IN ITS RUSH TO
MAKE ALL
R&D PAY ITS WAY,
BUSINESS RISKS
SHORT-CHANGING
INVESTMENT IN
BASIC RESEARC
THEREBY CUTTING
ITSELF
OFF FROM THE
DISCOVERIES
OF TOMORROW.
Whether measured in macroeconomic productivity gains or in the new drugs, computing power, or communications tools basic research made possible, the overall benefits of R&D over the past half century have been large. This is not the result of blindly throwing money at research in a game of luck. Rather, the nation's research investments have been systematic, quality-driven, and outcome- and missionoriented-to enrich our science base with fundamental new knowledge.
Yet the serendipity principle still holds-rarely can we impose a firm timetable on insights into fundamental processes of nature. Specific outcomes are unpredictable. Even assessing the impact years after a breakthrough can be hard. Benefits are often diffuse, spilling over into other areas and across many economic sectors and industries. For example:
The Bell Lab scientists of the '50s who provided early insights into the understanding of lasers had no idea they were contributing to the foundation of modern telecommunications.
New and effective treatments for HIV and AIDS-especially the new HIV protease inhibitors-are the result of public and private sectorfunded biomedical research in immunology, virology, and biochemistry. While developing new drugs for HIV and AIDS, researchers at Merck made significant contributions to the understanding of HIV disease, building upon work in academic labs that showed that HIV replicates rapidly and over the years erodes the capacity of the immune system.
When the BBN Corp. and others built the ARPANET-the forerunner to the Internet-in 1969, its primary goal was to enable scientists and engineers to share information. The Internet's creators also brought together more than a century of fundamental research and discovery. The speed, size, reliability, and cost-efficiency of the network switching equipment were based on advances in electronics that can be traced back to the development of logic circuits in the 1850s.
The success of our nation's research system, in which government, universities, and the private and nonprofit sectors all play important roles, is evidence that how we support research matters greatly to the outcomeseven if those outcomes are not predictable. Government-funded research, for example, laid the groundwork for new technologies primarily developed by private industry. In turn, companies' industrial research efforts contribute to the stock of knowledge in many different scientific disciplines, although the primary objective is to support product development.
This uniquely American combination of publicly and privately funded basic research has sustained U.S. leadership in many areas of innovative scientific research-and brought significant benefit to the economy. Although estimates range widely, a consensus holds that returns on R&D activities are high, generally double the average historical returns on stocks.
Sometimes benefits are easier to see closer to home. A BankBoston study shows that MIT research has an enormous impact on greater Boston. Estimates put more than 1,000 MIT-related companies in Massachusetts, with 125 employees and worldwide sales of $53 billion. Worldwide employment of these MIT-related firms is about 353,000 workers. Silicon Valley, the Research Triangle of North Carolina, and other areas boast similar effects.
There's no question that the economic benefits of basic research are great. But will they continue to be so?
TROUBLE SPOTS AHEAD The core strengths of the American system remain: a healthy industrial basic research sector; an even larger sector of publicly supported, university-based research that also senses as a training ground for future scientists and engineers; and a competitive peer reviewbased method of allocating public funds to individual researchers and projects. But a new study by the Committee for Economic Development suggests a number of trouble spots on the horizon:
growing claims on public research dollars for more downstream-applied or commercially related R&D that would be better spent on peer-reviewed basic research,
a K-12 education system ill-equipped to serve the needs of scientific research,
an increasingly complex relationship between universities and industry, and
an array of demands on the university scientist, all with the potential to draw attention away from the research lab.
Peer review is typically identified with the largest federal agencies for basic research, the National Institutes of Health and the National Science Foundation, identifying high-quality science and establishing funding priorities based on scientific merit. But a great deal of governmentfunded research is not subjected to peer review, which raises questions about public confidence in allocating funds based on quality, not politics. Allocating research dollars by congressional "earmarking," whereby federal research dollars are given to politically selected projects, circumvents review of proposed research projects by scientific leaders in the respective fields of inquiry. This practice has less to do with quality science than with securing funding for constituent institutions.
Some argue that as a public expenditure, federal research dollars should be divided equally among states, congressional districts, universities, and other constituent institutions. They claim that peer review actually limits funds to a relatively small group of universities, to the detriment of other institutions. These attitudes are reflected in the recent dramatic and troubling growth in earmarks (see chart above), which increased to $495 million in 1997. Yet, this approach often undervalues the importance of scientific merit and should not form the basis of our publicly supported basic research enterprise.
Increasingly, basic research funding is sharing the stage with funding for so-called "national competitiveness" initiatives, such as the Advanced Technology Program, which provides matching grants to individual firms in support of applied research and civilian technology development deemed critical to national competitiveness. Whether or not such programs warrant significant federal funding remains to be seen, but they do not merit the same strong claim to the taxpayer's dollar that basic research does.
As an aging population places greater demands on federal entitlement programs such as Social Security and Medicare, basic research will face even greater competition for federal funds. Managing the growth of entitlements is therefore critical to the long-term viability of our national research investments.
WHO WILL BE TOMORROW'S SCIENTISTS?
Results of the Third International Mathematics and Science Study suggest that even our best K-12 students turn in only a mediocre performance compared to foreign students. This is alarming news, particularly for the basic research enterprise, which depends on a steady flow of quality students into graduate training and employment. American universities can only do so much to make up for the inadequacies of our K-12 system. If this trend continues, the flow of bright math and science students into higher education will slow to an anemic pace.
