The Competitiveness of Nations in a Global Knowledge-Based Economy
Partha Dasgupta [a] and Paul A. David [b]
Toward a new economics of science
Content
Abstract
1. Introduction and motivation: Science, economics and politics
2. The old economics of basic research, and the emergence of a new
economics of science
3. Knowledge: Codified or tacit? Public or private?
3.1. Knowledge, information, and the endogeneity
of tacitness
3.2. Science and Technology: Public and private knowledge
4. Priority and adherence to the norm of disclosure in the reward
system of science
4.1. Priority and the science reward system
4.2. Priority and secrecy in Science: Public virtue and private vices
4.3. Culture: The enforcement of cooperative rivalry and collective
regulation in Science
5. Resource allocation within scientific fields and programs
6. The timing of research programs within Science
7. Policy challenges: Maintaining Science and Technology in dynamic
balance
7.1. Capturing the training and screening externalities generated by
open science
7.2. Managing competition for scientists between complementary research
activities
7.3. Promoting greater ‘industrial transferrability’
of university research findings
8. Conclusion
9. Acknowledgements
10. References
7. Policy challenges: Maintaining
Science and Technology in dynamic balance
The thrust of the analysis
in the two immediately preceding sections has been to show that there are
numerous features of the reward system and characteristic institutional
structures of open science in the modern West that give rise to resource misallocations
and static inefficiencies in the conduct of basic and applied research. Correspondingly, there may be a wide field
here for economists specializing in contract theory and institutional mechanism
design to familiarize themselves sufficiently well with the detailed internal
workings of Science, as they have lately begun to do with regard to the
realities of public regulatory bodies and procurement agencies. The problems in these two areas of public
economics are not the same, of course, and the sources of the allocative inefficiencies to which we have pointed lie so
close to the core of the collegiate reputation-based reward system of the open
science system that, in a sense, they may be said to be intrinsic to it. Nevertheless, it is premature to declare that
it is beyond the wit of economists to devise modifications of existing
institutional procedures that would ameliorate some of the problems identified
here. [61]
Science, however, is not a
self-contained system - and indeed, could not survive as such. Rather than risk suggesting that the agenda of
the new economics of science is concerned exclusively, or even primarily, with
the more static resource allocation issues internal to publicly supported
research activities, it is now time for us to recognize that many of the most
important challenges facing science policy-makers concern the dynamics of
science-technology interactions - the disposition of research resources and the
flows of information between the open science and proprietary science
communities, and the consequences these will have for the improvement of
economic welfare. [62]
That the open conduct of
research in Science offers continual benefits to firms operating in the realm
of Technology by making available complementary information - typically basic
scientific knowledge - free of charge is, of course, the familiar point with
which we began our analysis. Basic
research may, of course, yield unexpected discoveries that have immediate
practical uses, some of which will be extremely valuable (such as lasers, and
enzyme restriction techniques for recombinant DNA research). These are the rare exceptions, however. More typically, the important economic payoffs
to society from basic research come in the form of higher rates of return on
expenditures allocated to applied research, in both the private business R
& D sector and in publicly funded, mission-oriented or ‘applied: R&D. [63]
61 See, for example, Laffont
and Tirole (1993) on the distinction between
regulation and procurement (briefly, that the latter is a principal-agent
relationship in which the principal is also the buyer of the commodity
supplied, whereas regulation refers to situations where a firm acts as an agent
of the government in supplying commodities to third-party purchasers). In its attention to the realities of the
institutional environment, and the informational, contractual and political and
administrative procedural constraints upon the public regulator (the
principal), the ‘new regulatory economics’ exhibits many points of kinship with
the spirit of the analysis explored here. The key additional features with which the new
economics of science has to deal are that the agents in question (the
researchers) are supplying information products rather than conventional
tangible goods and services, and have been assigned collective responsibilities
for regulating many aspects of their activities.
62. On science-technology interactions and interdependences, see, e.g.,
the empirical studies in Grupp (1992), the survey in
Freeman (1992) of modern formal institutions supporting science-based
innovative activity, and the treatment of technological change as a dynamic
system involving feedbacks between basic and applied research activities given
in David (1993b).
