 57

Table No. Page

12. Milestones in the History of Computer -

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

Architecture . . . . . . . . . . . . . . . . . . . . . ..5 7

1982 Federal Spending for Computer

Architecture R&D..... . . . . . . . . . . . . . 58

Federal Open Access Supercomputer

Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Summary occurrent and Planned

Government Open Access Advanced

Computer Architecture Software

Development Facilities. . . . . . . . . . . . . . 59

NSF Plans for Computer Research .,.. 60

Summary of New Commercial

Supercomputer Systems Under

Development . . . . . . . . . . . . . . . . . . . . . . 61

1983 DARPA, DOE, and NSF University

Funding of Advanced Computer

Architecture . . . . . . . . . . . . . . . . . . . . . . . 62

Major Government Sources of Artificial

Intelligence R&D Funding. . . . . . . . . . . 94

NSF Grant Awards in Artificial

Intelligence . . . . . . . . . . . . . . . . . . . . . . . . 94

Strategic Computing Cost Summary . . 94

Representative Expert Systems . . . . . . 104

Figures

Figure No. Page

8.

9.

10.

110

12.

13.

14.

15.

Computer Architecture Functional

Elements . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Optical Fibers Are Small, Lightweight

and Versatile . . . . . . . . . . . . . . . . . . . . . . 68

The Software Life Cycle. . . . . . . . . . . . . 80

Artificial Intelligence . . . . . . . . . . . . . . . 90

Artificial Intelligence Science and

Engineering . . . . . . . . . . . . . . . . . . . . . . . 92

Strategic Computing Program Structure

and Goals . . . . . . . . . . . . . . . . . . . . . . . . . 95

A Semantic Network.. . . . . . . . . . . . . . . 98

Markets for Artificial Intelligence . . . . 101
Chapter 3

Selected Case Studies in Information

Technology Research and Development

Introduction

These case studies present a microcosm of

the R&D process in information technology.

The diversity of research and development efforts in information technology make it virtually impossible to examine in detail all of the

many fields and disciplines. Therefore, four

fields have been selected for detailed analysis.

They are: Advanced Computer Architecture

(ACA), Fiber Optics (FO), Software Engineering (SE), and Artificial Intelligence (AI).

These fields were selected for several reasons. They depict the wide range, diversity

and inter-relatedness of the fields and applications of information technology. An analysis

of them provides a broad overview of the scientific, technical and institutional issues in information technology R&D. These fields were

chosen to include both hardware and software

and both computer and communications technologies. They also illustrate the mix of longterm goals and near-term capabilities, thus reflecting the importance of these different

perspectives in the R&D process. These four

areas, moreover, are among those considered

to be critical in determining the direction and

pace of advance of information technology as

a whole. The importance of advances in the

four fields is exemplified by the development

of government funded national R&D programs in Japan, Britain and the European

Economic Community.

Case Study 1: Advanced Computer Architecture

●

●

Findings

The technology of advanced computer design is critically important for the expansion of information technology in many

fields. There is extensive R&D activity

underway in universities, in industry, and

in the National Laboratories aimed at producing and exploiting new computer designs; but there is considerable uncertainty

over which new designs will be viable.

Since their invention, electronic computers

have been based on one architectural model,

the von Neumann sequential processing architecture. The limits of computational

speed achievable with this design are being

reached; significant further increases in

computer performance will require parallel

processing architectures, which are inherently

more complex to design and to use.

VLSI (Very-Large-Scale Integrated Circuit)

design facilities, based on powerful computers, are now being used to develop and

test computer architectural designs, including parallel processors and special designs

for certain dedicated operations, such as

communications signal processing, image

processing, and graphics.

Software has been difficult to produce for

computers of advanced, high-performance

design. As the variety and complexity of architectural types increases, the difficulty of

developing and integrating software will increase. Therefore, research in software development for novel computer designs will

be critical.

55

38-802 0 - 85 - 5
56 . Information Technology R&D: Critical Trends and Issues

●

●

●

The Federal Government has been a major

driver of advanced computer architecture

because of its scientific and national security applications. The Government has influenced the evolution of computer design

through the funding of R&D and the procurement of state-of-the-art systems. This

leverage, though still important, is diminishing as commercial applications for advanced computers grow and as Federal requirements become a smaller fraction of

sales.

National programs in Japan, Great Britain,

France, Germany, and the European Community have been established to pursue advanced computer R&D. The Japanese have

recently demonstrated an ability to produce

advanced architecture computers of competitive performance to American products.

American companies and universities pursuing R&D in- computer design face-difficulties:

Universities cannot afford design and

testing facilities for developing an architectural idea to the point where its performance

can be assessed.

Companies face large, risky investments

in the design of new high-performance computer systems. Markets for novel machines

are initially small and expand only slowly

as new applications are exploited and software becomes available.

Changing Computer Architecture

Computer architecture is the internal structure of a computer, the arrangement of the

functional elements that carry out calculations

and information manipulations. (see fig. 8).

Since the early 1950s, all electronic computers (with a few exceptions) have been designed

around one basic architectural model, the von

Neumann machine, invented by mathematician John von Neumann. In this architecture,

instructions and data are stored in memory,

fetched one by one in sequential fashion, and

acted on by the processor. Computer design

is now changing, encouraged by two factors.

Figure 8.—Computer Architecture Functional

Elements

SOURCE: Office of Technology Assessment.

First, the limits imposed by physical laws

on the computational speed attainable with

traditional computer design are being approached. Science and engineering demand

continual advances in computational speed to

increase the precision of calculations and to

improve accuracy in models and simulations.1

Sequential processing constitutes a severe restriction on the precision and completeness

that these calculations and models can achieve

in a reasonable amount of time. Therefore,

computer designers are studying architectures

that can make possible decomposition of large

calculations into pieces for simultaneous processing by a number of computational units in

parallel.

Second, as information technology is applied

in more and more areas, special problems are

encountered that impose unique demands on

computer capabilities. Until recently, system

designers have relied on software to apply the

capability of von Neumann processors to problems. Now, it is possible to create special integrated circuits to address specific problems.

IThese are the applications normally associated with so-called

“supercomputers.” Major current applications are in, for example, weather modeling and the simulation of nuclear weapons explosions. The reader is referred, for a discussion of the

applications of and policy issues surrounding supercomputers,

to Supercomputers: Foreign Competition and FederaJ Fund”ng

by Nancy Miller, Congressional Research Service, Issue Brief

83102, latest update July 12, 1984.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 57

Computer architecture R&D is making possible the economical design of custom computer

architectures for specialized applications including telecommunications and data acquisition signal processors, image and graphics

processors, and symbol processors for the

manipulation of nonnumerical information.

The impending changes in computer architecture promise cost-effective solutions to

many problems, but they also challenge the

designers, suppliers and buyers of computer

systems. Designers will need to have more

detailed appreciation of applications; computer vendors will be faced with more complexly segmented markets; and buyers will

need to be more sophisticated in defining their

needs and in choosing among a wider offering

of products.

Computer Architecture R&D

Federal Government Involvement

The Government has had considerable involvement in advanced computer architecture

R&D (see table 11), both as a funder and a performer of work. Major elements of the software development work for each generation of

these systems have been done by the National

Laboratories, especially Los Alamos (LANL)

and Lawrence Livermore (LLNL).2 Moreover,

the impetus for the development of each successive generation of advanced architecture

scientific computers has come predominantly

from government demand for faster, higher capacity, and more sophisticated systems for

weapons, intelligence, energy, and aerospace

applications (see table 12). The National Labs

still constitute the greatest concentration of

users of supercomputers (see table 15).

The Federal Government has provided between $15 and $20 million in annual funding

for advanced computer architecture R&D in

recent years (see table 13). In addition to sponsoring research in universities and in industry, the Government has performed computer

research at the National Labs.

——— —

The first Cray-1 computer was placed in Los Alarnos National

Lab without any software.

Table 11 .—Major Federal Advanced Computer Architecture R&D Projects

Machine Year delivered Agency Contractor Major use

ENIAC . . . . . . . . . . . . . 1945

NORC . . . . . . . . . . . . . 1950

— 1950

CDC 1604 . . . . . . . . . . 1959

LARC . . . . . . . . . . . . . 1961

STRETCH . . . . . . . . . . 1961

CDC 6600 . . . . . . . . . . 1964

ILLIAC IV . . . . . . . . . . 1972

MPP . . . . . . . . . . . . . . 1983

s-1 . . . . . . . . . . . . . . . . –

Army

Navy

NSA

NSA

AEC

AEC

LLNL

DARPA/NASA

NASA

LLN L/Navy

University of Pennsylvania

IBM

Sperry

Control Data

Sperry

IBM

Control Data

Burroughs/University of Illinois

Goodyear Aerospace —

Ballistics calculations

Ordinance research

Classified

Classified

Nuclear weapons design

Nuclear weapons design

Nuclear weapons

Aerodynamics

Image processing

Signal processing

SOURCE Office of Technology Assessment

Table 12.—Milestones in the History of Computer Architecture

Class Date Typical machines Major innovation

I . . . . . . . . . . . . 1953 IBM 701 Vaccuum tubes

II . . . . . . . . . . . . 1960 CDC 1604 Transistors

Ill . . . . . . . . . . . 1964 IBM 360 1/0 processing

CDC 6600 Freon cooling

Iv , , ... , ., . . . 1970 IBM 370 Integrated circuits

CDC 7600

v . . . . . . . . . . . . 1972 Illiac IV Parallel processing

TI ASC Pipeline architecture

VI . . . . . . . . . . . 1976 Cray-1 Vector processing

SOURCE Office of Technology Assessment
58 • Information Technology R&D: Critical Trends and Issues

Table 13.—1982 Federal Spending for Computer

Architecture R&D (millions of dollars)

Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . $12.0a

Department of Energy , . . . . . . . . . . . . . . . . . . . . . . . . . 2.9a

National Aeronautics and Space Administration . . . 1 .5a

National Science Foundation . . . . . . . . . . . . . . . . . . . . 1.2

Total . . . . . . . . . . . . . . . . . . . . ... ... ... ... ... ... .$17.6

aEstimates.

SOURCE: Department of Defense and Department of Energy numbers from the

Office of Technology Assessment Workshop on Advanced Computer

Architecture; NASA number from personal communication with Paul

Schneck; NSF number from Summary of A wards, FY 1982, NSF Directorate for Mathematical and Physical Sciences, Computer Sciences

Section,

DOE spent $645,000 at Los Alamos and

$500,000 at Lawrence Livermore National

Labs in fiscal year 1983 on two experimental

research projects on advanced computer architecture hardware.3 In addition, Los Alamos is

leasing a Denelcor HEP-1 to experiment with

parallel processing software concepts. The

Navy, in conjunction with Lawrence Livermore, has been involved with the design and

construction of an advanced architecture computer, termed the S-1 Project. The design is

intended to handle signal processing tasks for

Navy missions. Approximately $20 million

has been spent over the last 4 years on the S1 Project.4

Facilities and help in advanced computer applications development are provided to re9Edward Oliver at the OTA workshop on Advanced Computer Architecture, July 14, 1983.

‘Personal communication from Sidney Fembach, Consultant,

Control Data Corp.

searchers in science and engineering fields to

support the missions of several Government

departments (DOD, DOE, NASA), and to further basic research (NSF). Seven Federal facilities provide limited open access to certain

groups of researchers (see table 14).

The National Laboratories plan to add more

supercomputers over the next few years, so it

can be expected that Government scientists

and engineers and contractors on mission

agency work will have access to state-of-theart large-scale computing facilities (see table

15). Academic researchers will have limited access to these facilities for work in fields related

to agency missions (e.g., fusion energy, atmospheric and ocean sciences, and aerodynamics).

These facilities also provide support for software development.

The Department of Defense, through the

Defense Advanced Research Projects Agency

(DARPA), has formulated ambitious plans for

research and development in advanced computer-based systems. Included will be efforts

to develop high speed signal processor architectures and to integrate numeric and symbolic processing in advanced computer architectures for use in intelligent weapons systems.5

In April 1983, the National Science Foundation organized a working group to study

————

‘This program, called “Strategic Computing, ” is covered in

some detail in the Artificial Intelligence Case Study later in

this chapter.

Table 14.—Federal Open Access Supercomputer Facilities

Facility Major system Research users Charges

NCAR . . . . . . . . ........2 CRAY 1-As Atmospheric and ocean sciences No charge to NSF users. $2,200 per

prime CPU hour for others

MFECC . . . . . . ........2 CRAY 1 Magnetic fusion energy No charge

1 CDC 7600 community

LANL . . . . . . . . . . . . . . . .Open 1 CRAY Government agencies, labs, and $636 per prime CPU hour

3 CDC 7600s nonprofit institutions

1 CYBER 825

NASA-Ames . . . . . . . . . .CRAY 1-S Computational fluid and No charges to NASA grantees.

CDC 7600 aerodynamics $2,000 per CPU hour for CRAY

NASA-Goddard . . . . . . . . CYBER 205 NASA-funded and NASA-project No charge to NASA grantees. $1,000

related per CPU for others

NASA-Langley. . . . . . . . .CYBER 203 NASA and NASA-funded $1,300 per CPU hour

scientists

NASA-Lewis . . . . . . . . . .CRAY 1-S Principally aerodynamics related No charge for NASA supported

SOURCE: A Nafioml cornwtiw ~rrtirortmerrt for Academic l?esearcl? National Science Foundation, October 1983
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 59

Photo credit: U.S. Department of Energy, Los Alamos National Laboratory

View of a part of the main computing facility at Los Alamos National Laboratory. CRAY 1 in foreground

Table 15.—Summary of Current and Planned Government Open Access

Advanced Computer Architecture Software Development Facilities

Number Planned additions

Agency Current systems of users fiscal years 1984-88

National Science Foundation. ...2 Class VI 850 1 Class Vll

Department of Energy . . ........3 Class VI 6,400a 1 Class Vl, 5 Class Vll

National Aeronautics and Space

Administration . . . . . . . . . . . . ..3 Class Vl, 1 special 3,000 1 Vl, 1 Vll, 1 special

Totals . . . . . . . . . . . . . . . . . . . . ..8 Class Vl, 1 special 10,250 2 Vl, 7 Vll, 1 special

 performing classified work.

SOURCE: A Computing Environment for Academic Research, National Science Foundation,
60 ● Information Technology R&D: Critical Trends and Issues

what was recognized as a critical scientific imperative. The report of that group stated:6

Computing facilities have a decisive effect

on the kind of research which is done by academic scientists and engineers. During the

1950s and 1960s the Government encouraged

the growth of computing in research, research methods were transformed in discipline after discipline, and the United States

enjoyed a large, ever-widening lead in quantitative research and modeling complex phenomena. In the 1970s Government support

slackened and academic computing facilities

no longer kept pace with advancing technology . . . Science has passed a watershed in

using computers for research. Computers are

no longer just tools for measurement and

analysis but have become the means for making new discoveries . . . Academic research in

computer architecture, computational mathematics, algorithms, and software for parallel computers should be encouraged to increase computing capability.

In response to this imperative, the NSF

working group recommended an expansion in

spending for academic research in advanced

computers, and improved access to computing

facilities including 10 new supercomputer facilities and special networks to make these systems widely available (see table 16).

The House Committee on Science and Technology considered R&D in advanced computers and access to powerful computer systems by scientists and engineers in many

fields to be crucial elements in the advance6A Natiomd Computing Environment for Acadenu”c Computing, prepared under the direction of Marcel Bardon by the Working Group on Computers for Research, Kent K. Curtis, Chairman, July 1983, pp. 1-2.

Table 16.—NSF Plans for Computer Research

(million of dollars)

Fiscal years

1984 1985 1986

Local facilities . . . . . . . . . . . . . . . . $45.5 $ 90.9 $106.7

Supercomputers . . . . . . . . . . . . . . . 14.4 70.0 110.0

Networks . . . . . . . . . . . . . . . . . . . . . 2.1 7.3 11.5

Advanced computer systems and

computational mathematics. . . 8.0 20.0 33.0

Total . . . . . . . . . . . . . . . . . . . . . . . $69.9 $188.1 $261.2

SOURCE: A National Computing Environment for Academic Research, National

Science Foundation.

ment of science and technology. Accordingly,

they approved a budget of $40 million in fiscal

year 1985 for NSF’s Advanced Scientific Computing initiative, thus doubling the administration’s request for this program.7

Industry’s Role

Three U.S. companies are developing next

generation (Class VII) supercomputer systems. In addition, two Japanese companies

(Fujitsu and Hitachi) have introduced new systems and a third (Nippon Electric-NEC) is developing a new supercomputer, planned for delivery in 1985 (see table 17).

Cray will introduce the Cray-2 in 1985. This

will be a four processor vector machine.8 The

Cray-3 is scheduled for introduction in 1986.

It will be an 8 to 16 processor vector machine

with Galium Arsenide (GaAs) (see ch. 9) circuitry. Cray sees integrated circuit technology

as critical. The Japanese are the major suppliers of state-of-the-art fast bi-polar memory

chips, and one-half of the integrated circuits

in current Cray machines are Japanese made.9

Control Data (CDC) spun off development

work for its next generation advanced architecture machine to a new company, ETA Systems, which CDC capitalizes with $40 million

for 40 percent ownership. This approach is being taken by CDC because small groups with

dedication, entrepreneurial spirit, and a personal stake in the success of the project are

considered important.10 ETA Systems will

spend $4 million to $6 million the first year

on direct R&D costs. Plans are for the first

demonstration machines to be available late

7Authorizing Appropriations to the National Science Foundation, House Committee on Science and Technology, Report

98-642, Mar. 30, 1984, pp. 8-9.

8Vector computers have specialized architectures that achieve

high speed calculation of mathematical formulas by treating

entire arrays of data (vectors) as processable by single instructions, saving time on certain calculations that can be arranged

as a series of vectors.

‘L. T. Davis, “Advanced Computer Projects, ” presentation

at the Frontiers of Supercomputing Conference, Los Alamos,

Aug. 15, 1983.

‘OW. Norris, “A Conducive Environment for Supercomputers, ” banquet address at the Frontiers of Supercomputing Conference, Los Alamos, Aug. 18, 1983.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 61

Table 17.—Summary of New Commercial Supercomputer Systems

Under Development

Maximum speed

Companv . Model (M FLOPS’) Available

Cray Research . . . . . . . . Cray-2 1,000 mid 1985

Cray-3 NA 1985-86

ETA Systems . . . . . . . . .GF-10 10,000 1986-87b

GF-30 30,000 NA

Denelcor . . . . . . . . . . . . . HEP-2 4,000 1985-86

NEC . . . . . . . . . . . . . . . . .SX-2 1,300 March 1985

NA—Not announced

aM FLOpS (million floatlng~olnt ~Peration~ per second) a measure of computer performance on high preci SiOn Calculations

bL M Thorndyke at the ~ro”tier~ of s~pe~~o~p”t~~g conference, LOS Alamos, August 1983.

SOURCE The IEEE Committee orI Super Scierrt/f/c Computers.

in 1986, and volume production of two machines

per month is planned for 1987. The design will

employ two to eight vector processors with the

maximum eight processor version to sell in the

range of $20 million.11

Denelcor, a former maker of analog computers, developed a parallel processing computer design (HEP-Heterogeneous Element

Processor). Since 1982, this design has been

available for sale or lease. Considered to be an

experimental machine by users at facilities

such as Los Alamos, this design is a step

toward a new generation of computer architectures. Work is currently underway on the

HEP-2, which should be competitive with Cray

and CDC machines if component and software

problems can be overcome. Moreover, the viability of Denelcor efforts will require higher

sales than have so far occurred with the HE P-1 .12

In addition, other U.S. firms including computer companies (Digital Equipment, HewlettPackard, Honeywell, IBM, NCR and Sperry),

telecommunications companies (Harris), semiconductor companies (Advanced Micro Devices, Intel, Monolithic Memories, Mostek,

Motorola and National Semiconductor), electronics companies (Allied, Eaton, General

Electric, RCA and Westinghouse) and aerospace companies (Martin-Marietta) are involved to some extent in research on parallel

—. —

“L. M. Thorndyke, “The Cyber 2XX Design Process, ” presentation at the Frontiers of Supercomputing Conference, Los

Alamos, Aug. 15, 1983.

“B. Smith, “Latency and HEP, ” presentation at the Frontiers of Supercomputing Conference, Los Alamos, Aug. 15,

1983.

processing, data-flow or multiprocessor architectures. 13

Industry representatives characterize the

advanced computer architecture business as

risky. The market is small: approximately 100

Class VI supercomputers have been installed

worldwide as compared to tens of thousands

of less powerful computers. Development

costs are high: design tools include other advanced architecture machines for hardware

simulation and software development.

The Role of Universities

Although as many as 50 U.S. universities

are involved in advance computer architecture

(ACA) research,14 significant funding levels are

available in only a few major schools. (See

table 18.)

University research in advanced computer

architecture is characterized by a series of

stages of elaboration of a concept including:

1) theoretical paper and pencil work; 2) simulation of ideas on existing computer systems;

3) “breadboard” wiring of designs with off-the

shelf components; and 4) full-scale engineering and construction of prototype machines

in which state-of-the-art components, software

and peripheral devices can be integrated to

test the design on full-scale problems. OTA

found that few if any projects currently under-

“’’Next-Generation Computing: Research in the United

States,” IEEE Spectrum, November 1983, pp. 62-63.

“The OTA workshop on Advanced Computer Architecture

concluded that every major Computer Science and Electrical

Engineering department has some interest.
62 • Information Technology R&D: Critical Trends and Issues

Table 18.—1983 DARPA, DOE, and NSF University Funding of

Advanced Computer Architecture

Institution DARPA DOE NSF

California Institute of Technology . . . . . . . . . .

Massachusetts Institute of Technology. . . . . .

University of California, Berkeley . . . . . . . . . . .

Stanford University . . . . . . . . . . . . . . . . . . . . . . .

New York University . . . . . . . . . . . . . . . . . . . . . .

University of Illinois . . . . . . . . . . . . . . . . . . . . . .

University of Texas . . . . . . . . . . . . . . . . . . . . . . .

University of Wisconsin . . . . . . . . . . . . . . . . . . .

Duke University . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 ,000a 550

2,000 250 102

2,000a

2,000a

600 150

155 200

107 120

95

197

570

7,000a 1,757 1,339

a Estimate

SOURCE DARPA numbers from a personal communication with Duane Adams; DOE numbers from Edward Oliver at the OTA

Workshop on Advanced Computer Architecture; NSF numbers from Summary of Awards: Fisca/ Year 1983, National

Science Foundation, Division of Computer Research.

way in universities have funding to carry a design concept through to the final, systems

engineering stage. Several projects will produce prototypes, but the elaboration of an idea

into a system with software and supporting

peripherals to demonstrate the performance

and utility of the concept on real problems requires funding on the order of twice what the

currently best funded projects receive.

The major distinction between efforts pursued in industry and in universities on ACA,

aside from the commercial and product development orientation of industry work, is that

more radical and advanced designs are being

pursued in universities, whereas evolutionary

designs are sought by industry. This is a result of the stake that industry has in the existing base of software and users and the need

for upward compatibility of systems. University researchers have a greater ability to pursue revolutionary designs that could require

completely new programming approaches and

techniques.

Facilities Requirements

The increasing availability and capability of

VLSI circuitry and computer-aided design

tools are expected to have significant impact

on computer design.15 Prototype production

time and cost will decrease. Both general pur- ——- -- - —

‘

sS. Trimberger, ‘‘Reaching for the Million-Transistor Chip,

IEEE Spectrum, November 1983, p. 100.

pose and custom application architectures are

implementable in VLSI, opening opportunities

for the testing and evaluation of many more

computer architecture ideas. However, the initial investment required for VLSI design and

fabrication equipment is very costly and will

probably remain so. It is unlikely that most

universities will be able to afford this equipment.

Other expenses associated with ACA research include computer-based simulation facilities. There may be a need for current generation supercomputers at universities to

facilitate and test the design of new architectures. Bell Laboratories currently devotes

most of its Cray computer to VLSI circuit

design.

Supercomputers are also used by Cray and

Control Data for software development, so

that software is available when a new hardware design is completed. Universities would

benefit from access to these software development tools, giving researchers the chance

to test ideas experimentally. But here again,

the costs associated with the procurement and

operation of these design and computing resources are beyond the means of university

project budgets. Some universities are forming consortia to spread the cost of microelectronics design and fabrication facilities across

several institutions (see ch. 6). Shared supercomputer facilities are a key element to NSF

plans for Advanced Scientific Computing.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 63

Annual operating costs for government

supercomputer facilities average more than

$10 million.” Only three U.S. universities currently operate such facilities and these are utilized at less than 50 percent of capacity. The

reason for this low usage is the high cost of

computer time on these systems, ranging from

$2,000 to $3,000 per hour. University ACA research is therefore usually done on minicomputers which lack the capability of generating

sophisticated, high-resolution graphics of importance to the design of integrated circuits.

Critical Areas of Research

Currently, the goal of most advanced computer architecture research and development

is parallel computation.

The two major U.S. industrial developers of

supercomputers, ETA Systems and Cray Research, and the Japanese manufacturers,

Hitachi and Fujitsu, are pursuing parallel architectures in a conservative incremental fashion, contemplating the production of machines

with up to 16 parallel processors by the late

1980s. Vector architecture will remain the

dominant method for achieving fast numerical processing in these systems.

Universities, by contrast, are pursuing a

number of methods of achieving “massively

parallel” computation with upwards of 1,000

processors working in concert. One of the basic

problems of computing in parallel is the requirement for communication and coordination among the individual processing elements

when they are working on pieces of a single

problem. Often the results of one process are

required for another process to go forward.

Several architectural solutions to these difficulties are under study, and extensive evaluation of different approaches must be done

before their viability in real-world problems

can be assessed. Detailed simulation of concepts and testing of prototypes is required,

and present university funding is inadequate

to support such work.

‘6A National Computing Environment for Academ”c Research, op. cit., p. 22.

There are currently more than 50 concepts

for parallel processing architectures under consideration in academic and industrial institutions. However, there are no standard metrics

for comparing the performance of different architectural designs or the software to be used

on parallel machines. Nor is it likely that any

one metric could fully measure differences in

performance, since different applications place

different demands on systems. The development of such metrics and the establishment

of suitable test facilities for implementing

standard design evaluations are critical issues

in advanced computer architecture. The Federal Government may have a role in this area

by setting voluntary standards for computer

performance measurement, and by providing

facilities for testing.

Thus far little attention has been devoted

to the problems of symbolic, as opposed to

numeric processing architectures. In the past,

the von Neumann architecture has been used

for both kinds of computations; the focus of

advanced computer architecture R&D has

been on computers for “number crunching”

applications, or high precision calculation,

simulation and modeling for science and engineering. The increasing importance of artificial intelligence is encouraging the design of

special machine architectures, both to ease the

programming of artificial intelligence applications, and to speed the processing of symbolic

computations. Several companies are now producing machines for artificial intelligence, and

the list is expected to grow. ’7

Three other areas of technology are critical

to the development of advanced computer architecture systems: integrated circuits, circuit

packaging, and algorithm and software design.

Integrated Circuits (IC)

An order of magnitude (1 OX) increase in computer speed is expected from improvements

in IC materials and manufacturing techniques.

Silicon will remain the dominant IC substrate

material through 1990 because the technology

“See the case study on Artificial Intelligence in this chapter.
64 Ž Information Technology R&D: Critical Trends and Issues

is well understood and the practical limits of

device density, speed and power consumption

have yet to be reached. Silicon will be the basis

of a growing set of special purpose VLSI architectures. Gallium Arsenide (GaAs) digital

logic and memory circuits are growing in importance, and will be used in the Cray-3.18

University based research in chemistry, physics and microelectronics are expected to make

significant contributions to increased integrated circuit capability.

Packaging

Interconnections among the logic elements

on some complex chips occupy over half of the

useable chip area, and affect the performance

speed of chip functions. Currently, three sandwiched layers of interconnection within a chip

are typical, and it is expected that as many

as 12 layers will be common in a decade.19

As chips have become more complex, containing greater numbers of logic elements, the

number of “pins,” or inputs and outputs, required for communication with them has

grown. The connection of sets of chips has

thus become more complex, and the difficulty

of simultaneously housing and powering chips,

and dissipating the waste heat from chip sets

is forcing advanced computer designers to find

more sophisticated methods of packaging

them. 20

Cryogenic liquid cooling equipment is required for most existing and planned supercomputers. Facilities must be provided for the

refrigeration and storage of the coolant. And

the size, weight, and reliability of the cooling

equipment must be considered in the purchase

and use of these systems.

—.———

“L. T. Da~is, op. cit.

“J. A. Armstrong, “High Performance Technology: Directions and Issues, ” presentation at the Frontiers of Supercomputing Conference, Los Alamos, Aug. 15, 1983.

20MCC is devoting some of their initial efforts to packaging

technology; and ETA Systems sources estimate that 60 percent of the R&D effort for the GF-10 will be in packaging. ETA

is planning to use liquid nitrogen cooling to obtain a doubling

in speed from CMOS silicon integrated circuits (L.M. Thorndyke at the Los Alamos Conference).

Packaging is also a critical factor in supercomputer manufacturing costs. Cray machines

are currently hand wired. In an effort to reduce costs, the Japanese are developing designs that lend themselves to automated manufacturing procedures.

Software and Algorithms

The lack of applications software for supercomputers has been a significant barrier to

their adoption and use.

One half of recent Cray Research R&D funds

have reportedly been devoted to software development, 21 and the vectorizing FORTRAN

compiler, a software program that helps prepare standard FORTRAN code for execution

on the Cray vector architecture, has been a major factor in the commercial success of the

Cray-1 line.” Users of vector computers, including the Cray, are quite pleased to obtain

20 percent of the maximum rated speed of

these machines on typical problems.23 Work

is continuing in industry and universities to

develop software to make vector machines

more effective and easier to use, and this work

will be of critical importance through this

decade.

The introduction of parallel processing designs and the proliferation of special purpose

computer architectures will make software

production and design more complicated.24 The

creation of new high-level languages that are

more easily understood by users, and other

tools and programming support environments

that facilitate the expression of logical, symbolic, mathematical, scientific, and engineering concepts in computable form, could greatly

—

2’Rollwagen, op. cit.

*’Nippon Telephone and Telegraph, the Japanese state telecommunications monopoly, has chosen a Cray-XMP over recently introduced Japanese supercomputers of comparable or

superior speed, reportedly because of the software, and the experienced team of field representatives, available from Cray.

“NTI’ Picks Cray Super CPU,” Ektronz”cAfews, Oct. 10, 1983,

p. 87.

Z~David Ku*, at the OTA workshop on Advanced Computer

Architecture, July 14, 1983.

*’Paul Schneck, at the OTA workshop on Software Engineering, Nov. 17, 1983.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 65

expand the utility and lower the costs of operating advanced computer systems.25

In order for the speed potential of advanced

computers to be used, problems must either

be programmed to take advantage of the computer design, or the architecture must be designed to handle the unique characteristics of

the problem. The mediating factor between the

problem and the architecture is the algorithm,

or the structured procedure for solving the

problem. In the future, computer designers

will have to be more cognizant of computational algorithms and the effects of computer

architecture on programming and problem

solution, and thus they will need greater knowledge of applications. Similarly, designers of

complex programs, especially scientists, mathematicians, and engineers, will need to have a

greater appreciation of the inherent capabilities and limitations of particular computer architectures as they become more dependent on

advanced computers in their work. Collaboration between the users and designers of future

computer systems is critical to both the utility and the commercial success of advanced

architecture computers.26

Manpower

There is a shortage of people capable of designing software for advanced architecture

computer systems. In particular, people skilled

in the design of software and software tools

for use in sophisticated scientific and mathematical applications are scarce.27 There is a

need for people who understand scientific

problems in a range of disciplines, and who can

design and implement computer systems to

solve those problems.

Attracting talented faculty to train the next

generation of computer researchers is a problem. The difficulty results, in large measure,

—- . —- — — .

“M. B. Wells, “General Purpose Languages of the Nineties, ”

presentation at the Frontiers of Supercomputing Conference,

Los Alamos, Aug. 17, 1983.

Z60TA Workshop on Advanced Computer Architecture, JUIY

14, 1983.

Z7This point was emphasized in one applications area in Particular, telecommunications (Paul Ritt at the OTA workshop

on Advanced Computer Architecture, July 14, 1983).

from the uncompetitive salaries and low job

mobility offered by universities. The problem

is expected to become acute as demand for

computer architectures employing symbolic

processing and artificial intelligence capabilities increase. (See Artificial Intelligence case

study.)

International Efforts

Japan

Two Japanese firms, Fujitsu and Hitachi,

have introduced advanced architecture computers whose performance is competitive with

the fastest available American supercomputers. Early copies of these machines have

been installed in three Japanese universities.

A third company, Nippon Electric, has announced plans to introduce a supercomputer

in 1985.

The Japanese Government is funding two

national efforts in advanced architecture research and development: “High Speed Computing Systems for Science and Technology’

and the “Fifth Generation Computer System”

program.

The Electrotechnical Laboratory of the

Agency of Industrial Science and Technology

(AIST), an arm of the Ministry of International Trade and Industry (MITI), is managing a 10 year project (January 1981—March

1990) called “High Speed Computing Systems

For Science and Technology. ” It is focused on

microelectronics research and development

(GaAs, Josephson Junctions and High Electron Mobility Transistor devices), parallel

processing systems with 100 to 1,000 computing elements, and systems components, including mass storage and data transfer devices, to support high-speed scientific and

engineering calculations. Total government

funding will be on the order of $100 million.

A consortium of six major Japanese computer

companies (the Technology Research Association) has been formed to conduct much of this

work in industrial laboratories on “consignment” from MITI.28

———. - — --—

“’’Super Computer-High Speed Computing Systems for Science and Technology, ” Science & Technology in Japan, OctoberNovember, 1982, p. 16.
66 ● /formation Technology R&D: Critical Trends and Issues

The “Fifth Generation Computer System”

program is managed by the Institute for New

Generation Computer Technology (ICOT). The

program is described in more detail on page

105, as part of the artificial intelligence case

study.

Great Britain

Great Britain has reacted to the Japanese

efforts (in particular the Fifth Generation project) by establishing a national plan for research in advanced computer systems, known

as the Alvey Programme for Advanced Information Technology. It is discussed below in

the Software Engineering and in Artificial Intelligence Case Studies. Researchers in British universities have made significant contributions to advanced computer architecture

research. For example, the University of Manchester has an advanced prototype of a “dataflow” architecture machine.29 Work is also being pursued in industry .30 Inmos, Ltd. has

developed the Transputer, a device which combines processing and communications functions on a single chip. This device has been

specifically designed for the connection of a

number of units to achieve concurrent processing. 31

France

France has considerable interest in advanced

computer architecture research and development. Two industrial companies, Cii-Bull and

CGE, as well as seven government funded institutions including five universities are pur-

.

‘9A. L. Davis, “Computer Architecture, ” IEEE Spectrum,

November 1983, pp. 98-99.

‘°Five have been identified, see “Next-Generation Computing: Research in Europe, ” IEEE Spectrum, November 1983,

pp. 65-66.

““lhnsputer Does Five or More MIPS Even When Not Used

in Parallel, ” Iann Barron, Peter Cavill, David May and Pete

Wilson, Electronics, Nov. 17, 1983, p. 109.

suing work in this area.32 Three “supercomputer” projects are expected to produce machines

by 1985-88, but these systems are not likely

to be speed rivals of American and Japanese

systems of similar vintage.33

West Germany

West Germany has four universities and six

industrial companies working on advanced

computer architecture R&D.34 The government is providing about $4 million per year

for research at the universities on parallel processing. A project at the Technical University

in West Berlin has received a grant from the

Ministry of Research and Technology to develop a full-scale prototype.35

The European Community

The Commission of the European Communities (EC) has initiated ESPRIT (European

Strategic Program for Research and Development in Information Technology) to pursue information technology R&D on a cooperative

basis with industry, universities, and the

governments of the EC countries pooling their

efforts. Four institutions (three Belgian and

one French) have thus far announced plans to

study parallel processing with ESPRIT funding.36 The proposed ESPRIT plan calls for ‘he

development and use of computerized facilities

to study new computer designs.37 (For more

information on ESPRIT, see ch. 7.)

‘

z

’’ Next–Generation Computing: Research in Europe, ” IEEE

Spectrum, November 1983, pp. 64-65.

39Reportof the IEEE Super Scientific Computer Comm.f”ttee$

Oct. 11, 1983.

“IEEE Spectrum, November 1983, op. cit., pp. 67-68.

“’’Western Europe Looks to Parallel Processing for Future

Computers, ” Ekctrom”cs, June 16, 1983. p. 111.

“A. L. Davis, op. cit.

“Proposal for a Council Decision adopting the first European

Strategic Programme for Research and Development in Information Technologies (ESPRIT), Commission of the European

Communities, June 2, 1983, p. 24.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 67

●

●

●

●

●

●

●

Case Study

Findings

Fiber optic communications

2: Fiber Optic Communications

technology is

an important export (e.g., a $3 billion world

market projected for 1989), and is a key element in improved productivity and reduced

costs in telecommunications systems.

Fiber optic communications technology is

developing rapidly and the potential benefits from continued research are extensive.

The most significant research is concentrated in only a few large firms and universities, in part because of the expense and

the required long term commitment.

Increased Government funding in this technology-now at a low level—would enlarge

university participation and accelerate technological advances.

The scarcity of trained research and development personnel is a continuing handicap.

A large proportion of university researchers in fiber optics are foreign nationals and

many return to their native land after completing graduate studies.

Research conducted in Japan and Europe

is among the world’s most advanced and exchange of research information internationally among colleagues is critical to scientific

advancement.

Japan is the world’s leader in several key

aspects of the technology, and is a strong

competitor to American firms.

The first successful transmission of voice

signals using energy from the Sun was accomplished in 1880 by Alexander Graham Bell and

Sumner Tainter using a device called the photophone, but was abandoned because weather

made the system unreliable.38 Since 1970, interest has resumed in using light energy for

telecommunications, in the form of fiber optic communications because of two technological advances: the laser and light transmission

through low loss silica glass fibers.

—. —..— 38 Report on Research at the University of Arizona, vol. 1, No.

1, fall 1983, p. 11, published by the Research Office, University of Arizona.

Advantages

Fiber optic communication is the transmission of light signals through transparent glass

or plastic fibers, where the signals are generated by lasers or light emitting diodes (LEDs)

and received by photodetectors, which convert

light signals to electrical signals. The major

components of fiber optics technology are the

fiber cables and connectors, transmitters and

receivers, and repeaters, or regenerators,39

which amplify and reconstitute the signals periodically along the fiber.

There are several properties of fiber optic

communications that make them attractive

for telecommunications applications:

●

●

●

●

large bandwidth, meaning that large

amounts of information (voice conversations, computer data, graphics) can be

transmitted rapidly. For example, a quarter-inch diameter optical cable with two

fibers carries as much data as a 3-inch

copper cable with 20,000 wires.40 (See fig.

9.) Conservatively, the capacity of a single

pair of fibers currently available commercially is about 4,000 voice grade circuits

in field applications and about 400,000

voice grade circuits under controlled laboratory conditions;

less susceptibility than copper wire to

radio frequency interference, providing

less cross-talk, higher quality signal

transmission, and immunity from electromagnetic pulse (EMP) effects-characteristics of value for both civilian and military uses;

lower loss of signal strength, meaning

that fewer repeaters are needed;

resistance to “noninvasive” or covert

wiretaps;

. . .— sg]n Stmdwd copper telephone wires, Signal regeneration is

required at about onemile intervals. Repeaters add significantly

to the installation and maintenance costs of transmission

systems. 4~High Technology, “Fiber Optics: Light at The End of the

Tunnel, ” March 1983, p. 63.
68 ● Information Technology R&D: Critical Trends and Issues

Figure 9.—Optical Fibers Are Small, Lightweight, and Versatile

Photo credits: AT& T Sell Laboratories
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 69

small size and low weight, factors that

contribute to ease of transport and less

need for underground and building duct

space;

declining cost compared to other terrestrial telecommunications technologies.41

Commercialization Trends

The technology has progressed rapidly into

the commercial marketplace since 1966, when

researchers 42 first proposed the possibility of

purifying the glass used in optical fibers to reduce losses in signal strength. In 1970, the

first low loss fiber was produced by Corning

Glass Works, and by 1977 prototype systems

were being installed by AT&T and General

Telephone and Electronics Corp. in the United

States. Today, many developed countries have

fiber optic communication systems in operation or plan to install them.

The United States, Canada, Western Europe, and Japan accounted for an estimated 96

percent of a $550 million world market in fiber optics communications equipment in 1983.

The world market was approaching $1 billion

for 1984,43 and is projected to expand to $3 billion by 1989,44 as countries satisfy their telecommunications system expansion and replacement needs with the increasingly costcompetitive fiber optic communication systems rather than with microwave radio, copper twisted wire pair, and coaxial cable.

Applications in the United States

Telecommunications, the major market (85

percent)45 for fiber optics, can be described in

four segments: long distance; interoffice trunks

that connect telephone central offices; local

feeder lines; and local area networks. Long dis-

—— tlThiS Compuison is based on the relative cost per chmnelmile, which is the number of voice circuit equivalents (channels) multiplied by the distance of the transmission link.

42Kao and Hockrnan, I(IT Standard Telecommunications Laboratories, England.

43D. G. Thomas, “Optical Communications, ” Research and

Development, June 1984, p. 203.

“Signal, September 1983.

“The remaining 15 percent of the noncommon carrier applications are said to be in vehicular,, industrial control systems,

and in CATV. High Technology, op. cit.

tance applications are currently the most cost

effective for fiber optic communications, and

comprise the vast majority of current use in

the United States.

Interoffice trunking provides links between

intracity telephone facilities. Feeder lines include intracity transmission links between carrier facilities and subscriber distribution points,

while local feeder lines extend to subscriber

locations. Local area networks (LANs) serve

limited communities, for example, within a

building or a building complex. They are just

emerging and will become an important market for fiber optics.

There are a growing number of installations

of fiber optic systems in long distance telecommunications. Among these are AT&T’s Northeast Corridor route. In 1983 a line connecting

Washington, DC and New York City was inaugurated. In 1984 this line was extended to

Cambridge, MA, and Richmond, VA. The total Northeast Corridor line will use 45,000

miles of fiber over the 750 mile route. The first

phase of a west coast route, which will eventually extend from Los Angeles to Oakland

and Sacramento, has been completed. A transatlantic cable (TAT 8), engineered to carry

40,000 voice circuits at a cost of less than half

that of its predecessor, is scheduled for installation in 1988. By March 1983, AT&T had

already installed over 100,000 miles of fiber

and projections are for another 300,000 miles

by 1990.4’

Other firms planning major systems include

United Telecommunications, Inc., with its

23,000 mile, $2 billion lightwave network to

be completed by 1987.47 Southern New England Telephone Co., in a joint venture, will

route its system through 20 States along railroad rights of way; MCI, with a 4,000 mile system intended to serve the east coast;48 and

Cable and Wireless, a British company, with

4Qptoelectronics Supplement to JZkctrom”c News, “Fiber Optics Market Still Baffles Suppliers, ” p. 5, Apr. 4, 1983.

47’’ 23,000 Mile Fiber Network Planned by United Telecom, ”

The Journal of Fiber Optics, June 1984.

4aFiber Optics Industry Service: Competitive Environment,

Gnostic Concepts, Inc., 1983, pp. 1-2.
70 ● Information Technology R&D: Critical Trends and Issues

a 560 mile network that will link major cities

in Texas.

Fiber optics is already an attractive replacement for copper cable in some local telecommunications applications: 1) in trunk lines between telephone central (switching) offices

where the average 10-mile distance can be

spanned by optical cables without repeaters,

thus installation and maintenance costs are

lower, and 2) in local feeder lines in large cities where crowding in underground utility

ducts is a growing problem.

Local area network applications are expected

to grow rapidly according to some industry

projections, particularly as user requirements

for bandwidth increase to the 10 to 100 million bits per second (Mbs) range. The past slow

growth of fiber optic applications in LAN systems is due to the variety of technical needs

among different customers, and a lack of uniform technical standards. In contrast with

long distance communications systems, which

have traditionally paid extensive attention to

technical standards development, a Federal

telecommunications standards committee only

recently (July 1984) held its first meeting to

develop Federal guidelines for LANs. Once

standards issues are settled, growth in the use

of fiber optics within buildings and building

complexes is expected to be rapid.49

Other factors limit the adoption of fiber optic communications technology. The large base

of installed copper wire in the AT&T plant

(some 827 million miles) is likely to be replaced

slowly. The large capacity (up to 100 television channels) of some CATV systems and the

fact that this expensive investment in coaxial cable has been made quite recently in many

cities, suggests that fiber optics will not be

widely used for cable television for some time.

Advances in nonoptical transmission techniques are enabling considerable increases in

the information carrying capacity of copper

wire pairs.

‘

gAviation Week and Space Technology, “Promising Future

Seen for Optical Fibers,” pt 1, Oct. 12, 1983, pp. 44-77,

In applications other than communications

carrier uses, such as aerospace and military

systems, fiber optic technology is already being exploited. These are primarily in command, control, and communications applications including guidance and control systems

for aircraft, spacecraft, and missiles; optically

multiplexed data bus transmission systems;

electronic warfare and sonar applications; and

advanced instrumentation systems. The imperviousness of fiber optics to electromagnetic

interference, along with light weight, small

size, and high information rates, make it of

special value in aerospace and military applications.

Foreign Applications

Installation of fiber optic communications

systems have been completed, or are planned

in a number of countries. A small sample of

these includes:

●

●

●

West Germany. By late 1984, 10 broadband integrated fiber optic local area networks will be built in Berlin, Hamburg,

Hanover, Dusseldorf, Nuremburg, and

Munich, called the BIGFON (Broadband

Integrated Fiber Optic Local Network)

network. In addition to having access to

the public switched telephone network,

subscribers will also be able to access the

integrated telex and data network and receive radio, television, telephone, and full

motion picturephone. The long-term goal

is to include all telephone subscribers in

the nation.

France. Several fiber optic systems are being installed by the French. The government has decided to upgrade the nation’s

antiquated telecommunications network

by leapfrogging toward the most advanced

technology available-especially fiber optics. They also plan to install a submarine

cable between France and Corsica in 1985,

providing over 7,600 channels operating

at 280 Mbs.

Japan. One of several projects being

undertaken is an 80 km fiber optic route

in the suburbs of Tokyo. The system operates at 400 Mbs, providing video confer-
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 71

encing and facsimile services. In addition,

the Japanese have installed a broadband

network for data communications in

Tsukuba to facilitate scientific and technical communications.

An Intelligent Network System (INS)

is being developed by Nippon Telephone

and Telegraph’s Yokosuka Laboratory

near Tokyo. Services include voice, data,

CATV, still and motion pictures, facsimile, TV conferencing and high resolution

TV. The INS is expected to make extensive use of fiber optic technology. Another

project involves a 45 km undersea fiber

optic cable south of Tokyo, operating at

400 Mbs. The system will be extended

over a 1,000 km route between islands.

● United Kingdom. British Telecom, the nation’s telecommunications authority, has

committed itself to using only fiber optics

in the trunk network from 1984 on. By

1990, half the trunk network will be fiber

optic systems.

Mercury Communications, a communications carrier in limited competition with

the government telecommunications authority, has begun installing an intercity

fiber optic network using the British rail

rights of way.

The British plan to construct a nationwide cable telecommunications system for

the delivery of television programming,

FM radio, pay television, and text. An experiment with a small number of homes

is being conducted using fiber optics technology. This is considered to be the prototype for the national system.

United States R&D

Much fiber optics R&D in the United States

is being conducted by a few large companies:

AT&T Bell Laboratories; Corning Glass Works;

ITT; and, to a lesser extent, GTE; a few universities; and some smaller companies. Many

of the commercial products now available are

a result of R&D performed by Bell Labs.

AT&T began funding optic communications

research in 1960 and related laser research in

1958.

There is concern that many U.S. companies

have been inclined to undertake research only

where the prospective payoff is likely to occur within a very few years. This attitude has

the effect of shifting investigation away from

promising areas such as research on infrared

systems, where another 5 to 10 years of work

may be required before commercial products

become available. Thus, the importance of

stable Federal funds for basic research is

underscored by short-term planning within industry.

The expense of research in fiber optics

makes it difficult for small firms to play a role

in R&D, except in some areas of product commercialization. In addition, there is a tendency

for equipment purchasers to prefer vendors of

complete lines of components, which works to

the detriment of small firms. As a result, small

specialty firms often must rely on DOD for research funds, on takeovers by larger firms, or

on venture capital in order to remain competitive. Regardless, these firms play an important role in the technology by providing innovative ideas and products, by serving as

conduits for the commercialization of university-based research, and by filling niches that

might not be attractive to larger firms.

Because of the considerable expense associated with research in fiber optics technology,

and the low level of available funding, few

universities have major research programs.

The importance of cost is illustrated by the

$500,000 or higher cost of Molecular Beam

Epitaxy equipment (needed for growing alternating epitaxial layers on semiconductor light

sources and detectors) and $200,000 for fiber

drawing equipment (needed to produce fiber

and to experiment with different fiber designs)

required to perform research. Very little university research is focused on glass fibers, but

instead is directed toward light sources and

detectors. The principal universities with major research programs are the California Institute of Technology, the University of 11-

38–802 O - 85 - 6
72 • Information Technology R&D: Critical Trends and lssues

linois, Stanford, Cornell,

Massachusetts Institute

Government Funding

Princeton, and

of Technology.

the

University research has been supported for

decades through NSF funding for the support

of research and, more recently, training and

laboratory equipment. NSF supports several

universities, such as the University of Arizona

in Tucson, Northeastern University, and Cornell University’s Submicron Facility. Although

NSF funding levels in this technology are not

large $1.75 million in 1983–they represent

a consistent source of funds, often supporting

fundamental research with very long term potential payoff. Additional levels of funding

would likely accelerate the rate of technological advance.

Between 18 and 20 projects are being funded

by NSF in about a dozen universities. Many

of these are concerned with advancing theoretical knowledge in areas such as laser technology, the development of pioneering optic

and optoelectronic integrated systems and

bistable optical switching devices, research

into infrared lasers and detectors, and the application of integrated optical interface circuits

in local area networks at gigabit (billions of

bits) per second data rates. Another $300,000

of NSF funding is available for upgrading

university laboratory equipment.

The DOD funds fiber optics research through

mission-oriented procurements. Approximately

95 percent of the research is carried out by industry. DOD has some $32.4 million committed to the development of cables and connectors, light sources and detectors, radiation

effects exploration, and to sensor and communications applications. An estimated $12.6

million of this is committed to research, principally applied research. In addition, the military departments allocated about $22 million

for fiscal year 1984 among seven procurement

programs for applications ranging from surveillance, shipboard and long distance communications, and helicopter flight control

systems.

Cooperative Research

NSF has several activities directed at encouraging cooperative research between universities and industry, and transferring technology into industry. One of these noted in

chapter 2, the Industry/University Cooperative Research Centers program, provides planning grants to aid universities in establishing

industry affiliations and support for specific

scientific or engineering technologies.

NSF has awarded a $75,000 grant for planning purposes to the University of Arizona at

Tucson, Optical Sciences Center. The University held its first meeting with industry in

early 1984 to begin determining mutual interest in specific areas of cooperation and industry support. Most of this research is expected

to be directed toward long term projects in

physics and materials science with potential

applications in optical logic circuitry and optical computers, with limited attention to fiber optics.

Another NSF activity funds specific projects where research is undertaken cooperative

ly by universities and company investigators.

Funding is at levels of about $100,000 per year

over a 2 to 3 year period, on the average. One

of the funded projects is being undertaken

jointly by Bell Laboratories and the University of Arizona, Optical Sciences Center. This

project’s long-term research is in high speed

optical, bistable switching devices operating

at picosecond (1 trillionth of a second) rates.

The current level of cooperation in research

is not extensive, but holds promise for broadening the base of research. Among the problems and issues to be worked out are finding

ways for competing firms to share research

data and establishing a balance between university investigators’ interest in long-term research and companies’ desire for short-term

payoffs.

Manpower and Industry Support

Fiber optics research requires training in

both physics and in electrical engineering. Be-
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 73

cause universities, in general, do not provide

this cross disciplinary training at the bachelor and masters degree levels, companies hiring recent graduates provide supplementary

in-house training. Some companies also establish an affiliation with universities. An example is the affiliation between Corning Glass

Works and the University of Rochester Institute of Optics, in which the company provides

some faculty and funding. Another example

is the support from United Technology Research Center to the Rensselaer Polytechnic

Institute which is providing real estate for new

facilities and adjunct faculty to teach specialized engineering courses.

The University of Rochester is the only

school in the United States to offer an undergraduate degree in optics. Only three schools

in the nation offer graduate degrees in optics:

The University of Arizona in Tucson, the

University of Rochester, and Northeastern

University.

A factor aggravating the availability of

trained Ph.D. graduates in this field is that

a large proportion of the students are foreign

nationals. Industry argues that immigration

laws make it difficult for the student-graduate

to remain in the United States after graduation, although many would prefer to stay and

perform research.

Directions of US. Research

Among the areas of R&D focus identified

during the course of this study are:

Fibers

The early fiber optic cables put in use were

of the multimode type, in which lightrays enter the fiber at a variety of angles and travel

through the core of the fiber reflecting from

its inner refractive surfaces. However, single

mode fiber technology, where lightrays follow

a single direct path along the fiber core, has

important advantages. Single mode fibers

have greater information carrying capacity

and allow a tenfold increase in the distance between repeaters for regenerating signals.

Today’s single mode fiber systems are able to

transmit, without repeaters, up to 200 Mbs

(million bits per second) over 80 to 100 km.

(This information rate is sufficient to carry

simultaneously a video channel, high fidelity

audio, data, and many telephone calls.) In laboratory tests, this performance has been exceeded by about 10 times, suggesting far

greater potential gains from research. Improvements from research are expected to continue in both multimode and single mode

fibers.

Improvements have been made in lowering

attenuation (losses in signal strength) in both

types of fibers by a factor of 100 since 1970,

primarily due to development of methods to

reduce impurities in the fibers.

Activities are being directed toward further

improvements in optical fibers. These include

research into different cross sections for fiber

cores, such as circular, triangular, and oval,

as investigation into new materials such as

plastics, and improvements in fiber splicing

techniques. Research into plastic materials is

about at the stage of 1975 era research in glass

fibers, and promises even lower cost, more

durable fiber materials for some applications.

Longer wavelength (1.7 and 4.0 micron) material for fibers is also receiving attention, as

these show promise of decreased attenuation

by a factor of 10 to 100 over that of currently

available fibers, with long-term prospects for

transcontinental or transoceanic transmission

without the need for repeaters.

Light Generators and Detectors

Light generator and detector technologies

are important areas of research. Research is

continuing to improve the lifetimes of these

devices, their spectral stability, the narrowness of spectral emissions, switching speeds,

current threshholds, and receiver sensitivity.

The most recent advance is the cleave-coupled

cavity laser—a device notable for its wavelength stability and capability of changing frequencies rapidly, making it attractive as a

multisource generator. It has been demon-
74 . /formation Technology R&D: Critical Trends and Issues

strated at 274 Mbs over 100 km of fiber optic

cable by Bell Laboratories, and at 1.6 Gbs

(billion bits per second) over 40 km by the

Japanese.

Coherent detection, a technique to improve

receiver sensitivity and to increase the information carrying capacity of fibers, is being

pursued in many research laboratories, and

may become important if a variety of obstacles

can be overcome.

Research is also continuing into ways of integrating light sources, detectors, and the

associated circuitry into single chips thus

lowering cost and increasing reliability.

Optical Multiplexer

Optical multiplexer (and demultiplexers)

are devices that combine (or separate) different

signals so they can be sent through the same

optical fiber. Wavelength multiplexing is already being used in AT&T’s east coast and

west coast systems, and a few experimental

systems in Japan, Canada, and Europe. Research in wavelength multiplexing techniques

should lead to important cost savings for wideband systems.

Connectors and Splicing Techniques

Research is continuing to simplify techniques for splicing together separate segments

of optical fiber and to achieve lower losses due

to the splice.

Bell Labs recently announced the development of an ultraviolet splicing system that

contributes only 0.03 decibels to signal loss,

using an optical test signal to assist in the

alignment of fibers.

Switches

Switching permits a signal to be routed

through specific paths to subscribers. Switching is a bottleneck in optical communications

systems because the conversion of signals

from light to electronic (current switch technology is electrical) causes delays in moving

the signals through the system. Improvements in switching capabilities hold promise

for reducing the number of conversions required from optical to electronic and vice

versa. Current switches are expensive, limited

in applications, and of unpredicted reliability.

Optical switching research is being conducted at Bell Laboratories and the University of Arizona, where experimental, room

temperature switching rates, for “turn on, ” of

50 picosecond (50 trillionths of a second) have

been measured.

Storage

Research is continuing into methods for

storing optical signals on fixed and volatile

memory devices. Improvements in storage will

make possible store and forward and electronic

mail features for optical networks.

Amplifiers and Repeaters

Regenerative repeaters detect a signal, then

amplify, reshape, and retime it into a replica

of the original signal. The regenerated signal

then modulates a laser or light emitting diode

for transmission along the next span of optical

fiber. Decreasing the number of repeaters required along a line depends in part on amplification capabilities.

Integrated Circuits

Research is continuing to improve capabilities for putting optical and optoelectronic

light generators and detectors onto single integrated circuits, and to increase the operational bit rates. Recent breakthroughs hold

promise for reducing the number of discrete

components required in fiber optic systems

and expanding bit rate capabilities.

Research in Japan

While research in fiber optics is being actively pursued in the United Kingdom, France,

and West Germany, the most advanced foreign research has been undertaken in Japan.

Japan’s research is being conducted, at least

in part, to support the development of a new

nationwide broadband telecommunications
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 75

network that will make extensive use of fiber

optic technology. Research is also being supported for future commercialization and international markets. Fiber optic research supporting this network is performed mainly in

private companies, and is supported by the

Ministry of International Trade and Industry

(MITI) through the Optical Measurement and

Control System (OE) project. OE plans to develop optoelectronic integrated circuits, transistors, and GaAs/GaAIAs lasers and detectors. The budget is approximately $100 million

for the 1979-87 time period. Half of this amount

is to be devoted to a coordinated research facility, information exchange among researchers, and the remainder on projects in six or

seven companies, including Hitachi, Nippon

Electric Corp., Toshiba, Mitsubishi, Fujitsu,

and Matsushita. Japanese investment in infrared laser research is estimated at between

$3 million and $4 million.

Case Study 3: Software Engineering

Findings

Software is an important factor in information technology, exceeding four times the

cost of hardware in large systems. The relative decline in hardware costs is shifting the

focus of R&D to software. The complexity

of new applications and information systems is also forcing the focus of information

technology R&D toward software issues.

R&D in software engineering has produced

prototypes of software design tools and programming environments (integrated sets of

tools) that promise significant productivity

increases. But the cost of retooling, including retraining software manpower, and the

uncertainty associated with innovation

in software development are retarding adoption of innovative tools and techniques.

In order to speed the acceptance of software

engineering innovations, an applied research

base needs to be established to scientifically

test and validate new software development

techniques, and to disseminate information

on their performance in specific applications

environments. Such an applied research

base would link basic research in universities to applied research and development

efforts in industry and government.

Foreign efforts, particularly those in Japan

but also national targeted efforts in Europe,

show signs of movement toward such an applied software engineering research base.

●

●

The Federal Government, through the Department of Defense, is making some efforts

to create a software engineering applied

research base for national defense purposes,

but the applicability of this research base

to the general problem of software productivity in the American economy is uncertain.

It is difficult to differentiate software production activities from R&D, especially development. Much software production is a

creative design effort. There are some aspects and types of programming that are

clearly not R&D, but the dividing line is difficult to define.

Introduction

The term software refers both to the instructions that direct the operation of computer

systems, and the information content, or data,

that computer systems manipulate. Software

is thus a logical rather than a physical product. An adequate organizing formalism or

calculus for software creation has not yet been

discovered. 50 Therefore, the development of

large, complex software systems depends

heavily on the insight and creativity of sys50” We are in a business that is 35 years old . . . and I invite

you to think where civil engineering was when it was 35 years

old . . . they had not discovered the right angle yet. ” Harlan

Mills at the OTA workshop, Nov. 17, 1983.
76 ● /formation Technology R&D: Critical Trends and Issues

terns designers and programmers. The methods presently employed to develop and test

software are ad hoc, without a strong scientific basis. Thus, software systems are expensive to build and maintain, and can be unreliable in operation. The problems associated

with inadequate software methods are growing as information technology uses spread and

are relied on for larger, more complex, and

more critical applications.

Research and development efforts have produced new methods that show promise for improvement in the productivity and reliability

of software creation, testing and maintenance.

These include Advanced program editors and

debuggers, new languages, design methodologies and integrated programming environments. However, the introduction of innovative techniques into software production is

proving difficult. The adoption of new methods often requires the conversion of large existing program inventories. This is expensive

and risky because evidence that one methodology is better then another is not systematically collected. As well, most software development is oriented toward the single project

at hand and often relies on antiquated programming habits and attitudes. The high job

mobility of programmers and software systems designers perpetuates individualism and

fragmentation in software methodology.

The establishment of software engineering

then, involves not only the development of

superior methodologies, but a transformation

of the programming process—from an art to

a science and from a labor intensive to a capital intensive effort. The pressures on software

production for larger, more complex, more cost

effective, and more reliable systems, make the

present situation untenable.” A concerted ef-

——— ... —- —-——

‘l’’ According to a projection made at an early 1981 data processing managers conference, Department of Defense software

costs would increase nearly three times as fast as the department’s budget, and nearly 20 percent faster than expenditures

for computers during the 1980s, ” B. M. Elson, “Software Update Aids Defense Program, ” Aviation Week and Space Technology, Mar. 14, 1983, p. 209. Just as the explosion in numbers of telephone operators in the 1930s and of bank clerks for

check processing in the 1960s forced a move to automated systems, the sheer demand for manpower in computer programfort among researchers, educators, data processing managers, systems designers, and programmers, and support from corporate and

Government management is required for this

transformation to occur.

Software R&D Environments

Varieties of Software and Characteristics

of Software Development

Software is classified as being of two general types: applications software that is designed to apply computer power to a specific

task or tasks, such as computer-aided design

of automobiles, or payroll or inventory management in a department store; and systems

software that is used to manage the components of an information system itself, such as

computer operating systems that control input and output operations.

In general, systems software is an integral

component of the hardware because its job is

to control the hardware, including the peripheral equipment–e.g., disk, printer, and

memory usage, and to schedule and accommodate the creation and execution of applications

programs. A recent trend, encouraged by the

spread of personal computers, has been toward

the use of standard systems software so that

a large number of applications programs can

be made comparable with hardware from different suppliers. The manufacturers of hardware or specialized software vendors write

most systems programs, and more of the systems programs are being embedded in hardware-in programmable integrated circuit

memory called ROM (Read Only Memory).

Thus end-users now generally do not create or

alter systems programs.

Much applications programming is done by

users. For personal computers in homes and

for supercomputers at the National Weather

Service, programs must be written to tell the

machines how to solve problems and organize

ming seems to be increasing the pressure for the introduction

of less labor intensive software development techniques; see

T. C. Jones, “Demographic and Technical Trends in the Computing Industry, ” DSSD User’s Conference.
information. Much of this work is done by

highly trained professionals knowledgeable

about computer systems and the problems to

be solved.

Not all applications programming is software R&D. For example, an economist writing

a short program to calculate a unique set of

statistics that may never be used again or by

others is not engaged in software R&D. Conversely, a physicist developing a program for

a supercomputer to calculate formulas used in

nuclear reactor design certainly may be involved in R&D. There is a large area in between these examples that is ambiguous, and

no hard data is available concerning the time

spent creating different categories of programs. The Internal Revenue Service has

faced this difficulty in defining the types of

software work that are eligible for the R&D

tax credit. Their proposed solution has been

to consider the costs of developing computer

software as not eligible for tax credits, unless

the software is “new or significantly improved, ”

or “if the programming itself involves a significant risk that it cannot be written. ”52

Software R&D in Industry

The information processing industry is

devoting a large and growing amount of resources to software development. Purchases

alone, currently some 12 percent of total

spending for software, are expected to exceed

$10 billion in 1984. Approximately 10,000

companies of various sizes, from one man operations to divisions of major corporations, are

developing software for sale. Estimates of the

total number of programmers in industry

range from 500,000 to nearly a million,53 and ——-——

‘*’’Credit for increasing Research Activity, ” Federal Register, Jan. 21, 1983, pp. 2799-2800. There has been considerable controversy over this issue. See W. Schatz “A Taxing Issue, ” June 1983, pp. 58-60. 53ADAPS0 estimates, and T. C. Jones, op. cit. p. 83.
78 ● Information Technology R&D: Critical Trends and IssueS

the distinction between hardware and software developers is becoming increasingly

blurred.54

Every major computer and telecommunications equipment manufacturer and service provider develops programs and software tools

to make their products suited to the needs of

users. Some firms such as Hewlett-Packard,

reportedly spend nearly tw0thirds of their

R&D budgets on software.66 More than 40 percent of the technical people at Bell Labs are

involved with software development.56

Interest in the improvement of software productivity has led some large corporations to

establish formal programs for the development and evaluation of software practices—to

introduce scientific and engineering techniques into the evaluation of software development and use. AT&T currently employs approximately 300 Ph.D.s in software research,

while IBM has approximately 150 and ITT

has about 20 of these researchers developing

and using formal experimental methods of

evaluating software engineering techniques.

Other large companies, including Control

Data, Xerox, and Honeywell, are also beginning to use experimental R&D studies as the

basis for improvements in software production.57

The Federal Role

The National Science Foundation funds university and some corporate research in software engineering. The NSF Software Engineering Program within the Division of Computer

Research awarded $2.2 million in grants in

fiscal year 1983.56 Additional research related

to software engineering is funded by other programs in the Computer Research Division

(e.g., the Software Systems Science, Computer

— — . ——

54See, for example, S. B. Newell, A. J. De Geus, and R. A.

Rohrer, “Design for Integrated Circuits, ” Scieme, Apr. 29,

1983, pp. 465-471. See also “The Changing Face of Engineering, ” Electrom”cs, May 31, 1983, pp. 125-148.

‘SW. P. Patterson, “Software Sparks a Gold Rush, ” industry Week, Oct. 17, 1983, pp. 67, 69-71.

56AT&T: 1982 Annual Report, p. 19.

‘70TA workshop on Software Engineering, Nov. 17, 1983.

58Summary of Awards, Fiscal Year 1983, National Science

Foundation, Division of Computer Research.

Systems Design, Theoretical Computer Science

and Special Projects Programs) bringing the

total funding to $5 million to $10 million per

year.59

The Federal Government is the world’s largest user of data processing resources. A recent

GAO study found that 95 to 98 percent of the

Government’s applications software is custom

developed. 6o The cost of software for the Department of Defense is estimated to be $4 billion to $8 billion per year.61 DOD operates a

patchwork of incomparable systems and computer languages.62 The incomparability of software contributes to increased software development costs, through schedule slippages,

lengthy testing programs, and problems in

contracting for hardware and software services.

DOD has moved toward the development

and use of a single standard computer language. The rationale for this is the potential

for saving several hundred million dollars a

year through lower personnel training costs,

increased programmer productivity, and substantial reuse of standard code modules. After

competitive development of four separate languages and extensive design evaluation, the

Pentagon chose a language developed by the

French company Cii Honeywell Bull. The

name of the language, Ada, is trademarked,

and compilers using the Ada name are strictly

controlled and validated to assure that the language remains standard. Ada is expected to

be the primary DOD computer language by

1987.

There is some resistance to use of Ada. Several years ago, the Air Force developed its own

quasi-standard language, Jovial. Comparison

tests between Ada and Jovial will continue for

59Estimates by OTA.

‘“’’ Federal Agencies Could Save Time and Money With Better Computer Software Alternatives, ” General Accounting Office, GAO/AFMD-83-29, May 20, 1983, p. 1. Even standard applications such as payroll are largely custom designed. This

GAO report found that there are at least 78 different Federal

civilian payroll systems. elElson, Op. Cit., p. 209.

’21. Peterson, “Superweapon Software Woes, ” Science News,

May 14, 1983, pp. 312-313. Testing of software alone is estimated to account for nearly half of this cost.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 79

the rest of the decade.63 The Army is more enthusiastic about Ada. The Navy, which has

more software already written than the Air

Force and Army combined, is interested, but

the task of switching the Navy to Ada will be

enormous. The Navy has over 450 different

systems and subsystems with embedded computers, and the number of Navy computers

has been doubling every 2 years.64

A limitation of Ada is that a new programming language only addresses about 20 percent of the total software problem. As detailed

below, coding of computer programs is 20 percent or less of the effort of developing and

maintaining software. Government computer

systems in particular require an enormous

amount of documentation, and Ada has no facilities for automated documentation.65

To deal with these problems of software design, production and maintenance, DOD has

proposed a new initiative called Advanced

Software Technology.66 This is envisioned as

a 10 year program costing $250 million.67 The

administration requested a funding level of

$19.3 million in fiscal year 1984, but the Senate Armed Services Committee cut the program to $10.5 million because, “The Committee is not convinced that the necessary

planning has been done to justify a budget of

nearly $20 million in the first year. ”68 Included

in the plan, as it has thus far been developed,

is a provision for a Software Engineering Institute to help formulate and standardize software engineering techniques and practices.69

— . —

“J. Fawcette, “Ada Tackles Software Bottleneck, ” High

Technology, February 1983, pp. 49-54.

64petergon, op. cit.,p. 313. It has been estimated that there

are some 50 million unique lines of Navy software code in a variety of languages currently in use, It would cost, it has been

reported, some $85 billion and take several years to rewrite this

mass of code.

e5The OTA workshop on Software Engineering, NOV. 17, 1983.

“This initiative is known within DOD as STARS, Software

Technology for Adaptability, Reliability and Serviceability.

eTPeterson, Op. cit.

eaomm”bus Defense Authorization, 1984, Report to Accompany S.675, Committee on Armed Services, U.S. Senate, p. 131.

‘BOTA Workshop on Software Engineering, NOV. 17, 1983.

Content and Conduct of Software

Engineering R&D

Software engineering ideally is a set of concepts and tools for transforming descriptions

of tasks to be performed by computer systems

into digital code that machines can understand. Software engineering research involves

the study of methods to understand, improve,

implement, and evaluate these concepts and

tools, and to embody them in software development systems or programming environments to facilitate the entire software lifecycle.

The Software Lifecycle

As can be seen in figure 10, there are several stages in the life-cycle of a piece of software. Each of these stages is characterized by

its particular set of objectives and methods

that influence each stage of research and expected improvements. Testing occurs continuously throughout the life of a software and is

an integral part of software production and

maintenance. Documentation, an activity not

depicted in figure 9, is of preeminent importance in every phase of the software lifecycle.

Comprehensive records of every activity and

software characteristic must be created to aid

designers, programmers, maintainers, and

users in understanding the structure and operation of the software system.

Requirements Specification

This initial phase of software development

involves the description of the system objectives and the tasks that the end users want

performed. This description requires a thorough knowledge of the application by the software design project team. It is accomplished

by rigorous and continuing communication between the project team and the end users.

OTA advisors and published sources emphasize that requirements specification is the

most critical phase of project development, because all of the later stages must build on the

foundation laid in this activity. At the same

time, it is the most difficult activity in the software lifecycle to develop a rigorous method-
80 ● Information Technology R&D: Critical Trends and Issues

Figure 10.—The Software Life Cycle

SOURCE: Data Communications.

ology for. Requirements specification involves

the understanding, explicit organization, and

integration of what are often idiosyncratic

practices of information usage. Often it is not

possible to completely specify requirements at

the beginning of a project; also, requirements

can be expected to change over the course of

a long software development project.

Computerized tools now available or under

development may offer assistance in the specification process. 70 They are designed to help

users describe and specify system properties,

functions and performance requirements.

Some of these tools allow the specifications to

be checked by computer for consistency and

correctness; some of them can generate simulations to help the user analyze the operation

of a specified system. Thus far these tools have

worked well only on a limited range of applications.

A difficult problem is specifying how the

knowledge, experience and habits of workers

in particular environments can be described

and how these abstract specifications can be

7WTA workshop on Software Engineering, Nov. 17,1983.

converted into machine code. Research is proceeding in knowledge representation and

knowledge engineering (see Artificial Intelligence Case Study). Near term prospects are

uncertain for identifying core concepts for

organizing the different kinds of knowledge

found in the variety of environments in which

computers are applied, or designing broadly

applicable very-high-level languages which can

automatically render abstract specifications

in machine-executable procedures.71

The experience now being gained in research

and development of “expert systems, ” and the

more fundamental research efforts in knowledge representation, machine learning and

human cognition should eventually contribute

to the process of computer systems requirements specification. But for the near term, this

phase of software development will remain labor intensive and will require special skills (including human relations) and specific knowledge of applications among its practitioners.

——. —

“R. Yeh, “Software Engineering, ” IEEE Spectrum, Nov.

1983, p. 92.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 81

Prototyping

Once the project team has a working knowledge of the requirements of the software, a preliminary design of the final system is made so

that the team can obtain feedback from the

users. Thus, fine adjustments can be made at

an early stage.

A software prototype can be as simple as a

paper and pencil sketch that runs through the

workings of the system, or as complex as a

large and intricate computer simulation. The

choice of prototype complexity is based on the

nature of the application, the level of training

and the sophistication of the end users, the

size of the final software system, and the

criticality of the application.72

Research and development of the prototyping phase involves the design, development

and testing of methods and tools to make prototyping more understandable to systems designers and users, and more automated so that

it is a logical and accepted part of software development. Research efforts in universities

and industry are focusing on languages that

make the quick production of prototypes possible, and on the design of man-machine interfaces to enhance and verify the effectiveness

of communication between the system and its

users.

The major issue in prototyping involves the

acceptance of this activity and the awareness

among system designers of its importance.

Prototyping is commonly ignored in current

software development practice because of its

expense and difficulty and the lack of automated support. But experts contend that, in

the long run, prototyping can save time and

effort because changes to requirements specifications become more costly as each phase of

software development proceeds.

Design

The design stage of software development

involves the reduction of the software speci72 For example, air traffic control software requires extensive

simulation, whereas an inventory system might need only a simple sketch and some text to check against user needs.

fications to a set of procedures that can be programmed for the computer. The software

design team analyzes the application and segments the design problem into subproblems

or modules that can be programmed by individuals or small groups.

The segmentation or modularization of the

software design breaks the problem into manageable pieces to maximize the ease of programming and testing the segments, and to

facilitate the interchange or replacement of the

modules to simplify maintenance. Proper

segmentation is of particular importance because it has been demonstrated that as the size

of the programming project team grows, more

and more time is spent communicating among

team members and coordinating communication among program segments and less in actually writing code. Thus segmentation has a

crucial impact on the overall productivity of

the software development team.

The design phase of software production

relys heavily on the experience and intuition

of the design team and is considered to be best

learned by apprenticeship. Understanding of

fundamental mathematical principles is also

important. 73

Research on the design phase of software

engineering is embedded within the larger

framework of R&Don “programming environmerits. ” The objective of software engineering is to provide as much support as possible

for the creative designer. Facilities should be

made available to ease the rendering of abstract principles and problems into workable,

testable, reliable, and cost-effective solutions.

Software design can be made more productive

in much the same way that design of complex

integrated circuits has improved: by the application of computer-aided-design (CAD) tools

based on sophisticated graphics workstations.

A number of companies are making significant

productivity gains using CAD tools for software design.

. —

“Data Communications, op. cit. p. 81, and AZosa”c, op. cit.

pp. 4-5.
82 ● Information Technology R&D: Critical Trends and Issues

In the longer term, software design productivity could improve significantly through the

expanded development and use of software

Libraries, or systems to store and access standard, reusable software modules that perform

functions required in many programs. As now

practiced, software design generally segments

each program problem in a unique fashion,

both to accommodate the unique features of

new applications and to make the most efficient use of hardware. Program modules are

usually not designed for reuse, and there is no

strong incentive to do so because facilities are

not provided for storing separate modules or

for classifying and finding appropriate segments for new programs, and because the project development team is generally unable to

spread the cost of creating reusable modules

across a large organization. The result is that

designers and programmers are constantly

“reinventing the wheel” in software development.

Researchers in computer and information

science have identified basic techniques and

have designed tools to provide generic programming modules, data structures and algorithms, and to classify and organize them for

storage and access. But the software community has been slow in adopting the facilities

necessary to make software libraries work because of high initial cost, poor management

understanding of such systems, and reluctance

among programmers to modify long-established

design practices.

coding

Coding is the stage of software production

that makes a procedural description of the system executable by computer. More emphasis

has traditionally been placed on this activity

than on any other, even though it is estimated

to comprise only 15 to 20 percent of the total

software development effort.74 The reason for

the traditional emphasis on coding is that it

represents the basic mechanism by which pro-

— .————. .—

“Data Communications, op. cit. p. 58, and E. B. Altman,

“Software Engineering, ” Mim”-Micro Systems, December 1982,

p.184.

grammers control the operation of computer

systems.

Many tools are already available to programmers to help produce efficient and reliable code. The most familiar of these are the

high-level languages such as FORTRAN,

COBOL, and Basic that were designed to aid

programmers in coding certain broad types of

applications. Compilers translate high-level

language into machine executable binary digital code. Editors and debuggers facilitate the

entry, testing, and correction of code lines.

Research and development in the improvement of computer code writing continues. Innovations over the last decade include structured programming which greatly simplifies

the tasks of testing and deciphering code during maintenance, and new high-level languages

designed to be easy to learn and use or technically sophisticated (no languages yet introduced appear to be both simple and highly

flexible).

A recent trend, that has proceeded hand in

hand with the introduction of personal computers, has been the development of coding

systems or languages that can give end users

of computer systems more control—and remove the need for the help of a professional

programmer for each application. An example

is Visicalc.

Large companies, including manufacturers

of mainframe computers, are interested in

decentralizing the control of computer programming and use by providing software systems that are responsive to the needs of noncomputer professionals. A proposed solution

to the software bottleneck dilemma is to farm

out some of the work now done by professional

programmers to end users. IBM, for example,

asserts that up to one-half of computer applications development can and should be handled by the end-users with personal computers. 75

75AppZication Development in Practice, Tech Tran User Survey, Xephon Technology Transfer, Ltd., 1983, pp. 53-54. Some

experts consider this solution to be dubious, and believe that

it may in fact merely spread software problems.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 83

The proliferation of personal computers in

the business world has some other possible implications, both for the process of software development and for employment patterns of

professional software development personnel.

End-users programming on personal computers could allow central data processing departments to concentrate their efforts on the

larger, more complex, and more critical applications. A reduction in the backlog of small

projects could also encourage the development

of new large-scale applications that heretofor

languished because of long waiting times. It

is conceivable that the demand for professional programmers will slacken in such industries as financial services which have traditionally employed a large part of the data

processing workforce in coding and maintaining applications programs. This could result

from trends toward: 1) small-scale applications

development by end-users with personal computers using commercially available software

packages, and 2) increased use in data processing shops of standardized and automated

software development tools, also commercially

obtained, for large-scale projects. But increasing demand for innovative, off-the-shelf applications programs and software development tools suggests that demand for the most

talented software designers will increase as

competition intensifies in these expanding

markets.

There is a secondary impact of the introduction of personal computers on software development. Upper management is becoming familiar with the problems and possibilities of

software and computer use through experience

with personal computers. Management aware

ness of and commitment to change in the software development process may be a key factor in introducing and accepting software engineering concepts and innovations.

Large and complex applications will continue to depend on the efforts of professional

software designers and programmers. Thus,

the introduction of automated tools and techniques such as CAD are imperative. Pressure

will continue for more productive and reliable

software engineering as the complexity of

computer-based systems increases and as

more of society’s functions are entrusted to

computerized systems.

Testing and Validation

An important activity in software production and maintenance is the testing of the

products of the various phases of the software

lifecycle. Until recently software development

budgets included sufficient funds for adequate

testing in only a few highly critical projects.

It is impossible, no matter how extensive

the testing activities, to guarantee large software systems to be error free. A risk assessment based on the cost associated with software defects or breakdown in a given application

must be made to determine the level of effort

in testing that is justified. A rigorous testing

regime can double the cost of software development.

There are many concepts, tools and techniques available and undergoing research or

development for testing and validating software. They range from traditional methods

such as manual “desk checking” or “walk

throughs, ” to statistical methods to determine

the probability of errors in a set of code, to

some as yet highly experimental automated

program provers that verify that properly

structured programs perform as specified. The

broad applicability of program provers will de

penal on some fundamental breakthroughs in

program theory.76 Until the requirements

specifications and design stages of software

development are better understood and supported, manual techniques will be the key

testing methods available. Although some

automated tools are in use, few exist as integrated packages. They must generally be

pieced together by individual projects; and

— —.

“Some experts contend that the pursuit of formal verification methods such as program provers may prove fruitless because of the increasing complexity of software and the rapid

changes in software development practices. See R. A. DeMillo,

R. J. Lipton and A. J. Perlis, “Social Processes and Proofs of

Theorems and Programs, ” Communications of the ACM, May

1979, pp. 271-280.
84 ● /formation Technology R&D: Critical Trends and Issues

they themselves can become sources of high

cost and errors.77

Maintenance

This is the phase of the software engineering lifecycle that is concerned with the revision of software that is in use. Software maintenance consists of two kinds of activities:

correction of errors that went undetected in

the course of software development and testing but that crop up in the use of the software;

and changes in programs resulting from altered or additional requirements specifications. It has been estimated that 50 to 90

percent of current software costs involve maintenance. Some software systems may cost 25

times as much to maintain as to develop.78 Because of poorly designed, badly written, and

inadequately documented code, much of the

maintenance programmers’ time is spent trying to understand programs rather than changing them.

A solution to the maintenance problem

adopted in many cases is to discard old code.

This is because experience indicates that the

“patches” made in programs when they are

fixed or revised often increase the complexity

and difficulty of maintaining code and make

it inefficient to run. Therefore an average of

10 months worth of programming development effort is thrown away each year by mainframe based data processing organizations.

Unfortunately, this old code is often replaced

by poorly designed new code which again is

difficult and expensive to maintain.

Poor requirements specification and design

practices, idiosyncratic coding styles, and

poorly organized documentation increase

maintenance costs. Because requirements

were vaguely specified or have changed, the

design proceeded on assumptions that were

false or later rendered invalid. Bad design

assumptions lead to poor segmentation and

structuring of programs which exacerbate the

77w.R.Adrion,hf. A. Branstad, and J. C. Cherniavsky,

“Validation, Verification, and Testing for Computer Software,”

ACM Computing Survey, June 1982, p. 183.

7sOlsen, op. cit. p. 58.

problems of making changes and testing. A

change in one part of a poorly designed program will require changes in other parts of the

program, multiplying the cost and time for

maintenance. Novel coding of standard functions increases the difficulty of predicting the

effects of changes. Large and cumbersome,

poorly organized and incomplete documentation make it difficult for maintenance programmers to know what the system is supposed to do.79

Junior programmers with little experience

are generally assigned to maintenance tasks,

thus increasing the delays in bringing software

back into use, and also perpetuating the

knowledge and acceptance of poor programming styles and habits.

The Scientific Basis for Software Engineering

There are some well understood scientific

methods that can contribute significantly to

the improvement of software engineering tools

and practices. The application of scientifically

designed, experimentally based statistical

methods for the evaluation of the effectiveness

of software tools may produce the concepts

and methods for at least an order of magnitude increase in software productivity.

In particular, in the critical area of human

interaction with computers, a body of research

methods have been developed in universities

that, if widely and systematically applied,

could identify, quantitatively assess, and produce improvements in programs for making

computers more responsive and easier for people to program and use. Research in behavioral

psychology and psychophysics is being applied to the design of computer systems and

software engineering tools on a limited basis

in a number of university programs.

The limited scale of commitment to applied

research in software engineering maybe a major reason for lack of dissemination and use

of these well understood techniques. Acad7%3TA advisors related that program documentation captures,

on average, only 60 percent of the information needed to fully

understand a program.
Ch. 3—Selected Case Studies in Information Technology Research and Development • 85

emics are generally involved in small-scale,

fundamental research oriented projects that

cannot test large size programs or a large number of possible software development aids.

Some researchers suggest that applied research on a massive scale following the model

of medical clinical trials is necessary to disseminate and make use of the knowledge embodied in available techniques.

Industry participation is an important ingredient in increasing the scope of experimentation because of its large and diverse software

efforts. As a user of innovative tools and systems, industry must also be involved in the

research so that essential feedback is provided

to tool designers and evaluators. Inadequate

appreciation of the gains that can be achieved

in software productivity and a concentration

on short-term results have made industry

management reluctant, until recently, to make

a commitment to large scale or long-term experimental software development studies.

As mentioned earlier, some large companies

are becoming interested in applied software research and are hiring computer and human

factors scientists to develop research programs. However, competitive and proprietary

considerations and the uncertainty of software

protection by copyright or patent appear to

have inhibited an integrated applied research

effort among companies. Antitrust laws may

also have a chilling effect on industry based

joint applied research.80

An alternative approach is for the Federal

Government to use its software development

efforts as a test-bed for software engineering

research. Some moves in this direction are being discussed within the defense community,

and the National Bureau of Standards has a

research effort in software engineering in its

Institute for Computer Science and Technology.

SOEleven major defense contractor companies recently announced plans to form a consortium for the pooling of efforts

in software engineering R&D. The Justice Department has

reportedly given the go-ahead for the development of a formal

business plan patterned after the Microelectronics and Computer Technologies Corp. (MCC). M. Schrage, “Software Research Group Set, ” Washington Post, Oct. 10, 1984, pp. C1-C2.

International Efforts in Software

Engineering R&D

Japan

The Japanese have had a software engineering effort since 1970.81 The Information Technology Promotion Association (IPA), a consortium of private companies and the government, together with long-term credit banks,

provided $25 million in 1983 for software R&D

and technology transfer. Current projects include: purchase or development of software

packages for rent to users; a Software Maintenance Technology Project, to be completed

in 1985, which is developing work stations for

program analysis, documentation, testing, and

production management; and a cooperative effort among users, suppliers, and researchers

to develop computer-aided design, computeraided instruction, and software engineering innovations.

A noteworthy aspect of Japanese software

engineering efforts is the establishment of

software factories. These are consortia, staffed

by people from participating companies, which

are creating integrated environments for software production, testing, and maintenance.

Impressive programmer productivity gains

are reported to have resulted from the average reuse of 30 percent of computer code in

new applications.82 Japanese software factories appear to owe their success in raising

productivity levels, in part, to the fact that

only restricted kinds of applications with fixed

and well understood requirements are attempted. It is uncertain how effective these

software factories would be on more difficult

applications. Nevertheless, these concerted,

cooperative efforts provide a test-bed for new

software engineering concepts and tools in a

well capitalized development and production

environment. As well, they train people in the

use of advanced software development techniques, serve as a dissemination mechanism

81 Summary of Major Projects in Japan for R&D of Information Processing !fechnology, prepared by Arthur D. Little (Japan), Inc., under contract to OTA, July 1983.

‘*Raymond Yeh at the OTA workshop on Software Engineering, Nov. 17, 1983.
86 • Information Technology R&D: Critical Trends and Issues

when those people return to their companies,

and raise management awareness of the importance and efficacy of software engineering.

Thus software factories have potentially significant implications for future Japanese software development efforts on a broad scale, regardless of their impact on individual software

systems.

Britain

As a part of the Alvey Programme for R&D

in information technologies (see ch. 7), Britain plans to spend approximately $100 million

over 5 years (1984-89) on software engineering R&D, which is approximately 20 percent

of the total Alvey Programme effort.83 Britain’s traditional strength in software will be

built upon, expanded and modernized to minimize dependence on software imports.84 An

initial focus of the Alvey effort will be the

measurement of the cost effectiveness of software engineering through analysis of software

imports and exports. Also, the program will

track the capitalization of software development and analyze the relationship of capital

intensity to programmer productivity. Efforts

will be made to establish formal output measures for software cost and quality to help

evaluate new tools and methods and to establish a system for software warranties.85

The software engineering effort will consist

of three main thrusts:86

1. Exploitation of existing tools and methods, the transfer of technology from universities to industry, and increased investment in software production capital

and in training.

—.. .. —-. .— 83A fiO/@UIMIl e for Advanced Information Technology: The

Report of The Alvey Co-”ttee, Department of Industry, Her

Majesty’s Stationery Office, p. 47.

84A]veySoftwwe En@”nMring—A Strategy Overview, Prepared by Alvey Software Engineering, Director D. E. Talbot,

Department of Trade and Industry, p. 1.

as~ftwm &h”abih”ty and Metn”cs ~gramm e: Ovem”ew, prf+

pared for the Software Engineering Directorate by the Center

for Software Reliability, Alvey Directorate, Department of

Trade and Industry, April 1984, p. 4.

‘Alvey Software En@”neen”ng-A Strategy Overview, op. cit.,

p. 3.

2.

3.

Integration of tools and methods for the

improvement of hardware and software

development which will be focused in an

Information Systems Factory.

Innovation software engineering through

increased levels of R&D aimed at developing new tools and evaluating their effectiveness.

The Information Systems Factory, to be established by 1989, is based on the premise that

information systems’ functional requirements

may be written independently of whether a

given function is to be implemented in hardware or software. Therefore, it is reasoned, the

trend should be toward the design of modules

whose uses are known in relation to other modules, such that the decision of whether to implement a function in hardware or software

may be made on the basis of economic, timescale and other cost-benefit criteria. The Information Systems Factory concept will evolve

into the 1990s, by which time advances in fundamental research are expected to make possible a truly intelligent software engineering

production environment with fully automated

and integrated tools and a large library of

standard function modules.87

The British consider the understanding of

software engineering concepts to be too primitive at this point to make a final determination of a single direction to pursue to produce

a fully integrated software engineering environment. Like those in the United States, current British research projects are too small in

scale to adequately test software in diverse applications to determine the efficacy of new

tools and methods. The Alvey Programme will

fund several approaches for full-scale development, both to select useful techniques and to

build technology transfer bridges between research, development, and production. In this

context, the software engineering effort is expected to contribute to, and to benefit from,

the parallel Alvey Programme efforts in computer-aided design for VLSI circuits and

knowledge-based systems.88

——..—————

“Ibid., pp. 5-7.

*

a

Ibid., pp. 7-8.
Ch. 3—Selected Case Studies in Information Technology Research and Development Ž 87

France

Like the British, the French have been noted

in the past for the quality of their software.89

The major French R&D centers for software

engineering are run by L’Institute National

de Recherche en Informatique et en Automatique (INRIA) and the Centre National d’Etudes

“

yThree significant computer languages, Algol, Prolog, and

Ada, were originated in France.

Telecommunications (CNET). Together, these

laboratories employ approximately 100 researchers in software engineering and related

studies. 90In addition, 11 other French Government and industry labs are pursuing R&D

in software engineering.91

wRe~ewch and De\~e]opnlent in h’lectrom”cs uSA-France

1982/1983, French Telecommunications and Electronics Council, March 1984.

glI~~E Spectrum, November 1983, PP. 64-65.

Case Study 4: Artificial Intelligence

Findings

● Artificial intelligence (AI) research seeks to

make computers perform in ways that demonstrate human-like cognitive abilities: perception and action in complex situations

and environments; interaction with humans

in natural language; and common sense and

the ability to learn from experience.

● The capabilities of artificial intelligence are

often subject to exaggeration. AI has gone

through several waves of optimism and disappointment as new fundamental concepts

have been discovered by research, as new

computational techniques and equipment

have allowed these concepts to be tested,

and as the limits of these concepts have

been realized when applied to real-world or

large-scale problems.

● In the last several years, the first real commercial products of about 25 years of AI research have become available. These systems are of three types:

— expert systems that aid human experts

in analyzing complex situations and in

making decisions,

— natural language processing programs

that serve to make the interaction of humans and computers more natural, and

— image or vision processing systems that

can make robots and other automated

processes more flexible in operation.

● Presently available AI technology is of

value in only a limited range of applications.

But the promise and potential have led to

several national efforts to push AI technology forward.

In the United States, AI research has been

supported principally by the Department of

Defense. Plans for putting artificial intelligence concepts to work in defense applications have recently been announced. These

applications are far beyond the capabilities

of any present systems.

Basic AI research is conducted at a relatively small number of the nation’s top

universities by a small number of researchers. These researchers are under conflicting

pressures from companies wishing to capitalize on the production of highly valuable

systems, from students demanding training

in AI, and from personal desire to pursue

their own research interests.

Only a few universities have the facilities

and equipment to compete with industrial

AI labs. Therefore some highly motivated

researchers are drawn out of academia

where they would be available to perform

needed fundamental research and to train

future generations of researchers.

Introduction

The goal of artificial intelligence (AI) research is to create systems that demonstrate

some of the following characteristics: the

ability to assimilate unstructured information

and to act independently in complex situations; the capability of natural language interaction (e.g., in English) with humans; com38-802 0 - 85 - 7
88 • Information Technology R&D: Critical Trends and Issues

mon sense, and the ability to learn from

experience. 92 The possibility that machine s

may be made capable of such activities has

burst into public consciousness as a result of

the increasing power of microelectronics-based

computers and their application in many new

environments, the establishment of national

efforts with the aim of creating intelligent

computer systems, and the sudden emergence

of some commercial products that embody

characteristics of artificial intelligence.

Some experts contend that the ultimate aim

of computer science is to produce intelligent

machines. Just as the industrial revolution

was driven by the urge to amplify human and

animal muscle power with more efficient mechanical devices, the computer revolution is

driven by the desire to amplify human intellectual power with electronic information

machines. 93

An expanding user population and the increasing diversity and complexity of the applications of current and planned information

systems, are compelling designers to find ways

to build intelligence into computers. Computers are increasingly being required to exchange information among people with diverse

interests, backgrounds, and levels of computer

sophistication, so they are being designed with

software that permits people to interact with

them in forms more closely resembling natural language. New varieties of sensors and increasingly diverse sources of information are

providing input, thus computer systems must

be more flexible to make use of information

with varying levels of importance and confidence attached to it. Processing and output

9~D.w~tz, “Artifici~ Intelligence: An Assessment of The

State-of-theArt and Recommendation for Future Directions, ”

AI Magazine, fall 1983, pp. 55-66.

93 For exmple,the Japanese 5th Generation project is motivated by a belief that intelligent computer systems will be one

of the cornerstones of a healthy economy and society in the later

years of the 20th century and beyond. See T. Moto-oka, “Challenge of Knowledge Information Processing Systems (Preliminary Report on Fifth Generation Computer Systems), ” pp. 3-

89, and H. Karatsu, “What is Required of The 5th Generation

Computer–Social Needs and its Impact,” pp. 93-106 in Fifth

Generation Computer Systems, T. Moto-oka (cd.), JIPDECNorth Holland, 1982, 287 pages.

facilities are needed that present information

in forms that are tailored to the unique needs

of individuals, or that can control operations

in complex and perhaps unpredictable circumstances.