Perhaps more troubling is the fact that we are becoming a society increasingly isolated from the world of science and discovery. If Americans become less knowledgeable and enthusiastic about science, the case for public research support will become harder and harder to make.
In addition to supporting higher standards, our schools need to attract and retain more qualified math and science teachers, particularly at the middle and high school levels. Improved teaching methods coupled with today's interactive learning technologies can motivate student performance and accelerate learning.
The Carnegie Institution of Washington and the New York Academy of Sciences are active in addressing the shortcomings of public science education. Carnegie provided 350 Washington, DC, teachers with intensive training in fundamental math and science concepts. The New York Academy coordinates a science summer internship program for New York City high school students. But not every community has a science-focused foundation or professional society, which is why it's important for businesses, universities, and schools to work together to place more professional scientists and engineers in the classroom as volunteers.
WALL STREET MEETS PHYSICS A spirit of entrepreneurship has swept through university research labs in recent years with universities obtaining patents on research findings and licensing them to industry. These entrepreneurial activities have been essential to technology transfer, the process by which science moves out of the lab and into the marketplace, ultimately for society's benefit. The Bayh-Dole Act of 1980 helped usher in this new era for university research by allowing universities and other federal grant recipients to retain the property rights on inventions made in the course of federally funded research. The number of patents issued to academic institutions, which increased from 249 in 1974 to 1,761 in 1994, is a gauge of its impact.
However, the patents awarded by the U.S. Patent and Trademark Office to universities in 1994 amounted to less than 1 percent of all patents issued that year. In 1993 alone, IBM and General Electric received more patents than all U.S. research universities combined.
Still, universities and their researchers find themselves walking a fine line as they pursue patents, which can restrict access to the use of fundamental knowledge and technologies, while continuing to conduct basic lab research that often depends on open access to knowledge from other researchers and disciplines. As licensing revenues stream into university coffers, the temptation to shift research away from truly exploratory work with no obvious commercial value toward work that has a shorter-term outlook and greater commercial potential grows. So far, universities have performed this balancing act, spelling out detailed procedures and operating agreements to ensure the continued health of the basic research lab while promoting technology transfer. Columbia University, for example, receives funding from VIMRx Pharmaceuticals-in which Columbia holds 10 percent ownership. In addition to potentially leading to commercially viable medical products, the partnership provides VIMRx with world-class research it could not carry out on its own, and Columbia receives a significant infusion of research funding.
This ongoing challenge will be more difficult as patenting and licensing activities grow. The federal government's abdication of responsibility for supporting research, however, would be sure to doom universities' efforts. If universities are to maintain a public mission in basic research, then funding for that research must come primarily from the public sector.
KEEPING RESEARCHERS IN THE LAB
A group of talented scientists and engineers, all deeply committed to exploration and discovery, forms the heart of the basic research enterprise. An inefficient grant-writing process is among the most detrimental distractions from this pursuit. Too often, grants are short-lived, requiring the researcher to start over again in the grant-raising process to keep the research project going. Extending the period of grant awards and increasing the total number of grants could alleviate the problem.
Academic employment is at the core of basic research and will remain so. But more and more Ph.D. scientists and engineers are finding roles in the private sector and private-sector science is an important part of the dissemination of scientific knowledge. Grant-making agencies can take advantage of the trend toward university-private sector teamoriented and cross-disciplinary work. Graduate schools and business should also work together to offer more training programs and mentorships that can prepare graduate students for employment outside of academe.
A MANDATE FOR THE FUTURE
Science itself often trumps efforts to better organize our investments in the discovery process, presenting problems and opportunities we can't predict. For example, the value of gene research to new drugs has driven as much of the entrepreneurial activity in universities today as any policy initiative.
What we can predict about the future of American basic research is that it will be increasingly global. The globalization of the research enterprise should be viewed as an opportunity, not a threat. The U.S. may be unsurpassed in its ability to translate the outcomes of basic research into commercial products and higher economic productivity. We are uniquely positioned, then, to benefit from other countries' basic research, just as they try to benefit from ours. Rather than hide from globalization, we should embrace it-first by ensuring that our immigration policies do not create barriers for foreign scientists to work and live in the U.S., and second by actively pursuing international collaboration on large-scale research projects.
Responding to these challenges requires resolve. The key for policymakers, and the citizens they represent, is to keep their focus on the potential for the future. Simply put, new knowledge and scientific insights derived from basic research are a key source of economic prosperity and social progress-perhaps today more than ever, with an economic boom that is making the most of product innovations and bringing new technologies to market at a rampant pace.
But like any far-reaching entity that comprises hundreds of institutions and thousands of workers, America's basic research enterprise must constantly renew itself in response to changing scientific, political, and economic conditions. Raising a cautionary note about the future of basic research in today's highly productive environment is no easy task. Certainly, we do not foresee calamity on the horizon. The U.S. will continue to see benefits from its basic research investments, as it has throughout this century. Yet, left unchecked, some emerging trends could become a potent threat to tomorrow's research enterprise and the health of our nation's economy and its people. o
[Author Affiliation]
Raymond V Gilmartin is chairman, president, & CEO, Merck 6 Co. George H. Conrades is a partner at Polaris Venture Partners. The policy statement, "America's Basic Research: Prosperity Through Discovery," is available from the Committee for Economic Development (212688-2063 ext. 212).