63. To the extent that basic research funding is devoted to fundamental
scientific inquires, the latter have been likened (by David, 1993b p. 230) to
providers of “maps to guide mission-oriented researchers, directing explorers
on the applied science frontier to the more fruitful areas, and sparing them
the wastage of time and resources in searching barren regions or trying to
cross unbridgeable chasms”. The role of
basic research instrumentation advances in creating spillovers to applied
R&D is also discussed by David (1993b, pp. 222-225).
510
While it has been customary
for economists to emphasize the spillovers of information about the material
world, it seems no less important to notice another informational channel
through which the existence of open science institutions conveys benefits to R
& D activities that are being carried on with immediate commercial goals in
mind: the educational and evaluative activities that are closely coupled with
academic research.
7.1. Capturing the training and screening
externalities generated by open science
Open science discloses
information about research methods and findings, and in the process about the
abilities of the researchers themselves, which can be captured by private
producers who transfer scientific personnel from the academy to their domain. Disclosure and peer evaluation mechanisms make
available, at very low cost to managers of company R & D laboratories, a
great deal of information about the qualities of scientists who they might wish
to recruit as employees. [64] Thus, were
there no institutional structures corresponding to those of Science (as we have
defined it), Technology’s knowledge of the ability and experience of its
scientific research personnel would be far less complete than it is. This would add substantially to the expected costs
and the uncertainties involved in company financed research projects - even if
the distribution of scientific abilities and training in the pool of potential
recruits were unchanged. On average,
their value to prospective employers would be lower on account of the greater
uncertainty surrounding their individual qualities and the nature of the
knowledge that they had acquired in the course of their training and research
experience. Thus, the modern research
universities’ productivity in training and evaluating the work of many more
researchers than they collectively can permanently absorb ought not ipso
facto to expose them to being castigated (as they sometime have been) for
lacking social responsibility and a capability for manpower planning, or for
disappointing the career aspirations instilled in many of their graduates. Quite the contrary; the export of scientists
and engineers from the academy into industrial research is potentially the most
important and salutary among the mechanisms available for effecting knowledge
transfers that bring economically valuable ‘spillovers’ to the commercial
R&D sector, and for creating informational networks that help impart
industrially relevant direction to academic researchers and teachers..
Proper policy measures
undertaken by government agencies, educational institutions and business
corporations acting in concert are necessary, however,
to assure that these potentialities will be exploited. There is nothing to guarantee it will happen
spontaneously, and arrangements that evolve historically as legacies of
responses to past problems are likely to drift far from the currently optimal
state. Such a condition is illustrated by
a brief glance at the prevailing arrangements governing the training of
graduate scientists and engineers in the US. Historically, American research universities
have adapted themselves rather readily to take advantage of whatever funding
opportunities were created by federal and state government policies (or, should
we say, by the collection of ad hoc legislative and administrative
decisions that usually passes for ‘policy’ in this area), in this instance by
organizing the subsidized education of science and engineering PhDs as a
by-product of publicly supported research projects. From one point of view, this seems quite the
most natural thing for these institutions to have done; it could be readily
64. Academic scientists, of course, form a pool of potential recruits
upon which industrial research organizations regularly draw. Recent sectoral
retention rates are very similar for US doctoral scientists and engineers
employed in business and industry, on the one hand, and those employed in
universities and colleges, on the other.
Within the 1973-1987 interval, a 2-3% movement
occurred in either direction between the industrial and academic sectors during
selected 2-year periods (see National Science Board, 1987, p. 94; National
Science Board, 1989, pp. 118-119, 325).
According to unpublished National Science Foundation (NSF) survey data,
5% of doctoral scientists and engineers who were in industry in 1975 had moved
to employment in colleges and universities by 1985; 8% of those in colleges and
universities in 1975 had moved to industry by 1985. However, because the stock of researchers in
the academic sector is much larger (more than twice that in industry), this
similarity in rates of mobility implies that much greater numbers of academic
researchers move to industry than vice versa.
