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Science and Public Policy, volume 27, number 2, pages 97–108, April 2000, Beech Tree Publishing, 10 Watford

Close, Guildford, Surrey GU1 2EP, England.

Industry competitiveness

Technology policy in the United States and the


European Union: shifting orientation towards
technology users

Nicholas S Vonortas

In recent years, the United States and the


European Union have made significant steps to-
wards technology policies to enhance industry
competitiveness. Government attention has
D URING THE PAST TWO DECADES, the
United States (US) and the European Union
(EU) have made significant steps towards
technology policies to enhance industry competi-
shifted progressively from more supply-oriented tiveness. Reflecting the changes introduced by in-
technology policies to a greater balance with creasingly open international markets and a better
understanding of the innovation process, government
demand-oriented (technology-user-oriented) attention has gradually shifted from more supply-
innovation policies. The transition has pro- oriented technology policies to a greater balance
gressed differently in the two regions reflecting with demand-oriented (technology-user-oriented)
their institutional environments, policy tradi- innovation policies.
tions, and recent political developments. The The US has tried to give innovation policy features
transition has also been controversial because to an existing formidable science and technology
of the increased complexity of the policy and the (S&T) policy system. The EU first legally established
patchy success rate of past attempts of govern- a technology policy system in the 1980s and, more re-
ments to intervene in civilian technology cently, has tried to transform it into an innovation pol-
markets. icy system. The transition has been controversial in
both regions because of the patchy success rate of past
attempts to intervene in civilian technology markets.
The transition has progressed differently in the two
regions as a result of their different institutional envi-
ronments, related policy traditions, and recent politi-
Nicholas S Vonortas is in both the Center for International Sci- cal developments. The US government first tried to
ence and Technology Policy, and the Department of Economics, introduce radical changes in institutions (for instance,
in The George Washington University, 2013 G Street NW, Suite antitrust and intellectual property rights systems) and
201, Washington, DC 20052, USA; Tel: +1 202 994 6458; Fax: +1
202 994 1639; E-mail: vonortas@gwu.edu.
only later moved into programs providing active sup-
The author would like to thank the participants in the confer- port to industrial research and development (R&D)
ence “EGM/Workshop on Science and Technology Policies and and technological innovation.
Strategies for the 21st Century”, organized by the United Nations The European Commission first moved in the early
Economic and Social Commission for Western Asia (ESCWA) in 1980s to set up a formal policy system to support in-
Beirut, Lebanon, 10–12 March 1999, for comments on an earlier
version of the paper. Professors Robert Rycroft and Henry
dustrial R&D. Reflecting the dominant thinking at the
Hertzfeld of the George Washington University have also made time (and the technology policy approach of influen-
very valuable comments. The usual disclaimer applies. tial mission-oriented member states), the resulting

Science and Public Policy April 2000 0302-3427/00/020097-12 US$08.00 © Beech Tree Publishing 2000 97
Technology policy in the US and the EU