The complexity of the environment in which

the system is to operate is perhaps the most

important dimension to be considered in the

design of AI computer systems. As the number of environmental variables increases, and

the number of possible responses multiplies,

automated systems must exhibit increasing

degrees of intelligence. Currently, computer

systems are being designed for environments

in which they will be required to resist confusion and error from ambiguous or contradictory input signals, automatically coordinate

diverse activities under changing conditions,

and provide logical and understandable explanations of their actions to operators.

The highest degree of machine intelligence

might be the ability to automatically adapt to

conditions that were not specifically anticipated by the designers. Such ability would require a machine to have “common sense, ”

broad world knowledge from which to infer

reasonable courses of action, and also the

ability to assimilate new knowledge by learning, through self-organization of experience.

Machines with this degree of intelligence are

speculative, and attempts to push present AI

concepts toward such capabilities illustrate

both the difficulty of the problems, and the inadequacy of present concepts as a foundation

for machine intelligence on a scale approaching

the cognitive abilities of humans.94

There have been some notable recent successes in applying AI concepts to real-world

problems. The introduction of a number of AI

systems into commercial use has elicited a demand in industry for AI software that can

make computer systems more responsive and

productive. Three types of artificial intelligence products in particular are generating in-

“Some tasks requiring “intelligence” are already performed

better by machines than humans, f~r example long division;

other tasks may never be performed by machines. See Waltz,

p. 55. See also M. Michael Waldrop, “The Necessity of Knowledge, ” Science, Mar. 23, 1984, pp. 1279-1282.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 89

tense interest among industrial companies.

These are: natural language data base interfaces that allow users to access information

stored in a computer data-bank with English

language queries; expert systems that aid people in complex tasks that require experience

and detailed knowledge to perform; and robot

vision systems that promise increased flexibility in manufacturing and other robot applications. Industry sees these systems as

enhancements or potential replacements for

rare and/or expensive human skill.

Similarly, the Department of Defense is interested in artificial intelligence to enhance the

power, efficiency and reliability of increasingly

automated computer-based weapons and command and control systems. DOD’s new “Strategic Computing” program seeks to push the

frontiers of AI science and technology for use

in battlefield management systems, autonomous (unmanned) tanks and submarines, and

automated expert assistants for airplane

pilots.

There is concern, among both AI researchers and observers of information technology

R&D, that enthusiasm about recent successes

and fear of foreign competition are encouraging irrational expectations for artificial intelligence. These forces are drawing limited AI

R&D resources toward risky, short-term development work, and away from some of the

tough questions that AI research should and

could answer. As Arno Penzias, Nobel laureate

and Vice President for Research at Bell Laboratories has written about artificial intelligence R&D:

A crash effort in any one area would inevitably pull talented people away from other

areas . . . whose payoffs to society might be

even greater in the long run. Our challenge is

to improve computers and extend their expertise into all the areas where people will need

them and want them. We can best do that

with a balanced program of research and development. . . using knowledge to help create

a society that provides a meaningful life for

all the people in it.95

‘6A. A. Penzias, “Let’s Not Outsmart Ourselves in ThinkingComputer Rush, ” Wall Street Journal, Sept. 13, 1983.

The sudden discovery of promise in artificial intelligence by society at large raises several questions. Of immediate concern are the

questions of whether AI, as it is now understood, can meet industry and military expectations for performance, or whether there will

be expensive failures in applying this technology, and by implication a casting of doubt on

the entire AI enterprise, because present concepts are immature and limited; and whether

the present educational structure, or some reasonable extension of it, can meet the growing

demand for trained AI R&D talent. For the

longer term, there is a question whether the

progress of AI research can be sustained in

the face of feverish commercial development,

or whether the limited number of researchers

will be drawn away from the study of fundamental and difficult problems and the teaching

of new AI people. There are also profound

questions concerning how artificial intelligence

technology might be used, and how these uses

might affect society in general, especially in

terms of employment and the potential the

technology offers to enhance or compete with

human intellect.

Artificial Intelligence R&D Environments

The Roots of AI

The idea of automated intelligence has intrigued mankind for more than a century.% In

the 1950s, two important figures in the early

history of electronic computers, John von Neumann and Alan Turing, both expressed confidence that within a short time computing

machines would equal or surpass human intellectual capabilities.97

‘E. Charniak, “Artificial Intelligence-An Introduction, ” pre

sentation at the 1983 Conference of The American Association

for Artificial Intelligence, Washington, DC. One can conceive

of artificial intelligence as the culmination of the mecha”stic

paradigm of scientific thought that has been dominant since

the time of Newton. See Science and Change, 1500 to 1700 by

Hugh Kearney, McGraw Hill, New York, 1971, for a discussion of the emergence of the mechanistic paradigm. Some

historians suggest that Man has always sought to represent

and embody life and intellect in his artistic and useful creations.

See J. David Boulton, Turing’s Man: Western Culture in the

Computer Age, (Chapel Hill) University of North Carolina Press,

1984,

“See J. von Neumann, “The General and Logical Theory of

Automata, ” pp. 99 and 109, and A. M. Turing, “Computing
90 • Information Technology R&D: Critical Trends and Issues

Improvements in the understanding of computation and knowledge organization coupled

with advances in computer speed and memory capacity made possible through improvements in electronics, have encouraged intermittent waves of optimism that super electronic

“brains” were just a few years in the future.

Time and time again, these waves of optimism

have ebbed in the face of a common problem.

As the systems that researchers contemplate

and build are required to deal with more information, and as the situations in which they

are required to operate become more realistic

(more perceptually complex and unpredictable), the fundamental computational principles

and methods they have to work with become

less efficient and impossibly sl0W.

98

The term “artificial intelligence” was coined

by John McCarthy in a grant application in

1956 to describe the subject of a conference

that he was organizing.99 This meeting, held

at Dartmouth College, brought together researchers in different fields whose common

concern was the study of human and machine

cognition. The conference established AI as a

distinct discipline, and also served to define

the major AI research goals: 1) to design machines that think, and 2) to understand and

model the thought processes of humans. Thus

AI research is grounded in computer science

and electrical engineering and also has its

roots in cognitive psychology, linguistics, and

philosophy. There is an appreciation among

many researchers that AI is an interdisciplinary study born of the interaction of these two

goals, and that the intersection of the separate traditions constitute what has come to be

a core of concerns that distinguish artificial

intelligence from other fields of science and

engineering. loo (See fig. 11.)

Machines and Intelligence,” p. 245, in Perspectives on the Computer Revolution, Z. Pylyshyn, (cd.), Prentice-Hall, Englewood

Cliffs, NJ, 1970.

‘aJ. T. Schwartz, “Research in Computer Science: Influences,

Accomplishments, Goals,” Report of The Information Z’echnology Workshop, R. Cotellessa, Chairman, National Science Foundation, Oct. 10, 1983, p. 18. ~gcharni~, op. Cit., p. 5-

‘OONils Nilsson, “Artificial Intelligence Prepares for 2001, ”

Presidential Address given at the Amual Meeting of the American Association for Artificial Intelligence, Aug. 11, 1983.

Figure 11 .—Artificial Intelligence

SOURCE: Randy Davis and Chuck Rich.

As an esoteric study melding some aspects

of computer science, linguistics, psychology,

and philosophy, artificial intelligence research

has grown up, for the most part, in an exclusive set of universities. Some industry-based

research efforts at AT&T Bell Laboratories,

Xerox Palo Alto Research Center, Bolt Beranek

and Newman, and SRI International span

more than a decade, but most of the work has

been concentrated at Massachusetts Institute

of Technology, Stanford University, and Carnegie-Mellon University, the leading research

and academic centers offering a full range of

AI subdiscipline. The concentration of effort

and expertise in these top tier universities has

tended to restrict entry into the field, and to

foster a very tightly knit community of researchers.

Some years ago, AI research and training

programs began to spread to a wider set of

universities, and this expansion of academic

programs continues. These schools have programs built around one or two graduates of
Ch. 3—Selected Case Studies in Information Technology Research and Development . 91

the established programs, and thus they offer only restricted AI curricula. Also, a number of new industry-based R&D programs are

being formed. The newer industrial programs

in AI R&D have also tended to center on the

ideas of one or two researchers from the top

schools. The lifespan of these industrial efforts

may be limited if they are unable to draw in

new talent from the small available pool and

are unable to obtain infusions of new ideas. 101

The difficulty of establishing and maintaining new AI R&D programs results from the

fact that there is only a small base of existing

researchers. Second, the nature of AI work is

such that an interdisciplinary team is required

in most cases to produce programs of useful

size and complexity. This “critical mass” of

workers knowledgeable in AI concepts exists

only in a few universities and companies and

requires a number of years to pull together

before fruitful work can be expected.l02

OTA found that a major transformation is

occurring in AI, resulting in two major directions for the R&D community. On one hand,

fundamental research will advance theory. The

other direction is taking existing AI concepts

and developing their applications. As in other

fields, the two directions reflect the divergence

of interest between basic scientists and applied scientists or engineers (see fig. 12). However, AI is distinct from other fields that have

undergone this transformation in at least four

significant ways: 1) AI is a very young (scientifically immature) field, 2) there are few

trained AI practitioners, 3) the expectations

for the technology are high, and 4) the pace

of transformation to an applied study is fast.

The divergence of interests is expected to

eventually result in the concentration of the

traditional “top-tier” university centers of AI

research on the fundamental scientific questions, an expansion of industrial R&D efforts

to deal with the development of applications,

‘“’ The OTA workshop on Artificial Intelligence, held Oct. 31,

1983. There is some controversy on this point, but it is gener

ally agreed that some “critical mass” of AX trained people, working in close proximity where they can exchange ideas, is a critical factor in performing advanced AI work.

“

zWaltz, op. cit., pp. 64-65.

and the establishment of new academic programs for the training of applied AI scientists

and engineers.

The growing commercial and military importance of AI is forcing researchers to make difficult choices in how they spend their time.

They must balance a number of commitments:

to the study of research issues that have longterm significance; to the teaching and supervision of students;103 to consulting for industry and government; and to startup companies

in which they develop personal interests. To

be sure, not all of these commitments are

mutually exclusive. Long-term research and

student supervision can reinforce one another.

Consulting and entreprenuerialism can be

complimentary. But the wearing of many hats

by AI faculty may pose conflicts apart from

the overcommitment of time.

First, there is a danger that students may

be judged, consciously or unconsciously, on

their contribution to the business interests of

faculty, rather than on their progress in learning the science of AI.104 Second, the progress

of AI, as well as that of other sciences, is dependent on the free exchange and public dissemination of research results. Yet proprietary

interests may inhibit that flow of information.105 Third, many researchers face a conflict

between the objectives of the sponsors of research and their own conception of the best

direction for the research. (See ch. 6 of this report on New Roles for Universities.)

This latter conflict may be particularly acute

among those in AI research because of the fact

that the social implications of artificial intelIOWne OTA advisor said that at his university, one quarter

of the students now entering computer science and electrical

engineering want to study AI. AI faculty across all schools are

obliged to supervise, on average, some ten graduate students;

in other fields the average ranges from less than one to about

four. As well as teaching and advising, faculty must spend time

writing proposals and seeking funding and equipment for graduate thesis work.

‘

04 MIT has developed a policy that prohibits faculty from

supervising students that work for companies in which the

faculty member has substantial interest. Patrick Winston at

the OTA Workshop on Artificial Intelligence, October 31, 1984.

105This point was made by advisors at the OTA workshop on

Artificial Intelligence, and is discussed by Jordan J. Baruch

in an editorial in Science, Apr. 6, 1984.
92 ● Information Technology R&D: Critical Trends and Issues

Figure 12.—Artificiai Intelligence Science and Engineering

Research Topics

Motivations

I Requirements

The evolution of the field of artificial intelligence is producing new relationships and new

distinctions within the Al science and engineering community.

SOURCE. Office of Technology Assessment.

ligence are so profound. They include the

replacement of humans with machines in

skilled work, the increased reliance on automated systems and the risk of system failure,

and affects on man’s perception of himself, and

his institutions. These conflicts raise ethical

questions such as: how much responsibility do

the creators of powerful technologies have for

the social impacts of their creations? or, should

scientists consider the public interest in deciding what research should be done?l06

 reader is referred to Relations of Science, Government

and Industry: The Case of Recombinant DNA, ” by Charles

Weiner, ch. 4 in Science, Technology, and the Issues of The

Eighties: Outlook, A. H. and R. Thornton (eds.),

Westview Press, Boulder CO, 1980.

Until recently, artificial intelligence research

was supported by four Federal agencies, primarily the Defense Advanced Research Projects Agency (DARPA) plus the National Science Foundation, the Air Force Office of

Scientific Research, the Office of Naval Research, and a handful of companies. Now, significant levels of work are beginning to be

funded in several corporations as the profit potential of AI grows. The Department of Defense plans to expand AI research in universities and defense contractor companies.

Industry Efforts

An increasing number of industrial firms

have begun AI R&D efforts in the past few
Ch. 3—Selected Case Studies in Information Technology Research and Development • 93

years. Market research sources report that industry spent a total of $66 million to $75 million in 1983 on AI products.107 As many as 15

or more of the largest U.S. corporations are

on the threshold of expanding the development of expert systems.l08 The Microelectronics and Computer Technologies Corp. (MCC)

is devoting a fair amount of its early R&D efforts to AI related questions. 109 Three U.S.

companies, Xerox, Symbolics, and Lisp Machine, Inc., currently offer computer systems

especially designed for AI program development. 110 Four other computer companies, Sperry, Apollo Computer, Data General, HewlettPackard and Digital Equipment, are also developing AI computers.111 Of most significance

is the number of startup companies developing AI products, particularly expert systems. 112 At least a dozen firms have been

founded in the past few years and they are obtaining people, techniques, and seed ideas from

the top universities and from nonuniversity

centers such as SRI International.

““T. Manuel, and S. Evanczuk, “Commercial Products Begin

to Emerge From Decades of Research, ” Electrom”cs, Nov. 3,

1983, pp. 127-129. It should be noted that these numbers reflect a very broad definition of AI with which many experts

would disagree.

‘“*J. Johnson, “Expert Systems: For You?, ” Datanation,

February 1984, pp. 82, 84, 88.

‘“’See ch. 6, in this report.

‘‘“These so-called “Lisp Machines’ (because they use the AI

programming language Lisp) represent an estimated market

value of $50 million.

“’These machines are useful in many types of complex program development; nearly one-half of the sales of these machines, by at least one of the current vendors, are to users that

are not necessarily developing AI applications. J. M. Verity,

“LISP Markets Grow, ” Datamdion, October 1983, pp. 92-94,

98,100.

“*See Verity, op. cit. p. 94, and Kinnucan, P., “Computers

That Think Like Experts, ” High Technology, January 1984,

p. 42. One OTA advisor believes that venture capital will be

a significant source of funding for AI R&D. At least $16 million has thus far been invested in startup companies developing expert systems, J. W. Verity, “Endowing Computers With

Expertise, ” Venture, November 1983, p. 49.

Government Funding

The Department of Defense is the lead agency funding AI research. The Defense Advanced

Research Projects Agency (DARPA) established the three university “centers of excellence” at MIT, Carnegie-Mellon, and Stanford, and has awarded contracts since the early

1960s. The Office of Naval Research (ONR)

and the Air Force Office of Scientific Research

(AFOSR) have been funding AI work since the

1970s. The Air Force in particular is interested

in AI techniques for image understanding.

DARPA has proposed a significant expansion

in its AI efforts (see “Strategic Computing”

below). ONR and AFOSR funding is expected

to remain stable in the near term. 113 (See table

19.)

The National Science Foundation has awarded

grants for university and some industrial AI

projects since the late 1950s. In recent years

the NSF AI research budget has remained stable, between $5 million to $6 million annually.

(See table 20.) Two NSF directorates, Computer Science and Information Science and Technology, provide the bulk of these funds, and

a number of the awards (13 of 80 in 1983) are

made jointly between these two divisions, or

with the NSF Office of Interdisciplinary Research, or with other programs within NSF.

“STRATEGIC COMPUTING”

DARPA has embarked on a major effort to

push the frontiers of computer technology and

artificial intelligence for application in future

military systems. The “Strategic Computing”

program plans to spend $600 million over the

next 5 years (see table 21), over and above past

levels of funding, and spending will accelerate

to unspecified levels as prototype development

gets underway in the late 1980s. The project

calls for the demonstration of significant milI I ‘Personal commumcatmns from Dr. David Fox, Director of

!tIathematics and Information Science, Air Force Office of Scientific Research, and Paul Schneck, Head, Information Sciences

Division, Office of Naval Research.
94 ● /formation Technology R&D: Critical Trends and Issues

Table 19.—Major Government Sources of Artificial Intelligence R&D Fundinga

Estimates

Low High

National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 6.0

National Institutes of Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 4.2

Office of Naval Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1 .4b

Air Force Office of Scientific Research . . . . . . . . . . . . . . . . . . . 2.5 3.0

Defense Advanced Research Projects Agencyc . . . . . . . . . . . . 15.0 20.0

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.2 34.6

asources indicate that these levels have obtained for the past several years, and with the exception Of DARPA, are eXrx?C@d

to remain stable or increase modestly in the near term. bThiS does rro~ include $.goo,@o in robotics research, some of which iS in artificial irIt011i9encf3

CTlliS represents the base level Of C)ARPA funding before the initiation of the “strategic computing” Pr09rWI (began in fiscal

year 1984).

SOURCES: NSF numbers from Swnrnary of Awards publications of the Division of Computer Research, FY 1982-83, and the

Division of Information Science and Technology, FY 1981-82 and 1983, National Science Foundation. NIH numbers

from Susan Stimler, Director, Biomedical Research Technology Program, Division of Research Resources, National

Institutes of Health. ONR numbers from Paul Schneck, Leader, Information Sciences Division, Office of Naval

Research. AFOSR numbers from David Fox, Director, Division of Mathematics and Information Science, Air Force

Office of Scientific Research, DARPA numbers from Ronald Ohlander, Program Manager, Defense Advanced Research Projects Agency.

Table 20.—NSF Grant Awards in Artificial Intelligence

Fiscal year 1982 Fiscal year 1983–

Number–of Institutions . . . . . . . . . . . . . . . . . . . . . . . . . 41 38

Number of awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total awards granted ($OOO)a 

. . . . . . . . . . . . . . . . . . . . $6,077 $5,150

Top 12 institutions: (Dollars in thousands)

MIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946 240

Stanford University. . . . . . . . . . . . . . . . . . . . . . 485 587

Rutgers University . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 442

University of Maryland . . . . . . . . . . . . . . . . . . . . . . . . 351 317

University of Illinois . . . . . . . . . . . . . . . . . . . . . 478 141

University of Pennsylvania . . . . . . . . . . . . . . . . . . . . 302 288

SRI International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 202

New York University. . . . . . . . . . . . . . . . . . . . . . . . . . 360 130

Yale University . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 301

Carnegie-Mellon University . . . . . . . . . . . . . . . . . . . . 185 227

University of Massachusetts . . . . . . . . . . . . . . . . . . 87 229

University of Michigan. . . . . . . . . . . . . . . . . . . . . . . . 40 337

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,951 3,441

aThese numbers reflect the awards In each fiscal year and not I he amount Of funding dur!ng those Years sixteen Of the 67

awards made In 1982 were mult!-year grants (most were 2 year grants), 5 of the 80 awards made I n 1983 were multl.year qrants

Therefore, total funding probably Increased somewhat between 1982 and 1983

SOURCE Office of Technology Assessment, and the National Science Foundation, Divisions of Information Science ancl Tech.

nology and of Computer Research

Table 21.—Strategic Computing Cost Summary

Fiscal year

1984 1985 1986 1987a

1988a

(Dollars in millions)

Total military applications . . . . . . . . . . . . . . . . . $ 6 $15 $27 TBD TBD

Total technology base . . . . . . . . . . . . . . . . . . . . 26 50 83 TBD TBD

Total infrastructure . . . . . . . . . . . . . . . . . . . . . . . 16 27 36 TBD TBD

Total program support . . . . . . . . . . . . . . . . . . . . 2 3 4 TBD TBD

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50 $95 $150 TBD TBD

%ut-year funding levels to be determined by program progress.

SOURCE: Defense Advanced Research Projects Agency.
Ch. 3—Selected Case Studies in Information Technology Research and Development • 95

itary capabilities within 10 years (see fig. 13).114

The major areas of focus are:

● autonomous (unmanned) vehicles,

● pilot’s associate systems to aid combat

pilots in coping with the complexity of

current and planned aircraft, and

● battle management systems to help commanders make decisions under conditions

of uncertainty.

To lay the groundwork for the development

of such systems, DARPA plans to fund the

building of Galium Arsenide integrated circuit

pilot production lines for the manufacture of

low power and radiation resistant microelectronics. In addition, DARPA is focusing

——.

‘14Strate@”c Computing, “New-Generation Computing Technology: A Strategic Plan for its Development and Application

to Critical Problems in Defense, ” Defense Advanced Research

Projects Agency, Oct. 28, 1983, p. vii.

efforts on research and development of advanced computer architectures to meet the

computational speed, and physical size and

weight requirements of mobile systems (see

the case study of Advanced Computer Architecture in this chapter), as well as artificial intelligence R&D in vision, speech, natural language, and expert systems.116

Some of the goals of the “Strategic Computing” program, particularly the vision system

requirements for autonomous vehicles, have

been described as “extremely ambitious.’’’”

Some describe this program as unprecedented

in the history of U.S. Government funding of

science and technology.117 Unlike the Manhat-

‘]51bid., app. IV, p. 2.

‘

]

’ Ronald Ohlander, at the OTA workshop, Oct. 31, 1983; see

also Strate&”c Computing, pp. 22-23.

“’Mitch Marcus at the OTA workshop, Oct. 31, 1983.

Figure 13.—Strategic Computing Program Structure and Goals

Major

Develop a broad base of

machine intelligence technology

goals to increase our national

security and economic strength

Military Autonomous Pilot’s Battle

applications systems associate management

& ●

Inteligent

functional Natural language Vision Expert systems

capabilities Navigation Speech Planning and reasoning

Hardware/software High-speed signal-processing General purpose systems

system

architecture Symbolic processors Multi-processor programming

and operating systems

Technology

base

Microelectronics Silicon and GaAs technology

VLSI systems

1

Networks Research machines Rapid machine

infrastructure I

implementation systems and foundries

prototyping

Interoperability protocols Design tools

SOURCE’ DARPA.
96 • Information Technology R&D: Critical Trends and Issues

tan Project or the Manned Moon Landing Mission, which were principally engineering problems, the success of the DARPA program requires basic scientific breakthroughs, neither

the timing nor nature of which can be predicted.

The kind of work that is being done now

[in AI research] that would support, for instance, an autonomous vehicle system, is

primitive in relation to the problems that are

to be addressed [by the DARPA project].

Operation in a complex combat environment

that may have multiple targets with camouflage, different kinds of obstacles with varying degrees of threat and impedance associated

with them, and the integration of various

kinds of sensors, for example touch and vision, and the appropriate knowledge representation to deal with them, is an enormous

problem that will be solved only by significant strides in basic AI research, and not

just development in narrow vehicle applications.118

It is expected that the Strategic Computing

Program will approximately quadruple the annual Federal funding of R&Din AI and related

hardware.ll9 This major increase in R&D funding will have significant and far reaching effects on the artificial intelligence community

and research environment. Undoubtedly, the

increased flow of money will have some positive effects on AI research. In particular the

availability of funds for modern equipment

should make university laboratory facilities

comparable with increasingly well equipped industry labs.120 The increased availability of

graduate student financial aid in the form of

research assistantships should draw in and

help hold more qualified post-graduate trainees, thus expanding the potential faculty base,

and relieving some of the pressure on current

faculty to obtain funding for graduate research. However, as industry scales up to meet

“’Marvin Denicoff, at the OTA workshop, Oct. 31, 1983.

1‘gFrom about $30 million to approximately $120 million (averaging the $600 million program over its 5 year projection). One

DARPA source estimated that one-fourth of the program funds

would be spent in universities. (Duane Adams at the OTA Workshop on Advanced Computer Architecture, held July 14, 1983.)

““This may be an inducement for researchers to accept research appointments.

military requirements, additional pressures on

the limited AI manpower resources are expected. 121 Although the expansion of training

programs should eventually increase the supply of manpower, the rate of that expansion

is limited by the small existing faculty base.122

The current imbalance in the supply and demand of AI manpower will continue, and likely

increase, and may intensify competition among

commercial, military and academic AI R&D

agendas. Thus some applied research, such as

work toward “intelligent library systems” and

computer assisted education, and fundamental research that is unlikely to have high immediate commercial or military value, may be

neglected. 123

Content and Conduct of Artificial

Intelligence R&D

Artificial intelligence as a field is a set of

somewhat loosely related R&D activities that

range from the study and implementation of

machine sensing (e.g., vision and speech) and

pattern recognition algorithms and systems,

to theoretical and practical work on automatic

problem solving, inferencing and reasoning

strategies and programs. Of central concern

is the concept of knowledge, a set of information (facts, procedures, patterns) that is integrated and processable as a whole, and thus

constitutes a useful representation of a part

or domain of the world. AI deals with how

knowledge is built up and used in computerbased systems: how it is collected, stored, accessed, manipulated, and transferred. AI R&D

seeks methods of formalizing and representing knowledge in consistent and unambiguous,

yet flexible ways so that these tasks can be

performed by machines.

“’Ronald Ohlander, at the OTA workshop, Oct. 31, 1983.

‘*zIn the three AI subfields from which most commercial and

military applications are expected, expert systems, natural language understanding, and vision, there are approximately 60

faculty at the top schools turning out some 30 Ph.D. graduates

per year, half of whom take industry jobs. D. Waltz, “Artificial Intelligence: An Assessment of the State-of-the-Art and

Recommendations for Future Directions,” prepared for the NSF

Information Technology workshop, Jan. 5-7, 1983; and a personal communication from Azriel Rosenfeld, Apr. 25, 1984.

‘

z

’ David Waltz at the OTA workshop, Oct. 31, 1983. A private funding organization, the Systems Development Foundation, is sponsoring research directed at “intelligent libraries. ”
Ch. 3—Selected Case Studies in Information Technology Research and Development Ž 97

Although investigators in a number of fields

perform work that contributes to and overlaps

with the subject matter of AI, a number of

areas are considered the core of AI research.

Symbolic Computation

Since AI is concerned with the processing

of knowledge, intelligent machines are required to manipulate symbols that represent

objects, concepts, and qualities, as well as

symbols that represent numbers or quantities,

which are the focus of traditional computation.

These qualitative symbols may be represented

within a computer as logical relationships or

as lists of symbols with pointers linking various objects, concepts, and qualities. The manipulation of symbols provides a mechanical

means of achieving inference, in particular

deductive inference, in which a problem solution or a conclusion is tested against facts in

a knowledge base to determine its truth or

validity.

A branch of AI research and development,

which forms a link with R&D in advanced

computer architectures, is the design of computing machines that optimize efficient manipulation of symbols. Some in computer architecture research maintain that this R&D

effort has not received sufficient attention. 124

‘*’Sidney Fernbach at the OTA workshop on Advanced Computer Architecture, July 17, 1983.

m

Photo credit, AT&T Be// Laboratories

Specialized microprocessors promise increasing levels

of “intelligence” in computer systems

Pattern Recognition

Of particular importance to the branches of

AI concerned with sense perception, such as

machine vision and speech understanding, is

the idea of matching input from the environment with symbolic representations of patterns (e.g., visual objects or speech utterances)

stored in the system. Raw sensory input, in

the form of electrical signals from a television

camera or a microphone, must proceed through

several levels of processing to produce patterns that are comparable with stored symbolic representations and recognizable as having

unique meaning.

In general, these processing levels include:

●

●

●

Formation: The sound or light signals are

digitized and stored as a set of simple

physical parameters such as frequency

and amplitude.

Analysis: Patterns of variations in the parameters, for example areas of light and

dark in pictures or variations in pitch and

intensity in an utterance, are detected and

measured to produce a detailed physical

description of the input.

Interpretation: The patterns, now represented by sets of measurements, can be

either directly compared with templates,

stored descriptions of entire patterns, or

further analyzed to extract features,

which are parts of patterns that are of

particular value in defining and identifying the patterns.

Knowledge Representation

This area of research deals with ways of expressing knowledge in computable form and

making and exploiting connections among the

facts or propositions in a knowledge base. A

basic concept in knowledge representation is

the propositional formalism, which is simply

the structured way that facts are expressed

so that ambiguities are avoided and processing operations are as efficient as possible.
98 . Information Technology R&D: Critical Trends and Issues

As well as a formal structure or syntax,

knowledge representation requires a method

of capturing meaning, or semantics, in a

knowledge base. Meaning in a qualitative

sense is expressed by the relationships that

are stated to exist among concepts. One method of representing relationships is the Semantic Network (see fig. 14).

A knowledge representation scheme that is

similar to semantic networks has been developed in which the attributes of concepts are

expressed and related. Frames provide slots

to fill to structure knowledge about things,

thus they represent expectations about what

attributes members of a given frame will possess. These “expectations” can be exploited

to imply procedures. For example, a computer

can be programmed to inquire about the attributes of a newly introduced object.

Similarly, knowledge representations called

scripts can represent expectations about a

knowledge domain. But instead of representing concepts, scripts describe situations and

actions that are expected in those situations.

A classic example is a restaurant script in

which one expects people to order from a

waiter (or waitress), to eat, and to pay the bill.

Thus, invoking the restaraunt script would invoke the entire set of expectations surrounding restaurants that have been programmed.

Another knowledge representation scheme,

one that was developed in the mid-1960s, is

the production system. This essentially consists of a set of if-then rules that specify a pattern, for example, “if the temperature is less

than 65 degrees” and an action to be taken,

“then turn the furnace on. ” The importance

of this scheme is its ability to express procedural knowledge and to initiate operations

depending on prevailing conditions. Its major

weakness is that a fixed rule must be stated

for every condition that is to be encountered.

Figure 14.– A Semantic Network

I

1 J

mI

I r

Parakeets I

I

I “

Chickens ,

 Cows

SOURCE: Randy Davis and Chuck Rich.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 99

All of the knowledge representation schemes

thus far adopted by AI researchers use considerable computer memory if they contain a sizable or complex domain of knowledge. Traditionally, researchers and builders of programs

have had to “shoe-horn” knowledge into computer systems with limited and expensive

memory capacity. The precipitous decline in

the cost of computer memory is alleviating

some traditional AI problems, making possible for the first time the production of costeffective systems with enough knowledge to

tackle “real-world” problems. Advances in

computer architecture design, especially the

ability to make customized VLSI processors

dedicated to symbolic computation and capable of parallel processing, should have a great

impact on the kinds of problems that may be

addressed by knowledge-based systems.

Other difficulties inherent in the application

of existing knowledge representation schemes

will not necessarily be alleviated by lower

memory costs and advances in hardware capability because they involve the limitations

of the schemes themselves. Existing knowledge representations deal only with surface

knowledge, which is either explicitly stated in

relationships or deductively inferred by the

chaining of propositions. Deep knowledge,

knowledge gained from inductive inference

(reasoning from facts to general principles),

and commonsense knowledge that is routinely

learned by children through experience, are

not expressable using current knowledge representation systems. Other problems involve

the inflexibility of procedural knowledge and

the difficulties of programming machines to

reason about unforseen occurances.

Given the large collection of facts, relations

and patterns in a useful size knowledge base,

even the fastest computers can bog down.

Therefore, an AI program must concentrate

the search of its knowledge base on those portions that are most likely to hold the facts, patterns, or solutions that are needed in a given

situation. The problems associated with the

search of knowledge bases are ubiquitous in

AI. They result from what is termed the “combinatorics explosion”: as the size of a knowledge base increases, the number of possible

paths to a sought-after piece of information

increases exponentially. AI interest was originally in developing general knowledge AI systems, but the combinatorics explosion sets a

limit on how broad or useful such systems can

be. More recent work has focused on specific

problem domains where a detailed representation of the world can be built and exploited,

and where the search is controlled by knowledge about the problem domain, or heuristics.

Machine Learning

The study of heuristics (“rules of thumb”

or knowledge acquired from experience), how

they may be used to process knowledge, and

how they may be generated automatically by

computer systems are major pursuits of AI

research. Ideally, a computer could modify its

repertoire of procedures as new facts are added

to its knowledge base. Likewise, new procedures should suggest new relations among

facts, but current knowledge representation

and programming techniques are incapable of

supporting changing knowledge and rule

bases.

Commonsense Knowledge

Human knowledge is based on a wide range

of experience acquired through sense organs.

This experience is fed into a cognitive system

that can integrate that knowledge in order to

cope with a complex, dynamically changing

world. Much of what people know involves

relationships that are obvious but that depend

on explanations beyond the comprehension of

most. Representing commonsense knowledge

in computer systems is a major challenge to

researchers, and is essential for certain kinds

of intelligent machine behavior, such as reasoning about the chronology of events in the

course of a disease or reasoning about the

movement and characteristics of robots.

Pragmatic Knowledge

Current artificial intelligence systems employ syntax (structure) and semantics (mean-
100 . Information Technology R&D: Critical Trends and Issues

ing) to represent knowledge about the domains

in which they operate. Systems of higher intelligence, ones capable of choosing among a

range of responses in complex situations, of

adapting to changing (and unanticipated) conditions, and of interacting with humans and

perhaps other intelligent systems on a high

level of understanding, must employ ways of

representing and reasoning about the needs

of users and about knowledge itself. Truly intelligent machines would respond to people of

different backgrounds and needs in ways that

are appropriately tailored to individuals. They

would also possess an understanding of the

uses and limits of knowledge-a mechanism

for judging the appropriateness of information

to a given situation. For example, a robot tank

would need to be able to distinguish between

trees it could run over and those that it would

have to avoid.

Current syntax- and semantics-based artificial intelligence systems employ knowledge

representations that are inadequate to support

pragmatic knowledge. Frame- and scriptbased representations can, in a rudimentary

way, deal with expectations about situations,

but those situations must be tightly circumscribed and clearly defined at the time of program design. Research has yet to identify

knowledge representation schemes that can

support the processing of pragmatic knowledge in complex and dynamically changing

domains.

Commercially Available Artificial Intelligence

Notwithstanding the fundamental limitations of present artificial intelligence concepts,

programs are being developed that are proving useful in a widening array of applications.

Two market forecasts125 describe the commercial potential of AI systems as exploding over

the next decade. From the small 1983 sales

base of $66 million to $75 million, the market

for AI products is expected to rise to $2.5 billion to $8.5 billion by the early 1990s.126 The

changing mix of products and sectors in which

.—--—— —. ---

‘2sInternational Resource Development, Inc., and DM Data,

Inc.

‘

z

’ Manuel and Evanczuk, op. cit., pp. 127 and 129.

they will be used is depicted in figure 15, which

shows AI emerging from the laboratory into

the home, the factory, and into schools. Three

types of AI-based systems in particular are expected to experience rapid growth-vision systems, natural language understanding systems, and expert systems.

COMPUTER VISION SYSTEMS

Vision systems are being designed as input

subsystems to enhance the utility and flexibility of computer-based automation. Vision

systems are increasingly used in industry for

quality control inspection, for product identification, and for robot guidance and control.127 Machine vision will be a crucial function in many future automated systems,

including aspects of the DARPA “Strategic

Computing” initiative. For example, an advanced vision system will be an integral component of autonomous vehicles.

Some sources estimate a current annual

market for machine vision systems of $35 million. This market is projected to double each

year for the next 5 years, and should reach

about $1 billion by the end of the decade.128

More than 250 companies, most of them in the

United States, are designing and selling machine vision systems.129

Vision systems consist of cameras and computer processors to analyze and interpret the

information collected by the cameras. The

cameras provide the processor with frames,

typically 60 per second, collected by scanning

the camera’s visual field. A frame forms an image consisting of a matrix of dots, or pixels

(picture elements), numbering in current systems 64 X 64 or 256 X 256 pixels. Higher

resolution cameras are being developed, but

as the resolution (number of pixels per frame)

increases, higher speed processors are needed

to handle the increased information within reaIZIThe reader is referred to the OTA report, cornpu~er~z~

Manufacturing Automation: Employment, Education, and the

Workplace, April 1984, pp. 89-92, for a discussion of current

industrial applications of machine vision systems.

‘*s’ ’Machines That Can See: Here Comes a New Generation, ”

Business Week, Jan. 9, 1984, pp. 118-120.

12gIbid., p. 118.
Ch. 3—Selected Case Studies in Information Technology Research and Development ● 101

Figure 15.— Markets for Artificial Intelligence

 

1993 total $8,536 million •

SOURCE International Resource Development Inc.

sonable time limits.130 Each pixel represents

an area of light or dark in the image. Most sys-

— — — Stanford University researcher has developed a robot cart that can navigate in a simple environment at a speed of 3 to

5 meters per hour while analyzing one image of its surroundings

for each meter of progress using a computer capable of processing a million instructions per second. For such a system to

terns allow a pixel to represent only black or

white, though systems are being developed

and are in use in which pixels may be one of

as many as 64 shades of gray, and color vision

systems will soon be available. Gray scale and

color systems will be capable of higher acuity,

but such systems require much higher processor speed and more sophisticated algorithms

to interpret the increased information flow.

The processor analyses the image to extract

patterns that may represent edges or textures

that can be used to characterize and recognize

objects in the visual field. Simpler systems

have stored “templates,” or representations

of entire objects, in memory to which the extracted patterns are compared. More sophisticated systems store “features,” or characteristic parts of objects. In these systems, sets

of features are extracted from the image and

are combined to represent constraints on the

list of possible objects that may be present;

recognition involves the identification of an

object (or objects) that could satisfy those constraints.

A major problem in machine recognition is

inferring three-dimensional information from

two-dimensional information in an image of

the scene.131 One method that has been adopted

to solve this problem is to project “light

stripes” on objects in the scene; depth cues

and contours can be inferred from distortions

in the stripes.

Current vision systems are primitive in comparison to human visual recognition capability. The human retina can perform at least 10

billion operations per second, and the brain is

undoubtedly capable of much higher processing speeds.132 As important, human experience with the visual world provides a store of

knowledge with which the eye and brain may

make inferences and interpretations to resolve

naviagate at walking speed would require a computer capable

of from 1010 instructions per second. T. and R.

 “Computer Vision: The of Imperfect Inputs, ”

 Spectrum, November 1983, pp. 88-91. Computers of this speed are being developed, but may require facilities as large

as a room just to provide cooling for the hardware. ‘

3

’ personal communication, May 25, 1984. ‘

32 and op. cit., p. 88.
102 ● Information Technology R&D: Critical Trends and Issues

ambiguities caused by shadows and variations

in lighting, the orientation of objects, and the

presence and often overlap of multiple objects

in a scene. Also, subtle variations and movements can be detected and used by the human

eye and brain to distinguish superficially similar objects (e.g., the faces of identical twins).

In order to make vision systems based on

current processor architectures and algorithms work, the number of environmental

variables that may cause ambiguities must be

reduced. For example, objects on an assembly

line may be arranged so that only one face is

presented to the camera or only one object at

a time is in the visual field. Lighting may be

controlled so that perceived edges can be interpreted as facets of an object and will not

be the result of shadows or variations in the

reflectance of surfaces of an object; or structured lighting may be used to infer distance

and contour.

If vision systems are to operate in less controllable circumstances, such as out-of-doors

or in the home, much higher speed processors

and more sophisticated algorithms for analyzing and interpreting visual scenes will be

needed. Custom designed, massively parallel

VLSI-based processors dedicated to visual

analysis are being looked to to provide more

powerful hardware. Research in vision algorithms is proceeding to provide more powerful

concepts and more sophisticated software. The

parallel advance of hardware and software

solutions, and fundamental advances in AI research, will be required to produce systems capable of the interpretation of complex and

unstructured visual scenes.

NATURAL LANGUAGE UNDERSTANDING

SYSTEMS

These systems are intended to allow communication with computers in English or other

human languages, freeing users from the need

to learn a computer language. In the words of

one researcher:133

The ultimate goal of creating machines

that can interact in a facile manner with

——. . .-—

“’Waltz, Al Magazine, op. cit., p. 56.

humans remains far off, awaiting breakthroughs in basic research, improved information processing algorithms, and perhaps

alternative computer architectures. However, the significant progress experienced in

the last decade demonstrates the feasibility

of dealing with natural language in restricted

contexts, employing today’s computers.

Automatic natural language understanding

work began with the goal of producing systems that could translate one natural language

into another. Such systems are in use now, but

are proving to be limited to rough translation,

requiring a human translator to produce final

fluent text.

The goal of another class of natural language systems is to understand documents:

to produce an abstract of a piece, perhaps alert

people who might be interested, and answer

questions on its content. Such systems might

be paired with document generators that could

produce instruction manuals.134 Document

understanding and generation systems are

still largely experimental, but they have the

potential to augment human knowledge through

the production of intelligent library systems,

aiding people in searching and evaluating large

bodies of information.

More immediate-term applications are in

using natural language systems as “frontends” or interfaces to computer systems. Natural language systems are in operation that

serve as interfaces to data bases, for example,

to help store and find personnel or inventory

records. One can expect that model systems

will soon be available that demonstrate the

feasibility of controlling complex systems such

as power generation facilities and weapons

systems with natural language interfaces. In

conjunction with expert systems, natural language systems are being developed for computerized medical advisor, trouble-shooting

and repair, mineral exploration, and investment analysis applications. Future applications, requiring advanced work to produce,

might include use in the creation of graphical

displays and in computer-aided education.135

—

“’Ibid., p.-57.

“’Ibid.
Ch. 3—Selected Case Studies in Information Technology Research and Development • 103

There is also current work in producing

speech understanding systems, which would

replace keyboards with voice input devices.

Primitive systems are available, but true

speaker independent systems with large vocabularies that can handle continuous speech,

as opposed to isolated words separated by

pauses, are as yet unattainable with present

technology. Advanced integrated circuit signal processors should produce some progress

over the next decade.136

In part, the capabilities of natural language

systems have been limited by the cost of computer memory. Natural language systems

must have large vocabularies to be “natural’

to users. This problem is diminishing because

of the fall in computer memory prices.

Two other problems are replacing memory

cost as an upper limit to system size and functionality. First is the “combinatorics explosion” problem: as the size of the system

vocabulary increases, the time required for

presently available computer architectures to

process a sentence increases exponentially.

Novel machine architectures based on parallel processing promise some relief for this problem. Second, as noted in the previous discussions of commonsense reasoning and pragmatic

representation, researchers are finding difficulties in designing systems with broad and

deep knowledge of the world, and with pragmatic understanding of situations. In language, this kind of knowledge is crucial to the

solution of ambiguities.

EXPERT SYSTEMS

These AI-based programs are designed to

serve as consultants in decisionmaking and

problem solving tasks that require the application of experience and judgment. ’37 Expert

—— —.. —————

“’For discussions of the state-of-the-art in voice input computer systems, the reader is referred to: A. Pollack, “Computers

Mastering Speech Recognition,” New York ~“mes, Sept. 6, 1983,

pp. Cl and C7; R. D. Preuss, and D. J. Jurenko, “Digital Voice

Processing,” Astronautics and Aeronautics, January 1983, pp.

44-46; and R. J. Godin, “Voice Input Output, ” Ehxtrom”cs, Apr.

21, 1983, pp. 126-143.

“’Expert systems illustrate an interesting point about human

intelligence, “Paradoxically, it has proven much easier to

emulate the problem-solving methods of some kinds of specialsystems consist of a set of “if-then” rules

which express the knowledge and experience

of an expert, and the actions one would take

when faced with a set of conditions in the domain of his expertise. They also generally have

a separate knowledge base which states facts

about the domain, to which the program can

refer to make inferences and deductions about

given situations and conditions.

Expert system programs are developed from

extensive interviews with recognized experts

in the field of application. Such interviews

often reveal many unwritten (and even unconscious) rules and criteria for judgment that the

expert applies in solving problems.138 The interviewer, called a knowledge engineer, then

codes the rules and facts in a way that is efficiently processable by computer. Extensive

testing and validation must be conducted before a system is considered complete enough

to use in actual practice.

This area of AI application is receiving considerable industry and military interest because expert systems may be capable of relieving some of the demand for high-priced experts

in the fields in which they are applied. Ironically, because they require man-years of effort

from scarce knowledge engineers to develop,

expert systems are quite expensive. Therefore

they are currently being attempted commercially only in applications that promise a particularly high payoff.139

Research in this field has demonstrated that

expert systems can rival human expert judgment if the domain of application is properly

ists than to write programs that approach a child’s ability to

perceive, to understand language, or to make ‘commonsense’

deductions, ” R. O. Duda, and E. H. Shortliffe, “Expert Systems Research, ” Science, Apr. 15, 1983, pp. 261-268.

138This fleshing out of unwritten rules is a possible side benefit of the development of an expert system; it can lead to progress in the field of application itself. Conversely, some fear

that this codification of knowledge in automated systems could

“ossify” and constrain progress in certain fields by foreclosing the possibility of the unexpected discovery of new solutions

through serendipity.

‘3gSome of the enthusiasm recently derponstrated by companies for expert systems may be unfounded; OTA advisors were

wary of overstated claims for the usefulness and applicability

of current generation expert systems.
104 . Information Technology R&D: Critical Trends and Issues

chosen.140 This means that the application

must have certain characteristics for an expert

system to be successfully applied. These include: 14

1

● There must be recognized experts in the

field;

● The task normally takes the expert a few

minutes to a few hours to accomplish;

● The task is primarily cognitive (as opposed to manual);

● The skill is teachable to neophytes;

● The task requires no commonsense.

More generally, the application domain

must be restricted enough to be expressable

in a finite set of rules, numbering less than

2,000 at present, so that available computers

can solve problems in a reasonable amount of

time. Even so, most current expert systems

take longer to perform a task than a competent human expert.142

Table 22 shows a representative sample of

current expert systems and their uses. Several

companies are forming or expanding efforts

in developing expert systems, and venture

capital interest in startup companies is reportedly brisk.143

———.

‘401n fact, one OTA advisor said that the success of current

applications depends more on the choice of domain than it does

on how well the program is written. Patrick Winston at the OTA

workshop, Oct. 31, 1983.

‘“R. Davis, and C. Rich, Expert Systems: Fundamentals,

Tutorial at the AAAI Conference, Aug. 22, 1983, p. 31.

“’Waltz, AI Magazine, op. cit., p. 61.

“’see l%ctrom”cs, Nov. 3, 1983, pp.127-131, and Venture, November 1983, pp. 48-53.

Current systems, because of the limitations

of the concepts on which they are based, all

suffer from several serious weaknesses:144

●

●

●

●

●

They are highly customized to specific applications and are useless in other, even

closely related fields;

Since the knowledge on which they are

based is collected over a period of time,

often from a number of experts, there can

be inconsistencies in the programs that

are difficult to detect and repair;

The systems are necessarily based on narrow sets of rules and facts, therefore their

judgments and recommendations can be

myopic and naive;

Since all of the current systems contain

only surface knowledge from which to

make inferences, if knowledge that is critical for a given judgment is missing, their

performance is poor;

Few current systems have natural language interfaces, therefore they can be

difficult for the uninitiated to use.

Although many systems can provide explanation for the chain of reasoning that led to

a given conclusion, these explanations are often unsatisfactory because they are not tailored to the needs or understanding of individual users. Neither do the explanations usually

refer to underlying principles, such as physiology or geology, so human experts find them

unconvincing. 145

——

“’Waltz, op. cit.

14’Duda and Shortliffe, op. cit., p. 266. See also G. O. Barnett,

“The Computer and Clinical Judgement, ” editorial in The New

England Journal of Medicine, Aug. 19, 1982, pp. 493-494.

Table 22.—Representative Expert Systems

Type of Routine

Expert system Domain evaluation use

DENDRAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mass spectroscopy interpretation Case studies Yes

MYCIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Antimicrobial therapy Randomized trials No

INTERNIST-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal medicine diagnosis Case studies No

CASNET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Glaucoma assessment and therapy Case studies No

PROSPECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geological exploration Case studies No

RI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer layout and configuration Case studies Yes

Digitalis Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . Digitalis dosing advice Randomized trials No

PUFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pulmonary function test interpretation Randomized trials Yes

Microprocessor EXPERT . . . . . . . . . . . . . . . . . . . Protein electrophoresis interpretation Case studies Yes

HASP and SIAP . . . . . . . . . . . . . . . . . . . . . . . . . . . Ocean surveillance (signal processing) Case studies No

SOURCE’ R. 0. Duda and E. H. Shortliffe, “Expert Systems Research,” Science, Apr. 15, 19s3.
Ch. 3—Selected Case Studies in information Technology Research and Development ● 105

Research is underway to help alleviate some

of these shortcomings, including the study of

improved knowledge representation schemes

and inference methods. Novel computer architectures should push back some of the

limitations now imposed on system size by

computer speed. The most immediate and

probably far-reaching problem is the difficulty

and expense of building and testing expert

systems, including the acquiring and validating of rules and facts. Applied research

work is progressing in the development of programming aids (tools, languages, environments) to lower the time and cost of building

expert systems. Some current basic research

is concerned with the automatic acquisition

and structuring of knowledge. Incremental advances can be expected over the next decade,

but fundamental breakthroughs will be required to expand the usefulness of expert systems significantly beyond current limits.

Foreign National Efforts in Artificial

Intelligence R&D

Artificial intelligence is a key pursuit of

recently initiated national, government financed R&D programs in Japan and Great

Britain. Britain’s effort is in fact a reaction to

the Japanese Fifth Generation Project 146 as it

was detailed in a conference held in October

1981. ’47 The achievements of the objectives of

these targeted national programs will require

unprecedented fundamental advances in basic

research. Their ultimate success is much less

certain than were previous national technical

efforts, such as the Manhattan Projector the

Manned Moon Landing. However, these national AI research commitments are likely to

produce advances in AI science, technology,

and commercial application.148

—.— .

‘“A British delegation reported that the extent and cohesiveness of the Japanese plan, and the reaction to it that could be

expected from American industry, were a “major competitive

threat. ” A Programme for Advanced Information Technology,

The Report of The Alvey Cou”ttee, Department of Industry,

Her Majesty’s Stationery Office, London, October 1982, see p.

5. ~d~The In~mation~ Conferene on Fifth Generation COmpUter Systems, Tokyo, Japan, Oct. 19-22, 1981.

“’OTA workshop, Oct. 31, 1983.

The Fifth Generation

The Japanese plan to build, from a base of

research that is almost exclusively borrowed

from the United States and Western Europe,

significant artificial intelligence systems with

the stated purpose of enhancing productivity

in areas of the Japanese economy that thus

far have proven resistant to automation.149 The

total funding for the life of the project is not

publicly stated, but some sources estimate

that up to $1 billion to $1.5 billion may be

spent over the next 8 to 10 years.150

The Fifth Generation Program is centrally

managed by the Institute for New Generation

Computer Technology (ICOT), formed by the

Ministry of International Trade and Industry

(MITI) in 1982. ’61 The program will be funded,

for the most part, by eight industrial companies. The government has provided seed money and staffing; 42 of the total staff of 52 have

come from MITI’s Electrotechnical Laboratory. 152 Spending thus far has been $2 million

in 1982, $12 million in 1983, and $27 million

in 1984.153

Overall, the functions that the Japanese see

their Fifth Generation system performing include: 154

1. problem-solving and inference,

2. knowledge-base management, and

3. intelligent interface (with users),

These goals correspond roughly to previously discussed research in:

1. expert systems,

2. knowledge representation, and

———

lt~hese include a=iculture and fisheries, the office, and the

service industries; applications are expected, as well, in areas

that are already highly automated such as electronics and

automoble design and manufacturing. Fifth Generation Computer Systems, T. Moto-oka (cd.), op. cit., see p. 3.

IWP. Marsh, “The Race for the Thinking Machine,” iVew Su”entist, July 8, 1982, p. 85-87. Note, this is the highest estimate

encountered.

15’’ ’Fifth Generation Computer System Under Development, ”

Science & Technology in Japan, January/March 1983, p. 24-26.

152’’ ICOT: Japan Mobilizes for the New Generation, ” IEEE

Spectrum, November 1983, p. 48.

‘

s

’Personal communication from John Riganati, National Bureau of Standards, June 1984.

“’Science & Technology in Japan, op. cit., p. 24.
106 ● Information Technology R&D: Critical Trends and Issues

3. natural language understanding. ’55

The Fifth Generation R&D plan calls for

three phases of 3 to 4 years each:156

●

●

●

Phase I: Development of “basic technologies” consisting of computer architectures and related software.

Phase II: Development of prototypes of

the inferencing and knowledgebase functional components, to correspond to the

architecture and software developed in

phase I.

Phase III: A “total system” prototype is

to be developed in the final phase: -

The reactions of experts in this country to

the Fifth Generation Program goals and methods have been mixed, ranging from enthusiastic to skeptical. However, there is agreement

that the goals the Japanese have established

are quite ambitious for the time frame that is

set for achieving them, and the program is

unlikely to succeed in all of its objectives.

The Alvey Programme

Named for John Alvey, chairman of the

committee that developed the plan for a British response to the Japanese Fifth Generation

Program, this academia-government-industry

cooperative effort will concentrate on four

segments of information technology, one of

which is artificial intelligence, termed by the

British, “Intelligent Knowledge Based” Systems. 157

The British see a manpower shortfall in AI

R&D similar to that in the United States, so

their program will initially have a strong educational component, focusing on the expansion of both academic and industrial training

facilities in the early part of the proposed 10

year effort. As the program progresses, emphasis will shift first to a broad effort in many

— .

‘5SL. R. Harris, “Fifth Generation Foundations, ” DatanMti”orI,

July 1983, pp. 148-150, 154, 156.

‘5GIbid., p. 25.

ISTThe other ~eas me Software Engineering, Man/machine

Interfaces, and VLSI. A Programme for Advanced Information Technology, op. cit., p. 21.

aspects of basic AI research, and will later focus on specific demonstration systems to be

developed in collaboration between the strengthened university programs and industries interested in particular applications.158 Expected

milestones include:159

●

●

●

●

●

The research community (numbered in

1982 at some 150 people) is to grow by

50 percent in 2 to 3 years and double in

about 5 years as a result of increases in

graduate student funding, and numbers

of faculty and research positions;

Computer equipment and software support are to be expanded into an adequate

base for research in 2 to 3 years;

An increased understanding will be

gained of knowledge representation and

intelligent computer interface concepts,

and knowledge based tasks and domains

within 2 to 3 years;

Within 5 years, there will be substantial

progress in understanding the application

of knowledge based concepts using logic

programming languages and parallel

processors, expert systems and natural

language understanding systems;

Over the 10 year time course of the program, progressively more sophisticated

demonstration systems will be developed,

some early target applications being

teaching assistant programs, software

production aids, and improved robot systems; later applications might include

medical advisor systems, tactical decision

aids, full 3-D vision systems, and office

management and document production

systems.

The government has pledged a total of $310

million for the entire Alvey program, with private industry expected to contribute an additional $230 million.l6O The plan calls for expenditures of about $39 million on Intelligent

Knowledge Based Systems in the first 5 years,

some $30 million of that going to universi-

‘

6

’ Ibid., p. 35.

“

g

Ibid., pp. 38-40.

“

OM. Peltu, “U.K. Eyes 5th Gen., ” Datamation, July 1983,

pp. 67-68, 72.
Ch. 3—Selected Case Studies in Information Technology Research and Development . 107

ties. ’G’ The Science and Engineering Research

Council (SERC), roughly the equivalent of the

American NSF, will develop plans and disburse most of these funds.l62

The United Kingdom has a strong tradition

in AI, particularly in the University of Edinburgh and Imperial College, London. But in

the years immediately preceding the Alvey initiative, efforts had been scaled back because

of an unfavorable government report on the —-—

‘“A Program For Advanced Information Technology, op. cit.,

pp. 47 and 49.

“’Ibid., p. 48.

prospects for artificial intelligence, and many

researchers emigrated to the United States to

continue work in American universities.163

Alvey Programme funding may reverse these

trends, but there is disagreement among experts concerning the ability of European universities, in general, to respond flexibly to the

growth of a field such as AI, where interdisciplinary research across traditional academic

departmental lines is so crucial.

“’The OTA workshop, Oct. 31, 1983.
Chapter 4

Effects of Deregulation and

Divestiture on Research
Contents

Page

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Antitrust Laws, Deregulation, and Divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of Research at AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TheBell

Modified Final Judgment and Bell Laboratories. . . . . . . . . . . . . . . . . . . . . . . . . . .

Labs After Divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Factors Affecting Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stability of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocation of Research and Development Expenditures . . . . . . . . . . . . . . . . . . . . . . . .

Basic Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Role of Bell Communications Research, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Availability of Research Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

111

113

116

120

121

122

123

123

125

128

129

130

131

134

Table No. Page

23.

24.

Regional Bell Operating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

R&D Intensities of Selected Major Telecommunication Firms . . . . . . . . . . . . . . . . . . 125

Figures

Figure No. Page

16.

17.

18.

Pre-Divestiture Bell System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Post-Divestiture Organization of AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Bell Operating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Chapter 4

Effects of Deregulation and

Divestiture on Research

Findings

As a major source of information technology R&D—and as an organization that has recently undergone major legal, regulatory, and

institutional changes-AT&T’s Bell Laboratories merits special attention. In reviewing

the potential effects of the AT&T divestiture

and of recent regulatory decisions on Bell

Labs, OTA made the following findings:

● Organizational changes within AT&T

Technologies and within Bell Labs indicate that AT&T is already preparing to

speed the development and marketing of

new products. Other firms may also increase their development activities to

meet competition from AT&T.

• The effects on the research side are less

clear. AT&T has some incentives to continue funding applied and basic research

at past levels, but these stand in tension

with powerful new forces that could tempt

AT&T to direct more resources away

from research and into short-term research and development projects. There

is little reason to think that AT&T’s competitors will perform more basic research

now than they have in the past.

● The areas where AT&T will be the most

likely to focus its competitive efforts are

also the areas where Bell Labs has been

responsible for major scientific contributions computer science, solid-state physics, and photonics. Work in those areas,

including basic research, is likely to continue into the foreseeable future.

● A significant portion of Bell Labs’ research base has been moved to Bell Communications Research, Inc. (Bellcore), a

unique new organization owned jointly by

the divested Bell operating companies.

Bellcore’s role in basic research is still

unclear.

● It is possible to monitor research activities over the next few years to determine

whether the quality or direction of basic

research change in a deregulated environment. Because of the long-term nature of

the work, however, it may take some

years for any changes to become evident.

The AT&T divestiture has been making

headlines since January 1982, when AT&T

and the Department of Justice announced the

settlement of the Department long-standing

antitrust suit. The divestiture marked the end

of an era. Before divestiture, AT&T had been

the nationwide provider of end-to-end telecommunications services. AT&T’s system of Bell

operating companies provided local service to

85 percent of the telephones in the United

States; the Long Lines division carried the

vast majority of long-distance calls; the Western Electric subsidiary manufactured most of

the equipment used in the system and leased

to end users. With assets of $150 billion and

annual revenues of $69 billion, it was the biggest communications company in the world.

On January 1, 1984, the size of the corporation was reduced to one-fourth as AT&T spun

off the Bell operating companies and gave up

local telephone service.

While divestiture is indeed a dramatic event,

the concern and publicity associated with it

have tended to obscure a related regulatory

decision: the Federal Communications Commission’s (FCC’s) decision in the Second Computer Inquiry (Computer II) detariffed the sale

of terminal equipment, deregulated enhanced

telecommunication services, and permitted

AT&T to sell these to end users through a subsidiary after Jan. 1, 1983.1 These changes in

AT&T’s structure and markets have raised

some important questions related to research

and development in telecommunications. The

question addressed here is how divestiture and

deregulation will affect the functioning of

AT&T’s research arm, Bell Laboratories,

“’Enhanced communications” are services which require adding value to a transmission by altering the message in some

way, as explained below.

111
112 ● Information Technology R&D: Critical Trends and Issues

viewed by some as the star of modern industrial and scientific research.

In 1982, before any of the changes associated with divestiture and compliance with

Computer II, Bell Labs had a budget of $2 billion, facilities at 21 locations, and 25,000 employees-3,000 with doctorates and 5,000 with

masters degrees. Bell Labs provided nearly all

R&D leading to the manufacture of Western

Electric’s products, as well as systems engineering to support the Bell System generally.

While the Labs’ principal role is in developing products for sale or use by AT&T, about

10 percent of the budget has been dedicated

to scientific research. The research has had

fallout applications in a wide variety of fields,

from telephony and computer science to astrophysics and health care. The research results

and technical standards are widely published

in scientific and technical journals. Bell Labs

researchers have made many fundamental advances, inventing the transistor and other concepts at the base of the current generation of

computer and telecommunication technology.

Among Bell Labs’ employees and alumni are

seven Nobel laureates.

The Labs recently (1983) received its

20,000th patent; this amounts to one patent

per day since Bell Labs was incorporated in

1925, and many other of its inventions have

not been patented. Traditionally, about 99 percent of AT&T’s R&D has been done internally.

Very little technology has been bought from

outside, although AT&T does enter into crossPhoto credit: AT&T Bell Laboratories

Bell Labs developed the first 32 bit microprocessor: the dime-sized chip contains nearly 150,000 transistors and has

processing power comparable to that of today’s minicomputers.
Ch. 4—Effects of Deregulation and Divestiture on Research ● 113

licensing agreements. On the other hand, it

had been AT&T’s policy since the 1920s, and

a legal requirement under the 1956 consent decree described below, to license its own patents ●

to other firms at reasonable cost. There are

currently over 400 such licensing agreements

outstanding in the United States and 200

more with foreign firms. Arno Penzias, Bell

Lab’s Vice President, has been quoted as saying that “without Bell Labs there would be no

Silicon Valley.”2

Although that may be hyperbole, it is certainly true that Bell Labs holds the basic

patents for the processes and products needed

by many United States and foreign firms to

get their start in microelectronics, computers,

telecommunications, or other fields. The availability of licenses and technical information

from Bell Labs greatly speeded development

of the microelectronics industry.

Bell Labs’ R&D efforts are clearly important

to information technology generally. The

Labs’ budget makes up perhaps 15 percent of

the R&D investment by information technology firms.3 Further, if Bell Labs is producing

over 370 patents per year, then it accounts for

perhaps 5 percent of U.S. patents in information technology fields.4 Anything that might

“’Bell Labs, Threatened Star of US Research,” Fortune, July

5, 1982, P. 47.

‘See page 316. Investment in information technology by industry in 1983 is estimated to be about $10.8 billion. Bell Labs’

R&D budget of $2 billion is about 18 percent of the $10.8 billion invested in IT R&D by large IT companies in 1982. However, the $10.8 billion figure may be too low, as it does not include R&D expenditures of many small firms.

‘This is an estimate based on approximately 5,180 Bell Labs

patents as a fraction of 101,900 US patents in communications

equipment and electronic components in 1963-1981. Data on

U.S. patents from National Science Board, ~“ence Inol”cators,

1982, U.S. Government Printing Office, 1983, p. 207.

reduce the scope or quality of research at Bell

Labs alarms observers who see the Labs as a

major contributor to the U.S. lead in information technology R&D.

The restructuring of AT&T creates pressures and incentives for Bell Labs that did not

exist while AT&T was a regulated, end-to-end

monopoly. Because of competitive pressures

on AT&T in the deregulated markets, Bell

Labs may choose to devote more of its resources to product development and to reduce

the number of long-term research projects

leading to fundamental scientific discoveries.

Such an event could be deleterious to the longrun competitive position of AT&T, and more

importantly, might negatively affect the level

of U.S. R&D in information technology.

This chapter discusses the problems and opportunities that the new post-divestiture environment offers Bell Labs, and the possible

effects that the changes in AT&T’s corporate

structure may have on research at the Labs,

and throughout the telecommunication and

computer industry. It focuses specifically on

the future stability of AT&T’s earnings, its

incentives to engage in research, and the possible effects of deregulation on research elsewhere in the telecommunications and computer industry. Finally, it outlines some methods

for monitoring the health of research at Bell

Labs and possible options for Federal Government action.

Before examining the effects on Bell Labs,

it is necessary to briefly review the regulatory

and legal decisions leading to deregulation and

divestiture and to discuss the technological

and market forces that drove them.

Antitrust Laws, Deregulation, and Divestiture

American Telephone and Telegraph is no General that resulted in the Kingsbury comstranger to antitrust litigation. In order to mitment. In the commitment, AT&T agreed:

avoid a threatened Government suit under the 1) to end its policy of aggressive mergers with

Sherman Antitrust Act in 1913, AT&T en- competing independent telephone companies;

tered into negotiations with the U.S. Attorney 2) to allow the remaining independents to in-
114 . Information Technology R&D: Critical Trends and Issues

terconnect with its long-distance system; and

3) to get out of the telegraph business by

divesting itself of the Western Union telegraph company.5 It removed AT&T from the

telegraphy market and significantly constrained

future purchases of competing telephone companies.

However, the actual effect of the Kingsbury

commitment was to confirm AT&T as a regulated monopoly and to quell the competition

between Bell operating companies and independents which had grown up in the 1895-1913

period. Under terms of the commitment, Bell

companies and independents negotiated the

borders of their service areas and exchanged

telephones where necessary to give each other

geographical monopolies. AT&T was acknowledged to control the entire long-distance

network, and the independents used that network as noncompeting partners in end-to-end

service.

The next major antitrust case against AT&T,

in 1949, asked for an end to AT&T’s ownership of Western Electric and an end to all restrictive agreements among AT&T, the Bell

Operating Companies, and Western Electric.

The suit essentially sought the separation of

regulated monopoly services from equipment

supply.

A negotiated settlement of the 1949 suit led

to a consent decree in January 1956. The consent decree imposed two important restrictions on AT&T’s future activities. First, AT&T

was restrained from entering other lines of

business, such as the sale of solid-state components or computers. It was restricted to providing regulated common carrier service, with

Western Electric as its captive equipment

manufacturer. AT&T was free to develop Bell

Labs technology, such as the transistor, for

use within its own system, but was forbidden

to market these products to the public. Second, AT&T was required to license all patents

controlled by the Bell System to any applicant

at a “reasonable royalty” and to provide tech5Gerald W. Brock, The Telecommum”cati”ons Industry: The

Dynamics ofi%farket Structure (Cambridge: Harvard University Press, 1981), p. 155.

nical information along with patent licenses

on payment of reasonable fees. This licensing

provision ensured that other firms could use

Bell technology outside of regulated telephone

markets.6

Two major trends, each with a technological and a regulatory component, developed

over the ensuing 25 years to make the line of

business restriction of the 1956 consent decree

increasingly unworkable. First was the development of technological alternatives in transmission and switching that greatly reduced

the cost of providing long-distance service and

made it economically attractive for competitors to challenge AT&T’s dominance of the

long-distance market. Second was the advance

in computer microelectronics, which has been

leading to a convergence and interdependence

of communication and computation services.

These technological changes, and the market

activity that they generated, led to a number

of regulatory decisions that eroded AT&T’s

monopoly position and gradually opened the

telecommunication transmission and equipment markets to competition.

The first chink in the long-distance monopoly was FCC’s 1959 Above 890 decision,7 opening the microwave radio spectrum to private

users. This led eventually to FCC’s approval,

in 1969 and again in 1971, of MCI’s application for authorization to offer private line service via microwave. It was also in 1971 that the

FCC made its Specialized Common Carrier

decision, 8 in which it concluded that a general

policy in favor of entry by new carriers into

specialized communications would serve the

public interest. Long-distance service from

“other common carriers” became more widely

available to the public in 1979 after a series

of FCC and court decisions. By the end of

1984, other carriers had captured 15 to 20 per5AT&T had been granting licenses and making available technical information on its inventions before 1956. AT&T had developed cross-licensing agreement with major manufacturers

like General Electric over the previous two decades. The policy of licensing patcmts to smaller firms was in force in the

1940s.

7

27 FCC (1959).

*29 FCC 2nd 8 70 (1971).
Ch. 4—Effects of Deregulation and Divestiture on Research ● 115

cent of the long-distance market, as measured

by minutes of calls transmitted.9 Other carriers

can now claim relatively small numbers of subscribers, but they are principally the high volume users. AT&T estimates that other carriers

serve about one-third of the highest volume

residential callers (those spending over $25 per

month) and one-half of high volume business

callers (over $150 per month).*

In the terminal equipment market, the

FCC’s 1968 decision in the Carterphone case10

was the first FCC action to allow consumerowned terminal equipment to be attached to

the Bell system network. This decision, together with an equipment registration program authorized by FCC in the 1970s, allowed

manufacturers other than Western Electric to

enter the U.S. market, giving rise to the “interconnect” market for telephones and other

customer equipment.

Meanwhile, the computer industry was

growing rapidly and without significant government regulation. In order to determine how

best to deal with the policy questions that

were already emerging from remote-access

data processing, FCC initiated in 1966 its first

Inquiry into Regulatory and Policy Problems

Presented by the Interdependence of Computer and Communication Services and Facilities

(Computer I Inquiry). The decision in Computer I, adopted in 1970, divided computer/communications services into two regulated

services—pure communications and hybrid

communications-and two nonregulated services—hybrid data processing and pure data

processing. Under the terms of the 1956 Consent Decree, AT&T could provide pure and hy- ——— —

*FAA estimate, private communication, February 1985.

*AT&T Communications briefing to OTA staff, August 17,

1984.

IO%13F~Zd, 420, 437 (1968). “Terrnina.1 equipment” or

“customer premises equipment” termin ates the telephone wire

on the customer’s premises. The most common example is the

ordinary telephone. The terms are also used to refer to systems

of telephones, like the six button “key sets” used by many small

businesses, and to switching equipment, like the private branch

exchanges (PBX) used to route calls inside large businesses.

Modems (modulator~demodulat.ors that convert analog signals

to digital signals) interface between the telephone wire and a

computer and are considered terminal equipment, as are computer te rminals with built-in modems.

brid communications but could not provide

any service or product that fell into the data

processing categories.

Throughout the 1960s and 1970s, AT&T

had been manufacturing and selling terminals

for access to mainframe computers. These

were primarily built by the Teletype Corporation, a subsidiary of Western Electric. Early

terminals were clearly communication devices—they were only of use for sending information to a remote computer for processing.

As microelectronics advanced, however, more

intelligence and power could be placed in terminals. It became increasingly difficult to determine at what point a terminal ceased to be

a “hybrid communications” device and became a “hybrid data processing” device.

AT&T’s applications to the FCC for permission to market new terminal equipment were

sometimes challenged as being in violation of

Computer I rules and the consent decree. ”

Further, AT&T was at a competitive disadvantage because it had to go through a

(sometimes lengthy) regulatory process before

introducing each new product, whereas the

unregulated terminal suppliers (computer

manufacturers) could introduce new products

whenever, at whatever price, they chose. It

was clear that the combination of Computer

I rules, the consent decree, and the evolution

of technology were preventing AT&T from offering state-of-the-art terminal equipment to

the public.

FCC initiated its second inquiry, Computer II, in 1976 and issued a decision in 1980.

That decision deregulated the sale of terminal

equipment, both voice and data, and allowed

— — -

llF or e x m ~ e, AT & T ’ g rquegt for a tariff to sell the Dataspeed 40/4 was denied by FCC’s Common Carrier Bureau in De

cember 1976. IBM and others objected that the terminal would

be in direct competition with terrnin sls built by computer manufacturers, and the Common Carrier Bureau agreed that the

terminal’s storage and processing capabilities (designed to allow

an operator to correct mistakes before sending data to the computer) violated FCC rules. The full Commission overturned this

decision 9 months later. In its decision the Commission noted

that the Computer I rules were inadequate to deal with the

changing technology and that Computer II Inquiry then beginning would establish a new policy. See FCC Transmittal No.

12449, 1977.
116 • Information Technology R&D: Critical Trends and Issues

AT&T to offer this equipment for sale to the

public through a subsidiary. Computer II also

allowed AT&T to offer other enhanced telecommunication services through a subsidiary.12

AT&T created that subsidiary, AT&T Information Services or ATTIS (originally called

American Bell), in June 1982.

Divestiture

Meanwhile, the Department of Justice

brought an antitrust suit against AT&T in

1974, seeking many of the same goals as in

1949. The suit alleged that AT&T monopolized

the manufacturing, long-distance, and local

service markets; that it used its monopoly

power in each market to strengthen its power

in the other markets; and that it attempted

to prevent competing equipment manufacturers and long-distance carriers from gaining access to the local networks. In January 1982,

Department of Justice announced that it had

reached agreement with AT&T on changes to

the 1956 consent decree and in August 1982,

Judge Harold H. Greene of the U.S. District

Court for the District of Columbia approved

the Modified Final Judgment. The Government’s case was dismissed upon acceptance

of the terms of the Modified Final Judgment

by all parties.

Under the Modified Final Judgment, local

Bell operating companies providing local exchange telephone services were divested by

AT&T, and spun off into seven regional holding companies. AT&T retained ownership of

a nationwide intercity network composed of

its Long Lines division and the intercity facilities of the Bell operating companies, and

continued to own Bell Laboratories and Western Electric. The Modified Final Judgment

l~In it9 ~ond ComPuter Inquizy decision, the FCC distinguished between basic and enhanced services. Basic services

were defined to be the transmission of information, while

enhanced services involved adding value to transmission by

changing or acting on the message itself in some way. As an

example, in voice traffic, a simple long-distance telephone call

constitutes basic service. Enhanced service would be provided

if the carrier stores and forwards calls or provides recorded

messages for those who are calling. An enhanced data service

might be one that provides protocol conversion so that noncompatible computers can communicate.

allowed AT&T to enter computer, computerrelated, and information services markets in

competition with unregulated firms (although

there are still restrictions on AT&T’s actions;

e.g., AT&T may not provide information services over its own lines for 7 years).

The breakup, according to Judge Greene, reduces AT&T’s ability to rely on its monopoly

at the local exchange to exact competitive advantage in interexchange (long-distance), terminal equipment, and computer services markets. AT&T’s long-distance market is still

regulated, but FCC regulation was not viewed

by the court as so extensive, nor were barriers

to entry seen as so high, that AT&T will be

able to use its currently large share in this

market to provide a competitive advantage in

unregulated segments of the industry.

Figures 16 and 17 compare the predivestiture and post-divestiture organizational structure of AT&T and the Bell operating companies. Before divestiture the entire Bell system

existed under a single corporate umbrella and

the firm was organized to provide end-to-end

telephone service. The Long Lines division

provided interstate long-distance services;

Western Electric manufactured equipment for

use throughout the system; the 22 wholly

owned Bell operating companies provided local and intrastate service; a small international

division marketed AT&T equipment abroad.

Bell Labs provided design and development

for Western Electric as well as research and

network system engineering for the rest of the

system. The AT&T Information Systems subsidiary was created in 1982 in response to the

Computer II decision.

As figure 17 shows, AT&T after divestiture

is primarily comprised of AT&T Communications, AT&T Technologies, AT&T International, and the subsidiary, AT&T Information

Systems. AT&T Communications provides

long-distance service between local calling

areas.13 AT&T Technologies includes the functions of Western Electric and Bell Labs. It

now provides research and development, manlaLATA—~~ A@ss and Tr~port Area-is the term now

used to identify a local calling area.
Ch. 4—Effect of Deregulation and Divestiture on Research • 117

Figure 16.—Pre.Divestiture Bell Systema

Pacific/Nevada

aAll entitles report to AT&T

Southwestern Southern

ufacturing, and marketing of equipment and

services both in the United States and abroad.

Western Electric no longer exists as an organizational unit, but AT&T Technologies will

continue to use it as a trade name. Bell Labs

is the section of AT&T Technologies responsible for R&D.

AT&T Information Systems will market information services, terminal equipment and

computers to end users. Dealings between

ATTIS and the other AT&T entities, under

rules of Computer II, must be at arm’s length.

Information related to AT&T’s customer base,

for example, cannot be shared with ATTIS

(unless it is also shared with competitors).

As shown in figure 18 and table 23, divestiture places the Bell operating companies into

seven regional holding companies, of approximately equal size in terms of assets and customer base. The seven jointly own and operate Bell Communications Research (Bellcore),

which provides technical and administrative

services.

Judge Greene ruled shortly after the divestiture that the name “Bell” and the familiar
118 • Information Technology R&D: Critical Trends and Issues
Ch. 4—Effect of Deregulation and Divestiture on Research • 119

Figure

The seven regional Bell operating companies

1

2

3

4

5

6

7

Nynex

18.-Bell Operating Companiesa

Indiana Bell

Michigan Bell

Ohio Bell

Wisconsin Telephone

Southwestern Bell

Southwestern Bell

U.S. West

Mountain Bell

Northwestern Bell

Pacific Northwest Bell

Pacific Telesis

—

New England

Telephone

New York

Telephone

Bell Atlantic

C&P Telephone

(4 companies)

Diamond State

Telephone

New Jersey Bell

Bell of Pennsylvania

Bellsouth

Southern Bell I

South Central Bell

Ameritech

Illinois Bell

Paclflc Telephone

Nevada Bell

a The ~eglona~ Bell ~peratlng ~ompanle~ are h~ld,ng ~~rnpant~s for Bell operating companies that offer service In the States Inchcated above Within mOSt StateS IOcal

telephone service IS also provided by Independent telephone companies

SOURCE: AT&T.

Table 23.—Regional Bell Operating Companies

Total operating Value of

revenue 1984 assets Net income embedded plant Access lines

Regions (millions) (billions) (millions) (millions) (thousands)

Ameritech . . . . . . . . . . . . . . . . . 8,900 16,26 1,037.1 14,409 13,970

Bell Atlantic. . . . . . . . . . . . . . . . 8,732 16.26 1,054.5 14,596 14,011

Bell South . . . . . . . . . . . . . . . . . 10,512 20.81 1,393.1 19,081 13,367

NYNEX . . . . . . . . . . . . . . . . . . . . 10,006 17.39 1,029.8 15,186 12,658

Pacific Telesis. . . . . . . . . . . . . . 7,895 16.19 977.1 14,493 10,717

Southwestern Bell . . . . . . . . . . 8,859 15.51 887.9 14,112 10,189

U.S. West . . . . . . . . . . . . . . . . . . 7,596 15.05 910.9 13,767 10,381

SOURCE: Bell Communications Re9earch, Inc., November 1984.

38-802 0 - 85 - 9
120 . Information Technology R&D: Critical Trends and Issues

logo are the property of the Bell system–that abroad. The one exception to this ruling was

is, the Bell operating companies. AT&T may that the name of Bell Laboratories did not

not use the name or logo in the United States, have to be changed, although it is now called

although AT&T International may use it AT&T Bell Laboratories. -

Management of Research at AT&T

Bell Labs was named and incorporated in

1925, but it grew out of an in-house research

capability which AT&T had maintained since

1907. AT&T was a groundbreaker in bringing

R&D out of the homes and private laboratories

of individual inventors and into the industrial

context. In many ways, research at AT&T was

a model for the modern industrial lab as it developed in other industries.

Most of Bell Labs’ resources have been devoted to design and development of products

for sale or use in the Bell system. However,

about 10 percent has traditionally been devoted to research. “Research” at Bell Labs encompasses those projects for which no specific,

short-term benefit to the corporation is foreseen. Most of the research is applied or directed systematically toward the solution of

particular problems, but some resources have

been devoted to basic research, sometimes

leading to major scientific advances.

Before divestiture, Bell Labs’ work was supported by the other AT&T entities. In 1982,

and typically in the predivestiture era, about

half of the Labs’ support (54 percent) came

from Western Electric, to cover costs of specific design and development.14 In addition,

Western paid another 3 percent to support

work on products being developed under Government contract. Another 11 percent came

from Bell operating companies to pay for centralized development of computer information

systems.

The remaining 32 percent of Bell Labs budget was paid by AT&T for research and systems

14 Fiweg from ch~les River Associates, Impacts of the

AT& Td”vestiture on Innovative Behavior, unpublished paper

prepared for OTA, 1983, p. 17.

engineering. The majority of the funds used

for research and system engineering came to

AT&T from the Bell operating companies

under the “license contract. ” The contract was

an arrangement under which the operating

companies were assessed up to 2.5 percent of

their annual revenues to pay for their use of

AT&T technical and administrative services.

About 30 percent of these funds, together with

a contribution from the Long Lines division,

were allocated to research.

Funding of research at Bell Labs was analogous to some of today’s attempts at joint research funding, such as Microelectronics and

Computer Technology Corporation (MCC) or

Semiconductor Research Corporation (SRC).15

The operating companies were, in a sense, separate user companies that contributed to the

support of a central research facility for mutual benefit. The difference in this case was

that the operating companies all existed under

a single corporate umbrella, so that they had

little control over how their contributions were

spent and no option of withdrawing from the

joint funding venture or establishing other arrangements.

A number of factors in the “climate” of Bell

Labs have been cited as contributing to its

achievements in fundamental research. Some

have pointed out that Bell Labs scientists had

access to state-of-the-art equipment, and were

free to focus on their research without the responsibilities of teaching or serving on committees that would be required in a university

setting. Because of job security and the stability of funding, there was no need for researchers to spend time pursuing grant support.

15FOr a description of these joint research ventures, .9- ch. 6.
Ch. 4—Effects of Deregulation and Divestiture on Research ● 121

There has been a tradition of staff interactions

across disciplinary boundaries. Bell Labs

maintained an open publication policy-its researchers have published about 2,000 papers

per year. With these advantages, Bell Labs

was able to attract outstanding scientists and

engineers to work in its research organization.l6

The Modified Final Judgment and

Bell Laboratories

In his opinion on the Modified Final Judgment, Judge Greene commented on the proposal that Western Electric and the Bell Laboratories be divested from AT&T. He noted

that the success of the Bell Laboratories in

basic and applied research (and the beneficial

impact of that research on the Nation’s economic position) was due to its relationship

with the operating companies and the Long

Lines division. He argued that continued association of the Labs with the AT&T entities

providing manufacturing and long-distance

services would supply “the practical experience that would be useful in stimulating the

research operations. ”17

The possibility of negative effects on research at Bell Labs was considered in the negotiations leading to divestiture, but was not

considered a matter of highest priority. Chessler,l8 in summarizing the position of Government negotiators, indicates that they accepted

the possibility that divestiture might lead to

a reduction in basic research activities:

The competitive era in station equipment,

interexchange communications, and information services under the [MFJ] will bring forth

a great blossoming of progress in those areas

of telephony. It was the thought of the framers . . . that the blossoming will be so great

as to more than compensate for the loss of

pure research at Bell Telephone Laboratories,

and the reduced incentives for innovation at

the Bell operating companies.

Judge Greene did not believe that incentives

for innovation were being sacrificed or that

‘~TA, notes on interview with workshop participants.

170pinion and Order, Aug. 11, 1982, p. 62.

“Cited in “Bell Labs on the Brink, ” Science, Sept. 23, 1983.

divestiture per se would hurt the quality of

service provided by the operating companies

or the research performed by of Bell Laboratories. He noted-that the largest potential customers of Western Electric will be the divested

operating companies, hence, Western Electric’s association with Bell Laboratories

should provide an incentive to improve equipment and technology.19

The Modified Final Judgment sets aside the

1956 Consent Decree and the requirement that

AT&T grant nonexclusive licenses for its

patents to any applicant. The elimination of

this requirement makes it easier for Bell Labs

to appropriate the potential benefit of new

breakthroughs, and therefore might be considered an incentive to research. AT&T may now

grant or deny licenses as it chooses, and may

change whatever royalty it chooses. Before

divestiture, when revenues from local exchange ratepayers were supporting Bell Labs’

research, it made sense to require AT&T to

share the fruits of its monopoly financing with

others, according to Judge Greene. With the

divestiture of the-operating companies and the

termination of the license contract fee payments, this rationale for required licensing is

eliminated. Judge Greene also believed that

the advance of technology and the dispersion

of knowledge related to telecommunications

technology has reduced the dependence of established domestic firms and foreign competitors on information from Bell Laboratories.20

The Modified Final Judgment requires that

AT&T grant licenses to the divested operating com-panics on all existing patents and all

patents issued for a period of 5 years following approval of the Modified Final Judgment.

AT&T is also required to provide the operating companies with nonpatentable technical

information that has been funded by the license contracts. The operating companies will

have the right to sublicense AT&T patents

and technic-d information to those providing

them with goods and services.

I’Charles River Associates, “Impacts,” p. 43.

‘“Ibid.
122 ● Information Technology R&D: Critical Trends and Issues

Bell Labs After Divestiture

The most noticeable change resulting from

Computer II and divestiture is a reduction in

Bell Labs’ size. About 4,000 employees became part of AT&T Information Services

(ATTIS). FCC has interpreted the Computer

II ruling that ATTIS and Bell Labs deal at

arm’s length to mean that ATTIS employees

must be kept separated from former Bell Labs

colleagues, even though they are sometimes

located in the same buildings. Another 3,000

Bell Labs employees went to the newly created

Bell Communications Research Inc. (Bellcore,

formerly the Central Services Organization) of

the Bell operating companies. This leaves Bell

Labs with about 18,000 employees, returning

it to approximately the size it was in 1978.

Organizational changes taking place elsewhere in AT&T Technologies will also affect

Bell Labs. In 1983, AT&T Technologies was

organized into “line of business” divisions

defined by customer and product type. Within

Bell Labs, development teams have been reorganized along the same line of business categories in order to facilitate cooperation with

manufacturing. 21 Authority for managing design and development of products within Bell

Labs was given to executives running each line

of business division, as shown by the dotted

lines in figure 17.

This is a major departure from previous

AT&T policy wherein Bell Labs, Western Electric, and AT&T shared this authority; unlike

practice at most firms, the old arrangement

gave Bell Labs some control over a product

even after it went into production. The new

arrangement was chosen to make development

more responsive to the needs of marketing and

manufacturing, and is a preparation to enter

competitive markets. Although the organizational structure is new, it marks the continuation of a trend which began when the market

for large private branch exchanges (PBXS)

22

became competitive after 1968. Shortly there-

~lBrO utt~, “cold New World,” Fortune, June 27, 1983, P. 83.

~~private Br~ch Exch~W is a generic term for the switch

used on the customer premises for routing calls within a building or organization.

after, nearly all Bell Labs personnel working

on PBXs were collected in one Colorado Lab

facility near the Western Electric facility

where PBXs were manufactured.

Figure 17 also shows that research at Bell

Labs remains independent from the lines of

business in AT&T Technologies. However,

sources in Bell Labs note that research is

undergoing review and changes as a result of

deregulation and divestiture. The loss of research personnel to ATTIS and Bellcore caused

some realignment of research projects. Some

other areas of research-for example, regulatory economics and social psychology-have

been judged unproductive or inappropriate

and have been cut back. New research topics,

such as robotics, are being undertaken.

A major change to Bell Labs’ funding since

divestiture is the termination of the license

contract revenues from the local operating

companies, funds that were specifically dedicated to research and system engineering.

Under the current funding arrangements, research is supported by AT&T Headquarters

with funds provided by the AT&T companies

under a “composite allocator. ” AT&T entities

will be assessed for Bell Labs research (as well

as administrative functions of AT&T Headquarters) according to their size, number of

employees, and revenues. The allocation formula, under the Computer II rules, must be

reviewed and approved by FCC to ensure that

AT&T allocates a reasonable portion of research costs to the unregulated portion of its

business and does not subsidize it from regulated long distance revenues.23

Another major change for Bell Labs will be

an increase in the work done on military projects. AT&T Technologies is planning to increase the number of defense contracts, and

the design and development work will be done

in Bell Labs. Although defense contracts were

once very important to Bell Labs, they had

been reduced to a minor part of the R&D budget during the 1970s. In 1971, Bell Labs derived

30 percent of its income from defense-related

*

gSee FCC 83-600, Dec. 22, 1983 and FCC 83-123, Mar. 31,

1983.
Ch. 4—Effects of Deregulation and Divestiture on Research ● 123

work; by 1976 the share was down to 2 percent and in 1983 about 3 percent.24

Growth of defense projects to an expected

10 percent of Bell Labs’ budget should not be

difficult. Based on its previous work, AT&T

has strong ties with the Pentagon and a good

reputation for designing and building the

——. - — 24Marilyn A. Harris, “Bell Labs Looks to Military Research, ”

Electrom”cs, Feb. 9, 1984.

kinds of large complex systems that the Department of Defense wants. As Solomon J.

Buchsbaum, executive vice president for consumer systems, points out, “The military side

of government is a voracious eater of new technology, and we are good at [providing] that. ”25

2s’’Bell Labs: The Threatened Star of U.S. Research, ” Bzzsiness Week, July 5, 1982, p. 49.

Factors Affecting Research

All the changes taking place in AT&T’s mission, markets, and corporate structure cannot

but affect the activities of AT&T Bell Labs.

The purpose of the Labs has always been to

provide research, systems engineering, and

product design to support the corporate activities of AT&T. As those activities have evolved,

the role of the Labs has also changed. Of particular concern to many observers is the way

in which deregulation and divestiture might

cause changes in the commitment to research,

particularly basic research, within Bell Labs.

Several concerns have been voiced. Will

AT&T, as a smaller corporation with a narrower revenue base, be able to support research

as it has in the past? What incentives does

AT&T have to allocate funds to research, and

how strong are they compared to incentives

to allocate more resources to development of

competitive products? How will changes related to divestiture and deregulation affect research at other firms in the telecommunication

and computer industries? Could a reduction

in the level of research at Bell Labs have a negative effect on U.S. research generally, and if

so, what can be done about it? The remainder

of this chapter addresses these questions.

Stability of Earnings

The future funding of research at Bell Labs

will depend, at least in part, on AT&T’s success in the market. The combination of divestiture and deregulation leave AT&T a smaller

firm.

book

While the predivestiture AT&T had a

value of $150 billion, the new AT&T has

assets of only about $34 billion. However, the

new AT&T is expected to have a much more

favorable ratio of revenues to assets. Annual

revenues are now expected to be on the order

of $57 billion, compared with $69 billion for

the predivestiture firm. This is largely because

AT&T will continue to provide long-distance

service, which has traditionally been very profitable and is estimated to provide two-thirds

of the corporation’s profit base.26 Also, AT&T

will continue to manufacture telecommunications equipment. Further, AT&T now has the

opportunity to expand into potentially profitable computer-related markets.

While competitive computer markets are potentially profitable, they are also notable for

their volatility over the past few years: new

firms and new products have had meteoric successes and catastrophic failures. This kind of

market may be dangerous for a firm which is

unaccustomed to competition. AT&T has not

been particularly successful in markets where

it has been open to competition in the past.

After 1976, when customers were permitted

to purchase their own private branch exchange

(PBX) switching equipment from other manufacturers, AT&T’s market share fell sharply.

Although AT&T is still the largest single manufacturer, it now has 24 percent of U.S. sales,

‘Peter Hall, “AT&T and the Great Divide, ” Hnanci”al World,

Jan. 10, 1984.
124 . Information Technology R&D: Critical Trends and Issues

compared to 100 percent 8 years ago. Major

competitors, specifically, Northern Telecom,

Rolm, and Mitel have shares of 16,14, and 11

percent, respectively .27

This loss of market share is due at least partly to AT&T’s higher prices and relative slowness in bringing new products to market. Both

these tendencies could be major disadvantages

in industries that are noted for rapid introduction of new products and rapid obsolescence

of old ones. In part, slowness in bringing products to market was related to the regulatory

process-a situation that has been eased since

Computer II, but not eliminated.

AT&T has traditionally designed and manufactured its products to extremely high

standards; they were expected to be highly

reliable with a long useful life. Such a strategy made sense when AT&T was the owner

of a huge nationwide network of transmission

and terminal equipment that had to be depreciated over 20 to 40 years. The higher costs

of conservative design were made up by a long

production run. Western Electric maintained

a price advantage over some other manufacturers by producing large numbers of standard products over many years.

Western Electric has often been at a cost

disadvantage, however, in the case of newer

electronic products, the very ones that are the

target of the competitive market. Small digital

PBXs for example, cost Western about 75 percent more to manufacture than those made by

their lowest cost competitor, Mitel.28

AT&T has made a concerted effort to streamline its manufacturing and to reduce costs.

AT&T Technologies is reducing its work force,

and several former Western Electric factories

have been closed down or cut back. Although

AT&T did not sell integrated circuits and

other electronic components to the public, it

is the Nation’s 12th largest manufacturer.

AT&T Technologies is now expanding that

manufacturing capability, including construc-

‘7Northern Business Information, Inc., as cited in “ITl”s Big

Gamble” Business Week, Oct. 22, 1984.

*8Northem Business Information, as quoted in Bro Uttal,

“Cold New World,” Fortune, June 27, 1983, p. 83.

tion of a new plant in Florida to make lower

cost chips for use in computers and switches.

AT&T Technologies will continue to be a

major manufacturer of telecommunication

transmission equipment, large central office

switches, and terminal equipment. Potential

customers include Bell operating companies,

independent telephone companies, and telecommunications agencies abroad.29

In addition, AT&T is now free to sell products it developed but could not market to the

public under the 1956 consent decree. It can

now market computers based on the UNIX

operating system, the 256 K-byte memory

chip, and the 32-bit processor, all developed

at Bell Labs. Its 3B computer series will offer a range of computers of varying size and

capability.

For the first time, AT&T is acquiring some

of its new products, marketing talent, and distribution channels through other firms. For example, AT&T acquired a 25 percent interest

in Italy’s Olivetti Co. at a cost of about $260

million.3o Olivetti is Europe’s largest word

processor and computer manufacturer. The

agreement is expected not only to supply

AT&T with Olivetti office equipment for the

U.S. market, but also to provide a European

distribution system for AT&T products. AT&T

has also entered a joint venture with a Netherlands electronics firm, Philips, to manufacture

central office switching equipment for Europe.

AT&T has also made agreements with a number of smaller US. office computer manufacturers for development of new office automation equipment.

At the same time, and equally importantly,

AT&T is developing its own marketing capability. Before divestiture, Western Electric

was strictly a manufacturer and dedicated

very few resources to marketing. One observer

notes that a competitor, Northern Telecom,

spends about 9 percent of manufacturing sales

on marketing while Western Electric spent

~gKathl~n K. wiegner, “Prometheus is Unbound and Seeking His Footing, “ Forbes, Mar, 12, 1984, p. 143.

‘“Ibid.
Ch. 4—Effects of Deregulation and Divestiture on Research ● 125

only 1.2 percent in 1982.31 Now, AT&T Technologies will be responsible for marketing all

products not handled by ATTIS, and a marketing division and all the support functions

are being developed.