According to unpublished NSF survey data, in 1985, 16% of doctoral
scientists and engineers in industry were employed in colleges and universities
in 1975; only 2% of the stock employed in the academic sector had been in
industry a decade earlier-(NSF, 1988, pp. 14-15).
construed to be consistent with the two-part structure of the
‘contract’ that we, have argued would have to be offered to qualified
researchers under the patronage system. After
all, is not graduate teaching, and especially training in research methods, the
form of regular salaried employment that is most immediately compatible with
the instructors’ ongoing engagement in research? There is little dispute over the contention
that these two activities are mutually complementary: participation in research
enhances the effectiveness of graduate teaching, while the use of graduate and.
postdoctoral ‘trainees’ as research assistants, in turn, represents a significant
form of subsidy for academic science. [65] Indirectly, of course, the arrangement also can convey important
subsidies to the eventual non-academic employers of scientists and engineers,
because it must reduce the costs of hiring PhDs when the latter have been
trained under the auspices of publicly funded research projects. They did not have to pay the full costs of
their acquisition of the information and experience which they will be expected
to put at the disposal of their employers, and for which investment they
otherwise would need to be compensated.
That is all very well, save
for the one unfortunate ‘hitch’ that has developed in the operation of this
ingenious machinery for subsidizing both open science and the transfers of
knowledge (embodied in trained scientists) to the business sector. The growing demand for trainee research
assistants in university laboratories was allowed to become a major factor,
perhaps the major factor, driving the system and causing the population of
academic scientists to reproduce like sunfish. It has been estimated that under the
prevailing setup, the majority of PhD scientists in the US each train about 15
new doctorate-holding researchers, on average, over the course of their own
academic research careers. [66] Evidently,
this would be an unsustainable situation were it required that the benefits of
university training externalities be captured somewhere in the nation’s economy
- the supply of scientists and engineers that is being generated has, for some
time, been outrunning the capacity of the academic and non-academic research
sectors to absorb them in productive employment. That the dynamics of the market for new
doctorate-holders in the sciences and engineering are characterized by lagged
responses and, consequently, by periodic episodes of temporary excess supply or
excess demand is well known, but the imbalance to which we are referring is a
structural and persistent one, which manifests itself in the high and rising
proportion of doctoral recipients in science and engineering who are foreign
nationals holding temporary residence permits. By 1990, among the new PhDs in the physical
sciences, mathematics, computer science and the life sciences, the proportion who were temporary residents had risen to 28.4%,
and, among engineering PhDs it had reached 48.7%. [67] Educational and science policy makers in the
US might well conclude that by thus subsidizing the growth of the international
pool of scientists, it can cheaply provide itself with well-prepared and
motivated trainee-research assistants and be in a position to select the most
talented young researchers, thereby, maintaining at least cost the vitality of
its basic science establishment. Reconsidering its immigration policies and
encouraging the universities to prepare graduates for work in the R & D
laboratories of the US corporations is an alternative course of action worth
serious consideration under the rubric of improving university-industry
knowledge transfers within the national system of innovation.
65. Whether it is the most efficient way to subsidize academic research
is less clear. On the one hand, the
support services may be costly, inasmuch as the research assistant staff is
turned over rapidly, talented assistants cannot be retained for long, and it is
necessary to train one cohort of students after another to perform routine
laboratory tasks. On the other hand, the
incentive structure of the trainees is such that they do not need to be paid
highly to induce them to try to provide a quality of service that will bring
favorable notice from their instructor-employers.
66. See estimates attributed to David Goodstein of Caltech in The
Scientist, 20 September 1993, p. 5.
67. The cumulative shares of temporary residents among new PhDs during
the period 1986-1990 were 25.7% and 46.8% in the case of the scientists and the
engineers, respectively. Among the
recipients of doctorates in the four science fields cited in the text, 63% were
US citizens in 1990, compared with an average of 69.2% over the period 1986-1990;
the corresponding figures among the doctorates in engineering were 42.9% in
1990 and 45.5% in 1986-1990. These
percentages were calculated from the data for US citizens, temporary US
residents and permanent US residents (excluding degree recipients whose
nationality was not known) as reported by the National Science Board (1991),
Appendix Table 2-24).
512
That course of ‘readjustment’
in the system seems much to be preferred to two others that may be
contemplated, namely, cutting the level of indirect support for the university
training of scientists until the intake of foreign students is reduced, or
pushing the academic sector into using qualified and inexpensive foreign
trainees to carry out a larger volume of applied research on behalf of national
commercial enterprises. To support this
argument, we shall examine the latter two potential science and technology
policy thrusts in the following subsections, taking them in turn.