Framework Programme for Research and Technolo- and civilian technology policy.1 Various Presidents
gical Development was more of a technology sup- since Herbert Hoover in the late 1920s have expressed
ply-oriented policy system. Later in the same decade, interest in technological advancement for economic
the EU created the legal basis for the Framework growth and in the difficulties of industry segments —
Programme (Single European Act). Since the primarily small manufacturers — in producing and/or
Maastricht Treaty in the early 1990s, the European accessing new technologies.
Commission has tried to redirect its technology policy However, it was President Clinton and Vice Presi-
towards industrial innovation, introducing strong dent Gore that first issued an official document outlin-
user-oriented-technology features. ing an aggressive strategy on civilian technology
In both the US and the EU, however, the evolution policy for the federal government directly focusing on
of technology policy at the ‘federal’ level towards economic growth.2 Released only a few months after
technology users has been met with skepticism, if not the inauguration of the newly elected Democratic
outright criticism. Part of the skepticism is ideologi- Administration, this document proclaimed a radical
cal. It has to do with the traditional aversion to central departure from the postwar policies of the US, as is
government intervention with the markets. Part of the evident early on the first page:
skepticism is realistic. It reflects concerns over the
effectiveness of governments far removed from “American technology policy must move in a
technology-creating and -using communities in new direction to build economic strength and
implementing this type of policy. Critics have alleged spur economic growth. The traditional federal
that many demand-oriented aspects of the new tech- role in technology development has been lim-
nology policy approach are more effectively imple- ited to support of basic science and mission-
mented at the local level, leaving central government oriented research in the Defense Department,
agencies with traditional technology-push policy NASA, and other agencies. This strategy was
objectives. appropriate for a previous generation but not for
This paper comparatively examines the main de- today’s profound challenges. We cannot rely on
velopments in technology policy in the two regions the serendipitous application of defense tech-
since the mid-1980s. Many of the differences between nology to the private sector. We must aim
the US and the EU can be explained by the historical directly at these new challenges and focus our
differences in the existing innovation systems. For ex- efforts on the new opportunities before us, rec-
ample, in the case of the United States, state govern- ognizing that government can play a key role in
ments have been trying to increase their capabilities helping private firms develop and profit from
and involvement in technology policy in the past few innovations.” (White House, 1993a, page 1).
years, thus supplementing their long tradition in
industrial policy. They have often started from poor The ‘old’ orientation of US science and technology
beginnings. policy had stood on two pillars. First, a very active ba-
The reverse is true for the European Union. All the sic science policy, based on the consensus built
core member states have had long traditions of S&T around the suggestions of Vannevar Bush’s report to
policy, as well as of industrial policy, and stand out as the US President at the closing of World War II (Bush,
very important R&D spenders in their own right. 1945). Second, the development of advanced technol-
Other differences between the two regions can be at- ogy by several federal agencies in pursuit of their stat-
tributed primarily to conceptual differences concern- utory missions (Ergas, 1987). The most important of
ing the role of the government in the ‘technical these missions has been national defense resulting in
enterprise’. large R&D expenditures by the Department of De-
The paper proceeds as follows. The second section fense — accounting until recently for more than the
deals with recent developments in US technology pol- expenses of all other government agencies combined
icy. The third section deals with developments in EU — and extensive military procurement.
technology policy. A fourth section critically dis- Following Branscomb (1993), it can be argued
cusses the new orientation of technology policies in that, since World War II, US policy had been based on
the two regions and addresses some of the challenges the following principles:
facing the respective governments. Finally, the fifth
section concludes. 1. Basic science is a public good. Moreover, in-
vestments in science lead to new technologies
and, occasionally, new industries. Recognizing
US technology policy the importance of basic science, but also its own
inability to direct it, the government entered into
Recent changes a ‘social contract’ with scientists. The govern-
ment accepted to support scientific research at a
For much of the postwar period, the economic policy much grander scale than ever before, leaving the
of the United States has, more or less, been synony- specifics concerning direction and quality to be
mous with macroeconomic policy. The federal gov- decided on the basis of scientific meritocracy
ernment has largely shied away from industrial policy (peer review).