Allocation of Research and

Development Expenditures

As listed in table 24, AT&T and IBM have

the largest R&D budgets among the U.S.

firms shown. The R&D intensity, that is, R&D

as a percent of revenues, is based on total

sales, which before divestiture included revenues of the operating companies providing

local telephone service. AT&T’s R&D intensity is a fairly low 3.3 percent when based on

total revenues. Nordhaus cites historical evidence, however, to indicate that as a percent

~lBrO ut~, “cold New World, ” Fortune, June 27, 1983, P. 83.

of manufacturing sales AT&T spent approximately 9.8 percent of revenues on R&D in the

1970s, as compared with an average of about

2.8 percent for communication firms, and 1.9

percent for manufacturers generally .32

On average, Bell Labs has spent about 10

percent of its R&D budget on research. Among

the other firms in table 24, both Northern

Telecom and IBM also claim to spend about

10 percent on research. While Northern Telecom is a competitive firm, it operates under

the corporate umbrella of Bell Canada, and

shares the expenses of Bell-Northern Research

with the regulated firm.

The general argument expressed by concerned observers is that AT&T may be forced,

because of competitive pressures, to invest

more of its R&D funds in developing salable

9Zchwle9 R,iVer Associates, Op. Cit., P. 7.

Table 24.–R&D Intensities of Selected Major Telecommunication Firms (1982)

R&D Expenses Sales R&D intensity

Company (millions of dollars) (percent)

(1) (2) (1)/(2)

AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,126a

$65,093 3.3 ”/0

COMSAT . . . . . . . . . . . . . . . . . . . . . . . .

GTE . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Harris. . . . . . . . . . . . . . . . . . . . . . . . . . .

ROLM . . . . . . . . . . . . . . . . . . . . . . . . . .

United Telecommunications . . . . . . .

Western Union . . . . . . . . . . . . . . . . . . .

Zenith Radio. . . . . . . . . . . . . . . . . . . . .

ITT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rockwell International . . . . . . . . . . . .

General Dynamics . . . . . . . . . . . . . . . .

IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Motorola . . . . . . . . . . . . . . . . . . . . . . . .

RCA . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General Electric . . . . . . . . . . . . . . . . . .

L. M. Ericsson (1980). . . . . . . . . . . . . .

Northern Telecom . . . . . . . . . . . . . . . .

Plessey (fiscal year 1982) . . . . . . . . . .

Siemens (fiscal year 1982) . . . . . . . . .

Thomson-CSF (1980) . . . . . . . . . . . . . .

The CIT-Alcatel Group (1981). . . . . . .

Hitachi (fiscal year 1981) . . . . . . . . . .

NEC (1981) . . . . . . . . . . . . . . . . . . . . . .

Fujitsu . . . . . . . . . . . . . . . . . . . . . . . . . .

‘{”~lud~~ $1,515 million spent by western Electric Co. and other subsidiaries, not worted in ATaT’s 10K.

bCanadian dollars.

SOURCES: Business Week, June 20, 1983; L. M. Ericsson Telephone Co., Anrrua/ Repoti, 1980; Plessy, Report and Accounts,

1982; Siemens, Annual Reporl 198142; Thomson4SF in 1980: The Year in Review; CITA/catel Group Review; Hitachi,

1981 Annua/ Report; NEC Nippon Electric Co., Limited, Annual Report, 1981; and Fujitsu Limited, Anrrua/ Repoti,

March 1981.

FROM: Charles River Associates, “Impact of the AT&T Divestiture on Innovative Behavior, ” unpublished report prepared for

Office of Technology Assessment, December 19S3,

22.3

267.0

92.8

24.4

11.2

11.0

63.8

519.0

222.0

139.0

2,053.0

278.0

195.4

781.0

231.3

241.4b

241.8

3,300(DM)

3,600(FF)

1,000(FF)

609.0

227.8

256.1

’41O

12,066

1,719

381

2,249

1,025

1,239

15,958

7,395

6,155

34,364

3,786

8,237

26,500

2,779.4

3,035.5b

1,723.9

34,600(DM)

22,300(FF)

1O,7OO(FF)

15,996.1

4,820.2

2,769.9

5.4

2.2

5.4

6.4

0.5

1.1

5.1

3.3

3.0

2.3

6.0

7.3

2.4

2.9

8.3

8.0

14.0

9.5

16.1

9.3

3.8

4.7

9.2
126 ● Information Technology R&D: Critical Trends and Issues

products, and correspondingly less in funding

research projects that may lead to future

scientific breakthroughs. They note that the

license contract fees described above, which

provided a steady income source for Bell Labs,

will no longer be available, and that research

funding will depend on yearly corporate decisions. Any reductions, instability, or even

uncertainty about funds could have negative

effects on the productivity of research projects

that by their nature require long-term attention and investment.

The arguments related to a possible change

in AT&T’s policy toward research are based

on two major effects of the deregulation and

divestiture-AT&T will be operating in competitive markets and it will be a smaller corporation.

Neither the theoretical nor the empirical relationships between market structure, firm

size, and innovative activity are straightforward or well understood. It is not clear whether

innovation is most likely to occur under conditions of competition or of monopoly. In addition, although many support the view that

larger firms have more incentives to innovate,

there are many examples, especially in the information industries, of small firms that grow

large due to extremely successful innovations.

Further, most existing theory deals with “innovative behavior” or R&D as a whole, rather

than with the specific relationship of market
Ch. 4—Effects of Deregulation and Divestiture on Research ● 127

structure or firm size with the basic research

component of R&D.

One theoretical argument, as proposed by

Schumpeter and others, is that innovative

behavior is greater in monopolistic industries

than in competitive ones because a firm with

monopoly power: 1) can prevent imitation and

therefore capture more profit from innovation,

and 2) is better able to assemble the funds and

bear the risks of R&D.33 On the other hand,

critics of this position theorize that firms in

competitive industries are more likely to innovate because new products or processes will

help them to reduce costs or increase market

share. In this view, monopolistic firms would

be slow innovators because they can continue

to earn profits by continuing to produce the

current products. In addition, because the

monopolistic firm is under less pressure to

operate efficiently, the results of innovative

activity would be obtained at excessive cost.34

Real-world markets are characterized by

varying degrees of concentration rather than

extremes of pure competition or monopoly. Attempts to empirically measure the relationship

between innovation and degree of industry

concentration have had mixed results.35 For

example, Scherer36 found some evidence that

dominant firms in highly concentrated industries are more innovative. However, in a later

study37 he found that the relationship varied

greatly depending on the industry, and that

there were examples where higher levels of innovation were associated with more competitive industries. In some cases, dominant firms

were only moderately productive innovators,

but they were able to aggressively take advan-

———. — 33 Summarized in Morton I. Kamien and Nancy Schwartz,

Market Structure and Innovation (New York: Cambridge

University Press, 1982), p. 47. SiMorri9 E. Morkre, “Innovation and Market Structure: A

Survey, ” Working Paper No. 82, Bureau of Economics, Federal Trade Commission, 1982, p. vi.

S~The 1itera~re is review~ in Morkre, “Innovation, p. 11.

‘F. M. Scherer, “Firm Sizes, Market Structure, Opportunity,

and the Output of Patented Inventions, ’ American Econom”c

Review, 55:11 19.

“F. M. Scherer, Industrial Market Structure and Econom”c

Performance (New York: Rand McNally, 1980), p. 431-432.

tage of innovations by other firms. IBM was

given as an example of such a firm.38

The empirical evidence on the effects of firm

size on innovation is less ambiguous than the

evidence on market structure. R&D at small

firms is sometimes more efficient than at large

ones for R&D projects undertaken by both

large and small firms. 39 However, some proj -

ects are simply beyond the reach of small firms

and there may be economies of scale for other

projects. It appears that R&D intensity increases with firm size until firms reach annual

sales of $250 million to $400 million (1978

prices) and then level off.40 After reviewing the

empirical evidence on firm size and innovation,

Scherer concludes that an industry with a

moderate degree of concentration and a variety of firms of different sizes is most conducive

to innovation.

All things considered, the most favorable

industrial environment for rapid technological progress would appear to be a firm size

distribution that includes a preponderance of

companies with sales below $500 million,

pressed on one side by a horde of small, technology-oriented enterprises bubbling over

with bright new ideas and on the other by a

few larger corporations with the capacity to

undertake exceptionally ambitious developments. 41

After divestiture, AT&T is still many times

the threshold level of size that empirical studies have associated with maximum R&D. It

will still be the dominant firm in a telecommunications industry that fits well Scherer’s

description of the environment most favorable

for innovation. Thus, though the details of

AT&T’s R&D may change, there are no convincing theoretical arguments or empirical

evidence related to market structure or firm

size that would predict a lessening of its innovative activity.

3BIbid., p. 432.

‘gMorkre, p. vi.

40Charles River Associates, “Impacts,” p. 88.

ilscherer, lndust~”~ Market Structure, P. 422.
128 • Information Technology R&D: Critical Trends and Issues

Scherer and others have concluded that the

important determinant of innovation may not

be market structure or firm size but rather the

richness of innovative opportunities opened up

by the underlying base of scientific knowledge.

Advances in science related to semiconductors, computers, software, satellites, microwave transmission, fiber optics, and lasers provide a rich set of technological opportunities

upon which to base innovations in telecommunications and information technology.42

Basic Research

Economic literature on “innovation,” however, does not deal adequately with the effect

of firm size or market structure on contributions to the knowledge base that supports innovation. The expected effect of competition,

as noted above, is investment in development

of new products and services, which will reduce cost or improve market share in the short

term. Investments in research, especially basic

research, may not pay off until many years

after the initial investment is made.

One unique characteristic of Bell Labs is its

reputation for doing basic research.43 In general, only a few firms in the information industries have spent much on in-house basic research. In 1981, out of 110 firms doing R&D

in information technology, only seven did any

basic research at all, according to the National

Science Foundation.44 Speaking of Bell Labs

one observer from Bell-Northern Research

noted, “Most other organizations are looking

—. —- .

42Charles River Associates, Impacts, p. 85.

48National Science Foundation, Reseamh and Development

in Industry, 1981, NSF 83-325 (Washington, DC: U.S. Government Printing Office, 1983), p. 3. The National Science Foundation defines basic research as “original investigations for the

advancement of scientific knowledge not having specific commercial objectives, although such investigations may be in fields

of present or potential interest to the firm.

“Information technologies in this case includes firms in the

following categories: office, computing, and accounting machines (SIC 357); communications equipment (SIC 366); electronic components (SIC 367). See “Table B-33–Number of R8zD

Performing Companies Conducting Basic Research By Industry: 1981,” p. 38 in National Science Foundation, Reseamh and

Development in Industry, 1981, NSF 83-325 (Washington, DC:

U.S. Government Printing Office, 1983).

at how to exploit technology, not at how to

push it forward.’’”

When AT&T gets more experience as a competitive firm, will it continue to do basic research, or will it begin to behave as it appears

other competitive firms do, and dedicate more

resources to product-oriented research and development? Some observers, including Nordhaus, believe that AT&T will now “tilt much

more toward a conventional equipment manufacturer, and it will therefore have a relatively greater incentive to invest in R&D that

will enhance its equipment sales and profits”

and relatively less incentive to invest in basic

research.46

At the present time, AT&T’s management

has voiced a commitment to continuing fundamental research, recognizing that advances in

science are necessary to advances in technology. In testimony before the Senate Commerce Committee, AT&T President Charles L.

Brown called Bell Labs the “jewel” of the Bell

system, and pointed out that “basic research

has been the root of Bell Laboratories success

and will continue to be the root of it. We

do not intend to skimp on it . . . . This is something we have as a basic tenet.”47

It is probably true that more than half a century of reliance on internally developed technology will not be quickly tossed aside. One

Bell Labs spokesman said that the “corporate

culture” of AT&T is completely oriented toward doing basic research in-house. The forces

of habit and tradition may resist some pressures to shift too many resources to development.48 Most of the technologies that will be

commercially important to AT&T in the future–computer science, photonics, and solidstate physics—are the very areas where Bell

Labs has made ongoing contributions to basic

46John A. Roth, executive VP, Bell Northern Research, as

cited in “Bell Labs the Threatened Star of US Research,” BusJ”-

ness Week, July 5, 1982.

4’William Nordhaus, cited in “Bell Labs on the Brink,”

Science, Sept. 23, 1983, p. 1267.

47Testimony of Charles L. Brown Before the Senate Committee on commerce, Saence and Transportation, March 1982.

‘

s

Interview, March 1984.
Ch. 4—Effects of Deregulation and Divestiture on Research • 129

science. It is highly unlikely that AT&T will

abandon research in these areas. Further, as

was pointed out in the case studies in chapter

3, the boundaries between basic and applied

research in these fields are sometimes very

fuzzy. Bell Labs’ researchers are likely to make

some contributions to the advancement of

science even in pursuit of commercial ends.

There are some tangible and intangible benefits of performing basic research that are as

advantageous to AT&T now as they were before Computer II or divestiture. For example,

Nelson49 points out that research often yields

discoveries and inventions in unexpected

areas. The wider a firm’s scope of activities,

the higher the proportion of these unanticipated outcomes it will be able to use. Thus,

diversified firms can realize higher rates of return from research, and engage in more of it

than firms with narrow product lines. Prior to

divestiture, AT&T was a vertically integrated

firm which could make use of research results

in a large number of areas. Although the size

of the firm is now reduced, AT&T is now in

a position to diversify in other areas, and will

continue to benefit from research results.

An additional benefit to funding basic research is that a reputation for achievements

in basic science gives the Labs a certain prestige, credibility, and glamour, even if its chief

business is not basic research. Although these

benefits are not quantifiable, they are useful

in attracting qualified scientists and engineers.

Divestiture and Computer II changed the

rules under which AT&T funds research, and

there has been speculation that the new rules

may bring about a reduction in the amount

spent on research over the long term. As a

rate-base regulated monopoly, AT&T was able

to spread the costs of basic research over

many ratepayers. The license contract fee was

essentially a “tax” on telephone calls. The

revenues generated provided a regular source

of income that could be counted on year after

‘

gRichard R. Nelson, “The Simple Economics of Basic Scientific Research, ” Journal of PoliticaJ Economy 67, 3 (June): pp.

297-306.

year.50 AT&T was free to use those funds much

as a government might use tax revenues, allocating some portion of those revenues to

support activities that were for the general

good but provided no immediate commercial

benefit. While some research eventually paid

off in discoveries useful to AT&T, some never

paid off at all. Many research results that were

not of direct benefit to AT&T were made available to others through licenses of patents or

through scientific and technical publication.

As a competitive firm, AT&T must now support its research through a different internal

funding mechanism. An important aspect of

the deregulation and divestiture rules is that

AT&T will be watched closely by FCC to be

sure that it allocates a reasonable portion of

research costs to the nonregulated portion of

its business. Before divestiture, most of the

cost of research was paid for by the Bell operating companies and the Long Lines division.

Under the new “composite allocator” developed by AT&T and approved by FCC, approximately 50 percent of research costs will be

paid by AT&T Communications and 50 percent will be paid by AT&T Technologies and

AT&T Information Systems.

Role of Bell Communications

Research, Inc.

Another unknown factor in the future of

telecommunications research is the role of Bell

Communication Research, Inc. (Bellcore), the

technical services organization owned by the

regional holding companies. The scope and

quality of Bellcore’s research effort is still unknown. One of Bellcore’s jobs will be to test

and evaluate products and equipment for the

Bell operating companies. In order to do this

properly, Bellcore will have to stay ahead of

the manufacturers, anticipating the state-ofthe-art and doing some basic research. According to Alan G. Chynoweth, Vice President for

‘OAT&T points out that the license contract payments were

not completely guaranteed income. Occasionally a Stab regulatory comrnission would disallow a portion of a BOC’S license

contract payment.
130 ● Information Technology R&D: Critical Trends and Issues

Applied Research, “Everything we do will be

chosen because of its relevance to the longterm needs of the telephone companies. We’re

smaller than Bell Labs. We have to be more

selective. But in those areas we select to be

expert in, we’ll dig very deeply. ”51 Among the

areas where research will be done are mathematics and computer science, materials, solidstate science, fiber optics and photonics, and

switches.

Nearly half of Bellcore’s technical personnel came from Bell Labs. To the extent that

former Bell Labs research personnel will still

pursue the same sorts of problems at Bellcore,

the value of their research contributions has

not been lost to the Nation. It remains to be

seen whether the creation of Bellcore will have

a positive or negative impact on basic research

in areas related to information technology. The

research agendas of Bellcore and Bell Labs will

naturally overlap in certain areas. It is possible that this duplication of effort will be inefficient and may reduce the quality of U.S. research in information technology overall. On

the other hand, it maybe that the creation of

this new center of initiative will have a stimulating effect on research.

The regional Bell operating companies are

the owners of Bellcore and have control over

how funds are spent. Under the current arrangement, they all contribute to certain

“core” projects, but each is able to limit its

investment in “noncore” projects it does not

believe to be beneficial to its own business.52

Funding priorities for Bellcore will depend

partially on actions of State regulatory commissions. Before divestiture, a few State commissions sometimes disallowed part of a Bell

operating company’s payment for support of

Bell Labs on the grounds that research did not

benefit the telephone ratepayers of that State.

Support of research at Bellcore may face the

same sort of problem.

The growing competition among its owners

may also affect Bellcore’s future. Although

they provide regulated telephone service only

within their assigned geographic areas, the re5’Lee Dembart, “Dividing Bell Labs: Breakup to Put the Best

to New Test, ” Los Angeles Times, Sept. 6, 1983, pp. 1,3.

‘*Remarks of Irwin Dorros at seminar “Research at Bell” held

Apr. 5, 1984, Massachusetts Institute of Technology, Program

on Research in Communications Policy.

gional operating companies are creating subsidiaries to enter other lines of business.

Among the enterprises already under way are

computer sales and repair, computer software

sales, office equipment sales, cable television

installation, and real estate development. In

many cases the regionals are providing goods

and services in nationwide markets, in direct

competition with one or more of the others.

Other ventures are being planned, subject to

approval by Judge Greene’s court, under terms

of the divestiture.

The regional Bell operating companies have

many common R&D goals because the majority of their business will continue to be the provision of regulated local and interstate telephone service. However, there are a growing

number of areas where their interests diverge

or where one company wishes to withhold

information from some or all of the others.

Bellcore is still developing an organizational

structure to deal with this situation. It is possible that the growing competition between

the owners could encourage them to jointly

fund basic research at Bellcore but to turn to

other labs for development of products needed

for the competitive market. At this point it is impossible to say what Bellcore’s long-term research agenda will be. Bellcore will be an interesting experiment in jointly funded R&D.

It remains to be seen how much of Bellcore’s

resources the regional Bell operating companies will be willing or able to spend on basic

research with possible long-term payoffs.

Availability of Research Results

Even if Bell Labs continues to perform research at the current levels, it has fewer incentives to make the results available to others.

It has maintained a fairly open policy, encouraging its scientists to publish results,

present papers, and consult informally with

other researchers. Some of the research results, as well as some of the patents, were of

little direct value to AT&T because it was permitted only to provide regulated common carrier service. But some of them were of immense value to firms in related fields and even

to AT&T’s competitors.

Now, according to Bell Labs Vice President

Arno Penzias, AT&T will “have the opportunity and motive to use our own technology. ”
Ch. 4—Effects of Deregulation and Divestiture on Research • 131

Photo credit AT&T Bell Laboratories

An experimental, interactive computer-based system

is helping Bell Labs engineers design

integrated circuits.

However, he emphasized that in the area of

basic research, Bell Labs is still part of the

scientific and technical community where communication and trading of information is vital.

In order to benefit from the results of research

elsewhere, it will have to continue to share its

research results. In order to keep good scientists on the staff, it will have to allow them

to publish.

Only a small number of basic research projects lead to results that have an obvious application. In some of those cases AT&T would

probably get patent protection before publishing the results. In other cases, the published paper may report a discovery without

giving details of how to duplicate it. This type

of protection has been used by many labs, including Bell Labs in the past. Penzias noted

that at IBM the number of papers published

per dollar of research is about the same as Bell

Labs, even though IBM is a competitive

firm. 53

A policy of complete openness of research

results may be transferred to Bellcore. Its interest is to see that research results are disseminated widely so that manufacturers can

use them to produce the best and lowest cost

products for use by the Bell operating companies. Bellcore itself, under its current charter, will not be able to manufacture products

or otherwise benefit from any discoveries or

inventions resulting from its research. Therefore, it may establish a publication and licensing policy even more open than Bell Labs’ has

been in the past.

‘9Arno Penzias, remarks at a seminar “Research at Bell, ” held

Apr. 5, 1984, Massachusetts institute of Technology, Program

on Research in Communication Policy.

Policy Implications

The recent divestiture and the entry of

AT&T into competitive markets poses new

challenges for U.S. policy toward the telecommunication and information industries. The

1979-83 period in which the divestiture and

Computer II decisions were announced and

implemented was also a period of intensive

congressional debate about telecommunications. Bills have been introduced to modify the

Communications Act of 1934, to deregulate

parts of the industry, or to force some version

of AT&T divestiture.64 Many of the policy issues raised in this legislative debate have now

been addressed by FCC in Computer II and

through settlement of the Department of Justice suit. Speculation over the effects of the

“For example, S. 898, H.R. 5158, as introduced in the 97th

Congress, are only two bills which proposed modifying the 1956

consent decreq creating a subsidiary of AT&T to enter new unregulated markets, and stimulating competition in terminal

equipment.

new policies have added to the uncertainty and

change in the information industry. Several

years under the new rules will be necessary

before all the effects can be assessed.

Similarly, the full effects of deregulation and

divestiture on the quality and direction of research at Bell Labs will only become clear as

this “shakedown” period goes on. Neither history nor economic theory seem to be of much

help in foreseeing the future of research at Bell

Labs. There appear to be only a few things

that government can do about major changes

in research at Bell Labs. Clearly, in the postdivestiture era, decisions about the funding

and nature of research will be in the hands of

AT&T management. This is not new. Decisions about research have always been management decisions, in AT&T as throughout

U.S. industry.
132 . Information Technology R&D: Critical Trends and Issues

It is possible that, in the new climate created by deregulation and divestiture, AT&T

management will make decisions about research that will allow the quality or quantity

of Bell Labs’ research to decline. In that case,

there may be a role for limited government action. Some regulatory or funding policies

might be developed to stimulate or facilitate

research. These policy changes, discussed later

in this section, might be aimed at AT&T alone,

but might also be applied more generically to

raise the quality of research in industry, universities, and government.

However, it would be premature to introduce policy changes without evidence that the

current institutional arrangements are inadequate, or that the U.S. research capability is

in jeopardy. The first step of government action might be to monitor Bell Labs’ research

over the next several years to see whether the

quality of research actually changes. The

monitoring effort might be expanded to include the whole range of industry and university research in information technology. It

would not be difficult to develop an analytical framework and a set of criteria for measuring the vigor or quality of research. A number of possible measures are suggested below.

While none of them is decisive in isolation, together they might give a picture of the health

of research at Bell Labs and at other research

organizations. 65

For example, it would be possible to monitor the funds that AT&T allocates to research

over the next few years. Dollar amounts seem

very objective and quantifiable, but alone are

not a sufficient gauge of the quality or direction of research effort. For example, if all basic

science were dropped and the research effort

steered toward more applied projects, the total

amount spent for “research” might remain the

same. This criterion may be useful, but cannot be used in isolation.

Another measure would be the number of

papers by Bell Labs scientists published in

prestigious scientific and technical journals

each year. A decline in the number of papers

could be an indication that the amount of research is declining, perhaps, or that AT&T is

significantly limiting publication in order to

“Some of the measures listed have actually been used informally by Bell Labs management to monitor the strength of research in the Labs.

protect possible commercial advantage stemming from certain types of research.

In addition to monitoring the number of papers published, it might also be possible to examine the quality of the journals in which they

appear. Although this measure is subjective,

it should reflect the quality of Bell Labs work

as viewed by other members of the scientific

community. Researchers in all fields have a

clear idea which of their journals is the “best.”

To the extent that Bell Labs work continues

to be published in the same sorts of journals

as now, it may be evidence that the quality

of results remains unchanged. A shift to publication in less prestigious journals might indicate a decline in quality.

The vigor of research can also be measured

by its usefulness to other researchers. Thus,

a possible measure of the continuing value of

Bell Labs research would be the number of

times their work is cited in papers published

by scientists in universities and other labs. In

addition, the attitude of the scientific community toward Bell Labs could be monitored by

its ability to attract and retain well-qualified

research workers.

There is the possibility that, even with a reduction of basic research at Bell Labs, research

in the information field generally will not suffer. Scientific research may simply move to

other laboratories. Any decline in quality of

fundamental research would certainly make it

harder for Bell Labs to attract and keep a staff

of qualified scientists. Top graduate students

would choose to work at other firms or at universities. To the extent that researchers continue to work in the same scientific fields and

are equally productive in their new surroundings, there may be no noticeable effect on U.S.

basic research.

To get a complete picture of the effects of

deregulation and divestiture on the state of information technology basic research in the

United States as a whole, it would be necessary to monitor the research performed throughout industry and at university labs as well.

Even then, it would be extremely difficult to

attribute observed changes in the U.S. research environment to changes occurring at

Bell Labs. As noted in chapter 2, the state of

information technology research is in flux and

changes will occur with or without Bell Labs.
Ch. 4—Effects of Deregulation and Divestiture on Research . 133

It may be possible, however, to trace some

causal factors and to, at least, draw reasonable inferences.

One difficulty with the proposed studies is

the collection of relevant data over an extended period of time. While the data needed

are not extensive, they include items that

firms do not currently report to any Federal

agency (except that the FCC will continue to

be concerned with AT&T’s research budget).

Some special effort and cooperation on the

part of industry and the Federal Government

would be needed to collect and analyze the necessary information.

It is difficult to say who might be best

suited to carry out the studies mentioned

above. One possibility is the FCC, which is responsible for oversight of many aspects of

AT&T’s business. However, many of the firms

and institutions engaging on information technology research are not regulated by the FCC

and it may not be appropriate for the Commission to study them. Other possibilities might

be the National Telecommunications and Information Administration (NTIA), which has

an interest in the health of U.S. information

R&D, or the National Science Foundation

(NSF), which monitors the state of R&D and

basic research in a number of fields. Yet

another possibility might be an independent

research group outside of government—perhaps one created by a university or industry

association. Most of the technical and scientific journals needed for bibliometric studies

are already in the database of the Library of

Congress. These analyses might be performed

by the Congressional Research Service, an independent research group, or one of the agencies mentioned above.

For some of the studies mentioned above

data may only be available several years after

the actual research has been done, and in many

cases meaningful conclusions can be drawn

only after data for 5 or 10 years have been analyzed. If there is a reduction in basic research

at Bell Labs, the trend might have been under

way for several years before the data indicate

a change. By that time, it might be difficult

to effect any correction in the trend.

If it is determined that changes in basic research at AT&T have had a major effect on

the U.S. research capability, and that Government action is warranted, there is a question

of what can be done. Basically, it appears that

two general approaches might be considered.

Regulatory policies might be changed to modify the rules under which AT&T operates, giving it greater incentives to perform basic research or requiring it to do so. More broadly,

consideration could be given to implementing

funding policies that might stimulate more basic research throughout industry and in university laboratories.

In the regulatory area, for example, it might

be possible to allow some subsidy for basic research. At the present time, FCC is working

under the terms of the divestiture and Computer II to make sure that AT&T does not use

the revenues it earns in the regulated market

to support research or development that leads

to advantages in the nonregulated market. For

this reason FCC must approve the “composite allocator” developed by AT&T to allocate

research costs among the various AT&T entities. The economic theory is that a competitive firm should pay its own R&D costs without shifting them to regulated ratepayers.

On the other hand, when AT&T was permitted to use such a cross-funding arrangement, it used the funds to create a highly

respected and productive research organization that presumably benefited the Nation as

a whole. If experience over the next few years

shows that it is impossible for AT&T to maintain Bell Labs’ quality without additional

funding, and if it is determined to be in the

national interest that such an organization be

maintained, then additional funds must be

provided. They could come from a direct Federal subsidy or from some kind of cross-funding. The former is not likely to be politically

acceptable; the later is increasingly complex

as the long-distance telecommunication market becomes more competitive. By its own

estimate, AT&T now provides only 69 percent

of total long-distance capacity.56 AT&T is

rapidly losing the market power it once had

“AT&T, private communication, Apr. 30, 1984.
134 ● information Technology R&D: Critical Trends and Issues

to control prices throughout the industry. If

it were required to raise the price of longdistance calls to provide greater support for

basic research, it would be placed at a competitive disadvantage with respect to other

long-distance carriers that do not support research. Development of a mechanism by which

all long distance carriers contribute to funding basic research would be difficult in the increasingly competitive long distance market.

An alternative regulatory approach might

be to stimulate basic research by allowing

more cooperation between ATTIS and Bell

Labs. About 4,000 former Bell Labs employees were moved to ATTIS when it was created

in 1982. Expertise in some research areas has

been lost to Bell Labs through this transfer

and through the subsequent transfer of 3,000

employees to Bell Communications Research.

The FCC’s interpretation of Computer II rules

do not allow the exchange of market and network information between ATTIS and Bell

Labs and they also prohibit the joint development of certain products, especially computer

software.

In the future, easing this requirement to the

extent of allowing ATTIS and Bell Labs to cooperate on certain types of research, might

allow greater cross-fertilization among the two

research organizations.

Policies to stimulate basic research generally might include such incentives as additional grant support from National Science

Chapter 4

“Bell Labs on the Brink, ” Science, Sept. 23, 1983,

pp. 1267-1269.

“Bell Labs: The Threatened Star of U.S. Research, ” Fortune, July 5, 1982, pp. 46-52.

Brock, Gerald W., The Telecommunications Industry: The Dynann”cs of Market Structure (Cambridge: Harvard University Press, 1981).

“Competing with the New AT&T,” Venture, JanUWY 1984, pp. 54-57.

Charles River Associates, Impacts of the AT&T

Divestiture on Innovative Behavior, unpublished paper prepared for Office of Technology

Assessment, 1983.

Foundation (for example), direct support of

basic research through direct Federal subsidies, or tax incentives for industries that

engage in basic research. Such policies might

be applied not only to Bell Labs, of course, but

to Bellcore or to other university and industry research organizations. Over the next few

years, while the health of research is being

monitored, it might be possible to structure

such programs to stimulate research and to

develop “trigger” mechanisms for putting

them into place if results indicate that the

quality of research is declining.

In conclusion, it is still too early to tell

whether the quality or direction of research at

Bell Labs will be adversely affected by deregulation and divestiture, or whether any changes

in its research would have major repercussions

for U.S. research as a whole. There are several

possible measures for monitoring the health

of basic research at Bell Labs, but evidence

of change may not be apparent for several

years. While Bell Labs is a major contributor

to the sciences related to information technology, it is not the only important player. To

gain a true picture of the effects of deregulation and divestiture it would be worthwhile to

expand such studies to monitor the state of

basic research throughout industry and at

university labs as well. It will be important

to begin collecting information soon in order

to fully document the transition from the preto post-deregulation environment.

References

Dembart, Lee, “Dividing Bell Labs: Breakup to

Put the Best to New Test,” Los Angeles Times,

Sept. 6, 1983, pp. 1,3.

Hall, Peter, “AT&T and the Great Divide, ” Financial World, Jan. 10, 1984, pp. XX.

Harris, Marilyn A., “Bell Labs Looks to Military

Research,” Electrom”cs, Feb. 9, 1984, pp.

102-104.

Kamien, Morton I., and Nancy Schwartz, Market

Structure and Innovation (New York: Cambridge University Press, 1982).

Morkre, Morris E., “Innovation and Market Structure: A Survey, ” Working Paper No. 82. Fed-
Ch. 4—Effects of Deregulation and Divestiture on Research • 135

eral Trade Commission, Bureau of Economics,

1982.

National Science Board, Science Indicators, 1982

(Washington, DC: U.S. Government Printing

Office, 1983).

National Science Foundation, Research and Development in Industry, 1981, NSF 83-325 (Washington, DC: U.S. Government Printing Office,

1983), p. 3.

Scherer, F. M., “Firm Sizes, Market Structure, Opportunity, and the Output of Patented Inventions, ” American Economics Review, 55:1119.

Scherer, F. M., Industrial Market Structure and

Economic Performance (New York: Rand McNally, 1980).

Uttal, Bro, “Cold New World, ” Fortune, June 27,

1983, pp. 81-84.

“Why AT&T Will Lose More Long Distance Business, ” Business Week, Feb. 13, 1984, pp. 102-

104, 110.

Wiegner, Kathleen K., “Prometheus is Unbound

and Seeking His Footing, ” Forbes, Mar. 12,

1984, PP. 141-148.

38-802 0 - 85 - 10
Chapter 5

Education and Human Resources

for Research and Development
Contents

Page

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

The Concern About Manpower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

The Relationship Between Manpower Development and Economic Growth . . . . . . . . . 140

Identifying Particular Manpower Problems and Solutions . . . . . . . . . . . . . . . . . . . . . . . . 141

The Range of Manpower Predictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

The Supply of Manpower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

The Problems in Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Elementary and Secondary Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

The Federal Role in Manpower Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

The Societal Context for Determining Federal Manpower Policy . . . . . . . . . . . . . . . . . . 161

Chapter 5 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

Tables

Table No. Page

2A. Scientists and Engineers Engaged in R&D Per Labor Force

Population, By Country: 1963-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

25. BLS Manpower Estimates.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Figures

FigureNo . Page

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

Employed Scientists and Engineers by Field, 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

Distribution of Scientists and Engineers by Primary Work Activity, 1981 . . . . . . . 144

Percentage of Firms Reporting Available Jobs for Scientists and Engineers . . . . . 148

Comparison of Growth in Engineering Undergraduate

Enrollment and Number of Faculty, 1973-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

Share of All S/Es Employed in Educational Institutions by Field, 1981 . . . . . . . . . 151

Educational Gifts by Computer Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Selected Indicators of the Overall Quality of Mathematics

and Science Education in the United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

Americans Science Teacher Shortage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

Selected Indicators of Shifts in Undergraduate Science/Engineering Education . . . 157

A Quarter Century of Student Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Chapter 5

Education and Human Resources

for Research and Development

Findi

OTA found that major Federal actions designed to affect the supply of manpower to

perform research and development (R&D) in

the area of information technology would appear to be unwarranted at this time. Forecasts

of future manpower needs in this area are replete with uncertainty. Moreover, developing

manpower for the specific areas where potential shortages might tentatively be predicted

would be particularly hard to accomplish

through broad Federal actions. The educational backgrounds and skills required to meet

these potential shortages are at once both too

broad and too narrow to be developed at the

Federal level. In addition, given the length of

time required to develop skills and the rapid

changes taking place in the area of informangs

tion technology, Federal action, taken now,

might prove to be inappropriate in the future.

A number of legislative proposals have been

made that are designed to increase the future

supply of highly qualified scientific and technical manpower. These proposals differ considerably in terms of their goals, their targets,

their costs, and their scopes. Given the high

levels of uncertainty that surround the present

manpower debate and the number of competing uses to which the Nation’s limited educational resources might be profitably put, the

most prudent course might be to adopt those

policies that would provide for the greatest

amount of flexibility and the broadest range

of skills.

The Concern About Manpower

In the United States today, there is a growing and widespread belief that the Nation’s

poor economic performance is inextricably

linked to the relative decline in the size and

the quality of its technical work force. Noting

that Japan and West Germany, our major international competitors, have four times as

many electrical engineers and computer scientists, per capita, as the United States, many

of the people who hold this view fear that, as

the economies of the developed world become

more technologically intensive, and thus as

R&D becomes more critical to their success,

the United States will increasingly lose its

ability to compete. Typical of this perspective

is the statement made by Representative Margaret Heckler during hearings on Engineering

Manpower Concerns, when she said:1

To maintain its technological edge in world

markets the United States must reemphasize

science and engineering on our agenda of national priorities. When the Soviets launched

Sputnik I, a remarkable engineering accomplishment, the United States rose to the challenge with new dedication to science and

technology. Today, our technology lead is

again being challenged, not just by the Soviet Union, but by Japan, West Germany, and

others.

The negative consequences of having a

shortage of manpower in information technology R&D, it is argued, may be particularly

severe. Given the speed with which the field

is changing, even a temporary shortage might

impair the ability of information technology

industries to remain at the frontiers of re-

‘Representative Margaret Heckler, Opening Statement, Hearings On Manpower Concerns, before the Committee on Science

and Technology, House of Representatives, 97th Cong., 1st

sess., Oct. 6-7, 1981, p. 4. For a more recent statement of this

perspective, see also, Hearings on Mathematics and %“ence Education, before the Committee on Education and Labor, House

of Representatives, 98th Cong., 1st sess., Jan. 26-28, 31, 1983;

see also, Amen”ct-i Competitive Challen~ Report of BusinessHigher Education Forum, 1983.

139
140 . Information Technology R&D: Critical Trends and Issues

search. And, because the information technology industry represents the fastest growth

sector of the economy, failure to keep pace in

this industry may have serious consequences

for the Nation’s economy as a whole.

Concerned about the state of available human resources for high-technology jobs, spokesmen from business, government, and education have called on the Federal Government

to undertake a number of significant educational measures and reforms. These measures

range widely in terms of goals, targets, costs,

and scope. Some of them, for instance, focus

on a specific curriculum area, such as math

and science; others emphasize educational

infrastructure—the training of teachers and

the need for equipment; while still others seek

to foster new modes of cooperation between

business, government, and educational institutions. Given our Nation’s limited resources

and the growing number of demands and

stresses that are being placed on our educational system at all levels, choices and decisions will have to be made about which goals

to pursue and about which measures to adopt.

Notwithstanding the widespread discussion

and concern about the poor state of the Nation’s manpower resources, there has been

very little systematic effort to clearly identify

and characterize the nature and the extent of

the problems. Before making any major policy decisions designed to affect the supply of

manpower, therefore, it will be necessary to

have a greater understanding of: 1) what we

know and don’t know about the relationship

between manpower development and economic growth; 2) what we know and don’t know

about this relationship as it relates in particular to R&Din information technologies; 3) the

range of projections about the future supply

of and demand for manpower in this field; 4)

the ability of the present institutional structure to accommodate these manpower needs;

5) the role of the Federal Government in the

development of manpower; 6) the societal context in which, today, decisions about education will be made; and 7) the range of Federal

alternative strategies and options for meeting

future manpower needs in the area of information technology R&D. The following discussion provides a preliminary basis for such an

understanding.

The Relationship Between Manpower

Development and Economic Growth

The assumption of a positive relationship between the size and quality of a nation’s work

force and its economic wealth is not a new one.

Over 100 years ago, for example, the British

Government sponsored a parliamentary committee to investigate the causes of rapid industrial growth in the United States. Like

many of our recent studies of economic growth

in Japan, the British parliamentary committee attributed much of America’s industrial

success to the superior education of the American worker.2

‘Report Fmm the Select Committee on Su”enti”fi”c Instruction,

Parliamentary Papers, 15, (1867-1868) Q 6722, as cited in William Abernathy, Kim B. Clark, and Alan Kantrow, Industzz”al

Remissanm: l%niucing a Competitive Future for Amen”ca (New

York: Basic Books, 1983).

Indeed, ever since the beginning of the industrial revolution, economists and other social observers have argued that a skilled and

educated work force is the most productive.

Writing as early as 1776, Adam Smith, for example, pointed out that “the skill, dexterity,

and judgment with which it’s [the nation’s] labor is generally applied,” is the primary factor determining the size of “the fund which

originally supplies it with all the necessities

of life. ”3

— — —

‘Adam Smith, The Wealth of iVati”ons (New York: The Modem Library, 1937), p. lviv.

As modem societies became more technologically advanced, an increasing amount of attention was paid to

the development of the labor force. Anticipating the effect that technology would have on society, the German

sociologist, Max Weber, pointed out for example, that,

in an advanced industrial society, the organization of

human relations could no longer be left to chance. Instead, human beings become factors of production-their
Ch. 5—Education and Human Resources for Research and Development . 141

Present government policies designed to affect the supply of manpower are also based on

this assumption. However, as the following

discussion illustrates, while we can identify

some general linkages between education,

manpower, and economic development, our understanding of causal relationships, or of relationships in specific situations, is extremely

limited.

While acknowledging that having qualified

manpower is critical to the success of a nation’s economy, social and economic analysts

are still unable to fully account for, or to completely explain, the nature of the relationship

between the size and the skill level of the labor force and economic growth and development. As the economist, Nathan Rosenberg,

has noted:4

———.—..

relationships w be structured in accordance with there

quirements of industrial progress. And the American

economist, Thorstin Veblen, writing in the 1930s, went

so far in his discussions of technology and society as to

suggest that, for technology to develop to its full potential, the technical expert-the engineer-wodd have to

play a key role in society’s decisionmaking process. Jay Weinstein, Sociolo@I’echnology: Foundations of Post

Academz”c fi”ence, Transaction Books, 1982, p. 32;

Thorsten Veblen, The Theoxy of the Leisure Class (New

York: The Modem Library, 1934).

4Nathan Rosenberg, Inside the Black Box–Technology and

Econorm”cs (Cambridge, MA: Cambridge University Press,

1982), p. 8.

One of the central historical questions concerning technical progress is its extreme variability over time and place. . . . Clearly the

reasons for these differences, which are not

yet well understood, are tied in numerous

complex and subtle ways to the functioning

of the larger social systems, their institutions, values, and incentive structures. The

explanation of these differences is intimately

tied to such even larger questions as why social change occurs and why economic growth

proceeds over time and place.

Not only is each piece of the puzzle difficult

to solve; the whole problem is subject to the

vagaries of external events, well beyond our

anticipation and calculation. Nor are the tools

of analysis particularly refined. For—although

demographers may tell us something about

population trends; sociologists something

about the institutions and processes in which

individuals are recruited, educated, and trained

for work; economists something about the

point at which, and the rate of exchange by

which, the supply and the demand for labor

are brought into a state of equilibrium-historians are sure to remind us that it is, more

often than not, a unique set of circumstances

that has had the most significant effect on a

particular outcome.

Identifying Particular Manpower Problems and Solutions

Our limited knowledge of the role of human

resources in economic growth and technological change is clearly evident in our efforts to

identify and analyze specific manpower problems and solutions. For although manpower

specialists might agree that having sufficient

qualified manpower is critical to a nation’s

economy, they do not necessarily agree about

the number of people who are required to meet

the employment needs of a particular sector;

about the kinds of skills and experience that

might be required to perform particular kinds

of jobs; or about the way in which these skills

might best be obtained or developed.5

6National Institute of Education, Education, Productivity,

and the National Economy, A Research Iru”tiative, December

1981; see also Edwin Mansfield, Education, R&D, and Productiw”ty Growth, revised, University of Pennsylvania, Jan. 31,

1982.

To identify future manpower needs in a particular area, policymakers have traditionally

relied on economic and other forecasting methodologies. While useful as policymaking tools,

these methodologies are subject to a number

of problems and weaknesses which stem,

among other things, from imperfect data,

weak forecasting models, and ill-founded assumptions. 6 To be most useful, forecasting

methods need to be flexible and responsive.

Acknowledgment should be made of the limitations of these methodologies, and efforts

should be undertaken to verify their results

by conducting frequent surveys and by performing case studies designed to determine

6R. H. Bezdek, Long-Range Forecasting of Manpower Requ.z”rements (New York: Institute of Electrical and Electronics

Engineers, 1974).
142 ● Information Technology R&D: Critical Trends and Issues

the changing skill requirements that are linked

to the emergence of new technologies.

It should be noted, moreover, that manpower forecasts can themselves produce a pendulum effect, underminingg the validity of the projections. This effect results from both the long

period of time that it takes for people to prepare for afield of work, and from the fact that,

once committed to a career path, people rarely

change their plans in midstream to adapt to

new circumstances. Upon hearing predictions

of an impending manpower shortage in a particular field, for example, an inordinate number of students may seek to pursue such a career, hoping that when they have finished their

educations, jobs will be plentiful and competition will be in short supply. The resulting manpower glut will appear only later; but predictions of it may induce a number of students

to avoid the field, leading to another shortage

in the future.

It should also be remembered that manpower predictions can be interpreted differently by different kinds of people. Economists

might describe a shortage, for example, when

they see a rapid increase in wages due to a gap

between the supply and demand for labor.

Businessmen might consider that there is a

shortage of manpower when they are dissatisfied with the quality of preparedness of the

pool of people from whom they have to select

employees. New graduates may interpret a

manpower shortage to mean that they face little competition in seeking employment.

The problem of predicting manpower needs

in the area of information technology R&D is

even more complicated, because the field is

new and in a rapid state of flux. There is, for

example, very little historical basis for identifying who the people are who might typically

perform R&D tasks in the area of information

technology; what skills they should possess in

order to perform these tasks most effectively;

or what their optimum career patterns might

be.

It is only very recently that either the National Science Foundation (NSF), the key

agency mandated to monitor the supply and

demand of engineers and scientists in the

United States, or the Bureau of Labor Statistics, have begun to treat computer scientists

as a distinct group. NSF, for example, has only

recently stopped labeling everyone who works

in a computer-related field as working in the

area of computer theory, a heading that was

itself a subcategory of mathematics. And,

even today, NSF does not list a department

of computer science under that heading if the

department’s name appears in a combined

form and if the words “computer science” appear second in that combination.7 Even when

the appropriate statistics have been collected,

moreover, they have often been subject to a

variety of interpretations.8

It is also difficult to determine not only who

or how many people are working on or with

these technologies but also who or how many

people are performing specific R&D tasks in

this area. NSF estimates that in 1981,3.1 million scientists and engineers were employed

in the United States. Of these, 47 percent were

employed as engineers (including engineers do

ing management jobs), and 13 percent were

working as computer specialists (see fig. 20).9

NSF reports, moreover, that 34 percent of all

scientists and engineers are involved in R&D

activities”10 (see fig. 21). As table 24 illustrates,

compared to other countries, this is a high proportion of R&D scientists and engineers relative to the total labor force. Figures are not

available, however, for the percentage of scientists and engineers who specifically perform

R&D tasks in the area of information technology.

Use of aggregated data based on broad skill

categories or outmoded technologies reduces

the value of manpower demand forecasts. A

category such as computer programmer, for

example, is much too broad to use for forecasting manpower demand in R&D. Further sub7Kent K. Curtis, “Computer Manpower-Is There a Crisis?”

(Washington, DC: National Science Foundation, January 1983).

‘Ibid.

‘Su”ence Inch”catms 1982: An Analysis of the State of U.S.

Sa”ence, Engine,and Tdnology, National Science Board,

1983, p. 63.

IOIbid., p. 66.
Ch. 5—Education and Human Resources for Research and Development . 143

Figure 20.-Employed Scientists and Engineers by

Field, 1981

Engineers 47%

Mathematical

Physical

scientists

8 %

Environmental

Psychologlsts 30/o

40/0

alncludes earth sclentlsts, oceanographers, and atmospheric scientists.

NOTE: The total number of scientwts and engineers m 1981 was 3.1 mdlion.

SOURCE: Science Indicators, 1982,

division into types such as entry level, applications, and systems programmers based on

existing job specifications, while useful, will

probably not suffice for long, since the mix of

computer-related skills required for R&D is especially sensitive to technological innovation.11

Some of the most important skill categories,

for example, lie at the frontiers of information

technology, and these do not show up in the

broad categories based on aggregated data.

The problem of identifying these skills, therefore, is not just one of substituting one set of

static descriptors for another; it is a problem

of gathering information about new skills over

time and in response to changing conditions.

The task of identifying research and development workers in the field of information

technology is complicated, moreover, by the

fact that the traditional distinctions that have

always been made between the tasks that are

——. ——

llAb~ hfowshowi~, “on Predicting R&D Skill k@.rement9

for Information Technology,” paper prepared for the Office of

Technology Assessment, February 1984.

entailed in R&D and those entailed in production are becoming increasingly blurred in this

area. This problem is clearly evident in the

case of software engineering. Calculations of

future manpower needs that focus specifically

on R&D activities are, therefore, particularly

difficult to make in the area of information

technologies.

Questions also arise with respect to how the

skilled technical workers, who provide support

to the R&D process but who do not perform

the most highly skilled tasks, might best be

factored into manpower projections. These

workers might include, for example, all of

those who maintain, troubleshoot, repair, and

sometimes fabricate sophisticated equipment,

those who build and help develop prototypes

of new products, draftsmen and nondegree designers, computer system operators, and technical writers. Since the skills that these workers require may be more easily obtained or

may be more easily substituted—either by

other workers or by technology-than the

skills required for the more highly technical

jobs, the manpower projections for this sector of the R&D process, and the policy implications that might be drawn from them, may

also be quite distinct. Policies designed to affect the availability of skilled technical workers, for example, might call for some general

educational changes at the elementary and/or

secondary levels whereas those that are designed to influence the supply of manpower

in a highly technical area such as artificial intelligence, or software engineering, might call

for targeted incentives at the university or

graduate studies level.

Defining R&D manpower and estimating

manpower needs for this area becomes even

more troublesome the further one looks into

the future. Over the long run the future demand for manpower, for example, is likely to

depend on the extent to which and the speed

at which the new technologies are deployed

throughout society. However, the rate and degree of their deployment will depend, in turn,

on the kinds of social variables that are most

often left out of forecasting models, and that

are the most difficult to predict.
144 ● Information Technology R&D: Critical Trends and Issues

Figure 21 .–Distribution of Scientists and Engineers by Primary Work Activity, 1981

 and computing, consulting, other, and 

SOURCE: Science Indicators, 
Ch. 5—Education and Human Resources for Research and Development ● 145

Table 24.–Scientists and Engineersa Engaged in R&D Per Labor Force Population, By Country: 1963.82

Country 1965 1968 1972 1975 1979 1982 — —.

S/Es a engaged in R&D per 10,000 labor force population

France . . . . . . . . . . . . . . . . . . . . 21.0 26.4 28.1 29.3 31.6 NA

West Germany. . . . . . . . . . . . . . 22.7 26.2 36.0 41.0 47.7 NA

Japan . . . . . . . . . . . . . . . . . . . . . 24.6 31.2 38.1 47.9 50.4 NA

United Kingdom . . . . . . . . . . . . 19.6 20.8 30.4 31.2 33.2b NA

United States. . . . . . . . . . . . . . . 64.1 66.9 57.9 55.5 57.9 63.8

U.S.S.R. (lowest) . . . . . . . . . . . . 44.8 53.5 66,5 78.2 84.4 89.8

U.S.S.R. (highest) . . . . . . . . . . . 48.2 58.8 73.2 87.5 95.5 102.4

S/Es a engaged in R&D (in thousands)

France . . . . . . . . . . . . . . . . . . . . 42.8 54.7 61.2 65.3 72.9 NA

West Germany. . . . . . . . . . . . . . 61.0 68.0 96.0 103.9 122.0 NA

Japan . . . . . . . . . . . . . . . . . . . . . 117.6 157.6 198.1 255.2 281.9 NA

United Kingdom . . . . . . . . . . . . 49.9 52,8 76.7 80.5 87.7b NA

United States. . . . . . . . . . . . . . . 494.5 550.4 518.3 532.7 620.2 716.9

U.S.S.R. (lowest) . . . . . . . . . . . . 521.8 650.8 862.5 1,061.8 1,216.4 1,340.4

U.S.S.R. (highest) . . . . . . . . . . . 561.4 715.2 950.1 1,187.6 1,377.4 1,340.4

Total Iabor force (in thousands)

France . . . . . . . . . . . . . . . . . . . . 20,381 20,744 21,817 22,310 23,059 NA

West Germany . . . . . . . . . . . . . . 26,887 25,968 26,655 25,323 25,573 NA

Japan . . . . . . . . . . . . . . . . . . . . . 47,870 50,610 51,940 53,230 55,960 NA

United Kingdom . . . . . . . . . . . . 25,498 25,378 25,195 25,798 26,464 NA

United States. . . . . . . . . . . . . . . 77,178 82,272 89,483 95,955 107,050 112,383

U.S.S.R . . . . . . . . . . . . . . . . . . . . . 116,494 121,716 129,722 135,767 144,201 149,215

alncludes all scientists and engineers engaged in R&Don a full-time equivalent basis (except for Japan whose data include persons Primarily employed in R&D ex.

ciudlng soc!al scientists, and the United Kingdom whose data include only the Government and industry sectors)

blg78

NA—Not available.

SOURCE National Science Foundallon,Sc~ertce /ndicators 1982

Future manpower requirements in software changes or their future impacts is extremely

engineering, for example, might be significant- difficult, given the newnessofthe field and the

ly reduced as new software tools are developed fact that they are dependent on a number of

and introduced, if new institutional practices social variables-e.g., the willingness of indiare adopted to improve the efficiency of those viduals and institutions to both adopt and

working in the area, and if more and more ap- adapt to technological changes-variables

placations software are developed on personal that are themselves notoriously unpredictable.

computers by end users. 12 Predicting these

“Ibid.

The Range of Manpower Predictions

Given the problems involved in identifying

future manpower requirements, it is not surprising that there has been considerable controversy over and discrepancy between many

of the projections that have been made about

the need for high-technology manpower. Among

those making forecasts, the consensus has

been the greatest with respect to projected

shortages of Ph.D.s to teach at the university

level in the fields of engineering and computer

science. To a somewhat lesser degree, manpower experts concur that the future growth

in demand for computer scientists will be extraordinary. They disagree, however, about

whether or not the educational system, as it

exists today, can effectively respond to meet
146 . Information Technology R&D: Critical Trends and Issues

that demand. Agreement is lowest with regard

to whether or not there will be a future shortage of engineers.

The following summaryprovides some sense

of the range of projections. Because these

forecasts are based on different assumptions,

methodologies, baselines, and timeframes, it

is impossible to compare and contrast them

analytically as a whole. Evaluations about

their reliability and accuracy are quite dependent, therefore, on judgments about the validity of their methods and assumptions.

Generally speaking, however, it can be said

that manpower forecasts are more reliable the

greater the number of and the more refined the

underlying analysis. 13 The least sophisticated

forecasting methodology, for example, might

be one based solely on survey data, or simply

extrapolating trends on the basis of the present.

A much more comprehensive approach, on the

other hand, might be one that takes into account such things as changes in the relative

prices of capital and labor, and/or that posits

a set of alternative assumptions about the

future. The most ambitious forecasts are those

that try to factor into their analysis the impact of technological change.14

Perhaps the most widely referred to, and

among the more sophisticated projections, are

those that have been put forward by the Bureau of Labor Statistics (BLS). These projections cover a period of 10 to 15 years. They

are not only based on a set of alternative economic scenarios, positing different rates of

growth; to some extent, they also seek to take

technological change into account. Moreover,

BLS has consistently sought to improve its

methodology by systematically evaluating the

accuracy of its own projections. Such evaluations show that BLS has had more success in

determining how technology might effect future job growth than it has in identifying at

what point such changes in employment patterns might take place. Past projections have,

l~Henry M. hvin and Russell W. Rumberger, me Edu~ti”ozIal Implications of High Technology, The National Institute of

Education Report #83-A4, 1983.

141bid.

moreover, tended to exaggerate the growth of

technical occupations and underestimate the

decline of certain traditional jobs. One useful

measure of the accuracy of these projections

is the recent finding that 60 percent of the

1980 forecasts fell within a 10 percent range

of the actual employment level for that year.15

BLS projects the rate of growth and the future demand for manpower in given occupational categories. The Bureau’s most recent

projections for those categories most relevant

to information technology are listed in table

25.16 For each category, there are three projections—high, medium, and low—each corresponding to one of the three economic scenarios used by BLS in developing their forecasts.

Because it does not make predictions about

the future supply of manpower, the Bureau of

Labor Statistics does not predict labor shortages or labor surpluses per se. However, review of the recent articles in the BLS publication, Occupational Outlook Handbook,

suggests that there will be a multi-tiered mar-

‘51bid.

‘K!onversation with Tom Nardone, Manpower Economist, Bureau of Labor Statistics, Department of Commerce, May 15,

1984.

Table 25.—BLS Manpower Estimates

Base year: 1982 1995

Electrical and electronic engineers:

320,000 . . . . . . . . . . . . . . . . . . . . . . . LOW 531,000

Moderate 528,000

High 540,000

Computer specialists:

Programmers:

226,000 . . . . . . . . . . . . . . . . . . . . . . . LOW 465,000

Moderate 471,000

High 480,000

Systems analysts:

254,000 . . . . . . . . . . . . . . . . . . . . . . . LOW 469,000

Moderate 471,000

High 480,000

Technicians:

55,000 . . . . . . . . . . . . . . . . . . . . . . . . Low 106,000

Moderate 108,000

High 108,000

Computer operators:

211,000 . . . . . . . . . . . . . . . . . . . . , . . Low 366,000

Moderates 371,000

High 378,000

SOURCE: Tom Nardone, Manpower Economist, Bureau of Labor Statistics,

Department of Commerce, personal communication, May 15, 19S4.
Ch. 5—Education and Human Resources for Research and Development . 147

ket for these job categories, with a shortage

of people with some specific skills and a surplus of those with others.

The National Science Foundation also makes

projections of the supply and demand for scientific, engineering, and technical personnel.

These projections are developed using a multistep model, similar to the one used by BLS.

Like the BLS model, for example, the NSF

model tries to anticipate how technological

change might affect future manpower needs.

In one way, however, the NSF model goes further than that of BLS: its alternative scenarios

posit different levels of defense spending as

well as different levels of economic growth.17

In its recent report, Science Indicators 1982,

NSF pointed out that computer specialists

accounted for almost 45 percent of the total

growth of scientific employment over the period 1976-81. Matching this growth against

the future supply of computer science personnel, it predicted a future shortage in this area.

Indicators for the future supply and demand

of engineers were more mixed, however. For

while these indicators revealed a shortage in

1981, they also suggested that by mid to late

1982, the situation already appeared to be

shifting back towards a balance between the

supply of and the demand for engineers in

general.

A recent survey conducted for NSF raises

some questions about the degree to which

manpower shortages may in fact materialize

in the future, even in the area of computer

science. Nearly one half of the 351 firms surveyed, for example, reported fewer openings

for scientists, engineers, and technicians during the 1982-83 recruiting year than in the

1981-82 period. These results are broken down

by area in the following figure18 (fig. 22).

Focusing on manpower needs for defense,

the U.S. Air Force, in The Regional Planning

and Evaluations Systems (ROPES) Project,

forecast manpower needs for 30 States and 70

major cities. The States were selected for anal-

‘7Levin and Rumberger, op. cit., pp. 12-13.

‘“Ibid.

ysis because they are major centers of defense

activity. The ROPES study found that the

need for all skill groups involved in “the use,

operation and repair of computer equipment

will grow at an alarming rate throughout the

1980s and that these skills will be particularly

affected by increased expenditures for defense. ” Although the Air Force study group

did not project the supply of manpower for

these areas, they concluded, based on the projected rate of growth in demand, that the field

of computer science, and perhaps electrical and

mechanical engineering, may be areas of potential national shortage.

A 1982 study by Betty M. Vetter of the Scientific Manpower Commission summarizes information on the present and future supply

and utilization of scientists and engineers in

the United States. Vetter concludes that, except in the field of computer science, the supply of scientists appears sufficient to fill nearterm demands. For engineers, she notes that

the number of new graduates at the baccalaureate level has been rising since 1975, but that

“a high level of demand has not only fueled

that increase, but has utilized so many engineering graduates at the baccalaureate level

that graduate enrollments of U.S. students

have not climbed commensurately and shortages of Ph.D. engineers have become serious,

at least at academic institutions. ” She concludes, however, that there is no general agreement about the adequacy of the future supply

of engineers, even when considering particular specialties.

Industry projections of future manpower

needs are quite inconsistent with one another.

Derived, as they are, by stakeholders, their

conclusions must be regarded with some degree of caution.

Basing its conclusions on a survey of 815

manufacturing facilities, the American Electronic Association (AEA) predicts that through

1987, the need for technical professionals will

grow by 69 percent; while the need for technical paraprofessionals will increase by 60 percent. Respondents to their survey estimate,

moreover, that in 5 years they will need to
148 ● Information Technology R&D: Critical Trends and Issues

Figure 22. —Percentage of Firms Reporting Available Jobs for Scientists and Engineers

Engineers Scientists

(Percent of firms) (Percent of firms)

o 20 40 60 100 0 20 40 60 100

Petroleum

Electronic

Electrical

Computer

Civil

Chemical

Mechanical

Industrial

Metallurgical

Manufacturing

SOURCE: National Science Foundation.

employ more than 100,000 each of new technical professionals and new technical paraprofessionals. l9 The occupational groups for

which they foresee a tremendous amount of

growth during this period—defined as over

100 percent total increase—are software engineers, electronic engineering technologists,

and computer analysts/programmers.20

To project the future supply of these key occupational groups, AEA uses data that assume that U.S. colleges will continue to increase the number of Bachelor of Science/

Computer Science degrees at the same rate as

they have over the past 5 years. Comparing

projected supply and demand, the AEA report

concludes that by 1987 there will be a short-

*

U

AEA, p. 10.

Computer science

Geology/geophysics

Chemistry

Systems analysis

Physics

Mathematics

Biochemistry

Biology

age of 113,406 computer scientists and electrical engineers. Discounting employment related to defense, the shortage would be 81,780.

More skeptical about the likelihood of an

impending shortage of electrical engineers is

David Lewis, Council Chairman for the Career

Activities Council of the Institute of Electrical

and Electronic Engineers, Inc. (IEEE). Noting that the engineering profession is made up

of people who are trained in a range of disciplines, projections of shortages, he says, fail

to take into account the extent to which electrical engineers can be substituted for by engineers trained in other specialties. He has expressed concern, moreover, that an uncritical

acceptance of such predictions might lead to

a surplus of electrical engineers, a situation

not dissimilar to the one that existed for aeronautical engineers in the early 1970s.21
Ch. 5—Education and Human Resources for Research and Development ● 149

The Supply of Manpower

Although manpower projections tell us

something about the number of people who

will be needed and who may appear to fill existing high-technology positions, they say very

little about the quality of skills and experience

that the people who are available might bring

to these jobs. To evaluate the quality of our

existing and future supply of manpower for

R&D in information technologies, we have to

look at the major source of this manpower—

at the Nation’s educational institutions.

Formal educational institutions are, of

course, neither the only nor necessarily the

most significant institutional setting for manpower training and development. At one point

in history, for example, it was the family that

dominated in preparing its members for economic roles. Later, as society became more

technologically advanced, a somewhat more

formal system of apprenticeship emerged. Formal schooling became especially important

during the age of industrialization.

Today, as we move towards what has been

characterized as a high-technology society,

businesses have themselves become involved,

both formally and informally, in performing

educational tasks. This has been particularly

true in the area of information technology,

where the larger corporations like IBM, Xerox,

and Digital Equipment Corp. have set up their

own educational centers. Moreover, informal

training takes place and is diffused within the

business community as people, trained in large

companies, move on to form new companies

of their own.

Recognizing that a number of different

kinds of institutions are presently involved in

the development and training of future manpower, this chapter will nonetheless focus on

those that are a part of the formal educational

system. For it is chiefly within the context of

these institutions that the Federal Government plays out its role in manpower development.

The Problems in Higher Education

While the American university system has

always been renowned for the number of scholars and the amount and quality of research

that it has generated, today many people are

beginning to question whether universities can

continue to effectively perform all of their

traditional roles. And, although almost all

areas of university education have suffered

from the problems of increased educational

responsibilities and increased educational

costs, the problems that universities face appear to be particularly acute in the areas that

generate manpower to perform R&Din information technologies. University departments

in these areas are having an especially difficult time because, given their limited funding,

they are finding it almost impossible to compete for manpower and other resources in what

is becoming a rapidly growing and wide-open

high-technology market.

The difficulties are well illustrated in the

case of engineering and computer science education, where a large proportion of faculty

positions are unfilled and where the number

of Ph.D.s graduating each year has dropped

substantially. The problem in this area is not

one of attracting highly qualified undergraduate students.22 Over the past decade undergraduate enrollments in these areas have

grown at a tremendous rate—by 80 percent in

the case of engineering29 and by 20 percent in

ZZJeme MCDel-rnOtt, “’1’echnical Education: The Quiet Crisis,” High ‘1’echnology, November/December 1982, p. 87.

ZgJerrier A. Haddad, “Key Issues in U.S. Engineering Education, ” NAE Bridge, summer 1983, p. 11.
150 . Information Technology R&D: Critical Trends and Issues

the area of computer science.24 And, given the

growing popularity of electrical engineering

and computer science and the limitations that,

in almost all engineering schools and departments of computer science, are now being

placed on the number of admissions, the high

qualifications of new entrants are without

precedent. 25

Rather, as figure 23 illustrates, the problem

at universities-has been one of recruiting sufficient faculty members to support this enroll-

——.— .—

““AS Students Flock to Computer Science Courses, Colleges

~r~ble TO Find Professors,” T..e Chronicle of Higher Education, Feb. 9, 1981.

‘5John Horgan, “Technology ’84 Education,” IEEE Spectrum, January 1984. [Data on Admission Illustrations.]

Figure 23.—Comparison of Growth in Engineering

Undergraduate Enrollment and Number

of Faculty, 1973-80

100

90

80

30

20

10

0

1973 1974 1975 1976 1977 1978 1979 1980

Year (fall term)

NOTE: Faculty numbers drawn from ASEE’s Research and Graduate Study

directory were adjusted on the basis of enrollment data to include the

same number of schools as in EMC’S enrollment survey.

SOURCE: Engineering Education, November 1982.

ment. According to the American Council on

Education, 1,583 teaching positions were vacant in the Nation’s 244 accredited departments of engineering during the 1980-81 academic year.26

The gap would probably be much greater,

moreover, were it not for the sizable number

of foreign engineers who teach in American

colleges and universities. A recent survey of

engineering schools found, for example, that

25 percent of all junior faculty members in

engineering received their bachelor’s degree

outside of the United States.27

The shortage of faculty members in the field

of engineering and computer science has been

attributed to the fact that industry, by offering higher salaries and other, nonmonetary incentives, has been able to draw a number of

academics and students away from universities.28 The extent of the problem is illustrated

by figure 24, which shows that, in contrast to

other areas of science, only a relatively small

proportion of the Nation’s engineers and computer scientists are employed in academia.29

Discrepancies between the salaries earned

by scientists working in industry and academia have, in fact, been quite extensive. It

has not been atypical, for example, for an inexperienced electrical engineer with a bachelor’s degree to earn more than an assistant

professor of engineering with a Ph.D.30

*

g

”As Students Flock to Computer Sciences Courses,” op. cit.

““AS Students Flock to bmputer Science Courses,” op. cit.

*

a

’’ Supply of Engineering Faculty,” Electronz”c Market

Trends, January 1982, p. 14:

It should be noted in this regard that the continued

supply of foreign faculty will depend to some extent on

the fate of The Immigration Reform and Control Act,

a bill that was recently passed by the Senate and that

would require fonigners to return home after graduation

for at least 2 years. An amendment maybe attached to

the bill, however, allowing certain students studying in

high-technology fields to stay.

‘

eScience lti”cators, op. cit., p. 123.

‘McDermott, op. cit., p. 47.
Ch. 5—Education and Human Resources for Research and Development • 151

Figure 24.—Share of All S/Es Employed in

Educational Institutions by Field, 1981

All S/E

fields

Mathematical

scientists

Life

scientists

Social

scientists

Physical

scientists

Environmental

scientists

Computer

specialists

Engineers

(Percent)

o 10 20 30 40 50

I I I I I I I 1 I

.

I

I

I I

SOURCE: Science Indicators, 1982.

university campuses to industry is the poor

condition of most university research facilities.

In an effort to reduce costs, for example, many

colleges and universities have failed to purchase, maintain, and upgrade their buildings

and equipment. As a result of such decisions,

university instrumentation inventories are

now nearly twice as old as those of leading

commercial labs.31 The cost of adequately improving these facilities in the area of engineering education alone has been estimated to be,

at a minimum, between $11⁄4 billion to $2 billion.32 This cost, moreover, is rapidly escalating with inflation.

Problems of university instrumentation are

particularly serious in those fields where the

cost of equipment is especially high and where

it plays an essential, if not an integral, part

of the educational and research processes

themselves. This is the case, for example, in

the area of artificial intelligence. Only very few

universities can afford the cost or have the

space and facilities available to house and support the kinds of sophisticated equipment re81John Brademas, “Gradua~ Education: Signs of Trouble,”

Sa”ence, vol. 223, Mar. 2, 1984, p. 881.

‘zHaddad, op. cit.

quired to perform R&D at the leading edge of

the field.33

Other institutional factors that have been

cited as reasons for the exodus from academia

to industry include uncertainty of tenure,

heavy teaching loads, inadequate funds and

institutional support for research, and increases in educational fees compounded by diminishing financial aid for students.

It is difficult to assess the extent to which

these problems will persist in the future. The

number of students studying for Ph.D.s in

engineering significantly decreased over the

course of the decade 1972-82. Educators of engineering suggest that, as a result, there will

not be enough new faculty members to replace

even those who die or retire.34 If this kind of

trend continues, there will probably be a faculty shortage in the future. However, there are

some indicators that point to a reversal of this

trend. In 1982, for example, the number of engineers earning doctorates increased for the

first time in 8 years. 35 In 1983, the number increased again—from 2,888 to 3,023.3

’

On the other hand, the academic manpower

problem may be more difficult to overcome in

the field of computer science where the percentage of faculty leaving for industry is two

times that of any other field of engineering.37

Even in this area, however, there is some anecdotal evidence reported by NSF to suggest

that the number of graduate students studying in this area is now increasing.38

It is possible, however, that faculty shortages could become even more critical in the

future in some specific areas, limiting the

amount of research and the amount of teaching that can be done in these fields. This is particularly true, for example, in an area such as

artificial intelligence (AI).39 Because the field

8WTA Case Study on Artificial Intelligence.

MNAE Bridgq op. cit., p. 121.

sb~”aa Indz”catirs, op. cit., p. 123.

‘Manpower Comments, vol. 21, No. 3, April 1984, p. 24.

sTC@i9, Op. cit., p. 8.

‘Conversation with Kent Curtis, National Science Foundation.

S90TA ewestudy on Artifi”a”al InW”gence.

38-802 0 - 85 _ 11
152 . Information Technology R&D: Critical Trends and Issues

of AI is so specialized and because the size of

the research community is so small to begin

with, the number of qualified faculty members

cannot be multiplied rapidly enough to meet

the rising number of students who are now beginning to enter the field. The problem is likely

to worsen if, as might reasonably be expected,

the greater commercialization of AI applications together with enhanced military interest in the field lead to increased competition

for those trained in artificial intelligence in the

future. The effect of a faculty shortage may

be particularly acute in an area such as this

where the required skills and knowledge are

best taught in an apprenticeship-type situation.

To alleviate the present faculty shortage,

more than half of all engineering colleges have

had to eliminate courses, and two-thirds are

increasingly substituting graduate assistants

for full professors for some coursework, a situation that could adversely affect the teaching

of advanced technical courses. A number of

universities have also increased the teaching

load. 40 It has been estimated, for example, that

over the past 10 years the teaching burden of

the average professor of engineering has increased by 40 percent.41 While such actions

may ameliorate the problem in the short term,

in the long term they may—to the extent that

they discourage people from pursuing teaching careers-actually exacerbate it.

Compounding their problems of loss of faculty and deterioration of equipment, schools

of engineering and departments of computer

science will also have to find ways to modernize their curricula to meet the educational

needs of a high-technology society undergoing rapid technological change. It has been

estimated, for example, that given the speed

at which technological change is occurring,

today’s engineering education, acquired over

the course of 4 or 5 years, will be obsolete in

about the same amount of time. 42 Up-to-date

coursework, moreover, will have to take into

@McDemot,t,, op. Cit., P. ‘-

41~nfowor~d, May 30, 1983, P. 32.

4“’The Changing Face of Engineering,” Electronics, May 31,

1983, p. 127.

account the changing style of doing engineering and computer science. To be effective, for

example, the engineers and computer scientists of the future may have to be adept in

communications as well as in technical skills.43

As one young computer scientist described it,

The old stereotype of an engineer was a

guy with a slide rule hooked to his belt and

who was not into sports, not into team play.

The jobs that we have to do now are not

1-man year projects but are 5- to 10- to 20-

man-year projects. Integrated circuits, even

linear ICs, are so complex that they are no

longer designed by one engineer, but by

teams. . . this concept may be new to us, but

it’s not to the Japanese.

The mounting problems that engineering

schools are facing would appear to be having

a negative effect on the quality of education

that they provide. In the last 3 years, for example, 30 percent fewer engineering schools

were given full 6-year accreditation. Moreover,

there has been an increase of over 70 percent

in the number of institutions that have been

asked to show cause why their accreditation

should not be revoked. 44 Many university officials agree with this assessment. In a survey

of engineering colleges conducted by the American Council of Education, 49 percent of the

respondents reported that the quality of education provided by their institutions had either greatly or moderately declined.45 Concerns

about the decline in the quality of engineering education are also echoed in the industrial

community, where a number of companies

have independently taken steps to improve the

pool of engineering manpower.46

The current situation is not, however, set in

stone. To the contrary, the American educational system is today in the midst of considerable change. In adopting policies to affect

the future supply of manpower, therefore, policymakers should be reminded of the “pendulum effect.” In making decisions about the fu4sIbid,, pp. 127-128.

44McDermott, op. cit., p. 90.

4’High Technology Manpower in the West: Strategies for Action, op. cit., p. 12.

*For a discussion of many of these efforts see Chapter 6: New

Roles for Universities in Information Technology R&D.
Ch. 5—Education and Human Resources for Research and Development ● 153

ture, they need to take into account not only

the projections of future manpower needs but

also how present reactions to those projections

may, in fact, undermine their validity.

Concerned about the present state of hightechnology manpower training in the United

States, a number of businesses and corporations, for example, have already taken it upon

themselves to improve the situation. In particular, they have adopted a number of measures that are designed to keep faculty in academia and to encourage students to pursue

academic careers. Bell Labs has recently begun a program that, over time, will provide $2

million to doctoral candidates studying in

fields related to telecommunications. The General Electric Co. has donated $2 million to

engineering schools to be used primarily by

teachers and Ph.D. candidates. IBM has established 150 graduate and postdoctorate fellowships in engineering, computer science, and

information systems. And Hewlett-Packard

recently initiated a student loan forgiveness

program that allows students to write off a

part of their loans in accordance with a prearranged schedule for each year that they teach.

Companies are also providing funds for

equipment and instrumentation. Digital Equipment Corp. and IBM together have donated

$50 million for equipment to MIT. Sizable contributions have also been made to a number

of other universities by IBM, Hewlett-Packard, Apple Computer Inc., Wang Laboratories, Inc., NCR Corp., and Honeywell, Inc. (see

fig. 25).

In addition, businesses and corporations are,

more and more, joining with universities in

cooperative ventures to overcome perceived

shortages of scientific and technical manpower. The goal of training manpower, for example, was the major reason for establishing the

Microelectronics and Information Sciences

Center at the University of Minnesota, and the

most important inducement in gaining industry support. These cooperative ventures, as

well as a number of others, are discussed in

some detail below, in chapter 6.

Figure 25.—Educational Gifts by Computer Vendors

IBM $50 million in cash and equipmen to 20

advance research in CADICAM.

• Co-donation of $50 million in equipment to MIT

to research data transfer.

● $15 million pledge to Brown University to

establish institute for research in information

and scholarship.

● $2.4 million in graduation fellowships to science

and engineering students.

Digital • $ co-donation of $50 million in equipment to MIT.

Equipment

Corp. •

-

$1.6 million to Boston University to fund new

compute science programs.

● Total of $45 million in fiscal 1982 to higher

education.

Apple ● $21 million in equipment to California schools

computer, grades K-12 for “Kids Can’t Wait” Program.

Inc. Company wants a Similar nationwide program, but wants Federal tax deductibility first

via so-called “Apple Bill"

● $500,000 to Brown University in form of 5O

Lisa Computer.

Hewiett- ● Approximately $22 million, mostly in equipment,

Packard to universities in fiscal 1983.

co.

Wang ● Total of $3.7 million in equipment and $458,000

Laboratories, in cash to 23 universities and secondary

inc. schools in 1982.

NCR • $140,000 in equipment to Michigan State

Corp. University.

● $170,000 in equipment to Cornell University.

• Several gifts of companies NCR systems to

other universities.

Honeywell, ● S220,000 to Arizona State University.

Inc. ● $30,000 to United Negro College Fund.

● Total of $3 million in education contributions

in 1982.

SOURCE: Compurerworld, July 25, 1983.

The States have also taken steps to improve

and foster the development of manpower for

a knowledge-intensive society. Not only have

they joined in cooperative ventures between

industry and the universities, they have also

taken steps to enhance the research environment and to improve faculty salaries.

While most State and corporate efforts to

improve manpower training have been focused

on the most prestigious universities, there

have been a number that have sought to improve the education and training provided to

less advantaged colleges and universities. Exxon, for example, recently donated $1.8 million to six predominantly black engineering

colleges, to be spent during the course of the

next 3 years. IBM has lent several of its employees to teach in schools that serve “disadvantaged students. ”
154 • Information Technology R&D: Critical Trends and Issues

Elementary and Secondary Education

To determine whether or not there will be

enough highly qualified people available to

perform R&D in information technology, one

must look not only at institutions of higher

education, but also at elementary and secondary schools. Generating the pool of students

from which university and graduate students

are drawn, these institutions have an effect on

both the number and the quality of students

who desire to pursue fields of study that might

lead to work in this area.

A number of reports have been released recently that raise serious questions about the

ability of elementary and secondary schools

in the United States to adequately prepare the

Nation’s youth to work in a knowledge-intensive society. While differing in the focus of

their concerns, all of these reports find that

our schools are inadequately preparing American students for their futures. As evidence,

they point to declining test scores, the need

for colleges and business to provide remedial

education and training programs, the level of

functional illiteracy among the general population and the Nation’s poor showing in international comparisons of student achievement. 47

Of particular concern in all of these studies

is the overall poor quality of math and science

education. A number of indicators give cause

for such concern (see fig. 26). Enrollments in

math and science courses, for example, are

generally low. Only one-third of all U.S. high

school graduates have completed 3 years of

mathematics, and less than 8 percent have

completed a calculus course.48 Moreover, in

grades kindergarten through six, students

spent only approximately 20 minutes per day

on science lessons. And by 10th grade, only

about half of all students study any science

 B. Education in Reports on 

 and Recommendations for Change, Issue Brief #

IB83106 Congressional Service, Library of Congress, NOV. 17, 1983.

 “High School Science Problems Gain Spot- light,” & News, May 24, 1982, p. 39.

Figure 26.—Selected Indicators of the Overall

Quality of Mathematics and Science Education

in the United States

Scholastic Aptitude Test score averages from

1963 to 1981

500 i 1

480

460

440

420

0

1963 1965 1967 1969 1971 1973 1975 1977 1979 1981

Years

Proportion of 1980 high school leavers who have taken

various courses

Algebra I

Algebra II

Geometry

Trigonometry

Calculus

Physics

Chemistry

o 10 20 30 40 50 60 70 80

Percent

Average scores on science tests among school children around

the world (1973)

England

Scotland

Germany

Japan

USA

o 10 20 30 40 50 60

Percent of maximum score
Ch. 5—Education and Human Resources for Research and Development . 155

at all.49 In contrast, students in many other

industrialized countries spend about three

times more class time on math and science

than the most scientifically oriented American student.50

Student attitudes about science and math

also reflect problems in the education of these

courses at the elementary and secondary

school levels. Science, for example, is the subject that is preferred the least by most American students.51 Moreover, although most children regard scientists themselves as being

intelligent and dedicated, they consider the

work that scientists do as being “boring, dull,

and monotonous. ”52 Mathematics is not much

more popular. While it is the favorite subject

of 45 percent of students in the third grade,

it is rated tops by only 18 percent of those in

the 12th.53

Overall, student performance in these areas

reflects the lack of interest and low enrollment

in these subjects. In the three studies conducted by the National Assessment of Educational Progress, which were designed to assess

the achievements of precollege students in a

number of areas over the years 1969, 1973, and

1977, all age groups showed significant average declines on mathematical applications

which involve the use of mathematical knowledge, skills, and understanding to solve problems.54 In the area of science, the results were

similar. There was a downward trend for all

age groups, from the first to the second assessment, although this decline appeared to be diminishing for 9 and 13 year olds in the third

assessment.55

As in the case of higher education, many of

the problems in precollege math and science

education have been attributed to the shortage of high-quality teachers to teach in these

areas. According to the Director of the Nation-

“Herbert J. Walberg, “Scientific Literacy and Economic pro

ductivity in Intematimal Perspective, ” Dzmdalus, p. 12.

‘OHeylin, op. cit.

*

] Walberg, op. cit.

5$ Heylin, op. cit..

“Walberg, op. cit.

“Sa”ence Indicators, op. cit., p. 74.

551bid.

al Science Teachers Association, since 1971

there has been a dramatic decline in the number of people training to teach in these areas—

79 percent in the case of math and 64 percent

in the case of science (see fig. 27).

The lack of new entrants into the teaching

profession is not surprising insofar as there

are few incentives to draw well-qualified individuals into the field.56 With the financial problems facing schools today, a career in teaching

is no longer considered to be secure. And it is

considered by many to be less likely to provide the rewards of public status or personal

esteem. Since teaching salaries are by no

means competitive with those in private industry, many of the most qualified teachers—

especially those with training in math and

science—are giving up teaching to sell their

skills on the open market. Moreover, wellqualified women–a traditional source of highquality educators—are particularly likely to

seek out the wider range of employment opportunities now available to them.57

The actual extent of the present shortage of

qualified math and science teachers is a matter of some debate, however. A survey of educational placement offices conducted by the

National Science Teachers Association found,

for example, that no less than one-half of the

Nation’s math and science teachers were hired

on an emergency basis.58 The Association for

School, College and University Staffing has

reported, moreover, that there is a considerable nationwide shortage of teachers in the

area of mathematics, physics, and computer

programming on the other hand, a recent

study conducted by the General Accounting

Office concluded that the gaps in the available

— . .——.

‘The New Sa”entist, July 14, 1983.

In explaining the shortage of teachers, much of the attention has focused on salary differentials between teaching and industry. While salary levels are no doubt important, one recent study found that internal morale

factors, such as the potential for personal growth, are

even more so. Edward B. Fiske “Teacher Fulfillment Put

Above Pay, ” The New York Times, Oct. 4, 1983, p. Cl.

“J. Myron Atkin, “Who Will Teach in High School?” America Schools: Pubh”c and Pn”vate, Daedalus, summer 1981.

68 The New Scjentjst, Op. cit.

W’eacherSupplyDemand 1984, Association for School, College, and University Staffing.
156 ● Information Technology R&D: Critical Trends and Issues

Figure 27.—America% Science Teacher Shortage

A 1982 survey reveals just how many new science and mathematics

teachers in the U.S. do not hold the appropriate qualifications to do

their jobs. This is partly a result of a fall in the numbers of those

840/0

460/o 43 ”/0

3

Pacific Mountain 63% — 40%

1971 base

1971 1973 1975 1977 1979

1-0

0-75

0-50

0-25

0

South

Atlantic

.

East

South

Central

1971 1973 1975 1977 1979

- Qualified teachers available for employment

_ Accepting teaching positions

Teachers taken on in 1982 to teach science and math not qualified

in those subjects (top left). Decline in number of new teachers beSOURCE: New Scientist, July 14, 1963.

information are so great that whether or not

there are shortages of math and science teachers,

and whether or not the quality of technical

teaching has declined in recent years, cannot

be determined.60

Since a strong foundation in math and science is, in most cases, essential to a future career in information technology R&D, these

findings raise a number of questions about the

future supply of manpower in this area. Their

answer, however, is not particularly clear or

straightforward. For although the data show

that the level of math and science understanding and competency for the student population as a whole has declined, it has not declined

60New D&@”ons for Federal Programs to Aid Mathematics

and Su”ence Teachi”ng, GAOIPEMD-84-5, Mar. 6, 1984.

achieving the appropriate qualifications. Another important factor is

the far more attractive salaries offered to graduates in the sciences,

whether qualified teachers or not. -

Teachers

(all disciplines)

Those entering

government or

industry, by

discipline:

Humanities

Social sciences

Biological sciences

Agricultural sciences

Accounting

Health professions

Chemistry

Mathematics

Computer sciences

Earth sciences

Engineering

 Me n

 Wome n

1 1 I 1 I 1 I

12 14 16 18 20 22 24 26 28

Thousand dollars

tween 1971 and 1980 (above left). Starting salarlis for new graduates

entering careers in government or Industry in 1982 (above r!ght).

among those students who are most likely to

pursue careers requiring a strong background

in math and Science. 61University math and science departments and schools of engineering

report, moreover, that they are continuing to

recruit high-quality students, many of whom

are being drawn from the humanities departments with the idea of having better future

job prospects62 (see, e.g., fig. 28). On the other

hand, given the diminishing supply of highquality educators in these fields and the

predicted decline in the school age populael~”ena In~”ca~rs, Op. cit., P. 77”

ufiti J. A-, stud~t Quali”tyin the ti”ences and Ew”-

neering Opku”on of Sam”or Academi”c Offi”a”als, Higher Education Panel Report No. 58, American Council on Education, February 1984.
Ch. 5—Education and Human Resources for Research and Development ● 157

Figure 28.—Selected Indicators of Shifts in Undergraduate Science/Engineering Education

Chart 1. Perceptions of academic officials about change over

last five years In quality of undergraduate science/engineering

(S/E) students, 1982

Percent

o 10 20 30 40 50 60 -- -- 7(-I

Type of 1 I I I I I

Institution

 NO Signifcant chang e

All institutions significant improvernen t

Doctorate

granting

granting

Publicly

control led J

Privately

controlle d

100 largest S/E

baccalaureate

SOURCE: National Science Foundation and American Council on Education,

tion,63 a more serious problem may emerge in

the future.

Just as the situation in the case of higher

education, the situation in elementary and sec- —

WI’he number of Americans graduating from high school is

projected to drop from a peak of 3.2 million of 1977 to a low

of 2.3 million in 1992, following a roller coaster pattern through

the end of the century. High Schcnd Graduates: Projtwti”ons for

the Fifty States (1982-2000), Western Interstate Commission

for Higher Education, Boulder, CO.

Chart 2. Opinions of academic officials about shift in distribution

of most able undergraduate students between science/engineering

(S/E) and other fields over the last five years, 1982

Percent

o 10 20 30 40 50 60 70 80

Type of

institution I No change

All institutions

 Shift awa y S/E trends

Doctorate

granting

Nondoctorate

granting

Publlcly

controlled

Privately

control led I

100 largest S/E

baccalaureate . I

ondary education is not static and changes are

taking place that might affect the long-term

supply of scientific and technical manpower.

The public’s response to the numerous reports

on the condition of American education has

been immediate and widespread, involving

parents, teachers, businessmen, and government officials at all levels.

The Federal Role in Manpower Development

As the largest employer of scientists and engineers, the Federal Government has a direct

interest in whether or not the educational system can provide an adequate supply of technically trained people. Its role in the development of manpower, however, has traditionally

been indirect. For it is the States, and not the

Federal Government, that have had the primary responsibility for educational policies.

Given the Constitutional limitations on the

Federal Government’s role in education, the

responsibility for developing manpower has

always been shared by a number of different

social institutions ranging from the family to

the business community. As American society

has become more technologically advanced,

however, the Federal Government has been increasingly called onto play a more significant
158 ● Information Technology R&D: Critical Trends and Issues

role. Pressure on it to be more active in this

area is particularly strong today, as the Nation seeks to maintain its place in a highly

technical and competitive world environment.

While conscious of the economic benefits associated with having a skilled labor force,

Americans did not originally adopt a formal

system for transmitting vocational and technical skills, in the earliest years of their history, when agriculture was the dominant mode

of production.64 Instead, most formal educational institutions were designed to serve general social and political functions, while general vocational skills were left to be passed on

more or less informally, by family members

or through apprenticeship systems.65

In particular, there was little effort given to,

or even much concern for, the development of

scientifically trained manpower. When scientists were needed in the United States, they

were brought over from Europe. Thus, it was

only in 1902 that the Federal Government first

became involved in the development of scientific manpower. Concerned at this time about

the security dangers entailed in relying almost

exclusively on foreigners for scientific expertise, Congress established the Army Corps of

Engineers at West Point.66

It was only with the rapid industrialization

of society, at the end of the century, that education came to be really valued in economic

and technical terms.67 And then, as Americans

‘For a discussion of American education in the preindustrial

period, see Bernard Bailyn, Education in the Fornu”ng of American Sou”ety (New York: W. W. North, 1980); Lawrence Cremin,

TradI”tiorIs in Amen”can Education (New York: Basic Books,

Harper, 1976); and Rush Welter, Popular Education and

Democratic Thought in Amerz”ca (New York: Columbia University Press, 1962).

‘A. Hunter Dupree, Sci”ence in the F’dmd Governm ent: Histoxy of Pd”a”es and Actk”tiee to 1940 (Cambridge, MA: Belknap

Press of Harvard University Press, 1957).

sdlbid. Initi~ly trained in the s~s neCeSSSry b cm out

explorations of the West and to conduct surveys of the eastern coastline, these West Point graduates played a key role in

many of the scientific ventures carried out by the Federal Government up until the end of the 19th century.

o~David K. Cohen and Barbara Newfeld, “The Failure of High

Schools and the Progress of Education,” Amen”ca’s Schools:

Public and Pn”vate, Daedalus, spring 1981.

came to believe that special technical knowledge was the key to prosperity in the modern

age, secondary educational institutions were

restructured to prepare American youth for

an increasingly differentiated set of economic

roles. Not only were vocational courses added

to the educational curriculum, but the schools

themselves were remodeled to conform to the

prevailing business standards of efficiency.

The business community played a major role

in bringing about these changes. Concerned

about strikes, labor turnover, and increasing

worker absenteeism, they hoped that schooling would socialize a growing number of immigrant youths for the workplace.68 69

The growing enthusiasm for scientific and

technical knowledge also had an impact on the

nature of higher education. Accustomed to

training gentlemen as preachers, lawyers, and

doctors, the universities began to expand their

roles and to train people in the more vocational

applications of education.70 Efforts to move in

this direction met with considerable resistance

from traditional academics, however, who

were disdainful of the study of experimental

science and even more so of the teaching of

the “useful arts.”71 72

The transformation of the university system

was greatly facilitated by the passage of Federal legislation establishing the land grant colleges. Provided for under the Merrill Act of

1862, 73 these colleges, open to children of all

backgrounds, were established to provide education in practical fields such as agriculture,

engineering, home economics, and business

‘David Tyack and Elizabeth Hansot, “Conflict and Consensus in American Education, ” ti”a /Wwls: Public and Private, Daedalus, summer 1981.

‘

s

Ibid.

~OEmest L. Boyer ~d Fr~ Heckinger, Higher Education in

the Nati”on’s Serw”ce (Washington, DC: Carnegie Foundation

for the Advancement of Teaching, 1981); and Edward Shils,

“The Order of Learning in the United States From 1865-1920,”

Minerva, vol. 21, No. 2, summer 1978. nDa~d Noble, Am~”ca by Detu”gn: &i”eXlce, T~OIOKY, ‘d

the Rise of Corporate Capitalism (New York: Alfred A. Knopf,

1977), p. 24. T2Boyer ad HW~@r, op. cit..; ~d ShilS, oP. cit.

7~his law provided land to the States, the proceeds of which

were to be used to teach in the fields of agriculture and me

chanical arts. Subsequent legislation provided Federal financial support for research and the operation of the landgrant

colleges.
Ch. 5—Education and Human Resources for Research and Development ● 159

administration. Through their agriculture experiment stations and their service bureaus,

their activities were designed to serve the

state .74

The impact of the Merrill Act on development of scientific and technical manpower is

clearly evident in the case of the engineering

profession. Before its passage, State legislatures had been reluctant to invest in technical education. Responding to the offer of Federal grants, however, they quickly sought to

establish the new types of schools, while private colleges, caught up in the movement, also

established departments of engineering.75

Schools of engineering expanded rapidly,

thereafter, numbering 110 by 1886. The number of engineering students similarly increased,

from 1,000 in 1890 to 10,000 in 1900.7’ As

more and more engineers were educated in formal institutions, there was a greater emphasis in engineering on science. Moreover, with

the establishment and growth of these institutions, a profession was developed and with

it a means of preserving, transmitting, and

increasing an evolving body of engineering

knowledge. 77

The real impetus for manpower development, and for a strong Federal role in it, came,

however, after World War II, when advanced

technology had proven to be critical not only

for the Nation’s economic growth, but also for

its defense. It was in recognition of this fact,

for example, that the National Science Foundation was created in 1950 with the task of

improving the Nation’s potential in scientific

research and in science education.78

The philosophical basis for establishing

NSF, and the rationale for including the development of scientific manpower within its

“Clark Kerr, The Uses of the Um”versity (Cambridge, MA:

Harvard University Press, 1972).

76 Noble, op. cit., pp. 38+9.

“Edwin T. Layton, Jr., The Revolt of the En@”neers: %cial

R.esponsibih”ty and the Amen”can Engineering Pmfesm”on (Cleve

land, OH: The Press of Case Western Reserve University, 1971).

771bid.

‘oThe Natjon~ ~ience Foundation and Pre-COflege Science

Education: ~950-1975, report prepared for the Subcommittee

on Science and Technology, U.S. House of Representatives, 94th

Cong., 2d sess., by the Congressional Research Setice, Library

of Congress, January 1976.

organizational mission, was explained by Vannevar Bush in Science—the Endless Frontier,

his report to the President on a program for

postwar scientific research. About the need for

scientific manpower, he said,79

. . . Today, it is truer than ever that basic research is the pacemaker of technological

progress. In the 19th century, Yankee mechanical ingenuity, building largely on the basic discoveries of European scientists, could

greatly advance the technical arts. Now the

situation is different.

A nation which depends on others for its

new basic scientific knowledge will be slow

in its industrial progress and weak in its competitive position in world trade, regardless of

its mechanical skill.

Provoked by the successful launching of the

Soviet spacecraft Sputnik, defense considerations also motivated the passage of the National Defense Education Act of 1958 (NDEA),

which was aimed at improving instruction in

mathematics, science, and foreign languages.

Under this law, funds were provided on a

matching basis to public schools, and as longterm loans to private institutions, for needed

equipment in these instructional fields, for curriculum development, for guidance counseling,

for vocational education in defense-related

fields, and for teacher training in foreign language instruction. The passage of NDEA

resulted in substantial increases in Federal aid

to education (see fig. 29). Since Federal dollars

had to be matched by State and local funds

under provisions of the act, the overall investment in NDEA programs was large. Between

1958 and 1961, $163.2 million in Federal funds

were dispersed. Approximately 75 percent of

these funds were directed to the development

of science curricula.

Although the U.S. educational system is organized on a local basis, the Federal Government has, over the years and in response to

changing technological developments, come to

influence the development of scientific and

technical manpower in a number of ways. Particularly in the area of science and mathematics, the Federal Government has, for

7e1bid., p. 19.
160 ● Information Technology R&D: Critical Trends and Issues

Figure 29.—A Quarter Century of Student Aid

25 years ago, the National Defense Education Act was signed

Student loans

NDEA, 1958

National Defense Student Loans, for

which about $30 million was appropriated in the first year, were provided at an

interest rate of 3 percent. The law told

colleges to give “special consideration”

to outstanding students who planned to

become teachers in elementary and

secondary schools and to those with a

background of high achievement in

science, mathematics, engineering, or a

1983

The program, renamed National Direct

Student Loans and transferred to the

Higher Education Act, provided loans at

an interest rate of 7 percent. About $193

million was appropriated for fiscal 1983.