7.2. Managing competition for scientists between
complementary research activities
Academic science and
industrial science are complementary activities when viewed from the societal
perspective, but as professions they are distinct and offer contrasting mixes of
monetary payments, peer recognition, and working conditions, on the basis of
which the two realms compete for creative talent. A commonplace observation is that the material
component of the rewards can be far greater in industry than in university research
supported by public and private patronage. Thus it would seem rational for materially
minded researchers to want to work in the open science environment, where
others could be expected to assist them by sharing knowledge with them, but to
plan to remain there just until they had made some discovery or invention that
they could sell (either as a patented device, or as a trade secret) for
commercial exploitation or further development in the hands of some proprietary
research entity. Such attractive options,
however, are rarely available. More
often than not, both scientific research projects organized in academia and
those organized in government laboratories demand pre-commitment from their
participants. If the findings are
proprietary and are not to be disclosed publicly (unless authorization is
obtained), one has a project pre-committed to Technology, whereas
pre-commitment to public disclosure is the hallmark of projects in the realm of
Science. To the individiual
researcher, then, the basis of choice between these alternative commitments is
provided by his/her expectations of the pecuniary and non-pecuniary returns
under each of these institutions. That being
the case, it is not so apparent why any scientist with the goal of material
success in mind would not immediately want to be signed up, at higher pay, to
do proprietary research.
Aside from the obvious
point that for some individuals the academic lifestyle may hold strong
attractions, is there anything that enables the academic research sector to
provide itself with young talent in the face of competition from industry? One consideration is suggested by the notice
given a moment ago to the informational value to potential employers of being
able to recruit from a pool of researchers who have worked in the open science
sector. Even those who acquired a
scientific training with a view to eventually putting it to use in the
industrial R & D sector may have an incentive to enter academic science
initially, and remain actively engaged in research there at least for a while. Doing so gives them greater leave to publish
their findings, thereby signalling their innate
abilities and acquired expertise to prospective employers in the other sector. Signalling in this
way is quite compatible with preserving the option of continuing in Science,
should they manage to win an attractive place there. In the extreme, one can imagine that embarking
upon a research career in academic science is a form of investment undertaken
purely for the purposes of this signalling. Let us see what this simplified way of
accounting for the co-existence of the open and the proprietary research
sectors implies about the requirements for maintaining a proper balance in the
distribution of personnel between them.
Provided it is not overly
costly to forego proprietary R & D employment by taking a postdoctoral
research position, the young scientists who believe they have an exceptional
talent for research would wish to join the Republic of Science, because it is
they who benefit most from providing employers in Technology with a better
quality signal as to their abilities. Once
they have entered Science, however, the remaining lot
represent a truncated distribution (with a lower average research
aptitude). If they realize that employers
would recognize that, the best among the remaining group would opt to go into
Science as well, thereby making it necessary for the next best group to follow
them, and so forth. In fact, in the
thought-experiment we have set up, the process continues until they all embark
on an initial so-
journ in Science - even at some material cost to
themselves. This goes some way towards
explaining why the academic sector initially retains so large a proportion of
the current flow of newly trained graduate scientists and engineers, without
supposing that the latter have been ‘socialized’ or otherwise infected by their
professors with a desire for the lifestyle of university teaching and research.
It aso
accounts for the numerical preponderance of the outflow of postdoctoral scientists
and engineers leaving university research for industry, without implying that
those who move on are doing so because their ambitions for an academic science
career have been frustrated. third
point o note is the rough correspondence between this extreme, signalling model and the observation that the largest
percentage of doctoral scientists and engineers in research who are going to
leave their initial academic employments do so within a few years after
entering; those who enter Science primarily for the purpose of signalling would not wish to tarry there overlong,
especially if their training was being rendered obsolete (from the viewpoint of
prospective employers in industry) by the rapid advance of the research
frontier in their area of specialization.