98 Science and Public Policy April 2000


Technology policy in the US and the EU

2. Federal agencies must aggressively pursue the de- for economic growth (Vonortas, 1995). Objectives
velopment of new technology for specific ‘mis- two and four also called for an enhanced government
sions’ in activities with extensive public good role in creating the necessary infrastructure and social
characteristics, including national defense, nuclear capital to attract and utilize efficiently private invest-
energy, space exploration, and public health. ment in areas of technology of strategic economic im-
3. The federal government must refrain from portance. Objective six simply continued earlier
‘picking winners’ through R&D investments di- policies.
rected to technologies for commercial exploita- Again following Brancomb (1993), the basic prin-
tion and specific firms. It is the private sector’s ciples of this new S&T policy can be characterized as
responsibility to try to benefit from govern- follows:
ment-supported science (and education) and
from mission technology spin-offs. 1. The government must partly shift its priorities
4. A further role of the federal government is to from large government missions toward assist-
create the appropriate regulatory environment to ing the technological prowess and international
enable efficient markets and occasionally to competitiveness of the private sector. National
steer private sector investment in desired direc- defense cannot anymore be driving technologies
tions (for instance, toward environmentally in many cutting-edge fields. Government agen-
benign technologies). Science and technology cies are encouraged to buy off-the-shelf,
can be used to support the struggle against state-of-the-art technologies from the private
communism. sector. Agencies with significant S&T budgets
should try to develop, to the extent possible,
This was essentially a supply-side approach. The dual-use technologies.
mechanism through which government investments 2. The government must try to balance the supply
in R&D would assist industrial innovation was that of and demand sides of its technology policy. That
a ‘linear’ (‘pipeline’) model according to which scien- is, in addition to the creation of new technolo-
tific discoveries (and mission technology spin-offs) gies, significant weight must be placed on tech-
inevitably lead to new commercial technologies. The nology dissemination. The government must
selection of technologies for development and the pay attention to the ability of firms to locate,
timing of commercial innovation is left entirely to access, adapt, and use new technologies.
market forces. 3. State governments must increase their role in the
In contrast, the ‘new’ policy orientation of the early national technology policy. At a minimum, they
1990s had the following objectives: must be prepared to assist smaller firms, attract
capital, and diffuse innovation-related knowl-
“ • Strengthening America’s industrial com- edge (e.g., manufacturing extension services).
petitiveness and creating jobs; 4. An increased dialogue with industry is neces-
• Creating a business environment where sary to assist the government in making deci-
technical innovation can flourish and sions with respect to civilian technologies.
where investment is attracted to new ideas; Specific technology policy goals can be
• Ensuring the coordinated management of frequently pursued through public/private
technology all across the government; cooperative R&D undertakings.
• Forging a closer working partnership 5. A more relaxed antitrust environment allows
among industry, federal and state govern- firms to enter multiple strategic alliances to allay
ments, workers, and universities; the pressures from increased international com-
• Redirecting the focus of national efforts petition and to assist them in responding to the
toward technologies crucial to today’s demands of rapidly changing technologies.
businesses and a growing economy, such Multi-firm research joint ventures for
as information and communication, flexi- precompetitive and infrastructural R&D must
ble manufacturing, and environmental be favored.
technologies; and, 6. An increasingly stringent enforcement of intel-
• Reaffirming our commitment to basic sci- lectual property rights by the court system pro-
ence, the foundation on which all technical motes the creation and rapid commercialization
progress is ultimately built.” (White of new technological knowledge for the compet-
House, 1993a, page 1). itiveness of American industry. Intellectual
property matters can be linked with the efforts of
Several of these objectives pointed at a radical shift in the US Trade Representative office to ensure a
the traditional policies of the US federal government. ‘level playing field’ for American companies in
Particularly striking were objectives one, three, and foreign markets.
five calling for an aggressive federal technology pol- 7. The system of national laboratories should in-
icy to improve the international economic competi- crease their interaction with the private sector in
tiveness of the country, to coordinate management order to expedite the transfer of innovation-
across agencies, and to aim for technologies explicitly related knowledge and facilitate large-scale,

Science and Public Policy April 2000 99


Technology policy in the US and the EU

heavy facility-dependent R&D.