The debts are forgiven for borrowers who

become teachers in schools serving disadvantaged students and those who teach

the handicapped.

International education

NDEA, 1958 1983

The law authorized support The programs have been

for fellowships, research, and modified and incorporated in

university centers for foreign- the Higher Education Act, with

language and area studies, increased emphasis on support- k .., 

. . . . , putting emphasis on the train- ing the education of nonspeing of specialists in languages cialists as well as specialists in

“needed by the federal govern- foreign language and area

ment or by business, industry, studies. About $26 million was

or education in the United spent on those programs in

States.” Some $5 million was fiscal 1983. ~ ,

, *

appropriated in the first year.

n

.,=[3

,

fellowships for students plann- vamped and transferred to the I

ing to become college teachers Higher Education Act in 1972. 

and grants to encourage the The Education Department’s

establishment and expansion principal graduate-fellowship 

of graduate schools. About program provided support for 

$5.3 million was spent in the women and for blacks and

first year. other minorities. About $10 roillion was provided in fiscal t

1983. , f

$6,718

1959 ’60 ’61 ’62 ’63 ’64 ’65 ’66 ’67 ’68 ’69 ’70 ’71 ’72 ’73 ’74 ’75 ’76 ’77 ’78 ’79 ’80 ’81 ’82 ’83

Years

SOURCE: Compiled by the American Council on Education, based on data from the U.S. Department of Education. Totals do not include Veterans Educa[ or Social Security Benefits for college students.

lion Belnefits
Ch. 5—Education and Human Resources for Research and Development • 161

example, provided support for curriculum development and the production of new course

materials. In addition, it has also lent considerable institutional support to colleges and

universities, in the form of direct grants,

research grants and contracts, equipment

grants, and the establishment of institutes and

specialized instrumentation centers. The Federal Government has, moreover, assisted individuals through training programs and fellowships as well as by providing scholarships

and other forms of financial aid.

By targeting scholarships or fellowships for

specific fields of study, the Government can

also influence the direction of manpower development. 80 This was particularly true, for example, during the years following Sputnik

when there was a widespread belief that the

normal pool of technically trained graduates

could not meet the manpower needs of the civilian space and the military ICBM programs.

Where a large number of people have been involved, the Government has tended to provide

only generalized incentives. Where the number is much smaller and the area of expertise

quite specific, it has sought more to narrowly

target its support.

‘“Ibid.

The Societal Context for

Federal Manpower

Determining

Policy

The role of the Federal Government in development of scientific and technical manpower is not only indirect, it is also complicated.

It is complicated by the fact that the Nation’s

educational system-the primary institutional

means by which the Federal Government can

affect manpower—serves a number of societal

goals in addition to, and at times competing

with, those that directly relate to manpower

development.

Today, given the growing concerns about

the United States’ declining position in the international economy of high-technology goods

and services, the American educational system is being called on to develop the Nation’s

scientific and technical manpower as a means

of gaining for the United States a greater competitive edge. In examining this issue, this

chapter has posed a number of questions

about: 1) the causal relationships between education and economic performance, and 2) the

extent to which there will actually be a critical shortage of manpower in the future to perform R&D in such high-technology areas as

information technology. Before policy alternatives can be adopted to address the manpower

problem, it is necessary to inquire further and

to ask first whether or not Federal efforts to

move the educational system more in the direction of manpower ‘development can be

achieved without sacrificing other equally, if

not perhaps more important, educational and

societal goals.

Education has always played a particularly

important role in American society. For while

educational institutions are publicly supported

in many societies, in no other country have

they been established with such deliberate purpose and public expectation, or been conceived

of as being such an integral part of the political, social, and economic order. Contrasting

the attitude of Americans towards education

with that of Europeans, for example, Alexis

de Tocqueville, the well-known French commentator on American society, noted in 1831:81

Everyone I have met up to now, to whatever rank of society they belong, has seemed

incapable of imagining that one could doubt

the value of education. They never fail to

smile when told that this view is not universally accepted in Europe. They agree in thinking that the diffusion of knowledge, useful for

all peoples, is absolutely necessary for a peoa] Alexis de Tocqueville, Journey to Amen”ca, translated by

George Lawrence, J.P. Mayer (cd.) Anchor Books, 1971.
162 ● Information Technology R&D: Critical Trends and Issues

ple like their own, where there is not property

qualification for voting or for standing for

election. That seemed to be an idea taking

root in every head.

The goals that Americans have sought to

achieve through education have changed over

time and in different historical circumstances.82

In the earliest years of American history, for

example, education was considered essential

for the survival of the new democratic nation.

Later, with the need to acculturate immigrants into society and to unite a divided Nation in the aftermath of the Civil War, it was

considered the means for building a nation of

citizens. At the turn of the century, education

was expected to train and socialize American

youths to participate in a modern, industrialized society. In the 1960s, Americans saw in

education a way of providing equal access to

social and economic opportunity.

Today, much of the national discussion

about education has focused on the goal of

meeting the manpower needs of a high-technology economy. Unlike earlier periods of

American history, however, when the educational system was itself undergoing tremendous expansion and enjoying a period of considerable prosperity, today the educational

system is having to take on a multitude of new

tasks at a time when it faces the prospect of

shrinking economic and human resources. Thus

today, given limited social and economic resources for education, the choice to take Federal actions to increase the supply of manpower for R&D in the area of information

technology might be made at the expense of

addressing other educational problems or of

meeting other educational and societal goals.

Some of the most important of the new

tasks that educational institutions will have

to perform are those that relate to the emergence of an “information society. ” In the recent OTA study, Information Technology and

Its Impact on American Education, it was

found, for example, that the growing use of

information technology throughout society is

creating new demands for education and train-

——— —— esw~ti~, op. cit.; cohen and Newfield, op. cit.; ‘1’’ya~, oP. cit.

ing in the United States and is increasing the

potential economic and social penalty for those

who do not respond to those demands. Moreover, the study found that the information

revolution is creating new stresses on many

societal institutions, particularly those such

as public schools and libraries that traditionally have borne the major responsibility for

providing education and other information

services.

New demands will also be placed on the educational system by virtue of the changes that

are now taking place in the American economy. Programmable automation, for example,

as the recent OTA study, Computerized Manufacturing Automation: Employment, Education, and the Workplace, points out, is one of

the economic forces that is currently reshaping the roles for and the values being assigned

to education, training, retraining, and related

services such as career guidance and job counseling. This study concludes, moreover, that

the inadequate capacities of the present instructional system may constrain the establishment of strategies to develop adequate

skills for programmable automation.

Educational institutions will also be called

onto perform a number of cultural tasks. Forecasts of demographic trends suggest, for example, that Hispanics, Asians, and other cultural groups with specialized educational needs

will soon comprise a major portion of the school

population. Moreover, the increase in the number of school-age children living with a single

parent or two working parents will force schools

to provide more supervision and socialization.

In addition, a growing number of adults are turning to the educational system to fill in the nonvocational, liberal arts gaps in their educational

backgrounds. 83 Thus, instead of cutting back on

their educational activities, schools and universities will, most likely, have to cater to a growing number and variety of educational needs.

The role of the educational system as a

means of providing equitable access to economic and social opportunities could become

‘

a

’’More Adults Return to College h Study the Liberal Arts,”

Chronicle of Higher Education, Apr. 25, 1984, p. 1.
Ch. 5—Education and Human Resources for Research and Development . 163

all the more important in an age of high technology. The Bureau of Labor Statistics, for example, has predicted that the number of lowskilled jobs will constitute an increasingly

larger proportion of the total work force than

the highly technical jobs.84 Other social observers have suggested, moreover, that the wages

earned by low-skilled workers will decline rela- —— . — BiBLS, Levin and Ruxnberger, op. cit.

tive to those earned by technical workers.ab

Under such circumstances, the competition for

educational credentials may become more intense in the future, and the issue of equitable

access may become at least as important as,

if not more important than, the issue of manpower development.

8’Bob Kuttner, “The Declining Middle, ” The Atlantic

Monthly, July 1983.

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Richie, Richard W., Hecker, Daniel E., and Burgan, John, “High Technology Today and Tomorrow: A Small Slice of the Employment Pie, ”

Monthly Labor Review 106, November 1983,

pp. 50-58,

Rosen, S., “Human Capital: A Survey of Empirical

Research, ” Research in Labor Economics,

(Greenwich, CT: JAI Press, vol. 1, pp. 2-39.

Rosenberg, Nathan, Inside the Black Box–Technology and Economics (Cambridge, MA: Cambridge University Press, 1982).

Schultz, T. W., Investment in Human Capital

(New York: Free Press, 1971).

Setlzer, Richard, J., “Impact of Technology on

Employment Probed,” Chemical & Engineering

News, Aug. 1, 1983, pp. 23-24.

Shils, Edward, “The Order of Learning in the

United States from 1865 to 1920, ” Minerva, vol.

21, No. 2, summer 1978.

Silverstri, George T, Lukosiewicz, John M., and

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The Modern Library, 1937).

Stedman, James B., Education in America: Reports on Its Condition and Recommendations

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1983.

Tyack, David, and Hansot, Elizabeth, “Conflict

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Symposium on Labor-Market Conditions for

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2, 1984.

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Washington, DC, Feb. 2, 1984.
166 ● Information Technology R&D: Critical Trends and Issues

Veblen, Thorsten, The Theory of the Leisure Class tions of Post Academic Science, Transaction

(New York: The Modern Library, 1934). Books, 1982.

Walgerg, Herbert J., “Scientific Literacy and Eco- Welter, Rush, Popular Education and Democratic

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Weinstein, Jay, Sociology/Technology: Founda-
Chapter 6

New Roles for Universities in

Information Technology R&D
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

A Conceptual Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

Forces Driving New Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

Impacts of New University Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

Expected Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Potential Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

New Roles for Universities: Selected Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

Massachusetts Institute of Technology Microsystems Industrial Group . . . . . . . . . . 177

Microelectronics and Information Sciences Center University of Minnesota . . . . . . . 178

Rensselaer Polytechnic Institute Center for Industrial Innovation . . . . . . . . . . . . . . . 180

Stanford University Center for Integrated Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

Microelectronics Center of North Carolina. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

Semiconductor Research Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

Microelectronics and Computer Technology Corporation . . . . . . . . . . . . . . . . . . . . . . . . 193

Chapter preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Tables

Table No. Page

26. Stanford University, Center for Integrated Systems Research Topics . . . . . . . . . . . 185

27. A Distribution of SRC Funding by Region, March 1983 . . . . . . . . . . . . . . . . . . . . . . 192

Figures

Figure No. Page

30. A Conceptual Framework: New Roles for Universities

in Information Technology R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

31. Stanford University, Center for Integrated Systems Patent Policy . . . . . . . . . . . . . 183

32. Communications System Linking MCNC Participating Sites. . . . . . . . . . . . . . . . . . . 187

33. MCNC Participating Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

34. Working Relationships, Microelectronics Center of North Carolina . . . . . . . . . . . . . 188
Chapter 6

New Roles for Universities in

Information Technology R&D

Introduction

Throughout history, new institutional arrangements have been created to satisfy

changing needs. As one of society’s major institutions, the university, too, has evolved.

Particularly in the case of information technology R&D, new roles for universities are

developing. Other major players–industry,

State and local governments and the Federal

Government–are involved along with the university in the formation of new institutional

relationships.

The new institutional arrangements between university and industry, as well as those

among university, industry and government,

are driven by many factors. These include the

need for new knowledge and the application

of advancing technologies in new products and

processes; the efficient use of high-technology

manpower and ensuring a renewable supply

of manpower resources; economic survival and

future industrial growth; and maintenance of

national security and defense.

Since these efforts are essentially in their

formative stages, it is difficult to draw conclusions now about their long-term impacts.

In establishing a framework for analysis and

policy options, OTA developed a series of seven case studies (described later in this chapter)

that were selected as examples of the range

of new institutional relationships. Taken together, they illustrate several of the key issues

in today’s debate.

A Conceptual Framework

OTA created a conceptual framework to

analyze the changing institutional R&D relationships being played by the Nation’s academic institutions–one that emphasizes the

pivotal role being played by them. Figure 30

outlines this framework and focuses on the

connections among university, industry, and

government in terms of education, research,

and economic development. At the same time

there are forces converging on these institutions that, while creating new opportunities

and strengthening connections among university, industry and government, also are creating strains and producing tensions.

While education, research and development,

and economic development are separate functions, they, like the institutions that foster

them, are becoming increasingly interrelated.

For example, concepts in advanced computer

architecture taught in a university program

or course are directly dependent upon the rapid advances in research and development at

both the university and in the industry. Similarly, the development of new industries and

subsequent economic growth are directly tied

to the products coming from the university—

highly trained technical graduates and new

knowledge, new processes, and new applications—as well as to the advances and offshoots

coming directly from industry.

In examining the institutional players in

terms of their relationship to education, research, and economic development, we see that

both universities and industry are directly involved in the creation of new knowledge

through research, that both universities and

State and local governments are directly concerned with the educational process and the

provision of a renewable supply of trained

graduates, and that both State and local governments and industry are directly concerned

with economic health and growth.

169
170 . Information Technology R&D: Critical Trends and Issues

Figure 30.–A Conceptual Framework: New Roles for Universities in Information Technology R&D

*Changing nature of R&D: increasing

complexity; high cost of research.

*Dwindling resources: faculty and

students drawn to industry; obsolete

facilities.

UNIVERSITY

New knowledge Trained manpowe r

innovation and expertise

-

INDUSTRY ECONOMIC GROWTH

1

STATE AND LOCAL

GOVERNMENT

● International competition joint lndustry- ‘ Economic development; need for new

national R&D efforts. Products,servlces, industries; strengthening the tax base.

*Need for cooperation to reduce high * Expanding Iimited resources for

risks, high cost of R&D. jobs, revenue economic development, education, and

public services,

* Forces driving new Institutional relationships

SOURCE Off Ice of Technology Assessment

There are also important indirect relationships. The educational program and knowledge resources of the university can have an

impact on the economic well-being of the region. Industry is involved in education indirectly through the training and resources it

has to offer to the other players. Industry is

also a consumer of talent and new ideas, the

products of the university. States and localities are finding that they need to be concerned

with research not only because the creation of

new knowledge can lead to the development

of new processes and products by industry,

but because the quality and scope of university research efforts can strengthen the educational program and in turn provide the region

with a renewable supply of highly trained

manpower.

There is also a national dimension to this

triad. These relationships and interactions are

affected by and in turn affect national issues

and the Federal role. The strength and effectiveness of the educational system, the quality

of research, and the level of economic growth

and industrial innovation and productivity determine, in part, the Nation’s national security and economic well-being. The role of the

Federal Government has also been both direct

and indirect. For example, the passage of the

Merrill Act in 1862 fundamentally affected the

nature of research and education in the univer-
Ch. 6—New Roles for Universities in Information Technology R&D ● 171

sities, as did the direct collaboration among

government, industry and academic researchers during World War 11.1 Recently, the Federal Government’s role has become more in-

—-— direct, increasing authority to State and local —

‘See ch. 6, “The Provision of Education in the United States,”

in Information Technology and Its Impact on American Education, OTA, 1982.

government for various discretionary education programs, providing a positive climate for

industrial joint ventures, and encouraging

joint sponsorship of R&D through tax incentives.2

‘See ch. 2, “The Environment for Research and Development

in Information Technology in the United States. ”

Forces Driving New Relationships

One can argue that the institutional framework has been in place a long time, even though

the interconnections may not have been sharply defined. Why, then, are the relationships

among the university, industry, and State and

local government increasing in strength and

activity today? Although there are many factors that could be considered, several forces

appear to be critical.

One of the principal factors has been the

change in the direct and indirect roles played

by the four participants shown in figure 30.

The changing Federal role in education, research, and economic growth has shifted certain areas of responsibility to State and local

governments, academia, and the private sector. While Federal R&D funding has stayed

roughly constant in real dollars over the past

decade, recent increases have been targeted to

specific areas, such as defense. The consolidation of federally funded discretionary programs in education has increased local and

State decisionmaking and control.

Universities have been constrained by the

resources available for support of research, faculty, students, and facilities.3 The rapid obsolescence of laboratory and research tools, coupled with the highly complex and sophisticated nature of the equipment now needed for

advanced information technology research, results in capital costs beyond the reach of most

academic institutions.4 The retention and at-

— . . . . —. . —-

‘W. R. Lynn and F. A. Long, “University-Industrial Collaboration in Research, ” Technology in Society, vol. 4, 1982, p. 199.

‘For example, in 1970 a need for $200 million in new instrumentation in the Nation’s university research laboratories was

identified: a decade later the accumulated need is estimated to

traction of top-quality faculty and the recruitment of advanced-level students, many of

whom are being drawn to industry, are critical problems.5 Further, as information technology R&D advances, multidisciplinary efforts

are required to achieve new breakthroughs.G

Not unexpectedly, universities have had to

seek new ways to operate educational and research programs.

Given the resources for R&D within the major information technology corporations,’ it is

logical to ask why industries would initiate or

be responsive to new institutional research relationships. The change in the scope of the information technology industry from a national

to a global arena has been a critical factor.

Competition within the industry has expanded

from the U.S. to a new situation where the

competition derives from nationally coordinated industry-government efforts worldwide. 8

be more than $1 billion. National Research Council, Revitalizing Laboratory Instrumentation (Washington, DC, National

Academy Press, 1982).

‘Louis Branscomb, former Chairman of the National Science

Board, points to needs for advanced degree training in computer science, electrical engineering, polymer science and

. materials engineering-a problem which requires both fellowship support and the strengthening of university instructional

and research facilities, At the same time, he points out that

incentives must be provided to make university research careers

as attractive as offers from industry-principally through the

provision of research and equipment support. See: L. Branscomb,

“The Computer’s Debt to Science,” Perspectives in Computing,

vol. 3, No. 3, October 1983, p. 18.

6

1 bid, pp. 13-15. See also ch. 3, Case Studies on Advanced

Computer Architecture, Fiber Optics, Software Engineering,

and Artificial Intelligence.

‘See table 23, R&D Intensities of Selected Major U.S. Telecommunications Firms, 1982, ch. 4, Divestiture.

Wee ch. 7. Information Technology R&Din the United Kingdom, France, and Japan, for examples of such efforts.
172 ● Information Technology R&D: Critical Trends and Issues

Based on the perception that industrial

growth, productivity and competitiveness are

dependent on new knowledge and innovation,

and a renewable supply of highly trained manpower, industries have turned increasingly to

the universities. The increased cost of R&D

makes cooperative efforts highly desirable

among the industries themselves, and among

cosponsored efforts with universities. Such cooperation goes beyond cooperation among

large companies. It includes cooperation between large and small companies, and among

business, academia, and government.9 In sum,

given the rapid advances in technology, the

escalating costs of R&D, and the global intensity of competition, intranationa. 1 cooperation

is seen as a means of maintaining international

competitiveness, 10 and universities are seen as

cornerstones of the cooperative effort.

Over the past two decades, several regions

of the United States have developed strong

local economies based on high-growth, technology-based firms that are engaged in systematic development and commercialization

of new products, processes, and services.

These firms, and the industries they represent,

have provided a major source of new jobs in

the manufacturing sector.11 12 Thus States, as

‘See for example, testimony by Erich Bloch, Vice President,

IBM, and Chairman, Semiconductor Research Corp. “In order

to cope with increasing competition in the world market, the

semiconductor industry must increase its efforts in research

and development. At the same time the research tasks are becoming more complex and more capital-intensive; lead time is

increasing and the shortages of sufficiently trained manpower

make the staffing of needed projects difficult. For all these reasons, some research efforts are beyond the affordability of individual companies. ” Hearings Before the Subcommittee on Investigations and Oversight and the Subcommittee on Science,

Research and Technology, House of Representatives, 98th

Cong., 1st sess., June 29-30, 1983, Japanese Technological Advances and Possible United States Responses Using Research

Joint Ventures, p. 46.

IOW. B. Norris, “How to Expand R&D Cooperation. ” 13usiness Week, Apr. 11, 1983, p. 21. Keynote Address “Cooperation for Improving Productivity, ” San Diego, July 20, 1983,

IEEE Task Force on Productivity and Innovation.

“U.S. Congress, Office of Technology Assessment, Technology, Innovation, and Re~”onal Economic Development, Census

of State Government Im’tiatives for High Technolo~ Industrial

Development-Backgmund Paper OTA-BP-STI, May 1983; Encouraging High-Technology Development—Background Paper,

OTA-BP-ST1-25, February 1984. 12Tot~ employment in the information technology industry

experienced considerable growth in the decade between 1972

and 1982, despite economic recessions. See ch. 9.

well as local communities have become active

competitors in seeking to attract high-technology firms. Just as U.S. industries have had

to acknowledge the international change in the

competitive forces for their products, so too

have State and local governments had to recognize that the competition for high-technology industry is interregional. The intensive

State bidding for location of the Microelectronics and Computer Corporation (MCC) is

such an example, with some 60 mayors and

27 governors involved. Notes Arizona Governor Bruce Babbitt,

The great MCC bidding war marks a special chapter in American industrial history.

State and local governments across the country have discovered scientific research and

technological innovation as the prime force

for economic growth and job creation. And

local officials have also uncovered a broad

base of public interest that can be translated

into support for aggressive action programs.

With the exception, perhaps, of the postSputnik era, such grassroots enthusiasm for

science and technology has not been seen

since the Gilded Age of the 19th century,

when communities vied to finance the transcontinental railroads. *

To attract such industry, incentives such as

tax breaks, donations of real estate, venture

capital for industry and funding for educational programs have been provided. ’3 Not all

State and local high-technology initiatives

have focused on education, nor does every

State or locality have equal resources on which

to draw. However, a strong educational base

is seen as a way of becoming more competitive. In a survey of 691 high-technology firms,

completed for the congressional Joint Economic Committee, “the importance of skilled

labor points up the necessity of linking State

and local development efforts with a region’s

universities in order to attract high-technology

*B. Babbitt, “me Sta@s and the Reindustriahzation Of America,” Issues in Science and Technolo~, fall 1984, p. 85.

“For examples of such efforts, see the report by the National

Governor’s Association, Zkwhnology and Growth: State lm”tiatives in Technolo~”cal Innovation (Washington, DC: National

Governors’ Association, 1983), pp. 23-45.
Impacts of New University Arrangements

While we can find examples of State and local high-technology initiatives and numerous

examples of long-standing university-industry

interactions including industry’s support for

research through gifts of funds or equipment;

cooperative research grants and contracts; the

use of university consultants, exchange of personnel between universities and industries and

other arrangements,15 the university today is

in a special position. Universities are being

courted by all of the principal actors and many

are initiating programs of their own. Most im-

 Foundation, Research

Relationships (Washington, DC: National Science Foundation,

1982).
174 . Information Technology R&D: Critical Trends and Issues

portantly, they are the linking element in multi-institutional R&D relationships.

The new institutional relationships take

many forms; some efforts represent new and

largely experimental ways of working together; many efforts that are being developed are

not really new, but are evolving from previous efforts and relationships. However, all of

the efforts that OTA examined involve a set

of agreements whose principal characteristics

are multidisciplinary arrangements and commitments to research with long-term objectives. While several of the ventures have been

initiated by one or few individuals, the negotiated agreements themselves are made at the

institutional level. It is the level of commitment and the extent of the involvement that

differs from previous university-industry

efforts.

It is too early to know with any certainty

the benefits and costs of the new universitycentered activities. However, in breaking new

ground, the university arrangements, cosponsored efforts, and high-technology State and

local initiatives have generated high expectations amid questions of appropriateness.l6

The number of meetings, conferences, hearings, and publications on this subject has been

significant. 17 The debates over these relationships have involved university leaders and

academicians, governors, congressmen, and

corporate executives.

-.— — .— —

“This concern has been most focused on biotechnology, where

se~reral university-industry agreements have involved large

sums of funding, over multiyear periods, and where a major

research unit of the university is involved with a single company with varying agreements for industry participation on

campus, and on some agreement to delay publication or provide exclusive licensing to processes and products developed

during the duration of the research agreement.

174’ Academe and Industry Debate Partnership, ” Science, vol.

219, No. 4481, January 1983, pp. 150-151; T. W. Langfitt, S.

Hackney, A. P. Fishman, et al., Partners in the Research Enterprise, University-Corporate Relations in Science and Technology (Philadelphia: University of Pemsylvania Press, 1983). U.S.

House of Representatives, University/Industry Cooperation in

Biotechnology. Joint hearings of the Subcommittee on Investigations and Oversight and the Subcommittee on Science, Research, and Technology, June 16-17, 1982.

Expected Benefits

The increased interactions among the university-industry-government triad depicted in

figure 30 underlie potentially successful approaches to several critical problem areas:

●

●

●

Research and new knowledge: The coupling between university and industry

may match needs of both. Industry gets

access to the research and knowledge that

resides in the university. Similarly, university researchers can benefit from the

pool of industry expertise. The academic

community obtains R&D laboratory facilities and research tools, as well as funding to undertake research. With increased

interaction, the university has an opportunity for better understanding of the industry’s practical concerns, and, conversely, industry may get a closer look at

the university’s research findings, speeding technology transfer.

Education and manpower: With the increased opportunities for research, and a

strengthening of the academic research

program, the educational program can

also be affected positively. Incentives

that would attract and retain top-level

faculty and advanced graduate students

are derived from higher levels of support

of new facilities and research. Moreover,

as a result of interacting with industry

personnel, students can make more informed decisions about their future employment. The combination of top-level

personnel, adequate facilities, and a vigorous research agenda can strengthen the

educational program, as new courses are

developed and learning opportunities increase. The university products can then

feed back into both industry and the community.

Economic growth: New institutional efforts are aimed at a strengthened research

base and a renewable source of highly

trained manpower, which are needed by

industry for its economic growth. This, in

turn, can strengthen the regional econom-
Ch. 6–New Roles for Universities in Information Technology R&D ● 175

ic base through new jobs, new spin-off industries, and the continued development

of entrepreneurial efforts to fill new

niches. 18

Potential Costs

The increased interactions among academiaindustry-government also raise questions of

long-term impact:

● Research and new knowledge: Closer interaction may lead to subtle changes in

the setting of research goals both in terms

of the selection of topics to be studied and

in the shortening of time horizons for results. Breakthroughs in fundamental research often require decades of study.

Thus some problems may be overlooked

if the institutional time frames for research are 3, 5, or even 10 years. How will

topics not of direct interest to industry

be covered in such institutional arrangements?

In addition, industry’s traditional emphasis on secrecy is in direct conflict with

academic practices. The new arrangements have involved extensive negotiation regarding patent and licensing agreements.l9 Thus far, most universities have

resisted industry pressure to limit access

to research results, maintaining their traditional role “to protect and to foster an

environment conducive to free inquiry,

the advancement of knowledge and the

free exchange of ideas. “2° The conflict between openness and control is of continuing concern,21 and will require solutions

on a case by case basis.

“For example, in a recent study of the Route 128 High Technology Industrial Corridor, Massachusetts’ advantage h attracting and supporting industries has resulted from the rich

university environment. “Entrepreneurs in the electronics fields

come mainly from the staffs of universities and their research

labs, and from other high tech firms (already established).” N. S.

Dorfman, “Route 128: The Development of a Regional High

Technology Economy,“ Research Policy, 12:6, December 1983,

p. 309; see also table 1, p. 301, ibid.

1’Fowler, “University-Industry Research Relationships: The

Research Agreement, ” Journal of College and University Law,

9:4, 1982-83.

‘“A. B. Giarnetti, “The University, Industry and Cooperative

Research, ” Science, vol. 218, December 1982, pp. 1278-1280.

“D. Nelkin, “Intellectual Property: The Control of Scientific

Information, ” Science 216:14, May 1982, pp. 704-708.

Education and manpower: It is possible

that these new, highly visible, exciting

ventures will cause competition between

research and education, drawing faculty

away from teaching, and recruiting students from other areas. There is the danger that these new efforts will skew the

balance among programs and capture unequal attention and support from university administration.

Economic growth and development:

While there are many other joint industry-university activities involving small

and large businesses, a variety of academic institutions, and individual faculty

members, the industry sponsors and major participants in both the multidisciplinary university centers and the industry

cooperative ventures have mainly been

the large information technology corporations. Fewer numbers of smaller companies have joined projects as ‘‘associate’

(in contrast to fully participating) members. Full membership includes access to

research as well as personnel exchanges,

and active participation in planning research, selecting proposals for funding

and evaluating ongoing programs. Thus,

cooperative joint-industry ventures among

the information technology giants may

put the smallest, entrepreneurial companies at a disadvantage.

The costs of increased interaction come from

two directions. First, in coming together, each

of the institutions may lose some measure of

autonomy and relinquish aspects of their traditional roles. Conflict is inevitable, for example, between the university’s need for openness

and industry’s need for protection of proprietary interests. Another conflict may develop

if the traditional distinctions that have separated the use of public funds from private interest and gain are blurred.22

Second, there is the “cost” of nonparticipation. Most of the debate has focused solely on

22’’ WeighinK the Social Costs of Innovation, ” Science, vol.

223, Mar~h 1384, p. 1368. A suit involving the University of

California and its research, raises the question of the legality

of spending public funds for research that allegedly benefits

large agribusiness more than small farmers and laborers.
176 • Information Technology R&D: Critical Trends and Issues

the generic institution without recognition of

the differences within each of the institutional

communities. Thus, it has not looked very

much at how the establishment of university

industry relationships may affect a smaller or

less prestigious research institution, nor how

joint-industry ventures may affect smaller

businesses, nor how local and State initiatives

place some other regions or other institutions

within the region in an inequitable position.

There is concern that the already existing

differences between the Nation’s top-tier and

second-tier universities may grow even greater as the competition for industrial resources

and partnerships accelerates. Thus, there is

concern for the needs of the range of the Nation’s universities. Even though programs

may be less ambitious in scope and scale, the

needs for sophisticated equipment, advanced

research facilities, highly trained and knowledgeable faculty, and advanced-level students

New Roles for Universities:

University-industry-government information

technology R&D efforts demonstrate a variety of approaches which have been only recently implemented. Because these efforts are essentially in formative stages, an assessment

of their effectiveness and impact on R&D is

premature. Yet it is clear that the efforts examined in this chapter provide important examples of new directions and major commitments. The case studies provide examples of

how problems or barriers raised by these new

relationships are being addressed, as well as

those issues which are not yet resolved. The

case studies also provide an understanding of

the motives and factors stimulating change,

how the institutional players are responding,

and the role played by incentives and directions from the Federal Government. Thus,

they provide a framework for analysis and the

development of policy options.

While each of the case studies is unique, several themes emerge:

remain critical. Therefore, a diversity of efforts

and approaches needs to be explored and supported.

At the State and regional level, the ability

to compete for new industry, for research centers of excellence, and for expert manpower

may also become equity issues. As noted earlier, while the number of high-technology centers has increased in recent years, the competition among State and regional localities is

becoming fierce. The ability of States to assure

significant support for new facilities, additional faculty and graduate students, the availability of venture capital, and the cooperative efforts of business and academic leaders are

critical factors in attracting new institutional

research ventures. Moreover, as a result of successful bids, regions expect to attract other

high-technology companies while the universities hope to attract senior faculty and the

top graduate students.

●

●

●

●

Selected Case Studies

Institutional arrangements involve longterm, multiyear commitments with agreements that include facilities, equipment,

and human resources.

These arrangements bring together multidisciplines, multi-institutions, and multifunding resources to support wide-ranging

research, educational, and development

efforts.

These arrangements involve leadership

and support of individuals at the highest

levels of the university, corporations, and

government.

While Federal funds continue to support

a significant portion of the research at the

university centers, the Federal Government had a limited role in development

of the institutional arrangements, influencing them by providing limited funds

for startup activities, by creating tax

credit incentives, and by its supportive

policy towards joint ventures.
Ch. 6–New Roles for Universities in Information Technology R&D ● 177

Massachusetts Institute of Technology

Microsystems Industrial Group

MIT’s experience with joint industry arrangements is extensive and reaches virtually

every program area in the Institute. More

than 300 joint programs are currently sponsored at MIT by industrial firms. Federal

sources nonetheless provide the bulk of funding for research. In 1983, only 10 percent of

MIT’s sponsored research was funded by industry. 23 It is estimated that support from industry will not grow beyond 15 or 20 percent.

However, MIT faculty point out that industry involvement is important because it provides exposure to and understanding of industrial concerns, motivations, and needs. This

interaction is seen as critical for the future of

most students who graduate from the university to work in the information technology

field. Equally important, it provides necessary

expansion of academic research concerns that

would otherwise be guided primarily by the

interests of particular Federal funding agencies. 24

While there have been long and well established industry-university research ties at

MIT, the formation of the Microsystems Industrial Group breaks new ground. Increased

industrial involvement in the MIT Microsystems program was stimulated by the program’s need for advanced state-of-the-art

equipment and laboratory facilities. A proposal to reach out to industry for help in developing these facilities was made by members

of the faculty, who argued that the amount

needed (originally estimated at $10 million)

could not be supported by any Federal program or by the university itself. The advanced

research Very Large Scale Integration (VLSI)

laboratory and facilities are supported by industry sponsors; contributions are estimated

to be $10 million (half of the actual cost of renovation and operation). The rest of the cost is

being recovered through overhead charges on

current contract research. In agreements negotiated with industry, full member companies

-— —-— ———

“Kenneth A. Smith, “Industry-University Research Programs,”’ Physics Today, vol. 37, No. 2, February 1984, p. 24.

“Ibid., p. 24.

contribute $250,000 annually for 3 years, and

associate member companies contribute $50,000

annually for 5 years.

Thus far, 18 companies have joined the

group. 25 Full member companies can send one

technical staff member to MIT to work in the

Microsystems research program annually for

3 years. Each visiting professional submits a

plan of proposed research topics, and these are

matched with an appropriate faculty member

or research group. More than a dozen industry people have participated in the program.

The opportunity to work in a new area of interest, “get caught up in the MIT atmosphere” and interact daily with students and

faculty members is viewed very positively .2’

Research projects under way have been developed by faculty and reflect their traditional

roles as principal investigators. The director

and faculty meet with the industry member

advisory group, who provide information and

advice. Even more directly, the technical people from industry have contributed to the research efforts, and have broadened the view

of faculty and students. The director of the

Microsystems Industrial Group explains:

“These are smart people with different backgrounds than my University colleagues. It is

very important for those of us who do research

to have the industrial viewpoint in front of

us. ‘ ’27

Understanding grows both generally

through interaction with the Council of member companies, who offer advice and guidance,

and in the process of working out specific visiting relationships. This understanding helps

faculty, students, and the academic program.

But it is also clear to faculty and administraz5Full member Compwies included AT&T Bell labs, Di@~

Equipment, General Electric, General Motors, GTE, Harris,

IBM, Raytheon, and United Technologies. Associate member

companies are Analog Devices, GCA, Genrad, NCR, Polaroid,

Sanders Associates and Teradyne.

*’Personal communication, March 1984. According to Paul

Penfield, Director, MIG, these experiences provide industry associates unique opportunities for professional growth and development, and appear to be a way for a company to retain

highly valued employees.

“Personal communication. Paul Penfield, Director, Microsystems Industry Group.
178 ● Information Technology R&D: Critical Trends and Issues

tors who have responsibility for universityindustry research that, even though time and

competitive pressures are high, the academic

integrity of both the research and educational

program must not be compromised. Thus, in

some cases, decisions are made not to undertake certain projects, for example, when the

proprietary stakes are too high, or the timeframes are inappropriate or if scientific exchange is jeopardized.28 From industry’s point

of view, the Microsystems Industrial Group,

as well as other similar efforts such as the Center for Integrated Systems at Stanford, are

working because the research effort is

focused. 29

New institutional relationships can benefit

both university and industry if the agreements

meet the needs of the partners. In analyzing

the aspects of such negotiations at MIT, the

Associate Provost and Vice President for Research identifies the fundamental issues to be

addressed:

1.

2.

3.

4.

the relevance of a proposed line of inquiry

to the essential missions of the university

and the industry—maintaining a balance

between the pursuit of research as an integral part of the educational process and

industry’s need for useful knowledge to

be applied in the development of products, processes and services;

the organization of a program that meets

the different time constraints of industry

and the university—accommodating the

multiyear efforts of graduate students

with the shorter time pressures of the

marketplace;

the issue of proprietary rights versus

openness—achieving openness and free

exchange of research results while protecting the industrial partners’ proprietary

rights;

the issue of patents and copyrights—

determining licensing agreements that

advance scientific and technological discoveries in ways that are most likely to

‘“Personal communication, George Dummer, MIT, March

1984.

*

gPersonal communication, Bill Nelson, GTE, April 1984.

5.

benefit the public and the research participants and institutions; and

the issue of conflict of commitment—

assuring that faculty are primarily committed to the university: its research and

its educational programs.30

Microelectronics and Information

Sciences Center (MEIS)

University of Minnesota

The Microelectronics and Information Sciences Center (ME IS) is a joint endeavor between the University of Minnesota’s Institute

of Technology and Minnesota industry. It was

created to establish a center of excellence in

these sciences as well as to meet local industry’s technical manpower needs. Such joint efforts are not new to Minnesota.31 The impetus

for the Microelectronics and Information Sciences Center came from Minnesota industries—

Control Data, Honeywell, 3-M, and Sperry

Corp. —who committed $6 million to launch

the effort. The Minnesota State legislature

allocated an additional $1.2 million. Current

operation is at $2.5 million a year matched by

$4.0 million in external grants and contracts.

Faculty members, university officials, corporate executives and center administrators

have worked together to define the directions

for research and educational programs, the

center’s operation, and the university-industry

interface mechanisms. This negotiation took

time to work out, and programs were phased

in gradually over a several-year period.32 The

‘°K. A. Smith, “Industry-University Research Programs, ”

op. cit., p. 25.

31 For example, in the early 1970s such a joint effort initiated

the development of the Minnesota Educational Computing Consortium to provide instructional time-sharing capability to the

State’s colleges and universities, as well as the elementary and

secondary schools. See: a case study of “Minnesota Schools and

the Minnesota Educational Computing Consortium, Informational Technology and Its Impact on American Education,

(Washington, DC: U.S. Congress, Office of Technology Assessment, OTA-CIT-187, 1982) pp. 214- 221.

32The Center’s slow start has been criticized by some. However, the benefits of taking the time to work out an arrangement that suited the needs of both the university and the sponsoring industries outweighed the costs of delay. Personal

communication, Dr. Martha Russell, March 1984,
Ch. 6—New Roles for Universities in Information Technology R&D ● 179

results of the negotiations are embodied in the

ME IS Center goals:

1. to sponsor and conduct research at the

frontiers of microelectronic and information sciences;

2. to strengthen the course offerings of the

University of Minnesota in these sciences;

and

3. to provide active interplay between university researchers who seek discovery

and industrial firms that apply those research results to the development and

marketing of innovative products and

services.

Research

Through the sponsorship of interdisciplinary research projects, the center links faculty,

students, and industry. Proposals for research

are submitted by faculty members. ME ISsponsored research is reviewed annually by

technical experts at the university and supporting companies. In 1983, projects in 3-D

Integrated-Circuits, Processor Array Concepts

for Engineering, Design Automation and Software Engineering, and Ultrasmall Electronic

Research received ME IS seed funding, totaling $625,000; additional research funds of

$4,312,000, principally from Federal grants,

was obtained. In 1984, MEIS has awarded

both seed and matching funding to three integrated team efforts in Intelligent Systems Research, II I-V Semiconductor Materials and

High Speed Devices, and High-Performance

Integrated Circuits. Another planned effort

will include a project on Artificially Structured

Materials.

Renovation and development of laboratory

facilities has been directly tied to the research

efforts. The University is planning a new Computer Science and Engineering building which

will house both offices and laboratories. ME IS

co-owns, with Argonne National Laboratory,

a Synchrotrons X-Ray Beamline Facility, located in Stoughton, WI. In addition, MEIS

and the University share the newly remodeled

microelectronics laboratory and the VLSI

engineering design laboratory.

Education

Strengthening the educational program has

focused on increasing the number of faculty

members, starting new courses, and attracting

top-quality graduate students. Eighteen new

graduate and undergraduate courses have

been added in computer science, electrical

engineering, materials science and chemical

engineering; seven new faculty members have

already been recruited through a 3-year costsharing program with the university, and

plans call for hiring an additional four members in Computer Science as well as a director; 54 graduate students and four post-doctoral assistants were supported by MEIS

funds in the five departments receiving ME IS

research sponsorship; 16 fellowships will be

available for 1984-1985. 33

Technology Transfer

The exchange of knowledge and technology

between MEIS member companies and the

university community has been a major goal

of the Center. Through direct scientist-toscientist interaction, it is anticipated that the

time between discovery and application will

be shortened. Faculty, students, and industry

technical staff have worked jointly on projects,

in some cases using industry’s state-of-the-art

facilities for design, special fabrication or

testing. A major assumption is that graduate

students serve a key role in the transfer of

technology between industry and university.

After the first year of graduate study in the

doctoral program, students work in the research laboratories of the industry sponsors,

learning what drives industrial use of innovation in science and technology, and bringing

their recently acquired knowledge and skills

to the task. Research projects developing from

these experiences expand the involvement of

faculty, students, and the industrial scientists.

Like other joint efforts, the center has fostered the exchange of ideas through confer-

—

“Microelectronics and Information Sciences Center, 1983 Annual Report, February 1984.
180 ● Information Technology R&D: Critical Trends and Issues

ences and seminars. ME IS technical reports

and newsletters have also been widely disseminated. Center participants from both academia and industry point out that this open exchange has been facilitated by concentrating

on long-term research areas conducted over a

5 to 7 year period. The Center has thus far

avoided the issues regarding exclusive research and proprietary information.

Continued ability to recruit high-quality

graduate students, as well as recruiting and

retaining excellent faculty, is critical to the

long-term stability and growth of the program.

Stable funding and full implementation of programs are anticipated by 1985. In addition,

the Center expects to attract additional State

and private support.

Rensselaer Polytechnic Institute Center

for Industrial Innovation

The RPI Center for Industrial Innovation

is the result of a focused University initiative

that has involved key participants from academia, industry, and New York State government—including the governor. This initiative

was based on the experiences of RPI’s three

established Centers for Interactive Graphics,

for Manufacturing Productivity, and for Microelectronics. With a $30 million interest-free

loan from the State and an additional $30 million commitment by RPI, construction of a facility to house these Centers is under way.

These Centers involve more than 100 arrangements and agreements with industry, including support for ongoing research through industry affiliates, specific research an d

problem-solving agreements, continuing education and training, adjunct industry-faculty

arrangements, faculty-industry consulting, industry fee payments, and gifts or loans of

equipment and software. However, it was not

the quest for industrial partnerships, but

rather the desire to improve the undergraduate engineering education program, that

served as the initial catalyst for these activities. 34

— .— ——-— ...—

“G. M. I.ow, “The Organization of Industrial Relationships

in LJni\’ersities, ” Partners in the Research Enterprise, ‘I’. W’.

I.angfitt et al. (wis. ), (Philadelphia: Uni\’cv-sity. of Pennsylvania

pl.(=$s, 1 983), P. 71

The effort to improve RPI’s educational program was begun in 1975-76 and resulted in

several new interrelated directions: expansion

of the graduate program (from approximately

500 to a goal of 2,400 graduate students by

the year 2000); an institutional commitment

to research through the expansion of faculty

and facilities as well as of the number of students, and a revision of the undergraduate curriculum to overcome the lack of hands-on engineering experiences.

Center for Interactive Graphics

The first step was the creation of an interactive computer graphics laboratory designed as

a service facility for undergraduates. This was

based on the belief that an important emerging tool for engineering was the interactive

computer graphics terminal. The facility and

the applications have grown beyond the original classroom to a Center for Interactive

Graphics. The growth was due not only to the

increased use in almost all engineering

courses, but also to the decision to combine

research with practice as the means for keeping up to date with the advancing technology.

The Center for Interactive Graphics was created in 1978, with initial funding from the National Science Foundation. From its inception,

it was intended to involve industry, and to

share research results with industry. A measure of its success is that the Center has grown

from 20 supporting companies with $20,000

annual fees to 35 companies with $40,000 annual fees. An early concern that it would not

be possible to keep up with the continually advancing hardware and software has been reduced: companies have been willing to donate

their latest equipment. Just recently, for example, the Center received a $3 million equipment grant from IBM.3S

Center for Manufacturing Productivity

The Center for Manufacturing Productivity

and Technology Transfer was the result of a

deliberate decision to train students in areas

—— —..-——

‘ Personal communication, Dr. Christopher I,eMaistre, Director Center for Industrial Innovation and ~lssistant Dean, School

of I’engineering, March 1984.
Ch. 6—New Roles for Universities in Information Technology R&D ● 181

Graduate student and faculty member using a

CAD/CAM workstation, in the Center for

Interactive Computer Graphics, RPI

that would be needed in the decade of the

1980s and at the same time to meet industry’s

research needs so that industrial funding

would be available. Support from Federal

sources was not available. Thus, the Dean of

the School of Engineering made initial contacts with executives from General Electric.

He and two GE executives traveled to Europe

to see how industry and universities were

working together. RPI’s Center was modeled

after one at the University of Aachen in West

Germany.

With a commitment from GE, the Center

started in May 1979. Presently there are eight

founding companies and five affiliate companies who support the operation of the Center

and its research.36 In addition, the Center engages in contract work and involves undergraduates and graduates in “real life, real

time” industrial problem solving, all under the

direction of faculty and a project manager. The

intent is to create experiences that are directly

relevant for students’ entry into the industrial

world. The Center reports to and receives guid-

—- - . -—.

“Member companies include General Electric, General Motors, Boeing, Norton, IBM, Alcoa, Digital Equipment Corp.,

and United Technologies. Affiliate companies include Kodak,

Cincinnati Milacron, Fairchild Republic, Fairchild Schlumberger, Altech, and Timex.

ance from a board of advisers comprised of

founding member company representatives.

Center for Integrated Electronics

The Center for Integrated Electronics also

has industrial sponsors, who support research

efforts which are fully open with no restrictions on disclosure.37 The Center is equipped

with $8 million in hardware, much of it donated, from companies such as IBM, Calma,

and Computervision. RPI also provides “incubator space” for small fledgling companies

on campus and provides administrative support to help companies while they find venture

capital, develop management capability, and

begin to grow.

In addition, RPI has created an industrial

park, located 10 miles south of the institute,

on a 1,200-acre parcel of land owned by RPI.

With strong leadership from then RPI President George Low the Institute committed $3

million for initial preparation of the site in

1982. National Semiconductor was the first

company to move in, with several others following. RPI is currently constructing its own

building in the park to provide startup space

for companies that are not yet large enough

to be on their own.

Center for Industrial Innovation

All of these activities led to the Center for

Industrial Innovation. The RPI President and

the Chief Executive Officers of GE and Kodak,

along with other corporate executives, met

with the Governor to push for a State Technology Initiative to be funded through the

State legislature. The arguments, as in other

industrial States, were that the smokestack

industries were dying, new technology industries were locating elsewhere, and that to overcome this, new catalysts were needed. RPI

argued that it had the necessary infrastruc-

. —

3TFounding members include Harris COW., Computervision,

Digital Equipment Corp., Eastman Kodak, General Electric,

Raytheon, Polaroid, GTE, IBM, Phoeti Data Systems, Eaton

Corp., and AIR Products. Affiliate members include Sperry,

Xerox, Hewlett-Packard, Perkin-Elmer, Fairchild Semiconductor, BTU Corp., Matheson, I’IT, and the PEW Memorial Trust.
182 . Information Technology R&D: Critical Trends and Issues

ture in place and that what was needed was

a $30 million interest-free loan.

The ground has been broken for the Center

at RPI and the university expects completion

of the facility in September 1986. RPI expects

to put an additional $30 million into the facilities. In return for the State loan, RPI will provide an outreach program to 2-year colleges

and to industry to upgrade the level of technological expertise.

While there has been strong support for

these activities and agreement that they have

helped the Institute, their industrial orientation does cause concern to some faculty. The

Center argument is, however, that there is a

healthy balance between uncommitted research support and both focused engineering

and applied projects. There is evidence that

the program brings together a blend of research and application for students, and that

the quality of the instructional program has

been significantly improved.38

Stanford University Center

for Integrated Systems

Like the MIT, RPI, and University of Minnesota efforts, the institutional relationship

developed between Stanford University and

industry breaks new ground. In May 1983,

more than the construction of a $15 million facility to house the Center for Integrated Systems (CIS) was being celebrated. According

to participants from the faculty, university

administration, and industry, this project and

others like it are part of a new willingness by

industry and the academic community to become “allies in basic research.”39 According to

William Hewlett, “CIS is a clear and distinct

answer to three major problems that face the

United States–the failure of our national programs of basic research to keep pace with the

needs of our universities and industries, the

need to strengthen our system of education,

and the challenge to U.S. trade and technology posed by foreign countries.”40

38Low, op. cit.

“F. H. Gardner, “Special Report: The Center for Integrated

Systems, ” Hewlett-Packard Journal, November 1983, p. 23.

‘“I bid.

Planning Activities

As early as 1977, Stanford engineering faculty discussed the idea of a center for integrated systems research, a multidisciplinary

endeavor involving the interaction of people

knowledgeable about integrated circuits with

another group knowledgeable about computer

and information systems. “From the outset

it was clear that a collaboration, more intense

than had ever before occurred, between IC

types and systems engineers needed to evolve.”41

Furthermore, such a center could vertically integrate the research process, with a state-ofthe-art facility for design, fabrication and testing of VLSI chips. This fast-turnaround facility would allow a systems designer, in collaboration with an IC designer, to create

experimental devices in a shorter time than

ever before.

The faculty took their idea to the Dean of

the School of Engineering, and subsequently

a formal proposal was submitted to the university. By January 1980, the Center for Integrated Systems was under way with approval from the Board of Trustees. Executives of

Hewlett-Packard, TRW, Xerox, and Intel

formed a development committee to raise funds.

By March 1981, 10 corporations agreed to contribute $750,000 each, spread over a 3-year

period. By 1983-84, an additional 10 sponsors

brought the total to 20, with each also agreeing to provide $100,000 annually for education, research, and administration of the facility.

42

Formulating New Policies

Not unexpectedly, the most controversial

aspect of the plan was not the facility, but the

intention to involve industrial companies as

sponsors of the Center and offer them “facilitated access” to the research program. Of con-

——- —- —.—. .

“John G. Linvill, Director Industrial Programs, Center for

Integrated Systems, Stanford University. Personal communication, April 1984.

‘

zCorporate sponsors are General Electric, Hewlett-Packard,

TRW, Northrop, Xerox, Texas Instruments, Fairchild, Honeywell, IBM, Tektronix, Digital Equipment Corp., Intel, 11’”1’,

GTE, Motorola, United Technologies, Monsanto, Gould/American Microsystems, Inc., North American Philips/Signetics

Corp., and Rockwell International.
Ch, 6—New Roles for Universities in Information Technology R&D . 183

cern to faculty members and corporate sponsors was how patent ownership, licensing, and

intellectual property rights would be determined. The companies’ initial posture was insistent on exclusive proprietary rights to inventions which involved their own people. The

university, on the other hand, argued that research in the Center was funded principally

with Federal support and that the University’s legal obligation was to make sure that

any resulting patents would be brought into

the stream of commerce as quickly as possible, with any company capable of commercialization having the right to bid and obtain a

license.

The successful resolution of the issue centered on categorizing the patent in terms of

the inventor (see fig. 31, CIS Patent Policy).

In addition, if a corporate visiting scholar develops a patentable product jointly with a

Stanford faculty member or student, the company may request a 90-day delay of publication to get the patent filed; it also gets free

but nonexclusive rights to exploit the product.

CIS sponsor companies have also agreed to a

cross-licensing plan, sharing any inventions

developed at CIS. While intellectual property

rights have generated much discussion and

have taken time to work out, it appears unlikely that highly commercial applications will

result, given the basic nature of the research

under way at CIS. Moreover, both sponsors

and faculty point out that it is in their interest that the Center produce new basic knowledge as well as students trained as broadly as

possible.

Another area of concern focused on the question of research direction: would the nature

and direction of basic research be distorted by

industrial sponsorship? The answer appears

to be that this is unlikely, given the tradition

of independent research teams led by principal

investigators. At the same time, the investment of industrial sponsors is not insignificant, and there is the sense that faculty will

be receptive to good problems posed by industry. There is also the sense that research questions can be shaped to examine fundamental

issues likely to be of interest to all. 43 There

is additional concern that there will be pressures to keep research secret. Such pressures

are likely to be strongly resisted; the number

of seminars, publications, and open meetings

have demonstrated the University’s and the

Center’s intent to maintain openness.

Finally, there is the question concerning the

advantage corporate sponsors have over nonparticipating companies. The questions here

—. —..—

“John Linvill, Director, CIS, notes, “We gain much more

through access with each other. The watchword is not isolation, but interaction. ” Personal communication, March 1983.

Figure 31.—Stanford University, Center for Integrated Systems Patent Policy

CIS Patent Policy

Disposition of Rights

Visiting

Scholar

. .

p-~ -.---z=

1. Stanford takes title and Inventor receives nonexclusive, fullv paid Iicense Including right to sublicense

2. Upon request of inventors, Stanford will authorize a petltlon by Inventor’s employees to U.S. Government for greater r!ghts than 1

SOURCE: HewlettPackard Journal, November 19S3.

38-802 0 - 85 - 13
184 ● Information Technology R&D: Critical Trends and Issues

relate not just to this project but to other projects as well. Proponents of the Center argue

that the fundamental nature of the university

has not been changed, that everything the university does is open to dissemination-a way

of life that undergirds every relationship—no

matter “whom we get money from. ”44 While

sponsoring companies have access to graduate

students, and may seem to have an advantage

in recruiting them, the networks between

Stanford faculty and their contacts in hundreds of companies in the Silcon Valley remain

strong. In addition, if a CIS research team

wishes to include a nonparticipating company

on a research project, they can do so. Reaching

this agreement, noted several participants,

was a hard fight to win.

Nonetheless, the controversy persists, and

questions are likely to remain.45 The negotiated agreements concerning patents, and the

disposition of licenses are seen as experiments

which may or may not work out and which

may need to be revised as research and work

progresses. The experimental nature of the

center is not limited to intellectual property

arrangements, note participants, but includes

as well the social and organizational arrangements built around cooperation—both among

the various departments and among the corporations.

Center Operation

While the Center itself is still evolving in

terms of the agreements for intellectual property rights, the working relationships between

corporate sponsors and faculty, and the facilities under construction, the research and involvement of the faculty and students are well

under way. CIS research projects, funded prin-

—. —..—-. . —.-

441 bid.

45A recent article in the New York Times highlights the continuing questions and controversy. While the Vice Provost notes

that CIS is an “innovative setup for Stanford, ” a professor of

history argues, “It’s potentially very dangerous for a university to give privileged space and privileged access to information to particular companies. There is a danger that researchers will create relationships that are likely to influence what

they study and what they do not study. It is a threat to the

autonomy of the university. ‘“ See: R. Reinhold, “Stanford and

Industry Forge New Research Link, ” New York Times, Feb.

10, 1984.

cipally by the Federal Government, total $12

million a year. (see table 26: CIS Research

Topics). Seventy-one faculty members, representing seven departments, are affiliated with

the center, and 30 Ph.D. and 100 MS degree

candidate students a year are being trained.

It is the people who are the most important

output of the Center for Integrated Systems:

“To the extent that we educate people with

the right background, have them do interesting research of significance to the Nation’s

problems but at a fundamental level, and do

this in close collaboration with the industries

which need such people, we will significantly

modify the nation’s productivity and competitiveness. “46

Microelectronics Center of

North Carolina (MCNC)

Universities play a critical role in the Microelectronics Center of North Carolina (MCNC).

As a multi-institutional R&D effort, MCNC

combines the resources of Duke University,

North Carolina A&T State University, North

Carolina State University, University of North

Carolina at Chapel Hill, and University of

North Carolina at Charlotte, as well as the Research Triangle Institute. These institutions,

along with the MCNC core organization, the

new MCNC research facility, and the communications system linking all the facilities provide a concentration of resources for education, research, technology transfer, and

industrial development.

Established in July 1980, MCNC is organized as a private, nonprofit corporation to

assist North Carolina’s development of modern electronics and related high-technology industry. MCNC has been funded primarily with

State grants, as a result of strong leadership

from the governor and support from the legislature. Thus far, $43 million has been allocated by the North Carolina General Assembly for constructing, equipping, and operating

MCNC. An additional $34 million for new capital facilities at the participating institutions

has also been provided.

“John Linvill, personal communication, April 1984.
Ch. 6–New Roles for Universities in Information Technology R&D ● 185

—

Table 26.—Stanford University, Center for Integrated Systems Research Topics

Although its building won’t be completed until early 1985,

the Center for Integrated Systems is already coordinating a

$12-million-a-year basic research program at Stanford, funded

largely by the Federal government. Here’s a sampler of recent and current topics investigated by CIS affiliated faculty

in various existing labs.

Computers

● Research on streamlined-instruction -set microprocessor

(featuring partnership of computer and IC engineers)

● Research in VLSI systems

● Knowledge-based VLSI project

● Image understanding

● IntelIigent task automation

● Network graphics

● Partitionable computer systems

. Analysis and verification of high-order language programs

● Study of very high-speed integrated circuits (VHSIC-Phase

3)

● Real-time communications systems: design, analysis, and

implementation

Ž Structured design methodology for VLSI systems

● Logical methods for program analysis

● Ultra-concurrent computer systems

● Silicon compilation

● Data base theory

● Computer languages for VLSI fabrication

Information Systems

● Multiple user channels and information theory

● Computational complexity, efficiency, and accountability

in large-scale teleprocessing systems

● Multiplexed holographic reconstruction methods for 3D

structures

● Information theory and data compression

● Signal processing and compression

● Statistical data processing, system modeling, and reliability

● Algorithms for Iocating and identifying multiple sources

by a distributed sensor network

● Fast algorithms for improved speech coding and recognition

● Dual-energy digital subtraction radiography for noninvasive

arteriography

Integrated Circuits

● Computer modeling of complete IC fabrication process

● Integrated electromechanical and optical sensor arrays for

Optacon II (a reading aid for the blind)

● BME Center for Integrated Electronics in Medicine (to produce implantable telemetry systems for biomedical research)

● Computer-aided design of IC fabrication processes for VLSI

devices

● Submicron device physics and technology

● Development of multichannel electrodes for an auditory

prosthesis

● Study of transdermal electronics for an auditory prosthesis

● Multilevel-metal interconnection technology

● Biomedical silicon sensors

● Fast turnaround laboratory for VLSI

Solid State

● Ion implantation and laser annealing in semiconductors

and related materials

● Laser and electron beam processing of semiconductors

● Characterization of high-speed semiconductor device

materials using advanced analytical techniques

● Ion implantation and laser processing of 3-5 compound

conductors

● Defects at electrode-oxide and electrode-silicon interfaces

in submicron device structures

● Microstructure fabrication using electron beams of conventional and very low energies

● Advanced concepts in VLSI metalIization

● Advanced packaging concepts for VLSI

● Studies of surfaces and interfaces of 3-5 compounds and

Si:silicides

● Silicon photocells in thermophotovoltaic energy conversion

. Investigation of metalIic impurities introduced into SiO2

and Si by various candidate VLSI metallization systems

● Modeling of emitters

● Structural and bonding studies of practical semiconductor layers

Space Telecommunications and Radioscience

● Establishment of a Center for Aeronautics and Space Information Sciences at Stanford University (Funded by the

U.S. National Aeronautics and Space Administration. The

focus will be on applying VLSI techniques to develop new

hardware and firmware for space instrumentation and command and control.)

● Communication satelIite planning center

Material Science and Engineering

● Atomic-level physics modeling of the thermal oxidation

process

● Fabrication and properties of muItilayer structures

● Computer simulation of surface and fiIm processes

● Photoelectronic properties of 2-4 heterojunctions

● Photoelectronic properties of zinc phosphide crystals,

films, and heterojunctions

● Photovoltaic heterodiodes based on indium phosphide

● Preparation and properties of CdTe evaporated fiIms compared with single-crystal CdTe

Ginzton Laboratory

● Superconducting thin fiIms, composites, and junctions

● Acoustical scanning of optical images

● Research on nondestructive evaluation

● Evaluation of machining damage in brittle materials

● Optical and acoustic wave research

● High-frequency transducers

● Research on acoustic microscopy with superior resolution

● Study of properties of material by channeling radiation

● Surface acoustic wave MOSFET signal processor

SOURCE Hewlett Packard Journal, November 1983
186 • Information Technology R&D: Critical Trends and Issues

While the extent of State support is significant, such a role is not new for North Carolina. The precedents for government-industryuniversity cooperation span two decades. The

development of the Research Triangle Park,

the Research Triangle Institute, the establishment of the North Carolina Board of Science

and Technology, and now MCNC, are seen as

models of government-industry-university cooperation to develop new technology-based industries. 47

New Facilities for Education,

R&D, and Technology Transfer

The MCNC facility, under construction since

May 1982, will house core MCNC staff, visit-

—.

“U.S. Congress, of Technology Assessment, Technology, Innovation, and Development, Census

of State Government for High Technology Industrial Development–Background Paper, OTA-BP-STI-21, May

1983, p. 56,

ing engineers and scientists from industry,

and visiting faculty and graduate students

working on special research projects. The

l00,()()()-squar~foot,” $30 million facility has capability for performing advanced manufacturing processes, including high-density integrated circuit fabrication, system design, and

design tool research.

The MCNC $6.5 million communications

system, scheduled for completion by 1985, will

put in place a ISO-mile microwave network

linking the educational and research activities

at MCNC, the universities, and the Research

Triangle Institute (see fig. 32, MCNC Communications System). In the first phase hookup

of the system, computer science students at

Duke University in Durham and UNC at

Chapel Hill take classes (which originate from

Durham) together without leaving their own

campuses. Similarly, courses on Computer

MCNC dual source electron beam/r.f. metal evaporator for next generation integrated circuit manufacturing research
Ch. 6—New Roles for Universities in /formation Technology R&D . 187

Figure 32.—Communications System Linking MCNC Participating Sites

MCNC Communications System

● Unique high-performance microwave system.

● 152 miles from end to end. \

● 2 two-way, full-motion video channels.

. 7 program-origination locations.

. 192 high-speed data paths.

SOURCE Mlcroelectronlcs Center of North Carollna, Research Triangle Park, NC

Graphics and VLSI Design originate from

Chapel Hill.

Like the MCNC research facility, the development of the telecommunications system required funding beyond the reach of each of the

individual institutions. “Before the center was

created, each of our participating universities

hoped to develop its own major microelectronics program. But the financial realities and the

difficulties of attracting talent from the limited talent pool, soon made it apparent that

the only way to develop a first class program

was to join forces and work together. ”48

MCNC Working Relationships

MCNC is more than a consortium of universities sharing resources and interacting with

industry. The participating institutions are

linked together by MCNC (see fig. 33, The

MCNC Community) and MCNC as an organizational entity and actor bridges the interests

and functions of the industry and university

communities (see fig. 34, Working Relationships). As members of industry work along

with university researchers, the applied re-

—..— . .

“D. S. Beilrnan, President of MCNC, “New Initiatives in Modem Electronics, ” address before the Materials Research Society

Annual Meeting, Boston, Nov. 14, 1983.

Figure 33.— MCNC Participating Institutions

Microelectronics Center of North Carolina

MCNC and the participating institutions

The MCNC community

SOURCE: Microelectronics Center of North Carolina, Research Triangle Park,

NC.

search and technology projects tie together

the commercial technology activities under

way in industry and the basic research being

conducted at the universities.

Since 1980, more than 30 new faculty members in microelectronics-related disciplines

have been recruited. In contrast to the recent

trend of faculty leaving universities for em-
188 ● Information Technology R&D: Critical Trends and Issues

Figure 34.—Working Relationships, Microelectronics Center of North Carolina

SOURCE: Microelectronics Center of North Carolina, Research Triangle Park, NC

ployment in industry, 20 of the 30 new faculty staff of the Center number more than 70, with

have come directly from industry .49 Full-time 12 having joint institutional appointments.

Moreover, the combined microelectronics-re-

 that was able to compete with belated manpower resources at the participating

cause it offered industry-level salaries, access to an advanced institutions consist of over 150 faculty mem- state-of-the-art research and manufacturing facility, a strong bers and 450 graduate students, a significant university R&D environment, and a thriving high-technology

industrial center. pool of talent.
Ch. 6–New Roles for Universities in Information Technology R&D • 189

MCNC spokesmen argue that MCNC’s ability to bridge university/industry concerns is

enhanced by its structure as a nonprofit “neutral” facility. The Center’s permanent staff,

specialists with joint university and Center appointments, resident scientists and engineers

representing industrial affiliates, visiting

scientists from other national centers, and

graduate students involved in special projects

physically work together in the MCNC microelectronics manufacturing research complex.

In contrast to MCC (see below), a joint venture owned by its corporate companies, MCNC

leaders envision this effort as providing technology functions that are not now provided by

either MCC, other planned industry joint development programs, or other joint industryuniversity collaborative efforts in the microelectronics field. “All of the industrial joint development programs or companies are sponsored by the first tier of large electronic

companies. The perceived need for these largecompany joint efforts to remain competitive

greatly amplifies the need for similar support

to the larger number of second-tier and evolving smaller companies in the electronics industry. “5° MCNC expects to involve a broader

segment of companies, in part because of lower

fee levels, and because of substantial, continuing State support. The industrial affiliate program is just getting under way. By 1985, the

Center expects to have 20 industry affiliates.”

Affiliates can come and use the MCNC facility to develop products, can participate in

research and educational programs (tuition

and fees are provided for three staff members

at a time for each affiliate), are represented on

an advisory council, participate in semiannual

reviews, and in the process have increased access to faculty and students. Nonexclusive,

nontransferable licenses for intellectual property rights are available to affiliates on a preferred royalty basis. It is expected that the

majority of cooperative research will be openly

disseminated.

—.—..——

““D. S. Beilman, personal communication, April 1984 .

“I+~ach industrial affiliate pays an annual $250,000 fee.

The establishment of MCNC appears to be

an example of effective university-industrygovernment collaboration. Some point out

that it is an example of how State leadership

and initiative can be the driving force in pulling together traditionally independent public

and private academic institutions and forging

new relationships to attract significant industry participation in education, research, technology transfer, and industrial development.

What has made MCNC work? In reflecting on

the experiences thus far, the president of

MCNC lists three basic requirements:

1.

2.

3.

the need for a long-term strategic approach to substantial funding. This includes building upon existing programs

and investments, as well as obtaining at

least a 3-year commitment from all members of the collaborative effort as a dependable commitment to common goals;

the need to structure in-depth interaction

among the limited talent available. Full

participation by personnel from industry,

universities, and government is necessary

for understanding each other’s perspective and for crystallizing and mutually accepting responsibility for important common goals; and

the need to plan for and accelerate the

transfer of research into technology and

to promote R&D in progressively more

scientific endeavors while making use of

all basic related investments.”

MCNC spokesmen are confident of MCNC’S

future. Continued support for two-thirds of its

operation are expected to come from the State.

Industrial and Federal support are anticipated

to cover the remaining third.

Semiconductor Research

Corporation (SRC)

Under the aegis of the Semiconductor Industries Association, the Semiconductor Research

Corp. (SRC) was formed in 1981, to establish

— ————

“D. S. Beilmen, “New Initiatives in Modern Electronics, ”

op. cit.
190 • Iformation Technology R&D: Critical Trends and Issues

a cooperative organization that would sponsor university research needed by the industry. SRC was incorporated in February 1982.

As noted by Robert Noyce, of the Intel Corp.,

“The semiconductor industry is fiercely competitive and that competition has resulted in

the vitality and success of the industry. ”53 The

cooperative institutional arrangement that

makes SRC possible represents a change for

the semiconductor industry.

In the case of that industry, the forces stimulating cooperation centered around three

issues: research, manpower resources, and international competition. There was growing

concern that the industry’s basic research efforts, the foundation of its future well-being,

were increasingly directed towards the solution of near-term problems; that industry research efforts were often duplicative and redundant, as each corporation tried to stay on

top of the competition; and that fierce competition and the squeeze for profits, combined

with increasing costs of R&D, created disincentives and high risk for long-term industry

research efforts.54

At the same time, there was growing recognition that the Nation’s research universities

were underutilized resources that industry

could turn to for long-term basic research and

creation of new knowledge. There was also concern that the pool of experienced and trained

manpower was being “overgrazed” by the industry itself, and that both faculty and advanced graduate students were leaving universities, irresistibly drawn to industry .55

In view of the growing competition for semiconductor products, and the increased and coordinated R&D efforts undertaken by its foreign competitors, it was argued that the U.S.

.—— —

“R. Noyce, “Competition and Cooperation–A Prescription

for the Eighties, ” Research Management, March 1982, pp.

13-17.

“R. M. Burger, and L. W. Summey, “An Update on the Semiconductor Research Corporation”, QIE Conference Proceedings,

1983, pp. 51-59

“Robert Noyce uses the analogy of the “Tragedy of the Commons’ where the commonly held resources, in this case, research and manpower are exploited by industry self-interest,

op. cit., p. 15.

semiconductor industry had to increase R&D.56

Moreover, more complex and more capitalintensive research tasks, coupled with increasing lead time and a perceived shortage of sufficiently trained manpower, created additional

difficulties to undertake such research, particularly for a single company .57 And drawing on

the examples of other nations, such as Japan,

joint coordinated efforts are seen as ways of

assuring long term competitiveness through

cooperation.

These factors resulted in four major objectives for SRC:

1. increasing semiconductor research in the

United States;

2. sharing research efforts among industry

sponsors;

3. strengthening and upgrading research in

the universities; and

4. attracting more students to this field of

study and improving the quality of education.

Since its formation in 1982, SRC has grown

from 10 to 40 companies, of varying size, companies that manufacture or purchase semiconductor devices for manufacturing other products, or companies that manufacture equipment or materials for use by the semiconductor industry .58 Membership fees are tied to a

company’s IC sales or purchases worldwide,

with annual fees ranging from $60,000 up. All

— . -- - .

‘

)

’’ E:. f?loch, prepared statement, Hearings, Japanese Technolo~”cal Advances and Possible United States Responses Using

Joint Research Ventures, Subcommittee on Investigations and

Oversight and the Subcommittee on Science, Research, and

Technology, U.S. House of Representatives, June 29-30, 1983.

“Ibid., p. 46.

58SRC membership, as of September 1984, includes: Advancwl

Micro Devices, Inc., AT&T Technologies, Inc., Burroughs Corp.,

Control Data Corp., Digital Equipment Corp., E.I. du Pent de

Nemours & Co., Eastman Kodak, Eaton Corp., E-Systems, Inc.,

GCA Corp., General Electric Co., General Instrument Corp.,

General Motors Corp., Goodyear Aerospace Corp., GTE Laboratories, Inc., Harris Corp., Hewlett-Packard Co., Honeywell,

Inc., IBM Corp., Intel Corp., LSI Logic Corp., Monolithic Memories, Inc., Monsanto, Co., Motorola, Inc., National Semiconductor Corp., Perkin-Ehner Corp., RCA, Rockwell International,

Silicon Systems, Inc., Sperry Corp., Texas Instruments, Inc.,

Union Carbide Corp., Varian Associates, Inc., Westinghouse

Electric Corp., Xerox Corp, and Zilog, Inc.. In addition, the following companies are in the Semiconductor Equipment and

Materials Institute, Inc.: Micro Mask, Inc.; Pacific Western Systems, Inc.; Probe-Rite, Inc.; Pure Aire Corp.
Ch. 6—New Roles for Universities in Information Technology R&D ● 191

member companies have equal privileges: access to all sponsored research through seminars, annual meetings, and newsletters and

reports, access to research data bases and

license rights, as well as an expanded recruiting base.

The SRC 1984 budget is over $15 million,

up from $6 million in 1982, and $10 million in

1983. Currently, approximately $12 million is

available for university research projects, an

amount which “substantially increases total

available funding for basic research in semiconductor technology. ”59 Spokesmen point out

that SRC has promoted research in engineering, mathematics, and the physical sciences

underlying semiconductor technology. Major

areas of focus established by the industrial

board members and the technical advisory

board are:

• Microstructure Sciences:

—Materials, Phenomena, and Device

Physics,

—Microsciences,

—Device Fabrication Technologies.

● Systems and Design:

–Design Automation,

–System Component Interactions.

● Production and Engineering:

–Reliability, Quality Assurance, and

Testing,

—Packaging,

—Manufacturing.

Impacts

In planning the research activities to be

undertaken, several different levels of funding

and effort were envisioned by board members.

SRC has awarded individual university research projects, as well as several contracts

—.—. ——-—

“Erich Bloch, Former Chairman of the Board, SRC, estimates

that the semiconductor industry allocates 3 to 5 percent of its

R&D budget to basic research–approximately $35 million to

$50 million annually. He notes that the R&D tax credit was

an important factor in the decision to proceed with the formation of SRC. Moreover, if there were a differentially larger tax

incentive for industry-sponsored university research, there could

be an even broader expansion of industry funding of university research in the future. Testimony before the Subcommittee on Taxation and Debt Management, Senate Committee on

Finance, Feb. 24, 1984.

for major research “centers of excellence” and

major research projects. In its initial solicitation for proposals from the universities, SRC

received 166 proposals from 63 universities.

In the first. year of operation, eight universities

received research contracts. In 1983, more

than 30 universities, involving approximately

100 researchers and 125 graduate students, received $10 million for research through 47 contracts with SRC.60 By May 1984, 34 universities involving 125 faculty and research staff

and 202 graduate students were supported by

$12.275 million in SRC research funding.

It has been SRC policy to distribute the contracts for centers and individual research projects on a broad geographic basis among leading research centers as well as to universities

whose expertise in these areas is not as well

established (see table 27, “Regional Distribution of SRC funding”). Thus, SRC efforts may

have an impact that goes beyond the specific

research projects: in helping to expand a university’s research capabilities, it may help it

attract high caliber faculty and graduate students. Moreover, in the long run the SRC support may contribute to additional universityindustry cooperation, and new high-technology industrial development.

SRC research “centers of excellence” include

Cornell University, University of California at

Berkeley and Carnegie Mellon University. Major research programs are supported at the

North Carolina consortium (MCNC), Massachusetts Institute of Technology, Clemson,

Stanford, Rensselaer, and the University of

California at Santa Barbara. Over the next few

years, there are plans to support 8 to 10 more

of these centers and programs, and to to conduct research into design of microstructure,

properties of silicon material, computer-aided

design and automation of design, lithography,

beam processing, fault tolerance, micropackaging and cooling, three-dimensional silicon

structures, and manufacturing systems research.

‘(’N. Snyderman, ‘‘I ndustry Observer,Electrom”c .%’ews, ,January 1984.
192 ● Information Technology R&D: Critical Trends and Issues

Table 27.—A Distribution of SRC Funding by Region,

January 1985

Region/institution Funding

New England

MIT . . . . . . . . . . . . . . . . . . . . .$ 976,110

Yale . . . . . . . . . . . . . . . . . . . . . 211,258

Brown . . . . . . . . . . . . . . . . . . . 104,000

Vermont . . . . . . . . . . . . . . . . . 86,220

Middle Atlantic:

Cornell ... ... ... ... ... .. .$1,776,651

CMU . . . . . . . . . . . . . . . . . . . . 1,414,580

RPI . . . . . . . . . . . . . . . . . . . . . 800,000

Penn State . . . . . . . . . . . . . . . 126,489

Rochester . . . . . . . . . . . . . . . . 119,000

Johns Hopkins . . . . . . . . . . . 114,589

Columbia . . . . . . . . . . . . . . . . 89,901

North Central

Illinois . . . . . . . . . . . . . . . . . . . 750,607

Michigan . . . . . . . . . . . . . . . . 337,155

Minnesota . . . . . . . . . . . . . . . 206,755

Notre Dame . . . . . . . . . . . . . . 126,000

Iowa . . . . . . . . . . . . . . . . . . . . 118,013

Purdue . . . . . . . . . . . . . . . . . . 102,870

Wisconsin . . . . . . . . . . . . . . . 93,500

South Atlantic:

MCNC . . . . . . . . . . ... ......$ 900,000

Clemson . . . . . . . . . . . . . . . . . 215,424

Georgia Tech.... . . . . . . . . . 190,553

Auburn . . . . . . . . . . . . . . . . . . 152,342

North Carolina . . . . . . . . . . . . 149,744

Mississippi State . . . . . . . . . 135,000

Florida . . . . . . . . . . . . . . . . . . 71,864

Mountain:

Arizona . . . . . . . . . . . . ......$ 503,530

Arizona State.... . . . . . . . . . 100,914

Colorado State . . . . . . . . . . . 84,000

Texas A&M . . . . . . . . . . . . . . 50,100

Pacific:

Stanford .. .. .. .. .. .. .. .. .$1,511,990

Berkeley (UC)... .. .. .. ... .$1,350,000

Santa Barbara . . . . . . . . . . . . 450,000

Southern California . . . . . . . 101,943

UCLA . . . . . . . . . . . . . . . . . . . 96.307

$1,377,588

$4,441,210

$1,734,900

$1,814,927

$ 738,544

$3,510,240

Total . . . . . . . . . . . . . . . . . .. .. ..’. .. .. .$13,617,409

SOURCE: Semiconductor Reseach Corp. Reasearch Triangle, NC.

In its short span of operation, SRC provides

an example of a joint industry approach in the

management and coordination of information

technology R&D and in the establishment of

new relationships between industry and academia for the conduct of research efforts.Thus

far, SRC member companies have been able

to agree on research priorities. Ongoing research projects have focused onVLSI circuit

processes and Computer-Aided Design, aimed

at commercially relevant results over a 3-to

5-year period. In developing a list of potential

research topics for longer term research (e.g.,

research needs in GaAs), SRC workshops have

involved both university researchers and industry participants. Beginning with abroad

array of potential research needs, the groups

were able to reach consensus on research topic

priorities and areas for future focus.

There is other evidence that SRC’s approach

has fostered closer links between industry and

academia. In addition to the technical advisory board, composed of member company

representatives, SRC has established industrial mentors for each contract. With recoinmendation from the technical advisory board,

an industry engineer or scientist in an SRC

member company becomes the direct contact

point for each of the SRC contracts. The industrial mentor can help identify important

problem areas, and may from time to time be

able to provide direct technical assistance to

the university research community. Through

topical research meetings, additional industryuniversity contacts are strengthened.

Program reviews of SRC Centers of Excellence cover a wide spectrum of technical interest and are designed to attract abroad representation from the industry and research

community. Member companies may also participate in SRC activities by assigning an employee to participate in the management of the

SRC program at Research Triangle Park. Industry assignees may also become researchers in residence, spending at least 3 months

to a year, working in the university laboratory

with one or more of the university researchers. This may foster technology transfer in

ways that are not accomplished through the

dissemination of reports, newsletters, and conference results.

There is no question that SRC has provided

additional research opportunities for the university community and that these opportunities have reached a range of institutions. Research results have been freely disseminated.

The ownership rights to the patents are held

by the universities. So far, only one patent has

resulted from SRC-sponsored research. Several researchers have indicated their appreciation of lack of bureaucratic hassle in the SRC

contracting process, and find the yearly reports and reviews helpful.
Ch. 6—New Roles for Universities in Information Technology R&D ● 193

The eventual impacts of SRC will be seen

in how well it meets the needs of both universities and the semiconductor industry. For the

member companies, the usefulness of research

results, in both the short and long term may

become factors in their continued support. For

the industry as a whole, new knowledge and

new manpower are important, as well as the

attraction of additional researchers to new

fields of study in the future. How effective is

the interface between the university and the

industry over the long term? A sign of success,

at least interim success, note SRC spokesman,

is the increase in the number of member companies and the continued support of the initial companies who have signed on each of the

three years of operation.

Microelectronics and Computer

Technology Corporation (MCC)

The Microelectronics and Computer Technology Corporation (MCC) is an R&D jointventure owned and operated by 20 U.S. computer and semiconductor companies.61 The

idea for MCC was conceived by William C.

Norris, President of Control Data Corp., and

in his view “MCC represents a cooperative effort to develop a broad base of fundamental

technologies for use by members who will each

add their own value and continue to compete

with products and services of individual conception and design. ”62 While these companies

have traditionally avoided cooperation, “in

this period of scarce resources, however, and

at a time when this country’s leading position

in technology is being challenged by foreign

competitors, refusal to cooperate is no longer

tenable. ’63

Governed by a Board of Directors composed

of representatives of each shareholder com-

‘lShareholder companies include Advanced Micro Devices,

Allied Corp., BMC Industries, Control Data Corp., Digital

Equipment Corp., Eastman Kodak, Gould, Hank Corp., Honeywell, Lockheed, Martin Marietta Aerospace, Mostek, Motorola,

National Semiconductor, NCR, RCA, Rockwell, Sperry Corp.,

Boeing, and 3-M.

62W. C. Norris, “Cooperation for Improving Productivity, ”

keynote address, Prepatory Meeting for the White House Conference on Productivity, San Diego, CA, July 20, 1983.

63W, C. Norris, “How to Expand R&D Cooperation, ” Business Week, Apr. 11, 1983, p. 21.

pany, MCC began formal operations in January 1983, with the selection of its chief executive officer and the development of a plan for

R&D. A technology Advisory Board of shareholder representatives provides advice in developing the research strategies, in evaluating

new program proposals, and in monitoring existing programs.

With a $50 million to $60 million annual

budget, four long-range advanced technology

programs are expected to cover a 6- to 10- year

time Span.64 In defining the areas of research,

the shareholder companies “came to concentrate on areas in which they believed accomplishments were necessary to make quantum

jumps in the performance of the next generation of computers. ”65 The programs include:

●

●

●

●

Packaging: A 6-year program to advance

the state-of-the-art in semiconductor

packaging and interconnect technology,

with a focus on technologies compatible

with automatic assembly at both the circuit and system level.

Software Technology: A 7- to 8-year program to develop new techniques, procedures and tools that can be used to improve the productivity of the software

development process by one or two orders

of magnitude.

Computer-Aided Design and Manufacturing (CAD/CAM): An 8-year program to improve CAD/CAM technology and to develop an integrated set of tools that will

have particular application to complex

systems and the complex VLSI chips

from which they will be built.

Advanced Computer Architecture: This 10-

year effort will focus on artificial intelligence, new techniques for database management, human interface with computers, and parallel processing.

In addition to forming a comprehensive

agenda for research, MCC has selected a site

for operation and hired staff. While still in tem84B. R, Admiral, President, Microelectronics Computer Corp.,

personal communication, May 1984.

‘

i

’M. A. Fischetti, “MCC: An Industry Response to the Japanese Challenge, ” IEEE Spectrum, November 1983, pp. 55-56.
194 ● /formation Technology R&D: Critical Trends and Issues

porary quarters, more than 173 professionals

have been brought into the operation. Originally, the staffing plan was to draw senior and

highly trained technical professionals from the

participating companies, with only about 25

percent expected to come from the outside. In

actuality, 40 percent of the professionals have

come to MCC from the shareholder companies.

There is some concern that MCC will attract

senior faculty members from the universities

and put a strain on available manpower resouces, particularly in areas such as artificial

intelligence. 66 MCC officials recognize that if

they hire away the university faculty, they will

compromise the universities’ ability to produce

highly trained top-quality graduates-the very

people they need for the future.67

So far, the MCC strategy appears to be

working; of the talent on board, the majority

are from industry, and the remainder from

academia and government. Full operation, expected by late 1985, will bring the total number of professionals to 350. At full strength,

MCC will be looking for the “brightest graduates, ” and it is expected that many will come

from nearby educational institutions–the

University of Texas and Texas A&M University.

Not surprisingly it was these universities,

and their promised commitment to develop a

major, first-class computer science and microelectronics program, as well as strong support

from the State officials and the business community, that led to the decision to locate MCC

headquarters in Austin, after conducting a

search of 57 cities in 27 States. It has been

noted that few cities in Texas—or anywhere

else—could put together the incentives that

were offered. The University of Texas at Austin promised to construct a $20 million officelaboratory facility, to be leased to MCC. Thirty

ea~e the OTA Case study on Artificial Intelligence.

@Tin a recent interview, Admiral Inman discussed this issue.

“I have a standard rule that I will not recruit from universities.

If I am approached by someone on a faculty, my requirement

is that they go up the chain and say they are going to leave

to go to industry. I can’t have it both ways–to encourage the

production of additional topquality graduate students, and to

hire away university talent. ” See: J. A. Turner, “Big-Spending U. of Texas Aims for the Top in Computer Science, ” Chronicle of Higher Education, Apr. 4, 1984.

new faculty positions and 75 new graduate

fellowships would be supported. In addition,

there was a commitment of at least $1 million

a year for maintenance and support for researchers, and $5 million for purchase of laboratory equipment at UT-Austin. After MCC

selected the Austin site, an anonymous donor

made available $8 million, with the proviso

that other private sources match that amount.

The university then matched that total, using

funds from the Permanent University Fund

(derived from revenues from oil leases on land

owned by the University). The result is 32 new

endowed chairs at the University of Texas, 10

of which are in microelectronics and computer

sciences. 68

The developments in the academic community, the development of MCC, and the developments in the fast-growing high-technology

corridor between Austin and San Antonio 69

have drawn national attention. The potential

for economic growth, quality education and

cutting-edge research are cited as the real

cause for excitement.70 Texas leaders point out

that these high-technology initiatives (e.g.,

MCC, the university programs) are just the beginning of the State’s commitment to high

technology development. It is recognized that

not only the universities, but the entire State

educational infrastructure have to be strengthened and supported over the long term. The

improvement of the State’s elementary and

secondary schools has been addressed by the

Governor as well as MCC’s director, Admiral

Bobby Inman and other leaders in industry,

who are concerned that without improvement

Texas public schools represent a deterrent to

recruiting engineers and other highly trained

specialists. Among the recommendations of a

special panel headed by Texas industry leader,

H. Ross Perot, are increased teacher salaries,

68A11 32 ch~rs me timed at strengthening the university’s

science and engineering programs. Eight disciplines are the f~

cus of this effort: chemistry, mathematics, molecular biology,

physics, computer engineering, manufacturing, systems engineering, materials science, and microelectronics.

‘

g

For examples of recent economic development, see J. R. Lint+

backer, “Letter from Austin: Texas Cash Fuels Electronics

Boom. ” Electronics, June 15, 1983, pp. 95-96.

‘“J, Kraft, “The Japaning of Texas, ” 14’ashington Post, Apr.

17, 1984.
Ch. 6—New Roles for Universities in Information Technology R&D ● 195

State aid to equalize school spending among

rich and poor districts, and strengthened curriculum requirements—at a cost estimated at

nearly $1 billion in new taxes.

The ultimate test for MCC will be its ability

to draw sufficient talent to conduct the R&D

necessary to keep its member companies internationally competitive. MCC officials and corporate sponsors are confident that this can be

accomplished. Some observers are less confident that MCC will be able to transfer its technology to individual corporate efforts. As

Chapter 6

“Academe and Industry Debate Partnership, ”

Science, vol. 219, No. 4481, January 1983,

pp.150-151.

“The Academic-Industrial Complex, ” Science, vol.

216, May 28, 1982, pp. 960-961.

“Artificial Intelligence (I): Into the World, ” Science, vol. 223, February 24, 1984, pp. 802-805.

“Cooperation is the Key: An interview with B. R.

Inman, ” Communications of the ACM, vol. 26,

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“The Challenges: Designing the Next Generation, ”

IEEE S’ectrurn, November 1983.

Probable Levels of R&D Expenditures in 1984:

Forecast and AnaZysis (Columbus, OH: Battelle

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“Texas Uses Oil to Fuel Research, ” Science, vol.

220, April 22, 1983, pp. 390-391.

“Tomorrow’s Computers: The Quest, ” IEEE Spectrum, November 1983.

“Semiconductor Research Co-op Eyes 4 Megabit

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“Weighing the Social Costs of Innovation, ” Science, vol. 223, Mar. 30, 1984, pp. 1368-1369.

Ashford, N. A., “A Framework for Examining the

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Issue 2, spring 1983, pp. 16-23.

Brademas, J., “Graduate Education: Signs of

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Branscomb, L. M,, “The Computer’s Debt to Science, ” Perspectives in Computing, vol. 3, No. 3,

October 1983.

noted earlier, MCC originally intended to draw

its staff principally from the member companies, thereby speeding technology transfer.

Since recruitment has drawn more heavily on

outside sources, MCC will have to find other

approaches if it is to accomplish this goal.

While it is too soon to assess the impacts

of the MCC joint venture, and related activities at the University of Texas and Texas A&M,

they do provide an example of how academia,

business, and government can join forces to

create new institutional arrangements.

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Chapter 7

Foreign Information Technology

Research and Development

Contents

Page

Information Technology Research and Development 201

201

for International Markets 202

International Trends in

International Trade . .

Adapting Technology

Multinational Corporations . . . . . . . . . 206

Technology Exchange Agreements . . . . . 207

Patents . . . . . . . . . . . . . . . . . . . . . . . . . . 210

Scientific and Technical Literature . . 211

Science and Engineering Students . 212

Implications for U.S. Information Technology R&D Policies 214

Science and Technology Policy Goals ., . 215

Government Role in Information Technology Research and Development 216

Government/Industry/University Institutional Arrangements for Information

Technology Research and Development ., 217

Industry Participation in Information Technology Research and Development 219

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

The Size of Japanese Participation in Information Technology Markets 225

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

University . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .,, 246

The Size of French Participation in Information Technology Markets 247

The Political Environment for French Information Technology

Research and Development . . . . . 248

Social Environment for French Information Technology

Research and Development. . . . . . . . 252

Government . . . . . . . . . . . . . . . . . . . . . . . 252

University. . . . . . . . . . . . . . . . . . . . . . . . 257

Industry . . . . . . . . . . . . . . . . . . . . . . . . 259
The United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261

The Size of U.K. Participation in Information Technology Markets . . . . . . . . . . . . . . 263

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

University. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

European Strategic Program for Research in Information Technology . . . . . . . . . . . . 272

Tables

Table No. Page

28. Computer Production and Apparent Domestic Consumption

of Six Leading Supplier Nations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 201

29.U.S. Computer Trade: Origins and Destinations,

Flow Value, and Annual Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

30. World Trade in Telecommunications Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

31. Aggregate Trends in U.S. Telecom Equipment Trade . . . . . . . . . . . . . . . . . . . . . . . . . 204

32. Company R&D Performed Abroad by Foreign Affiliates

of U.S. Domestic Companies by Selected Industry: 1975 and 1981 . . . . . . . . . . . . , 207

33. International. Technology Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

34. Number of U.S. Patents Granted to Selected Foreign

Countries in All Product Fields and in Communication

Equipment and Electronic Components, 1963-81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210

35. Share of Foreign Patenting in the United States for the

Three Most Active Countries by Selected Product Fields: 1981 . . . . . . . . . . . . . . . . 211

36.U.S. Owned and Foreign Owned U.S. Patents in Information Technologies . . . . . . 212

37. Distribution of Foreign Students With Percentage

of All Foreign Students by Field of Study, for Selected Years: 1954/55-1981/82 . . 213

38. Doctoral Degrees Awarded to Foreign Students as a Percent

of All Doctoral Degrees from U.S. Universities by Field: 1959-81, . . . . . . . . . . . . . . 214

39. Average Annual Growth Rates in the Engineering Industry . . . . . . . . . . . . . . . . . . . 218

40.R&D Performed in the Business Enterprise Sector

by Source of Funds: 1970, 1975, and 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

41. Percent of Private Industrial R&D in Selected Industries: 1969-79 . . . . . . . . . . . . . 220

42. R&D Expenditure by Type of Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

43. Japan Development Bank Loans for Development of Technology.. . . . . . . . . . . . . . 240

44. Department of Trade and Industry R&D Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 266

Figures

Figure No. Page

35.U.S. Computer Trade Imports by Source; Exports by Destination. . . . . . . . . . . . . . 203

36. Sources of U.S. Imports and Destinations of U.S. Exports

of Telecommunications Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

37.U.S. Bilateral Trade Position in Telecommunications, With Selected Countries . . . 206

38. Share of Foreign Patenting in the United States

for the Three Most Active Countries in 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

39. index of International Cooperative Research by Country . . . . . . . . . . . . . . . . . . . . . 212

40. Estimated Ratio of Civilian R&D Expenditures

to Gross National Product for Selected Countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

41. Trends in the Production Composition Ratio

of Major Consumer Electronics Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

42. Japanese Share of World Production of Consumer Electronics Products in 1980. . 226

43. Japanese Information Technology Industry Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

44. Integrated Circuit Relative Production Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228

45. Japanese Government Organization for

Information Technology Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . 229

46. Japanese Government Support for Information Technology . . . . . . . . . . . . . . . . . . . 233

47. Cooperation Between Research Participants

for the Fifth-Generation Computer Systems Project . . . . . . . . . . . . . . . . . . . . . . . . . 234

48. Concept Diagram Showing How Research and Development

Are to Progress in the Fifth Generation Computer Systems Project . . . . . . . . . . . . 235

49. Chart Showing the Recommended French Government/Industry/University

Cooperation Relationships for Information Technology R&D . . . . . . . . . . . . . . . . . . 251
Chapter 7

Foreign Information Technology

Research and Development

International Trends in

Research and

Several trends demonstrate that the United

States is experiencing greater international interdependence in the area of information technology research and development. They include: 1) the large and growing world market

for computer and communications products;

2) the increasing adaptation of information

technology products and standards for international markets; 3) the growing number of

multinational information technology firms;

4) the increasing number of international technology exchange agreements; 5) the increasing percentage of U.S. information technologyrelated patents granted for foreign inventions;

6) the greater utilization of foreign contributions in U.S. scientific and technical journals;

7) and the growing number of foreign students

enrolled in technical and scientific programs

at U.S. universities.

These trends indicate two significant factors, both of which make foreign organization

Information Technology

Development

and activities relevant to U.S. R&D efforts.

First, they indicate a growing number of links

between other nations’ R&D efforts and those

of the United States. Second, these trends

point to a growing participation of foreign nations in information technology innovation

and markets, which has led to a relative decline in the U.S. market share. Thus, the

United States, which in the past has developed

policies for its internal markets that were

largely unaffected by foreign manufacturers,

may now need to take greater account of foreign information technology research and development efforts.

International Trade

World trade in computer products is growing rapidly. For each of the major supplier nations, overseas shipments are a steadily rising share of both total output and consumption. Table 28 shows this trend towards a gloTable 28.—Computer Production and Apparent Domestic Consumptiona of

Six Leading Supplier Nations

1982 Percent 1982 Percent

product ion change ADCa

change

($ million) 1981-82 ($ million) 1981-82

United States. . . . . . . . . . . . . . .