The key qualification in
the foregoing line of analysis is that the acquisition of credentials and signalling opportunities in Science should not be too
costly for the individual researchers. (Otherwise they will directly enter
research activities within the realm of Technology and try their luck there, or
decide to abandon research as a career entirely.) his cost reflects,
among other things, the foregone salaries in Technology and the length of time
spent ‘queueing’ for access to interactions with
senior established research leaders and specialized research facilities that
may be required to produce results worthy of publication. If, over a period of time, the value of
privately appropriable commercial profits from the production of information
increases at a sharp rate, the foregone earnings would increase
correspondingly. [68]
Should researchers be
sufficiently myopic when weak public patronage of university research raises
the penalties of deferring an industrial science career, we would expect to see
a constriction of the inflow into Science and an ageing of the population of
researchers occupied there. Following on
from that would be a corresponding reduction in the benefit that Technology
could derive from new additions to the stock of public knowledge, and from the
opportunity to select from among researchers who had established a track record
under the rules of open science. If
prolonged, the constriction of these forms of spillovers would tend to have a
substantial depressing effect upon the rate of technological progress, since
technical enterprises would now have to conduct more duplicative research than
they found necessary in earlier periods.
The foregoing analysis
suggests that once material incentives have deteriorated to the point that it
is recognized that very talented researchers are not remaining in university
science to acquire a subsequently valuable signal, the signal value of starting
off in academia itself will tend to be depressed - especially for those who may
also wish to indicate that they are not unresponsive to prospects of material
rewards. The signalling
motive may be sufficient to compensate for some economic disadvantage of
remaining in, the university sector, but it is not robust enough to stand on
its own when weak public patronage of academic research causes the diversion of
a substantial part of the distribution of newly trained scientific talent away
from Science. Indeed, there may be a
point at which it would evaporate completely, because failure previously to
have been drawn out of the ivory tower and into the corporate laboratory would
become a negative signal for prospective employers, a blot on the young
researcher’s track record. To keep the
balance on the right side of that critical point, Science is constantly in need
of shoring up through public patronage so that it may initially command a
substantial share of the most talented researchers in the face of competition
from Technology.
In fact, the more closely
the two communities resemble each other in terms of the actual research work
that is being performed, the more vulnerable Science becomes. Unless young scientists are culturally
conditioned to value scientific
68. Lower stipends for postdoctoral appointees, less well-equipped
university laboratories, and senior academic scientists whose time was more and
more occupied with proposal writing, administration and other tasks that
rendered them less available to work with neophyte scientists would, likewise,
raise the expected ‘cost’ of an individual’s investment in signalling
his or her research capabilities.
514
inquiry for its own sake, or to desire fame and public
recognition, or to derive satisfaction from teaching and the academic lifestyle
- all of which may create considerable adjustment problems if and when they
move into employment in industry - and unless the conditions supporting open
scientific research are improved, the inflow of intellectual talent into
Science eventually will be curtailed by the prospects that neither form of
scientific research career is likely to remain economically rewarding. For it must be recognized that once the flow
of scientific talent into open science is diminished, the profitability of
firms’ investments in R&D in the future is likely to be affected adversely,
which will reduce the future demands for scientists of proven research ability
there, and undercut the signal-acquisition motivation for individuals to embark
first upon a career in Science: In this way the complementarities between the
open science and the proprietary R & D sectors can result in the dynamic
system descending into a contractionary spiral, in
which less and less investment is made in the production of new knowledge - public
or private.
One implication of the
foregoing dynamic analysis is that the repercussions of sharply curtailing
support for training graduate and postdoctoral scientists and engineers may be
far more destructive than linear extrapolation of observed responses of the
system to modest funding cutbacks would suggest. It is important to recognize that the
dependence of knowledge-based industrial development upon the science-technology
nexus has made the stability of economic growth at high levels a hostage to
rather fragile features of the cultural and institutional environment, features
that require protection rather than assault from political and business
leaders. It is the taste for the lifestyle
of science, the compatibility of research with teaching, and the persistence of
public authorities in subsidizing science at a level to which none of the
constituents would appear willing to subscribe that has prevented the collapse
of the economic structure erected upon a high level of open science activity. There is today a worrisome inclination to take
all that has been achieved for granted. What
can at best be politely described as a shocking lack of comprehension of the
economics of science reveals itself all too frequently in the glibly confident
pronouncements of faith in the workings of the market that continue to emanate
from ‘conservative’ policy circles on both sides of the Atlantic: governments
are being told, in effect, that if there is some research to be done that would
be of immediate social benefit, the private sector is the natural place for it
to be done, and - as a corollary proposition - public research support for
science largely displaces corporate R&D funding that would have every
incentive to accomplish the task more cheaply. [69] Under conditions approaching the state of ‘universally
privatized. science’ that such ideologues call for, an unbalanced research
regime might continue to generate economic growth through the exploitation of
the scientific and technological knowledge base, but sooner or later, economic
progress almost certainly would lose the sustained character that has been
taken by many scholars to distinguish ours from previous historical epochs.