8. The research universities must also interact
more with the private sector. This will both cre- The penetration of information
ate an alternative source of funds for the univer- technology, biotechnology, and
sities and will speed up the commercialization of advanced materials throughout the
good science to benefit industry.
9. Large science projects should be increasingly United States’ economy has changed
funded and undertaken cooperatively with other the basic meaning of high tech:
countries. technology policy must be more
Greater attention to the demand side of technology user-centered and demand-based than
policy is, of course, tantamount to saying that the US ever before
was entering a new phase in which innovation, rather
than just technology, was becoming the government’s
target. The success rate of innovation policy depends 1980s stressing the need for radical policy change.3
on understanding the demand side of a technology Even President Carter’s science advisor was consider-
(first application, diffusion), and not just the technol- ing several similar ideas.
ogy’s initial production. Consider the position that a more balanced sup-
A large number of programs were set in place ply-side/demand-side technology policy is much
during 1993–1994 to implement the new policy more appropriate today for the US than, say, 20 years
principles. In addition, existing initiatives relating to ago. The obvious justification relates to the change in
civilian technologies were given a significant boost. society’s perception of high technology (Branscomb
Well known examples of new or enhanced programs and Florida, 1998). The traditional perception of high
include the Advanced Technology Program (ATP), tech — still reflected in our indicators — has been re-
the Technology Reinvestment Program (TRP), the search-intensive manufacturing industries, such as
Environmental Technology Initiative (ETI), the Man- computers and aircraft.
ufacturing Extension Partnership (MEP), the Partner- The penetration of technologies such as informa-
ship for a New Generation of Vehicles (PNGV), and tion technology, biotechnology, and advanced mat-
the Small Business Innovation and Research (SBIR) erials throughout the economy has, however, changed
program. Information technologies, advanced manu- the basic meaning of high tech. Rather than referring
facturing technologies, and environmental technolo- to the output of R&D-intensive industries, high tech
gies were considered areas of strategic importance, now refers to a style of work applicable to just about
needy of government intervention because of signifi- every business. We can have high-tech steel produc-
cant infrastructure requirements and frequent market tion and low-tech steel production; high-tech machine
failure. tools and low-tech machine tools; high-tech banking
The National Information Infrastructure (NII) services and low-tech banking services; high-tech
initiative was put in place. The Defense Advanced entertainment services and low-tech entertainment
Research Projects Agency (DARPA) was renamed services; and so forth.
the Advanced Research Projects Agency (ARPA) and This change is said to have revolutionized the fea-
focused on dual-use technologies. Government lab- tures of a successful technology policy. Distributed
oratories (many of them part of the Department of knowledge, skill, entrepreneurship, together with new
Energy’s research system) were strongly induced to forms of collaboration between firms, universities
set up Cooperative R&D Agreements (CRADAs) and the government, can now result in more effective
with industry. Manufacturing R&D was promoted products and services. Importantly for both firm and
through collaborative agreements in the private sec- worker income, they can result in significantly differ-
tor, made possible by an increasingly relaxed antitrust entiated products and services. In other words, tech-
regulatory system. There were efforts to make the nology policy must be more user-centered and
Research and Experimentation (R&E) tax credit demand-based than ever before.
permanent. The S&T policy community in the US had ob-
served such changes since the late 1970s, slowly but
Policy continuity steadily moving towards a position of extensive S&T
policy modifications. The arguments often drew
The first Clinton Administration arrived with a grand strength from the signs of declining American com-
vision that turned technology policy into a front- petitiveness in vital industries such as consumer
runner (White House, 1993b). Although it set out to electronics, cars, machine tools, and computers from
implement a serious policy shift, however, neither the the mid-1970s to the mid-1990s.
justifications of this shift nor the specific instruments The signs were strong enough even to move the
to achieve the main policy objectives were entirely Reagan Administration, in principle hostile to any-
new. The ‘new’ policy orientation reflected issues and thing that can be labeled microeconomic manage-
solutions debated for years. A significant number of ment. At least two major steps were taken during its
high-visibility reports were produced during the time. One was the discontinuation of the long-term