Japan . . . . . . . . . . . . . . . . . . . . .

France . . . . . . . . . . . . . . . . . . . .

West Germany. . . . . . . . . . . . . .

United Kingdom . . . . . . . . . . . .

Italy . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

Estimated share of world total

(percent) . . . . . . . . . . . . . . . . .

$33,550 b

7,1 79C

3,834d

3,511

1,929d

1,076

$51,079

89

12.30/o $26,888 15.3’%0

21.0 6,276 10.2

–5.0 4,720 8.4

7.5 3,789 5.3

11.8 2,898 NA

11.0 1,343 3.2

10.80/0 $45,914 NA

80

aAPParent Domestic consumption (ADc) iS production ITIi I_IUS exports Plus ‘m Port s

bEstimated by Bureau of Industrial Economics

CDOeS not Include parts

‘Preliminary.

SOURCE U S /ndustr/a/ Out/ook, 1984, Bureau of Industrial Economics, U.S Department of Commerce, 1984

201
202 . Information Technology R&D: Critical Trends and Issues

bal computer market as it has evolved over the

last few years, and figure 35 illustrates major sources and destinations. This trend results in part from the rapid rise in demand for

computer-related products in the developing

world, a steady demand in traditional markets

for products that incorporate information

technology, and increasing overseas activities

of multinational subsidiaries.1

For the United States, increased global participation in the information technology market has meant a rapid rise in imports and a

decreasing world market share. During the period 1978-82, U.S. imports of computers and

computer-related products rose by approximately 30 percent. (See table 29.)

The telecommunications market is also becoming internationalized as equipment manufacturers look beyond maintaining traditional markets (the national telecommunications service monopolies, or PTTs) toward

expanding international trade.2 Table 30 illustrates this trend and summarizes the current

positions of the United States, the United

Kingdom, France, and Japan.

The internationalization of the telecommunications market, as in the case of the computer market, has weakened the relative U.S.

position in telecommunications trade. Although U.S. exports have increased at a rate

of 13 to 18 percent per year, a continuing increase in foreign imports (24 to 30 percent a

year) has diminished the U.S. trade surplus

(table 31). Japan supplied about 50 percent of

U.S. imports, resulting in a U.S. trade deficit

with Japan of $250 million (figs. 36 and 37).3

—. —.. .——..

‘High Technology Industries: Profiles and Outlooks: The

Computer Industry, U.S. Department of Commerce, International Trade Administration, 1983, p. 22.

‘High Technolo~ Industn”es: Profiles and Outlooks, The Telecoxnmuxu”cations Industry, U.S. Department of Commerce, International Trade Administration, 1983, p. 18.

‘Although the French, the British, and the Japanese are increasing their participation in information technology markets,

particularly in the computers and telecommunications areas,

the degree to which this trend is linked to information technology R&D remains unknown. The traditional skills needed for

success in the marketplace range from basic research, to applied R&D, to production and distribution, and to marketing

skills; it is therefore difficult to attribute success in the marketplace solely to R&D efforts or to any other single factor.

See ch. 2 for a more complete discussion.

Adaptations of Technology for

International Markets

The growing international trade in information technology products has led to increased

efforts to develop international standards for

information technology products in order to

allow access to foreign markets and to allow

interconnections of services. For example, following a recent meeting of the Commission of

European PTTs (CEPT), European countries

agreed to develop technical standards not only

for basic equipment such as telephone handsets, but also for videotex systems and other

sophisticated data communications systems.

The CEPT program will also suggest other

areas where national telecommunications practices might be standardized. This could eventually lead to a unified European network of

approximately 400 million subscribers. The

European Program for Research and Development in Information Technology (ESPRIT)

has a group working on international standards specifically designed to enable various

European-manufactured products to communicate with each other.

In markets where standards do not exist, information technology products, such as computer software, must be tailored for international sale. Because personal computer

hardware has proliferated worldwide without

a parallel growth of indigenous software companies, many American software companies

are developing products for the international

market.

For example, Lotus Development Corp. has

been tailoring its software packages to the language and idioms of other nations. The Lotus

International Character Set enables the program to generate different currency signs and

different versions of international day and

date displays. Although the cost of converting

programs for international markets can be

quite high, Lotus Corp. reportedly believes

that the return on its investment will also be

substantial. They expect that international

sales will eventually generate between 30 and

40 percent of the company’s income.4

—.— —

4Mich~el Schrage, “Firms See Boom in Software, ” The Wiwhington Post, Mar. 4, 1984, p. H, 4.
Ch. 7—Foreign Information Technology Research and Development ● 203

Figure 35.—U.S. Computer Trade (SIC 3573) Imports by Source; Exports

Other countries

25.80/0

I —

by Destination

United Kingdom

15.20/o

NOTE: SIC 3573 includes: Computing equipment (equipment, peripherals, and services).

SOURCE: High Technology Industries: Profiles and Outlooks: The Computer Industry, International Trade Administration, U.S. Department of Commerce, 1983.
204 ● Information Technology R&D: Critical Trends and Issues

Table 29.—U.S. Computer Trade @W 3573): Origins and Destinations, Flow Value, and Annual Growth

1981-82, percent of value) (millions of U.S. dollars)

1982 Imports

Japan . . . . . . . . . . . . .$ 729

Canada . . . . . . . . . . . . 404

Hong Kong . . . . . . . . 151

Mexico . . . . . . . . . . . . 123

United Kingdom . . . . 90

West Germany . . . . . 79

Spain . . . . . . . . . . . . . 78

France . . . . . . . . . . . . 64

Total ... ... ... .. .$2,140

(+88.20/o)

(+ 0.0%)

(–21.60/o)

(+27.00/o)

(+ 12.2%)

(+12.90/o)

(+25.3%)

(– 2.6%)

(+29.9%)

United States

Imports Exports

1978 . . . . . . $ 755 $4,194

1981 . . . . . . 1,646 8,493

1982 . . . . . . 2,295 8,957

1983 . . . . . . 4,100 10,300

1984 . . . . . . 6,470 12,360

Growth

1982 Exports

United Kingdom ... .$1,374 (+15.3%)

Canada . . . . . . . . . . . . 1,103 (–11.2%)

West Germany . . . . . 958 (– 6.20/o)

France ., . . . . . . . . . . 841 (+ 7.0%)

Japan . . . . . . . . . . . . . 777 (+ 8.30/o)

Netherlands . . . . . . . . 380 (+ 14.0%)

Australia. . . . . . . . . . . 344 (+ 0.0%)

Italy. . . . . . . . . . . . . . . 298 (– 4.1%)

Total ... ... ... .. .$9,040 (+ 4.5%)

(1978-82) . +29.8% +21.2`%

NOTE: SIC Code 3573 includes: Computing equipment (equipment, peripherals, and services).

SOURCE: H/gh Techrro/ogy /mWstr/es: Profiles arrd Outlooks: The Computer Industry, International Trade Administration, U.S. Department of Commerce, 1983.

Table 30.–World Trade in Telecommunications Equipment (SIC 3661)

(millions of U.S. dollars)

1977 1981

Principal producer countries Imports Exports Balance Imports Exports Balance

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24 $ 363 +$ 339 $ 4 6 $ 911 +$ 665

Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 458 +422 65 776 +71 1

West Germany . . . . . . . . . . . . . . . . . . . . . . . . 104 562 +458 128 809 +681

Netherlands. . . . . . . . . . . . . . . . . . . . . . . . . . . 126 228 + 102 128 398 +270

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 168 +111 86 320 +234

United States . . . . . . . . . . . . . . . . . . . . . . . . . 129 257 + 128 494 653 + 159

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 80 –13 143 298 + 155

United Kingdom . . . . . . . . . . . . . . . . . . . . . . . 91 247 + 156 235 331 +96

Belgium/Luxembourg . . . . . . . . . . . . . . . . . . . 76 248 + 172 118 262 + 144

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 97 +47 101 143 +42

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 2,708 + 1,922 1,544 4,901 +3,357

NOTE: SIC Code 3881 includes: Telephone and telegraph apparatus.

SOURCE: High Tec/rno/ogy hrdusfries: Prof//es and Outlooks: The Telecommunications Industry, International Trade Administration, U.S. Department of Commerce, 1983.

Table 31.–Aggregate Trends in U.S. Telecommunications Equipment Trade (SIC 3661)

(millions of U.S. dollars)

1977-83

1972 1977 1979 1980 1981 1982 1893 growth rate

Exports . . . . . . $76 $257 $448 $557 $653 $725 $850 +22.1 “/0

Imports . . . . . . 86 129 319 421 494 635 790 +35.3%

Balance . . . . . . –10 + 128 + 128 + 136 +159 +90 +60 – 11.1%

NOTE: SIC Code 3881 includes: Telephone and telegraph apparatus.

SOURCE: U.S. /ndustrla/ Out/ook, 1983, Bureau of Industrial Economics, U.S. Department of Commerce, 1983.

International marketing is also an impor- West Germany. Like Lotus, Microsoft has

tant component for Microsoft, a U.S. software revised many of its software programs for

company whose overseas market accounted foreign use. The company has closely tailored

for approximately one-third of its estimated its software products for the Japanese mar-

$75 million 1983 revenue. Microsoft already ket by offering phonetic Japanese versions of

has development operations in Japan and sub BASIC, and it has translated its Multiplan

sidiaries in the United Kingdom, France, and program (business applications program) and
Ch. 7—Foreign Information Technology Research and Development Ž 205

Figure 36.—Sources of U.S. Imports (1982) and Destinations of U.S. Exports (1982) of Telecommunications

Equipment (SIC 3661)

Japan

45.20/o

Netherlands

West Germany 2.4% 

United Kingdom 2.9% Canada

 . . \ 22.50/o \ / “

I

-! ---- -

Kingdom

/

I

4.60/o

43.0 %

NOTE: SIC 3661 includes: Telephone and telegraph apparatus.

SOURCE: High Technology /ndustries: Profiles and Outlooks: The Te/ecornmunicatio~s Industv, International Trade Administration,

U.S. Department of Commerce, 1983
206 ● Information Technology R&D: Critical Trends and Issues

Figure 37.– U.S. Bilateral Trade Position in

Telecommunications with Selected Countries (1981)

Japan Can U.K. Ger Neth Mex

+ 150

+ 100

+ 5 0

(Mil $) O

- 5 0

-10 0

– 150

– 200

- Import s

Exports

SOURCE: High Technology Industries: Profiles and Outlooks: The Tebcommunications Industry, International Trade Administration, U.S. Department

of Commerce, 19S3.

its MSX operating system (home computer

program) for the Japanese market.

Multinational Corporations

Rising innovation costs and the accompanying size of financial risks, as well as increasing equipment costs, have intensified the need

for expanding production and have forced

many manufacturers beyond the limitations

of domestic markets. For a variety of reasons

including tariffs and other forms of protective

legislation that place imported products at a

competitive disadvantage, multinational firms

have attempted to capture specific foreign

markets through the establishment of foreign

subsidiaries.

Many U.S. firms have opened production

and R&D facilities in foreign nations. Digital

Equipment Corp., for instance, operates six

plants in Europe and three more in the Far

East. Hewlett-Packard, Wang, Data-General,

Datapoint, and Texas Instruments are U.S.

minicomputer manufacturers that also operate foreign production facilities. Apple Computer has plants in Ireland and Singapore.

Amdahl and Trilogy Systems, manufacturers

of plug-compatible mainframes, have opened

facilities in Ireland, intended in part to supply

the Common Market.

Many foreign firms operate subsidiaries in

the United States and other foreign countries.

For example, Japan’s NEC Corp. has established three subsidiaries in the United States

and has won major contracts to supply U.S.

manufacturers with Japanese technology. In

addition, NEC has subsidiaries in Germany,

the United Kingdom, and countries in Africa

and South America.

This growth of international activity has not

only led to increased trade in information technology products, but has also encouraged the

performance of R&D by firms in various nations. After establishing foreign subsidiaries,

many companies find that R&D is necessary

to support local manufacturing when the requirements or standards for the foreign marketplace are significantly different.

U.S. companies are performing an increasing amount of research and development

abroad. Since 1975, total R&D conducted by

U.S. subsidiaries overseas has more than doubled and in 1981 amounted to $3.2 billion-9

percent of total U.S. private R&D funding.

Table 32 illustrates the increasing amount of

electronics R&D which is performed abroad by

foreign affiliates of U.S. companies. In contrast, in 1979, total expenditures for electronics research and development performed

by U.S. affiliates of foreign companies increased to $148 millions

Many governments actively encourage foreign subsidiaries not only to establish production facilities, but also to conduct R&Din their

nations. The United Kingdom has, for instance, implemented a series of incentives for

foreign firms to innovate. In addition to providing financial incentives for establishing

manufacturing facilities, the United Kingdom’s Support for Innovation Program (SFI)

‘Science Indicators, 1982, National Science Board, National

Science Foundation, 1983, p. 25.
Ch. 7—Foreign Information Technology Research and Development . 207

Table 32.—industry R&D Performed Abroad by

Foreign Affiliates of U.S. Domestic Companies by

Selected Industry: 1975 and 1981

(millions of U.S. dollars)

Percent

Industry 1975 1981 increase

Food and kindred products. . . 23 66 187

Chemicals and allied products 269 651 142

Industrial and

other chemicals . . . . . . . . 85 275 124

Drugs and medicines . . . . . . 184 376 104

Stone, clay, and

glass products . . . . . . . . . . . 7 15 114

Primary metals . . . . . . . . . . . . . 9

Fabricated metals. . . . . . . . . . . (a) 26 b N—A

Machinery . . . . . . . . . . . . . . . . . 331 585 77

Electrical equipment . . . . . . . . 245 455 86

Electronic components . . . . 7 47 571

Transportation . . . . . . . . . . . . . . 412 893 117

Motor vehicles and other

transportation equipment . 373 791b

112

Aircraft and missiles . . . . . . 39 l o 2

b

161

Professional and scientific

instruments . . . . . . . . . . . . . . 49 101 106

Other manufacturing

industries . . . . . . . . . . . . . . . . 105 147 40

Nonmanufacturing industries . 4 12 200

Total ... ... ... ... ... .. .$1,454 $3,157 117

alncluded in the other manufacturing industries 9r0up

bEstimated

NA—Not available

SOURCE: Science /rrdicafors, 1982, National Science Board, National Science

Foundation, 1963

offers grants of up to 33 1/3 percent towards

the cost of significant research and development of high technology products. About 200

information technology firms are located in

“Silicon Glen” in Scotland. U.S. firms there

include IBM, Honeywell, NCR, Hewlett-Packard, Digital Equipment, and National Semiconductor.

Multinational information technology corporations are also forming cooperative international research and development arrangements. This new type of international

arrangement is exemplified by the recent

establishment of Europe’s first multinational

research institution for information technology. Following an agreement made last September, Europe’s three largest computer manufacturers, France’s Compagnie des Machines

Bull SA, Britain’s International Computers

Ltd. (ICL), and West Germany’s Siemens AG,

will operate a jointly run and jointly financed

European Computer Research Centre (ECRC).

Located in Munich, close to a number of electronics firms, the ECRC will begin operations

with an initial capital investment of $655,000

and a staff of four researchers from the three

firms. The number of researchers is expected

to reach 30 to 35 by 1985, and approximately

50 within 2 years.

Technology Exchange Agreements

Table 33 illustrates some of the recent technology exchange agreements between U. S.,

European, and Japanese companies. Such

technology exchange is seen by firms as a way

to spread the risk in large projects, to enter

international markets where politics or national market specifications hinder entry into domestic markets, and to allow competitors to

pursue a dominant position in a specific

market.6

An example of a technology exchange agreement is the reciprocal development and marketing agreement for office telecommunications equipment between AT&T and Ing. C.

Olivetti & Co., a major European supplier of

office automation equipment. In accordance

with this agreement, AT&T will increase its

stake in Olivetti over the next 4 years to

acquire 25 percent ownership in the company.

The arrangement gives AT&T access to Olivetti equipment such as workstations, word

processors, typewriters, and data processing

systems for domestic marketing. In turn, Olivetti will market AT&T communications controllers for voice, data and networking applications, and a variety of micro-computers.7

Other technical partnerships include those

of LM Ericsson of Sweden with Honeywell,

and Atlantic-Richfield in the United States

with Thorn EM I in the United Kingdom. In

Italy, Italtel is cooperating with Telettra and

the U.S. company GTE in the public switching field. The British firm, ICL, has links with

Mitel, and Plessey (another U.K. company),

—— — ——

“’Bulls on Skis, ” The Economist, Feb. 4, 1984, p. 76.

‘In addition to its technical exchange agreements with Olivetti, AT&T has also made exchange agreements with Philips.
208 . /formation Technology R&D: Critical Trends and Issues

Table 33.—international Technology Agreements

Sector/partners a Date Technology Agreement

Communications:

Hitachi and Western Electric

Fujitsu and Ungermann-Bass (CA)

NTT and Hughes

Sperry-Univac and Mitsubishi

Motorola and NEC

Exxon Office Systems and

Mitsubishi

ATT and Philips

Honeywell and Ericsson

GTE and Italtel

Plessey and Stromberg Carlson

General Instruments and Thomson

Micro V and Jeumont-Schneider

Data processing:

Honeywell and NEC

Exxon Office Systems and Toshiba

TRW and Fujitsu

Sperry and Mitsubishi

Vertimag and Teijin (Osaka)

Amdhal and Fujitsu

Drexler Technology and Toshiba

Olivetti and Docutel

Olivetti and Stratus

Nixdorf and Auragem

Philips and Micom

ATT and Olivetti

Fortune and Thomson

Tandy Corp. and Matra

Matra and Tymshare

Cii Honeywell Bull and Trilogy

Cii Honeywell Bull and Honeywell

AMD and IBM

1981

—

—

—

1982

—

1983

1983

1982

1982

1983

1982

1984

—

—

1982

—

1982

—

1982

1982

1983

1977

1983

1982

1982

1982

1980

—

—

Communication equipment

Local networks

Telecommunications by satellite

Local networks and

communication and data

processing system

Portable paging systems

Telecommunications equipment

PBX

Telecommunications and office

automation

PBX

PBX

Videocommunication and

teledistribution by cable

PBX

Main frame computers

Office automation

Data processing

Office automation

High-density magnetic memory

Computers and peripherals

Smart card

Office automation

Minicomputers

Minicomputers

Office automation

Data processing, office

automation, communications

Microcomputers

Microcomputers

Terminals

Main-frame computers

General data processing

Computer-aided design

Patent exchange—technological

agreement

Industrial and commercial

agreement

—

Technological agreement

Agreement for manufacture and

commercialization in Japan

Technological agreement

Commercial agreement

Technological and commercial

agreement

Technological and commercial

agreement

Purchase of Stromberg-Carlson by

Plessey

Technological and commercial

agreement

Technological and commercial

agreement with partial

acquisition of Micro V and

creation of a joint subsidiary

Technological agreement

Technological agreement

Joint venture now controlled 100

percent by Fujitsu

Technological agreement

Technological and commercial

agreement

Take-over by Fujitsu

Technological and industrial

agreement

Control of Docutel by Olivetti

Control of Stratus by Olivetti

Control of Auragem by Nixdorf

Purchase by Philips

ATT acquires 25 percent of Olivetti

Thomson acquires 17 percent of

Fortune

Technological and commercial

agreement

Commercial joint venture in the

United States

Technological agreement with Cii

Honeywell Bull having minor

share in Trilogy

Technological and commercial

cooperation

Commercialization by IBM of Catia
Ch. 7—Foreign Information Technology Research and Development ● 209

Table 33.—lnternational Technology Agreements—continued

Sector/partnersa Date Technology Agreement

Electronics and components:

/rite/ and NEC

Texas Instruments and Fujitsu

Hewlett-Packard and Hitachi

Western Electric and NTT

IBM and NTT

Zilog and Toshiba

Western Digital and Siemens

United Technologies and AEG

Telefunken

Philips and Signetics

Philips and Magnavox

Philips and Sylvania

GCA and Matra

Harris and Matra

Motorola and Thomson

/rite/ and Matra

Thomson and RCA

Rhone-Poulnec and Siltec

Rhone-Poulnec and Dysan

Sagem and Motorola

Thomson and Diasonic

1982

1979

—

—

—

—

1982

1982

1975

1977

1980

1982

1981

1978

1981

1971

1983

—

—

1983

VLSI microprocessors and circuits Technological agreement

Integrated circuits

Integrated circuits

Integrated circuits

Integrated circuits

Microprocessors

Integrated circuits

Custom-made semiconductors

Components

Consumer electronics

Consumer electronics and tubes

Microelectronic equipment

Components and integrated

circuits

Components and integrated

circuits

Integrated circuits

Color tubes

Silicon

Magnetic disks

Bubble memories

Medical instrumentation

Technological agreement

Technological agreement

Technological agreement

Technological agreement

Technological agreement

Production and commercial

agreement

Production and commercial

agreement

Purchase by Philips

Take-over by Philips

Purchase by Philips

Technological and commercial

agreement

Technological, industrial, and

commercial agreement

Technological, industrial, and

commercial agreement

Technological, industrial, and

commercial agreement

Technological agreement

Joint venture

Technological agreement

Technological agreement

Technological and commercial

agreement

aThe technologically dominant partner is italicized.

SOURCE: Office of Technology Assessment. Compiled from Research and Deve/opmertf /n Electronics.’ USA-France, 1982/7983, French Telecommunications Council, 1984.

now owns Stromberg-Carlson. In addition,

France and the United States have arranged

joint ventures whereby American semiconductor firms have exchanged technical know-how

for access to the French markets-particularly

to the French telecommunications market

(normally well protected by the French PTT).

These joint ventures in which the French partners hold controlling interests include Thomson and Motorola, Saint-Gobain and National

Semiconductor (in a firm named Eurotechnique), and Matra and Harris.

U.S. companies also have technical exchange agreements and other business relationships with Japanese firms. Intel Corp., for

example, has a 5-year cross-licensing, crosscompatibility, and technology exchange agreement primarily in the area of controllers and

peripheral equipment with NEC Corp. Amdahl

Corp. currently uses a semiconductor chip developed and manufactured by Fujitsu in its

U.S.-manufactured computers. Moreover,

when Amdahl had difficulties raising capital

for expansion, Fujitsu bought 40 percent of

Amdahl Although Amdahl might have been

sold to another American firm, Amdahl management preferred to sell its stock to Fujitsu

in order to facilitate technology exchange

agreements, which involve cross-licensing,

financing, and information exchange.8 Fujitsu

Ltd. has also recently agreed to supply Texas

Instruments with gate array technical knowhow; Texas Instruments will produce the Japanese gate arrays and ship them back to

Fujitsu.

Other joint technical agreements between

American and Japanese information technology firms include Sperry’s high technology cooperative agreement with Mitsubishi, which

covers joint activities in manufacturing, re8Patricia Keefe, “Many U.S. Firms Have Japanese Ties, ”

ComputerWorld, May 2, 1983, p. 73.
210 ● Information Technology R&D: Critical Trends and Issues

search and development, and marketing of

computer systems. Mitsubishi also has a joint

agreement with IPL Systems to develop an

IBM-compatible processor. The technical exchange agreement between the two firms combines Mitsubishi’s” computer-aided design and

large scale integration technology with IPL’s

design expertise. Under the agreement, both

firms are granted the right to market the

jointly developed products. Mitsubishi and

Westinghouse have also arranged a joint venture to design and manufacture integrated circuits. In addition to technical exchange agree

ments between private firms, the U.S. Department of Defense encourages Japan to transfer defense-related electronics technologies to

the United States. In 1981, for example, the

U.S. Government asked Japan to provide advanced very large scale integration (VLSI)

technology to enhance air and antisubmarine

defense capabilities.

Patents

A large number of U.S. patents are granted

to foreign individuals and corporations (see

table 34). Foreign patenting activity in the

United States has been related both to increased foreign inventive activity and to a

growing interest in the U.S. information technology market. Moreover, studies have shown

that foreign patenting activity in the United

States by selected OECD countries correlates

significantly with industrial R&D in those

countries. This correlation is especially high

in the electrical and electronics industries.9

Foreign patenting in the communication

equipment and electronic components category was as much as 40 percent of the total

number of U.S. patents granted during 1979-

81, while the percentage of U.S. owned foreign

patents in the same category was 13 percent.l0

—.— —

9Keith Pavitt, “Using Patent Statistics in Science Indicators:

Possibilities and Problems, ” Z%e Meani”ng of Patent Statistics,

National Science Foundation, 1979.

*’The fields that have relatively high percentages of U. S.-

owned foreign patents are the areas corresponding to U.S. direct investment and research activity abroad. It is possible that

U.S. laboratories abroad supported R&D that resulted in

patented innovations. Sa”ence hh”cators, 1982, National Science Board, National Science Foundation, 1983, p. 14.

Table 34.-Number of U.S. Patents Granted to

Selected Foreign Countries” in All Product Fields

and in Communications Equipment and Electronic

Components (1963-81)

Communications equipment and electronic

Country of inventor All fields components

United States . . . . . 865,124 101,914

Foreign . . . . . . . . . . 369,519 41,242

West Germany . . 91,359 7,850

Japan . . . . . . . . . . 77,450 13,013

United Kingdom . 51,138 5,976

France . . . . . . . . . 35,244 4,455

Switzerland . . . . . 21,622 1,258

Canada. . . . . . . . . 20,241 1,773

Sweden . . . . . . . . 13,368 1,007

Italy . . . . . . . . . . . 11,958 847

Netherlands . . . . 11,103 2,701 b

U.S.S.R. . . . . . . . . 5,111 454

Belgium . . . . . . . . 4,459 360

Austria . . . . . . . . . 4,080 273

Australia . . . . . . . 3,585 198

Denmark . . . . . . . 2,520 161

Mexico . . . . . . . . . 1,075 21

Other foreignc. . . 15,206 895

Total . . . . . . . . . 1,234,643 143,156

%ountrles were selected on the basis of being in the top 10 of at least one of

the Standard Industrial Classifications.

blndicates ranking among the top five foreign countries in this PafllCLIlar Product field.

cother foreign Includes patents granted to foreign COUntrieS not shown

separately.

SOURCES: Office of Technology Assessment; compiled from information in Office of Technology Assessment and Forecast, U.S. Patent and

Trademark Office, Indicators of the Patent Output of U.S. /ndustry

/V(fW3+31), 19S2; in Science Mlcafors, 19S2, National Science Board,

National Science Foundation, 19S3,

Table 35 and figure 38 show that Japan has

the largest number of foreign U.S. patents in

communications equipment and electronic

components, although West Germany had

been the foreign leader in this field throughout the 1960s and mid-1970s. Since 1970, Japan has doubled its patent activity in communications equipment and electronic compnents, food and kindred products, primary

metals, and professional and scientific instruments.11 Data for the period 1970-81, presented in table 36, show that the percentage

of U.S. patents in information technology

areas decreased more than 20 percent while

the Japanese share of U.S. patents increased

by over 2oo percent.12

*’Science Indicators, 1980, National Science Board, National

Science Foundation, 1981, p. 21.

IZThe Office of T~hnology Assessment and Forecast, U.S.

Patent and Trademark Office.
Ch. 7—Foreign Information Technology Research and Development ● 211

Table 35.—Share of Foreign Patenting in the United States for the

Three Most Active Countries by Selected Product Fields (1981)

Total West United Other

Product field foreign Germany Japan Kingdom foreign

Percent of foreign

Chemicals, except drugs and medicines . . . . .

Drugs and medicines . . . . . . . . . . . . . . . . . . . . .

Nonelectrical machinery . . . . . . . . . . . . . . . . . . .

Electrical equipment, except

communications equipment . . . . . . . . . . . . .

Communications equipment and

electronic components . . . . . . . . . . . . . . . . . .

Motor vehicles and other equipment

except aircraft . . . . . . . . . . . . . . . . . . . . . . . . .

Aircraft and parts. . . . . . . . . . . . . . . . . . . . . . . . .

Professional and scientific instruments . . . . .

100

100

100

28

23

26

27

22

27

11

14

9

34

40

38

100 21 37 8 34

100 18 44 9 29

100

100

100

26

28

22

34

42

43

9

10

8

31

21

27

Number of patents

Chemicals, except drugs and medicines. . . . .

Drugs and medicines . . . . . . . . . . . . . . . . . . . . .

Nonelectrical machinery. . . . . . . . . . . . . . . . . . .

Electrical equipment, except

communications equipment . . . . . . . . . . . . .

Communications equipment and

electronic components . . . . . . . . . . . . . . . . . .

Motor vehicles and other transportation

equipment except aircraft . . . . . . . . . . . . . . .

Aircraft and parts. . . . . . . . . . . . . . . . . . . . . . . . .

Professional and scientific instruments . . . . .

5,338

1,288

8,166

1,520

300

2,088

1,452

288

2,240

566

182

731

1,800

518

3,107

2,541 535 952 202

279

852

3.027 534 1,338 876

1,652

777

4,100

429

216

892

563

323

1,760

151

75

329

509

163

1,119

SOURCE: Office of Technology Assessment and Forecast, U S Patent and Trademark Office, Indicators of Patent Output of U.S Industry (1%53-81); in Science Indicators,

1982, National Science Board, National Science Foundation, 1983.

Figure 38.—Share of Foreign Patenting in the United from 45 to 37 percent in the United Kingdom

states for the Three Most Active Countries (1981) and from 32 to 28 percent in France. Overall,

Communications equipment from 1971 to 1981, U.S. patenting in Canada,

and electronic components Japan, and in the European Economic Community declined approximately 40 percent.

Scientific and Technical Literature

U.S. utilization of foreign engineering and

technical literature is growing. Between 1973

and 1980, U.S. citations of foreign research

findings in engineering and technology fields

increased by 4 percentage points and by 7 percentage points in the field of mathematics. Although the U.S. utilization of foreign research

has grown, U.S. use of foreign research

SOURCE. Science /rrd/carors, 1982, National Science Board, National Sctence literature is lower than other nations’ use of

Foundation, 1983 foreign research literature.14

While the foreign patenting activity in the The number of jointly authored articles by

United States has been increasing, U.S. pat- scientists and engineers from different counent activity abroad has been decreasing over —– —-

the past decade. Over the past 10 years, the ‘3Sa”ence In&”cators, 1982, National Science Board, National

Science Foundation 1983, p. 15.

U.S. proportion of foreign patents decreased “Ibid, p. 12.
212 ● Information Technology R&D: Critical Trends and Issues

Table 36.—U.S..Owned and Foreign-Owned

U.S. Patents in Information Technologiesa

U.S. patent Percent ownership Percent

ownership 1970 1981 change

United States . . . . . . . . . 76 58 –23.7

Japan . . . . . . . . . . . . . . . . 6 19 +216

United Kingdom . . . . . . . 4 4 0

France . . . . . . . . . . . . . . . 3 4 +33

West Germany . . . . . . . . 5 8 +60

alnformation technologies included here comprise SIC 357—Office c0mPutin9

and accounting machines; and SIC 365-367—communications equipment and

electronic components.

SOURCE: The Office of Technology Assessment and Forecast, U.S. Patent and

Trademark Office. Information technology numbers were calculated

from data developed under the support of the National Science Foundation, Science Indicators Unit.

tries is also increasing. International coauthored engineering and technology-related

articles as a percentage of institutionally coauthored articles have risen from 13 percent

in 1973 to 16 percent in 1980. In 1980, more

than 40 percent of all jointly authored articles

in mathematics were international collaborative efforts.16 Moreover, the United Kingdom,

France, and West Germany had a greater percentage of internationally co-authored articles

(as a percentage of all institutionally co-authored

articles) than the United States. Japan and the

United States had the lowest percentages of

internationally co-authored articles. (See figure 39.)

Science and Engineering Students

The number of foreign students in scientific

and technical fields in U.S. universities is increasing. In mathematics and computer science the number of foreign students enrolled

in U.S. universities was 22,620 in 1981 -82.16

(See table 37.) Table 38 illustrates the large

proportion of doctoral degrees awarded to foreign students in mathematics and computer

science during 1981. In 1982 non-U.S. citizens

were awarded 38 percent of the 542 doctorates

in electronics and electrical engineering and

54 percent of the 72 doctorates in computer

science. l7 Although some of the foreign engineering and mathematics students choose to

161bid, p. 31.

la~”ence ~~”cator9, 1980, National Science Bored, Nation~

Science Foundation, 1981, p. 240.

17’’ Washington Newsletter,” Ehwtrom”cs, Jan. 12, 1984, p. 70.

Figure 39.—index’ of International Cooperative

Research by Country

(Percent)

o 5 10 15 20 25 30 35 40 45 50

I I I I I [ I I I I 1

United

States

Japa n

U.S.S.R.

France

Canad a

United

Kingdom

West

Germany

lobtained by dividing the number of all articles which were Written by sCif3ntists and engineers from more than one country by the total number of articles

jointly written by SIE’S from different organizations regardless of the country

involved.

NOTE: Based on the articles, notes, and reviews in over 2,100 of the influential

journals carried on the 1973 Sc/errce Cltatforr Index Corporate Tapes of

the Institute for Scientific Information.

SOURCE: Science Indicators, 1982, National Science Board, National Science

Foundation, 1963.

remain in the United States (if permitted), a

large number of them return to their native

countries.

Although the number of foreign graduate

science and technology students in U.S. universities has been increasing, the number of U.S.

students enrolled in technical programs at foreign universities has been decreasing. The

number and percent of U.S. graduate students

studying abroad was highest during 1971, but

now only constitutes about 1 percent of U.S.

graduate students.18 The decline of U.S. graduate students studying in foreign universities

could be attributed to employment considerations and cost of living differences. Currently,

as other industrialized nations’ technical capabilities improve, the low number of graduate

students abroad could inhibit the U.S. ability

to keep abreast of the latest foreign research

methods and developments.

“Science Inculcators, 1982, National Science Board, National

Science Foundation, 1983, p. 29.
Ch. 7—Foreign Information Technology Research and Development • 213

Co r- a

 m

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.

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.

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U)” N-.--- 

c

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)

d

0

0“

I

0

r -

0 0 0 0

o

NNT -

0003 .(=. =

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00000 0

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214 ● Information Technology D: Critical Trends and Issues

Table 38.—Doctoral Degreesa Awarded to Foreign Students as a Percent of

All Doctoral Degrees from U.S. Universities by Field 9-81)b

Field 1959 1963 1967 1971 1975 1979 1981

Science and engineering . . . . . . . . . . 14.8

Physical sciences . . . . . . . . . . . . . . 12.6

Physics and astronomy . . . . . . . 14.9

Chemistry . . . . . . . . . . . . . . . . . . . 10.5

Earth sciencesc . . . . . . . . . . . . . . 17.1

Mathematical sciences. . . . . . . . . . 13.4

Mathematics . . . . . . . . . . . . . . . . . A

Computer sciences . . . . . . . . . . .

Engineering . . . . . . . . . . . . . . . . . . . 24.5

Life sciences . . . . . . . . . . . . . . . . . . 17.6

Biological sciences. . . . . . . . . . . 15.5

Agriculture and forestry . . . . . . . 24.9

Social sciences . . . . . . . . . . . . . . . . 10.7

Psychology . . . . . . . . . . . . . . . . . . 5.5

Other social sciences. . . . . . . . . 15.5

Conscience total . . . . . . . . . . . . . . . . . 6.0

All fields . . . . . . . . . . . . . . . . . . . . . . 11.7

15.5

14.0

14.5

12.2

19.9

15.2

NA

NA

20.8

17.5

16.5

21.0

11.6

4.0

17.6

6.5

12.3

17.5

15.7

16.9

14.6

17.2

14.6

NA

NA

23.7

19.6

16.2

32.4

13.5

4.4

19.9

7.4

14.0

18.7

16.7

18.6

15.6

14.6

17.5

NA

NA

29.8

18.2

14.3

33.6

13.7

5.6

19.3

8.0

14.4

22.1

22.9

27.6

19.8

22.1

24.3

NA

NA

42.1

19.5

14.9

37.4

13.7

5.8

20.2

8.7

16.2

21.1

21.0

25.7

19.7

16.6

25.5

26.7

21.3

46.8

16.5

12.1

35.2

12.9

4.0

22.4

10.1

16.1

22.1

22.0

26.1

21.2

17.1

30.8

33.7

26.3

51.5

19.8

11.1

37.6

13.0

3.9

24.0

11.0

17.2

a percen t of those whose citizenship is known.

bFiscal year of doctorate,

clncludes oceanography.

NA—Not available.

SOURCE: Doctorate Record File, Special Tabulations, unpublished data; National Science Foundation, ScierIce Indicators, 1982, National Science Board, National Science

Foundation, 1983

Implications for U.S.

R&D

Given the strong links between other nations’ information technology research and development activities and those of the United

States, and economic competition from countries such as the United Kingdom, France, and

Japan in information technology innovation

and international markets, foreign R&D initiatives are a concern for the United States.

For the U.S. Government to participate in international research and development and, at

the same time, successfully compete with

these nations’ R&D initiatives, the United

States will need to understand other nations’

economic and social goals for technological development, government, and industry roles in

information technology R&D, and the significance of targeted national information technology R&D programs.

Although the philosophy of industrial competition is prevalent in other economies-particularly in the United Kingdom and Japan–

Information Technology

Policies

these industrialized nations have coordinated

their R&D efforts at a national level. Industrial and governmental cooperation is viewed

as a means to achieve common national technological objectives and enhance the competitiveness of the entire national information

technology industry in global markets. Coordination for R&D includes efforts at the national

level to disseminate information on technological developments, share research results, and

divide research activities among enterprises.

Moreover, in coordinating R&D efforts between government, university, and industry

participants, these nations have attempted to

link trade competitiveness strategies more

closely with R&D policies.lg

In the United States, competition in technological development among firms is viewed

‘

gWilson P. Dizard, “U.S. International Information Trade, ”

The Information Society, vol. 2, No. 3/4, 1984, p. 189.
Ch. 7—Foreign Information Technology Research and Development ● 215

as a variant of other forms of competition,

such as competition in production efficiency,

product quality, and marketing. Consequently, the United States relies heavily on open

market competition and private initiative to

spur industrial R&D.20 Moreover, trade competitiveness factors are not always considered

in the formulation of U.S. R&D policy.

Since other industrialized nations target information technology research and development programs at the national level, the question has been raised whether the United States

should adopt a similar national industrial

strategy for technological development. Although a number of nations that pursue coordinated industrial policies have relatively

weaker overall economic performances than

the United States, those that target information technology as a national priority may improve their competitiveness.

In response to foreign coordinated national

R&D programs, a number of legislative options (several of which are modeled on foreign

initiatives) for coordinating and targeting industrial sectors have been proposed in the

United States. There is also evidence, presented in this report, that the United States

may already be responding in ways particularly suited to its social, governmental, and

economic traditions. For instance, the government-industry technology transfer activities

stimulated by the Stevenson-Wydler Technology Innovation Act of 1980 (Public Law 96-

480) (described inch. 2) and the recently forming university-industry cooperative joint ventures (described in ch. 6) may be indications

that the United States is beginning to develop

indigenous mechanisms to pursue common

technological objectives.21

If, however, the United States is to develop

coordinated national industrial strategies in

response to other nations’ targeted efforts in

the area of information technology, the use of

other nations’ national R&D organizations

—— ———

‘“Jack Baranson and Harold B. Malmgren, “Technology and

Trade Policy: Issues and an Agenda for Action, ” Bureau of International Labor Affairs, U.S. Department of Labor, and the

Office of the U.S. Trade Representative, 1981, p. 5.

“See for example, Jan Johnson, “America Answers Back, ”

Datamation, May 15, 1984, p. 4057.

and activities as models should be carefully

considered. As a result of major differences in

the historical, cultural, and economic characteristics of each nation, there appear to be differences in their respective approaches to

science and technology policies, as well as government and industry participation in information technology R&D. Moreover, the

United Kingdom, French, and Japanese national information technology research and development programs differ in overall goals and

organization and vary significantly from current U.S. R&D efforts.

Science and Technology Policy Goals

Although the United Kingdom, France, and

Japan each developed science and technology

policies in part to strengthen and modernize

their economies, each of these nations varies

in its conception of what technology policy

should comprehend and what its objectives

should be.22 In some nations policy is aimed

at strengthening the competitiveness of targeted industries. Other nations are concerned

with developing information technologies for

social needs or national security applications.

In other nations, the perception of technology

policy is much broader, and constitutes a part

of a more general plan of how the economy

should be structured in the future. Many of

the goals for science and technology policy of

the United Kingdom, France, and Japan are

rooted in history. At the finish of World War

II, each of these nations’ societies and economies were severely damaged. These nations’

governments therefore perceived a need to actively promote the growth of a high technology industry in order to aid their ailing

economies.

Since World War II and particularly in more

recent times, science and technology policies

have become increasingly politicized. This reflects the view that science and technology is

linked to nations’ economic well-being (e.g.,

trade, productivity, and employment) and social welfare (e.g., quality of life, education, and

training). Moreover, the widespread belief that

“Jack Baranson and Harold Malmgren, op. cit., p. 6.

38-802 0 - 85 - 1 5
216 ● Information Technology R&D: Critical Trends and Issues

“the nation that dominates the information

processing field will possess the keys to world

leadership in the twenty-first century, ”23 has

caused nations to look to the development of

information technology for their future wellbeing. Evidence of the movement of science

and technology policies into the political arena,

for instance, can be found in both the recent

Thatcher (United Kingdom) and Mitterand

(France) political platforms in which information technology research and development

funding and programs were emphasized. However, these two leaders differ in their policies

for technological development. These differences are important in understanding and

evaluating the roles of these governments in

information technology research and development.

The various current approaches to science

and technology policy and the different objectives of each nation’s research activities underlie the distinct goals of each country’s national

research program. For example, Japan’s concerns lie in developing information technology

for improving Japanese society (which entails

developing an information-based infrastructure) and improving its world trade position

in information technology products. Consequently, Japan’s goals for its national information technology research program, the

Fifth-Generation Computer Systems Project,

is to develop a fifth-generation computer for

social applications and to develop a technological knowledge base which will enable Japan

to maintain and improve the volume of information technology exports that is so vital to

the Japanese economy.

Like Japan, the United Kingdom is also concerned with its economic survival in world

markets, as exports also play an important

role in the U.K. economy. The basic goal,

therefore, for the U.K. Programme for Advanced Information Technology is to improve

the competitiveness of the U.K. information

technology industries in the world market in

order to reverse its negative balance of information technology trade.

‘

gRobert E. Kahn, “A New Generation in Computing, ” 1~~~

Spectrum, November 1983, p. 36.

French governmental interest and efforts to

expand advanced information technology research and production are directed at two major goals: strengthening France’s international

competitiveness and the development of an information technology-based infrastructure for

the preservation and continued development

of French culture and society. Reflecting

French national goals, France’s national information technology research and development

program, La Filiere Electronique, has as its

long-term goals: to place France on a technological level closer to that of the United States

and Japan; create a trade surplus in information technology products; create new jobs;

assure a sound technological base; and accelerate the production of information technology products.

The Europeans, through the European Economic Community (EEC), are also concerned

about their basic economic survival in world

markets. Consequently, Europe’s major goal

is to establish a strong technological base

through collaborative research on various

long-range projects that may not be adequately funded within individual nations. The European Strategic Program for Research in Information Technology (ESPRIT), involves the 10

EEC member countries. ESPRIT’s major objective is to keep Europe competitive with the

United States and Japan in advanced information technology fields.

Government Role in Information

Technology Research and Development

The level of government funding for research and development varies widely. The

ratios of civilian research and development expenditures to gross national product (GNP)

presented in figure 40 show that the United

States devotes a lower proportion of its GNP

to civilian R&D than Japan, but a higher proportion than the United Kingdom. An examination of the annual growth rates of national

research and development expenditures for

electrical and electronics industries reveals

that the United States lagged behind most of
Ch. 7—Foreign Information Technology Research and Development ● 217

Figure 40.— Estimated Ratio of Civilian R&D

Expenditures to Gross National Product (GNP) for

Selected Countriesa

2.5

2.4

2.3

2.2

2.1

2.0

1.9

2.6 

1.8

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1.0

 ● ☛ ● ☛

.9

o~

1961 63 65 67 69 71 73 75 77 78 81 83

Years

Natlonal expenditures excluding Government funds for defense and sPace

R&D

SOURCE Scierrce Indicators, 7982, National Science Board, National Science

Foundation, 1983

the industrially developed nations during the

1970s.24

The United Kingdom, France, and Japan

singled out information technology as an area

for government promotion and support. This

contrasts sharply with the U.S. Government,

which at the present time has not singled out

or targeted any specific industry or technology for government support. Although in market economies governments use a more or less

standard set of policies to support research

and development,25 other nations differ from

ZtR,easOns ~or the relative declining growth rate Of us. GOVernment R&D funding during this period include major decreases in funding for defense and space wsearch and development, while civilian research and development was held

constant. Curnmtly, U.S. budget projections reflect increasing

R&D funding for defense purposes.

‘Slnternational Competitiveness in Electronics (Washington,

DC: U.S. Congress, Office of Technology Assessment, OTAISC-200, 1983), p. 381.

the United States in the extent to which each

coordinates and targets these policies to support information technology research and development. Policy measures for R&D support

include low interest loans, direct subsidies, or

actual government contracts. Other incentives

to stimulate information technology R&D include tax incentives, national development

banks which channel funds specifically to information technology industries, public sector

procurement, and merger/antitrust policies.

To varying degrees the governments of the

United Kingdom, France, and Japan have established institutional mechanisms to facilitate coordinated research and development

policymaking. Coordinated government intervention on the part of these industrialized nations is reflected in each of the governments’

structure which centralizes the responsibility

within one or a few government ministries, and

in the establishment of planning councils.

Moreover, the coordinated efforts of the British, French, and Japanese extend much further than the U.S. pluralistic and decentralized

approach to R&D support, to the coordination

of government, industry, and university information technology research and development

objectives and activities.

Government/Industry/University

Institutional Arrangements for

Information Technology Research

and Development

A major difference between the institutional

arrangements for U.S. information technology

research and development and those of the

United Kingdom, France, and Japan is therelationship between government and industry.

In the United States, government tends to be

viewed as a regulator and enforcer of laws and

social policies; U.S. industry generally perceives its relationship with government as adversarial. Moreover, the U.S. Government,

which traditionally avoids involvement in the

private sector, relies largely on private initiatives for risk-taking, innovation, job creation,

and the generation of profits and capital.

Although this adversarial relationship between the public and the private sectors ex-
218 ● Information Technology R&D: Critical Trends and Issues

Table 39.—Average Annual Growth Rates in the Engineering Industry

United United

States Japan Germany France Kingdom

1970-79 1970-79 1971-79 1970-79 1969-78

Research scientists and engineers: a

Aerospace . . . . . . . . . . . . . . . . . 0.3

Electrical and electronics . . . . –0.4

Machinery . . . . . . . . . . . . . . . . . 5.1

Transport equipment . . . . . . . . 3.3

Total expenditure:

Aerospace . . . . . . . . . . . . . . . . . – 1.1

Electrical and electronics . . . . 0.1

Machinery . . . . . . . . . . . . . . . . . 5.5

Transport equipment . . . . . . . . 5.4

Government funds:

Aerospace . . . . . . . . . . . . . . . . . – 1.7

Electrical and electronics . . . . –2.2

Machinery . . . . . . . . . . . . . . . . . 1.0

Transport equipment . . . . . . . . 3.1

industry and foreign funds:

Aerospace . . . . . . . . . . . . . . . . . 0.6

Electrical and electronics . . . . 2.3

Machinery . . . . . . . . . . . . . . . . . 6.3

Transport equipment . . . . . . . . 5.9

—

6.7

2.5

8.5

—

5.8

5.2

11.0

—

—

—

—

—

—

—

—

–5.3

3.2

6.7

3.8

–2.3

5.8

9.8

3.9

–1.0

7.1

10.0

10.1

4.1

4.9

8.5

3.3

1.1

4.1

3.9

1.8

2.6

4.7

0.9

7.2

1.8

0.1

—

6.9

5.0

7.7—

7.4

–2.6

0.9

3.6

0.2

–0.5

3.1

1.5

–0.3

–3.1

9.9

1.1

3.0

(b)

–0.7

–3.4

d

– 1.4

a~aPan not in FU1l.Tirne Equivalents.

bLarge increases from a very IOW start.

cFrom abroad 4.91 per annum.

dElectrical and electronics, For R&D purposes the following subclasses are identified with this subgroup: ISIC 3832 and ISIC

638 nec.

SOURCE: OECD Science and Technology Indicators, OECD, 1964.

ists in most countries, the governments of the

United Kingdom, France, and Japan have historically participated to a greater degree in industrial and technological development. For

cultural, historical, and political reasons, these

industrialized nations often regard government-industry relations as a partnership or

perceive government as an institution for

guiding and supporting targeted industries.

Government-industry coordination has begun

in some nations with the establishment of multipartite advisory groups representing government and private industry.26 Formal and informal advisory councils have become in some

nations, particularly in Japan, important forums for government-industry-academic consultations on industry policy and implementation. Particularly in information technology,

these councils orchestrate joint research, development, and marketing schemes among information technology firms and government.

‘Franklin Delano Strier, “On Economic Plannin g, Japan and West Germany Have a Better Idea,” The Center Magazine, January/February 1984, p. 36.

To coordinate more fully both their targeted

policies and information technology R&D, the

United Kingdom, France, and Japan have recently adopted major national programs.

These programs, which have no counterpart

in the United States,27 have been established

to pursue research projects cooperatively between government, private industry, and universities. The scale of funding for all the national programs is large and roughly

comparable, representing a major commitment of between half a billion and several billion dollars over the first 5 years.28 This funding is magnified because the companies which

receive government research funds usually are

required to match the funds.

“Some individuals contend that the Department of Defense

(DOD) programs, such as VHSIC, are similar to the national

research and development programs of the United Kingdom,

France, and Japan. However, there are major differences between DOD programs and these other nations’ programs.

28Trudy E. Bell, “Tomorrow’s Computers-The Teams and The

Players,” IEEE Spectrum, November 1983, p. 46.
Ch. 7—Foreign Information Technology Research and Development ● 219

Each nation, in structuring its cooperative

research program, has looked to successful

organizational examples both domestically

and in other countries, borrowing organizational concepts and applying them in innovative ways. For example, the Institute for New

Generation Computer Technology (ICOT),

with its central research center, is unique to

Japan. ICOT is organized for close cooperation of research activities among government,

industry, and university participants. Japan’s

customary approach has been to have each

participating research institution or company

conduct research individually. ICOT is also

contracting with outside companies and laboratories for some of the research and development—a technique often used for U.S. defense contracts, but unusual in Japan.

The institutional arrangements for the U.K.

Programme for Advanced Information Technology are also unique, although the Alvey

Committee closely modeled the program organization on Japan’s Ministry of International

Trade and Industry (MITI) and the U.S. Defense Advanced Research Projects Agency

(DARPA). This new organization is intended

in part to stimulate the transfer of basic research from academic environments to industry.

The ESPRIT program shares both similarities and differences with organizations such

as ICOT and the Alvey Programme. Like

these other new institutional arrangements,

ESPRIT research is undertaken by teams of

university, government, and industry scientists. In contrast to other nations’ cooperative

programs, ESPRIT represents a joint venture

at the international level in which each project must involve researchers from at least two

countries.

The success of these national programs in

achieving both national aims and research

goals remains undetermined. However, these

new institutional arrangements raise some interesting questions for the United States. How

will the cooperative research programs of the

United Kingdom, France, and Japan alter

their traditional research structures and serve

as models for future research projects? What

are the relative strengths of these new research programs versus traditional U.S. research environments? To what degree will

these new national research programs affect

U.S. technological development and market

share?29

Industry Participation in Information

Technology Research and Development

Funding of industrial information technology research and development varies from nation to nation. Table 40 represents industrial

R&D funding patterns in industrialized nations and shows that industry has been a more

dominant contributor in Japan (although the

Japanese Government also provides a great

deal of support through indirect subsidies)

than in any other nation, including the United

States.303’ The U.S. Government, in contrast,

supported approximately half of the U.S. research and development activities in 1970.

However, by 1979, U.S. industry had increased

its share of industrial funding to 67 percent,

approximately as much as the French industry’s 71 percent support of its own research.

Table 41 illustrates industrial research and

development support for electrical and electronics and computers categories in the industrialized nations. Japan and West Germany

had the highest proportion of industrial R&D

in the electrical and electronics category. In

the computer category, however, the United

States had the greatest proportion of industrial R&D followed by the United Kingdom,

France, and then Japan.

‘

g

Ibid.

300ECD Science and Technology Inal”cators, OECD, 1984, p.

119.

31 Sa”ence Indicators, 1982, National Science Board, National

Science Foundation. 1983. K). 9. ,*
220 ● Information Technology R&D: Critical Trends and Issues

Table 40.—R&D Performed in the Business Enterprise Sector by Source of Funds (1970, 1975, and 1979)

National currency

(in millions) Percent

Country and source 1970 1975 1979 1970 1975 1979 — — — France . . . . . . . . . . . . . . . . . . . . . . . . . .

Total domestic . . . . . . . . . . . . . . . . .

Business enterprise . . . . . . . . . .

Government . . . . . . . . . . . . . . . . .

Private nonprofit . . . . . . . . . . . . .

Higher education . . . . . . . . . . . . .

From abroad. . . . . . . . . . . . . . . . . . .

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total domestic . . . . . . . . . . . . . . . . .

Business enterprise . . . . . . . . . .

Government . . . . . . . . . . . . . . . . .

Private nonprofit . . . . . . . . . . . . .

Higher education. . . . . . . . . . . . .

From abroad... . . . . . . . . . . . . . . . .

United Kingdoma 

. . . . . . . . . . . . . . . . .

Total domestic . . . . . . . . . . . . . . . . .

Business enterprise . . . . . . . . . .

Government . . . . . . . . . . . . . . . . .

Private nonprofit . . . . . . . . . . . . .

Higher education.. . . . . . . . . . . .

From abroad... . . . . . . . . . . . . . . . .

United Statesb 

. . . . . . . . . . . . . . . . . . .

Total domestic . . . . . . . . . . . . . . . . .

Business enterprise . . . . . . . . . .

Government . . . . . . . . . . . . . . . . .

Private nonprofit . . . . . . . . . . . . .

Higher education. . . . . . . . . . . . .

From abroad... . . . . . . . . . . . . . . . .

West Germanyc 

. . . . . . . . . . . . . . . . . .

Total domestic . . . . . . . . . . . . . . . . .

Business enterprise . . . . . . . . . .

Government . . . . . . . . . . . . . . . . .

Private nonprofit . . . . . . . . . . . . .

Higher education . . . . . . . . . . . . .

From abroad . . . . . . . . . . . . . . . . . . .

8,322.4

8,007.3

5,310.0

2,689.0

4.6

3.7

315.1

895,020.0

894,193.0

876,608.0

17,585.0

NA

NA

827.0

680.3

647.7

431.2

216.5

NA

NA

32.6

18,067.0

18,067.0

10,288.0

7,779.0

—

—

—

7,114.0

7,090.0

6,146.0

939.0

5.0

—

24.0

15,616.5

14,393.5

9,965.8

4,376.8

47.2

3.7

1,223.0

1,684,847.0

1,683,200.0

1,654,502.0

28,698.0

NA

NA

1,647.0

1,340.2

1,255.5

841.4

414.1

NA

NA

84.7

24,187.0

24,187.0

15,582.0

8,605.0

—

—

—

14,469.0

14,005.0

11,397.0

2,596.0

12.0

—

464.0

26,260.0

24,460.0

18,723.0

5,674.0

58.0

5.0

1,800.0

2,664,913.0

2,662,698.0

2,624,843.0

36,807.0

935.0

113.0

2,215.0

2,324.3

2,138.8

1,459.0

679.7

NA

NA

185.5

38,226.0

38,226.0

25,708.0

12,518.0

—

—

—

20,720.0

20,070.0

15,650.0

4,400.0

20.0

—

650.0

100.0

96.2

63.8

32.3

.1

—

3.8

100.0

99.9

97.9

2.0

NA

NA

.1

100.0

95.2

63.4

31.8

NA

NA

4.8

100.0

100.0

56.9

43.1

—

—

—

100.0

—

—

—

—

—

—

100.0

92.2

63.8

28.0

.3

—

7.8

100.0

99.9

98.2

1.7

NA

NA

.1

100.0

93.7

62.8

30.9

NA

NA

6.3

100.0

100.0

64.4

35.6

—

—

—

100.0

96.8

78.8

17.9

.1 —

3.2

100.0

93.1

71.3

21.6

.2

—

6.9

100.0

99.9

98.5

1.4

—

—

.1

100.0

92.0

62.8

29.2

NA

NA

8.0

100.0

100.0

67.3

32.7

—

—

—

100.0

96.9

75.5

21.2

.1 —

3.1

alg70figure9forthelJnited Kingdom are from 1989, and 1979 figures are from 1978.

bcurrent expenditures plus depreciation onlY.

c1970figures for West Germany are from 1969.

NA—Not separately available.

NOTE: Details may not add to totals becauseof rounding.

SOURCES: OECD Scierrce artd Technology Indicators, VOLBOECD, 1982; Research arrd Development in/ndust~, National Science Foundation, 1981; in Science/n.

dicators, 19S2, National Science Board, National Science Foundation, 1983.

Table 41 .—Percent of lndustrial R&D in Selected Industries (1989-79)

United States Japan West Germany United Kingdom France

Industry 1970 1979 1970 1979 1969 1979 1969 1978 1970 1979

Six-industry total . . . . 71.2 70.2 61.5 55.6 71.1 72.4 58.4 60.7 NA 61.7

Aerospace . . . . . . . . . . . . 11.8 8.6 – – .1 .6 1.1 5.4 7.8 8.8

Electrical and

electronics . . . . . . . . . 19.5 17.6 24.9 23.4 29.3 26.9 20.4 16.0 16.5 20.2

Instruments . . . . . . . . . . . 5.3 7.8 2.3 2.9 1.6 2.1 3.1 1.9 NA 1.2

Machinery . . . . . . . . . . . . 14.3 6.0 8.7 7.0 }7.0 }16.6 6.6 NA

Computers . . . . . . . . . . . “ 11.5 2.9 2.8 !; 5.2 NA : : ;

Chemicals groupa . . . . . 20.3 18.7 22.7 19.5 33.1 26.2 22.1 25,6 24.2 23.4

alncludes chemicals and allied products and petroleum refining industries.

SOURCES: OECD Science and Technology /nd/caters, vol. B OECD, 1982; Research and Development in Industry, National Science Foundation, 1981; in Science hrdicators, 1982, National Science Board, National Science Foundation, 1983.
Ch. 7—Foreign Information Technology Research and Development ● 221

In addition to direct funding, governments

can support or discourage industrial research

and development with tax incentives, fiscal

and monetary policies which affect interest

rates and the availability of capital, regulatory

policies, procurement practices, patent policies, and antitrust policies.32 Moreover, ac-

——— —.. —.

32Science Indicators, 1982, op. cit., p. 10.

tions of a national government to define the

structure of its information technology industry will have profound but unpredictable influence on industrial R&D. For example, France

has recently nationalized some major information technology firms, whereas the United

Kingdom and Japan currently are moving in

the opposite direction by privatizing their telecommunications entities.

Conclusions

Cultural, social, and institutional differences

among nations profoundly influence the way

in which technological innovation occurs and

underlie the considerable differences in R&D

policies in the United Kingdom, France, and

Japan. Therefore, many of these nations’ successful research and development policies and

endeavors may not be easily transferable or

applicable to U.S. R&D environments. Nevertheless, cross-cultural comparisons of these individual nations, which have developed different methods of addressing similar public

policy issues and technologies, can be useful

to an individual society, such as the United

States, in devising a conceptual framework for

developing information technology domestic

and international R&D policies.

International comparisons also provide a

useful method for evaluating the status of U.S.

information technology research and development activities and expenditures. However,

making comparisons is difficult. Differences

exist among countries in definitions, concepts,

data collection methodologies, and statistical

reporting procedures.33 These problems are

particularly prevalent in the area of information technology .34 Although several international organizations such as OECD and the

ITU have initiated the development of uniform definitions and standards for information

technology products and facilitated the exchange of information on nations’ R&D policies and activities, the U.S. Government currently does not have a designated agency or

office within an agency to analyze and monitor foreign information technology R&D policies and practices.

The economic importance of industrial competitiveness and its close reliance on technological development emphasizes the importance of developing a program for periodic

mapping of the pattern of technological advantages and disadvantages relative to foreign

competitors.35 Such surveys could help to alert

government and industrial representatives to

changes in the technological underpinnings of

their competitive positions. These surveys

could also be broadened to encompass nontechnological factors affecting competitiveness or future technological developments.

These could include current or prospective

changes in foreign government R&D policies

that influence the competitiveness of their pro-

——— —

——-—————— gories. Moreover, each nation has its own methods for categoriz- tsscjence ~n~.catom, 1980, National Science Board, Nation~ ing information technology products and research and develScience Foundation, 1981, p.4. opment expenditures and activities.

34The U.S. SIC Codes, for example, do not have categories 3%ee S. E. Goodman and M. R. Kelly, “We Are Not Alone:

for information technology, but rather information technology A Sample of International Policy Challenges and Issues, ” The

products are encompassed within different and separate cate- Information Society, vol. 2, No. 3/4, p. 250-268.
222 ● Information Technology R&D: Critical Trends and Issues

ducers in export markets. Such a broader survey could provide the basis for a more effective assessment of changes in the current and

prospective competitiveness of foreign R&D

efforts than a narrow focus on technological

capabilities alone. 36 As one analyst stated :

Most governments, and most especially

the U.S. Government, are organized to reflect

primarily domestic interests and have great

difficulty in dealing adequately with one of

the consequences of science and technology—

the gradual blurring of the distinction between domestic and international affairs . . . .

—-

“Bela Gold, “Technological and other Determinants of the

International Competitiveness of U.S. Industries, ” JEh’E

Transactions on En&”neering Management, vol. LM 30, No. 2,

May 1983, p. 58.

Perhaps the most important observation

[is] . . . that the general character of changes

brought about by science and technology

tends, overall, to lead to increased international interaction and integration, with correspondingly reduced relevance of national

borders. The parallel spread and diffusion of

technological competence that is eroding the

dominance of one or a few nations in science

and technology makes it imperative that we

recognize the nature of the underlying changes

taking place as we attempt to develop policies to deal with the specific implications of

any given technology, or to influence the direction of development of technology itself.37

“Report by Eugene Skolnikoff entitled “Impact of Science

and Technology on the International System, ” in “Overview

of Intimational Science and Technology Policy” hearings before

Committee on Foreign Affairs, House of Representatives, 98th

Cong., 1st sess., Aug. 2,3 and Sept. 21, 1983, p. 317.

Japan

Given Japan’s minimal domestic natural resource base and its high dependence on other

nations for food, energy, and raw materials,

the Japanese Government treats science and

technology policy as a means of spurring overall economic growth and enhancing Japan’s

competitive position internationally. Japan’s

policies focus on maintaining a long-term, high

volume of exports in order to gain technological and, thus, market leadership in a broad

spectrum of high technology, high value-added

products. This perception in Japan has led to

a consensus in the nation’s government, business, financial, and academic communities to

continue strengthening the nation’s technological base.

The coordination of science and technology

policy to the promotion of economic development is rooted in Japan’s postwar recovery efforts. During the postwar recovery period, various science and technology institutions and

laboratories were established on the assumption that they would help stimulate an economic recovery. Another major component of

this strategy was to import and improve technology from the United States and Western

Europe. Following the enactment of the law

on Foreign Capital in 1950, the Japanese have

signed more than 36,000 licensing agreements

costing approximately $12 billion.38 Agreements between Japanese and foreign firms

were made under strict government supervision partly to control the outflow of foreign

exchange and partly to concentrate technological resources into certain key industries. Products manufactured with these imported technologies initially served to develop the

Japanese domestic market, bringing about a

GNP growth exceeding 10 percent throughout the 1950s. For example, transistor technology imported and commercialized by the

Japanese in the early 1950s provided a foundation for the modern electronics industry.

Although the general trend of importing

technologies has been receding, the imports of

technologies related to electronic computers

increased by 16 percent over fiscal year 1980,

with those relating to software accounting for

over 166 imports. Broken down into sectors

——. -———

3%mard Lynn, “Japanese Technology: Successes and Strategies,” Current History, November 1983, p. 366.
Ch. 7—Foreign Information Technology Research and Development . 223

of industry, out of a total of 2,142 cases, the

number of imports of foreign technologies during fiscal year 1980 in the electrical industry

amounted to 413 cases.39

In concert with the policy of importing technology, Japan has sought to develop its own

indigenous research base. The ratio of national

R&D expenditure to national income has risen

from less than 1 percent during the first half

of the 1950s to 1 percent in 1957, 1.5 percent

in 1960, 2 percent in 1971, and 2.36 percent

in 1981. According to official plans, this percentage will be increased to 2.5 percent by

1985 and to 3 percent by 1990.40 According to

statistics released by the Japanese Prime Minister’s Office, all Japanese R&D, publicly and

privately funded, in the area of information

processing (which includes software and computer systems development only) totaled

Y 158.6 billion ($687 million) in 1979 and

Y 164.6 billion ($713 million) in 1980.4

142

In Japan, a far lower percentage of total research funds is provided by government (Japan 27.7 percent, United States 51.1 percent,

United Kingdom 51.7 percent) than in other

nations.43 In part, this difference can be attributed to the high level of expenditure on defense research by Western governments (approximately 15 percent of total research funds)

relative to the small amount spent by the Japanese Government (0.7 percent). In some areas

of information technology R&D such as integrated circuit development, low military R&D

expenditure has helped Japanese industry. In

general, military areas demand the highest

state-of-the-art standards, regardless of costs.

—

‘

g

’’ Import of Foreign Technologies in Japan, ” Science and

Technology in Japan, April 1982, p. 27,

‘“’’ Summary of fiscal year 1981 White Paper on Science and

Technology, ” Science and Technology Agency, Tokyo, Foreign

Press Center, 1981.

“Barry Hilton, “Governme nt Subsidized Computer, Software,

and Integrated Circuit Research and Development by Japanese

Private Companies, ” Scientific Bulletin, Office of Naval Research Far-East, U.S. Department of the Navy, vol. 7, No. 4,

October-December 1982.

42All Japanese yen figures are converted into U.S. dollars according to foreign exchange rates as of June 1, 1984, where

+231 = $1.

“’’Science in Japan, “ Nature, vol. 305, Sept. 29, 1983, p. 361.

Therefore, these military developments sometimes result in expensive products which are

so specialized that civilian or consumer applications can be limited. This is often the case

with integrated circuit development in the

United States. On the other hand, Japan has

succeeded in developing integrated circuit

products solely for commercial application.

Taking into account all funds spent on defense, the government of Japan still contributes significantly less to total scientific research expenditure than other countries.44

More specifically in the area of information

processing, the Japanese Government R&D

expenditure in 1979 accounted for 8.2 percent

in 1979 and 6.2 percent in 1980 of the total

Japanese information technology R&D expenditures.45 In Japan, this government R&D

funding is concentrated in the national universities (13.5 percent), national research institutes (13 percent), with as little as 1.5 percent

of government funding channeled to private

industrial laboratories. Because government

R&D funding, which is the major supporter

of academic basic research, is relatively limited, reasons for Japan’s perceived ineffectiveness in basic research can be clearly understood. As a result, current improvements in

the Japanese academic environments for basic

research as well as increases in funding levels

for overall basic research are high priorities

on the Japanese policy agenda.

Because Japanese Government R&D funding is small and for the most part channeled

into university and national research institutes, Japanese industry funds constitute approximately 70 percent of R&D activities. Approximately 28 percent of all Japanese industrial R&D funding is devoted to information

technology R&D. Although the Japanese Government does not directly make use of the

vitality offered by private enterprise, the lack

44These low expenditures are also the result of the Japanese

Governments current large budget deficits.

46Barry Hilton, “Government Subsidized Computer Software,

and Integrated Circuit Research and Development by Japanese’

Private Companies, ” Scientific Bufletin, Office of Naval Research Far-East, vol. 7, No. 4, October-December 1982.
224 ● Information Technology R&D: Critical Trends and Issues

of government funding has intensified competition in the area of information technology research and development. This competitive effort is exemplified in Japan’s computer and

semiconductor industries which, in order to

survive, must develop and efficiently produce

high quality products as quickly as possible.

This “privatized” environment for R&D has

given Japan advantages and disadvantages in

its information technology R&D efforts. One

result of the large percentage of privately

funded R&D is the lack of basic fundamental

research activities. Because the R&D is subsidized mainly by private firms, basic creative

research, which is high-risk and long-term, is

sometimes ignored in favor of cost-efficient,

developmental, applied, commercialized R&D.

This continued preoccupation with R&D efforts that bring quick economic results has

resulted in a trend which places less importance on basic, innovative studies. The Japanese Science and Technology Agency (STA),

for example, published a list of 15 basic discoveries in the fields of recombinant DNA and

computer technology (superconductivity, optical fibers, lasers, Josephson junctions, tunnel diodes, and transistors). Japan was responsible for only two of the breakthroughs listed;

America for nine; the United Kingdom and the

Netherlands for four. This bias in Japan’s

overall research expenditures toward applied

research and prototype development is reflected both in government-supported R&D

and private sector research expenditure (see

table 42).

On the other hand, in the area of development, the application of basic research results,

Table 42.— R&D Expenditure by Type of Activity

Basic Applied Development

1970 . . . . . . . . . 18.9 28.2 52.9

1974 . . . . . . . . . 15.0 21.7 63.3

1975 . . . . . . . . . 14.2 21.5 64.3

1977 . . . . . . . . . 16.2 25.1 58.7

1978 . . . . . . . . . 16.6 25.1 58.4

1979 . . . . . . . . . 15.6 25.9 58.5

SOURCE: Kagaku Gijulsu Hydron (Indicators of Science and Technology), Kagaku

Gijutsu-Cho (Science and Technology Agency) 1981. Note: This table

covers all R&D, public and private.

the Japanese privatized R&D efforts are highly successful. Japan has clearly outstripped

most Western nations in processing technologies and incremental engineering-rapidly

refining existing designs and ideas by making

them smaller, lighter, faster, and cheaper. Japanese engineers, for instance, reengineered the

16 K RAMs with finer features to produce a

64 K RAM within a 2-year period.

Examples of Japanese strengths and weaknesses in information technology R&D are well

documented in the area of software development. Software development, currently believed to be crucial for future information technology development, can be classified into

various categories. Japan, with its industrial

emphasis on applied R&D, has concentrated

its efforts in production process-control software which has wide commercial industrial applications and which will reap significant economic benefits, both domestically in terms of

the productivity and capacity utilization of industry, as well as internationally, in terms of

the benefits of trade and technology transfer.

However, in other categories of software development such as computer-aided design

(CAD), the United States is technologically

more advanced than Japan. Most of this technological lead resulted from billions of dollars

that have been allocated for aerospace and defense basic research. As a result of this basic

research for U.S. defense purposes, the U.S.

computer simulation models and 3-D design

programs are among the most sophisticated

in the world.

Currently, Japanese industry is beginning

to experience some difficulties with its emphasis on appliedborrowed technology. Japan has

been slowly catching up to western technological innovations and has less input from foreign

basic research patent licenses on which to base

its refinements. Furthermore, Western firms

are expressing a disinclination to sell patents

to Japan, as they see the reengineered Japanese products competing with their own products. Moreover, Japanese firms that have

sometimes neglected basic research, have fewer technological innovations worth offering
Ch. 7—Foreign Information Technology Research and Development • 225

Western companies when they wish to inquire

about the possibility of cross-licensing. In addition to the fear of the decreasing amount of

innovative ideas which Japan can buy and perfect and the fear of being excluded from future

U.S. and other Western nations’ technical developments, national pride is also forcing Japan to put more effort into basic R&D.

As a result of some of these difficulties, the

Japanese Government is beginning to place

more emphasis on basic research activities.

This movement towards increased basic research is reflected in both government and industrial R&D activities as well as in the current Japanese Government’s institutional

mechanisms for influencing and funding industrial research. Because the government mechanisms which influence and fund information

technology R&D are mostly aimed at promoting R&D in the private sector (and many take

the form of informal cooperation), it is difficult at times to disassociate government and

private sector initiatives and roles in information technology R&D activities. However, for

purposes of clarity and comparison, the role

of government, universities, and industry environments for the conduct of information technology R&D will be separately described. Before discussing these environments in detail,

it is also important to understand the size of

Japanese participation in information technology markets.

The Size of Japanese Participation

in Information Technology Markets

Utilizing its basic technology policy which

historically dictated that Japan reengineer imported technological innovations, Japanese industry has developed a very strong position

in world information technology markets. In

many areas where Japan has managed to capture a substantial percentage of the world information technology market, it can largely

be attributed to Japanese industry’s strong

capabilities in product development, market”

ing strategies, and quality control.

Beginning in the 1950s, Japanese information technology industry efforts focused or

microelectronics. Over the last three decades,

there have been major shifts in Japanese consumer electronics production. Figure 41 illustrates the shift from the production of radios,

to television sets, to audio equipment, and finally to videotape recorders. This production

progression is particularly interesting in terms

of technology because it not only illustrates

the steady restructuring of an industry to

higher and more complex technologies, but

also illustrates the changing position of Japanese information technology industry in

terms of global competition.46

In each shift in Japanese consumer electronics production, industry has been dependent

on foreign technological innovations. For instance, Bell Laboratories supplied transistor

technology, RCA licenses made Japanese color

television production possible, and Corning

Glass supplied glass tube technology. Perhaps

more than any other of Japan’s industries, the

development of Japan’s consumer electronics

industry is the result of imported technology

that competitive Japanese firms adapted, improved, and drove costs down. Figure 42 illustrates the Japanese share of world consumer

electronics productions. The total value of production, second only to that of the United

States, reached Y 8,683 billion ($37.6 billion)

—or approximately 150 times that of 1955—

making electronics one of Japan’s major industrial sectors.

‘James C. Abegglan, and Akio Etori, “Japanese Technology

Today, ” Scientific American supplement, 1983, p. J, 18.

Figure 41.—Trends in the Production Composition

Ratio of Major Consumer Electronics Equipment

-

1951 1955 1960 1965 1970 1975 1980 ’82

Years

SOURCES: Annual Data on Japan’s Electronics Industry, 1983 Edition, Electronics

Industry of Japan, Tokyo, 1983; in James C. Abeggian and Akio Etori,

“Japanese Technology Today, ” Scientific American, supplement,

1983.
226 ● Information Technology R&D: Critical Trends and Issues

Figure 42.—JaDanese Share of World Production

of Consumer Electronics Products (1980)

SOURCES: Japan Electronics Industry Development Association; in Gene Adrian

Gregory and Akio Etori, “Japanese Technology Today: The Electronic

Revolution Continues,” Scientific American, supplement, 19S4.

Recognizing the primacy of computers and

telecommunications as growth sectors, as well

as conforming to the trend towards more advanced technology production, Japanese industry has focused on a technology key to

these areas-integrated circuits. As in the case

of consumer electronics, Japan imported basic

semiconductor technology and in the early

1970s initiated the production of integrated

circuits. Although exports were insignificant

during the beginning production years, Japanese industry focused on lowering costs and

improving quality. Integrated circuitry production has grown in value terms at approximately 25 percent per year. Figure 43 illustrates the growth in the Japanese information

processing, computer, and integrated circuit

industries between 1974-81. By 1976, Japan

accounted for a 40 percent share of the world

market for 16 K RAMs, and in 1978, Fujitsu

Ltd. was the first to announce the commercial

production of the 64 K RAM. Japanese companies as well as U.S. manufacturers are the

first to produce 256 K RAMs which will be

available in 1984-85. Figure 44 illustrates Japanese integrated circuit production relative to

U.S. production.

Perhaps the most significant step in this

technology development sequence is the recent

introduction by Japanese firms of one of the

fastest supercomputers worldwide. These new

computers, manufactured by Fujitsu and

Hitachi, represent a major step in Japan’s

government-sponsored national effort to build

fifth-generation computers.”

Government

The large percentage of private R&D funding would indicate the tremendous importance

of Japanese industry in the Japanese success

in world information technology markets.

However, it is a mix of government support,

a favorable and stable political structure, as

well as freedom from national security expenditures, that have combined with the rather

unique Japanese sociology to create a period

of economic growth in the area of information

technology. The nickname for the Japanese

economy “Japan Inc., ” which was given some

years ago, may be said to be a realistic evaluation of the Japanese Government and private

corporations during postwar Japan, when Japan sought to catchup with the industrially

advanced nations. The term “Japan Inc. ” is

still used today but in most cases this word

appears to reflect a misunderstanding of the

relationship between the Japanese Government and industry.

The Japanese Government does not control

industrial R&D through funding mechanisms

or specific policies that must be adhered to,

but rather there is a participatory partnership

among different segments of government and

industry, based on pragmatic decisions, mutual respect, working within a framework of

common goals. The councils and industrial

associations have long been proposing to the

Japanese Government to increase its research

47 Phillip J. Hilts, “Japanese Firms Build Two Fastest Computers, ” The WAirJgton Post, Feb. 7, 1984, p. A,l.
Ch. 7—Foreign Information Technology Research and Development • 227

2,00(

E

1 ,00(

Figure 43.—Japanese Information Technology Industry Sales

 Information processing industry

I Computer industry 2,104.0

IC industry

1,651.8

959.8

245.3

58Q.O

1974

933.9

P

275.1

7

541.2

1975

1,123.0

307.0

! ,

618.9

1976

1,34U.4

412.6

1977

460.2

1978 1979

2,535.6

2,166.9

669.8

596.6

,295.6

1980 1981

Years

NOTE: Information Processing Industry sales figures for 1981 not available.

SOURCE: Survey on Specified Services, Production Statistics in Computer 1982 Japan Infer.

 Processing Center.

and development support, but government

funding has only increased 1.4 percent annually over the past 10 years. Although the government does promote some industrial R&D,

industry has always been a larger investor.

Government-industry relations in Japan have

been broadly discussed, and it is often misunderstood that such relations are largely due

to the Japanese Government subsidy of industrial R&D.

Japan’s information technology firms are

fiercely competitive and the government’s role

is seen as a means for providing an orderly

framework for coordinating private industrial

development. But when any coordination or

intervention is decided on, it is undertaken

through the development of a consensus

among private enterprise and government.

This consensual decisionmaking process between industry and government, frequently

accomplished informally as well as through

formal institutional structures, is in many

ways the most important factor affecting decisions on R&D projects and funding for information technology.

The major function of the Japanese Government is to select, or to guide the selection of

technologies to be targeted, to reduce the economic risks normally associated with developing new technologies, and to assist companies
228 ● Information Technology R&D: Critical Trends and Issues

Figure 44.—integrated Circuit (IC) Relative Production Share

SOURCES: Electronics, newspaper articles; in James C. and Akio “Japanese Technology Today, ”

 supplement, 1982

to achieve large scale production. The direct

financial support for R&D provided by the

Japanese Government to targeted industries

is in many instances less important than the

fact that the industry has been singled out by

the government as a “target” sector. There are

tangible and intangible benefits which flow to

such industries. A targeted sector gains prestige and public respect. Private banks are

more willing to extend credit, customers and

suppliers will tend to give preferred treatment,

and government officials in various agencies

are also likely to be more responsive to the particular needs of target-sector companies.

In addition to the informal consensual decisionmaking, targeting and funding of information technology R&D is accomplished through

major formal government institutions: Ministry of International Trade and Industry

(MITI), Science and Technology Agency

(STA), Ministry of Education, Culture, and

Science (MOE), Ministry of Posts and Telecommunications (MPT) which has nominal

control over Nippon Telegraph and Telephone

(NTT), and the Ministry of Finance (FOC)

through the Japan Development Bank (JDB).

The major Japanese Government organizations directly involved with information R&D

are illustrated in figure 45.

Ministry of International Trade

and Industry (MITI)

Perhaps the most misunderstood agency

within the Japanese Government, the Ministry of International Trade and Industry

(MITI) has been credited by many in the

United States as being much more pervasive

than it is in reality .48 Taking into account the

scale of the Japanese economy, the complexity of international markets and the rapid

changes in technology, MITI alone cannot and

does not completely control industry. A case

in point is MITI’s failed attempt during the

1970s to consolidate the Japanese automobile

— — Tsuruta, “The Myth of Japan Inc.,” 

 July 1983, p. 43-48, and Robert C. Christopher,

“Don’t Overestimate Tokyo Industrial Aid,” The New York

Times, Jan. 30, 1984, p. A, 21.
Ch. 7–Foreign Information Technology Research and Development • 229

Figure 45.—Japanese Government Organization for Information Technology

Research and Development

SOURCE: “Science in Japan, ” Nature, Sept. 29, 19s3.

industries into three large groups. Some have

claimed that MITI is on paper at least no more

influential than the Department of Commerce

in the United States.49

MITI was established in 1949 with the

broad charter of shaping the structure of Japanese industry, managing foreign trade and

commercial relations, ensuring adequate raw

materials and energy supplies, and managing

relationships between particular business and

technical industrial sectors and the govern-

‘

g

’’Science in Japan, ” Nature, vol. 305, Sept. 29, 1983.

ment. Despite this broad legal mandate, the

pervasive MITI practice of “administrative

guidance” by which many policies are implemented depends on no statutory authority.

Nevertheless, MITI does have the advantage

of broad contacts across information technology industries and relies extensively on this

informal practice to influence firms and whole

industries in the direction it wants them to

take.5o

‘OIra C. Magaziner and Thomas M. Hout, Japanese hfustry PoL”cy (Berkeley, CA: Institute of International Studies,

1980), pp. 40-41.
230 ● Information Technology R&D: Critical Trends and Issues

Within MITI’s bureaucratic structure, the

Industrial Policy Bureau has played the major role in guiding overall industrial development. This Bureau consults with representatives from all industrial sectors and through

these informal and formal meetings sets Japanese industrial policy. The major MITI bureau involved with information technology is

the Machinery and Information Industries Bureau. In general, this Bureau oversees and

coordinates export, import, production, distribution and consumption of machinery and mechanical apparatus. In addition to information

technology, aircraft, automobile, machine

tools, as well as other industries, are within

the Bureau’s responsibilities. Within the Bureau there are several divisions which deal

directly with information technology.

The most significant division involved with

information technology is the Electronics Policy Division. Its responsibilities include: 1)

planning comprehensive policies for electronics equipment industries; 2) the distribution

of computers; 3) planning programs on the utilization of computers; 4) conducting surveys

on the utilization of computers; 5) representing the Japanese Government at international

organizations concerning information technology matters; and 6) overseeing the Data-Processing Promotion Council.

The Industrial Electronics Division is responsible for exports, imports, production, distribution, promotion of consumption, and improvement and adjustment of communications products. These products include computers, laser application devices, radar, electronic measuring instruments, telephone and

telegraph equipment, switchboards, facsimile

equipment, broadcasting equipment, fixed

multiplex communication devices, and communication wire and cables.

Two other divisions, Data-Processing Promotion and Electrical Machinery and Consumer Electronics, also are directly involved with

information technology. As its name suggests,

the Data-Processing Promotion Division responsibilities include: 1) the examination and

licensing of data processing technicians; 2) the

cultivation and promotion of data processing

service industries; and 3) the promotion of

computer usage and applications programs development.

In addition to these major Bureaus and their

respective divisions, MITI policies are influenced by several advisory councils, industry

associations, and research associations. Perhaps the most unique aspect of MITI policymaking, these advisory groups are where industry and government officials develop a

consensus on goals and policies for technological development. In these councils and associations members from government, academia,

and industry discuss technology trends, market potential, and policy. Problems, ideas, and

proposals are discussed, and if a general consensus is obtained, it is reflected in government and industrial R&D policies and practices. In addition to these formal channels,

there are also a number of informal exchanges

between government and industrial representatives.

Within MITI, the Agency for Industrial Science and Technology (AIST) is explicitly

oriented toward research and development of

technology with industrial applications. In addition to its responsibilities of planning and

administering policies and programs for research and development, AIST operates 16

government laboratories, including the Electrotechnical Laboratory (ETL), the major

MITI laboratory for information technology

R&D. In conjunction with ETL, AIST also

oversees collaborative research with affiliated

laboratories and private companies-particularly for MITI’s targeted national information

technology R&D programs. The AIST also administers the industrial standards programs.

Directly under MITI’s jurisdiction, the Electrotechnical Laboratory is the largest national

research organization in Japan specializing in

electronics research. The ETL, with an annual

budget of $40 million, employs approximately

730 researchers. ETL’s major areas of research

include solid state physics and materials, information processing, energy, standards, and

measurements. Similar to DOD facilities in the
Ch. 7—Foreign Information Technology Research and Development ● 231

United States, ETL has in addition to Its own

internal research, responsibility for advising

the government on technology options and

monitoring industrial R&D programs. ETL,

like other technology in-house research laboratories, does not attempt to compete with industry. As in many U.S. Government research

labs, ETL concentrates on identifying research

projects and directions (usually high risk)

where it could supplement industrial research

activities. ETL also oversees the industrial research efforts for MITI coordinated national

R&D projects.51

As the Japanese Government began to move

into more basic research activities and new

state-of-the-art technologies, many of its policymakers felt that its institutions were ill-

-equipped (e.g., too constrained, rigid) for basic,

pioneering research. Consequently, Tsukuba

Science City, which was begun in 1966, was

planned and built by the government for the

purpose of centralizing research and educational activities. In terms of its concentration

of high level personnel, it in many ways resembles Silicon Valley in the United States, although in terms of government organization,

the North Carolina Research Triangle is perhaps a better comparison. Located within

Tsukuba City are 30 of Japan’s 98 national research institutes. These 30 research institutes

account for approximately 40 percent of the

total research budget and 40 percent of the

total number of researchers in Japan. In addition to these 30 national research institutes,

the Tsukuba Science City accommodates a

total of 46 research organizations, including

two national universities, six organizations

belonging to government-funded special organizations, and eight organizations affiliated

with other administrative entities. Approximately 27 research-oriented private corporations have also relocated to Tsukuba Science

City.”

— —. — —

“George E. Lindamood, “The Rise of the Japanese Computer

Industry, ” Scientific Bulletin, Department of the Navy, Office

of Naval Research Far-East, vol. 7, No. 4, October-December

1982, p. 61, 62.

‘*For a detailed discussion of Tsukuba Science City see Justin

L. Bloom and Shinsuke Asano, “Tskuba Science City: Japan

Tries Planned Innovation, ” Science, vol. 212, June 12, 1981,

pp. 1239-47 and “Science City in Japan-Tskuba, ” Science and

Technology in Japan, January-March 1983, pp. 6-11.

Phofo cred(f Embassy of Japan

Tsukuba Science City

National Research and Development Projects

Another effort to stimulate basic long-term

research activities by coordinating industry

and government research efforts was begun

in 1966 with the initiation of National Research and Development Projects. Perhaps the

most significant aspect that sets Japanese

R&D efforts apart from U.S. R&D, these national projects are directed towards research

that is in the Japanese national interest, longterm, high-risk, and precompetitive-research

that is not directed towards any specific product, but technology that is useful for an entire industrial sector.

The initiation of a national R&D project is

accomplished through a series of steps. First,

through meetings with government, academic,

and industrial representatives, usually within

various councils and associations, MITI officials derive a consensus on areas for national

R&D attention. MITI’s “Vision of MITI Policies in the 1980s ” is an example of the consensuaI decisions reached among the representatives. Reflected in these “Visions of the

1980s” is Japan’s basic national economic philosophy which states that Japan should seek

to ensure its economic survival by becoming

a technology-based nation and by making

maximum use of brain power, which is its

greatest resource to develop innovative technology.53 More specifically, the report suggests

“’’The Vision of MITI Policies in the 1980s, ” provisional

translation, Ministry of International Trade and Industry,

Tokyo, Japan, Mar. 17, 1980.

38-802 0 - 85 - 16
232 . Information Technology R&D: Critical Trends and Issues

that Japan should encourage development efforts and a switch-over to “forward-engineering” in the knowledge-intensive or information

technologies.

By targeting specific information technology areas for national priority, MITI identifies

those areas to receive a combination of direct

and indirect project R&D support. This support system for national projects, often termed

seed money because of its relatively small

amount, initiates basic precompetitive research and leaves to industry detailed productoriented decisions. Often this seed money is

given to various information technology firms

in the form of 50-50 matching grants.

Lastly, MITI forms company groups or research associations to work on a specific national project. Sometimes research associations have actually overseen R&D activities

(as in the VLSI project); however, these research associations generally coordinate each

member’s separate research efforts. Staff of

these research associations usually include employees on detail from government and industry, as well as retired industry and government officials.

Between 1966 and 1979, the Japanese Government contributed approximately $400 million to 16 different national research projects.54

A chronological history of Japanese Government support for national information technology research and development projects is

presented in figure 46. Since the early projects,

typical amounts committed to national research projects appear to be increasing and the

scope of the projects is towards more basic research.

The VLSI development project exemplifies

one of the better known national information

technology R&D projects, largely because of

the subsequent market success of the Japanese integrated circuit industry. Begun in

1976, the VLSI project involved the formation

of a new VLSI research association with seven

participating private companies in addition to

Nippon Telephone and Telegraph and the —— 64 Leonard Lynn, “Japanese Technology: Successes and Strategies,” Current History, November 1983, p. 370.

MITI Electrotechnical Laboratory. The project was jointly funded at $150 million from

government and $200 million from industry

over a 4 year period. The VLSI Research ASSOciation and MITI laboratory efforts were

largely generic and provided support for already existing industry R&D efforts. The net

effect of these efforts was the worldwide introduction of the first 64 K RAM device. The

resultant successes of the Japanese information technology industry may signify that efforts across public (MITI), quasi-public (NTT),

and private (major corporations) sectors in

pursuit of a common national technological

goal is in fact one of the strengths of the Japanese national R&D projects system.55

The national information technology R&D

project which has received the most attention

recently is the Fifth-Generation Computer

Systems Project. Begun in 1979, the project

has become an impetus to the initiation of

other major national information technology

R&D projects in the United Kingdom, France,

and Europe.

In light of the Japanese Government’s goal

of stimulating basic research efforts, the objective of the fifth-generation computer project is to move Japan to a lead position in information technology areas related to office

automation, computer-aided design, computeraided engineering, robotics, and computeraided instruction. Moreover, the intent is to

direct information technology development in

Japan to specific societal needs. These include:

coping with an aging society; increasing activity in low productivity areas; increasing energy savings; and assisting the transformation

of society into one in which information plays

a key role. The goal of the fifth-generation

project is to develop basic technology and prototype systems that can perform functions

such as inference, association, and learning as

well as non-numeric processing of speech, text,

graphics, and patterns.

“For an in-depth analysis of the VLSI projec~ see Kiyanori

%ludcibara, “From Imitation to Innovation: The Very Large

Scale Integrated (VIM) Semiconductor Project in Japan, ” Alfred P. Sloan School of Management, Massachusetts Institute

of Technology, 1982-1983.
Ch. 7—Foreign Information Technology Research and Development ● 233

Figure 46.—Japanese Government Support for Information Technology

1

2

3.

4

5

6.

7

8

9.

10

12.

Sponsors Large Scale MIT I All government funding through consignment payments.

These are combined because IS a continuation of (1) Sponsors All government funding through consignment payments

FONTAC was aimed at developing a large size computer with IBM systems. Corporate 

The was established by law 1970 to encourage the development of software by direct and operations are by M(TI Three long

term credit banks provide loans to software houses and data services through guarantee fund Total government support unclear, but totaled 

 for FY 1972.1980 (see text for additional material),

 of (2) Sponsors AIST and Corporate Toshiba, Sanyo. 

 Research and Hoya Glass

 aimed at developing a new series of computers competitive with IBM’s 370 series a 50 percent subsidy to three computer manufacturer groups

Corporate (produced M series), NEC.Toshiba (produced and (produced 

Sponsor 31 companies, 50/50 develop high efficiency Input-output and terminals

Sponsor unclear, 50/50 (government/private).

Sponsors Machinery and Information Bureau and Data Processing Division, Corporate large Japanese software companies to an

I PA the Systems Development Corp , a number of unspecified smaller firms, to Increase the production and use of software programs This constitutes most software development program to date Results unclear

& 11, because 11 IS seen as a of (10), Sponsors Machinery & Information Bureau and Industrial Electronics Corporate 

two phases: Fujitsu, & Toshiba, OK I, Sharp, Matsushita; above, plus NTT and AlST’s Laboratory staff, 

formed Phase VLSI Research formed, Phase II Electronic Computer Basic Technology Research Association formed (July 1979). Funding (govern.

 conditional loan, repayable profits are generated from technologies; Phase 1: Y30 from the government, Y42 from the sector Phase 

 from the government; Y24.5 from the sector

Sponsors National Research and Development Program, Corporate Toshiba, Matsushita

 Electric, Research Association of Optoelectronics Systems (January 1981); Laboratory 

ed by Optoelectronics Joint Research the Fujitsu Plant, all government funding through consignment

payments.

Sponsors National Research and Development Program, Corporate Fujitsu, Toshiba, Mitsubishi Government

Laboratory Ass/s Laboratory, the for the Development of Speed Computers

(December 1981), Laboratory is also Involved, although majority of work be conducted at companies’ own research 

all government funding through consignment payments.

 Next Generation Baste Technology Of 48 companies 3 areas; numbers ( ) Indicate number of

firms, Area New Materials (33), Area Biotechnology (14), Area Ill: Semiconductor Elements (10), five formed, 3 for

Area 1, 1 for Area 11, and 1 for Area Ill; all government funding through consignment payments

Sponsor” Machinery and Information Bureau, Corporate Part/c/pal/on Fujitsu, Toshiba, Government Laboratory

Ass/stance. Laboratory, at preparatory stages; The Institute for New 

 Computer Technology, an endowed research foundation (April 1982), total funding yet to be determined

SOURCE Jimmy W Wheeler, Merit E Janow, Thomas Pepper, and Yamamoto, “Japanese Industrial Development in the 1980’s: Implications for U.S.

Trade and Investment, ” Hudson Institute , 1982, for the Department of State.
234 ● Information Technology R&D: Critical Trends and Issues

The Japanese Government established the

Institute for New Generation Computer Technology (ICOT) in April, 1982 as the center

organization for coordinating the fifth-generation computer project R&D activities.

Although the government is funding the initial 3 year R&D stage, eight manufacturers

donated money to establish and run ICOT.

The consortium of eight manufacturers which

equally support ICOT and share in the research results are: Fujitsu Ltd., Hitachi Ltd.,

Matsushita Electrical Industrial Co., Mitsubishi Electric Co., NEC Corp., Oki Electric

Industry Co., Sharp Co., and Toshiba Co.

These companies, in addition to NTT and

MITI’s Electrotechnical Laboratory, have

sent 42 researchers to the ICOT research

center.