7.3. Promoting greater ‘industrial transferrability’
of university research findings
So long as university
research supported by public and private patronage remains institutionally
distinct from the world of profit-motivated corporate R&D, the general
problems of exchanging information among learning entities will
69. Just as the assault on public funding for university-based science
seemed to be abating in the US, it apparently gained adherents in the UK (see,
for example, the account given by Adrian (1992 p. 528) of the views advanced by
Terence Kealy in a pamphlet issued by the Centre for
Policy Studies in London, a body often described ‘as ‘a right wing think-tank’.
The (London) Times for 29 April, 1991 quoted a report for the Institute
for Economic Affairs by Sir Douglas Hague as saying: “The best preparation for
becoming a scholar is now not necessarily a post in a university but in a
high-technology company and unless universities come to terms with this
challenge they could face failure... People outside the universities will
increasingly be working in similar ways with similar themes and with similar
talents to those within; and they will often do so more innovatively and with
greater vigour because they will come to what they do
untrammelled with academic traditions, preconceptions
and institutions.” Sir Douglas’s view of
this new ‘competitive environment’ for universities appears to have been a
welcoming one; his report is reported to have recommended that British
universities’ monopoly of higher education be broken, and more organizations
(including those from commerce and industry) “should be allowed to award
degrees and compete for the finance available”.
manifest themselves most visibly at the boundaries between the
two spheres. Lately, the difficulties
that, appear to cause delays and failures in the process, of transferring basic
research findings from university laboratories to corporate ,R & D
organizations have emerged as a focal point for expressions of concern in
science and technology policy circles in the US and western Europe. Some of the obstacles identified have their
roots in the existence of divisions between the respective cultures of academic
science and corporate R & D. This
supposed cultural barrier to information dissemination might well be accepted
as the downside of a state of affairs that is beneficial in other respects, for
we have seen that the establishment of a distinctive, open science ‘culture’,
identified with a set of prescriptive norms for universalistic, cooperative
behavior, plays a valuable role in permitting the maintainance
of effective informal networks of communication among university-based
researchers. [70] Policies
intended to promote greater transferrability of basic
science findings by eradicating the open science culture in order to forge ‘a
more perfect union’ between academic and corporate researchers may indeed be
successful in capturing some immediate economic rents by more intensively
exploiting the extant stock of basic scientific knowledge, but they risk
fragmenting the networks in which tacit elements of that knowledge base
resides, and so are likely to jeopardize not only the future growth of basic
knowledge, but also the flow of economic benefits deriveable
from the existing stock of knowledge.
Readjusting
institutional norms to enlarge the social boundaries of the research community,
as a way of facilitating the transfer of new findings from academic science to
industrial laboratories, is only one among many proposed solutions on the
table, or already moved onto the testing bench. [71]
Much attention
has recently been devoted to the promotion of university patenting and
technology licensing initiatives, creating intellectual properties that offer
profit-seeking firms an inducement to invest the complementary R&D that
will be required to create commercially viable new products and processes based
on the knowledge uncovered by academic researchers. Even though some delays and restrictions on
the publication of findings are typically imposed to allow time for, the
preparation and filing of patent applications (either by university authorities
or corporate sponsors), such practices are seen as a compromise solution that
is more compatible with the academic science community’s norms of disclosure
than the alternative of protecting innovation rents by recourse to secrecy. [72] Here too, however, the task of the university as
‘technological information broker’ and ‘innovation entrepreneur’, seeking to
transform the scientific discoveries and inventions of its faculty into intel-
70. Viewed from outside, however, open science culture(s) may be
perceived to be (less benignly) preoccupied with promoting external reputational status - largely for the benefit of the
participants, and even at the cost of jeopardizing the immediate interests of
the organizations that employ them as researchers. David (1991) analyzes historical problems of
principal-agent relations involving scientific networks in some detail. The problems of ‘culture clashes’ in a more
modern setting are illustrated vividly by the reports of a recent internal
security review conducted by officials of NASA at the Ames Research Center in
Mountain View, California. According to
the New York Times (22 November 1992, Sect. 1, p. 19):
the center
had not properly handled ‘sensitive technology’ and was considered at ‘high
risk for hostile intelligence operations’... NASA said it did not believe there
were similar problems at other centers, noting that ‘the culture and
environment’ at Ames ‘were found to be the underlying cause of NASA’s
vulnerability’. Workers at Ames said the
atmosphere there is more like that of a college campus than a Government
laboratory, with people being more concerned with moving and talking freely
than with following all security procedures.