100 Science and Public Policy April 2000


Technology policy in the US and the EU

policies of the United States related to competition The Clinton Administration reinforced the policies
and intellectual property rights. Another was the of its predecessors and added some new, more inter-
initiation of an extensive public debate on economic ventionist policy instruments. It also added a new
competitiveness, exemplified by the setup of the strong vision of a more balanced supply-side/
President’s Commission on Industrial Competitive- demand-side technology-cum-innovation policy.
ness and its report in the mid-1980s (PCIC, 1985). Perhaps its most significant contribution has been the
The activities around the first step culminated in strong signal to American industry of a government
two concrete actions. First, there was a radical change seriously concerned with technology for economic
in the philosophy of antitrust (competition) regula- growth.
tions, starting with the new “Merger Guidelines” is- Unfortunately for the Administration, an exten-
sued by the Antitrust Division of the Department of sively renewed 104th Congress quickly got busy
Justice and the Federal Trade Commission in 1982.4 unraveling its technology policy objectives and
Second was the creation of the 11th Circuit Court in strongly pushed in reverse. The 105th Congress,
the District of Columbia, the first Court dedicated to sworn in office in 1996, continued in the same direc-
the adjudication of issues related to intellectual prop- tion. Although, strictly speaking a science policy
erty, also in 1982. Essentially, the long-term US pol- document, the report of the House of Representatives’
icy was being reversed from strict enforcement of Science Committee did indicate the desired limits of
antimonopoly regulations (based on a ‘per se’ ap- government involvement (US Congress, 1998). The
proach) and fairly lax enforcement of intellectual 106th Congress, taking office in 1998, has seemed
property rights laws to more relaxed enforcement of much more willing to negotiate. Even so, the enthusi-
antimonopoly regulations (based on a ‘rule of reason’ asm of the second Clinton Administration in the
approach) and much stricter enforcement of intellec- technology policy area has seemed permanently
tual property rights laws (Vonortas, 1997). curtailed.
These actions were perfectly in line with the Ad- The extended set of programs that were pushed
ministration’s philosophy that, besides the big ‘mis- forward in the first four-year term of the Clinton
sions’ like national defense, the role of the Administration did not survive the 104th and 105th
government is limited to the general economic and Congresses intact. Some were eliminated (for in-
regulatory environment in which businesses operate. stance, TRP), others were weakened or neutralized
Three successive Republican administrations in the (for instance, ATP), and still others lost their direction
1980s became increasingly convinced that the world under a weakened Administration and became inef-
had changed for American business and that this ne- fective, even non-operational (for instance, PNGV).
cessitated policy changes. They were willing to take Irrespective of what has happened to specific pro-
the initiative to help strengthen what the S&T policy grams, however, one thing is clear: there is much more
community was claiming to be the foundation of the awareness today of the changing international envi-
competitiveness of American business: its ability to ronment of industrial technology and innovation, and
create and deploy technological innovations. the place of US business in it, than ever before.
Often nudged by the Democratic Party-dominated
Congress, these administrations were willing to push
for the aforementioned changes in antitrust and intel- EU technology policy5
lectual property rights policies, introduce a R&E tax
credit, maintain the government’s support of basic re- Historical background
search, and go along with supporting R&D in small
businesses through the SBIR program (requiring all In a similar manner to the United States, the European
agencies with a R&D budget to allocate part of it to Community (EC) entered the 1980s with increasing
small businesses). They were, however, much less anxiety over the perceived gradual loss of competi-
willing to offer direct assistance to civilian technol- tiveness and the effects of globalization of high-
ogy development than many S&T experts had hoped. technology industries. In the EC’s case, however, there
The public debate on competitiveness culminated were other factors influencing the policy landscape in
in the passing of the Omnibus Trade and Competitive- addition to the widely perceived change in the global
ness Act in 1988 by the American Congress. This was forces affecting R&D and innovation. These were:
an important piece of legislation which the Bush Ad-
ministration was basically forced to accept. Among · the continuing expansion of the Community and
many other provisions, it radically changed the nature the wide disparities between the industrial and
of a little known agency — the National Bureau of technological capabilities of the various member
Standards (NBS). It was renamed the National Insti- countries;
tute of Standards and Technology (NIST) and was · the already well established, but very different,
transformed into a much more formidable agency en- S&T policy infrastructures in a number of the
veloping, in addition to its long-standing laboratories larger and richer member countries and the lack of
for industrial standards, the newly established such infrastructures in the ‘cohesion’ members;
Advanced Technology Program, Manufacturing · the reluctance of public authorities to impose yet
Extension Program, and Baldridge Quality Award. another layer of policies and regulations on top of