Beginning with a staff of 52 and a planned

budget of $450 million over the first 5 years,

the overall research program is scheduled to

last for 10 years. In addition to its relatively

long-term research, ICOT is unusual because

it is a separate neutral organization with a centralized research laboratory. This contrasts

with the traditional Japanese approach in

which each of the participating research institutions and companies conducts its own research work. In addition to its own internal

research, I COT cooperates with two government laboratories, various Japanese universities, and independent foreign researchers.

ICOT also contracts with Japanese industries

to make and test prototype software and hardware. The specific universities and companies

involved vary with each individual research

project and participation is not limited to the

consortium of eight major companies sponsoring ICOT. Figure 47 illustrates ICOT’s organization for various research projects.

The research plans of the ICOT center focus

on seven major areas:

●

●

●

●

●

●

●

basic application systems,

basic software systems,

distributed function architectures,

new advanced architectures,

VLSI technology,

systematization technology, and

development supporting technology.

Within these seven areas, 26 research projects

are to be conducted by teams of university,

Figure 47.—Cooperation Between Research Participants for the Fifth-Generation

Computer Systems Project

(lest-model making)

SOURCE: Trudy E. Bell, “Tomorrow’s Computers—The Quest,” IEIEE Spectrum, November 19S3.
Ch. 7—Foreign Information Technology Research and Development ● 235

industry, and government researchers. The 10

year span for these 26 projects is divided into

three phases. Begun in 1982, the initial phase

involves reviewing and evaluating research on

knowledge processing and developing basic

technology for the second phase. Hardware

and software subsystems such as simulators,

prototypes for language processing, and experimental natural language processing systems are being constructed for several experimental systems. The intermediate phase will

attempt to develop subsystems for hardware

and software as well as algorithms and basic

architecture. The final stage will attempt to

integrate software subsystems, hardware subsystems, and applications software in order to

develop the first fifth-generation computer

prototypes. These three phases of research

Figure 48.—Conc

● Basic application system

. Basic software system

● New advanced arch itectul

● Distributed function

architecture

● VLSI technology

● Systematization

technology

● Development support

systems

within the seven different areas are illustrated

in figure 48.56

Science and Technology Agency (STA)

The Science and Technology Agency (STA)

is responsible for the overall coordination of

social needs-oriented science and technology

policy and expenditure in Japan. It is responsible for the planning, formulating and promotion of basic policies pertaining to science and

technology, and for coordination of these policies and activities throughout the various

 Richard Dolen, “Japan’s Fifth-Generation Computer

Project, ” Scientific U.S. Department of the Navy, vol.

7, No. 3, July-September 1982, pp. 63-97, and “Research and

Development Plans for Fifth Generation Computer Systems, ”

Japanese Embassy, April 1982.

ept Diagram Showing How Research and Development Are to Progress in the Fifth

Generation Computer Systems Project

study of basic Intermediate 

theory and system systern on a trial basis system (prototype)

re Satsic 

evaluation 

architect - a

● Trial production of ❁■

experimental machine , GW UJ -

● ✤❉▲✤❉❅ Fifth n of network $yateql generation we *..**.

●

 - 

 ..w ~m and

knowledge base I N

WanCad afchitao- 1

I Sufq

SOURCE” Fifth Generation Computer Systems Conference, Japanese Ministry of Trade and Industry, Tokyo, Japan, Oct. 19-22, 1961
236 ● Information Technology R&D: Critical Trends and Issues

government ministries. STA has jurisdiction

over councils, research institutes and development agencies which mainly concentrate on

technological developments in nuclear energy,

space and ocean development, aviation technology, and laser technology. Practically none

of STA’S budget directly supports industrial

R&D; therefore, information technology R&D

which is categorized as an industrial area, is

not widely influenced by STA. However, approximately half of the STA budget indirectly

supports information technology R&D

through procurement of information and communication technology equipment and facilities for its agencies’ activities.

Information Technology

Promotion Agency (IPA)

Another government organization aimed at

developing and disseminating information and

computer systems is the Information Technology Promotion Agency (IPA), which was established in 1970 under the Information Technology Promotion Agency law. Its goal is to

promote the use of computers, encourage the

development and use of programs, and help

software firms. It is the only national organization in the field of software promotion in

Japan.

Financing for the I PA comes from government subsidies, private corporations, three

long-term credit banks (the Industrial Bank

of Japan, the Japanese Development Bank,

and the Long-term Credit Bank of Japan), and

from revenues earned by the association itself.

One of the more important of IPA’s activities

is its credit guarantee programs. Information

processing firms and software houses are often

in need of funds to develop software programs,

but have limited property that can be used as

collateral. The I PA has a system for guaranteeing such obligations, as long as they are

registered with the IPA.S7

57An IPA-style credit guarantee system is not uncommon in

the United States. However, the American credit guarantee systems tend to be aimed at broad industries, such as housing,

rather than at narrowly targeted sectors.

Japan Electronic Computer CO. (JECC)

and Japan Robot Leasing Co. (JAROL)

Assistance is also provided by the Japan

Electronic Computer Co. (JECC), which borrows money from the Japan Development

Bank (JDB) and also from private banks. It

is a jointly owned firm that purchases computers from participating manufacturers and

leases them to customers. In 1980, the Japan

Development Bank provided $263 million to

the JECC, $218 million in 1981, and approximately $100 million in 1982. When the JECC

was first established, it provided major support

for the Japanese computer industry; however,

as the financial resources of these companies

increases, the Japanese computer companies

have become less dependent on government

subsidy and are establishing their own leasing operations.

The Japanese Government also helped toestablish the Japan Robot Lease Co. (JAROL)

which is made up of 24 members of the Japan

Industrial Robot Association and 10 insurance

companies. JAROL’S objective is the encouragement of the development and use of robots

in small and medium businesses. Like the

JECC, JAROL buys robots from manufacturers and leases them at low prices to small

businessmen. JAROL also receives most of its

funds from the JDB and is therefore able to

lease its robots at low prices. Similar to the

JECC, JAROL aims to create a mass market

for robot technology while encouraging production.

Ministry of Posts and

Telecommunications (MPT): Nippon

Telegraph and Telephone (NTT)

The Ministry of Posts and Telecommunications (MPT) indirectly influences information

technology research and development because

of its administrative guidance over Nippon

Telegraph and Telephone (NTT).S8 NTT’s

58There is Some contention over whether NTT should be classified as a nongovernmental or governmental entity. Because

NTT receives no direct funding from the Japanese Government

some argue that Nil’ is not a government entity. On the other

hand, the U.S. Government has encouraged NTT to open up

its procurements to foreign suppliers on the grounds that NTT

is a government entity and therefore is subject to the GATT

government code.
Ch. 7—Foreign Information Technology Research and Development Ž 237

budget, services, tariffs, and overall policies,

as well as appointments of top officials, are

subject to MPT’s review and approval. However, NTT has not received a government subsidy for over 30 years; in fact, over the last

3 years NTT has returned to the Japanese

Government on request approximately $2 billion. This contrasts sharply with the idea that

the Japanese Government heavily subsidizes

information technology R&D.

NTT is the domestic public telecommunications monopoly in Japan, although it does not

have any manufacturing capability within the

organization. NTT, as the owner of virtually

all the telephone lines in Japan, remains the

most powerful single entity in Japanese telecommunications. NTT accounts for about

three-quarters of the Japanese market for telecommunications and data communications,

equipment, and services. As a result, NTT

with its demands for new equipment and services has a powerful influence on Japanese information technology research and development—more so than MITI.

Typically, new communications products

destined for NTT use are initiated in one of

its four Electrical Communications Laboratories (ECL). NTT spends approximately 2 percent of its revenue on R&D (which amounted

to more than $350 million in 1980), mainly at

ECL labs. This system of labs corresponds to

Bell Labs although it is approximately onefifth of the size of its U.S. counterpart. ECL

tends to do more developmental R&D rather

than the basic research for which Bell Labs

has been so widely acclaimed. Much of the research carried out at NTT’s labs is devoted to

achieving the extremely detailed and demanding specifications that the company requires

when it issues R&D contracts to private firms.

More often, NTT launches research in collaboration with one or more of the four major

Japanese electronics firms (NEC, Fujitsu, Hitachi, and Oki Electric), which actually send

staff to the NTT labs. The subsidized joint research normally results in NTI's appointment

of a preferred supplier from among the researchers when the time comes to purchase the

product. Because NTT is one of the largest information technology and telecommunications

markets in Japan, most electronics firms cooperate with NTT. Competition often develops

between these firms in efforts to be selected

as partners in new technologies and systems

developments.

NTT divides its procurement procedures

practices into three tiers or “tracks” which

have been agreed to in the General Agreement

on Trade and Tariffs (GATT) and other bilateral trade agreements:59

Track 1 (competitive bidding) is applied to

products to be procured based on the Government Procurement Code agreed to by the

General Agreement on Trade and Tariffs

(GATT). These procurements usually include

off-the-shelf products such as PBXS, data terminals, modems, computers, peripherals, facsimile machines, measurement instruments,

etc.

Track II is applied to equipment that is not

available in the marketplace and which requires some research and development. This

track generally refers to products for which

a limited amount of collaboration between

the supplier and NTT is necessary to tailor

applications to NTT’s specifications. Track

II contracts are normally single-company

contracts.

Track III is applied to equipment not available in the marketplace and which requires

extensive R&D for NTT use. These are the

most highly prized contracts and the most

difficult for foreign or small companies to

penetrate. NTT seeks a supplier with sufficient research ability to develop a product,

or to develop one according to an NTT prototype.

In addition, there are Tracks 11A and 111A

that allow for new producers to take over expired Track II and III contracts.

U.S. and other foreign telecommunications

equipment manufacturers have suggested that

NTY'S close collaborative R&D activities with

several Japanese companies prevent them

from penetrating the Japanese telecommuni5gJack Osborn, outgoing telegram from the U.S. Embassy in

Tokyo, Japm Oct. 21, 1983, 7 pages.
238 • Information Technology R&D: Critica/ Trends and /ssues

cations market. With a 20:1 trade deficit in

telecommunications equipment and a substantial Japanese penetration of certain U.S. market niches, many U.S. companies would like

to balance some of these telecommunications

trade deficits.6o Moreover, other motivations

for insisting on participating in the Japanese

market relate to the changing balance in

American and Japanese research and development. Just as the Japanese presence in the

American market has a dual purpose-exports

and the transfer of technology-so might

American participation in Japanese markets

and R&D activities serve two functions.

The issue of NTT’s procurement policy can

be best viewed within the framework of the

plans for liberalization of the entire Japanese

telecommunications monopoly. Because a

large amount of NTT'S profits (last year’s profit was $1.6 billion) goes to the Japanese Government ($600 million) which needs revenue in

the face of its continuing deficits, NTT cannot make a large profit. Another fiscal constraint is the rapidly decreasing rate of growth

in the number of telephone users. More than

90 percent of Japanese households now have

telephones, which means that the traditional

market (revenue) has leveled off. In addition,

NTT is in the process of testing and eventually

implementing its ambitious 20-year all-digital

Information Network System (INS) program,

which is expected to cost up to $120 billion

by 1990.

To solve these financial problems, Prime

Minister Nakasone is supporting a major four

step reform plan recommended last year by a

special study group commissioned to study

the Japanese Government. The plan, now

under discussion, would first convert NTT to

an incorporated government-owned entity.

NTT would then be free, however, to set its

own management and personnel policies.

Under the proposed plan, many operations,

‘In 1982 the Japanese exported more than $408 million in

telecommunications equipment to the United States. During

this same period, Japan imported less than $88 million of this

same equipment from the United States. Peter J. Harm, “Data

Communications in Japan, ” Data Communications, August

1983, p. 56.

such as data communications services, would

be delegated to spin-off companies operating

at a regional level-somewhat like the pattern

of the AT&T divestiture in the United States.

Hisashi Shinto, the new chairman of NTT,

believes that transforming the massive bureaucratic Japanese telecommunications monopoly into a partly private company will be

more profitable, while encouraging greater

competition and innovation in the telecommunications and information technologies industries. It is believed that more Japanese companies will be encouraged to vie both for

NTT’s business and for the private telecommunications market previously controlled by

NTT and its selected family of suppliers.

Kokusai Denshin Denwa Ltd. (KDD)

The KDD operates Japan’s international telephone, telegraph, and other related communications services.61 Divided from NTT in

1953, it is 90 percent privately owned, with

10 percent of its stock held by NTT. At the

time of the inauguration of KDD, the international telecommunications research group

of the Electrical Communication Laboratories

of NTT was transferred from NTT and reorganized as KDD’s Research Department. By

1969, a development center was created and

the department was renamed Research and

Development Laboratories. The laboratories,

located in Meguro, Tokyo, employ more than

120 R&D personnel and are composed of 12

special purpose laboratories and three

divisions.

A new laboratory being built in the Nerima

suburb of Tokyo, will be completed in 1985.

This R&D reinforcement will permit further

research and development concentration in

such fields as switching for integrated digital

networks, fiber-optic submarine cable transmission, satellite digital transmission, opticalmemory disks, system conversion techniques,

wideband video, etc. To help in this effort,

KDD expects to add 50 more engineers to its

R&D staff by 1988.

8’Yasuo Makino, “Telecommunications in Japan: Changing

Policies in a Changing World, ” Z’ekcommum”cati”ons, October

1983, pp. 139-145.
Ch. 7—Foreign Information Technology Research and Development • 239

Defense Agency

Because of Japan’s small national market

for defense equipment, Japanese defense research and development activities are fairly

limited. Overall, Japanese procurement of defense equipment accounts for less than fourtenths of 1 percent of total Japanese industrial production.

Within the Defense Technical Research Institute there are very small-scale development

projects on electronics equipment (radar, etc.)

with a budget of ¥ 1.3 billion ($5.6 million) in

fiscal year 1982, ¥ 0.6 billion ($2.6 million) in

fiscal year 1983, and ¥ 3.8 billion ($16.5 million) in fiscal year 1984. These projects are

done in cooperation with private firms. In addition, the Defense Agency indirectly supports

information technology R&D by purchasing

hardware for testing purposes from private

electronics firms.

As a result of economic trends in both the

United States and Japan, as well as a changing international security environment, there

have been growing tensions over trade and defense issues. In general, some Americans believe that the low level of Japanese military

expenditures frees funds for civilian research

and investment while requiring higher taxes

and absorbing resources in the United States

which in turn provides defense.62 As a result,

the U.S. Government believes that Japan

should increase its military strength as well

as information technology R&D expenditures

for military applications. Moreover, U.S. companies argue that an inequality exists between

United States and Japanese trade: no manufactured U.S. civilian product (with the single

exception of airplanes) has captured as much

as 10 percent of the Japanese market, while

approximately 14 percent of Japanese defense

equipment is purchased by the United States.63

— — 62 — David Denon, ‘‘Japan and the U.S.—The Security Agenda, ”

Current History, November 1983, p. 355,

BqS~phen J. SOl~Z, “A Search for Balance,” Foreign Affm”rs,

p. 75.

Japan Development Bank (JDB)

The Japan Development Bank (JDB) is another government financial intermediary used to

target industrial development. The Japanese

Government’s Trust Fund Bureau (which is

the main organization in its Fiscal Investment

Loan Program) provides JDB with its main

source of capital, though it can also raise funds

by issuing certain types of bonds. JDB’s principal responsibility has been the extension of

long term, low interest loans for capital investment in new industries. In the years immediately after its formation, JDB concentrated on

loans for the reconstruction of basic manufacturing industries.

As a result of the consensus to increase the

support for “knowledge-intensive’ industries,

the JDB began to target support for what it

terms “development of technology.” The funding categories in area of development of technology are illustrated in table 43. Most of the

computer funds, as a matter of policy, have

gone to the JECC, although some software

firms have also received funding. For the other

funding areas for technology development,

there are two general JDB loan programs.

Both of these loan programs, which resemble

MITI’s seed money grants, attempt to stimulate private investment in specific areas of

information technology R&D. The first loan

program, set up under a 1978 law, amounted

to ¥ 10 billion ($43.3 million) in 1981. Loans

from this program must be directed toward

specific project areas designated by cabinet order. Should a designated project area be oversubscribed (as happened with semiconductors), JDB can force larger firms that have better access to private financial markets to utilize those markets, while JDB loans are

preserved for the smaller firms.

The other technology development loan program was established by the bank itself and

not designated by specific laws, though it still

falls within the broad policy guidelines of the

government. This part of the JDB budget totaled ¥ 44 billion ($190.5 million) in 1981.
240 ● Information Technology R&D: Critical Trends and Issues

Table 43.—Japan Development Bank Loans for Development of Technology (in billions of yen)

Fiscal year Fiscal year Fiscal year Fiscal year

1977 1978 1979 1980

New loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥71.2 ¥129.0 ¥108.5 ¥96.4 $457”

Development of electronic computers. . . . . . . 38.2 55.3 47.1 55.4 262

Domestically-manufactured computers . . . . 35.5 53.5 45.0 54.0 256

Computer manufacturing plants . . . . . . . . . . 0.4 0.2 0.4 0.6 3

Data processing systems. . . . . . . . . . . . . . . . 2.3 1.6 1.7 0.8 3

Use of high technology in certain electronic

and machinery industries. . . . . . . . . . . . . . . . 8.3 7.8 10.2 14.5 69

Electronic industry . . . . . . . . . . . . . . . . . . . . . 3.8 2.1 7.0 12.0 57

Machinery industry . . . . . . . . . . . . . . . . . . . . . 4.5 5.7 3,2 2.5 12

Development of domestic technology . . . . . . . 24.7 65.9 51.2 26.5 126

Development of new technology . . . . . . . . . 20.4 57.4 40.9 22.6 107

Trial manufacturing for commercial use . . . 0.9 4.0 1.2 0.3 2

Development of heavy machine. . . . . . . . . 3.4 4.5 9.1 3.6 17

a

ln millions of dollars.

SOURCES: U.S. Facts arrd Figures About the Japan Deve/oprnent Bank, Japan Development Bank, 1981, p. 28; and Jimmy W. Wheeler, Merit E. Janow, Thomas Pepper,

and Midori Yamamato, “Japanese Industrial Development Policies in the 1980’s: Implications for U.S. Trade and Investment,” Hudson Institute Inc., 1982,

for the U.S. Department of State.

These loans are devoted to new domestic technologies and initial manufacturing efforts for

commercialization of these new technologies.

Firms that believe that they have developed

a process or technology falling within the

broad parameters established by the cabinet

must apply in order to be considered for loans;

JDB does not solicit customers. The firm’s

proposal is submitted to a council of scientific

advisors, which evaluates the proposal. If the

technology is approved, the applicant then

faces an evaluation of credit worthiness and

of the financial characteristics of its loan application. If the applicant is a large company

with well established financial links, it must

concurrently seek private financing, because

JDB will provide only partial funding. If the

applicant is small, and has relatively weak financial links, or if the project is large-scale or

viewed as a high priority for the nation, then

the JDB may take a lead role in putting together a consortium to finance the project.

Finally, by general agreement, the JDB only

finances the first plant in a new area. Its role

is to help launch new technology, not to provide low cost financing for the expansion of

industry.

The small size of the JDB loans indicates

that the importance of government’s financial

mediary role “stems not from outright control

or from overall size, but rather from socializing risks, coordinating private investments,

and processing information.”64

University

The Ministry of Education, Culture, and Science (MOE) funds research at three research

institutes, six National Institutes (for joint use

by universities), and 93 national universities.

Among the various national universities in

Japan, the big seven are the universities of

Tokyo, Kyoto, Osaka, Tohoku, Hokkaido,

Nagoya, and Kyushu. In the area of information technology, Tokyo University has activities in several departments: information

science (in the Faculty of Science), information

engineering and precision engineering (in the

Faculty of Engineering), as well as a large central computer center. In most of the other universities, there is just one department (usually in the Faculty of Engineering), as well as

a sizeable central computer center. Kyoto University claims to have the oldest information

engineering department and is considered a

close rival to the University of Tokyo. Other

national universities that have significant

6tEi~uke S&&ibma, Robert Feldman, ~d YUZO H~ada!

“The Japanese Financial System in Comparative Perspective,”

a study prepared for the use of the Joint Economic Committee

(Washington, DC: U.S. Congress, U.S. Government Printing

Office, Mar. 12, 1982), p. 11.
Ch. 7—Foreign Information Technology Research and Development ● 241

computer science departments include Tsukuba University and the Tokyo Institute of Technology. Among private institutions, only Keio

University and Waseda University are considered to have sizeable computer science

programs.

Higher education has become an important

social investment in Japan. Between 1960 and

1975, the numbers of students in higher education multiplied by more than three times (to

2.2 million), including students in Japan’s junior colleges (post high-school institutions concerned with teacher training, technical education, etc.). Of the 1.73 million undergraduates

enrolled at Japanese universities in 1981, approximately 334,000 were enrolled in engineering studies (exactly six times as many students in the natural sciences, including

mathematics). Many universities have no

science faculty, only engineering departments.

These large numbers of engineering students

indicate the heavy emphasis placed on engineering in Japan. Consequently, Japan continues to maintain a large engineering manpower

base. However, a small percentage of these

engineering students continue on to graduate

study where they could contribute to basic

university research. For instance, in Japan,

the proportion of graduate research students

to the entire undergraduate student population is 3 percent. In the United Kingdom the

proportion is over 19 percent; in France 22 percent; and in the United States 12 percent.65 Although Japan has more undergraduate students enrolled in electrical and electronics

engineering programs than the United States,

Japan has approximately one-fourth as many

electrical and electronic engineering graduate

students as the United States. Because students at the graduate level make a large contribution to basic R&Din university environments, the low number of Japanese graduate

engineering and science students has been

cited as one reason for such a small amount

of university research in Japan. In this context

it is also worth noting that Japanese companies, which prefer to train their own development engineers, like to recruit young inexpe-

“The Economist, Aug. 6, 1983, p. 65.

inexperienced persons-recruiting them before

they go on to postgraduate work.

Recently, there has been concern that the

environment for information technology basic

research has generally not been adequate at

Japanese universities. In addition to the inadequate number of graduate students, two

other causes for the small amount of information technology basic research activities in

Japanese universities have also been cited.

Some researchers believe that the heavy emphasis on rote learning in Japanese schools has

helped to suppress creativity in the learning

process. Moreover, the importance of severe

university entrance examinations has been

seen as a deterrence to specially talented or

creative students.

Researchers usually cite two indices of success in originality and successful basic research-the number of Nobel Prize winners

and the frequency with which scientists’ work

is cited by other researchers. Japan has had

four Nobel Prize winners. The citation index

devised by the Institute of Scientific Information in the United States includes 19 Japanese

researchers (and roughly half of those worked

in American laboratories) among the 1,000

international scientists accredited with the

most frequent citations in the scientific literature.66

A second major factor affecting basic research in university environments is the level

of government funding. More than 98.8 percent of R&D expenditures at national and public universities was funded by the government

and only 1.2 percent by private industry.67 In

1979, universities spent approximately $3.69

milion for R&D: national and public universities spent $2.459 million, and private universities spent $1.15 million. The funds for research are distributed by the Ministry of

66The citation system however, does not take into account

the fact that very few Western scientists are able to read the

Japanese scientific literature that is published in Japanese. See

March 1984 hearings held by the House Science and Technology Committee on Japanese science and technology information.

67Michiyuki Venohara, Nippon Electric Company, Ltd., “Japanese Social System for Technological Development-Its Merits

and Demerits, ” presented on Dec. 8, 1982 in Endohoven, Netherlands, p. 21.
242 • Information Technology R&D: Critical Trends and Issues

Education in the form of formula support and

project research grants.

Through formula support the government

provides each Department Chairman with

three posts, two assistant professors and one

research assistant or vice versa. In each engineering or information science department or

other related department, the chairman is

given approximately ¥ 7 million ($28,000) to

spend on research. Half of these funds maybe

kept by the university to cover administration

costs. As a result, many departments are left

with approximately ¥ 2 million ($8,000).

The research project grants, totaling ¥

40,000 million ($160 million), also appear to be

insufficient because of their short term and

small amount. A limitation is that the funds

cannot be used for recruiting short-term assistance because most researchers (as well as most

Japanese workers) enjoy life-time employment. The Japanese Government began in

1982 to award 3 or 4-year support for research

projects, each costing approximately $1 million.

Although funding levels for basic research

are sometimes perceived as being inadequate,

the equipment in university laboratories has

been described as adequate by one recent

American visitor to the University of Tokyo

labs:

In general, both in the industrial as well as

in the university laboratories, the impression

I got was of a lot of equipment, some old,

some new, mixed in a somewhat random fashion. In the university laboratories, in particular, space seems to be at a premium. There

does not, however, appear to be any shortage of new equipment.G8

Research and Development Links

Between Universities and Industry

Direct cooperation between universities and

industries in basic and applied R&D has been

relatively limited. Japanese companies do not

‘Derek L. Lile, “Japanese Laboratory Visits,” %“entific Bulletin, Department of the Navy, Office of Naval Research, Far

East, January-May 1983, p. 48.

encourage students to obtain work experience

in private industry. Furthermore, most Japanese firms do not generally look to universities

for innovative ideas; the larger, more important firms prefer to carry out their own basic

research. Some university professors in Japan

have accused Japanese firms of suffering from

a “not invented here syndrome” and this has

caused a great mistrust between industry and

university faculty. A further factor is that the

Ministry of Education, which is the direct employer of university staff, actively discourages

direct links between academics and companies.

Professors at state universities are forbidden

to consult for private firms because it could

lead to nepotism in obtaining appointments.

The most effective channel for university-industry collaboration in Japan is through informal personal links. In comparison with

other countries Japanese graduates remain in

close contact with each other throughout their

professional careers. This leads to valuable cooperation between academics and industrialists, particularly in research. This is reinforced

by the role university professors play (as employees of the Ministry of Education) in the

establishment and implementation of national

research programs, such as the VLSI project

and the Fifth-Generation Computer Systems

Project. The presence of academics in the controlling bodies of these projects helps to exchange research results between companies

and universities more effectively.

Other cases of informal collaboration include

exchanges of researchers between companies

and industries. For example, the Electronics

Department at the University of Tokyo currently has five visiting researchers from well

known Japanese electronics companies for periods of 1 or 2 years. Also the department receives grants from at least 10 companies to

be used for purchasing equipment. The arrangement for visiting researchers from industry has some similarity to the U.K.’S Teaching

Company Scheme, but the emphasis seems to

be on the industrialist working in the universities rather than on the academic working in

industry environments.
Ch. 7—Foreign /formation Technology Research and Development . 243

Collaboration between companies and university departments is also aided by the practice of using universities as “shop windows”

for new equipment that is often given or sold

to them at very low prices. Through university use of new equipment, firms receive feedback on the operation of new equipment and

often valuable suggestions for modifications

and extensions. Instances of this practice can

be found in the areas of computers (Fujitsu)

and telecommunication receivers (NEC).

Another recent government incentive for industry-university R&D collaboration concerns

patents. As government employees, university

staff in Japan were not allowed to profit from

the commercial exploitation of their ideas.

This has created a disincentive to patenting,

while promoting dissemination of results

through open publications. Currently academic researchers are being encouraged to

apply for patents and at least two universities

have set up special offices to facilitate the patent application process (Tokyo Institute of

Technology and Tohoku University). This

could be to make research results more attractive to private firms, which can in turn apply

for licenses in order to market the technology.

As the technological level of Japanese industries approaches that of other advanced nations and the innovation of original technologies is more widely demanded by domestic

as well as foreign markets, the need has been

voiced by Japanese industrial and government

circles for much closer cooperation between industry and university researchers. As a result,

the Japanese Government is also encouraging

closer research links between universities, industrial firms, and government institutions

through the development of research parks,

such as Tsukuba Science City.

Industry

To compete in global markets, Japanese information technology industries, in general,

are large-scale organizations in order to assure

maximum economies of scale and to sustain

the large amounts of capital necessary for continued innovation. Although there are many

smaller electronic firms in Japan, most of them

subcontract small-scale production or fill special niches (some in global markets) which require custom or batch labor intensive production technologies. In general, however, major

information technology firms are more diversified and highly integrated than other competitor nations’ industries. For example, Japanese firms competing in the semiconductor

markets are significantly larger in total sales

and assets than their U.S. counterparts-approximately two to four times larger than

Texas Instruments and Motorola, and much

larger than National Semiconductor, Fairchild,

and Intel.69

In addition to large-scale operations, many

of the major Japanese information technology

firms are vertically integrated. For example,

most computer manufacturers produce semiconductors and several of them are major

semiconductor suppliers in the world market.

This sharply contrasts with the United States

where, although most computer manufacturers have at least some in-house semiconductor development and production capability,

only a few firms market both semiconductor

chips and computers, and most of them do not

‘gGene Adrian Gregory, and Akio Etori, “Japanese TWhnology Today, the Electronic Revolution Continues, ” Scientific

American supplement, 1983, p. J, 22.

Photo credit: Overseas Public Affairs Office,

Electronic Industries Association of Japan

Semiconductor research
244 ● Information Technology R&D: Critical Trends and Issues

sell the large range of products that are available from Japanese companies.

Another type of structural integration that

is believed to give the Japanese a competitive

advantage is in the area of consumer products.

Compared to many American computer manufacturers that specialize in their production

capabilities, Japanese firms which manufacture computers are also large producers of consumer electronics products. Because consumer

electronics products usually have a large market and generate large sales revenues, Japanese firms can utilize these large profits to

fund research and development projects in

other information technology areas.

As a result of structural integration, namely,

production and development of computers in

conjunction with telecommunications equipment, and consumer products coupled with integrated semiconductor development and production capabilities, the Japanese information

technology firms may have a strong technological base from which to continue their innovation process. Moreover, because of their

vertical integration, Japanese information

technology firms can draw on cash flow generated by consumer electronics sales to sustain large capital investments and research

and development costs of basic research.

Japanese information technology firms also

participate in cooperative joint R&D programs. Because there is relatively low technology transfer between Japanese firms (due to

lifetime employment of engineers and fierce

competition between firms), they often undertake identical research projects. The efforts of

limited numbers of research engineers in each

company are therefore spread out across many

different areas, making it difficult to concentrate on basic research. In response to these

difficulties, the Japanese Government created

research associations so that industries could

collaborate on research projects centered on

different technology areas.70

70See the section on MITI for a description of the industrial

participation in the research associations.

Because of the highly competitive nature of

the electronics firms, industrial researchers

were at first extremely skeptical about these

research associations. However, the area of cooperation is limited to very basic research, and

development efforts are still necessary to develop commercial products. The basic research

efforts generally leave many possible avenues

for future product development and allow

firms to compete with one another. Because

of their wide acceptance and heavy industry

participation, these joint R&D programs have

been useful to Japanese industry.

NEC Corp.

NEC Corp. is Japan’s largest manufacturer of communications equipment with fiscal

1982 sales totaling $4.98 billion and a pretax

profit of $204 million. In 1982 sales to NTT

and the Japanese Government agencies accounted for $888 million, or 19 percent of

NEC’S revenues, of which a significant portion

was for data communications. Foreign purchasers accounted for 30 percent of NEC’S

sales. NEC has a strong position in the world

market (including several plants in the United

States), and it markets over 14,000 products

in over 100 countries worldwide. NEC has also

produced the distributed information-processing network architecture (DIMA) on which 60

to 70 percent of all networks in Japan are now

based. NEC’S success in part can be attributed

to the fact that it is a vertically integrated supplier with strong shares of the Japanese computer, communications, and semiconductor

markets. Internationally, NEC is known for

having installed over half of all satellite earth

stations and for its microwave technology.

NEC’S vertical integration activities are best

summed up by Michiyuki Uenohara:

Combining computers and communications (C + C) was conceived as a form of business best suited for our expansion into new

areas, making the most of technological resources we have as a company that started

out as a communications equipment maker.

It was in 1975 that the concept was put into

practical business programs, and in 1977, we
Ch. 7—Foreign Information Technology Research and Development ● 245

came up with a clear-cut expression of C + C.

First of all, we achieved the ability to put on

the market a digital switching system which

can serve as a link between communications

and computer networks. Digital switching

has made the combination of computers and

communications not only possible, but natural. 71

NEC’S central research laboratory, located

just outside Tokyo in the city of Kawasaki,

houses approximately 700 scientists involved

in research on a wide variety of subjects related to computers and communications. Spe

cific research includes projects on GaAs circuit development and semiconductor surface

treatment.

Fujitsu Ltd.

Fujitsu is Japan’s largest mainframe vendor, and ranks second to NEC in telecommunications equipment sales. Fujitsu is now

ranked sixth in the world, ahead of Honeywell

(U.S.), CII-Honeywell Bull (France), ICL

(U.K.), and Siemens (West Germany). With fiscal 1982 sales of about $3.36 billion, telecommunications equipment accounted for $638

million of Fujitsu’s total sales. Sales to NTT

accounted for 37 percent and sales to the Japanese commercial market were 27 percent of

Fujitsu’s total sales. Similar to NEC, Fujitsu

is well established in the world information

technology market, with a solid history of

sales in the United States. Currently, Fujitsu

is manufacturing and marketing digital PBXs

in a joint venture with American Telecommunications Corp., and microcomputers and terminals in a joint venture with TRW, Inc.

Other joint venture partners include Canadian,

West German, and Spanish companies. Although Fujitsu ranks second to NEC in

microwave equipment, carrier transmission,

and automated office equipment, it is a leader

in Japan’s fiber optics and optoelectronics research.

“Gene A~rian Gregory and Akio Etori, “Japanese Technology Today, The Electronic Revolution Continues, ” Scientific

Amen”can, Special Supplement, 1984, p. J, 44.

The “tsu” in the title Fujitsu means communications and this was the basis of the Fujitsu laboratories. However, because of a perceived saturation of the communications field,

Fujitsu decided to diversify and as a result,

communications equipment now occupies a

minor part of Fujitsu’s research operations.

Approximately 60 percent of the research activities is currently devoted to computer and

computer-related research. The Fujitsu Laboratories, also located in Kawasaki, employ approximately 800 people. The semiconductor

division consists of 190 people divided into

three main subgroups: GaAs devices and circuits, silicon integration, and materials. Because its research is well advanced in the semiconductor division, Fujitsu is expected to play

an important role in the Japanese supercomputer project.

Hitachi Ltd.

Hitachi is Japan’s third largest company

(after Nippon Steel Corp. and Toyota Ltd.). It

entered the computer market in the late 1950s

and was one of the first Japanese companies

to enter into a technology exchange agreement

with a U.S. computer manufacturer (RCA in

1961). Since then, Hitachi has made agreements with Intel. During 1978-80, Hitachi also

completed marketing arrangements for its

computer systems in Europe with BASF

(West Germany), Olivetti (Italy), and St. Gobain (France).

Hitachi generated more than $3.3 billion in

fiscal 1982 (out of total sales of $15 billion)

from information and communications systems and other electronics devices. Although

Hitachi has in the past maintained a strong

position in the consumer electronics market,

the company is placing more emphasis on industrial electronic equipment. As a result,

Hitachi is attempting to evolve into an integrated office systems supplier in the United

States. Hitachi is concentrating some of its efforts on the development and marketing of

PBXs.
246 ● Information Technology R&D: Critical Trends and Issues

Photo credit: Overseas Public Affairs Office,

Electronlc Industries Association of Japan

A Hitachi engineer feeds a glass plate into an electron

beam lithography device which produces a photomask

by drawing LSI patterns on the plate with a sharply

focused electron beam under high-precision computer

control. The device is also capable of directly writing

patterns on silicon wafers.

Hitachi has rapidly increased research and

development expenditures. Hitachi’s Central

Research Laboratory at Kokubunji is one of

the five Hitachi research labs and is devoted

to the development of new materials and devices as well as new measurement equipment,

medical engineering equipment, and communications and information processing systems.

The laboratory, established in 1942, employs

approximately 1,200 research and support personnel. Their principal integrated circuit research project is aimed at developing a 1K bit

static RAM for use in the central processing

unit (CPU) and main memory of large computers. Other projects that are also currently

underway include the development of GaAs,

analog circuits for automobile telephones, and

semiconductor material research. There is also

research taking place in lasers, light-emitting

diodes (LEDs) and light detectors, and some

preliminary work in electro-optic integration.

Oki Electric Industry Corp.

Oki Electric Industry Corp. was one of Japan’s first entrants into the computer market

with its transistorized OKITAC 6020 in 1959.

Oki-Univac Company Ltd. was formed in September 1963 to manufacture various Univacbased machines in Japan. Since that time, Oki

has not engaged in the development of large

computers. However, it remains strong in

peripherals and terminals. In 1972, Oki established subsidiaries in the United States to pro

duce and market communications equipment

and computer peripherals, terminals, and components, and has subsequently set up similar

operations in Germany and Brazil.

Oki Electric Industry Corp. had fiscal 1982

sales of $1.03 billion, of which telecommunications sales to NTT totaled $185 million and

those to government entities another $94 million. Oki also exported approximately $120

million in equipment, mainly digital printers,

to the United States. In July, the company announced that it will build a plant in Atlanta,

Ga., to produce mobile cellular radio telephones for a subsidiary of AT&T. The facility is expected to produce 1.5 million units a

year eventually.

-

France

Introduction reduced to between 7 and 8 percent.72 InforThe historically agrarian society of France mation technology, particularly telecommunihas changed with tremendous speed since cations, has been a major component of this

World War II. In 1945 over half of the French

population was dependent on agriculture for ‘

z

Pierre Aigrain, “Seminar on High Technology in France, ”

Center for Strategic and International Studies, Georgetown Uni- its income; by 1970 that dependency had been versity, Feb. 9, 1983.
Ch. 7—Foreign Information Technology Research and Development ● 247

change. French efforts to expand advanced information technology research and production

have been directed toward two major goals:

strengthening France’s international competitiveness and the development of an information technology-based infrastructure for the

preservation and continued development of

French culture and society. Coupled with

historic French governmental involvement in

industry,73 the comparatively small size of

French participation in the world market for

information technology, and the unique

French social and political contexts for technology, these goals have shaped French information technology research and development

into a pattern quite unlike that in the United

States.

French information technology research and

development activities occur in government

laboratories, in industrial settings, and in academic environments. The structure, organization, and direction of R&D activities within

these communities are all dissimilar, however,

from the American experience. The pervasiveness of government intervention in industrial

and academic sectors makes it difficult to differentiate the three areas, but for ease of comparison with the American experience, French

government, university, and industry information technology research and development environments are discussed separately below.

Before discussing these environments, it is important to understand the size of French participation in information technology, and the

social and recent political environments for the

conduct of information technology research

and development.

The Size of French Participation

in Information Technology Markets

In 1982 the French estimated that they controlled about 5 percent of the world market in

information technology. This compares with

73The French Government has traditionally played a large role

in the coordination, funding, and direction of the French economy since Jean Baptiste Colbert founded the Academy of Sciences in 1666. French Governments since have changed the

scope and nature of that involvement, but the traditional mechanisms used by government in industry, including those of the

present French Government, have changed very little.

Photo credit’ Scientific Mission, Embassy of France

and Ministere des PTT, French Government

Videotex terminal “Minitel”

a United States share of 48 percent in 1982.

Moreover, if one were to compute the French

share of the world market using information

technology goods and services produced exclusively by French-controlled corporations,

the share would decline to 4 percent.74

Slightly over one-half of the French information market is served by foreign suppliers;

the United States holds about 22 percent of

the market, Japan and West Germany 7 percent each. The Netherlands holds 6 percent

———. -.— - .

“French telecommunications and Electronics Council, The

Electronics Industry: U.S.A./France 1982, pp. 10-18.

38-802 0 - 85 - 17
248 ● Information Technology R&D: Critical Trends and Issues

and Italy, the United Kingdom, Austria and

others hold the remainder. Several major subsectors of the French market such as mainframe computers are nearly dominated by U.S.

manufacturers. In areas of French strength

within the French market (e.g., in telephone

terminal and switching equipment, in which

the French control about 91 percent of their

market), French participation in the United

States and/or world markets is often very

small. For example, France has less than onetenth of 1 percent of the U.S. market in telephone terminal and switching equipment. This

situation may be more due to the structure of

the U.S. telecommunications industry than

any French inadequacy. In addition, the future

French position in the U.S. telecommunications market may improve as both CIT Alcatel

and Thomson CSF have recently established

U.S. subsidiaries.”

The size of French participation in the markets for information technology affects the level of funds available for R&D. French industrial funding of information technology

research and development was reported as

$2.2 billion in 1982, some significant portion

of which was funded by the government. In

addition to information technology research

and development in industrial settings, the civilian French governmental funding of information technology conducted in public laboratories was reported to be $0.6 billion in 1982.76

The Political Environment for French

Information Technology Research

and Development

It would be difficult to describe French information technology research and development activities without first considering the

context of the present French Government’s

policy. The last French presidential election

(1981) marked the first time science and technology were used as apolitical issues.” Indeed,

751nterview with Mr. Chavance, CIT Alcatel director, June

1983 and Telephony, July 25, 1983, p. 24.

7oA.F.P. Sciences, No. 325, Oct. 7, 1982, p. 30.

77 Pierre Aigrain, “The French Experience in High Technology, ” Center for Strategic and International Studies, Georgetown University, p. 2.

all candidates had some increased R&D funding planks in their platforms. Before losing to

Mr. Mitterrand, Mr. d’Estaing had designed

a plan for increasing real government R&D

funding 8 percent per year for 5 years beginning in 1980. When Mr. Mitterrand was

elected, he more than doubled that goal.

Mr. Mitterrand’s emphasis on increasing

R&D spending was part of a larger industrial

policy for France which included companion

employment and education policies as well as

planned market programs in several areas of

high technology.78 The overall government policy, designed around the Socialists’ principles

of decentralization, democratization, humanism, and volunteerism, included several

elements.

The first element of the French Government’s general policy was the declaration of

information technology development as a national priority. Thus a major objective was to

bring together universities, government laboratories, and industry to enhance national efforts in technological development.79 The second element was to convince the French people

of the importance of industry, a particularly

necessary action in a country that has not yet

completely integrated industrial activity

among its values and culture. The third element of the French Government’s policy was

to create conditions for people to accept more

readily changes in their work environment and

social structure (caused by the introduction of

new technologies), basically through a renewed

social participation. This was viewed as a necessity for the continuous introduction of new

technology. The fourth element consisted of

the introduction of mechanisms to increase industrial investment. One of the major mechanisms for attracting investment in major industries has been the nationalization of major

French industrial firms.

‘

a

’’ French Technology Preparing for the 21st Century,” Sa”entific Ame~”can, November 1982, p. F3.

‘

gRobert Chabbal, “The New Investment in Science and Technology in France, “ in Thomas Langfitt, Sheldon Hackney, Alfred Fishnay, Albert Glowaske (eds,), Partners in the Research

Enter@”se, Um”versity-Corporate Relationsin Su”ence and Technology (Philadelphia University of Pennsylvania Press), 1983,

p. 138.
Ch. 7—Foreign Information Technology Research and Development • 249

The first step taken by the Mitterand government was to establish a ministerial department for research and technology. One year

later, the three ministries of research and technology, industry, and energy were combined

to create one very large ministry called the

Ministere de la Recherche et de l’Industrie.

This ministry was created in part to stimulate

interactions and exchanges between government and industry.

Another measure taken by the French Government was the nationalization of major industrial firms and most of the banking sector.

Nationalism was viewed as a means of controlling investment and ensuring that the government could exert economic leverage to achieve

its goals of: expanding employment; transforming the workplace environment; enhancing French productivity and competition;

directing research and development into areas

of government priority; and recapturing the

domestic market by replacing imports with domystically produced products.8o Moreover,

government ownership was seen as means to

enable those companies to receive ample funding for innovative, relatively high risk research

and development.

8 Nationalization was alsoO

viewed as a mechanism to increase cooperation and technology transfer between industry and government.

The nationalization program was implemented in several stages over a period of 2

years.

82 Following several delays, the nationalization program was approved on February

11, 1984, giving the government control of 5

industrial groups, 39 banks, and 2 financial

organizations. 83 In the information technolOgy

sector, almost every major company has been

reorganized to reflect a majority of government ownership. For example, the government

took over the central organizations (but not

necessarily all the subsidiaries) of the Com-

‘OMichael H. Harrison, “France Under the Socialists, ” Current History, April 1984, p. 155.

*“’Pitfalls in France’s Vast R&D Plan, ” Business Week, Nov.

23, 1981, p. 94.

82Companies were actually nationalized on Feb. 11, 1982 (Law

82-155); however, the reorganization plans were not in effect

until January 1983,

‘3Michael H. Harrison, “France Under the Socialists, ” Current History, April 1984, p. 155.

pagnie Generale d’Electricity, Saint Gobain

Pont-a-Mousson, Pechiney-Ugine-Kuhlman,

Rhone-Poulnec, and Thomson-Brandt. The

government also acquired majority shares in

Dassult and Matra, and later negotiated controlling or full ownership of three foreignowned companies in France, Roussel-Uclaf,

Cii-Honeywell-Bull, and I.T.T. France.

The actual effects of nationalization on the

information technology industry and on the

French economy as a whole are still uncertain.

This uncertainty is created in part by the dominant role the French Government has played

in the French economy throughout all of the

postwar period, and in part by the confusion

in the transition to Socialist industrial policy.

Moreover, the effects of nationalization have

also been obscured by France’s economic decline in the first 2% years of the Socialist government, which in turn has ultimately weakened the nationalization efforts to reshape or

control the activities of specific firms or certain sectors of the economy.Nationalization

efforts have also been complicated by changes

in three different ministers of the Ministere

de la Recherche et de l’Industrie within a 2

year period.

Most significant to the general Mitterand

strategy for the development of technology

was the enactment of the legislation, Law for

Programming and Orientation for Research,

which established scientific and technological

research and development as national priorities. Moreover, the law ensured funding for

long-term scientific efforts by stipulating both

quantitative and qualitative objectives for the

following 5 years. The law stated that between

1981 and 1985 the percentage of the Gross National Product (GNP) devoted to research and

development will increase from 1.8 to 2.5 percent, thereby increasing by 40 percent the

spending for technological development in 5

years.

85This process began in 1980 and there

“1bid.

“Robert Chabbal, “The New Investment in Science and Technology in France, “ in Thomas Langfitt, Sheldon Hackney, Alfred Fishnay, Albert Glowaske (eds.), Partners in the Research

Enterprise, Um”versity–brporate Relations in Science and

Technology (Philadelphia: University of Pennsylvania Press),

1983, p. 140,
250 “ Information Technology R&D: Critical Trends and Issues

have been 12 percent annual increases in each

of the three successive budgets.86 The French

Government’s contribution will be matched by

industry, which calls for industry to increase

its expenditure for research and development

by 40 percent in the next 5 years.87

In addition to meeting broadly the scientific

and development needs, these increased expenditures are also for financing national

mobilizing programs that are focused on industrial and government targeted priorities,

such as information technology. Although

there are major programs in biotechnology,

new sources of energy, machine tools, etc., the

information technology program is perhaps

the most ambitious. La Filiere Electronique,

implemented by the Mitterand government in

1983, is designed to coordinate and stimulate

government, university, and industry information technology research and development efforts in order to move France into the forefront

of advanced information technology R&D and

production.88 Figure 49 illustrates some of the

coordination efforts between industry and

government for La Filiere Electronique program. The 5-year infusion of ƒ 140 billion (approximately $18.7 billion) for R&D is expected

to accelerate the production of information

technology products by 3 to 9 percent each

year, produce a surplus trade balance in information technology products, and create 80,000

new jobs.

Fourteen national projects for research and

development are outlined in La Filiere Electronique program:

● large scientific and industrial French

computer,

• building blocks of mini- and micro-computing,

● consumer electronics systems,

86This increase occurred after 10 years of decreasing spending

for scientific equipment and therefore, the need was extremely

acute.

sTRobert Chabbd, “The New Investment in Science ~d T~hnology in France, ” in Thomas Langfitt, Sheldon Hackney,

Alfred Fishnay, Albert Glowaske (eds.), Partners in the Research Enterprise, Um”versity and Corporate Relations in

Science and !l’echnology (Philadelphia: University of Pennsylvania Press, 1983) p. 140.

“A “filiere” in France is a targeted industry grouping or other

goal around which a government plan for funding, production,

investment, education and dissemination assistance has been

developed, There are currently six filieres in France today:

●

●

●

●

●

●

●

●

●

●

●

display technology,

ergonomics of computerization,

computer-assisted instruction,

multiservice communications,

widebank communications network,

design and production assisted by very

large scale integrated circuits,

computer-assisted engineering design and

production,

voice-processing module,

electrophotographic module,

electronic editing, and

computer-aided translation.

In addition to these projects and programs,

the plan sets forth mechanisms for state/industrial cooperation and outlines efforts which

are aimed at alleviating other constraints on

information technology research and development not related to direct R&D funding. These

include manpower programs to correct a perceived shortage of engineers and technicians

and government-sponsored market promotion

efforts .89

Because of economic difficulties, there have

been some funding problems for the Mitterand government. Consequently, the plans for

an overall increase of 4.5 percent funding for

research activities have suffered significantly.

For most areas of research, this reduction in

funding means that the 1984 research spending will remain at the same level as in 1983.

However, the government has stressed that

it will maintain its commitment to increase

funds for high priority areas, including information technology.90 Other impediments to La

Filiere Electronique program and to French

information technology research and develop-

— . . —

robotics, electronics, energy, biotechnology, work environments,

and cooperation with developing countries.

89For example, the number of people with Level 1 qualifications in information technology (a French Masters degree, approximately equal to an American Ph. D.) is expected to fall

short of needs by 70,000 for the period 1981-1990 in France.

In the French context, this number is quite large; in 1979 it

was estimated that 105,000 scientists and engineers were actively involved in all aspects of French science (energy, pharmaceuticals, mechanics, aeronautics agriculture etc., as well

as information technology). Jean-Pierre Letouzey, Scientific

Mission, Embassy of Fran~ Sta&ment for the American ASSO

ciation for the Advancement of Sciences, Mar. 24, 1983, p. 9

(unnumbered).

‘David Dickson, “Hard Times Force France to Cut Back Ambitious Plans to Support Science, ” Chrom”cle of Higher Education, Apr. 21, 1984, p. 10.
Ch. 7—Foreign Information Technology Research and Development ● 251
252 ● Information Technology R&D: Critical Trends and Issues

ment may also stem from the proliferation of

new projects which may in turn dilute available funds to inconsequential levels.

Social Environment for French

Information Technology Research

and Development

The French Government’s desire to push

France into a technologically based future has

encouraged information technology research

efforts in office automation, microcomputers,

consumer electronics, and telephone terminal

equipment. In addition, each of these research

areas has included a major effort in the human

factors aspects of design and interaction, perhaps in recognition of the difficulty expected

with the assimilation of these technologies into

French society. The emphasis placed upon human factors engineering has given rise to

French prototypes and products that are generally esthetically pleasing and easy to use.

Many French designs have been adapted else

where. For example, it was a French study

that suggested amber on black CRT screens

were the most pleasing and produced the least

eye strain.

Three French characteristics stand out as

important with respect to information technology research and development. Risk taking in

the French industrial sector does not appear

with the frequency or at the level considered

commonplace in the United States. One indication of this is the small number of venture

capitalists in France and the unwillingness of

the traditional banking industry to fund entrepreneurs. However, there are efforts on the

part of government and industry to increase

the use of venture capital.

For the conduct of information technology

research and development, the French riskavoidance characteristic may be translated

into the general lack of leading-edge, often

high-risk, technological research. Another possible consequence for information technology

research and development is the prevalence of

large organizational environments for the conduct of R&D. It is difficult to judge what implications this has for French information

technology research and development. It can

only be contrasted to the fact that one of the

strong aspects of U.S. information technology

research and development has been considered

to be the infusion of small, innovative firms

into the research community.

The second French characteristic which appears to affect the conduct of information technology research and development is the frequency of what might be termed reengineering. Reengineering, or the production from

scratch, of French versions of an existing product is very common in French information

technology. Reengineering efforts maybe attributed to the French attempt to develop domestic production capabilities in order to mitigate United States and Japanese dominance

in some niches of the French information technology market.

The French attention to reengineering is

quite possibly related to a third French characteristic, strong national loyalty to Frenchmade products. This adherence to French

products occasionally provides a serious handicap to French information technology research and development. Because the French

do not manufacture all types of state-of-theart instrumentation, French scientists and

engineers (who in some cases maybe restricted

to purchasing French instrumentation) may

be limited in their research activities.

Government

There are a variety of French Government

organizations involved in information technology research and development. A few were

newly created with the advent of the Mitterand government, but most have been operating for decades. Although the nationalization of industries and the government

provision of research and development under

Mitterrand are often thought of as socialist

government actions, the link between French

politics and French research has been longstanding. Traditionally, France has closely

overseen both basic and applied science research through government mechanisms.
Ch. 7—Foreign Information Technology Research and Development ● 253

Centre National de la

Recherche Scientifique (CNRS)

The largest and oldest French Governmentfunded research organization is the Centre National de La Recherche Scientifique (CNRS),

founded in 1939. CNRS supports basic research in chemistry, physics, earth, atmospheric and ocean sciences, life sciences, engineering, social sciences, mathematics, and

humanities. In 1984, CNRS had a budget of

ƒ 7,735 million (almost 24 percent of the public civil research budget), and employed approximately 25,000 people in 1,350 laboratories or within universities, other government

agencies, and industry. CNRS has seven laboratories devoted to basic research in some

aspect of information technology. The portion

of the 1984 budget applicable to information

technology research and development is

ƒ 225.2 million, an increase of 13 percent over

the 1983 budget. This increase in the budget

for the information technology research (in

contrast to other CNRS research areas which

received less or no increases) is significant and

is largely the result of the recognition of the

importance of information technology to the

French economy and society.91

In line with France’s new efforts in strengthening its information technology industry,

CNRS information technology activities are

currently coordinated with the Filiere Electronique program and are becoming largely de

voted to applied, industrial research. There are

efforts in software development and programming techniques, speech recognition and synthesis, artificial intelligence, and robotics.

CNRS draws heavily from the French university system for its personnel, unlike industry

or most other government agencies, where the

grandes ecoles supply the researchers and administrators. 92

In the past, CNRS ties with industry have

been relatively weak. However, as CNRS increases its applied research activities, ties with ——

“Discussion of CNRS based on “French Technology Preparing for the 21st Century, ” Scientific American, November 1982,

pp. F4, F11.

gZ1ntimiew with Ckles Ga.rriques, President, Agence de l’lnformatique, June 24, 1983.

industry have also grown. Closer ties between

CNRS and industry seem to be important to

the Directeur General of CNRS who has recently established several agreements between

CNRS and industry .93

CNRS has exchange programs and scientific

accords with 30 countries, including agreements with the National Science Foundation,

the National Institute of Health, Massachusetts Institute of Technology, the University

of Chicago, and others.

Ministere des Postes, Telecommunications,

et Telediffusion (PTT)

The French Ministere des Postes, Telecommunications, et Telediffusion (PTT), through

the Ministere de la Recherche et de l’Industrie,

is responsible for the provision of all telecommunications services and equipment, network

maintenance, standards development, telecommunications policy, technical assistance

to former French colonies and other foreign entities, and research and development. The

PTT’s jurisdiction over telecommunications

policy has resulted in increased PTT involvement in information technology R&D. The

PTT often joins the Ministere de la Recherche

et de l’lndustrie and others in the funding of

projects that cross the technological boundaries between telecommunications and computers.94

The reach of the PTT through the Ministere

de la Rechereche et de l’Industrie into the information technology research and development communities is extensive. The PTT

funds the Centre National d’Etudes Telecommunications (CNET) much in the same manner that AT&T funds Bell Labs. The PTT also

funds the Institut National des Telecommunications (INT), a portion of the Agence de

l’Informatique (ADI), and all of the Ecole Nationale Superieure des Telecommunications

‘

s

For example, agreements have been signed with SaintGobain, Renault, and Roussel-Uclaf. “French Technology Preparing for the 21st Century,” Scientific American, November

1982, pp. F4-F1l.

“For example, le Project Pilote NADIR (exploration of new

uses of Telecom 1 for data and voice transmission) is funded

50/50 by the ITT and the Ministere de la Recherche et de l’lndustrie.
254 ● Information Technology R&D: Critical Trends and Issues

Photo credit: Scientific Mission, Embassy of France

and Ministere des PTT, French Government

Videotex terminal “Minitel” with CCP card reader.

(ENST). The PTT’s terminal equipment, switching and transmission needs are supplied

through contracts with CIT Alcatel, Thomson

CSF, the French Cable Co., and a host of

others. The R&D for the products manufactured by these firms for PTT use is funded by

the PTT, generally through cooperative efforts

between the industrial entity and the CNET.

The current government-sponsored push in

information technology research and development follows upon a recent similar effort in

telecommunications implemented by the PTT.

By most accounts, the research, development,

and implementation programs designed in

1974 and 1975 to transform the French telecommunications system into a technologically

advanced network on par with the United

States has been a success.95 In 1974, France

averaged 12 main telephone lines per 100 inhabitants; in 1981 the figure was 33.96 The

number of lines in the national network grew

from 7 million in 1975 to 20 million in 1982.

In 1975 electronic exchanges were virtually

nonexistent in France; in 1981, 70 percent of

newly installed switching capacity was electronic. 97

As a result of the recent modernization of

the French telephone network, the French

have a greater percentage of digital equipment

than any other country.ga This, in turn, has

spawned the provision of many sophisticated

services such as Transpac (public data packet

switching network), Transmic (dedicated data

transmission), Teletel, and Videophone (video

conferencing). These technological possibilities

have pushed PTT-sponsored telecommunications and computer research and development

in several directions. The three main directions

have been satellite technology (the French

launched Telecom 1 in the summer of 1983),

an integrated services digital network (ISDN),

and optical fibers (a wideband, multiservice optical subscriber network experiment is taking

place in 1,500 homes in Biarritz). The major

research efforts in all of these areas have taken

place at the Centre National d’Etudes des Telecommunications (CNET).

Centre National d’Etudes

Telecommunications (CNET)

The CNET was formed in 1944 to provide

scientific research and technical assistance to

the PTT.99 The CNET is active in applied

mathematics, computer science, solid-state

physics, and earth sciences. The total budget

in 1982 was about ƒ 1 billion (about $133 million); approximately 55 percent is spent on net-

““No Hang Ups for French Phones, ” (ZWecom France, June

1982, p. 10.

‘Conseil Econornique et Social, La ‘1’elernatique et L ‘Amenagement du Z’erritoim, Apr. 21, 1983, p. 35.

97P’IT Telecommunications, Bim”tz, The b“ghtwave Communications World of the Future, p. 1.

‘81bid.

‘

gDiscussion based on the group of brochures and pamphlets

included in the CNET Dosw”er Presse.
Ch. 7—Foreign Information Technology Research and Development • 255

work and service engineering, 25 percent on

components engineering and 20 percent on basic research.

In 1982 2,600 scientists and engineers

worked in six laboratories. Two of the groups

are located in Paris. Paris A performs longterm network planning and administers the

other five centers. Paris B is the center of basic

research for the CNET. Materials and geophysical research are the primary efforts. Applied

work in components, transmission, marine

cables, and satellites is also performed.

The two centers at Lannion work on local

area networks, ISDN, software, human-machine interface, and acoustics (Lannion A) and

digital transmission, optical communications,

and components (Lannion B). The center at

Grenoble is devoted to microelectronics research, while the laboratory at Rennes is

shared with the Centre Commun d’Etudes de

Television et Telecommunications and studies

future telecommunications services and their

integration with broadcasting technologies.

Since the advent of the Mitterrand government, the CNET has assumed a significant

role in the French national industrial development strategy. Under the plan for the electronics sector (La Filiere Electronique), the CNET

laboratory at Grenoble has undertaken projects in CMOS technology for very large scale

integrated circuits, gallium arsenide, computer-aided design, and artificial intelligence.

In conjunction with La Filiere Electronique

research effort, CNET has introduced a program to improve its transfer of technology to

the industrial sector. The CNET owns over

550 patents which it licenses to French and

other companies. The licensing is done virtually without regard to the royalty potential;

CNET’S 550 patents provide approximately

ƒ 20 million in revenue per year.

L’Institut National de Recherche

en Informatique et Automatique (INRIA)

L’Institut National de Recherche en Informatique et Automatique (INRIA) is one of the

newest French Government information technology research agency. It was formed in December 1979 under the d’Estaing Ministry of

Industry. INRIA remains under the jurisdiction of the Ministere de la Reserche et de l’lndustrie in the Mitterrand government. The

name of this ministry has had several evolutions of late. With the advent of the Mitterand government the Ministere de l’Industrie

was changed to the Ministere de la Recherche

et de l’Industrie. Currently, the organization

is titled the Ministere de l’Industrie et de la

Recherche. The first change effected by the

Mitterrand government was an effort to combine the mission of the Ministry of Industry

with that of the Ministry of Research and

Technology. The second change appears to be

one of emphasis. INRIA is considered the leading research institute in computer science in

France. It has several locations. The main research center is in Rocquencourt (just outside

of Paris); another smaller center is located in

Sophia-Antipolis. INRIA shares facilities with

the CNET at Rennes and Grenoble and has a

small group in Toulouse. In 1982, INRIA’s

budget was ƒ 146 million (about $19.5 million)

which funded 409 people, 225 of whom were

scientists and engineers. In 1983, the budget

was expected to be ƒ 200 million for funding

of INRIA contracts with industry.l00

INRIA has a three part mission: the conduct

of research on experimental computer systems; international scientific relations; and the

transfer of technology. Each of the missions

is guided by industrial needs, at least insofar

as those needs are articulated by the Ministere

de la Recherche et de l’Industrie. Consequently, the research performed by INRIA is applied and the bulk of the work can be characterized as product development.

INRIA has eight research programs in areas

such as system architecture, languages, algorithms, automation, and man-machine interface. Each program conducts three to five

projects. In addition INRIA is responsible for

four of six pilot projects to be undertaken in

connection with La Filiere Electronique program. Those pilot projects are KAYAK (office

IOOINRIA, Dossier Presse.
256 “ information Technology R&D: Critical Trends and Issues

automation), NADIR (applications of Telecom

1 satellite capability), SIRIUS (distributed

systems), and SOL (portable software).

Each pilot project has a different configuration of funding, personnel, and industry participation. For example, NADIR is financed

50/50 by the PTT and the Ministere de la Recherche et de l’Industrie. The project administrative responsibility is shared between the

Agence de l’Informatique (ADI) and the Direction des Affaires Industrielles et Internationales, a division of the Direction Generale

des Telecommunications within the PTT. The

actual research is conducted at INRIA with

a mixture of INRIA and CNET personnel. Industry personnel are not research team members, although several industrial representatives are participating through provision of

user specifications.l0l

SIRIUS is an older project, and as such, its

original funding sources and location have

changed. Currently, the project is administered by ADI. The research team includes

INRIA, the University of Nancy, several

smaller divisions of the Ministere de la Recherche et de l’Industrie and 15 industrial

companies including CAP-Sogeti, Cii Honeywell Bull, and SNCF (the French national

railroad).1°

2

The organization of INRIA is quite different

from the CNET and in many aspects provides

complementary research support. Unlike the

CNET which draws heavily from the grandes

ecoles system for its researchers, INRIA recruits from the French university system.

Many project directors at INRIA are French

university professors who come to INRIA for

the duration of a project.

Also unlike the CNET, whose mission is to

be the research arm of the state telephone network, INRIA is not responsible to one centrally defined set of research requirements. Rather, the institution generally must respond to

a more diffuse set of requirements from industry. The coordination of research projects is

nominally the job of the Ministere de la Recherche et de l’Industrie, but most often, such

coordination is effected by INRIA research

staff members who take ideas forward to the

Ministry for funding.

Agence de l’Informatique (ADI)

Like INRIA, the Agence de l’Informatique

(ADI) was recently formed. Funded by the

Ministere de la Recherche et de l’Industrie (75

percent) and the PTT (25 percent), ADI’s 1981

budget was F 300 million ($40 million). Funding in 1982 was F 320 million as was the 1983

budget. A 20 percent cut is expected for 1984.

ADI was originally designed to be self sustaining though royalties from its research-derived

patents and the sale of its published studies,

but as yet, those items account for less than

1 percent of ADI’s revenue. ADI has three major areas of activity: research and experimentation, application development and dissemination, and training and education. It also has

three support activities: regional programs, international affairs, and economic and legal studies. Sixty professionals manage these programs.103

The goal of ADI’s training and education

program is to produce more computer science

graduates and to improve the quality and

availability of science and engineering education. Included in the program is a project to

put computers in the secondary schools. The

application development and dissemination

programs provide a forum for users and producers of information products to exchange

ideas and develop computer applications tailored to the specific requirements of various

business sectors.

ADI’s research program funds efforts in

computer science in a manner analogous to

that of the National Science Foundation; that

is, ADI funds but does not conduct the research. This program has approximately

F 100 million ($13 million). In addition to the

four pilot projects ADI helps fund at INRIA,

l’JIThe pilot ~Oj~t NADIR English Language bulletin, May

1983.

IOZINRIA, ~ggier Pregse Le Project Pilote SIRIUS.

‘OgAgence de l’Informatique, English language brochure, and

interview with Charles Garriques, President, ADI, June 24,

1983.
Ch. 7—Foreign Information Technology Research and Development ● 257

partial funding is provided for the RHIN (system interconnection) and SURF (functional security) projects. These six pilot projects were

originally to be undertaken as only a portion

of ADI research mission. Longer-term projects in new architectures, languages and programming, human-machine interface, design

aids, automation, computer-aided translation,

security, and translation are also planned. Recent budget cuts, however, have limited these

research endeavors.

Centre d’Etudes des Systemes

et des Technologies Advancees (CESTA)

The Centre d’Etudes des Systemes et des

Technologies Advancees (CESTA) is the newest French agency involved in information

technology. Founded in January 1982, it is one

of two completely new agencies formed by the

Mitterrand government in information technology. Under the jurisdiction of the Ministere de la Recherche et de l’Industrie,

CESTA’S 40 employees have two missions:

technology forecasting and identification of

employment impacts due to technological advance. The technological scope of CESTA goes

beyond information technology (e.g., there are

programs in biotechnology) but the majority

of its work involves various aspects of information technology. CESTA’S forecasting responsibility takes the form of evaluations of

market, cultural, and social acceptance of technologically advanced products. When employment impacts can be identified, retraining programs are developed by CESTA personnel.

CESTA’S major activities undertaken to further these goals are the conduct of seminars

and the commission of studies and papers on

topics of interest.l04

Although CESTA resides under the auspices of the Ministere de la Recherche et de

l’Industrie, the director described his agency

as independent, not administration-linked and

drew an analogy between CESTA and the Tennessee Valley Authority. He saw this independence as a necessary ingredient to his abil-

—.— I04CESTA,CESTA, December 1982, and interview with Yves

Stourdze, Directeur CESTA, June 20, 1983.

ity to gather groups representing divergent

interests.

Centre Mondial Informatique

et Ressource Humaine

The Centre Mondial Informatique et Ressource Humaine is the other information technology agency created by the Mitterand government. The original mandate of the Center

was threefold: research in those areas of information technology applicable to microcomputers; social experimentation in France; and

Third World pilot projects designed to explore

computer applications for the dissemination

of medical and education information.1°

5 However, the Center’s role in information technology research and development has not always

been clear. Since its inception in November,

1981, the Center has been racked with political struggles. Exactly what role the Center

plays or may play in French information technology research and development, however,

still remains uncertain.l06

University

Two parallel systems of higher education exist in France; one is found in the universities,

the other in the grandes ecoles. Both systems

produce scientists, engineers and administrators with relatively little training in the applied sciences and/or the business aspects of

research such as marketing, management finance, or accounting. Beyond this similarity,

the systems have few parallels.

In general, French university training does

not usually prepare individuals for careers in

government or in the higher levels of industry. University trained scientists are occasionally found in industry and in government research laboratories in instances where the

Iobcentw Mond,i~ Informatique et ~ssourceHllmtie, ~’ches

D’Information, Statuts et orgm”sation.

1%3ee for example, Dray and Menosky, “Computers and a

New World Order, ” Technology Review, May/June 1983, and

Walsh, “Computer Expert Signs Off From World Center, ” Science, vol. 218, Dec. 3, 1982.
258 • Information Technology R&D: Critical Trends and Issues

work is decidedly theoretical or, as in computer science, the discipline is so new that a

grande ecole exclusively for the subject is nonexistent. Although computer science is taught

in several of the grandes ecoles, computer scientists, particularly software engineers, in

France have emerged from the university community. As a result, several French universities such as the university of Grenoble, have

recently become sites for information technology research and development activities

around which industry has begun to collect.

This may eventually change the nature of

French research and development which traditionally has been institutionally split into

three components. In general, the universities

(and some government organizations) have

conducted France’s basic research, the government and the grandes ecoles have been the

sites of applied research, and industry has

been the environment for development activities. Although these various institutions have

certainly funded activities in each of the other

components, cooperation among them has

been minimal.

The highly respected grandes ecoles system,

which produces the French cadre of government officials and industrial managers, was

formed by Napolean to develop an elite group

of French intellectuals who would be responsible for guiding France’s cultural, social, economic, and political futures. Today there are

about 150 grandes ecoles in France of which

approximately 10 produce state engineers. The

others produce administrators, economists,

sociologists, artists, and a host of other professionals in the sciences, liberal arts, and

humanities. All grandes ecoles have entry requirements. One must take a competitive

exam which requires between 2 and 3 years

of study preparation. Typically, the French

high school graduate will prepare for this exam

at the university, within the high school setting, or in private preparatory institutions.

Based on their test scores, students are generally assigned to specific grandes ecoles.

The Ecole Polytechnique has traditionally

produced the highest level of government officials in France. As the name suggests, the curiculum at Ecole Polytechnique is based on a

theoretical education in a variety of scientific

disciplines. In addition, students who wish to

specialize in an area often enter one of the

other grandes ecoles for additional training

after graduation.

The Ecole Nationale Superieure des Telecommunications (ENST) is the primary grande

ecole for the production of researchers and

engineers in information technology. The

ENST is funded by the Ministere des Postes,

Telecommunications, et Telediffusion (PTT),

and its curriculum is overseen by the PTT. The

school is considered to rank among the top ten

of the 150 grandes ecoles in France. The school

accepts 70 first year students annually, based

on performance on the competitive exam.

More students are added during the second

and third years of the school’s program. Entry into the second year at ENST can be obtained after completion of another grandes

ecoles education and/or after graduation with

a maitrise (roughly equivalent to a U.S. bachelor of science degree) from the university.

These additions result in a total student population of about 540 and the award of 220 degrees annually. ’07

The first and second years of study at ENST

involve mathematics, physics, electronics,

computer science, economics, foreign language, and humanities. During the third year,

a student chooses from eight areas of specialty

to study for half of the year. Three months are

spent in a work-study project in industry or

government or in a foreign study program.

These work-study projects are a unique opportunity for students to gain applied or industrial experience. As a result of ENST’S emphasis on applied engineering, the proportion of

graduates who work in industry is quite high

in comparison to other grandes ecoles. Approximately 60 percent of the graduates of

ENST go to industry, and the remainder find

jobs in the PTT.

The ENST has four laboratories where instructional research is conducted: systems and

communications, computer science, electronics

‘

O

’ Ministeredes PTT, EA?ST.
Ch. 7—Foreign Information Technology Research and Development . 259

and physics, image and sound, and life sciences. Occasionally research is conducted in

collaboration with government research centers and industry; however, the main purpose

of the research is to provide student instruction, not to further the state-of-the-art.108

The highly theoretical nature of the

grandes ecoles training does not always prepare government officials to direct and conduct research for purposes of French industrial

growth. Experience in the industrial community does not appear to be an alternative method of developing such preparation for government officials, as the transfer of people from

careers in industry to careers in government

(or vise versa) is quite rare. However, in conjunction with its goal of strengthening the

links between industrial and government research and development, the Mitterand government has implemented several new programs. These include increasing the number

of commercially oriented grandes ecoles, the

teaching of marketing, accounting, and finance throughout the grandes ecoles system,

and encouraging more work-study programs.

Industry

The industrial component of French information technology research and development,

just as in the United States, has many members. Similar to the situation in both Japan

and the United Kingdom, a few large information technology firms are responsible for the

major proportion of research and development

efforts. Cii Honeywell Bull, Thomson CSF,

CIT Alcatel, and Sogitec, representatives of

the spectrum of French industrial experience

in information technology research and development, are described below.

Cii Honeywell Bull

When nationalization became operational at

Cii Honeywell Bull in January 1983, the firm

was completely reorganized. It took on several

divisions of Thomson and Alcatel and rearranged its internal divisions into four

—. ———

‘081bid.

groups: Bull Systems manufactures mainframes; Bull Sems (purchased from Thomson

CSF) manufactures minicomputers; Bull Peripheriques makes disks and printers; Bull

Transac (purchased from Alcatel) produces microcomputers and office automation products.

The collection of groups is now called Bull. The

transfer of the company to state ownership

has not only changed the structure of divisions, and their personnel, it has changed the

relationships between management and worker to reflect socialist principles. The work week

has been shortened, salary differentials between men and women have been eliminated,

and the number of upper management personnel and their salaries have been reduced.log

Research at Bull has been reorganized into

six working groups, each with 30 scientists

and engineers: advanced systems research; integrated circuits research and technology; custom design of integrated circuits; standard integrated circuits; interfaces for technology

use; and discrete components and subsystems.

The integrated circuits research and technology group is mandated to “be a proponent of

technology alternatives to our partners” and

to [provide] updated competence for the best

choices in integrated circuit technology at the

Bull group level. ” Similarly, the custom integrated circuits group is to “establish knowhow in design of custom VLSI” and “provide

support and expertise in our choices of new

technologies available outside the company. ”

In addition to the six research groups, additional studies to determine the feasibility of

research in languages, artificial intelligence,

vector processing, and distributed architecture are underway.ll0

Bull’s future position in information technology research and development is unclear.

It is important to note, however, that should

it not improve, the French efforts in information technology research and development,

and indeed in other advanced technology

“Wi.i Honey-well Bull, Bilan Social d’Entrepn”se, Exercise 1982

and “Avis du Comite Central d’Entreprise sur le Bilan Social,

1982, ”

““Bull, Corporate Z%chnology, June 17, 1983.
260 ● Information Technology R&D: Critical Trends and Issues

areas, may be diminished. Much of France’s

technological future is dependent on the availability of a wide range of sophisticated computers and computer peripherals. As long as

the French rely on Bull for these products, a

very important link in the information technology research and development chain may

remain uncertain.

Thomson CSF

Thomson CSF produces a variety of aeronautic electronics equipment, telecommunications equipment for the public telephone network, medical devices, electronic components,

and office automation products. Thomson CSF

is partially controlled (40 percent) by Thomson-Brandt, a producer of durable consumer

goods, electromechanical capital goods, lamps

and lighting fixtures, and engineering and financial services.111 Thomson CSF produces,

sells, and distributes its products through a

network of almost 60 domestic and foreign

subsidiaries and holding and associated companies. 112 Its revenues are dominated by the

sale of electronic equipment followed by telecommunications and medical devices.1

1

3

In 1981, Thomson CSF spent over F 4 billion ($530 million), approximately 10 percent

of Thomson CSF and Thomson-Brandt combined revenues, on research and development.

Seventy-five percent of the effort was internally financed. Thomson CSF performs R&D

for both Thomson CSF and Thomson-Brandt,

and its spending represents 25 percent of all

R&D spending in France. The vast majority

(95 percent) of the research is product-related

and takes place throughout the company’s

subsidiary structures. Basic research takes

place in the Laboratoire Central de Recherches. 114

Basic research at Thomson CSF includes

programs in gallium arsenide, molecular beam

epitaxy, single mode fiber optics, and machine

I I lThom90n.Brmdt, l%nc~pales ~fi”df?s et Participations

Francm”ses et Etrangers.

“’Ibid.

“

gThomson-CSF, Rapport Annual des Activities en 1981,

‘]41bid.

level languages. The basic research effort,

while small, is extremely important to Thomson CSF. The basic research effort provides

Thomson with entree into the basic research

community in France and abroad (Massachusetts Institute of Technology, Stanford University, CNRS and several French universities

were mentioned as important research collaborators). Moreover, a credible basic research

effort helps with the recruitment of scientists

and engineers. Because of the excellent reputation of Thomson CSF’S basic research function

and the small portion of corporate funds it represents, nationalization is not expected to

change the nature of the activities and may

even increase funding.

Like Bull, Thomson-Brandt, was nationalized with the passage of legislation in February 1982. The effect on R&D activities at

Thomson CSF has been minimal in comparison with the changes at Bull. Product-oriented

research has been modified slightly to meet

some specifications of La Filiere Electronique

program and state management has caused

some difficulties, but personnel and directional

changes for the company have caused almost

insignificant disruption.

CIT Alcatel

CIT Alcatel is a subsidiary of the Compagnie Generale d’Electricity (CGE), the fifth

largest company in France. CIT Alcatel

(through its 8 French and foreign subsidiaries

and affiliates) represents the public telecommunications division of CGE. Another 11

Alcatel Group members produce office automation and professional electronics products

and provide computer services. Nationalization has not changed the personnel or the conduct of research at CIT Alcatel. It is anticipated that state ownership will improve the

relationships between academia and industrial

research and development, although results

are not expected for another 10 years.lls

CIT Alcatel’s research and development activities are scattered throughout the company’s subsidiaries. In addition, some research

I IbAlca~l, The Alcatel Group.
Ch. 7—Foreign Information Technology Research and Development ● 261

activities take place in association with CGE,

CNET, and CNRS, and in conjunction with

other French (e.g., Thomson CSF) and U.S.

companies (e.g., SEMI Processes, Inc.). The

company’s director estimated that between 10

and 12 percent of the employees (some 17,065

in 1981) were involved in R&D116

Each product division within the CIT Alcatel companies funds the R&D activities it

deems needed. Like Thomson CSF, the basic

research at CIT Alcatel is performed at a central laboratory that is shared with all members of the CGE Group. Approximately 6 to

8 percent of CIT Alcatel’s total research budget is devoted to this central laboratory.117

Sogitec, S.A.

Unlike the majority of French information

technology firms, Sogitec is not a state-owned

corporation and is representative of a small information technology firm. Founded in 1964

by its president, Christian Mons, Sogitec has

grown to employ about 550 people in three locations: Paris, Rennes, and Lakewood, California. Sogitec also has sales offices in New York

and Washington, D.C. Its sales growth has

been impressive; 1978 revenues were doubled

by 1979. Customers include General Electric,

“’Ibid.

“’Ibid.

McDonnell Douglas, Ford, Daussalt, and

others in the aircraft, shipbuilding, and automobile industries.118

Sogitec has two divisions that are designed

to meet individual user needs. The data processing services division provides software

packages and the related hardware for full text

documentation, storage, and retrieval. The

other Sogitec division produces real-time simulators and simulation packages for aircraft,

helicopters, land vehicles, and ships. The

French military has purchased Sogitec products for combat pilot training in the French

Mirage fighter bombers. In addition, Sogitec’s

simulation expertise is currently being

adapted for film production, television commercials, and animation.

Some notion of Sogitec’s research intensity

can be seen in its distribution of personnel.

Over 250 of Sogitec’s 550 employees are scientists or engineers involved in research and development (50 are located in the United

States). Eighty percent of the researchers

come from the grandes ecoles system, the remainder from French universities.ll9

“’Department of State, “WTDR on Sogitec (SIC) Data Systems,” Oct. 10, 1983, p. 3.

“

g

Ibid.

The United Kingdom

Historically, the United Kingdom has heavily relied upon industrial manufacturing for its

economic well-being. As the post-industrial

society arrives with the decline of manufacturing as a primary economic activity, the British economy has suffered.120 The United Kingdom’s share of world trade in manufactured

goods in the decade 1963-73 fell from 15 to 9

percent. For the first time in history the

United Kingdom now appears to be approach-

‘

z

”Daniel Bell, The Coming of Post-Industrial Society (New

York: BASIC Books, Inc., 1976).

ing a trade deficit in manufactured products.

Moreover, the U.K. ’S needs for various information technology products are completely or

substantially met by imports. As a result of

the importance of exports to the U.K. economy and the increasing importance of information technology to the world economy, both

the U.K. Government and industry have concluded:

Our basic economic situation dictates that

we must become a net exporter of high technology, high value-added products; information technology is a prime example of this.
262 • Information Technology R&D: Critical Trends and Issues

Moreover, unless our [the United Kingdom]

information technology industry achieves a

strong world competitive position, then the

efficiency of our other industries in the manufacturing services will suffer. Their capacity to be advanced users of information technology has a close synergy with the level of

the information technology industry itself.121

Traditionally, the United Kingdom has been

one of the world’s leaders in basic scientific

research, particularly in the physical and biological sciences. Britain holds the highest per

capita ratio of Nobel Prize winners in the sciences which is more than double those for any

of the other industralized nations. Although

the United Kingdom has in the past had the

largest R&D expenditure percentage of gross

national product (GNP) outside of the United

States, the United Kingdom has been traditionally weak in converting and applying its

basic research efforts to the production and

marketing of new products and services.

This difficulty of transferring scientific

knowledge to commercial applications has consequently created serious problems in the industrial sector and in the international competitiveness of British-made goods. This

failure to capitalize on basic research efforts

is documented in a recent publication of the

Central Office of Information, London, “British Achievements in Science and Technology”:

. . . there have been an array of ‘firsts’ that

apply to the information technology area, including radio navigation, computers, optical

fibers, liquid crystal displays, and flat screen

televisions, yet in none of these areas is a

British manufacturer a principal supplier. ’22

Thus the current challenge in the United Kingdom is to bridge the gap between the creative

basic research in information technologies and

the relatively weak state of industrial application of these technologies in order to create an

environment which is more innovative in pursuing both domestic and international mar-

‘*’The Department of Trade and Industry, “A Prograrnme

for Advanced Information Technology, ” the Report of the

Alvey Committee (London: Her Majesty’s Stationary Office,

1982), p. 14.

‘22Central Office of Information, London, British Achievements in Science and Technology, April 1981, No. 11 l/RP/81.

kets. This is particularly important in the area

of information technology where the development of user applications of the technologies

for the provision of new and innovative services is vital to the marketing of information

technology.

Reflecting the need to increase applied research activities, the current U.K. Government has taken measures in the opposite direction of the traditional high level of government

intervention in both industry and social programs. The more conservative government’s

efforts include privatizing the economy and restoring entrepreneurial initiatives, thus attempting to make industry more independent

of government and reducing government involvement in the marketplace. Government

strategies include privileged credit, deregulation measures, and tax benefits to encourage

the growth of small and medium businesses.

Privatization measures also entail exposing

state-run monopolies to outside competition.

A major example of this introduction of competition is the termination of the monopoly of

British Telecom (BT) by granting a license to

a major competitor to operate an alternative

national telecommunications network. It is

hoped that this recently introduced competition into the provision of telecommunications

services will stimulate demand for advanced

technology transmission and exchange equipment. In conjunction with the privatization

measures in the field of information technology, the U.K. Government is also promoting

the marketing or applied aspects of research

and development by shifting some of its R&D

expenditure from government research establishments to the private sector. In Cambridge

for example, where a preference for basic research has long prevailed, anew view towards

research is emerging:

What has changed is the idea that money

is dirty and that one must do pure science.

Now, as in Cambridge, Mass., or in California, people are not adverse to doing research

that could be put to commercial use. This

change in the work ethic has helped us.123

IZ3p~p Ld?cmnkr, “Is Britain Reviving?” World Press Re

view, September 1983, p. 31.
Ch. 7—Foreign Information Technology Research and Development ● 263

Because of radical changes in government

policy over the past decades in the United

Kingdom, the continuity of policy which has,

for example, aided Japan in its post-war recovery, has not been there to support industry in

its efforts to expand. This complicates any

simple characterization of the U.K. Government role in industrial policy and suggests a

dynamic situation currently regarding U.K.

Government initiatives in information technology. Consequently, it is difficult at times to

disassociate government, industry, and university roles in information technology R&D.

However for purposes of comparison with

United States, Japanese, and French R&D efforts, government, university, and industry

R&D environments are described separately

below. Before discussing these environments,

it is important to understand the size of the

U.K. participation in information technology

markets.

The Size of U.K. Participation

in Information Technology Markets

While the United States and Japan are net

information technology exporters, the United

Kingdom is a net importer of information technology products by F 300 million ($420 million) annually.’” In 1980, the U.K. industry

captured approximately 50 percent of its own

F 2.1 billion ($2.94 billion) information technology market. Moreover, the U.K. information technology industry captured 3.8 percent

of the world information technology market

in1980.125

Because of the relatively small size of its national markets, the U.K. information industry

has been somewhat inhibited. Moreover, it has

had difficulty in generating significant export

markets for its information technology products to balance its heavy imports. For example, of the 19 top semiconductor companies in

the world, which account for approximately

IZ4AlIU.K.pund fi~res are converted into U.S. dollars according to foreign exchange rates as of Aug. 1, 1984, where L 1

= $1.4.

‘25”A Strategy for Information Technology, ” National Enterprise Board, 1981, p. 19.

75 percent of the world market, not one is from

the United Kingdom.

Government

The U.K. Government officially recognized

the importance of the development of information technology to the British society, industry, and economy by requesting the Advisory

Council on Applied Research and Development (ACARD),126 which advises the Prime

Minister and the Cabinet Office on important

developments in advanced technology, to address the following questions:

● Should development and application of information technology in the United Kingdom be stimulated?

● Are there constraints on British industry

which supplies and applies information

technology equipment, software, and

systems?

The resultant 1980 ACARD report “Information Technology” has contributed to present

policy formulation in relation to information

technology, with an emphasis on the application of information technology as a key element in the future industrial and commercial

success of the United Kingdom as well as on

the potential significance of information technology for both society and individuals.

The ACARD report recommended the following:

1.

2.

3.

4.

— —

One minister and one government department should be wholly responsible

for information technology.

One government department should be

responsible for the regulation of communications and broadcasting.

There should be a government commitment to information technology.

The government should actively promote and publicize British information

technology.

— ——

‘

z

’Probably the nearest United States counterpart to ACARD

is the Committee of Advisors, recently created by Dr. Keyworth

in the Office of Science and Technology Policy in the White

House. ACARD, whose members are experts drawn from industry, governmen~ and academia, offers specific recommendations for government action.

38-802 0 - 85 - 18
264 ● Information Technology R&D: Critical Trends and Issues

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Central government, local government,

and the nationalized industries should

apply information technology vigorously.

The Post Office should provide a

worldwide network.

Education, training, and guidance

should be accentuated in information

technology.

Links between users and suppliers of information technology equipment should

be improved.

Strong British teams should participate

in international fora on regulations and

standards.

Legislation should be introduced to provide for better protection of data, and

other legal reforms will be required.

The Post Office monopoly on use of its

services should be ended.

Public purchasing should be used to

“pull through” development of equipment.

The Science and Engineering Research

Council and the Department of Industry should promote research and development in information technology.

All publicly funded information technology research and development should be

coordinated. This would involve Department of Trade and Industry, Ministry

of Defense, the Post Office, and the Science and Engineering Research Council.

The United Kingdom has taken a wide-scope

approach to encourage the development and

application of information technology in British industry and society. In response to the

ACARD report, Mrs. Thatcher’s government

has developed an overall strategy for information technology. The main objectives of the

U.K. Government’s policy for information

technology are:

1.

2.

The development of a statutory regulatory framework favoring the growth of information technology products and

services.

The development of new products and

techniques through direct research and

34

4.

development support and enlightened

public purchasing.

Action to make individuals more aware

of what information technology offers and

so enable them to take advantage of the

new information technology products and

services.

The provision of a national telecommunications network capable of stimulating,

and meeting, demands for new services.

For implementation of these goals, 1982 was

designated as IT Year in the United Kingdom.

A wide range of promotional aids was used to

increase the awareness of the general public,

industry, and schools, and main procurement

agencies. The major force in IT Year, in addition to the information technology awareness

campaign, was a major and intensive government-industry initiative to encourage research, development, and application of information technology in order to help strengthen

the overall U.K. economy.

Also during 1982, the British Government

acknowledged the need to address the field of

information technology in a coherent manner

and subsequently made significant changes in

its policymaking structures. A minister with

special responsibilities for information technology was appointed, the first such appointment in any nation. The Minister for Industry and Information Technology has

responsibility, under the Secretary of State for

Trade and Industry, for all the Department

of Trade and Industry’s activities concerned

with information technology, including those

related to research and development. More

specifically, the Minister has responsibilities

for information technology, telecommunications, computer systems, microelectronics,

electronics applications, robotics, and space.

He oversees British Telecom and the Post Office public purchasing, research and development (including the industrial research establishments) and the British Technology Group.

He is also responsible for sponsorship of the

chemical, mechanical and electrical engineering, and paper industries; and for distribution

and service trade industries; newspapers,
Ch. 7—Foreign Information Technology Research and Development . 265

printing and publishing; and for standards and

quality assurance and firms. Although the responsibilities of the Minister of Industry and

Information Technology are central to the promotion of information technology in the

United Kingdom, at times the press coverage

of ministry activity tends to be exaggerated.

Department of Trade and Industry (DTI)

As a result of the 1980 ACARD recommendations which suggested increasing coordination between industry and government, the

Department of Trade and Industry (DTI) has

become the major focus for U.K. initiatives in

areas related to information technology. In recent years there has been a shift in U.K. Government support from its own research establishments (which still account for a substantial

part of the nation’s scientific resource) to the

private sector. The DTI total expenditure in

1982-83 was approximately F 230 million

($322 million), of which approximately twothirds was spent in the private sector. DTI allocated approximately F 80 million ($112 million) for information technology R&D in 1979-

80.’27 This trend is greatly supported by the

U.K. Government because it locates research

closer to the point of application (which some

feel is vital in the area of information technology) and encourages private sector initiatives.

The DTI’s decisions on funding priorities for

research and development rely on the advice

of five Research Requirements Boards (RRBs).

Each RRB is chaired by a Senior Industrialist

and consists of industrialists, scientists, and

government representatives. The RRB’s are

seen as an effective system for monitoring and

developing strategies to ensure that research

support priorities match the demands of

changing technologies and future industrial

needs. The DTI, therefore, works closely with

industry through the Research Requirement

Boards to ensure that research in the national

laboratories is directed towards industrial

needs. Three of the Research Requirements

Boards, Computers, Systems, and Electronics;

‘*’John K. Thompson, “ ‘IT’ in Britain, ” speech given at the

British Embassy to the Potomac Chapter of the American Society of Information Scientists, June 9, 1982.

Mechanical and Engineering; and Metrology

and Standards, are involved with information

technology R&D support. The Computers,

Systems, and Electronics RRB is the major

supporter of information technology R&D

with 1980-81 expenditures of F 6 million ($8.4

million). 128

In keeping with the current U.K. Government policy, which aims to achieve a profitable, competitive, and adaptable private sector,

the DTI has recently implemented a variety

of programs that are intended to supplement

direct R&D support. Because of the recent recession that has inhibited U.K. companies

from investing large resources in R&D activities, these programs are intended to encourage the private sector to research, develop, and

use information technology. The DTI’s support programs generally comprise three

elements:

1.

2.

3.

An awareness program to stimulate interest in the potential of the new technology.

Consultancy to explain how a particular

technology can be applied to a particular

company’s needs.

Support for ensuing projects.

These DTI R&D support programs, categorized by the various applications of information technology, are presented in table 44.

THE ALVEY PROGRAMME FOR ADVANCED

1NFORMATION TECHNOLOGY

In addition to industrial R&D support

schemes, the DTI recently initiated a collaborative national information technology R&D

program. One of the catalysts to the formation of the Alvey Programme was the announcement of the plans for Japan’s FifthGeneration Computer Systems Project and Japan’s invitation to other countries, including

the United Kingdom, to discuss participation

in the program. The scale and cohesiveness of

this and other Japanese programs were seen

by the U.K. representatives to the Japanese

conference as a major competitive threat. The

British also believed that the U.S. industry’s

‘z8Statement of Kenneth Baker, before the U.K. House of

Commons, Dec. 21, 1982.
266 ● Information Technology R&D: Critical Trends and Issues

Table 44.—Department of Trade and Industry R&D Programs

CAD/CAM

CAD/MAT

FMS

FOS

MAP

MISP

ROBOTICS

SPS

— The Computer-aided Design and Computer-aided

Manufacture program is designed to promote and

accelerate the acceptance and application of CAD/CAM

primarily in the mechanical and electrical engineering

industries.

— The Computer-aided Design Manufacture and Test

Program is designed to encourage the use of CAD/MAT

for design testing and production in the electronics

industries.

— The Flexible Manufacturing Systems Scheme is designed

to encourage fiirms to install flexible manufacturing

systems.

— The Fiber Optics and Opto-Electronics Scheme is

designed to encourage the development, production,

and application of fiber optics and opto-electronics.

— The Microelectronics Application Project is designed to

encourage the application of microelectronics in

products and processes in manufacturing industries.

— The Microelectronics Industry Support Program is

designed to promote the microelectronics components

industry, particularly for the manufacture of silicon

integrated circuits.

— The Industrial Robotics Scheme is designed to

encourage the development and application of robots

in manufacturing industries.

— The Software Products Scheme is designed to encourage

the development and application of software products

and packages.

Awareness programs, demonstration projects and other promotional

activities

- 6 million ($8.4 million) (over 3 years from

1981)

- 9 million ($12.6 million) (over 3 years from

1982)

- 60 million ($84 million) (over 3 years from

1982)

-25 million ($35 million) (over 5 years from

1981)

-55 million ($77 million) (commenced 1978)

-55 million ($77 million) (commenced 1978)

+ 10 million ($14 million) (over 3 years from

1981)

+80 million ($1 12 million) (over 4 years

commencing 1981)

SOURCE: Office of Technology Assessment.

reaction to the Japanese Fifth Generation

Computer Systems Project could also cause

an equal if not greater degree of competition

for the U.K. industry.

In the light of these factors, the U.K. delegation called for an urgent study into the feasibility for a collaborative R&D program geared

to particular strengths and requirements. This

study, completed by the Alvey Committee,

outlined plans for a national information technology R&D effort to improve the United

Kingdom’s competitive position in world information technology markets.129 John Alvey,

Chairman of the Committee, comments on the

coordination aspects of the program:

This is the first time in our history that we

shall be embarking on a collaborative research project on anything like this scale. Industry, academic researchers, and govern- —— —-—-— ‘

z

’See “A Pmgr amme for Advanced Information Technology,

The Report of the Alvey Committee, ” Department of Industry, Her Majesty’s Stationary Office, 1982.

ment will be coming together to achieve

major advances in technology which none

could achieve on their own. The involvement

of industry will ensure that the results as

they emerge are fully exploited here in Britain to the advantage of our economy. Information technology is one of the most important industries of the future and therefore

one upon which hundreds of thousands of

jobs in the future will depend. Collaboration

will ensure that the results of the research are

widely disseminated particularly to smaller

firms which have such an important contribution to make to the industry. No one can

guarantee success, but the government is

convinced that this program will ensure for

British industry secure access to the new

technology and to the products and processes

on which our future prosperity depends.

The Alvey Program for Advanced Information Technology is a 5 year program funded

by three government ministries and industry.