‘The culture is strongly biased toward maintaining an academic
reputation, rather than meeting US industry and national needs’, the agency
said.
71. The scholarly literature on the subject is already extensive and is
growing rapidly, as may be seen from Battaglini and
Monaco (1991), Blume (1987), Blumenthal (1986), Fusfeld and Haklisch (1984), Kuhlmann (1991), Stankiewicz
(1986). David and Steinmueller (1993) provide an
overview of the issues raised by recent experiments with closer forms of
university-industry research collaboration. See Hoke (1993) for
a journalistic treatment of university administrators’ and scientists
perceptions of the opportunities and challenges.
72. See Eisenberg (1987) for an extended discussion of the legal issues,
which recognizes that the fit between the requirements of intellectual property
protection under the patent system and the norms and reward system of academic
researchers is far from perfect. David
(1993a) examines points of congruence and non-congruence between the two modes
of organizing research from an economic resource allocation standpoint.
516
lectual property that it can license to business firms, is
not so easy. What complicates it, and
restricts the university’s effectiveness as a scientific information transfer
agent, are the informational asymmetries among the parties involved, and
especially the difficulties of specifying and monitoring the content of the
tacit knowledge transfers that often must accompany the transmission of
codified knowledge - if the full commercial value of the latter is to be
realized. As a rule, it is very awkward
and costly, if not impossible, to write a precise contract for the purchase of
tacit knowledge. To go to such lengths,
however, really may not be necessary when the tacit and codified materials are
strictly complementary, that is to say, when it is essential to enable the
patent licensee to implement commercially the information disclosed by the
patent. Arora
(1991) shows that if the codified part can be owned, and its use licensed, the
licensor will have sufficient incentives to provide (for compensation) the
socially optimal amount of tacit information. [75]
Seen from this angle, a key
structural problem impeding effective applied research transfers from
universities is that even were the university ready to grant an exclusive
license to a patent assigned to it by a faculty researcher, the university
officers responsible for technology licensing do not possess the complementary
tacit information (‘know-how’) that would make the patent really valuable to a
licensee. The faculty researchers either
have it, or are most likely to be in an advantaged position to develop what
needs to be learned about the application of their work in concrete contexts
other than the ones with which they already are familiar. But as their interests and those of their
university’s technology management program will rarely be perfectly congruent,
they may well decline to supply this knowledge, on the reasonable grounds that
they have more intellectually interesting, or more socially useful, or even
more financially remunerative things to do with their time. To address this awkwardness directly, without
allowing them to capture all the university share of the economic ‘rents’ from
the invention, [76] it would be necessary to alter the nature of the
academic researchers’ relationship with their institution. Non-scientist administrators would have to be able
to tell faculty researchers what they should work on, that is, to direct them
to make best faith efforts to deploy their scientific expertise in furthering
their employer’s legal interest - however the university chose to define those
interests! Contractual ‘reforms’ of this
sort, involving the loss of research scientists’ autonomy, and the supplanting
of the open science reward system by another that would both loosen the nexus
between teaching and research in the academy, and impede rapid public
disclosure of discoveries and the cooperative sharing of novel research
techniques and intermediate findings, would be tantamount to a complete removal
of university-based research from the domain of the Republic of Science. Along with government-run research
laboratories, university-based science would thus be dragged into the sphere of
organizational and institutional structures that we associate with the Realm of
Technology. To move towards altering the
balance between open and ‘restricted’ science in this direction would be to
jeopardize the fruitful symbiotic relationships between the two distinctively
organized and functionally differentiated spheres of the modern system for
generating scientific and technological knowledge. It hardly can commend itself as a sensible
course of institutional readjustments and reforms intended to promote even the
ostensibly worthy national goal of stimulating innovation and long-run economic
growth, let alone the narrower purpose of relieving the public purse of some
(small) part of the
75. Arora’s analytical and empirical studies
detail the way tacit information is transferred between business firms that
have differing technical capabilities, in conjunction with patent licensing
agreements between them.