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Technology policy in the US and the EU

the national ones; and Even so, they promoted fairly extensive inter-Euro-
· the absence of the appropriate legal framework and pean collaboration. Technology programs reflected
institutions at the EC level for supporting a consis- an effort to help create European industry ‘champi-
tent technology policy. ons’ (in classic 1970s fashion) to compete effectively
with large American firms and the increasingly threat-
Very early in the decade, the Community started with ening Japanese.
this last point. Against this backdrop, and with mounting con-
The three treaties underlying the creation of the EC cerns over the international competitiveness of
(the European Coal and Steel Community Treaty of European high-tech industry, a ‘Round Table’ was
1951, and the Treaties of Rome of 1957 establishing organized in 1981 by Viscount Davignon, the
the European Economic Community (EEC) and the European Commissioner for internal market and
European Atomic Energy Authority (Euratom)) fore- industrial affairs (1977–1981) and for industry and
saw European-level funding of R&D only for coal and S&T policy (1981–1985). The Round Table included
steel, agriculture, and nuclear energy. The Treaty of top representatives of the 12 strongest European elec-
Rome provided policy powers to determine the regu- tronics companies. The Commission offered assis-
latory framework and market conditions for European tance through new programs to help industry raise its
industry. competitiveness.
The construction of a policy framework for Euro- An important outcome of the Round Table was ES-
pean industry had thus progressed much sooner than PRIT, instituted in 1983. This program was set up to
the construction of a policy framework for technol- support pre-competitive research with broad applica-
ogy. Already in the early 1970s, proposals were being tions in information technologies. ESPRIT served in
considered for eliminating technical barriers to trade, the early 1980s as a model for a series of other pro-
opening up public procurement, harmonizing legal, grams such as RACE (communications) and BRITE
fiscal, and financial regimes, encouraging transborder (industrial technologies). Programs in biotechnology
industry conglomerations, and speeding up industrial and medicine were also set up. These were the first
readjustment and adaptation. The search for a consis- truly EC-based R&D programs. They shared a num-
tent EC framework for technology policy sprang up ber of characteristics (Vonortas, 1991):
later directly in connection with industrial concern
(restructuring, adaptation, international competitive- · The research was to be carried out collaboratively
ness). The technology policy framework materialized between firms, universities, and other research in-
only in the mid-1980s.6 stitutes across Europe.
This should not be taken to imply lack of concern · The research was to be pre-competitive and/or
over technology during earlier decades. On the con- pre-normative.
trary, technology and the dependencies on foreign · The funding was on a shared-cost basis for indus-
countries have been part of the Community’s debate trial participants (usually 50%).
since its creation. In the 1940s and 1950s, however, · Applications for funding were judged by independ-
the questions were different. Then, radically new ent reviewers.
technologies arrived in spates — for instance., plas- · The Commission determined only broad priorities
tics and polymers, antibiotics, transistors, computers after consulting stakeholders.
— and the technology to watch was nuclear energy.
Hence, the simultaneous creation of Euratom and of With a set of (uncoordinated) programs now in place,
the EEC in 1957. the need arose for an organized policy framework for
By the late 1960s, the major European economic EC R&D. The first Framework Programme for
powers had started to perceive a technological gap Research and Technological Development was es-
with the US and a need for independence in strategic tablished in 1984 to stress the interaction among the
industries (Servan-Schreiber, 1967). The United component program elements. The first Framework
Kingdom entered the EEC in 1973 largely on high Programme (FWP1) pre-dated the authority to allo-
hopes concerning the country’s significant industrial, cate finance and was more of a presentational exercise
scientific and technological capabilities. aggregating a number of separate budgets. Neverthe-
European S&T activities were, however, organized less, it cast the mould for the future.
largely outside the EC policy framework until the
mid-1980s, including CERN (Centre Européen Recent changes
Recherche Nucleaire), EMBO (European Molecular
Biology Organisation), ESRO (European Space Re- The legal basis for the EU S&T policy was provided
search Organisation), and ESF (European Science by the Single European Act (SEA), ratified in 1987.
Foundation) in basic research, ESA (European Space This set in motion the process for the creation of the
Agency) and COST (Co-operation in Science and single European market of 1992 by removing all bar-
Technology Programme) in more applied research, riers to the free movement of goods, services, capital,
and Airbus, Arianespace, supersonic transport, and and people in the EU within five years. One important
EUREKA (European Research Co-ordination Agency) objective of SEA was to promote competition.
in more commercially-oriented development research. Another was to create the legal basis for an active