Total funding for the program will be approximately $525 million over a 5 year period. The
Ch. 7—Foreign Information Technology Research and Development . 267

Department of Education and Science (DES)

through the Science and Education Research

Council (SERC) will fund approximately 50

million ($70 million) for promoting advanced

research in academic institutions and the

training of necessary manpower. The Ministry of Defense (MOD) will fund approximately

%40 million ($56 million) for research believed

to be important to the defense industry and

will contribute its experience in the field of integrated circuits. The Department of Trade

and Industry will provide the major portion

of the government’s funds, approximately

L 110 million ($154 million), and will have the

overall responsibility for management of the

program. Industry will fund the remaining

L 150 ($210 million) in the form of 50 percent

matching funds for each R&D project.

The Alvey Program R&D projects are concentrated in four technical areas, known as

“enabling technologies. ” These enabling technologies, seen as crucial to the development

and application of information technology in

the United Kingdom, include:

● very large scale Integration (VLSI) silicon

integrated circuits,

● software engineering,

● intelligent knowledge based systems

(IKBS), and

● man/machine interface.

The research projects in these four technical

areas will be managed by the Alvey Directorate consisting of staff from industry, DTI,

MOD, and SERC. Each of the four technology areas has its own director in addition to a

director in charge of networks and communications among the various R&D projects.

Each of the research teams will generally be

organized in small consortia—e.g., two information technology firms, together with a government research establishment team, and a

university team. Unlike the Japanese approach of creating a center for research, research teams will rely on a data network and

electronic mailbox service that will allow interactive communication among the R&D program participants.

The United Kingdom will also be a major

participant in the European Strategic Program for Research in Information Technology

(ESPRIT). Currently, U.K. companies are involved in more than half of ESPRIT’s pilot

projects. The Alvey program is also designed

to complement the ESPRIT program with interl.inking communications networks and common parallel research strategies.

THE DEPARTMENT OF TRADE AND

INDUSTRY’S NATIONAL LABORATORY

FACILITIES

The U.K. national research establishments

involved with information technology R&D

are the National Physical Laboratory, the National Engineering Laboratory, and the Computed-Aided Design Centre.130

The National Physical Laboratory (NPL)

has a long distinguished history in computer

technology. In 1981-82, NPL R&D expenditures were approximately L 22 million ($30

million). Currently, R&D projects are focused

on data networks, data security, special input

devices, and microprocessor applications. The

Laboratory also is developing standard network protocols and evaluating cryptographic

methods for data protection. NPL also develops software for solving engineering problems.

The National Engineering Laboratory

(NEL) carries out research, development, design, consulting, and testing in automated

manufacturing. The 1982 Information Technology Year campaign highlighted the Laboratory’s involvement in robotics and automated

production systems. NEL R&D expenditures

were approximately L 16 million ($22.4 million) in 1981-82. Key areas of NEL research

include automated assembly, control and optimization of production systems, the development of an advanced turning cell, and other

flexible manufacturing systems.

Computer-Aided Design Centre (CADCENTRE)

is the primary center in the United Kingdom

l30Discussion of the U.K. National Research Labs, based on

“Research and Development Report, 1981 -82,” Department of

Industry, 1982.
268 . Information Technology R&D: Critical Trends and Issues

for the development of computer techniques

in design and engineering. In 1981-82 the

CADCENTRE R&D expenditures were approximately L 4 million ($5.6 million). The center

offers approximately 30 computer software

packages in CAD/CAM and provides a comprehensive range of services including software development, consultancy, production

services and the provision of hands-on experience in CAD/CAM techniques. Because private sector initiatives were encouraged in DTI

sponsored R&D, the DTI agreed to sell the

Cambridge-based CADCENTRE to a U.K.

consortium led by the U.K. computer firm International Computers, Ltd. (ICL) for approximately L 1 million ($1.4 million). The newly

privatized CADCENTRE employs ICL staff

and DTI management staff. In addition, the

DTI has agreed to provide some financial support in order to ease the transition from a government research establishment to a commercially run company. The DTI will be entitled

to a royalty based on the CADCENTRE’S

turnover. 131

The Ministry of Defense (MOD)

The Ministry of Defense (MOD) is also a major supporter of applied R&D. Almost half of

the United Kingdom’s R&D budget has been

devoted to defense. In the 1970s, defense R&D

remained relatively constant although all

other areas of R&D decreased by almost 50

percent. In 1978, the Ministry of Defense expenditures for electronics research and development were approximately $900 million.132

Beyond the direct support from industrial

research funds, the defense sector has potentially the greatest possibility for contributing

to civil information technology. There has

been a recent shift in emphasis within the

MOD away from aircraft and towards electronics research and development. Because the

‘

g

’ Under the royal~ arrangements, the U.K. Government will

be repaid and could receive a further net amount of L 4.5 million over a 10-year period, assuming forecast revenue levels are

achieved by the company.

‘

s

’J. Thyme, “Information Technology in the U. K.: Government Policy, ” in G.P. SweeIWy (cd.), Informah”on and the 7hnsformation of Society, North-Holland Publishing Co., 1982, p.

261.

overseas defense electronics market is fairly

strong, it is difficult to predict what the longterm consequences of this shift maybe. If the

market grows for defense electronics, there

could be a positive effect on the U.K. supplier

industry. On the other hand, because the spinoff effect of U.K. military R&D to commercial

products has not been particularly significant,

any increase in attention to military needs by

the limited U.K. electronics industry might

have the effect of further reducing their civilian-oriented work and reducing their market

competitiveness.

Department of Education and Science (DES)

Under the advice of the Advisory Board for

Research Councils (ABRC), the Department

of Education and Science (DES) allocates the

science budget to five Research Councils. The

Science and Engineering Research Council

(SERC) has the primary responsibility for information technology R&D. The SERC budget allocated to information technology R&D

was L 5 million ($7 million) in 1979-80, L 8.5

million ($11.9 million) in 1980-81, and L 11

million ($15.4 million) in 1981-82.*33

SERC, analogous to the U.S. National Sc -

ence Foundation, accepts competitive bids

from universities for special projects. Unlike

NSF, SERC provides only half the funds for

sponsored projects. The rest of the funding

must come from industry, charitable foundations, or other government departments.

SERC also provides research establishments

with central computing support. The Engineering Board of SERC is most involved with

information technology, with funding areas in:

● device-related research,

● skilled manpower training,

• software technology, database utilization,

and system reliability,

● distributed computing systems.

SERC operates the Rutherford Appleton Laboratory (RAL). The lab itself has a considerable research program in information technol-

‘S9John Thompson, “ ‘IT’ in Britain,” speech given at the British Embassy to the Potomac Chapter of the American Society

of Information Scientists, June 9, 1982.
Ch. 7—Foreign Information Technology Research and Development ● 269

ogy, with efforts in distributed computing

systems, industrial robotics, computing applications in engineering, electron-beam lithography, and image processing.

British Technology Group (BTG)

The British Technology Group is an independent public corporation established to promote the development and application of new

technology. The British Technology Group

was formed in 1981 and includes the former

National Research Development Council

(NRDC) and the National Enterprise Board

(NEB).

BTG provides funds for technological innovation through:

●

●

●

joint venture finance under which BTG

can provide 50 percent of the funds required for the business in return for a levy

on sales of the resulting product or

process;

recirculating loans, which are a form of

working capital loan, through which BTG

can help a company to meet specific orders for innovative products; and

equity and loan finance on venture capital terms where a company is set up for

the purpose of developing and marketing

an invention or new technology; equity

may also be provided in the form of redeemable preference shares.

Projects from all sectors of industry are

eligible for consideration. The primary consideration for BTG support is that the proposal

project must be based on a new invention or

a genuine technical innovation.

University

Basic research is supported primarily at the

university level (approximately 22 percent of

government R&D spending) both by discipline

oriented committees of the Science and Engineering Research Council (SERC) and the University Grants Committee (UGC). Recent cuts

in university funding have been substantial—

15 percent over the last 4 years. In addition,

lowered enrollment has caused the universities

to become top-heavy with senior, relatively expensive faculty. The steadily rising cost of research equipment has also affected the available funds for university research. Together,

these three factors have resulted in substantially less spending for university R&D.134

Although university research funding has

been decreasing over the last few years there

have been marked changes in the distribution

of funds—away from basic research towards

engineering and applied R&D. This trend

towards greater emphasis on industrial application of research results is exemplified in

several recently initiated schemes. These

schemes, designed to promote high quality research in fields of applied science, are cosponsored by SERC and DTI. In one of the more

successful joint SERC/DTI initiatives, the

Teaching Company Scheme, DTI pays for engineers to do postgraduate work in industry.

Students work on product development, design, and manufacturing processes, but with

close attention and support of academic staff

who supervise the innovative aspects of the

graduates’ work. The program so far has attracted great interest from industry, and

many firms such as General Electric Co., British Aerospace, Ferranti, and IBM are participating.

Another program aimed at promoting industrial training is the introduction of approximately 150 information technology centers

(ITEC centers) throughout the United Kingdom. Funded by DTI, Manpower Services

Commission, and industry grants, these centers collaborate with local industries to provide computer training for unemployed highschool age youths. Approximately 70 percent

of the students upon leaving the centers find

employment in a computer-related field. Other

programs that offer technical training include

Computers in Schools, through which DTI

funds 50 percent of the cost of up to two microcomputers in each U.K. school, and a Manpow194 Robin B. Nicholson, “Science and Technology Policy in the

United Kingdom, ” address given at the Nineteenth Annual

Meeting of the National Academy of Engineering, Nov. 2-3,

1983.
270 • Information Technology R&D: Critical Trends and Issues

er Services Commission Program that funds

information technology training in computerrelated subjects. Approximately half of all the

programmers training in the United Kingdom

is provided by these programs.

In addition to industrial training programs,

the U.K. Government has encouraged greater

industrial participation in R&D as well as

closer industry-university ties through the initiation of science parks. Similar to the Japanese and U.S. science parks, the U.K. science

parks provide an opportunity for industry to

locate in the proximity of major research

universities.

Industry

Since the late 1960s, the U.K. Government

has played an important role in supporting the

U.K. computer industry. For example, in 1968

the government encouraged a series of mergers that led to the establishment of International Computers Ltd. (ICL) and then provided

funds amounting to approximately $12 million

annually until 1976. Moreover, the government encouraged ICL’S growth through preferential procurement policies that guaranteed

almost all large central government contracts

to ICL. ICL became the largest European computer company, with a wide customer base in

the United Kingdom as well as overseas, including the United States. ICL became so successful that government assistance was withdrawn in 1976, and in late 1979 the government sold its 25 percent share in the company.

However, by 1981, ICL was heavily in debt,

and the government (although it encouraged

private funding and joint research programs)

arranged L 270 million ($378 million) in loans

for ICL.

In an effort to become profitable again, ICL

is currently exploring joint activities with nonU.K. firms. In 1982, ICL and Fujitsu reached

a collaborative agreement. The arrangement

provides for special access to Fujitsu’s advanced microelectronics technology, and provides for purchases of semiconductor chips developed by Fujitsu. ICL will in turn market

large Fujitsu computers in Western Europe,

thus broadening the ICL product line into

more powerful computers. It is hoped to extend this collaboration at a later date to other

technology areas, including communications

technology. ICL also recently reached an

agreement with a small U.S. company, Three

Rivers, to manufacture and market worldwide

a microcomputer designed by Three Rivers.

In 1979, the U.K. Government also invested

$100 million for the creation of a national semiconductor firm, Inmos. Operating as an independent producer, Inmos was established to

manufacture a limited range of products (principally high-capacity semiconductor memory

chips) to sell to large electrical goods manufacturers. Also, to assure indigenous production of semiconductors, the U.K. Government

has convinced several U.S. semiconductor

companies to setup production in the United

Kingdom by offering them grants up to 33%

percent for R&D costs, under the Support for

Innovation Program (SFI).

Currently, more than half of the U.K. industrial electronics R&D expenditure is funded by

government. The funding may be in the form

of cost-sharing grants, procurements, or any

of the multitude of funding schemes. Moreover, the pervasive influence of the U.K. Government is exemplified in the original Alvey

proposal which called for the government to

fund 90 percent of industrial R&D activities.

The proposal, however, was finally amended

to the current commitment of 50 percent only

after considerable debate, on the grounds that

industry would not be committed if it only was

required to invest 10 percent of its own resources.

The historically low industrial funding for

information technology R&D has been attributed to the U.K. information technology industry’s focus on highly specialized markets.

Because the U.K. information technology industry in some instances fills small but important market niches, it usually does not capture

mass markets; consequently, the U.K. information technology industry has not always

had adequate resources for R&D funding.

A case in point is the British semiconductor chip industry. The leading U.K. informa-
Ch. 7—Foreign Information Technology Research and Development ● 271

tion technology firms have concentrated on

producing specialized chips known as “specials” where the demand is low and the market relatively small. For example, world sales

in 1980 of custom-built special chips came to

only L 100,000 ($140,000) almost one-twentieth of the comparable figure for standard

chips.135 Although the leading British electronic firms’ demand for these standard chips are

extremely high, U.K. industry has left the

manufacturing of these types of chips mainly

to companies from the United States and Japan, which together capture approximately 75

percent of the world market. However, the

United Kingdom’s leading firms—Ferranti,

Plessey, and GEC—all plan to expand their

manufacturing capability of standard chips for

domestic use. This pattern has also been repeated in other information technologies; for

example, few British companies produce hardware that directly serves the semiconductor

and electronics industry (i.e., for testing and

production needs).

There is some indication that U.K. industry

may be reassessing its investment policies.

Current estimates suggest, for example, that

the volume of R&D has been maintained

through the recession on a selective basis with

substantial advances in areas such as microelectronics and corresponding decreases in

metals and traditional engineering. For example, industrial electronics R&D expenditures

increased form L 279 million ($390.6 million)

in 1975 to L 442 million ($618.8 million) in

1978.136

Similar to the situation in France and Japan, a few large firms are responsible for a

large proportion of information technology

R&D expenditure in the United Kingdom.

Several of these major firms are described

below.

‘

35 Peter Marsh, “Britain Faces Up to Information Technology, ” New Scientist, Dec. 23, 1982, p. 637.

“’Robin Nicholsou “Science and Technology Policy in the

United Kingdom, ” address given at the Nineteenth Annual

Meeting of National Academy of Engineering, Nov. 2-3, 1983.

Plessey

In 1983, Plessey invested approximately

$225 million in R&D, 15 percent of its sales.

Approximately $22 million of the R&D expenditures were allocated to basic research

activities. Of the 320 researchers in the main

Plessey laboratory working on microelectronics, 170 people are working on gallium arsenide

and related materials and 150 are working on

silicon. Plessey’s silicon research is geared

towards speciality or custom circuits.

Plessey relies heavily on outside contracts,

and approximately 45 percent of its research

is done for the MOD and British Telecom. Of

the remaining 55 percent, half is conducted for

the Plessey operating divisions and half is conducted for the head office. Currently, Plessey

is attempting to reduce its reliance on outside

R&D funding in favor of more operating division work.137

General Electric Co. (GEC)

In 1983, the General Electric Co. (GEC) invested approximately $900 million in research

and development, approximately 10 percent

of its sales. Unlike Plessey, only 25 percent of

GEC’s research is for the MOD and British

Telecom. Fifty percent of the research is for

GEC’s 120 operating companies, and 25 percent is for basic, speculative research. Because

a large percentage of its R&D is supported by

its operating companies, GEC’s research activities are more oriented towards commercial

product development. GEC’s key areas of research include microelectronics, fiber optic devices, software engineering, and custom chip

design.138

British Telecom (BT)

Previously a public monopoly, the U.K. Government has recently privitized British Telecom (BT). Moreover, the U.K. Government has

permitted the licensing of other competitors

“’’’Profile: GEC and Plessey: Two Approaches to R& D,” The

Econom”st, Nov. 20, 1982.

‘

3

’’ ’Ibid.
272 . Information Technology R&D: Critical Trends and Issues

to provide telecommunications services. It is

hoped that the introduction of competition

into the provision of telecommunications services will stimulate new demand and provision

of a vast array of new services. Consequently,

U.K. companies with advanced products are

expected to be well placed to take advantage

of market development and to use the United

Kingdom as a springboard for capturing Euro

pean and other world information technology

markets.

The privatization efforts, however, have

caused some speculation about the future of

BT laboratories in much the same way that

divestiture has caused speculation about the

future of Bell Labs. Currently, BT Labs research expenditure is approximately L 100

million ($140 million) annually. BT has traditionally had strong research programs in four

major areas:

●

●

●

●

advanced technology (e.g., CAD in large

scale integrated circuit design, optical

communications systems, gallium arsenide, high speed logic);

transmission (e.g., digital transmission in

LANs, small earth station satellites);

customer service/apparatus (e.g., Prestel

and Viewdata);

advanced systems (e.g., microprocessor

software development ISDN local connection).

European Strategic Program for Research in

Information Technology (ESPRIT)

In an attempt to reverse the decline of Europe’s competitiveness, to ensure a stronger

technological base, and ultimately to ensure

economic and political independence, the Commission of European Communities proposed

the European Strategic Program for Research

in Information Technology (ESPRIT).139 Although EEC members hope that ESPRIT will

succeed in strengthening Europe’s technological base and international competitiveness,

there are concerns as to whether research can

be effectively undertaken and shared among

potential international competitors.

ESPRIT is designed to address three major difficulties that currently face the European information technology industry as it attempts to develop new state-of-the-art technologies: the problem of raising adequate

funds for long-term research and development

during a period of economic recession and fall-

.—— —

‘sgIn 1975, the European Community had a trade surplus in

information technology products; however, by 1980, the trade

deficit in information technology products reached $5 billion

and reached approximately $10 billion in 1982. At present, Europe represents one-third of the world information technology

market but accounts for only 10 p-cent of world information

technology production. For example, in the European domestic market, 2 out of every 5 information technology products

sold are European; 8 out of 10 personal computers sold in Europe are imported from the United States; 9 out of 10 videotape

recorders sold in Europe come from Japan. ESPRIT Proposal,

COM(83) 258 final, Commission of the European Communities,

June 2, 1983, p. 8.

ing sales; a domestic market which, unlike

those of the United States and Japan, is fragmented into a number of relatively small national units; and reluctance by some within individual countries to subsidize other nations

who have historically been economic and political rivals.140 Consequently, the ESPRIT

program seeks to: increase the size of research

teams, optimize the use of human and financial resources, and initiate definition and adoption of European standards for information

technology products.141

ESPRIT attempts to address the problem

of the fragmentation of the European market,

as well as the divided efforts of the individual member nations’ national R&D support

programs, by linking a significant proportion

of key European engineers and scientists from

government, industry, and universities. In this

respect, ESPRIT is similar to other national

research and development programs such as

Japan’s Fifth-Generation Computer Project,

the United Kingdom’s Programme for Advanced Information Technology, and the U.S.

Semiconductor Research Corporation (SRC),

which are also partnerships among various

companies, academic research laboratories,

“

=David Dickson, “Europe Seeks Joint Computer Research

Effort,” Science, Jan. 6, 1984, p. 28.

“’ESPRIT Proposal, COM(83) 258 find Commission of the

European Communities, June 2, 1983, p. 9,
Ch. 7—Foreign Information Technology Research and Development . 273

and government agencies. However, unlike

these other research and development programs, ESPRIT also represents an international institutional arrangement.

Unlike the MITI program in Japan, the

ESPRIT program is limited to precompetitive

research; it does not intend to develop a commercial product as does the Japanese fifthgeneration computer effort. At any point in

the research, however, the participating companies are free to take the technical results

gained from the ESPRIT projects and develop

commercial products on their own. Therefore,

ESPRIT is not seen to be in competition with

national research and development programs

or individual companies, but as a reinforcement to make them more effective.

Funding for ESPRIT is approximately $1.3

billion for the next 5 years and approximately

2,000 researchers will take part in research

activities. 142 The funding be equally shared

among 12 principle corporate partners and

other participating companies with the Commission of European Communities. The 12

main corporations participating in ESPRIT include: General Electric Co. (United Kingdom),

Plessey plc. (United Kingdom), International

Computers Ltd. (United Kingdom), Compagnie General de L’Electricity (France), CITAlcatel (France), Cii Honeywell Bull, (France),

Thomson-Brandt (France), AEG-Telefunken

AG (West Germany), Nixdorf Computer AG

(West Germany), NmbH Phillips Gloeilampenfabrieken (Netherlands), Olivetti SPA (Italy),

and Societa Torinese Esercizi Telefoncini

(Italy).

The ESPRIT program consists of five major research areas: advanced microelectronics,

software technology, advanced information

processing, office automation, and computer

integrated manufacturing. The EEC has chosen these five areas of information technology

————

‘42Actual funding for ESPRIT is 1,500 million European currency units (ECU). Approximately 1 AU equals 1 U.S. dollar.

Of the total European Community countries’ research and development expenditures, 1.7 percent is for EEC research and

development activities. Nine percent of the EEC R&D budget

is reserved for industry of which 20 percent is for ESPRIT

funding.

because of their perceived importance for future European industrial competitiveness. The

first three of these research areas were selected

in part to develop better enabling or core technologies. Office automation and computer integration were selected as specific applications

areas where information technology is expected to have a large economic and social impact–automation of the office and the factory.

The advanced microelectronics project’s major goal is to develop smaller, more reliable,

and more powerful integrated circuit technology so that devices can perform more functions or operations than circuits available

today. More specifically, the goal of the advanced microelectronics project is to improve

the current state-of-the-art process, which is

based on three-to-five micrometer structures,

to processes that are based on structures

smaller than one micrometer. The Europeans

are hopeful that this advanced microelectronics project will improve Europe’s current

integrated circuit trade deficit.143

The major emphasis of the advanced information processing project is on information

and knowledge engineering, information storage and usage, signal processing, and external interfaces. The research project’s overall

goal is to develop technological capabilities

that underlie machine intelligence. Advances

in the new types of information processing will

also entail breakthroughs in advanced computer architecture, further miniaturization in

microelectronics, and higher reliability.

The goal of the software technology project

is to improve software engineering techniques.

More specifically, the project’s goals include

establishing standardized software interfaces,

automating the software engineering process,

and disseminating and centralizing software

research results in a common database so that

individual modules of software programs can

be reused where similar functions are required.

‘43Currently, Europe absorbs 20 percent of the world’s integrated circuit market, although Europe produces only 6 percent of the world’s integrated circuits.
274 • /formation Technology R&D: Critical Trends and Issues

The office automation project, one of the two

specific applications projects, is directed at developing a multimedia interface for all office

communication needs, and at developing efficient electronic filing systems for unstructured

information (text, voice, graphics, images,

etc.). The project will also examine the crosscultural interaction of human factors, educational, sociological, and industrial effects of office automation systems. Moreover, research

on machine translation (which is of great importance to the European Community) and aspects of machine-user interfaces, such as integrated image test speech communication,

document creation, and distribution will also

be conducted.

The goal of the computer integrated manufacturing project is to develop improved systems for automated factories. These systems

will integrate in a common data base computer-aided design, computer-aided manufacturing, computer-aided testing and repair, and

assembly. Such integration will require further

developments in integrated systems architecture, advanced components, real-time based

imaging, and integrated control subsystems

mounted on semiconductor chips.

Experts from the 12 main industry partners

as well as outside consultants have developed

a work plan of specific projects in the five project areas. As these specific projects have been

defined, proposals are solicited. Proposals may

be submitted by research teams from any industry or university, although the team must

be composed of nationals from two or more

EEC countries. This arrangement is meant to

encourage international cooperation between

nations and industries, and therefore prevent

duplication of research efforts and make optimal use of limited financial and human resources. The main criteria for evaluating proposals include: technical soundness; contribution to industrial strategy in light of

ESPRIT objectives; European Community

usefulness; technical, scientific, and managerial capability to undertake the proposed

project; and proposed activities that will facilitate the dissemination of research results.

The Commission and the advisory board,

which consists of industry representatives

(mainly from the 12 contributing industries),

review research proposals and approve grants.

Two broad types of proposals are considered

for the different technical projects. Type A,

which represents the strategic long-term research activities of ESPRIT, involves large research establishments and large commitments

of resources, both human and financial, as

well as clear long-term strategic plans to

ensure continuity of research and long-term

benefits. Type A projects receive 50 percent

funding from the European Community, and

the research participant is expected to provide

the remaining funds. Type B proposals require

relatively smaller resources and account for a

significant share of the overall efforts under

ESPRIT. Type B projects could range from

very long-term, very speculative R&D to

shorter-term and more specific R&D. Type B

projects receive at least 50 percent of their

R&D funds from the European Community,

or more if the applicant is from an academic

institution or smaller business with limited

available finance.

One of the first ESPRIT research proposals

to be funded is a project to develop advanced

interconnection between very-large-scale integrated circuits. The research project is a joint

effort between Plessy and GEC in the United

Kingdom, Thomson CSF in France, and Telefunken in West Germany. Another initial project, jointly shared between the Polytechnic in

London and the University of Amsterdam, is

focusing on the development of 11 different

aspects of tools and methods for developing

machine intelligence.

The Future of ESPRIT

The initial response to the ESPRIT pilot

phase has been favorable; the 1 year pilot

phase of ESPRIT, launched in mid-1983 with

a budget of $20 million and funded 50 percent

by the European Community and 50 percent

by industry, attracted over 200 research proposals. However, only 36 could be selected to

receive EEC matching funds. EEC officials
Ch. 7—Foreign Information Technology Research and Development ● 275

were quite surprised not only at the scale of

response, but also at the apparent willingness

of companies to permit their scientists to work

together with few restrictions.144

Currently, however, there is still some doubt

as to whether ESPRIT will further achieve its

stated goals. In the past, the EEC has had

some difficulties with other joint projects. In

the 1960s, Pierre Aigrain, then President Pompidou’s chief scientist, proposed a European

project to strengthen the technological base

of the computer and communications industry. However, the project was never launched

because of resistance from the European telecommunications monopolies to the suggestion

that their own research was insufficient and

the lack of a plan to suggest how a cooperative research program supported by established companies and nationalized industries

could be beneficial to all the participants.145

Moreover, in the early 1970s, Dutch, German,

and French computer manufacturers formed

a joint venture, Unidata. Each company sent

their top engineers to a joint research and development facility. However, the project had

many difficulties and some of the participants

eventually withdrew from the project.146

As in past joint European research efforts,

the future of ESPRIT depends as much on the

results of political struggles around the restructuring of Europe’s economic and industrial base as it does on any judgment of its

technical and scientific merits.147 This is illustrated by the first few unsuccessful attempts

in early 1984 for EEC endorsement of ESPRIT,

which became intermingled with broader economic issues ranging from the efficiency of

French farming practices to the EEC’s budget procedures. Moreover, it is still unclear as

to how the national information technology research programs will mesh with ESPRIT proj-

——-— . —

“’David Dickson, “Europe Seeks Joint Computer Research

Effort, ” Science, Jan. 6, 1984, p. 28.

“’’’What Hope for ESPRIT?” Nature, Feb. 16, 1984, p. 582.

“’Beth Karlin and George Anders, “Europe Looks Abroad

for High Technology It Lags in Developing, ” The Wall Street

Jourzud, Oct. 5, 1983, p. 1.

“’David Dickson, “Europe Seeks Joint Research Effort, ” Science, Jan. 6, 1984, p. 28.

ects. Consequently, there are debates in each

country over whether the results of information technology research and development, as

an important key to future political and economic strength, should be shared with potential competitors.

International rivalry is also a large industry concern. The lack of an established legal

framework in which companies will be allowed

to collaborate may cause difficulties for European information technology industries. Because ESPRIT is concerned primarily with

long-term precompetitive research, there may

not be any conflict with the EEC antitrust

laws which are intended to apply primarily to

marketing strategies, rather than product development. However, some companies believe

that as the gap between scientific discovery

or basic research and commercial application

narrows, collaborative precompetitive research will be extremely difficult.148 It is for

this reason that three of Europe’s largest

mainframe computer manufacturers (Siemens,

ICL, and Bull) have established the European

Computer Industry Research Center. The Research Center discourages open collaboration

by initially excluding participation by other

companies because:

If you recognize the fact that you are in a

competitive market, in which companies are

fighting against each other, then you must

accept that it is not in the interest to offer

all research results to everyone who might be

interested in them, and that at least some

projects will be of character that will forbid

the open publication of research results from

the beginning. . . . We do abstract research

on an international basis where the balance

of cooperation and competition should be

determined by the rules of international commerce, and market-like research on a national

basis, where individual companies can adopt

the most appropriate strategies for their domestic and political environment. 149

——... —

148This problem maybe particularly acute in research projects

such as office automation and computer-aided manufacturing.

“’Statement by Mr. Heimann of Siemens, David Dickson,

“Europe Seeks Joint Computer Research Effort, ” Science, Jan.

6, 1984, p. 29.
276 ● /formation Technology R&D: Critical Trends and Issues

Despite the preliminary difficulties in achiev- ments. If ESPRIT does succeed, it is likely to

ing agreement on the funding for ESPRIT, the be used as a model for similar cooperative

establishment of the controversial Siemens- European Community projects in other fields,

ICL-Bull Research Center, and other under- such as telecommunications and biotechlying political and economic rivalry, ESPRIT nology.

may succeed in overcoming these impedi-
Chapter 8

Information Technology R&D

in the Context of U.S. Science and

Technology Policy
Contents

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part I: Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General U.S. Science and Technology Policies . . . . . . . . . . . . . . . . . .

Information Technology R&D Policies . . . . . . . . . . . . . . . . . . . . . . . . .

Part II: Key Issue Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issue A: Organizationof Government . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dimensions of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options for Addressing the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issue B: Military/Civilian Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dimensions of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options for Addressing the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issue C: International Competitiveness . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dimensions of the Issue . . . . . . . . . . . . . . . . . . . . . ...!..... . . . . .

Options for Addressing the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . .

Concluding Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tables

Table No.

45. Policy Tools, Actors, and Goals of Science Policy and Technology

46. Tenets of Science and Technology Policy, 1960-84. . . . . . . . . . . . . .

47. Forces Affecting Science and Technology Policy Since 1960 . . . . .

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Policy . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

48. Federal Government Policies Toward Information Technology R&D . . . . . . . . . . .

49. Department of Defense Funding for Basic Research by Discipline,

Fiscal Years 1982, 1983, and 1984... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figures

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Figure No. Page

50. Federal R&D Budget Authority for Defense and Nondefense Activities . . . . . . . . . 295

51. Federal R&D Budget Authority for Defense Activities by Character of Work . . . . 295
Chapter 8

Information Technology R&D

in the Context of U.S. Science and

Technology Policy

Findings

● Information technology is one of the most

dynamic and controversial areas of U.S.

science and technology due to its rapid

pace of change, the emphasis placed on

this technology for economic growth and

for national security, and the pervasive

or “core” nature of the technology and its

effects.

● In this area there is a growing conflict between policies that emphasize basic research and policies that focus on international competitiveness and applications.

These issues are prominent in information

technology R&D because the lines between basic and applied research are so

uncertain.

● Interest in coordinating Federal policy for

information technology is intensifying, in

part because of foreign government policies, growing costs for R&D, and growing concern for international competitiveness. Although coordination of various

aspects of Federal policy has been debated for decades, it is a particularly salient issue in information technology: many

Government agencies are involved, but

none devote high-level policy attention to

●

●

this area. The advantages of centralization or coordination are that it could save

money and more effectively focus R&D

in critical areas; the possible disadvantages include the establishment of a cumbersome bureaucracy and the loss of agency autonomy and flexibility.

The dominance of the Department of Defense in information technology R&D has

raised questions: Is military work siphoning off too much talent from civilian applications? Is the military work changing

the direction of research in information

technology in ways that are disadvantageous for the commercial sector or for the

public? And are existing efforts to transfer technology from military to commercial applications adequate? Evidence currently suggests that there are growing

problems in this area.

Current policies and practices toward information technology R&D conflict with

the realities of increasing international

competition. The situation may call for a

more sophisticated Government role in

monitoring and support of industry and

research.

Introduction

Earlier chapters documented the rapid themselves continue to change in cost, power,

changes occurring in information technology and the variety of functions they can perform.

research and development. The technologies At the same time, institutional structures for

279

38-802 0 - 85 - 19
280 ● Information Technology R&D: Critical Trends and Issues

R&D are quickly evolving, international competition is intensifying, and the technology’s

impact on a wide range of social issues and

problems is increasingly prominent. Because

information technology is pervasive, its effects

cascade through many aspects of society—

from science itself to education, business, and

defense–and at each point create seemingly

independent changes and conflicts.

These changes are bringing increased attention to U.S. policy toward information technology R&D. In particular, Japanese and European policies, as noted in chapter 7, have

brought increasing demands for U.S. policy re

sponses.

Because the effects of information technology are so wide-ranging, any policy to respond

to this technology must consider not only actions within specific issue areas such as manpower, but also broader issues in science and

technology policy, such as the organization of

Government and the roles of different agencies in R&D. The purpose of this chapter is to

examine these more general frameworks for

policy toward information technology R&D.

The chapter is divided into two major sections. The first begins with some brief background on science and technology policy in the

United States, and the forces that have affected this policy as it has unfolded over the

last few decades. Then, the chapter shows how

these broad policies and forces set the context

for and are closely tied to policy toward information technology. In the second section of

the chapter, OTA discusses three key areas

that are central to the science and technology

policy issues raised by information technology

R&D. The areas are the organization of Government, the balance of military and civilian

roles, and policy measures to enhance international competitiveness.

Part I: Background

General U.S. Science and

Technology Policies

Historically, science policy has been the

term used to describe the actions of Government that affect the funding, organization,

performance, and use of science.’ The term has

included policy for technology and engineering as well as for science. More recently, however, as technology has played a more prominent role in society and industry, many

experts view “science policy” as inadequate

in addressing concerns of technology.2 The

term “technology policy” has been used increasingly to refer to policy measures much

more directly related to development and use

IScience Policy Research Division, Congressional Research

Service, Sa”ence Policy, A Working Glossary (Washington, DC:

U.S. Government Printing Office, 1976).

‘See, for example, J. J. Baruch, “The Cultures of Science and

Technology,” Science, Apr. 6, 1984. Baruch argues that lumping science and technology policy together is unwise, since the

two enterprises have quite different approaches, goals, and

needs.

of technologies, particularly as they relate to

international competitiveness. In some recent

discussions of industrial policy, technology

policy has sometimes been considered an element of, or even a synonym for, industrial

policy.

Table 45 sketches some of the actors and

policy tools involved in both science and technology policy. The two types of policies have

different, yet overlapping, constituencies and

goals. In an area such as information technology, where “science” and “technology” are

often commingled, the boundary between science policy and technology policy is vague. Recent statements of science policy (box A) illustrate the priorities of various policymakers,

and show how science and technology are often mentioned together and blurred in the formation of policy. Note that although executive

branch statements of science policy may be

the most visible, other actors in the science

policymaking arena-particularly Congress
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy ● 281

Table 45.—Policy Tools, Actors, and Goals of Science Policy and Technology Policy

Science Policya

Technology Policya

Primary policy tools: Primary policy tools

Funding of basic research Mission-oriented R&D funding

Scientific manpower and education measures Engineering manpower and education measures

Science information dissemination Technology transfer mechanisms

International exchange programs Limits on international flow of technology and

information

R&D tax credits

Standards and patent policies

University/industry research collaboration

Primary Actors: Primary Actors:

Office of Science and Technology Policy Office of Science and Technology Policy

(The White House)

National Science Foundation, National Science Foundation

National Science Board

National Academy of Sciences National Academy of Engineering

Agencies conducting basic research, e.g., Department of Mission agencies— e.g., Departments of Defense, Energy,

Defense, National Institutes of Health the National Aeronautics and Space Administration

Congress Congress

University science community Industrial R&D community

American Association for the Advancement of Science Industry associations— e.g., Information Industry

Association

Professional societies—e.g., American Medical Professional societies—e.g., Institute for Electrical and

Association, American Chemical Society Electronics Engineers, Association for Computing

Machinery

Department of Commerce—International Trade

Administration, National Bureau of Standards, National

Telecommunications and Information Administration

Social goals: Social goals:

Quality of life Economic well-being

Knowledge for knowledge’s sake National security

Equity, education Technological leadership

a!,sCl~nC~ ~OllCY,, and ,~teChnOIOgY ~OllCY>> are often difficult to sepa~ate, The policy tools, actors, and goals listed under each category are those that tend to be associated

with science policy or with technology policy However, in many practical situations, the issues and actors are intertwined.

SOURCE” Office of Technology Assessment

and the scientists and engineers themselves—

have a strong (some would say dominant) influence over actual policy.

A brief history of U.S. science policy (which,

as noted above, has usually been defined to include technology policy) is helpful in order to

provide a context for the gradual unfolding of

policy toward information technology.3 U.S.

3This chapter’s analysis of science and technology policy is

a synthesis of published books, articles, statements and legislation; in addition, OTA and its contractor (J. F. Coates, Inc.)

conducted interviews with several dozen science policy experts.

OTA is indebted to this group (see acknowledgments at the

front of this volume) for their insights and assistance, although

OTA takes full responsibility for the content of this report. For

a fuller elaboration of history and issues in science policy,

readers should consult, for example: Harvey Brooks, The Government of Science (Cambridge, MA: MIT Press, 1968); W.

Henry Larnbright, Goverm”ng Science and Technology (New

York: Oxford University Press, 1976); Daniel S. Greenberg, The

Pofitics of Pure Science (New York: New American Library,

1971); A, Hunter Dupree, Science in the Federal Government

(Cambridge, MA: Harvard University Press, 1953); U.S. General Accounting Office, Major Science and Technology Issues

science policy has evolved since the 1940s out

of tension between two fundamental premises:

1. that research should be supported in order to push ahead the frontiers of human

understanding (“science for the sake of

science”), lay the groundwork for technological advances, and train future scientists and engineers; and

(Washington, DC: GAO, Jan. 30, 1981); Congressional Budget

Office, Federal Support for R&l) and Innovation (Washington,

DC: CBO, April 1984); Science Policy Research Division, Congressional Research Service, National Sa”ence Board: Science

Policy and Management for the National Science Foundation,

1988-1980, January 1983; Frank Press, “Science and Technology in the White House, 1977 to 1980, ” Science, Jan. 9, 1981,

pp. 139-145, and Jan, 16, 1981, pp. 249-256; and the annual series of reports on R&D from the American Association for the

Advancement of Science. For a comprehensive view of the role

of one key player in science policymaking, see Toward the Endless Frontier: History of the Committee on Science and Technology, 1959-79, House Science and Technology Committee

Print (Washington, DC: U.S. Government Printing Office,

1980).
282 ● Information Technology R&D: Critical Trends and Issues
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy . 283

. .

From President Carter’s 1979 message to Congress on Science and Technology:

Yet despite the centrality of science and technology in our lives, the Federal government has

rarely articulated a science and technology policy, This message sets forth that policy. The thesis

is that new technologies can aid in the solution of many of our Nation’s problems, These technologies in turn depend upon a fund of knowledge derived from bade research. The Federal government should therefore increase its support both for basic research and, where appropriate, for

the application of new technologies. . .

The Federal government’s support of research and development is criticaI to the overall advance of science and technology. Federal responsibility lies in three major categories:

1. The largest fraction of Federal investment serves the government’s direct needs such as defense, space, and air traffic control. . .

2. The Federal government undertakes research and development where there is a national need

to accelerate the rate of development of new technologies in the private sector. . . . when the

risk is great or the costs are inordinately high. , . .

3. The Federal government supports basic research to meet broad economic and social needs. . . .

The majority of Federal support for basic research is in the mission agencies.

From the White House Office of Science and Technology PoIicy’s 1982 Annual Science and Technology Report to the Congress:

The U.S. science policy is

● to enhance the contribution of science to the two most pressing long-term needs of the United

States: national defense and the international competitiveness of U.S. industry.

● To maximize the return on national R&D investments; and

● To ensure the long-term vitality of the U.S. science and technology base.

The strategy to implement U.S. science pOLiCY

Emphasizes excellence–in research results and in people:

Stresses the importance of scientific relevance to national needs, and more clearly defines the

appropriate roles of the Government and the private sector in supporting R&D;

Facilitates cooperation in scientific research among Government, industry, and academia;

Seeks to support sufficient basic and long-term applied research to ensure that the United States

maintains the world’s strongest science and technology enterprise;

Emphasizes the importance of having the leading research universities in the world and of

trainin g the highest quality scientists and engineers to ensure continued U.S. qualitative leaderShip; and . . . .

Allocates Federal R&D resources to support this strategy.. -

The U.S. technology policy is to ensure that U.S. scientific leadership results in economic and

defense leadership. .

. ~+ . ~ . *

The strategy to implement U.S. technology policy’ ‘ r -

Provides tax and other incentives to the private sector for commercial R&D;

Continues to emphasize the different private sector and government roles in developing new

technologies, products, and processes so as not to discourage private sector initiative with

the threat of Government intervention and competition; -

Improves the climate of cooperation so that maximum cross-stimuli occur among Government,

industry, and academia; . .=

Improves the ability of Federal laboratories to contribute to U.S, industry, and also takes advantage of foreign research results;

Encourages the change in industry’s outlook to emphasize long-term viability rather than only

short-term gain;

Recognizes that the service sector in the U.S. economy is gaining in importance, and focuses

emphasis on R&D accordingly; and

Recognizes the effect of economic and regulatory policies on U.S. science and technology and,

ultimately, on U.S. economic competitiveness.
284 ● Information Technology R&D: Critical Trends and Issues

2. that the investment of public resources

in research should be moderated and directed at specified high-priority national

needs, to which the private sector is unwilling or unable to respond.

The first principle was embodied in the creation of the National Science Foundation and

the National Institutes of Health to manage

the distribution of public funds to support

basic research. The primary mechanism for

this support is research grants, which are

made in response to requests by recognized

scientists and validated by the judgment of

their peers.

The roots of the second principle, which

underlies all “mission-oriented” Governmentfunded research, go far back into our national

history. The second principle is evident in the

science policy statements of box A, particularly those from the Reagan administration,

which emphasize the payoffs of science and

technology for the economy and defense.

The accountability and focus indicated by

the second premise is often at odds with basic

research, which sets its own directions and

often leads investigators down blind alleys or

toward ends that may have no immediate or

foreseeable practical applications.

Until the 1940s, most federally supported

research was closely related to well-established

Government responsibilities such as defense

or exploration and development in the West,

or to areas basic to the national economy (agriculture, water, and public health). After World

War II, leaders such as Vannevar Bush–realizing that we had entered an era of rapid advancement in scientific knowledge that could

create new technologies and industries-forcefully led the Nation to accept increased, systematic, and continuing support for science

through funding of basic research and science

education. 4

4See Vannevar Bush, “Science, the Endless Frontier: A Report to the President on a program for Postwar Scientific Research, ” originally pubIished in 1945, reprinted by the National

Science Foundation, Washington, DC, 1960.

The clearest landmark event in the post-war

era was the Soviet launch of Sputnik in 1957,

which had two major kinds of effects. The response to Sputnik-the technological venture

to put a man on the Moon, and bring him back,

by the end of the decade of the 1960s–was

unique for a non-war effort in having a singular clarity of mission and unequivocal criteria

for success. This mission galvanized a large

portion of the scientific and technological

enterprise to a single clear goal. The second,

more diffuse consequence was to redirect the

Nation’s attention, albeit for only a brief

period, to science, science education and new

scientific opportunities.

The premises of science policy, as described

above, have gradually evolved into a set of relatively consistent basic tenets or assumptions

that guide Government’s actions. OTA derived the science policy statements in table 46

primarily from the practices and behavior of

U.S. policymakers and institutions over the

past 25 years, as well as from published statements and policies and interviews with science

policy analysts. Although these principles

have been relatively stable, they may contradict one another and come into conflict in special cases, and exceptions could certainly be

found for each item in the list. Furthermore,

they have rarely been stated explicitly; instead, they are embodied in a diverse collection of decisions, practices, and legislation.

While table 46 is in no way a complete set of

the principles which guide U.S. science policy,

the essential tenets relevant to information

technology are included.

Each of the science policy statements displayed in table 46 has varied in importance

and salience in driving programs, projects, and

organizational relationships. Often, the processes by which a policy issue is resolved result in an overcorrection of some situation

which, in turn, later leads to the recognition

that the pendulum has swung too far. For example, the advent of Sputnik was perceived

to indicate that support for basic science had

been too weak. On the other hand, the Mans-
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy . 285

Table 46.–Tenets of Science and Technology Policy, 1960-84

Basic Research

1. Basic research is a Federal mission.

2. The best model for conduct of the basic scientific enterprise is physical science, and in particular, physics.

3. Peer review will be the primary means for selecting topics

for basic research. Management concerns will play a role

in more mission oriented research.

4. Manpower for the scientific enterprise will be produced

primarily as derivative of, and as an intimate part of, basic

research at universities.

5. Social sciences will flourish under the traditional (physical science) model of scientific research. Social and interdisciplinary research are keys to the more effective application of knowledge to many classes of societal

problems.

Mission Agency R&D

6. There is a useful and significant distinction between basic

and applied research and between research, engineering,

and technological applications. These distinctions are of

primary value in defining the role of Government in relation to the general economy and the role of Government

agencies in relation to their missions and to each other.

7. Mission agencies will define their knowledge needs which

may be satisfied through R&D and present their case

through the budget process.

8. Federal agencies are expected to undertake research in

support of the commercial, business, and private sector

insofar as support of that research will yield substantial

public benefit, especially to the clients and constituents

of that agency. Support is encouraged only in those cases

where research to satisfy nongovernmental needs is unlikely to be adequately sustained by private initiative.

Defense R&D

9. Defense research, although a major part of U.S. R&D expenditures, will be treated as an isolated, separate case

with the expectation that side benefits will accrue to the

larger scientific and industrial community.

10. DOD will have a restricted and limited role in support of

basic and social research at universities. This policy,

manifested in the Mansfield amendment under the renewed pressures of the Cold War, has been relaxed.

Organization of Government

11. Voluntary coordination, rather than legislative or centralized control and coercion, will be the primary instrument by which programs in and among agencies will be

integrated, Coordination will be a primary mechanism for

assuring completeness of coverage of essential fields and

the primary instrument for reducing overlap and redundant budgets and programs.

12. At the Executive level, the Office of Management and Budget will exercise its statutory role in assuring that mission needs are met and that research and development

programs are reasonable and realistic. There is also a role

for a White House science policy advice mechanism.

13. In the Congress, oversight, both general and budgetary,

will be the primary technique by which quality, completeness, and fullness will be assured.

14. Planning for science and setting the agenda for science

and technology are best handled by the mission agencies

or the specific disciplines.

15. Public and stakeholder participation in science and technology decisionmaking is appropriate, desirable, and encouraged.

Special Federal Roles

16. The Federal Government will help assure the strength of

the research system by collecting, analyzing, and disseminating information on subjects such as science,

scientific and engineering manpower, and technological

innovation.

17. National laboratories are general assets to the nation, well

18.

19.

20.

21.

22.

beyond the particular missions for which they were established.

R&D Funding

The scientific community may operate on the assumption that there is a firm long-term implicit commitment

to incremental funding increases.

To avoid disturbances in the established pattern of support for science, the identification of new problems,

issues, and options will be handled primarily by budget

augmentation, rather than by reprogramming of existing

programs. The primary instrument for effective infusion

of money in large quantities for new scientific enterprises

will be the establishment of an office, a bureau, an agency,

or a division.

In most fields, the most appropriate method of support

will be funding individual projects by individual investigators.

On large expensive basic science projects, the Federal

role is to provide large block funding and long-term support. It will stand clear of the programmatic side of those

activities.

Nonfederal R&D

Both basic and applied research in the commercial sector is best and most effectively handled by individual corporations and will best prosper under competition. To facilitate that development certain public strategies, such

as patents, copyrights, tax write-offs, and a variety of other

measures are appropriate for Government. American commercial research requires no particular Government intervention, attention, or assistance, since it can cope with

any foreign competition.

23. Applied research ”applicable to the private and nonfederal

public sector requires little attention. It will take care of

itself.

24. Good relationships between universities and industry are

beneficial to both institutions, and Government will act

to support such relationships, but not directly intervene.

25

26

Utilization of Research

The free and open dissemination of research results, except those of a commercial proprietary sort or affecting

national security, is the best guarantee of the effective

use of new knowledge in the service of the nation.

With regard to basic research, technology transfer, that

is, the practical use of research results, is best handled

by the delivery of scientific information through journals

and monographs. Commercial use best occurs through

scientific channels, through the employment of university scientists as consultants, and through private sec-
286 ● Information Technology R&D: Critical Trends and Issues

Table 46.—Tenents of Science and Technology Policy, 1960-84—continued

tor organizations assuming responsibility for remaining be placed upon trade and exchange where appropriate,

alert to developments in their own interests. primarily at the discretion and behest of the national secu27. Mission agencies have the primary responsibility for get- rity establishment.

ting the scentific and technical results of research to potential users within their mission areas. Technology

28. It is in the national interest to deprive Iron Curtain coun- 29. Policy toward technology is unnecessary or will be treated

tries of the benefits of Western, that is American, science as an adjunct to science policy. This policy has, of course,

and technology. Consequently, systematic restraints will come under some challenge in the last few years.

SOURCE: OTA analysis, interviews with science policy experts, and synthesis of published materials. See footnote 3. Note that these are statements of underlying

policies, and there are exceptions and contradictions to each statement

field amendment6 was a rebuke to DOD for

obscuring the distinction between basic and

mission-oriented research, but it also swung

Government away from the Sputnik-induced

changes and back toward accountability and

strictly defined applied research.

Nevertheless, most of the principles highlighted in table 46 have remained effective and

functional over the past quarter-century. As

general science policies they influence research

and development in the area of information

technology. While many of these influences are

subtle or indirect, the principles shown in table

46 can be seen in the current situation. For example, the U.S. Government’s position toward

the global market, reflecting the propositions

above, is that industrial competition will deal

effectively with issues of international competition and no special Government policy is

required. This is in sharp contrast, of course,

to Japanese and European strategies, as noted

in chapter 7, and this contrast has intensified

the debate about appropriate Federal roles in

—. —.. .—

‘As described in W. C. Boesman, “U.S. Civilian and Defense

Research and Development Funding,” Congressional Research

Service, Science Policy Research Division, Aug. 29, 1983, p. 23:

Even after the establishment of the National Science

Foundation, whose mission is the support of basic and

applied research and education in the sciences, DOD continued to fund a significant amount of basic research until, in 1969, the Congress passed the “Mansfield amendment” to the fiscal year 1970 military procurement

authorization which prohibited funds authorized by that

law from being used to conduct R&D not having “a direct and apparent relationship to a specific military function or operation. ”

The following year, the Congress passed the “modified

Mansfield amendment” to the fiscal year 1971 military

procurement authorization which prohibited funds authorized by that “or any other Act” from being used to

conduct R&D unless the Secretary of Defense determines

the existence “of a potential relationship to a military

function or operation. ”

international competitiveness. While these are

largely issues of trade policy, there are strong

connections between trade and science policies, especially in information technology.

Other aspects of policy toward information

technology R&D that stem directly from these

general science policies include the separation

of military and civilian research in information

technology R&D, and the implicit belief that

the market process will take care of the downstream social effects of information technology. The next section of this chapter will set

forth policies toward information technology

R&D in more detail.

Since 1960, several important trends and

forces have affected both general science policy and policies toward information technology R&D in particular. Table 47 highlights

some of these forces. As is evident from the

second column of table 47, many of the forces

affecting science policy generally have been

particularly prominent in information technology R&D. In some respects, policy toward information technology R&D is the leading edge

of issues in science and technology policy. This

is in large part due to the rapid pace of change

in information technology, the emphasis placed

on information technology for economic growth

and for national security, and the pervasive

or “core” nature of the technology.

Information Technology R&D Policies

Like general science and technology policies,

policies toward information technology R&D

are not often explicit or coordinated. Instead

there have been many decisions, actions, state

ments, and organizations, which taken togeth-
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy . 287

Table 47.— Forces Affecting Science and Technology Policy Since 1960

Trend or force Implications for R&D in information technology

1. Growing pervasiveness of science and technology in

society. This is accompanied by rapid blurring of

traditional distinctions between basic and applied

research, and between science and technology.

2. /integration of the global economy. This is

accompanied by an increase in international

competition, a challenge to U.S. supremacy in certain

research areas, and a growing consensus that U.S.

industries are not invincible and may need help.

3. The shifting role of the Department of Defense. D O D

sponsorship of R&D was dominant in the post war

era, then was shifted away from basic research and

other agencies played stronger roles. Now DOD is

once again dominant in most areas of R&D funding,

although the funding is much more directed than it

was after World War Il.

4. The side effects of technology. The public seems to

have grown increasingly wary of technology,

particularly in the ’60s and ‘70s. At the same time,

science and technology are viewed as a way out of

our economic malaise.

5. Big budgets for R&D. Demand for accountability has

grown as R&D budgets have swelled and agencies

have undertaken major projects (e.g., accelerators,

weapons systems).

6. Internal upheaval in the science enterprise. The

decade-long search for a more effective science

policy apparatus has bounced around government,

focusing at various times on agencies such as NSF

and OSTP. None have been conspicuously effective in

a broad-scale science policy role.

Information technology is one of the most vivid examples

of this growing pervasiveness. The intertwined nature

of basic and applied work, and of information science

and technology, raises questions about appropriate

Federal roles, which have traditionally been based on

those distinctions.

Information technology is an area in which these

challenges have become quite intense: while we still

lead in most areas of R&D, our lead is narrowing, and

our ability to use our technological leadership in

applications for economic gain is in question. The

margin of error for actions in information technology

R&D has been dramatically reduced because of

international competition.

DOD was an early and strong supporter of many areas of

information technology. 70-80 percent of Federal

funding for R&D in information technology now comes

from DOD. In certain areas (e.g., artificial intelligence,

software engineering), DOD continues to be a very

strong influence on the directions for R&D.

Though there are concerns about privacy and equity

issues, use of information technology seems to be

viewed as inevitable, and, in many cases, desirable.

R&D in information technology, as the basis for

innovations, is viewed as essential to support an

economy heavily oriented toward high technology.

The demand for accountability has just begun in

information technology R&D, particularly in major

software projects, or use of supercomputers.

Universities in particular are squeezed by rapidly rising

costs for this research.

Information technology R&D is acutely affected by the

multiplicity of agencies and roles in setting policy.

Because of the technology’s pervasiveness, more than

a dozen agencies set policy for R&D in information

technology. None of them have devoted high-level

policy attention to information technology; it tends to

be viewed as a tool.

—.

SOURCE OTA analysls, !ntervlews with science and technology policy experts, and synthesis of published material. See footnote 3

er comprise the de facto U.S. information tech- judgment that they are necessarily approprinology R&D policy. Using techniques similar ate at present or in the future.

to those used to develop table 46—i.e., analy-

—

1. The Federal Government has operated sis of published material and the actions of

policymakers, and discussions with policy ex- under the assumption that the United

States should not be dependent on foreign perts—OTA produced a list of policies specifically related to information technology R&D, information technologies to ensure its national security. which are displayed in table 48. Each of these,

elaborated below, can be seen to stem rela- A primary mission area for information techtively directly from one or more of the tenets nology R&D is national security. Defense

outlined in table 46. Note that the following spending dominates Federal support in this

are statements of the effective principles that area of R&D. The U.S. position as leader of

appear to underlie Government’s actions over the Western military alliance has led to a comthe past quarter-century. As in the statements mitment to keep the United States at the foreof general science policies, OTA has made no front of information technology developments.
288 ● /formation Technology R&D: Critical Trends and Issues

Table 48.-Federal Government Policies Toward

information Technology R&D

1. The Federal Government has operated under the assumption that the United States should not be dependent on

foreign technologies to ensure its national security.

2. Information technology R&D has been funded separately

for civilian and military applications.

3. R&D priorities have been set in Government by mission

agencies, and in commercial application areas by the

private sector.

4. The Federal Government has assumed that it should promote continuous innovation in information technology.

5. The market has been assumed to be the best mechanism

to bring the civilian benefits of R&D in information technology to society.

6. The market has been the primary means to attend to the

consequences and effects of information technologies.

7. Where necessary, the Government has used traditional

means for regulating the behavior of firms in information

technology industries.

8. The short- and long-term manpower needs of information

technology R&D have been addressed through traditional

means.

9. Government has followed industry’s lead in setting standards except where Government is a dominant purchaser.

10. The Federal Government has assumed that free trade

policies benefit the United States in the long term.

11. U.S. Government has restricted the export of sensitive

technical information, as well as advanced information

technology itself, to Eastern Bloc nations.

12. The primary international role for the U.S. Government in

information technology has been to promote equitable

use of common global resources.

SOURCE: See text.

2. Information technology R&D has been

funded separately for civilian and military

applications.

This policy is not unique to information technology R&D. It assumes that a useful distinction can be drawn between civilian and military uses of information technology. It also

assumes that there is little overlap between

the civilian and military uses in this area, and

that where such overlap exists, as in weather

forecasting, the results of military R&D will

find their way into commercial uses. In a few

cases, there are small transfers of funds from

military to civilian agencies performing R&D.

3. R&D priorities have been set in Government by mission agencies, and in commercial application areas by the private sector.

Government sees information technology as

a tool. Therefore, information technology R&D

is decentralized. Each agency sets its own

R&D priorities—the National Weather Service, U.S. Postal Service, the Department of the

Treasury, the Federal Aviation Administration, the Federal Reserve Board, and so on.

This area of R&D has not received high level

or coordinated policy attention.

4. The Federal Government has assumed

that it should promote continuous growth

and change in information technology.

Innovation in information technology is viewed

as overwhelmingly beneficial to society. On

the military side, Government seeks continual

innovation in order to keep ahead or abreast

of potential adversaries. On the civil side, the

contributions of information technology to

productivity argue for continued advances to

keep the U.S. economy prosperous. On the

other hand, the concentration on innovation

tends to shift attention, especially within Federal R&D, to new and glamorous technologies

and away from improving or reducing the

costs of existing technologies.6

5. The market has been assumed to be the

best mechanism to bring the civilian benefits of R&Din information technology to

society.

For the most part Government policy has

assumed that the market will identify and

meet the needs of society for information technology and that the market will make the appropriate investments in R&D to meet those

needs. Similarly, Government policy has assumed that industry will develop the supporting technologies and infrastructure such as

software quality control processes as part of

meeting the market’s needs.

Government frequently encourages innovation in the private sector through indirect

measures such as procurement and tax allowances. In cases where developments are important to the national interest, such as national

electronic mail, Government has used R&D

‘See L. Thurow, “The relationship between defense-related

and civilian-oriented research and development priorities, ” in

Prion”ties and Effia.encyin Fderal Research and Development,

a compendium of papers submitted to the Subcommittee on Priorities and Economy in Government of the Joint Economic

Committee of the Congress, Oct. 29, 1976.
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy ● 289

contracts to promote innovation while limiting

the risks to industry.

6. The market has been the primary means

to attend to the consequences and effects

of information technologies.

This policy assumes positive impacts will result in new markets, while producers will reduce adverse impacts in order to remove impediments to present and future applications.

Protection of individual rights is the major exception to the reliance on the market. The Congress, the executive branch, and the courts

have all attempted to cope with the issues of

individual privacy, intellectual property, and

freedom of access. For the most part, the assumption underlying their deliberations and

actions is that traditional legal, regulatory, or

organizational mechanisms can handle these

issues.

7. Where necessary, the Government has

used traditional means for regulating the

behavior of firms in information technology industries.

Historically, the Government seems to have

assumed that there is nothing special about

information technology industries. Government has not seen antitrust, patent, tax and

other regulatory policies as major impediments to innovation. For the past half-century,

Government has assumed that: 1) regulated

monopolies such as AT&T are effective performers of R&D; and 2) developments in regulated and unregulated areas of telecommunications and computers are not in conflict.

8. The short- and long-term manpower needs

of information technology R&D have been

addressed through traditional means.

As noted in chapter 5, the Government has

relied on the universities to meet the needs of

the market for the trained scientists and engineers necessary for innovation in information

technology. Support of research in information

technology at universities is the primary method by which the Federal Government supports

manpower development in the field. Government has also assumed that the universities,

assisted by various subsidies, will make the

necessary investments in equipment to provide the appropriate training for these future

information scientists and engineers.

9. Government has followed industry’s lead

in setting standards except where Government is a dominant purchaser.

Government treats information technology

like any other industrial product in terms of

standards, relying mostly on voluntary industry standards. When Government does get involved in standards-setting, it is usually at the

request of industry. In the computer field, the

Institute for Computer Sciences and Technology (ICST) at the National Bureau of Standards is responsible for developing standards

for the Federal Government, and it also participates in and coordinates a variety of industry standards efforts. In certain cases such as

computer networking standards, ICST has

taken a firm leadership role, both domestically

and internationally.7

10. The Federal Government has assumed

that free trade policies benefit the United

States in the long term.

From transistor radios to microchips, the U.S.

Government has maintained a position of free

trade in the area of information technology.

The assumptions underlying this policy have

been: 1) free trade will open up foreign markets for U.S. products, 2) the U.S. lead in information technology is largely unassailable,

3) the marginal benefits of lower costs to the

consumer outweigh the threat to U.S. industry, and 4) competition promotes innovation.

This openness has included access to R&D

through the published literature, licensing,

joint ventures, and other commercial routes.

11. The U.S. Government has restricted the

export of sensitive technical information,

as well as advanced information technology itself, to Eastern bloc nations.

The importance of information technologies to

U.S. national security has led to Government

actions to preserve the superiority of U.S. in7

J. H. Young, “Effects of Standards on Information Technology R& D,” paper prepared for OTA, Nov. 25, 1983.
290 ● Information Technology R&D: Critical Trends and Issues

formation technology. One way is to prevent

its adversaries from getting access to, for example, certain research publications, advanced

chip designs or cryptography software. This

policy assumes that: 1) the Government can

effectively control the international operations

of U.S. researchers and firms, 2) these controls

will not unduly harm the viability of the U.S.

information technology industry, and 3) the

advantage of such controls outweighs harm

done to the U.S. R&D enterprise through restriction of information flow among researchers.

12. The primary international role for the U.S.

Government in information technology

has been to promote equitable use of common global resources.

U.S. actions regarding international use of information technologies have focused on issues

such as spectrum allocation, the use of the geosynchronous orbit, the international use of

communications satellites, and access to data

from weather and other Earth applications

satellites.

Part II: Key Issue Areas

The previous section provided background

on the nature of policies related to information

technology R&D, and on the connections between those policies and broader science and

technology policies. A central conclusion is

that information technology R&D has been influenced to a substantial degree by policies

applicable across many areas of science and

technology. However, factors such as the reliance on information technology for economic

growth and national security, and the pervasive, core nature of the technology, are increasingly stressing policy toward information technology R&D, focusing attention upon it, and

setting it apart from policy for other areas of

science and technology.

This section attempts to build on that foundation by examining three particular areas of

policy toward information technology R&D

that may be ripe for change or improvement.

OTA selected the three issue areas because

they are key problems for the future development of information technology R&D. Throughout this report, scores of issues have been identified which, in themselves, merit attention.

The three issues discussed in this chapter are

overarching, in that they subsume many of the

earlier issues. Addressing these three areas

could help set the direction for many of the

more detailed issues. The first, and most fundamental, topic is the organization of Government to deal with information technology

R&D. The second issue area is the balance of

civilian and military funding in this area of

R&D. The final area is international competitiveness.

ISSUE A: Organization of Government

Demands for coherent Federal policy towards information technology R&D conflict

with the traditional system of pluralist decisionmaking by various agencies and the private sector.

Introduction

The search for coherence and effectiveness

in science policy of all kinds has been the object of many commissions, proposals, legislative initiatives, and reorganization plans. A

hundred years ago the first plan for developing a Department of Science and Technology

was introduced in the Congress.8 Several times

in the 1970s and again within the last year,

the idea of such a central department has reemerged.9 The fundamental issue coming out

of all such proposals is whether science is better managed through a central organization

— —

‘For a discussion see A. H. Dupree, Science in the Federal

Government, Harvard University Press, 1953, p. xi.

‘See, for example, H.R. 481, The National Technology Foundation Act, introduced Jan. 6, 1983, by Rep. George Brown,

et al.
Ch. 8—Information Technology R&D in the Context of U.S. Science and Technology Policy . 291

or as an adjunct to the missions of the Federal Government as reflected by the mission

agencies.

While the proposals for a central Department of Science and Technology have consistently failed, the Nation has reorganized its

science and technology apparatus several

times to meet new and emerging needs. The

Department of Energy, the Environmental

Protection Agency (EPA), and the National

Oceanic and Atmospheric Administration

(NOAA) all resulted from the coalescence or

rearrangement of diverse scientific and technical functions.

Nevertheless, the traditional Government

organization for science in general is decentralized, pluralistic, and only loosely coordinated. The strong centralizing force on science

comes from the annual budget review by the

Office of Management and Budget. Even

there, concern for scientific issues is for the

most part split up along agency lines; for example, NASA is in one area, NOAA in another, and Defense science in still another.

This pluralistic system of Federal policymaking has the advantages of allowing mission

agencies to tailor R&D to their own needs,

which is a basic tenet of science policy as discussed earlier. However, several trends are

putting stress upon the ability of the current

decentralized system to cope with new and

emerging problems:

● Increasing international competition, and

the presence of coordinated technology

policies among our trading partners, are

highlighting our absence of coordination

and causing many to call for reexamination and change; and

● The costs of R&D of all kinds have risen.

At the same time, there is increased pressure on the Federal budget from entitlements, defense, and the deficit. Some argue that a more coordinated and coherent

Federal science and technology apparatus

could be more cost-effective and accountable.

There is a broad spectrum of possibilities for

coordination of Federal activities in science

and technology areas, ranging from complete

decentralization and pluralism to a central

agency which handles the bulk of R&D funding and science policymaking. Despite the appeal of coordination in principle, it has costs

that include decreased flexibility of mission

agencies, creation of cumbersome bureaucracies, and potential loss of multiple funding

avenues—and hence multiple approaches—for

researchers. One report notes:

Coordination is like motherhood; everyone

agrees it must be done but it lacks an operational definition.

Coordination is not a homogeneous activity;

but rather an umbrella which encompasses

many different activities performed by different people, for similar effect.

Coordination requires significant effort at

all levels of management and, therefore, both

horizontal and vertical structures need to be

considered.

A certain amount of coordination is good

for the health of Government, but like exercise, too much will cripple or kill.10

Consequently, most science policy experts argue that some combination of centralized decisionmaking, ad hoc coordination, and mission

autonomy is appropriate.ll

Dimensions of the Issue

Current responsibilities for information

technology are dispersed all over Government—from the Department of Defense to the

General Services Administration, from the Department of Justice to the Federal Communications Commission. The ad hoc nature of policy in this area is even more evident than most

other types of science policy because agencies

tend to see information technology as a tool,

not as something warranting significant policy attention in itself. In addition, there are

simply more agencies involved because of the

pervasive nature of information technology.

10W. A. H~n, D. S. Alberts, and J. Lovelace, “Interagency

Coordination: Workshop Report,” in The Management of Federai Research and Development: An Analysis of Major Issues

and Processes (McLean, VA: The Mitre Corp., 1977), pp. 93-97.

*’See, for example, Harvey Brooks, The Government of

Science (Cambridge, MA: MIT Press, 1968).
292 ● Information Technology R&D: Critical Trends and Issues

More than a dozen agencies fund or affect relevant R&D.12

There is, however, some coordination in Federal policy. To the extent that DOD dominates

R&D funding, it is the de facto lead agency

and informal or formal coordination point.

And agencies often coordinate their work on

an ad hoc basis. For example, the Defense Advanced Research Projects Agency (DARPA)

and NSF brief each other on computer science

research programs. 13 And ICST at the National Bureau of Standards has a group of senior

officials from major agencies who advise the

Institute on its programs.

Several specific factors focus attention on

the degree of coordination and coherence in

policy toward information technology R&D.14

Among them:

In general, there is a lack of high-level policy commitment in this area, which has

several kinds of effects. One is that the

role of mission agencies in information

technology is shifting, uncertain and as

divergent as the roles of those agencies

themselves. Coordination would be useful

in such subjects as database collection,

R&D research topics, and compatibility

of technology and information.

Many have argued that there are substantial shortages of manpower. However, as

discussed in chapter 5, the evidence for

such shortages is inconclusive, except in

‘These include the Department of Defense (itself divided into

the Defense Advanced Research Projects Agency, the Office

of Naval Research, the Air Force Office of Scientific Research

and various other units in the Pentagon and the three services),

the National Science Foundation, the Department of Commerce

(largely through the National Bureau of Standards, the National

Oceanic and Atmospheric Administration, and the National

Telecommunications and Information Administration), the National Institutes of Health, the Department of Energy, the National Aeronautics and Space Administration, the Federal Aviation Administration, the Patent and Trademark Office, and the

Department of Justice (both in their jurisdiction over antitrust,

and in R&D for law enforcement systems).

‘SElias Schutzman, National Science Foundation, personal

communication, Mar. 2, 1984.

14For fither elaboration of some of these factors ~d discussion of institutional options, see “Institutional Options for Addressing Information Policy Issues: A preliminary Framework

for Analyzing the Choices, ” a staff memorandum prepared by

the Communication and Information Technologies Program of

OTA, NOV. 29, 1983.

●

●

●

certain very specific areas. The lack of

reliable assessments of manpower and the

associated uncertainties hinder policymaking in all areas of the Government

that work with information technology.

The Federal Government has an extensive network of national laboratories, although the quality and relevance of some

of these facilities has periodically been in

question. 15 Researchers at various national laboratories constitute the largest

concentration of expertise in use of supercomputers. The question of how best to

use the national labs in this and other

fields of information technology R&D

cuts across a variety of agencies, in particular the Departments of Defense and

Energy.

Related to use of the national labs, chapter 3 pointed out that researchers are increasingly requiring advanced computers

or “supercomputers” to perform a wide

variety of research. The question of where

to house such machines and how to provide access is of concern to a wide variety of agencies involved with information

technology R&D. Committees of the Federal Coordinating Council for Science,

Engineering and Technology (FCCSET)

at OSTP have attempted to address this

issue.

As discussed in chapters 2 and 3, the

emerging shared wisdom in the industry

is that software is a key problem in cost

and effectiveness of computing systems.

Many believe that American industry has

failed to give adequate research attention

to software problems, preferring for a variety of reasons to emphasize hardware.

The reliability and maintainability of software will become an increasingly large

issue, raising questions of quality control,

standards, manpower, and education policy for many agencies in the Federal Government with large information systems.

“See the Report of the Wlu”te House Su”ence Council Federal

Laboratory Review Panel, May 1983, sponsored by the Office

of Science and Technology Policy. (Also called “The Packard

Report, ” after its chairman, David Packard.)
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy . 293

● In the area of regulation, forcing new

technology into old categories is nearly

universal because the new is not always

seen as new, or the new is seen as a problem, not an opportunity. For example,

cable television throughout the country

is being treated as a local utility occupying some status resembling, perhaps, electric power. Each local government treats

what could be an integrated national information utility on a short-term and

somewhat parochial basis. In sharp contrast, Canada and France have adopted

policies toward cable that aim to develop

a national utility.

● Uncertainties about funding levels for information technology R&D contrast with

the needs for stability in budgets or support as a base for long-range research in

universities and industry. Examples of

such uncertainty include some recent vacillations in funding of certain information technology areas by DOD agencies,

particularly DARPA; and the current

uncertainties concerning supercomputer

research support between DARPA and

NSF. (See ch. 3).

● Information technology industries are

now combining technologies developed

under regulation (as in radio, telephone,

and television) with computer technologies basically developed in the market

system. The convergence of these two

types of technologies creates new regulatory issues dealing with ownership, public versus private control, privacy, and

access.

Options for Addressing the Issue

As a core technology, information technology is used by everyone but is not clearly the

responsibility of anyone. Yet, given its value

to the balance of trade and productivity of

U.S. industry, the demands for new, more

coherent action have become increasingly

strong.l6

“%, for example, Science Policy Research Division, Congressional Research Service, The Information Science and Technology Act of 1981, June 1982.

Option 1: Maintain the Status Quo. The

strongest argument for no major change in

Federal activity is that the technologies and

their effects are highly fluid, and it maybe too

early to devise appropriate policy or Government organizations. In addition, some may

view coherent, coordinated Federal policy

toward information technology R&D as unnecessary or infeasible. The ad hoc coordination

currently used has been relatively effective,

and attempting more formal coordination or

more elaborate national policy could be cumbersome. In addition, pluralistic research funding has the advantage of funding more than

one approach to a research topic or problem.

The disadvantage of maintaining the status

quo is that we may reduce opportunities to enhance our competitiveness and to use our

R&D resources in a more socially productive

manner.

Option 2: Improve Monitoring and Coordination. A first step toward coordination of Federal roles would be to provide new mechanisms

for the various agencies involved in this area

to communicate in a systematic way. Such coordination mechanisms would at least raise

the level of attention to information technology R&D issues and provide a forum which

could facilitate a common understanding of

areas of strength and weakness in Federal support. Congress could designate a formal coordination group with representatives from appropriate agencies involved in information

technology R&D. In fact, the first priority of

a coordination group could be a report to the

Congress, and subsequent hearings, on those

areas of strength and weakness. Though DOD

would be a major player in such a coordination effort, it is important that it not dominate; the status, needs, and objectives of the

civil sector should have an adequate platform.

Other coordination and monitoring steps

may also be desirable. To the extent that

States play a stronger role in promoting information technology R&D centers, and in

using information technology for delivery of

services, it may be useful to establish mechanisms whereby States and the Federal Government can cooperate in setting priorities for
294 ● Information Technology R&D: Critical Trends and Issues

information technology R&D. Such mechanisms could include a national conference on

the intergovernmental research needs in information technology R&D, hearings on State

and local information technology R&D needs,

and commissioning studies of the needs of

State and local governments for improved information technology.

Option 3: Set New National Policy. A more

comprehensive alternative is to make a highlevel policy commitment to information technology R&D. This could be accomplished by

reestablishing an office such as the Office for

Telecommunications Policy in the Executive

Office of the President, or elevating the responsibilities, status and visibility of the National Telecommunications and Information

Administration and the Institute for Computer Science and Technology (ICST) in the

Department of Commerce. To complement

this action, Congress could establish a lead

agency for information technology R&D policy that could devote a substantial amount of

high-level attention to the issue. However, the

establishment of a lead agency has the disadvantage that that agency’s mission may be

pursued at the expense of others.17 Note that

in the last several years Congress has been

considering various proposals for centralized

oversight bodies for information technology

policy-la Con=e ss may also wish to consider

restructuring the basic oversight mechanisms

for information technology R&D in the Congress and/or the executive branch.

Finally, it maybe an opportune time to take

action on several more detailed issues. The one

that is most prominent is software, as discussed in the chapter 3 case study of software

engineering. Federal standards for supporting,

using, testing, updating and documenting

software could add much reliability to Government information systems and consistency

to relations between the Government and industry. One mechanism for dealing with these

issues is to work through ICST.

“See Brooks, op. cit.

‘Wee “Institutional Options for Addressing Information Policy Issues, ” op. cit.

Option 4: Establish a New Federal Organization. Congress could create a new organization,

transferring to it much of the current dispersed responsibility for information technology and adding new functions. These new

functions could include compiling and interpreting information on Federal procurement

of information technology, civilian vs. military

priorities in R&D, regulatory actions with direct or indirect effects on the technology, the

U.S. position in domestic and international

markets, social impacts of information technology, high priority issues to be resolved, and

recommendations for congressional action.

The advantage of such a new organization

would be that it would assure that the technology would be visible and explicitly addressed; on the other hand, it could diminish

the effectiveness of other organizations that

pursue information technology R&D as part

of their mission. A new organization could be

part of a new “National Technology Foundation, ” or it could be a freestanding “Institute

of Information and Communication. ”

ISSUE B: Military/Civilian Balance

Relying primarily on DOD for funding of

information technology R&D may conflict

with the pressing demands of international

competitiveness and productivity.

Introduction

The Department of Defense (DOD) has been

by far the largest supporter of information

technology R&D among Federal agencies.

With increasing budgets for R&D in the recent past, DOD is sponsoring a higher proportion of many fields of R&D activity. The dominance of DOD in information technology is

perhaps the most striking of all, however; estimates of the proportion of DOD funding range

from 70 to 80 percent or more of all Federal

funding.19 In some parts of the field, DOD has

sponsored pioneering work which established

‘These estimates are based on W. C. Boesman, “U.S. Civilian and Defense Research and Development Funding, ” Science

Policy Research Division, Congressional Research Service, Aug.

29, 1983. Also see ch. 2 for further discussion.
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy . 295

foundations for both commercial and military

applications. However, with tightening budgets and growing concern over international

competitiveness, the wisdom of DOD’s continued dominance of information technology

R&D funding is coming into question. Specifically, three questions have surfaced in the

course of OTA’s study:

1. Is the military work siphoning off too

much talent from civilian applications?

2. Is the military work changing the direction of research in information technology

in ways that are disadvantageous for the

commercial sector or for the public?

3. Are existing efforts to transfer technology from military to commercial applications adequate?

Dimensions of the Issue

DOD and civilian agency funding of R&D

have varied in relative emphasis and roles over

the past decades. The issue of DOD vs. civil

funding of R&D has received little emphasis

since the late 1960s, when DOD R&D was

drastically reduced because of a perception

that the agency had overstepped its mandate,

and because of social concerns about the DOD

budget. As shown in figure 50, in the past decade (and particularly during the Reagan administration) DOD funding for R&D of all

kinds has risen dramatically faster than civilian agency funding, which has actually dropped

in real terms. It can be misleading to use the

combined term, R&D, in this discussion; as figure 51 shows, for all fields combined, the

dramatic increase has been almost exclusively

in development, rather than in basic or applied

research.

More specifically, DOD support for work in

information technology, particularly through

the Defense Advanced Research Projects

Agency (DARPA), has remained strong and

has grown dramatically. As shown in table 49,

support for basic research in mathematics and

Figure 50.—Federal R&D Budget Authority for

Defense and Nondefense Activities

ars

1975 1977 1979 1981 1983 1985

Fiscal year (est.)

SOURCE: Division of Science Resources Studies, National Science Foundation

“Federal R&D Funding: The 1975-85 Decade, ” March 1984

Figure 51 .—Federal R&D Budget Authority for

Defense Activities by Character of Work

1975 ’77 ’79 ’81 ’83 ’85

c

6

3 Applied research

L 0

Basic research

1975 ’77 ’79 ’81 ’83 

Fiscal year (est.) Fiscal year (est.)

SOURCE: Division of Science Resources Studies, National Science Foundation,

“Federal R&D Funding: The 1975-85 Decade,” March 1984

38-802 0 - 85 - 20
—

296 ● Information Technology R&D: Critical Trends and Issues

Table 49.—Department of Defense Funding for Basic Research by Discipline,

Fiscal Years 1982, 1983, and 1984 (budget authority In millions)

Fiscal year Fiscal year Fiscal year Fiscal year

1982 1983 1984 1985

Physics, radiation science, astronomy

and astrophysics . . . . . . . . . . . . . . . . . . . . 76.0 80.9 87.2 96.6

Mechanics, aeronautics, and

energy conversion . . . . . . . . . . . . . . . . . . . 73.1 79.5 86.3 92.2

Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.5 81.0 82.8 87.5

Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.0 90.5 97.9 93.7

Oceanography. . . . . . . . . . . . . . . . . . . . . . . . . 51.1 50.2 53.4 57.5

Biology and medical sciences . . . . . . . . . . . 64.9 66.3 79.8 86.7

Chemistry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.1 58.9 62.0 66.3

Mathematics and computer sciences. . . . . 83.3 98.8 111.7 124.9

Terrestrial sciences, geophysical

research . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.3 29.0 30.8 33.9

Atmospheric sciences . . . . . . . . . . . . . . . . . . 20.8 21.8 25.0 28.2

Behavioral sciences, human resources . . . 33.9 33.6 35.2 36.3

Special studies . . . . . . . . . . . . . . . . . . . . . . . . — 2.0 —

University instrumentation . . . . . . . . . . . . . . — 30.2 30.0 -300

In-house laboratory independent

research , . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.1 57.5 58.4 67.0

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696.1 780.0 839.3 899.9

SOURCE: Leo Young, Department of Defense, presentation to AAAS Colloquium on R&D Policy, Mar. 29, 1984.

computer science grew from $83.3 million in

fiscal year 1982 to a planned $124.9 million

in fiscal year 1985. In applied research and development, several major projects at DOD

have pumped many hundreds of millions of

dollars into information technology. These

projects include Very High Speed Integrated

Circuits (VHSIC); Command, Communications, Control, and Intelligence (C3

1); and more

recently the Strategic Defense Initiative (SDI)

or “Star Wars” program, and the Strategic

Computing program.

Science policy experts interviewed by OTA

were almost universally concerned about this

resurgence of DOD funding for R&D, and for

information technology R&D in particular.

Comparing the current situation to the postWar era when DOD research funding was also

dominant, they point out that current research

is generally much more mission-oriented and,

consequently, less productive for nonmilitary

uses. Some argue that we are endangering our

international competitiveness in the long term

by monopolizing the information technology

R&D community with defense-related projects. Others point out that it is unwise to have

a monolithic source of funding for any area—

e.g., certain technical approaches may tend to

be ignored —and argue that the current situation desperately calls for a civilian balance

to DOD’s funding. Despite these strong warnings, however, there is inconclusive evidence

that these negative results of DOD’s funding

are occurring.

For example, in artificial intelligence (AI)

the pool of researchers is very small and

almost all receive DOD funding. As noted in

chapter 3, DARPA and ONR have been almost

the exclusive funders of artificial intelligence

from the start. Yet, some AI researchers noted

during OTA’s case study that relatively basic

research which could lead to nonmilitary applications-such as intelligent libraries-is being neglected. The assumption that AI R&D

funded by DOD is equally applicable to both

military and civilian applications is, therefore,

under question, although more than anecdotal

evidence is needed to assess the problem.

Other controversial topics for the science

community in general are export and publication restrictions on scientific and technical information. The dominance of DOD funding of

information technology R&D raises the danger that the research will be classified too early

to allow nonmilitary users to benefit. This danger is particularly prominent in large scale defense initiatives such as the “Strategic Com-
Ch. 8—Information Technology R&D in the Context of U.S. Science and Technology Policy . 297

puting” program. For academic scientists in

particular, free information flow is viewed as

essential to productivity and to the ethos of

science as an international enterprise. Hence,

the tension has produced some strong rhetoric. A university association president recently told a gathering of the American Association for the Advancement of Science: “These

people feel that any delay or inconvenience for

the Russians is worth whatever it costs to

us . . . What we are seeing now is not disagree

ments among reasonable people; it is ideology without restraint, and it is dangerous to

us all. ”2°

Again, however, the extent to which restrictions on information flow have actually been

onerous or counter-productive has not been

carefully examined. More broadly, except for

science policy analysts, most people—at universities, in Congress, or in associations or research groups-have not raised DOD funding

as an issue. They maybe comfortable with the

current situation, or they may be uncomfortable alienating a powerful source of funding.

Part of the reason for infrequent questioning of DOD’s dominance in this area is that

defense applications for computer-related devices are fascinating problems. One computer

columnist noted that state-of-the-art equipment, challenging problems, and the mystique

of “secrecy” are powerful lures for computer

scientists. 21

—. —

‘“R. Rose~weig, president, Association of American Universities, address to American Association for the Advancement

of Science colloquium on R&D policy, Washington, DC, Mar.

30, 1984. This comment was made when the Department of De

fense was considering placing restrictions on the publication

of “unclassified but sensitive’ research. At the time, the

presidents of Stanford, California Institute of Technology, and

Massachusetts Institute of Technology “warned the Reagan

Administration that their institutions may be forced to stop

conducting unclassified research for the Pentagon if they are

required to give military reviewers the right to restrict publication of some findings. ” (Kim McDonald, “3 Universities

Warn Pentagon on Censorship,” The Chronicle of Higher Education, Apr. 4, 1984, p. 1.) In part in response to this outcry,

the Pentagon rescinded its plan for restrictions. (“White House

Decides to Cool Campus Secrecy Issue, ” Science and Government Report, June 15, 1984, p. 1), See also Albert H, Teich and

Jill P. Weinberg, American Association for the Advancement

of Science, “Issues in Scientific and TechnicaJ Information Policy, prepared for Office of Special Projects, National Science

Foundation, Dec. 28, 1982.

2

*D. Clapp, “While Japan Builds Computers, We’re Making

Missiles, ” Infoworld, June 27, 1983.

Options for Addressing the Issue

Option 1: Maintain the Status Quo. While it

may be desirable to have a stronger civilian

government presence in information technology R&D, some would argue that our national

security requirements mandate the current

level of DOD involvement, and that it is impractical or unnecessary for civilian agencies

to have a balancing involvement.

Potential negative consequences of maintaining the status quo are that we may be compromising international competitiveness, and

hence national security, in the long term. The

concerns surfacing about DOD’s funding of

R&D may be early signals of a serious problem, or they could be insubstantial worries.

Currently we do not have reliable information

to tell the difference.

Option 2: Increase Monitoring and Analysis.

The clearest need in addressing the impact of

DOD priorities is that it be explicitly addressed

and more monitoring and analysis be done.

Specific topics in need of monitoring and analysis include:

●

●

●

●

●

Effectiveness and effects of national security restrictions on access to information

technology research and devices—especially the exchange of ideas among leading researchers and the ability to use foreign graduate assistants on DOD-related

projects.

Effects of DOD support on the research

priorities of leading researchers in the

field.

Transferability of information technology

developed for DOD–the ease of transfer,

the time lag—compared with primarily

commercial development.

Use of limited manpower in certain fields

such as artificial intelligence and software

engineering.

Relation of DOD’s requirements for information technology R&D to commercial

requirements, and more broadly, the

tradeoffs between national security and

international competitiveness in this area.

One factor working against explicit consideration of military vs. civilian priorities in
298 • Information Technology R&D: Critical Trends and Issues

R&D is the fact that Congress is ill-equipped

to balance the funding of research among different agencies because the agencies’ budgets

are independent and handled by different congressional committees. The executive branch

is theoretically capable of such considerations,

but in practice, as noted above, it also handles

agencies’ budgets as discrete units. Hence,

there may be a need for a new mechanism to

weigh R&D goals in information technology

from a multiagency perspective. Such mechanisms could include joint congressional hearings, activities of the interagency coordination

body discussed in Issue A, and/or a joint study

by DOD and a prominent civilian group such

as the National Science Board on the relationship of DOD spending to R&D priorities. To

be most effective, such a study should probably be tied to subsequent congressional hearings on the issue.

Option 2 does not preclude either of the

other options, and hence may be a wise course

of action in any case.

Option 3: Bolster Civilian R&D funding. Congress could act to provide a stronger civilian

balance to DOD’s information technology

R&D funding, on the basis of the suggestive

evidence of problems, or on the assumption

that domination of information technology

R&D by one mission agency is unwise. Though

such a move would require budgetary increases of several million dollars, many industry and policy experts suggest that the ultimate payoffs in innovation and productivity

would be substantial.

Such funding may go beyond some policymakers’ notion of appropriate roles for Government. There does seem to be room, however, for more civilian agency funding of

“fundamental” (in the sense of being widely

applicable and long-term) if not “basic” (in the

sense of being disinterested in applications) research in information technology. The funding agency involved would have to be careful

that the research community had sufficient

manpower to absorb such funds. Some experts

have called for a civilian research effort that

would mobilize the research community in a

way similar to that of the Apollo program—

it could be a 5- or 10-year effort toward specific objectives such as uses of computers for

education, to aid the handicapped or poor, or

other social goals.

ISSUE C: International Competitiveness

U.S. policies and practices are based on an

assumption of unassailable U.S. dominance

in information technology R&D, which is increasingly inaccurate.

Introduction

Information technology is an important element of global high-technology trade. As discussed in chapter 7, the efforts of the French,

Japanese, and other governments to target information technologies as tickets to future international prosperity attest to that fact. Since

the advent of information technologies, the

United States has had the lead in development

and in global market share. That situation is

changing as other advanced nations are increasing their patents in international commerce, as the U.S. balance of trade in information technology begins to weaken, and as

the industry becomes more global in character and thus less amenable to traditional methods of governmental control.

Dimensions of the Issue

Stresses of global integration and foreign

competition on U.S. information technology

R&D policies emerge in several areas. One is

the effect on policies promoting development

of the R&D base of U.S. industry-manpower,

facilities, R&D information and R&D behavior. The issues in this area include:

● Foreign versus domestic high-tech manpower. A large percentage of the graduate

students in science and engineering are

foreign nationals. It has been a matter of

significant national pride that the world

comes to the United States for training

in science; on the other hand, some have

argued that we are investing resources in

these foreign students which those that
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy ● 299

leave then take away to their home country. The value we have placed on science

as an international enterprise is under

stress as international competition intensifies.

● A related issue is that in those areas that

involve national security or commercial

secrecy, there are increasing pressures to

restrict access of foreign scientists and

graduate students. Such restrictions could

be a major dislocation in the ethos of the

university.

● Restricting the access of foreign scientists

to U.S. research may isolate the U.S. research community. Such isolation could

reduce the infusion of new approaches and

ideas into the R&D process, and thus hinder R&D in the United States.

● Our traditional linguistic chauvinism conflicts with a recognition of the need to

translate literature from other countries

in this area. Little of the Japanese technical literature, and only somewhat more

European literature, is routinely available

in English translations.

● Internationalization of the information

technology industry is leading to the globalization of R&D. Countries such as

Great Britain, the United States, France,

and Italy are competing for the location

of research centers of the major multinational firms in information technology.

Scotland’s Silicon Glen is an example. In

addition to the competition for multinational R&D facilities, there is growing interest in joint ventures among firms in advanced nations such as Japan, Germany,

the United States and France.

Issues also emerge concerning U.S. policies

to maintain or improve the current U.S. leadership in information technology R&D and marketing. These include issues related to the

structure of the industry, the role of DOD, and

the effects of regulation on the industry:

● The individual American corporation in

the information technology market may

confront foreign government-coordinated,

sustained, and supported consortia or

consortia of private companies enjoying

●

●

●

●

●

subsidies and generic research input from

their governments.

The openness of U.S. markets to foreign

competition is not met by symmetrical

U.S. access to foreign markets. U.S. manufacturers still primarily focus on the U.S.

market-the world’s largest for information technology. These firms may not be

giving adequate attention to developing

nations’ markets, leaving them largely to

other nations. For example, the Japanese

are now vigorously pursuing countertrade

with the Chinese to exchange mineral resources for Japanese high technology.

One element of the dominance of DOD in

information technology R&D is the potential diversion of talent and resources away

from nonmilitary science and technology.

The rigid specifications and limited applicability of many DOD-sponsored technologies could skew the development of U.S.

information technologies away from those

products that are of most use in foreign

markets-especially markets in developing nations.

There is a conflict between the need for

free trade and the need to protect sensitive science and technology. The issue is

whether U.S. export controls on information technology are unnecessarily excluding U.S. companies from effectively

competing for large foreign markets.

With the development of foreign markets

for information technology, concerns arise

over the access of small and medium-sized

firms to foreign markets. Some feel that

where U.S. firms have penetrated foreign

markets, the larger firms have dominated

trade, to the exclusion of the smaller

firms. This is not unusual, since a large

majority of manufacturing exports come

from large firms. However, with the global integration of the industry, the United

States may wish to encourage smaller, innovative firms to seek out foreign trade.

Promotion of a rational world system for

managing the use of information technologies is also important to the long-term

leadership of the United States. Though

this has long been an area of recognized
300 • Information Technology R&D: Critical Trends and Issues

importance for U.S. policy, a number of

important global standardization issues

remain. For example, an increasing issue

will be global compatibility of communications systems. The fact that foreign

systems are generally run by national

governments, while the U.S. system is a

market-based system, tends to put the

United States in a different, often disadvantageous, position from all the other

contenders in international negotiations.

Options for Addressing the Issue

The central issue facing information technology industries is how best to enhance their

ability to compete on equal footing with companies from other nations, especially where

those companies are strongly supported by

government. This problem affects many other

industries-from steel to shoes. Continuing debate over the need for an industrial policy

flows directly from this issue. As noted in

chapter 7, the essential question is not how to

imitate the policy strategies of Japan or other

countries which appear successful, but to come

up with a response that could build on unique

U.S. strengths.

Option 1: Maintain the Status Quo. Some

would argue that the Federal Government is

ill-equipped to become more involved in a fastpaced area such as information technology.

The current scheme of activities to promote

international competitiveness works well in

some respects; the prime role of the Government should be to provide a healthy macroeconomic business climate.

The disadvantage of the status quo is the

increasing evidence that the traditional pattern of policies related to international competitiveness does not allow our industries to

compete on “a level playing field” with companies from other countries. At present, there

is little basis for deciding among options for

dealing with foreign competition and its effects on information technology R&D. The relative newness of the threat and the rapid ideological polarization of the industrial policy

debate have left the Nation long on conjecture

and short on facts.

Option 2: Monitor and Support International

Trade in Information Technology, and Related

Efforts in R&D. Various measures have been

proposed for the support of international

trade, and it is beyond the scope of this report

to discuss them in detail.22 A key aspect of

trade support is ensuring that foreign markets

are open to U.S. industry, and helping U.S.

companies to actively seek developing markets for the technology. This could involve

increasing the commitment and attention of

the U.S. Special Trade Representative, the International Trade Administration, and the

Foreign Commercial Service to the needs of

information technology firms.

Options more specifically related to R&D include promotion of generic information technology R&D centers in the United States, and

close monitoring and evaluation of alternative

institutional models-both domestic and foreign-for cooperative research in information

technology.

Further, support for international competitiveness in R&D could include establishing

mechanisms to monitor foreign technical literature and disseminate translations to American scientists and technologists. Such support could also provide funding for our research

personnel to travel overseas for conferences

and consultations, and for American students

or professors to study overseas. Congress may

wish to beef up scientific bilateral agreements

and exchange programs.

In addition, it would be appropriate to

analyze:

● The amount of foreign purchasing by the

Bell Operating Companies that were

formerly part of AT&T. As a vast market for information technologies, the behavior of these companies will be critical

to the future of the U.S. industry.

—.— —

22See the recent OTA report, International Competitiveness

in Ek+ctroru”cs.
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy ● 301

●

●

●

●

The extent and type of foreign ownership

of U.S. information technology firms and

the effects of such ownership on the transfer of information science and technology.

The career paths of foreign computer and

electrical engineering graduate students.

The extent to which major U.S. information technology firms undertake R&D in

foreign countries versus in the United

States.

The effects of joint ventures, countertrade

agreements, licensing, and other arrangements on the transfer of U.S. information

science and technology.

These information gathering activities would

be helpful regardless of the path Congress

chooses to take in addressing this issue area.