76. The university, presumably, would need to impose a fixed charge
against the income derived from the licences to cover
its out-of-pocket costs; it might also attempt to extract some rent from the
faculty patentee, in exchange for future research support, or other conditions
of employment. It should be apparent
that these fantasies do not constitute recommendations of a course of action
that is thought desireable; that they leave
unaddressed the issues of equity that would arise among colleagues who believed
that their efforts had contributed to the success of the patented discovery,
and fail to consider the implications of such institutional arrangements for
the management of conflicts of interest, and distortions of university
procedures for internal resource management and academic advancement.
517
costs of supporting university science and engineering.
The broad message, emerging
from recent advances in the economic analysis of science that have been
reviewed here can be expressed in the following four propositions.
(1) Although the
institutions and social norms governing the conduct of open science cannot be
expected to yield an optimal allocation of research efforts, they are
functionally quite well suited to the goal of maximizing the long-run growth of
the stock of scientific knowledge - subject to the constraints on the resources
that society at large is prepared to make available for that purpose.
(2) Those same institutions
and. social norms, however, are most ill suited to securing a maximal flow of
economic rents from the existing stock of scientific knowledge by commercially
exploiting its potential for technological implementations. The distinctively different set of
institutional arrangements, and different modes of conduct on the part of
researchers, that accordingly have been contrived for the latter
(technological) purposes unfortunately leave unsolved the problem of securing
the right amount of resources for the conduct of open science. Here, adequate public patronage is critical
and warranted.
(3) The organization of
research under the distinct rules and reward systems governing university
scientists, on the one hand, and industry scientists and engineers, on the
other, historically has permitted the evolution of symbiotic relationships
between those engaged in advancing science and those engaged in advancing
technology. In the modern era, each
community of knowledge seekers, and society at large, has benefited enormously
thereby.
(4) The institutional
machinery which has been performing these vital functions for our society is
intricate, jerry-built in some parts, and possibly more fragile and sensitive
to reductions in the level of funding for open science than often may be
supposed. For all their importance to
the modern economy and polity, the social mechanisms that allocate resources
within the Republic of Science are still too little understood, and remain
vulnerable to destabilizing and potentially damaging experiments undertaken too
casually in the pursuit of faster national economic growth or greater military
security.
The foregoing propositions
provide basic tenets ‘to guide discussions of concrete problems and proposals
that fall within the purview of decision-takers responsible for science and
technology policies. Obviously, they are
too general to have positive prescriptive value, and are meant to be largely
cautionary. If they are found to have
some utility, it will reside not in instructing us what to conclude about this
or that policy question, but rather that the economics of science can help
frame better science and technology policies only insofar as it comes to grips
with the logic and the performance of the specialized institutional structures
that organize the ‘production and distribution of that very peculiar asset:
scientifically reliable knowledge.
The authors are grateful
for comments and suggestions on earlier drafts received from Richard Nelson,
Laurence Rosenberg, Peter Temin and Harriet
Zuckerman, from Ashish Arora,
Ed, Steinmueller, and other members of the (Fall
Quarter, 1990) Technology, Organization and Productivity Workshop at Stanford
University, from Chris Freeman, Keith Pavitt, and
other participants in the SPRU Seminar at the University of Sussex (Spring
1991), and from Alfonso Gambardella and other members of the IEFFE Seminar at
the University of Bocconi, Milan, in April 1992. Weston Headley and Philip Lim provided able
research assistance in the early phases of this project. The present version has benefitted
from the comments of two anonymous referees. This also is an appropriate place to
acknowledge the financial support provided for this and related research by the
Mellon Foundation Program on “Science and Society”, and (for P.A.D.) from the
American Academy of Arts and Sciences, and the Information and Organization
Program of the National Science Foundation (Division of Information, Robotics
and Intelligent Systems, Grant IRI-8814179-02). The Center for Economic Policy
Research (CEPR) of Stanford
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