Option 3: Set National Policy. While there is

much we need to know, one alternative is to

begin setting a long-term policy on the role of

information technology in U.S. trade, and to

continue the debate on how the United States

might restructure its trade policies to respond

to those of Japan and other nations. In addition, the United States could assist the international competitiveness of U.S. firms by developing a national position in international

standardization which would take into account

the needs of Government, the private sector,

and the consumers as well as balance shortterm needs with the long-term development

of foreign markets.

The United States could establish a more

coherent policy on the flow of scientific information, and could establish a review and appeal mechanism for DOD’s restrictions on the

flow of information and technology.

Options 2 and 3 are not mutually exclusive,

and probably make best sense in concert with

each other.

Concluding Thoughts

As part of the preparation for this chapter,

interviews and workshops were conducted

with several dozen experts in science policy

and information technology R&D. Box B is a

sample of their responses to the question,

“What single message would you like to get

across to the Congress concerning information

technology R&D?” The diversity of these responses indicates the multifaceted nature of

issues related to information technology R&D.

Their responses are reprinted in box B in order to illustrate the wide-ranging priorities of

a group of well-informed specialists, and to

provide a different perspective on some of the

issues discussed earlier in the chapter.

A common theme in these comments, and

in many other discussions of policy in this

area, is a drive for perspective: for a long-range

view of technological and social changes, and

for policies that work together effectively in

a wide range of areas.

Indeed, U.S. policy toward information technology R&D, as in many other areas, is partial and incremental. This lack of long-term

perspective may in part be inherent in the

policymaking machinery; in other cases, policymakers have explicitly assumed that the

Government will be most effective when it

responds to a mature issue—an issue that has

reached a level of public concern where action

is clearly called for, and the background of the

issue is well understood.

However, the nature of a “core” technology,

facilitating major and pervasive social changes,

raises questions about the utility of partial and

incremental policies. Many of the issues evolving from a core technology are likely to evolve

late rather than early, and are likely to be

structural-that is, deeply built into the society, and hence very disruptive and traumatic

to correct.
Ch. 8—information Technology R&D in the Context of U.S. Science and Technology Policy ● 303

to do so.

ons Of this country reen given the latitude

t legislate on matters of

 R&D except where you

In response to some of these concerns, various interested parties have called for some

kind of prestigious national body which could

help sort out issues and lay the groundwork

for a long-term perspective.23 Congress may

wish to consider such an option. Although one

could be skeptical about creating another commission, other countries have tried variations

on this theme with some apparent success in

developing long-term perspectives.24 In the

United States, this area of research is rather

anemic. For example, the National Science

Foundation recently reorganized its Policy Research and Analysis Division to address the

short-term needs of the executive branch

“see, for example, J. L. Kirkley, “Backing into the Future, ”

Ikkrmtion, February 1982, p. 31; M. R. Wessel and J. L.

Kirkley, “For a National Information Committee,” DAunation, 1982, p. 234; David Burnharn, The Rise of the Computer

State (New York: Random House, 1983). For a discussion also

see OTA, “Institutional Options for Addressing Information

Policy Issues, ” op. cit.

24% Telecom Australia, Telecom 2000: An Exploration of

the Long-Term Development of Telecommunications in Australia (Melbourne, Australia: Australian Government Printing

Unit, 1975); and Nora, S. and A. Mine, The Computerization

of Society (Cambridge, MA: MIT Press, 1980).

—

-

Take “

T

rous action now to enhance science education

for peo e at aU levels and all education. Provide %~~”:

strong support for it. “ .- WXIRC13: UI’A wdshaw ad intervkws.

rather than long-term research on social impacts of science and technology .25

Given that such little effort is now being

undertaken to understand the long-term effects of information technology, it is difficult

to say whether development of such a perspective would be possible in the United States.

However, such efforts probably entail little

risk, in that any insights derived could help

inform policymakers on information technology R&D, and on use of the technology itself.

An examination and anticipation of the social

and cultural impacts of information technology could at a minimum suggest avenues to

explore and monitor, possible options to consider promoting, and identification of potential developments that one might wish to

thwart or prevent.

Z6SW Nation~ Science Foundation, Division of policy

Research and Analysis, “Program Announcement and Solicitation, ” January 1984.
-

Chapter 9

Technology and Industry
Contents

Page

Importance of Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Composition of Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

Functions .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

Examples of System Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309

Characteristics of theU.S. Information Technology Industry . . . . . . . . . . . . . . . . . . . . . 316

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317

International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317

Industry Structure . . . . . . . . . ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . 320

Small Entrepreneurial Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......321

Where the Technology is Heading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Microelectronics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324

Silicon Integrated Circuits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324

Gallium Arsenide Integrated Circuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

The Convergence of Bio-technology and Information Technology . . . . . . . . . . . . . . . . 330

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331

The Changing Role of Software in Information Systems . . . . . . . . . . . . . . . . . . . . . . . 332

The Software Bottleneck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

Software and Complexity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

Tables

Table No. Page

50. Functions, Applications, and Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309

51. Characteristics of Human Workers, Robots,

and Nonprogrammable Automation Devices. . . . . . . . . . . , . . . . . . , . . . . . . . . . , . 312

52. Comparison of the U.S. Information Technology Industry

With Composite Industry Performance, 1978-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317

53. Employment Levels in the U.S. Information Technology Industries . . . . . . . . . . . . 318

54.U.S. Home Computer Software Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

55.U.S. Office Computer Software Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

56. Percentage of Total industry Sales and Employment

by Size of Small Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322

57. Venture Capital Funding and Information Technology Firms, 1983 . . . . . . . . . . . . . 323

58. ICs Made With Lithographic Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

59. Software Sales by Use , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

Figures

Figure No. Page

52. Direct Broadcasting Satellite System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311

53. The Changing Structure and Growth of the

U.S. Information Technology Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318

54. Balance of Trade, Information Technology Manufacturing Industry . . . . . . . . . . . . 319

55. U.S. Trade Balance with Selected Nations

for R&D Intensive Manufactured Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319

56. Historical Development of the Complexity of Integrated Circuits . . . . . . . . . . . . . . 324

57. Read-Only Semiconductor Memory Component Prices by Type . . . . . . . . . . . . . . . . 325

58. Median Microprocessor Price v. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

59. Minimum Linewidth for Semiconductor Microlithography . . . . . . . . . . . . . . . . . . . . . 326

60. A Schematic of an Electron Beam Lithography System, and Its Use to Make

LSI Logic Circuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

61. Trends in Device Speed–Stage Delay

per Gate Circuit for Different Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

62.The Relative Costs of Software and Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332
Chapter 9

Technology and Industry

Importance of Information Technology

Information technology and the industries

that advance and use its products are becoming increasingly important to America’s economic strength. Information technology is a

core technology, contributing broadly to the

Nation’s trade balance, employment, and national security. The information sector already

accounts for between 18 and 25 percent of the

gross national products of seven of the member nations of the Organization for Economic

Cooperation and Development (OECD) and between 27 and 41 percent of employment in

these countries.

12 2

An important characteristic of this technology is the rapidity with which research results

are translated into “advanced” products and

from there to the mainstream consumer marketplace. This rapid transfer has been particularly

evident in semiconductor research leading to

cheaper and more powerful microprocessors.

Given the accelerated movement from the

research laboratories to a worldwide marketplace, it is natural that the attention of the

trading nations has focused on information

technology research and development (R&D).

Two basic building blocks of information technology are :

● the microelectronic chip-the large scal e

integrated circuit that permits the storage, rapid retrieval and manipulation of

vast amounts of information, and

● software-the sets of instruction that direct the computer in its tasks.

3

As noted in chapter 2, there is no consensus on what composes the “information tech-

‘Information Activities, Electrom”cs and Tekwomtnum”cations

Technologies: Impacts on Employment, Growth and Trade

(OECD, Paris, 1981), pp. 22 and 24.

‘M. R. Rubin, Information Econom”cs and Policy in the

United States, Libraries Unlimited, Littleton, CO, 1983,

pp. 32-44.

3

Software may also refer to the stored information.

nology industry. ” Because of the varying

definitions and the differing statistical analyses arising from them, it is impossible to pin

down the size of the industry. A relatively conservative estimate, discussed later in this

chapter, places the annual sales of the U.S. industry at over two hundred billion annually

and growing. From another perspective: over

one-half million jobs depend on computer industry exports.

4

Findings

In examining the composition of information technology, the characteristics of the U.S.

industry, and where the technology is heading,

several trends become apparent:

1.

2.

3.

The U. S. information technology industry

is large and growing rapidly; there is a world

market for its products and services as the

developed countries increasingly move into

the information age.

The technology is pervasive, making possible major productivity improvements in

other fields, creating new industries, and

enlarging the range of services available to

the public. The technology diffuses through

most facets of life, including business, engineering and science, and government functions.

With each level of technological advance in

basic information technology, the level of

complexity and cost increases for R&D, as

does the demand for additional technical

training for R&D personnel.

‘Robert G, Atkins, The Computer Industry and International

Trade; A Summary of the U.S. Role, Information Processes

Group, Institute for Computer Sciences and Technology, National Bureau of Standards, December 1983, p. IX-1. Draft of

a report under joint development by ICST and the International

Trade Administration, as of February 1985.

307
308 • information Technology R&D: Critical Trends and Issues

4. Domestic and foreign competition for world 5.

markets is both intensive and escalating.

The stakes for the United States are great

in terms of corporate sales and competitive

ness in world markets, and employment.

There will be continued rapid advances in

the capabilities of the industry’s underlying

basic building blocks, microelectronics and

software.

Composition of Information Technology

Individual information technologies have

grown explosively in technical sophistication

and, at the same time, diminished in cost. That

rare combination has propelled the new technologies into the mass marketplace. As the

two basic building blocks continue their advances, the parade of new information technology capabilities and applications will go on.

There is a recurrent pattern in which one

technological advance makes possible still

other advances, often in a “bootstrap” fashion. For example, sophisticated computeraided design (CAD) equipment is a tool used

in development of state-of-the-art random access memories and microprocessors; development of the next generation of super-computers depends on use of today’s most advanced

computers; “expert” systems— still in their

technological infancy-are already employed

in configuring complex computer systems and

custom-designing integrated circuits.

Functions

For purposes of this report, the term “information technology” has been used to refer to

the cluster of technologies that provide the following automated capabilities:

1.

2.

Data Collection. Examples of automated

data collection systems range from largescale satellite remote-sensing systems

such as weather satellites to medical applications such as CAT-scans and electrocardiograms.

Data Input. Input devices include the familiar keyboard, optical character readers, video cameras, and so on. They are

the means by which data are inserted and

stored, communicated, or processed.

3.

4.

5.

6.

Information Storage. The storage media

associated with the information industry

are the electronic-based devices which

store data in a form which can be read by

a computer. They include film, magnetic

tape, floppy and hard disks, semiconductor memories, and so on. The ability to

store increasingly vast amounts of data

has been essential to the information technology revolution.

Information Processing. Information processing is the primary function of a computer. The information stored by a

computer can be numeric (used for computations), symbolic (rules of logic used

for applications such as “expert” systems), or image (pictorial representations

used in applications such as remote mapping). The stored information–in whatever form—is manipulated, or processed,

in response to specific instructions (usually encoded in the software). The increasing speed of information processing has

been another essential factor in the information technology revolution.

Communications. Electronic communications utilizes a variety of media-the air

waves (for broadcast radio and television),

coaxial cable, paired copper wire (used,

among other things, for traditional telephony), digital radio, optical fibers, and

communications satellites. Communications systems play a major role in broadening the use of other facets of information

technology and make possible distributed

computing, remote delivery of services,

and electronic navigation systems, among

many other applications.

Information Presentation. Once the information has been sent, it must be “pre-
Ch, 9–Technology and Industry ● 309

sented” if it is to be useful. This can be

accomplished through a variety of output

devices. The most common display technology is the cathode ray tube or video

display terminal. Hard-copy output devices include the most commonly used impact printers as well as those using nonimpact technologies such as ink-jet and

xerography. There are also audio systems

that permit the computer to “speak”-

exemplified by the automobiles that admonish you to fasten your seat belts.

Table 50 shows some of the technologies and

application areas that depend on these functions.

Examples of System Applications

A few examples of the many information

technology applications are provided below.

They have been chosen to illustrate the diversity of applications, and in most cases reflect

capabilities that have only become feasible on

a significant scale in recent years. The examples include: cellular mobile radio commutable 50.—Functions, Applications, and Technologies”

Representative

Function Typical application areaa

information technology

Data collection Weather prediction

Medical diagnosis

Data input Word processing

Factory automation

Mail sorting

Storage Archives

Accounting systems

Scientific computation

Information processing

Ecological mapping

Libraries

Social Security payments

Traffic control

Distributed inventory control

Medical diagnoses

Engineering design

Scientific computation

Communications

Ecological mapping

Factory automation

Office systems

Teleconferencing

Rescue vehicle dispatch

International financial

transactions

Data output and presentation Word processing

Management information

Pedestrian traffic control

Radar, infra-red object detection equipment,

radiometers

CAT-scanners, ultrasonic cameras

Keyboards, touch-screens

Voice recognizes (particularly for quality control)

Optical character readers

Magnetic bubble devices, magnetic tape

Floppy disks

Wafer-scale semiconductors (still in research phase),

very-high-speed magnetic cores

Charge-coupled semiconductor devices, video disks

Hard disks

General purpose “mainframe” computers, COBOL

programs

Minicomputers

Multi-user super-micros, application software

packages

“Expert” systems

Spreadsheet application packages, microcomputers

Supercomputers: multiple instruction-multiple data

(MI MD) processors, vector processors, data driven

processors, FORTRAN programs

Array processors, associative processors

Robotics, artificial intelligence

Local area networks, private branch exchanges (PBX),

editor applications packages

Communications satellites, fiber optics

Cellular mobile radios

Transport protocols, data encryption, Integrated

Services Digital Networks (ISDN)

Personal computers, printers (impact, ink jet,

xerographic)

Cathode ray tubes, computer graphics

Voice synthesizers

aThi~ list is not ~xhau~tive; any given technology may also be used for some of the other applications mentioned.

SOURCE Office of Technology Assessment.
310 . Information Technology R&D: Critical Trends and Issues

nications, direct broadcast satellites, robotics,

computer simulation, a biomedical application

in heart pacemakers, and financial services.

Cellular Mobile Radio Communications

For decades, use of mobile telephone service has been limited by over-crowding of the

electromagnetic spectrum; major cities have

had only some few hundred subscribers because of spectrum constraints. Demand for additional mobile voice service has been growing at a 12 percent rate annually for the past

20 years. A new technology-cellular mobile

radio communications—holds promise for

vastly increasing the number of potential

subscribers (to more than 100,000 in particular geographic areas),’ while providing service of improved quality compared to that available previously. What is most significant

about the cellular concept is that it permits

conservation of the electromagnetic spectrum

—a limited natural resource.

The older technology provided service from

a single antenna to the area served. The cellular concept is based on dividing the service

area into a number of geometric shapes, or

cells, each served with its own antenna. The

cell antennas are interconnected with leased

telephone lines. When a vehicle leaves a cell,

that cell passes control to the next cell, and

so on. The number of subscribers is much

greater with the cellular concept because the

transmission frequencies can be reused repeatedly in nonadjacent cells. Thus the impact

of increasing demands on the spectrum is minimized.

According to some estimates, cellular radio

will be a $4 billion U.S. industry by 1990 and

could reach $6 billion by the mid-1990s. Cellular mobile telephones recently cost about

$3,000 but prices are likely to fall rapidly because of competition among vendors.

Other countries are also finding considerable

demand for mobile radio services. In Japan,

60peration of cellular mobile radio systems in dozens of U.S.

cities has been approved by the Federal Communications Commission.

mobile telephone services are now available in

Tokyo. In Spain, some 20,000 subscribers are

anticipated by 1990. The Netherlands reached

approximately 50,000 inhabitants by 1984.

Saudi Arabia introduced cellular mobile radio

communications in 1981 in three cities; by

1982, there were 19,000 subscribers, and the

Saudis have now extended coverage to 32

cities.

Direct Broadcast Satellites

The use of direct broadcast satellites (DBS)

has recently become feasible. With DBS, overthe-air signals (e.g., TV, radio) can be received

directly by small rooftop antennas (see fig. 52).

These new, commercial, geostationary systems may have widespread use in the United

States and in other countries, primarily providing entertainment, but also with potential

for education, advertising and other business

uses. As of early 1985, nine applications had

Photo credit: Motorola

Mobile cellular radiotelephone
Ch. 9—Technology and Industry ● 311

Figure 52.—Direct Broadcasting Satellite System

, Indoor unit

been approved by the Federal Communications Commission (FCC) for subscription services to the public, some of which may become

operational.

DBS services will compete with other media

such as multiple distribution systems, STV

(subscription TV), and cable TV (CATV) for

serving television viewers. DBS services may

prove especially valuable for providing service to sparsely populated geographical areas

that are not economical to reach by other

means, as well as to densely populated cities

where new cable installations are prohibitively

expensive.

Among the technical improvements that

make DBS systems feasible are higher power

and more efficient on-board power amplifiers;

solar power generation equipment; more accurate satellite station-keeping control; improved ground receiver sensitivity; the use of

higher frequencies; and better transmitter

downlink beam control. Higher power and

higher frequencies also make practical the use

of small (about 1 meter or less) rooftop antennas. Some of the early U.S. experimental

satellite communications systems, along with

parallel advances in solid-state electronics and

new materials processing techniques, have

contributed significantly to the improvements

in components and subsystems available

today.

DBS systems had their genesis when NASA’s

ATS-6 satellite was launched in 1974—a system having a multiplicity of payloads, two of

which included TV broadcast capabilities. A

number of countries have DBS systems in

place or in planning stages. Included among

these are: Canada’s medium-powered ANIK

C-2, which is serving Canadian audiences as

well as providing five channels of television

entertainment to the Northeastern United

States; Japan’s modified BS-2 satellite, launched

in early 1984; and France’s TDF-1 and West

Germany’s TV-SAT, which are expected to be

operational in 1986.

Robotics

Robots are mechanical manipulators which

can be programmed to move workplaces or

tools along various paths. They are one of the

four tools employed in computer-aided manufacturing (i.e., robots, numerically controlled

machine tools, flexible manufacturing systems, and automated materials handling

systems).6

Robotics emerged as a distinct discipline

when the century-old industrial engineering

automation technologies converged with the

more recent disciplines of computer science

and artificial intelligence. The convergence

produced the growing field of robotics, which

has had wide factory applications in areas that

include (but are not limited to) materials handling, machine loading/unloading, spray painting, welding, machining, and assembling. The

robots are most often used in performing particularly hazardous and monotonous jobs

while offering enough flexibility to be easily

adapted to changes in product models.

Neither today’s robots, nor those likely to

be available in the next decade, look like

humans nor do they have more than a fraction

of the dexterity, flexibility, or intelligence of

humans. A simple “pick and place” machine

‘See Computerized Manufacturing Automati”on: Employment,

Education, and the Workplace (Washington, DC: U.S. Congress,

Office of Technology Assessment, OTA-CIT-235, April 1984.

38-8o2 0 - 85 - 21
312 ● Information Technology R&D: Critical Trends and Issues

with two or three degrees of freedom may cost

roughly between $5,000 and $30,000, while

more complex progr ammable models, often

equipped with microcomputers, begin at about

$25,000 and may exceed $90,000.

Human workers, robots, and nonprogrammable automation devices each have certain

characteristics which offer advantages for the

manufacturing process. Table 51 compares

some of the salient characteristics.

Table 51 .—Characteristics of Human Workers,

Robots, and Nonprogrammable Automation Devicesa

Non programmable

Human Automation

Characteristic Worker Robot Device

Flexibility . . . . . . . . . . 1

Consistency. . . . . . . . 3

Endurance . . . . . . . . . 3

Ability to tolerate

hostile

environments. . . . . . 3

cost . . . . . . . . . . . . . . n/a

Speed . . . . . . . . . . . . . 2-3

Intelligence/

programmability . . 1

Sensing . . . . . . . . . . . 1

Judgment. . . . . . . . . . 1

Ability to adapt

to change. . . . . . . . 1

Dexterity. . . . . . . . . . . 1

2

2

1-2

1-2

2

2-3

2

2

2

2

2

3

1

1-2

1-2

1

1

3

3

3

3

3

aNumerical ranking indicates relative advantage, With “l” Indicating the greatest

advantage.

SOURCE: Computerized Manufacturing Automation: Employment, Education,

and the Workp/ace, (Washington, DC: U.S. Congress, Office of

Technology Assessment, 1964). This table was derived from the foregoing report

At the end of 1983 Japan had about 43,000

operating robot installations-by far the largest number in any country. The United States,

where the original patents for robots were obtained, had about 9,400 installations (v. about

13,000 in early 1985 and 6,300 in 1982), followed by West Germany (4,800), and France

(3,600). Some projections indicate that by 1990

there will bean installed base of nearly 90,000

robots in the United States. *

As reported by OTA6a, significant robotics

research is being conducted in over a dozen

universities, about three dozen industrial firms

and independent laboratories, and in Federal

Government labs at the National Bureau of

Standards (NBS), NASA, and DOD. The report further noted that the research was intensively addressing several problem areas :

improved positioning and accuracy for the robot’s arms; increased grace, dexterity, and

speed; sensors, including vision, touch, and

force; model-based control systems; software;

mobility; voice recognition; artificial intelligence; and interface standards. The interface

area is critical to widespread use of automated

manufacturing. NBS has created an Automated Manufacturing Research facility in part

to perform research on the interfaces between

different computerized devices in a factory.

Computer Simulation

“Computer simulation” is a process that

employs a computerized model of certain significant features of some physical or logical

system which is undergoing dynamic change.

We therefore find computers used in applications such as economic modeling and war

games where “what if” scenarios can be played

out to test suggested social policies or military

strategies. As relatively inexpensive computer

memories grow in size and integrated circuits

grow in speed, increasingly complex operations are being modeled. Software advances

have also played a large part in the growing

use of computer simulations.

*worldwide Robotics Survey ~d D&toW, 1984, to ~ published, Robotics Industries Association, Dearborn, MI. This

data is based on the RIA’s definition for robots which excludes

the simpler, nonreprogr amrnable machines.

@Compute~~ M~ufactufl-ng Automation: Employment,

Education and the Workplace, op. cit.
Ch. 9–Technology and Industry ● 313

When combined with other information

technologies, some startling simulations are

possible. In flight simulators, for example,

computer-generated imagery techniques are

used to create background, images, sounds,

and sensations, and to position discrete elements in a scene—elements which have been

obtained from video images of real trees,

buildings, clouds, aircraft, and other characteristics of the environment to be simulated.

The flight simulator is placed in the dynamically changing recreated environment and the

pilot then “flies through” in the simulator,

which duplicates the performance of the actual

airplane. Realistic simulations are made possible by the rapid calculation and implementation of flight characteristics related to the

known aerodynamic and engine properties of

the craft, air speed, altitude, attitude, and lift.

Some systems use 10,000 variables associated

with a single-engine jet fighter. In order to

achieve visual accuracy, simulator systems

calculate the aircraft’s position between 25

and 60 times per second.

The Federal Aviation Administration permits 100 percent simulation training for experienced pilots who are upgrading their flight

certifications to more advanced aircraft. Simu-
314 . /formation Technology R&D: Critical Trends and Issues

lated dogfight training at Williams Air Force

Base is so realistic that some F-4 pilots have

become airsick.7

Computer simulation is proving effective for

improving the quality of training in a variety

of jobs—e.g., operating a locomotive, controlling a supertanker, operating a space shuttle—while reducing the cost, time, and risk

associated with conventional training.

Heart Pacemakers

Microelectronics and software systems are

finding a variety of applications in medical

diagnoses and treatment. The heart pacemakers now being used by more than 500,000

patients in the United States are illustrative

of the widespread use of these technologies for

medical purposes.

The heart muscle contracts in response to

electrical impulses generated by apart of the

heart itself. The contractions force the blood

through the arteries to all parts of the body;

but if there is something wrong with the electrical impulses, blood flow is impaired and the

heart muscle becomes injured.

——-——. -

“’The Technology of Illusion,” Forbes, Feb. 27, 1984, pp.

158-162.

Photo credit: Medtronlc, Inc.

Heart Pacemaker

Pacemakers are medical devices that can be

surgically implanted under a patient’s skin

with electrode leads fed through the veins into

the heart. The two main components of a pacemaker are the pulse generator and the leads.

Pulse generators contain a power source and

the electrical circuitry for sensing, pulsing, and

progr amming. Some new pacemakers are also

capable of telemetry functions, which transmit

certain critical measurements of performance

of the pacemaker and the patient’s condition.

Programming changes and telemetry functions require external microprocessors that

communicate with the implanted devices in order to monitor performance and to modify the

pacemaker’s operation.

The first implantable pacemaker was developed in 1958, and the first implantation in a

human was performed in 1959. Early pacemakers sent electrical impulses to the heart

at fixed intervals. By 1970, the technology for

“demand” pacemakers was developed. These

pacemakers sense when the heart is not working properly and, when necessary, send out

electrical impulses to trigger the contraction

of the cardiac muscle. Programmable pacemakers-which are continually being updated

with advanced technology— can be reprogrammed without additional surgery, in response to changes in the patient’s physiology.

This capability reduces the risks of additional

surgery for cardiac patients and decreases the

costs of their care.8

The latest generation of pacemakers is designed to be flexible, enabling updating of the

software and external keyboard to accommodate newer technology. The flexibility extends to enabling pacemaker parameter settings to be customized for each patient’s

special needs, and to the use of the same technology for other medical applications, such as

drug dispensers and pain controllers.9

%pecisl Committee on Aging, U. S. Senate, Fraud, Waste,

and Abuse in the Medz”care Pacemaker Industry, (Washington,

DC: U.S. Govemxnent printing Office, 98-116. September 1982).

‘Richard M. Powell, “A New Programm er for Implanted Pulse

Generators,” pp. 678-687, technical paper presented at the 15th

Hawaii International Conference on Systems Sciences, January 1982.
Ch. 9—Technology and Industry . 315

Financial Services

The financial service industry would not provide the level of service it does without information technologies. 10 The numbers of checks

(over 37 billion annually), credit card drafts

(over 3.5 billion annually), and securities trades

(over 30 billion shares traded annually) are

simply too much for any manual system to

handle. In the 1960s, for example, before the

financial service industry was substantially

automated, there were days when the New

York Stock Exchange suspended operations

because the broker/dealers were unable to handle the workload.

Both users and providers of financial services have made use of virtually every category

of information technology. Banks and othe r

financial service providers have been longtime

users of computers. However, an increasing

number of retailers-large and small-are installing the hardware and using the telecommunications networks to verify checks and to

authorize and complete credit transactions.

Applications software packages for financial

services can process market data and generate information used for portfolio manage -

ment. They can also generate and analyze loan

information, and process bank card applications. The spread of remote terminals interconnected with central computers is becoming ubiquitous, and expanding the number of

services available to the public.

The video-related technologies-videotex ( a

two-way information service) and teletext (a

one-way information service)—are not ye t

widely used in the delivery of financial services, but experiments are under way and it is

likely that they ultimately will gain acceptance. One videotex system, currently being

marketed in Florida, uses an AT&T terminal

attached to a television set to link the financial service provider with the customer.

— . —

‘°For detailed discussion, see Effects of Information Technology on Financial Service Systems, (Washington, DC: U.S.

Congress, Office of Technology Assessment, OTA-CIT-202, September 1984).

There are also several card technologies. The

embossed plastic card with its strip of magnetic tape provides the primary means for

accessing credit and debit services that are delivered through both paper-based and electronic systems. Laser cards-not yet used by

the financial service industry–can store digital data signifying the bearer’s fingerprints.

Electron cards combine three encoding technologies-the banking industry’s magnetic

tape, the retail industry’s optical character

recognition, and the UPC bar code.

Document and currency readers have had

some acceptance, particularly for the reading

of checks encoded with magnetic ink. Systems

that process credit and debit card transactions

already truncate the paper flow at the earliest practical time. The data are recorded on

magnetic media and transferred electronically

for processing by the card issuer.

Together, these technologies have resulted

in a financial service industry that is offering

an increasing number of services such as automated redemption of money market funds. At

the same time these services are being provided in an increasing number of ways, including the use of automated teller machines

and telephone bill payers.

With all this, there is the possibility of

redistribution of functions among traditional

suppliers as well as potential new entrants.

Whereas in the past the payment system has

been reserved largely to banks, because they

had access to facilities for clearing and settlement, movement of funds electronically makes

it possible to avoid the traditional payment

system and to settle directly between trading

partners. Alternative means of distributing information could diminish the role of brokers

for such products as securities, real estate, and

insurance. Cash-oriented businesses, such as

gas stations and supermarkets, already use onsite automated teller machines to relieve the

requirement to cash checks while minimizing

the amount of currency that is held at each

store location.
316 ● Information Technology R&D: Critical Trends and Issues

Characteristics of the U.S. Information

Technology Industry

The information technology industry is a

composite of several industries both in manufacturing and services. There is no single,

generally accepted definition of the industry.

The definitions in use by the Information Industry Association, for example, are too broad

for the purposes of this report, while definitions used by the Computer and Business

Equipment Manufacturer’s Association and

by the Association of Data Processing Service Organizations are too restricted.

Despite the ambiguities, this section attempts to characterize the industry in terms

of size and structure, growth, employment, investment in R&D, and other areas of special

concern. The part of the information technology industry portrayed here includes primarily manufacturers of: electronics; information

processing equipment, including computers,

office equipment, and peripherals and services;

semiconductors; and telecommunications

equipment.

Table 52 is a summary of the key indicators

for the composite 30 industry categories covered by Business Weekll for the period 1978

to 1982, compared with aggregated data for

part of the information technology industry.”

A point of contrast worth noting is that information technology firms’ business performance during the period outpaced the composite industry average significantly as measured

by the following criteria:

●

●

growth in sales revenues: 40 percent for

the composite industry groups vs. 66 percent for the information technology sector.

growth in profits: 6.4 percent for the composite vs. 36.4 percent for the information

technology sector.

llBu~jne~~W=k, R&D Scoreboard, June 20, 1983, PP. 122-

153. See also Business Week, July 9, 1984, pp. 64-77, which

shows a continuation of the trends through 1983.

‘

zData shown by Business Week for national composite industry R&D expenditures correlates closely with NSF data in

Science Resources Stud-es “Highlights,” June 11, 1982.

●

●

●

●

profits/sales ratios ranging between 4.2

to 5.7 percent for the composite vs. 7.9

to 9.7 percent for the information technology sector.

growth in the number of employees: a decrease of 7.8 percent for the composite vs.

an increase of 11.8 percent for the information technology industry.

growth in R&D expenditures: 81 percent

for the composite vs. 111 percent for the

information technology sector. The information technology sector’s R&D expenditures per employee were higher than the

composite by about 20 percent annually

for the period, and both groups increased

their R&D investments in spite of a recession.13

investments in R&D as a percentage of

sales: averaging 2.1 for the composite vs.

4.2 for the information technology sector;

and, as a percentage of profits, 42 vs. 48,

respectively.

The above statistics are incomplete because

firms whose primary business is not information technology do not appear as part of the

industry—despite the fact that their information technology activities may be significant.

Among the firms not represented are General

Electric, Rockwell International, and Westinghouse.

The above data for the information technology manufacturing industry, when combined

with related sectors such as the software and

computer services, and telephone and telegraph services sectors of the economy, had

total revenues of $229 billion for 1982, up from

$180 billion in 1980, for a 27 percent increase.

Figure 53 illustrates the increasing portion of

‘Klf the four sectors-industry, Federal Governrnent, colleges

and universities, and other nonprofit organizations-only industry increased its funding for R&D in constant 1972 dollars

during the 1978-82 period. Probable Levels of R&D Expench”-

tures in 1984: Forecast and Analysis, Battelle, December 1983.
Ch. 9—Technology and Industry . 317

Table 52.—Comparison of the U.S. Information Technology Industry with

Composite Industry Performance, 1978-82

Percent

1978 1979 1980 1981 1982 change — — .

Composit e

Infotech

Composit e

Infotech

Composit e

Infotech

Composit e

Infotech

Composit e

Infotec h

Composit e

Infotech

Composit e

Infotech

Composit e

Infotech

Sales (mill Ions of dollars) . . . . . 1,085,291

131,872

1,277,764

149,783

1,421,551

174,449

1,586,510

193,921

1,520,313

218,862

40

66

Profits (millions of dollars) . . 59,578

12,780

72,505

13,821

73,493

15,474

81,757

16,056

63,365

17,436

6.4

36.4

Profits/sales (percent) . . . . . . . . . . 5.5

9.7

5.7

9.2

5.2

8.9

5.1

8.3

4.2

7.9

Employees (thousands) . . . . . . . . . . 15,133

2,952

15,542

3,099

15,498

3,226

15,045

3,252

13,959

3,301

– 7.8

11.8

R&D (millions of dollars) ... . 20,610

4,961

24,674

5,885

28,984

7,221

33,285

8,531

37,179

10,473

81

111

R&D $/sales (percent) . . . . . . . . . . . 1.9

3.8

1.9

3.9

2.0

4.1

2.1

4.4

2.5

4.8

R&D $/profits (percent) . . . . . . . . . . 34.6

38.8

34.0

42.6

39.4

46.7

40.7

53.1

59.0

80.1

R&D $/employee ... . . . . . . .

R&D expenditures per employee

lnfotech/Composite (percent) . . .

1,362

1,680

1,588

1,899

1,870

2,238

2,212

2,623

2,667

3,173

123 120 121 119 120

Business Week “Scoreboard” Numbers Notes:

A This IS a sample of R&D spending in information technology by U.S. corporations, It is based on total R&D expenditures for those companies that are publicly

held, have annual revenues over $35 million, and R&D expenses of $1 million or 1 percent of revenue. Only that spending by companies whose primary business

is Information technology (electronics, computers, office equipment, computer services and peripherals, semiconductors, and telecommunications) is included.

B Sales, R&D spending, and R&D spending per employee figures have been adjusted to reflect the numbers from Western Electric and other AT&T subsidiaries

that are not included in the “Scoreboard” numbers, This adjustment involves:

1 addition of revenues received from Western Electric to the total operating revenues figures in the AT&T Annual Reports for the years covered,

2 use of the total AT&T spending figures for R&D which include spending by Western Electric and other AT&T subsidiaries as provided in Business Week for

the years 1980-82 and as estimated from a chart in the 1983 AT&T Annual Report for the years 1978 and 1979.

3 use of total AT&T employment figures provided in Forbes each May for the years 1978-82.

C Employment numbers for all sectors have been calculated from the R&D spending per employee and the R&D spending figures provided in Business Week and

may reflect rounding errors,

SOURCE. Data obtained, or calculated from Business Week, Scoreboard, June 30, 1983 the U.S. Commerce Department; Forbes, May 1979 throuah 1983; 10K forms

filed by AT&T and Western Electric Corp

services closely matches that of compute r

manufacturing, both growing by about 14 0

percent between 1972 and 1982.

International Trade

Technology-intensive products have important implications for the balance of trade.

Studies on U.S. trade and the influence of technology have generally concluded that technology serves as an important determinant o f

comparative advantage in manufactured goods

trade .

14 15

“C. Mi~el Aho and Howard F. Rosen, “Trends in Technology-Intensive Trade: With Special Reference to U.S. Competitiveness, ” Office of Foreign Economic Research, Bureau of International Labor Affairs, U.S. Department of Labor, p. 11.

“T. C, Lowinger, “Human Capital and Technological Determinants of U.S. Industries Revealed Comparative Advantage, ”

Quarterly Review of Econozzu”cs and Business (1974), winter

1977, pp. 91-102, as reported in Aho and Rosen, pp. 11, 12.

total sales due to services, which are approaching 50 percent of total industry revenues.

Employment

Employment in information technology

manufacturing increased significantly between

1972 and 1982 in most segments of the industry (table 53), experiencing employment growth

ranging between 9 and 142 percent. Only the

consumer products (radio and TV sets) showed

a decline (28 percent). Total employment in information technology manufacturing grew by

51 percent, in spite of economic recessions.

Employment in information technology

services is about equal to that of the manufacturing segment, with some 1.6 million employees. The employment level in computing
318 ● Information Technology R&D: Critical Trends and Issues

Figure 53.—The Changing Structure and Growth of the U.S. Information

300

200

-

100

0

Technology Industry

Information industry revenues; 1980-83 (dollars in billions)

Software 180

n

and computer . 

servicesl

’

2

Telephone

and telegraph 34.3%

service2

Information

technology

manufacturing

229

258

34.7%

1980 1981 1982 1983

Years

SOURCES: IADAfJSO; 2U.S. Industrial Outlook, 1983, 1984.

Table 53.—Employment Levels in the U.S. Information Technology Industries

Employees (in thousands)

Percent change

1972 1982 1972-1982

Manufacturing a

Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 351 + 142

Office equipment. . . . . . . . . . . . . . . . . . . . . . . 34 51 +50

Radio and television receiving sets . . . . . . . 87 63 –28

Telephone and telegraph equipment . . . . . . 134 146 + 9

Radio and television communications

equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 454 +42

Electronic components. . . . . . . . . . . . . . . . . . 336 528 +57

Totals, manufacturing . . . . . . . . . . . . . . . . . 1,055 1,593

Services

Telephone and telegraph . . . . . . . . . . . . . . . . 949 1,131 +11

Computing b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 360 + 141

Radio and television broadcast . . . . . . . . . . 68 81 +19

Cable television . . . . . . . . . . . . . . . . . . . . . . . 40 52 +30

Totals, services . . . . . . . . . . . . . . . . . . . . . . . . . . 1,206 1,624

aEstimates provided by the U..S. Department of Commerce, Bureau of Industrial Economics.

bF\gures are for 1974 and 1983. Source: U.S. Industrial Outlook, 1984.

CFigures are for 1979 and 1983, Source: Federal Communication Commission in telephone interview with OTA staff, May 1984,

dF\gures are for 1981 and 1982. Ibid. (FCC).
Ch. 9—Technology and Industry ● 319

The U.S. merchandise trade balance has

been negative in recent years: deficits of $42.7

billion in 1982; $69.4 billion in 1983; and over

$100 billion in 1984. In 1980, advanced technology products showed a positive trade balance of $31 billion, compared with a deficit of

more than $50 billion for all manufactured

goods.”

Information technology manufactured products17 usually made positive contributions to

the U.S. balance of trade between 1972 and

1982 (fig. 54), led by sales of computer equipment. However, 1983 and 1984 saw trad e

deficits of $0.8 and 2.3 billion according to Department of Commerce estimates.

18 The deficits would have been much greater without

about $6 billion in exports of computer equipment in each of those years (see fig. 55).

—.— —

“International Competitiveness in Advanced Technology:

Decisions for Aznen”ca, National Research Council (Washington, DC: National Academy Press, 1983, pp. 23-24.

“The products include: computer equipment, SIC 3573; office equipment, SIC 3579; radio and TV sets, SIC 3651;

telephone and telegraph equipment, SIC 3661; radio and TV

communications equipment, SIC 3662; and electronic comp~

nents, SIC 367.

‘aU.S. Industn”d Outlook, 1978 through 1984.

Figure 54. —Balance of Trade, Information

Technology Manufacturing Industry

(dollars in billions)

6 -

equipment (SIC 3573)

4

2

o

,

-6 Radio and TV Communications

equipment, 

1972 1974 1976 1978 1980 1982 1984

Years

SOURCE: U.S. Industrial Outlook for years 1978 through 1984.

est

Figure 55.— U.S. Trade Balancea With Selected

Nations for R&D Intensive Manufactured Products

$30

28

26

24

22

20

18

16

14

12

4

2

0

-2

-4

-6

●✍

Developing nations 

1966 67 68 69 70 71 72 73 74 75 76 77 78 79 80

Years

aExports less imports.

blncludes West Germany,

SOURCE: Science Indicators— 1982, National Science Board, National Science Foundation, 1983.

Although the United States holds the major market share of the industrialized countries’ exports of high-technology products,

that share has declined from 30 percent in

1962 to 22 percent in 1978, and has increased

only marginally since. In absolute terms, the

U.S. positive trade balance in high-technology

products increased over eightfold from 1962

to 1980. During that same period West Germany, and especially Japan, starting from

smaller bases, have had impressive gains in

their surpluses of exports over imports—a

ninefold increase for West Germany and twohundredfold increase for Japan.

1 9

19U+S. Dep~ment of Commerce, International made Administration, as reported in “An Assessment of U.S. Competitive

ness in High-Technology Industries, ” prepared for the Working Group on High Technology Industries of the Cabinet

Council on Commerce and Trade, final draft, May 19,1982.
320 . Information Technology R&D: Critical Trends and Issues

Industry Structure

Information technology companies in the

United States are heterogeneous in dollar

value of sales, breadth of product lines, number of employees, and degree of vertical integration. Competing for those markets are

thousands of firms ranging in size from the

vertically integrated multinational companies

such as IBM, ITT, and the still-large, postdivestiture AT&T to the more typical, smaller

companies that produce a narrow cluster of

products with a large technology content.

While the majority of sales dollars are concentrated in the large companies, the vast majority of companies are relatively small.

The diversity in the sizes of the businesses

that populate the information technology field

is important for reasons that include the benefits of competition; the impetus to innovation

due to firms’ willingness to take risks and to

try new directions; and the tendency to fill

niche market demand for specialized products.

The U.S. telecommunications, electronics, and

software industries provide three illustrations

of the contrasts in the breadth of that diversity.

The telecommunications services industry

is simultaneously both a mature industry

dating back to the 19th century and a growing industry marked by limited competition

in some markets and diversity in others. While

local public telecommunications services are

largely dominated by regulated monopolies,

long-distance services are now offered in a

competitive market. New services, such as

paging, cellular mobile radio services, bypass

services and direct broadcast satellite services,

are not dominated by the established carriers,

but are being offered by a variety of firms.

Table 54.—U.S. Home

The telecommunications equipment providers are exceptionally diverse and competitive.

There are hundreds of firms in this field, ranging from a few U.S. and foreign multinational

companies manufacturing a full range of

equipment to dozens of medium size, and

many hundreds of small companies concentrating on a more limited range of products—

e.g., speech compression products, multiplexers, modems, data terminals and local area

networks.

The electronics industry is even more diverse. The thousands of electronic systems

and equipment providers, as well as consulting

firms, range in size from those with billions

of dollars in annual sales to small, start-up

ventures such as the Apple Computer’s garage

operation of a few years ago. For those segments of the industry undergoing rapid technological change, diversity is often accelerated

by spin-offs from rapidly growing companies,

and other new entries into the field.

The U.S. microcomputer software industry

is an example of rapid change, growth, and

diversity. Future Computing, Inc. estimates

that the U.S. market for home computer software grew by 168 percent from 1982 to 1983,

and projects an 85 percent growth from 1983

to 1984, with the growth rate declining to 26

percent by 1988 in a projected $5 billion annual market by then (table 54). Software unit

sales for office use are projected to enjoy comparable growth. Table 55 indicates growth

rates of 87 percent between 1982 and 1983,

and 58 percent from 1983 to 1984, gradually

tapering off to 24 percent in 1988 in a $6.7 billion annual market.20 Like the electronics industry, software firms number in the thou20 Future computing, ~r g on~ communication, Mmch 1984.

Computer Software Salesa

1981 1982 1983 1984 1985 1986 1987 1988

Software units (millions) . . . . . . . . . . 1.1 6.9 19.0 37.0 58.0 82.0 112.0 144.0

Percent growth (units) . . . . . . . . . . . . 486 168 85 52 42 32 26

Revenue (millions of dollars). . . . . . . 48 282 757 1,400 2,100 3,000 4,000 5,000

aData for 19u.M are estimates by Future cOrnPUllW.

SOURCE: Future Computing, Richardson, TX, by OTA staff telephone interview, March 1964,
Ch. 9—Technology and Industry . 3 2 1

Table 55.—U.S. Office Computer Software Salesa

1981 1982 1983 1984 1985 1986 1987 1988

Software units (millions) . . . . . . . . . . 3.2 6.1 11.0 17.0 25.0 35.0 46.0 59.0

Percent growth (units) . . . . . . . . . . . . 111 87 58 44 36 30 24

Revenue (millions of dollars) . . . . . . . 343 724 1,351 2,100 3,100 4,200 5,400 6,700

aData for lgsd.aa are estifnates by Future Computln9

SOURCE Future Computing, Richardson, TX, by OTA staff telephone interview, March 1984

sands. Although no hard data are available,

it is the impression of industry analysts that

the rapid pace of startups in the software industry seen in recent years now appears to be

slackening.

An important trend in industry structure is

toward concentration in the software and data

services industries, where larger firms have acquired hundreds of smaller ones. Among these

larger firms are Automatic Data Processing,

Electronic Data Systems, and General Electric.

Larger firms are also integrating their product lines-some moving into subsystems and

components, and others, such as semiconductor manufacturers, moving into subsystem

and computer manufacturing. AT&T, Texas

Instruments, Intel, and Northern Telecommunications Corp. are examples of companies

recently expanding into computers and related

products.

There is also an active trend toward affiliations between information producers and distributors. Among these are publishers of newspapers, books, and magazines and broadcast,

cable TV, and interactive computer network

companies.

Geographic diversification is taking place at

a rapid pace as foreign-primarily European—

companies acquire U.S. firms. Among the

European firms are: Olivetti, CAP Gemini,

Racal Electronics, Schlumberger, ThomsonCSF, and Agfa-Gevaert.

A number of U.S. firms are expanding their

markets by establishing joint ventures or by

acquiring foreign outlets—e.g., IBM, AT&T,

and Datapoint.

Small Entrepreneurial Firms

Small businesses play a central role in U.S.

industry in general, accounting for:

● thirty-eight percent of the Nation’s gross

national product;

● two-thirds of all new jobs;

● two-and-a-half times as many innovations

per employee as large firms;21and

Ž a tendency to produce more ‘‘leapfrog’

creations compared to large companies

and to introduce new products more

quickly than large firms.22

The contributions of small businesses to the

information technology industry are significant. Small businesses with less than 500 employees account for 33 percent of sales in electronic components and 34 percent of the

Nation’s employment in this sector. In the

computer services sector, small businesses account for 69 percent of the industry’s sales and

67 percent of its employees. These firms also

make contributions in sectors where large

companies dominate, such as in office computing equipment, consumer electronics, and

communications equipment (table 56).

Opportunities for innovation based on advances in information technology have been

numerous. Consequently, hundreds of market

niche applications have been created that

“Advocacy: A Voice for Small Businesses, Office of Advocacy, U.S. Small Business Administration, 1984. p. 1.

22Stroemann, 1977. Karl A. Stroetmann “Innovation in Small

and Medium Sized Firms.” Working paper presented at Institut

Fur Systemchnik und Innovations forschung, Karlsruhe, West

Germany, August, 1977. See Vesper (Entrepreneurship).
322 • Information Technology R&D: Critical Trends and Issues

Table 56.—Percentage of Total Industry Sales and

Employment by Size of Small Businesses

Companies with Companies with

under 100 employees under 500 employees

Sales Employment Sales Employment

Office computing machines

and computer auxiliary

equipment . . . . . . . . . . . . . . . 2.6 2.6 6.0 6.3

Consumer electronics . . . . . . . 5.4 5.9 9.3 10.1

Communications equipment. . 4.7 5.2 9.9 10.8

Electronic components . . . . . . 18.3 17.2 32.7 33.7

Computer services . . . . . . . . . . 51.2 47.7 68.6 67.1

SOURCE: Small Business Administration, 19S4.

small firms are quick to fill-niches too narrow or specialized to attract large firms.23 The

development of the computer in the 1940s and

the subsequent invention of the transistor led

to an explosion of new applications and to opportunities for then small companies whose

names are now familiar in the information

technology industry: IBM, Fairchild, Intel,

Texas Instruments, DEC, Data General,

Wang, and Computervision. One market research company’s listing of the fastest-growing niche markets shows that about 90 percent

of the top 50 entries are in information technology,24 and many of these technologies are

relatively new.

As the successful firms in this industry

grow, they tend to generate spin-off companies

that often specialize initially in a narrow range

of innovative products or processes. Fairchild

is such a company, having begun with only

eight employees and now accounting for over

80 spin-off enterprises.25

Venture capital funding is extremely important to the small entrepreneurial firms. In-

.— — ———

231n a July 1981 study, the General Accounting Office found

that in concentrated industries, such as the information technology industry, small businesses are likely to perform specialized innovative functions and develop products or processes to

be used or marketed by other, usually larger firms in that industry, For example, in the semiconductor industry there are

many small companies that manufacture diffusion furnaces, ion

implantation machines, epitaxia.1 growth systems, and maskmaking systems—all part of a necessary supporb structure for

the semiconductor industry.

‘421st Century Research, Supergrowth Technology U. S. A.,

newsletter as published in EDP News Service, Inc., Computer

Age-EDP Weekly, Feb. 28, 1983, p. 9.

“Carl H. Vesper, Entrepreneursiu”p and National Policy,

Heller Institute for Small Business Policy Papers, p. 27.

vestments through organized venture capital

investment businesses in 1983 amounted to

$2.8 billion, up 55 percent from $1.8 billion in

1982.26 It is improbable that this growth rate

will be sustained for very long.27

The supply of U.S. venture capital financing has grown at least eightfold since the mid1970s, helping to fund the more than 5,500

U.S. small startup and expanding firms. These

firms tend to operate in innovative market

niches where the risks are high and the potential payoffs much higher.

Information technology firms supported by

venture capital funds numbered in excess of

1,000 in 1983, and received about $2.1 billion

from organized venture capital investment

businesses. These funds were used for both

startups and expansion of existing companies.

The distribution of funds is shown in table 57.

These firms account for a significant number of advances in the information technology

field. Among the now-well known information

technology firms started or aided by venture

capital are: Intel, Apple Computer, Visicalc,

DEC, and Data General. R&D limited partnerships also contribute to this process (see ch. 2).

The existence of so many entrepreneurial

firms, the current abundance of venture capital to fund their growth, and the strengthening university-industry R&D relationships

serve as a powerful source of strength for innovation in the United States. For example,

“Data provided by Venture Economics, Inc., from its database covering organized venture capital investment companies.

“’’Scramble for Capital at Almost-Public Companies, ” Fortune June 25, 1984, p. 91.
Ch. 9–Technology and Industry . 323

Table 57.—Venture Capital Funding and Information Technology Firms, 1983

Distribution of Distribution of

available available

Percentage of 1,000 venture capital venture capital

venture capital firms (percent) (millions of dollars)

Computer hardware and systems. . . . . . . . . . . . . . 28 39 819

Software and services . . . . . . . . . . . . . . . . . . . . . . . 12 7 309

Telecommunications and data communications . 9 11 231

Other electronics. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10 210

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 61 1,569

alncl”des semiconductor fabrication and test equipment, instrumentation, fiber Optics, laser-related devices, etc

SOURCE Venture Economics Inc , prowded In telephone interwew with OTA staff, May 22, 1984

over 30 new computer chip firms have started

operation since the late 1970s. The fastestgrowing niche markets noted earlier are heavily populated with products that are new, or

radically different from those of only a decade

ago. Few of our major competitors now have

a comparable combination of factors to spawn

the next Silicon Valley. In fact, our West German,

28 French, and Japanese trading partners

are now actively seeking ways to emulate the

environment that fosters this type of entreprenuership. 29

Small Businesses and Joint R&D

Congress has passed, and the President

signed, legislation that would ease the restrictions of antitrust laws on joint R&D ventures.

——— — 28’’ The Technological Challenge: Tasks for Economic, Social,

Educational, and European Policy in the Years Ahead, ” speech

by Hans-Dieter Genscher, (West German) Federal Minister for

Foreign Affairs, Bonn-Bad Godesberg, Federal Republic of Germany, Dec. 13, 1983.

*

g

”In This New Age of Entrepreneurs, We’re Number One

Again, ” Joel Kotkin, Wdu”ngton Post, Apr. 29, 1984, p. B1.

Small business may find both new opportunities and impediments. Although small businesses are currently permitted to undertake

joint research activities among themselves,

the new joint venture legislation may encourage increased opportunities in joint ventures between small and large firms.

This type of cooperation between large companies and small companies has already begun

to occur. For example, Control Data Corp. has

made its advanced computer design tools

available to two small companies, Star Technologies, Inc. and ETA Systems, Inc. (the latter a CDC spin-off). IBM also has a marketing agreement with Floating Point Systems.

If the joint venture legislation can stimulate

transfers of marketing and technological resources of major U.S. companies to small information technology firms, small companies

can realize definite benefits from the encouragement of these new types of arrangements. A potential impediment could occur if

technology developed through R&D by large

firms is not made available to small firms

through licensing or other means.

Where the Technology is Heading

This section looks ahead to prospects for fur- tant tools for coping with increasing complexther advances in two building blocks of infor- ity through the use of computer-aided design

mation technology-microelectronics and soft- (CAD) and computer-aided engineering (CAE)

ware. As discussed later, these technologies systems, and are driving a wide range of apare being integrated and are providing impor- placations.
324 ● Information Technology R&D: Critical Trends and Issues

Advances in microelectronics and software

are dependent on entirely different underpinnings-e.g., physics, chemistry, materials

science and electrical engineering for the

former, and computer and information science,

psychology, and software engineering, among

others, for the latter. Prospects for continuation of the explosive growth of information

technology during the past two decades will

be paced by advances in microelectronics and

software.

Microelectronics30

The rate of technological improvement in

semiconductors has been phenomenal during

the past quarter century, and has sparked new

applications and economic advances worldwide. This section reviews the growth of

integrated circuit capabilities and seeks to provide insight into future progress, its dependencies and foreseeable limitations, and the

likely timeframe of that progress.

Probable trends include:

●

●

●

Silicon is likely to remain the most important semiconductor material for the next

decade and beyond, while gallium arsenide is likely to come into wide use in certain applications where its special properties provide specific advantages. The

impact of other innovative materials is

likely to be marginal until after the turn

of the century, when biotechnology may

begin to converge with information technology.

Prices for the main output of microelectronics technology, logic and memory, can

be expected to continue to decline on a per

function basis, following the general pattern of the past two decades.

Continued advances during the next two

decades in large-scale integration of silicon and gallium arsenide will require the ——— .—.—.

30A ~i~ficmtmount of data in this section is t~en from,

or based om 1) the Sixth Mountbatten Lecture, M2”c.melectmm”cs

Progress Prospects, delivered by Ian M. ROSS, President, AT&T

Bell Laboratories, Nov. 10, 1983, London, England; and 2) J.

D. Meindl, Theoretical, Practical, and Analogical b“zm”ts to

ULLU, Technical Digest of the International Electron Devices

Meeting, December 1983, pp. 8-13.

●

continued advance of other sciences and

technologies, particularly physics, chemistry and materials science, and manufacturing and software engineering.

The R&D costs for incremental advances

in microelectronics technology are expected by industry experts to increase as

the complexity of circuits increases and

as the theoretical physical limits of microelectronics are approached.

Silicon Integrated Circuits

Transistor Size and Density

Between 1972 and 1981, the number of transistors that could be packed on a chip doubled

each year (11,000 in 1972 and 600,000 in 1981)

(see fig. 56). Today, integrated circuit technolFigure 56.—Historical Development of the

Complexity of Integrated Circuits

1 0

5

. -

>

1 0

4

1 0

3

 1970 1975 1980 1985

Introduction year

SOURCE: Arthur D. Little, Inc. estimatea.
Ch. 9—Technology and Industry ● 325

ogy is approaching the capability of packing

a million components (mostly transistors) on

a single silicon chip.31

Along with these improvements in density,

costs per function have dropped dramatically

until now some memory components are less

than 0.01 cent per bit, and many microprocessors are under $10 per chip (see figs. 57 and

58). This is the result of a thousand-fold decrease in the cost of manufacturing compared

with 20 years ago.

The substantial increases in transistor density have been made possible by reductions in

integrated circuit feature size, which in turn

have depended on advances in photolithography, the technique by which integrated circuits are manufactured. Minimum line widths

have been reduced by a factor of two every 6

or 7 years. Using photolithography with visible light, line widths have been reduced from

25 microns in 1972, or l/1,000th of an inch, to

$lwhile other technologies (gallium arsenide, iridium ~-

timonide, cryogenic superconductors, photonic devices, and PO

tentially biotechnology) with higher switching speeds, lower

heat dissipation, or other qualities, will compete in certain

special applications, current expert opinion is that silicon will

have the major role for the next decade or more in meeting most

needs for digital memory and logic.

Figure 57.—Read-Only Semiconductor Memory

Component Prices (per bit) by Type

H PROM, 

and EPROM .

Fixed

. ..L— . Mask-ROM

SOURCE: Arthur D. Little, Inc., estimates.

Figure 58.—Median Microprocessor Price v. Time

(1,000 unit purchase)

100

10 i

1

Uncertainty

,10 1 1 1

1977 1982 1987 1992 1997

Years

o

4-Bit

SOURCE: Arthur D Little, lnc , estimates

about 1.5 microns currently, or less than 1/

10,000th of an inch.

Optical, or visible light, lithography, which

currently remains the leading integrated circuit manufacturing method, is expected to

reach the practical limits of its capacity for

small feature sizes in the range of 1.0 to 0.5

microns (the wavelength range of visible light).

At the same historical rate of progress, these

limits will be reached in the 1990-94 period (see

fig. 59.).

Most experts believe that advanced lithographic techniques using light of shorter wavelengths, in the X-ray range, and electron-beam

(see fig. 60) and ion implantation machines

that can directly draw lines and features on

semiconductor substrates32 will be needed in

gZ1n Cwent co~erci~ lithographic techniques, the semiconductor substrate is coated with a light-sensitive emulsion, or

photoresist, and a mask, much like a stencil, is used to expose

a pattern in the substrate that is then etched away with a chemical, creating lines and features. Electron beams can be focused

and directed to create patterns in the emulsion without a mask,

and ion beams can implant materials on the substrate without

the need for photoresist or etching.
326 ● Information Technology R&D: Critical Trends and Issues

Photo credit: AT& T Bell Laboratories

Microprocessor WE 32100

order to achieve further advances.33 A number of such machines are in use for experimental purposes and for production of circuits

to be used in-house at major companies such

as IBM and AT&T.

Electron beam lithography and ion implantation34 may become the ultimate semiconductor manufacturing techniques, with minimum

line widths possible in the range of 0.1 to 0.01

micron. The latter widths are comparable to

feature spacing on the order of 20 to 200

—————— ~~~me en~nWr9 have begun to question the premise that

more densely packed circuits are necessary. See “Solid State, ”

IEEE Spectrum, January 1984, p. 61.

WI’he Defense Department’s Very High Speed Integrated Circuits (VHSIC) program supports research on electron-beam and

ion-beam manufacturing techniques. Discussion of both of these

can be found in IEEE Spectrum, January 1984, pp. 61-63.

Figure 59.— Minimum Linewidth for Semiconductor

Microlithography

10

1

0.1

1977 1982 1987 1992 1997

Years

SOURCE: Arthur D. Little, Inc., estimates.

atoms. The major drawback of such systems

is that they are much slower than mask lithography; they are now used only in producing

custom chips of low production volume. Electron-beam and ion implantation technology

are expected to be in use on commercial integrated circuit production lines by 199435 (see

table 58).

Research is under way in the United States

and Japan that is striving to achieve more

densely packed circuit components by stacking chips into three dimensional structures. A

number of problems need to be solved to realize 3-D circuits, among them is the difficulty

of making connections with elements buried

within layers of semiconductor material. Ionbeam equipment is seen as critical to producing the complex microscopic structures required for such 3-D chips.36

—. .—.— 351EEESwtnn.n, January 1984, p. 63.

‘6’’3-D Clups, ” The Econonu”st, Feb. 12, 1983, p. 84.

Table 58.—ICs Made with Lithographic Techniques

(percent)

Technique 1983 1985 1987

optical scanner. . . . . . . . . . . . . 85 58 38

Optical stepper . . . . . . . . . . . . . 15 40 52

Electron beam . . . . . . . . . . . . . . 0 1 8

X-ray . . . . . . . . . . . . . . . . . . . . . . 0 1 2

Ion beam . . . . . . . . . . . . . . . . . . 0 0 0

SOURCE: IEEE Spectrum, January 1984, p. 80,
Ch. 9–Technology and Industry ● 327

Figure 60.—A Schematic of an Electron Beam Lithography System,

and its Uses to Make LSI Logic Circuits

Computer

(G)

Beam on-off control I

(F) I I I ICI I a~e

. . . . . , I . .

analog circuits

Electrostatic deflection

(p)

 ’ 

on awxor

SOURCE Mosaic, SS//MS//LVLSMJLSJ,S/, VOI 15, No. 1, p 15.

In devices with such subminiature dimensions, other limitations become significant,

e.g., the dielectric strength, electronic isolation, and heat dissipation of the silicon material-some of which may represent more severe limitations than the theoretical limits

imposed by the most advanced manufacturing techniques. Transistors with critical dimensions of 0.1 micron have been demonstrated

to operate by Bell Telephone Laboratories.

These dimensions would theoretically lead to

some billion components on a square centimeter of silicon. A more realistic, practical

limit for silicon may be 100 million components per square centimeter.37

Increasing the physical dimensions of the

chip may also contribute to increasing the

component count per chip. Chip sizes are

—

“ROSS, op. cit., p. 6.

determined by manufacturing control–the

ability to minimize the number of impurities

and defects in the semiconductor substrate

material and in finished circuits. Today’s

typical chip size is about 1 square centimeter.

There are development efforts under way

toward wafer-scale integration38 which could

provide a factor of 100 increase in integrated

circuit chip size, to 100 square centimeters or

larger. This factor, coupled with component

densities of 100 million transistors per square

centimeter made possible with the advanced

manufacturing techniques noted above, could

result in component counts of 1 billion transistors per integrated circuit.39

. —

SsChips me cut from 3 to 6-inch-diameter wafers which are

currently manufactured with some 100 separate integrated circuits per wafer.

“ROSS, op. cit., p. 7.

38-802 0 - 85 - 22
328 ● Information Technology R&D: Critical Trends and Issues

Integrated Circuit Speed and Reliability

Concurrent with, and largely the result of,

decreasing circuit feature size and increasing

density, circuit switching speeds have increased significantly. A little more than 20

years ago, switching delays were crossing the

millionth of a second threshold; by 1977 the

billionth of a second threshold had been passed;

by 1990, delays of 1 trillionth of a second (a

picosecond, or 10-12 second) may be possible

(see fig. 61). Practical limits are foreseen, however, that would reduce actual maximum performance to one-tenth that speed, or 10 picoseconds .40

As well as reducing circuit delays, the continued shrinking in the size of individual

components and the concentration of more

functions in each succeeding generation of

integrated circuits have reduced computer system chip counts and thus the time used up in

computers when signals travel between chips.

— —.—

‘“Ibid.

Figure 61 .—Trends in Device Speed—Stage Delay

per Gate Circuit for Different Technologies

1977 1982 1987 1992 1997

Years

SOURCE: Arthur D. Little, Inc., estimates.

Chip reliability has also improved. It is estimated to have increased by at least a factor

of 100, while the scale of integration has increased by a factor of 1,000.41

Gallium Arsenide Integrated Circuits

Another compound, gallium arsenide (GaAs),

should find an increasing number of applications

as a semiconductor substrate because of its

special characteristics. These include high frequency operation, low power consumption, radiation resistance and optoelectronic and photonic properties.

Analog Devices

Currently, GaAs is used mainly in discrete

component (non-integrated) analog devices

such as microwave and millimeter wave radar,

telecommunications and electronic warfare

transmitters. Electronic signals at these high

frequencies (10 to 100 Gigahertz or billion

cycles per second) can be generated at much

lower power with GaAs than is possible with

conventional transmitter technologies. Integrated circuit, or monolithic, microwave and

millimeter wave GaAs circuits have recently

become available. Integration promises improved performance and lower prices in military

systems and private sector microwave communications (local loop bypass and other)

applications. Cellular radio is expected to provide a large market for GaAs transmitters,

receivers and amplifiers.

Another application that offers a large potential consumer market for analog GaAs integrated circuits is direct broadcast satellite

service (DBS). The principal French laboratory

of N.V. Philips Co., based in The Netherlands,

recently announced development of a GaAs

chip that includes all of the functions necessary for the reception of DBS signals.

Optoelectronic and Laser Devices

Gallium arsenide is provoking excitement in

another telecommunications technology, fiber

optics. It can be fashioned into tiny lasers to

“ROSS, op. cit., p. 2.
Ch. 9—Technology and Industry ● 329

function as light sources for fiber optic transmission, into optoelectronic photodetectors to

receive optical signals and translate them into

electrical signals, and into signal processing

components for fiber optic system amplifiers

and repeaters (see Fiber Optics Case Study).

Recent work at Bell Labs has developed largescale integrated (LSI) GaAs signal processing

circuits that are scheduled for production.42

Heretofore, separate devices have been required for fiber optic light generation, reception and signal processing. Communication

among these separate devices introduces delays in fiber optic transmission systems.

Lasers have been particularly difficult to integrate with the other circuit components on

single chips because of their complex structure

and the large amount of heat that is generated

by their operation.

Fujitsu, the Japanese electronics giant, has

conducted GaAs R&D funded by that government as part of a $74 million, 7-year project

among a number of Japanese companies. In

1983, it announced development of a process

that integrates a laser light source and the

signal processing transistors necessary for fiber optic transmission, all on a single GaAs

chip that operates at room temperature. A

similar integrated optoelectronic photoreceiver is in the works.

American researchers at Honeywell and

Rockwell International have also announced

the development of integrated GaAs optical

transmitters. 43 The Rockwell device in particular is reported to be adaptable to well-known

LSI circuit manufacturing techniques, promising low production costs.”

— .— .-.— ——

‘zl??~ectrom”cs, Oct. 6, 1983, p. 154.

“Honeywell announced an integrated optical transmitter in

1982, but it originally required special cooling. The Honeywell

device has since been improved. See C. Cohen, “Optoelectronic

chip integrates laser and pair of FETs, ” Electrom”cs, June 30,

1983, pp. 89-90. See also The Econonu”st, Feb. 5, 1983, pp. 82-83.

441, Waler, ‘lG~s Optical IC Integrates Laser, Drive Transistors, ” Electronics, Oct. 6, 1983, pp. 51-52.

Digital Devices

Interest has begun to intensify in the use

of GaAs as a replacement for silicon in digital

logic and memory devices. High switching

speeds and low power consumption make this

semiconductor attractive in certain applications. For instance, Cray Research has announced its intention to develop and use GaAs

chips in the Cray-3 supercomputer which is

scheduled to be available in 1986 (see Advanced Computer Architecture Case Study).

But commercial semiconductor firms have

thus far been reluctant to move GaAs logic

and memory into production. Only low levels

of integration (fewer devices per chip than

silicon) and low yields (few good chips in a

batch) are currently attainable with GaAs. Although 42 U.S. companies conduct laboratory

work on GaAs, only two firms have announced

plans to sell digital GaAs chips.45

The Department of Defense is interested in

digital GaAs because, as well as having speed

and power consumption advantages, GaAs

circuits are highly resistant to radiation effects, making them attractive for military and

space applications. Since 1975, DOD, through

DARPA, has funded a total of $6 million to

$7 million in R&D of digital GaAs integrated

circuits. DARPA has announced plans to

spend an additional $25 million to set up pilot

production lines for GaAs 64K RAM and

6,000 to 10,000 element gate array (programmable logic) chips. The contract has been

awarded to a joint venture between Rockwell

International, who will develop the gate array

chip, and Honeywell, who will design the RAM

chip. Each of the two companies will develop

production capacity for both the logic and

memory chips to provide second sources for

each.46

“W. R. Iversen, “Pentagon Campaigns for GaAs Chips, ”

Electronics, July 28, 1983, pp. 97-98.

*J. Robertson, “Say Rockwell, Honeywell Get $25M DARPA

IC Pact, ” Ekctrom”c News, Feb. 30, 1984, p. 4.
330 . Information Technology R&D: Critical Trends and Issues

The DARPA program has received mixed

reviews from the industry. On one hand, Rockwell believes that the DARPA-funded facilities will help make digital GaAs profitable for

the entire industry, since the technology is expected to be made available to other defense

contractors, 47 but neither of the two companies that have announced plans to develop

digital GaAs for the merchant semiconductor

market. The companies-Gigabit Logic, which

recently entered into a private R&D venture

to develop GaAs RAM chips,48 and Harris

Microwave Semiconductors-submitted bids

for the DARPA contract. Both cited the

DARPA emphasis on low power for portable

military systems at the expense of higher

speed as the major factor in their decision to

forego bidding on the contract.49 This tradeoff is seen as forfeiting the major advantage

of GaAs in commercial competition with silicon digital memory and logic devices.

Optical Logic

Another area of applied research in which

gallium arsenide is playing a critical role is optical logic. The replacement of computer processors based on electronics with ones based on

photonics, which would theoretically be capable of vastly higher speeds, has been considered a possibility for some time. Such optical

computers might be capable of trillions of

operations per second.5o With the spread of fiber optic communications technology, optical

processing is even more attractive. The large

capacity of light-wave transmission demands

higher processing speeds to fully exploit the

available fiber optic bandwidth. Conversions

between optical and electronic signals introduce delays into current fiber optic systems.

Only recently, with the use of GaAs and

another new semiconductor material, iridium

antimonide, has the technology been available

471 bid., see also Iversen, op. cit., p. 97.

‘

a

’’ Gigabit in $6.lM Ga& static RAM R&D Venture,” Electrom”c News, Jan. 9, 1984, p. 66.

4eIversen, op. cit., pp. 97-98.

50E. Abraham, C. T. Seaton, and S. D. Smith, “The Optical

Computer,” Scientific American, February 1983, pp. 85-88.

to begin to develop optical devices that function like the logic elements that make up

microprocessors. Hughes Aircraft Research

Laboratories, which is performing R&D work

on optical logic under contract from the National Security Agency, has announced the development of a prototype device that is expected to be capable, in about 3 years, of more

than 10 times the speed of current electronic

logic devices. The device is to be applied in

data encryption systems.51

The major drawback seen with current approaches to optical computing is that the logic

elements are much larger than comparable

electronic ones. Barring fundamental theoretical and practical advances, especially in physics

and in materials sciences, optical logic systems

will probably not see widespread use before

the end of the century.

The Convergence of Bio-technology and

Information Technology

Advances in the biological sciences and

breakthroughs in genetic engineeering have

encouraged speculation and some preliminary

research on the possibility of designing biocomputers. Devices constructed from biochemical molecules potentially offer greater

logic and memory densities, and the possibility of totally novel information processing

methods, including the emulation of brain

functioning. The first interdisciplinary scientific conference on this subject, sponsored by

the National Science Foundation and the University of California, Los Angeles, was held

in October 1983.62 The meeting brought together biologists, chemists, physicists, mathematicians, computer scientists and electrical

engineers to discuss the prospects for this

technology and to generate questions to guide

research.

The field is just beginning to adopt theoretical concepts on how such biochemical-based

machines might operate, and on the more difSIL. Wdler, “components for Optical Logic Stat to Click, ”

Electronics, Dec. 29, 1982, pp. 31-32,

sZInt,ernation~ Conference on Chemically Based Computing,

Santa Monica, CA.
Ch. 9—Technology and Industry • 331

ficult questions of how one might construct

a bio-computer and make it work in concert

with existing information systems. Lewis

Mayfield, head of the Chemical and Process

Engineering Division at NSF concluded, “The

consensus of the Santa Monica Conference

was that a great deal more work will be needed

at the fundamental level before development

can begin. So although we will accept grant

proposals in this area, we have no plans to

organize a program to promote it. ”53

Software

Software and hardware are primary elements in information technology systems. The

hardware provides the set of generic functions

that information systems may perform (input,

storage, processing, communications and output), and the software combines and organizes

these functions to accomplish specific functions. The two elements are responsible for the

burgeoning range of capabilities of information technology, and, increasingly, for advances in the technology itself.

Software is the part of information technology that is most readily modifiable. A major

attraction of computer-based systems is that

they are programmable-machine functions

are fixed, but their sequence may be modified

to achieve different ends at different times or

to respond to changing conditions. The content of information systems maybe changed,

expanded and contracted, within limits, to accommodate the changing needs of users. Software is the vehicle for providing the flexibility

of information systems to the users of the

technology; software aids users in communicating and managing large bodies of information and in coping with the complexity of large

or specialized systems.

Traditionally, the term “software” narrowly

referred to programs for large mainframe computers and was of concern only to computer

professionals. But as computer power has

spread to wider segments of society, the char-

——

“J. B. Tucker, “Pioneering Meeting Puts Biochips on the

Map, ” High Technology, February 1984, p. 43.

acteristics of software have been modified by

the uses to which computer systems are put,

and the meaning of software has broadened.

Now, software is both the instructions that direct the operations of computer-based systems, and the information content, or data,

that computer systems manipulate.

The focus of software production and use is

changing from concerns of computer professionals to the concerns of a broad range of end

users of information technology -i.e., those

with no particular interest in the technology,

but only its capabilities and results. Because

of this and the increasing availability of computer and telecommunications capabilities,

future limits on the utility of information technology will depend less on hardware capability and more on the difficulties of defining and

accommodating the needs of users.54

Possible implications of an expanding number of users of information technology, and a

shift in the focus of concern toward the needs

of that expanding set of users include:

●

●

●

●

●

 ✎✍

The relative importance of software issues

in the research and development of information technologies will likely increase.

Small companies will continue to be important players in software development

because of their ability to respond to the

specialized needs of small segments of the

user population.

There will be movement toward standardization of software for common applications, such as in accounting, banking, insurance and government.

There will be continuing pressure to introduce systematic engineering practices

into the production of software to lower

software development costs and to assure

the reliability of software in critical applications. (See Software Engineering

Case Study.)

There will be a demand for higher level,

nonprocedural computer languages for

the development of new and unique appli-

“An analogy can be drawn between computer users and auto

mobile drivers: all want the benefits of the technology but most

are indifferent to how it works.
332 ● Information Technology R&D: Critical Trends and Issues

cations; such languages will allow the user

to focus on the characteristics of the tasks

to be performed and not on how the hardware performs them.

● The search will intensify for powerful and

simplifying concepts for the organization

of information and knowledge in many

fields.

● Computerization will require the users of

information systems to more clearly define and organize their habits and operations related to information use.

● There will be more concern among users

of information technology with the uses

of information and the content of information systems, and less concern with

how the technology works.

The production of software has become a

major industry in the United States, with estimated expenditures of $40 billion in 198255 for

software products and for in-house development of programs. Sales of software in the

United States doubled between 1982 and 1983

from $5 billion to more than $10 billion, and

are expected to increase to more than $24 billion in 1987 (see table 59).

As information technology applications proliferate in the office, factory and home, and in

the military, computer software is required to

fulfill many new and complex functions. The

growing demand for software is causing pres5%. Olsen, “Pathways of Choice,” Mosaic, July/August 1983,

p. 3.

sure to make software more useful, reliable

and cost effective, and to make software development more productive. Not unexpectedly,

software comprises higher and higher proportions of the cost of new information systems.

Estimates of the relative cost of software in

large systems range to above 80 percent (see

fig. 62).

The Changing Role of Software in

Information Systems

Computer software is traditionally classified

as two general types: applications software

that is designed to apply computer power to

Figure 62.—The Relative Costs of Software and

Hardware

1955 1970 1985

Years

SOURCE: Steve Olson, Pathways of Choice, Mosaic, July/August 1963, p. 6.

Table 59.—Software Sales by Use

1982 1983 1984 1985

(millions of dollars)a

Software, total , . . . . . . . . . . . . . . . . . . . . . . . 5,001 10,309 15,017 24,677

Application programs, total . . . . . . . . . . . . . 1,997 3,448 5,455 11,100

Computer-aided design, manufacturing

and engineering . . . . . . . . . . . . . . . . . . . . . 776 1,126 1,636 3,200

Other applications . . . . . . . . . . . . . . . . . . . . . 1,221 2,320 3,819 7,900

Systems software, total . . . . . . . . . . . . . . . . 3,004 6,861 9,562 13,577

Compilers, interpreters, and assemblers . . 541 610 700 932

Data-base management systems . . . . . . . . . 1,100 1,430 1,888 3,500

Diagnostic and performance monitoring . . 493 645 710

Operating system . . . . . . . . . . . . . . . . . . . . . . 870 4,176 6,264 8 , %

aAll figures in current U.S. dollars.

SOURCE: Electronics, Jan. 12, 1964, p. 128,
Ch. 9—Technology and Industry • 333

a specific task or tasks, such as computeraided design of automobiles or inventory management in a retail store; and systems software that is used to manage the operations of

information systems themselves, such as computer operating systems or database management systems.

Applications software has come to include

a user interface that allows persons other than

computer professionals to work with the computer system, while systems software is designed to help computer professionals write

and execute programs, make efficient use of

system components, diagnose and correct

faults, and manage and audit system resources,

contents and usage. This distinction, though

useful, is beginning to break down with the

advent of personal computers, in which operating systems are important tools to help

users control the workings of their machines

and perform such mundane tasks as copying

files. However, the ends to which the software

is applied still remain distinct-applications

software solves user problems, systems software solves computer problems.

In general, systems software is an integral

component of the hardware because its job is

to control the hardware and to schedule and

accommodate the development and execution

of applications programs. The trend has been

for the manufacturers of hardware or specialized software vendors to write systems programs, and for more of the systems programs

to be embedded in hardware, or ROM (Read

Only Memory), making the end user incapable

of altering them. There is also a trend toward

the standardization of operating systems to

increase the portability of applications software, or the ability to use identical applications programs on different machines.

The expansion of the computer user population is being fueled by the expanding content

of information systems, and is leading to an

expanding definition of the term “software.”

Information systems are increasingly encompassing and integrating many collections of

information formerly considered to be separate

and segregated, such as the files of corporate

divisions or government departments. The

technology that has heretofore embodied such

large information bases, for the most part paper and print, was not integrated; thus the information contained in those files has not been

accessible to single individuals. Now, relatively cheap computer terminals and telephone

links are making the enormous amounts of information being stored in digital electronic

form (software) accessible by people in their

homes and offices.56 Through such services as

videotex, newspapers, periodicals and even entire libraries may eventually be made available

“on-line.

Integration of information management on

such a large scale will require sophisticated

control software to help people find the information that they want; advances in information science and contributions from such fields

as artificial intelligence and psychology will

be needed for this to occur. The integration of

information management will also have profound effects on the way people view and

handle information, and on how organizations

conduct their business; the social sciences (sociology, political science, anthropology) will increasingly be looked to for understanding of

the inevitable organizational and human conflicts that will flow from the changes in information access and use made possible by information technology.

The Software Bottleneck

Demand for computer applications is outstripping the ability of the traditional large

data processing organizations (e.g., banks, insurance companies, government agencies) to

supply the programs these organizations need

in a timely and cost-effective manner. The lag

~eThe massive integration of information SYSteIXIS rtiSeS a

number of public policy issues including questions of the government role in protecting intellectual property, pn”vacy and

other civil h“berties assuring eqw”ty of access to information,

and the effect of information technology on the processes of

government itself. These and related issues are the subject of

two OTA assessments now in progress, “Intel.lectusl Property

Rights in an Age of Electronics and Information” and “Federal Government Information Technology: Administrative Process and Civil Liberties. ”
334 ● Information Technology R&D: Critical Trends and Issues

time between identification of an application

and completion of the software in the average

data processing department is 21⁄2 years and

is increasing, probably discouraging the proposal of many new applications.57 There area

number of factors that contribute to this “software bottleneck, ” chief among them that approximately 50 percent of the data processing

budgets are spent maintainingg old programs—

making changes in existing codes because of

errors in the design or coding of programs, or

because applications requirements were inade

quately specified.58

Another factor that slows the development

of new programs is that software development, as it is practiced now, is project-oriented. Each new program is built up from

scratch with little systematic reuse of parts

of older programs, even though identical functions may be implemented. The knowledge and

experience gained in one project are not systematically preserved and transferred to other

projects. Innovations in programming techniques tend to be adopted piecemeal as project budgets allow. As a result of this project

orientation and lack of standardization, large

programs that must rely on the efforts of a

number of programmers tend to be patchwork of pieces that reflect different programming styles, and are often nearly incomprehensible to people other than the original authors.

These problems are exacerbated by a turnover

rate among computer professionals estimated

at 15 percent per year.59

—.. —— ‘

7A recent survey of IBM mainfrarnebased data processing

departments found that the average time lag for the initiation

of applications programming projects is 2 years and this lag

is growing by 3 months per year. Once under development, the

average application requires 8 months to complete. At the same

time, software representing 10 months of programming effort

is discarded yearly by the average data-processing department

because of obsolescence. A certain backlog of work is desirable

to keep data-processing staff busy, but it is clear that many

organizations are falling behind. Application Development in

Practice, Tech Tran User Survey, Xephon Technology Transfer Ltd., 1983., p. 2.

‘“W. Rauch-Hindin, “Some Answers to the Software Problems of the 1980s, ” Data Commum”cations, May 1981, p. 58.

See also the Case Study on Software Engineering.

‘This figure reflects a recent decline in turnover attributable

to the last recession and may well be on the rise. Also, it is

believed by experts that the greatest turnover is among those

professionals writing code, so that this figure understates the

effect of turnover on program development productivity.

These difficulties combine to produce the

present software development situation in

which time is wasted in writing essentially

identical parts, testing is laborious and expensive, and maintenance programmers spend

most of their time trying to understand programs rather fixing them. The difficulties have

grown out of the historical context in computing in which hardware resources were expensive, and the creative aspect of programming was devoted mostly to the efficient use

of these resources through the clever compression of code. Now, with the precipitous decline

in hardware costs, progr amming productivity

rather than code efficiency is widely recognized as the limiting factor in the use of computing power.

The software development resources now in

use appear to be inadequate and too fragmented to keep up with the demand for computing power. These resources include trained

manpower and tools (software development

tools include workstations, computer-aideddesign, coding and testing programs, and documentation) to aid designers, programmers

and managers in creating and maintaining

cost-effective, reliable software.

Computer manufacturers and software developers, and government, university and industry experts are recognizing the problems

associated with the software bottleneck and

see the potential for sizable productivity gains

by changing the nature of software development. For example, some avenues to alleviating the productivity problems of software development and maintenance lie in the use and

reuse of standard function software modules,

and the development of software to produce,

test, and maintain other software. Research

and development efforts in software engineering are seen as essential to this change (see

Software Engineering Case Study).

Software and Complexity

Computer software is an important factor

in making information technologies useful in

a widening array of complex applications—

from space vehicles to telecommunications
Ch. 9—Technology and Industry ● 335

networks to weapons systems. Software is

used to produce simulations of complex systems and events, so that scientists and engineers can experiment and analyze without

building expensive prototypes, and to control

the operations of the most complex of man’s

creations, such as nuclear reactors and the

space shuttle.

The need to manage a variety of increasingly

complex systems is a major source of the pressure to improve software capability and reliability. For example, a large air traffic control

program can consist of more than half a million instructions that must mesh perfectly and

be essentially free of errors.60 The efforts of

hundreds of programmers over several years

may be required to produce a software system

of this size. The complexity of the software

makes it virtually impossible to assure that

no errors are present in a completed program.61

Software written for critical applications

such as air traffic control, manned space

vehicles, nuclear reactors, weapons systems,

or electronic funds transfer, although impossible to guarantee as error-free when completed, must be constructed in such a way that

at least the parts of programs and their interconnections are rigorously designed and adequately tested as they are built up. The complexity of software development is likely to

increase dramatically with the advent of

massively parallel computing systems and the

construction of large knowledge-based systems.

. — ~OolSen, Op. cit., p. 3.

GIEvery twochoice brnch point in a program (where decision

is made on what procedure will follow depending on the conditions that are present) doubles the number of possible paths

that the program can take, so that a program with 10 branch

points will have 1,024 possible paths. A program for a large

air traffic control system may have more than 39,000 branch

points. If a computer could test a trillion paths per second (a

capability far beyond toda ‘s most powerful supercomputers)

?’ it would require over 1011’ 31 years (that’s the number one followed by 11,731 zeros) to test all possible paths in such a program. See P. E. Olsen, and R. W. Adrion, M. A. Dennis

Branstad, and J. C. Chemiavsky, ACM Computing Surveys,

June 1982, p. 184.

Conclusion

The microelectronic and software building

blocks for information technology are likely

to advance dramatically in coming decades.

The path of progress for microelectronics is

reasonably clear into the 1990s as practical

and theoretical limits are approached for

silicon and as other technologies come into

use. For software, the path is less clear, but

most likely will include far more standardization, reuse of software modules, and development of software tools to produce, test, and

maintain other software. Most importantly,

the integration of the concepts behind advances in these two building block technologies will shape future capabilities.

Information technology capabilities and

their efficient utilization will depend upon the

integration of ideas from a variety of disciplines. For example, the acceptance and efficient use of emerging computer and telecommunications resources in organizations require

understanding of behavioral and social variables, as well as understanding of computer

technology. Similarly, computer-aided-design

requires both new software and new hardware

for the display and manipulation of complex

designs. The integration of hardware and software in new microelectronics and software design tools leads to further advances in information technology itself.

This integrative interaction constitutes a

powerful technological engine which is fueling

the advance of information technology in

many applications—including computers for

science, engineering and business, robotics and

computer-integrated manufacturing, telecommunications, and artificial intelligence, among

many others. These applications in turn will

influence opportunities for economic growth

and create alternatives for change in society,

and thus will have major impacts on some of

the policy issues that will become preeminent

for legislators.
Index
Index

Alvey, John, 106

American Council on Education, 150

American Electronic Association, 147

AT&T, 14, 16, 78, 111-134

Babbitt, Governor Bruce, Arizona, 172

Battelle Memorial Institute, 32

Bell Laboratories, 11, 14, 16, 74, 113, 120, 153

British Alvey Program, 18

Brown, Charles L., president, AT&T, 128

Buchsbaum, Solomon J., 123

Bureau of Labor Statistics (BLS), 142, 146

California Institute of Technology, 17

case studies, 9

advanced computer architecture, 9, 55

changing computer architecture, 56

computer architecture R&D, 57

critical areas of research, 63

international efforts, 65

manpower, 65

artificial intelligence, 13, 87

content and conduct, 96

foreign national efforts, 105

R&D environments, 90

fiber optics, 12, 67

commercialization trends, 69

directions of U.S. research, 73

research in Japan, 74

United States R&D, 71

software engineering, 11, 75

content and conduct of software

engineering R&D, 79

international efforts in software

engineering R&D, 85

software R&D environments, 76

Chynoweth, Alan G., 129

Computer Technology Corp., 36

Congress:

House Committee on Energy and Commerce,

3

House Committee on Science and

Technology, 3

Joint Economic Committee, 172

Senate Commerce Committee, 128

Corning Glass Works, 73

Defense Advanced Research Projects Agency

(DARPA), 9, 29, 58, 93, 95, 219

Department of commerce, 32

Department of Defense (DOD), 5, 11, 13, 20,

29, 41, 58, 75, 78, 89, 93, 279, 294, 329

Department of Energy, 4, 10, 20, 58

Department of Justice, 33, 111, 116

deregulation and divestiture on research,

effects of, 111-135

antitrust laws, deregulation and divestiture,

113

divestiture, 116

factors affecting research, 123

allocation of research and development

expenditures, 125

availability of research results, 130

basic research, 128

Bell Communications Research, Inc., role

of, 129

stability of earnings, 123

policy implications, 131

research at AT&T, management of, 120

Bell Labs after divestiture, 122

modified final judgment and Bell Labs, 121

education and human resources for research

and development, 139-166

concern about manpower, 139

elementary and secondary education, 154

Federal role in manpower development, 157

identifying particular manpower problems

and solutions, 141

problems in higher education, 149

range of manpower predictions, 145

relationship between manpower development

and economic growth, 140

societal context for determining Federal

manpower policy, 161

supply of manpower, 149

environment for R&D in information

technology, 25-52

concepts for R&D, 27

roles of the participants, 28

conflicts in perspectives, goals, and

policies, 42

Federal Government, 28

Government funding, 28

industrial R&D, 34

other Federal policies, 31

antitrust policy, 33

industrial policy, 33

patent policy, 31

R&D limited partnership, 33

tax credits, 32

technology transfer, 32

pattern of Government funding, 30

universities’ role in R&D, 37

measures of the health of U.S. R&D in

information technology, 43, 51

339
340 ● Information Technology R&D: Critical Trends and Issues

information industry profile, 43

U.S. patent activity, 45

European Community (EC), 66

European Economic Community (EEC), 216

European Program for Research and

Development in Information Technology,

(ESPRIT), 18, 202, 216, 219

Federal Communications Commission, 31, 111,

114, 115

Federal Trade Commission, 33

foreign information technology R&D, 201-276

conclusions, 221

international trends, 201

adapting technology, 202

international technology agreements, 208

multinational corporations, 206

patents, 210

science and engineering students, 212

scientific and technical literature, 211

technology exchange agreement, 207

trade, 201

U.S. computer trade, 203

Japan, 222

government, 226

Defense Agency, 239

Information Technology Promotion

Agency (IPA), 236

Japan Electronic Computer Co., 236

Japan Development Bank, 239

Japan Robot Leasing Co., 236

Kokusai Denshin Denwa Ltd., 238

Ministry of International Trade and

Industry, 228

Ministry of Posts and

Telecommunications: Nippon Telegraph

and Telephone, 236

national R&D projects, 231

Science and Technology Agency,

industry, 243

Fujitsu Ltd., 245

Hitachi Ltd., 245

NEC Corp., 244

Oki Electric Industry Corp., 246

size of Japanese participation in

information technology markets,

university, 240

France, 246

government, 252

Agence de l’Informatique, 256

Centre d’Etudes des Systemes et

Technologies Advances, 257

Centre Mondial Informatique et

Ressource Humaine, 257

235

225

des

Centre National d’Etudes

Telecommunications, 254

Centre National de la Recherche

Scientifique, 253

L’Institut National de Recherche en

Informatique et en Automatique, 255

Ministere des Postes,

Telecommunications, et Telediffusion,

253

Industry, 259

CII Honeywell Bull, 259

CIT Alcatel, 260

Sogitec, S. A., 261

Thomson CSF, 260

political environment, 248

size of participation in information

technology markets, 247

social environment, 252

university, 257

United Kingdom, 261

ESPRIT, 272

government, 263

British Technology Group, 269

Department of Education and Science,

268

Department of Trade and Industry, 265

Ministry of Defense, 268

industry, 270

British Telecom, 271

General Electric Co., 271

Plessey, 271

size of participation in information

technology markets, 263

university, 269

U.S. information technology R&D policies,

implications for, 214

government/industry/university

institutional arrangements, 217

government role, 216

industry participation, 219

science and technology policy goals, 215

France, 66, 70, 87, 246

French La Filiere Electronique program, 18

General Accounting Office (GAO), 39, 78, 155

General Electric, 181

Georgia Institute of Technology, 30

goals for Federal R&D policy, 3

Great Britain, 66, 71, 86, 261

Greene, Judge Harold H., U.S. District Court

for the District of Columbia, 116

Heckler, Representative Margaret, 139
Index ● 341

IBM, 12, 36, 53

information technology R&D, nature of, 6

close boundary between theory and

application, 8

complexity, 8

multidisciplinary nature, 7

software as technology, 7

Inman, Admiral Bobby, 194

Institute of Electrical and Electronic

Engineers, 148

issues and strategies, 14

changing roles of universities, 17

foreign programs, 18

science policy, 19

scientific and technological manpower, 16

telecommunications deregulation, impacts of,

14

Japan, 65, 70, 74, 85, 222

Japanese Fifth Generation Computer Project,

13, 18, 65, 105

Japan Ministry of International Trade and

Industry (MITI), 65, 75, 105, 219, 228

Lawrence Livermore National Lab, 58

legislation:

Economic Recovery Tax Act, 32

House Authorization Act of 1984, 41

Merrill Act of 1862, 158, 159

National Cooperative Research Act of 1984,

33

National Defense Education Act of 1958, 159

Public Law 96-517, 31

Sherman Antitrust Act, 113

Stevenson-Wydler Technology Innovation

Act of 1980, 32, 215

Tax Equity and Fiscal Responsibility Act of

1982, 32

Lewis, David, 148

Library of Congress, 133

Los Alamos National Lab, 58

Lotus Development Corp., 202

Massachusetts Institute of Technology (MIT),

17, 177

McCarthy, John, 90

Microelectronics Center of North Carolina, 36,

184, 188

Microelectronics & Computer Technology

Corp., 36, 120, 172, 193

Microsoft, Inc., 204

National Aeronautics and Space

Administration (NASA), 4, 10, 30, 31

National Bureau of Standards, 37, 85

National Center for Education Statistics, 34

National Oceanic and Atmospheric

Administration (NOAA), 4

National Science Foundation (NSF), 8, 9, 27,

29, 30, 40, 41, 58, 94, 142, 147, 159

National Science Teachers Association, 155

National Telecommunications and Information

Administration, 133

Nelson, Richard R., 129

new roles for universities in information

technology R&D, 169-195

forces driving new relationships, 171

impacts of new university arrangements, 173

expected benefits, 174

potential costs, 175

new roles, 176

Microelectronics Center of North Carolina,

184, 188

Microelectronics & Computer Technology

Corp., 193

Microelectronics and Information Sciences

Center, University of Minnesota, 178

MIT Microsystems Industrial Group, 177

Rensselaer Polytechnic Institute for

Industrial Innovation, 180

Semiconductor Research Corp., 189

Stanford University Center for Integrated

Systems, 182, 185

North Carolina State University, 30

Ohio State University, 30

Penzias, Arno, vice president, Bell Labs, 130

Perot, H. Ross, 194

principal findings, 5

Rensselaer Polytechnic Institute, 30, 73, 180

Research Triangle Park, NC, 173, 231

Semiconductor Research Corp., 36, 120, 189

Stanford University, 182, 185

technology and industry, 307

characteristics of the U.S. information

industry, 316

employment, 317

industry structure, 320

international trade, 317

smd entrepreneurkd firms, 321

composition of information technology, 308

examples of system applications, 309

cellular mobile radio communications, 310

computer simulation, 312
342 ● Information Technology R&D: Critical Trends and Issues

direct broadcast satellites, 310

financial services, 315

heart pacemakers, 314

robotics, 311

importance of information technology, 307

where the technology is heading, 323

convergence of biotechnology and

information technology, 330

gallium arsenide integrated in circuits, 328

microelectronics, 324

silicon integrated circuits, 324

software, 331-334

Texas A&M University, 194

top 15 U.S. companies in R&D spending, 44

Trilogy Ltd., 33

Tsukuba Science City, Japan, 231

Turing, Alan, 90

University of Arizona, 74

University of Minnesota, 178

University of Rhode Island, 30

University of Rochester, 73

University of Texas, 194

U.S. patent activity, 45

U.S. Patent and Trademark Office, 47

U.S. science and technology policy, 279

background, 280

general policies, 280

science policy statements, 282

tenets of science and technology policy,

285

information technology R&D policies, 286

key issue areas, 290

international competitiveness, 298

military/civilian balance of R&D funding,

294

organization of government, 290

Vetter, Betty M., 147

von Neumann, John, 90

West Germany, 66, 70

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