102 Science and Public Policy April 2000


Technology policy in the US and the EU

Community role in science and technology.


The Maastricht Treaty, ratified in 1993, further
elaborated the purpose of this ‘new’ Community role. The European region’s failure to
The goals of EU S&T policy were determined to be match the high growth rates of other
strengthening European capabilities in science and regions (namely East Asia) or the high
technology and promoting the international competi-
tiveness of European industry. Other goals of S&T rates of employment creation in the
policy included ‘cohesion’ — narrowing the gap be- United States became probably the
tween the richest and the poorest European regions. most serious policy concern for the
The SEA and the Maastricht Treaty made it neces-
sary for the Commission to formulate S&T policy European Union
strategies. This led to the development of a series of
four-year Framework Programmes covering all R&D
activities of the Community, using as a basis the have been illustrated extensively in European Com-
mould laid down by FWP1. Five Framework mission (1997). Essentially, there has been a sub-
Programmes on RTD (research, technology and de- stantial reduction in spending on energy, and a
velopment) have been implemented to date: FWP1 tremendous increase in the late 1980s and early 1990s
(1984–1987); FWP2 (1987–1990); FWP3 and a subsequent decline in the share of information
(1990–1994); FWP4 (1995–1998); and FWP5 and communication technologies. Support for life sci-
(1999–2002). ences has increased steadily but it still amounts to less
Although the budgets of the Framework than half the support for information and communica-
Programmes have grown substantially,7 caution tion technologies. Human capital and mobility
should be exercised in their interpretation: has also grown substantially more recently, as have
activities related to the study of the socio-economic
1. R&D is a distant third priority in the EU budget. effects of new technology.
With an approximate yearly expenditure of The Fifth Framework Programme (FWP5) has
ECU 3 billion in the mid-1990s, R&D trailed ag- been promoted as a significant advance over previous
riculture with ECU 42 billion and the structural ones. Its design reflects the changes in the policy
programs for regional development with ECU agenda of the EU in the 1990s. As mentioned earlier,
31 billion. the SEA and the Maastricht Treaty defined the overall
2. Total spending on R&D accounted for 4% of the objectives of the Community’s S&T policy to be the
EU budget in the mid-1990s. strengthening of the scientific and technological basis
3. The Framework Programme accounted for only of industry and the encouragement of industry to be-
a very small percentage of total government come more internationally competitive. In the early
spending on R&D in member states.8 1980s, when FWP1 was designed, this was encapsu-
4. However, if the Framework Programme expen- lated in a more supply-side policy, a push to close a
diture is focusing on pre-competitive research, perceived technology gap in certain areas with major
its contribution to the total European expendi- competitors (US, Japan).
ture on such research is much larger than the Gradually, however, the region’s failure to match
above numbers indicate. Adding industry’s the high growth rates of other regions (namely East
share (and assuming that this is ‘new’ rather than Asia) or the high rates of employment creation in the
‘replacement’ funds), the contribution may be United States became probably the most serious pol-
even larger. icy concern of the EU.9 While competitiveness is still
5. The contribution of these funds to the different considered a key factor and technology policy one of
member states varies widely. While not very im- the available policy tools to improve it, there has been
portant for the larger industrialized countries, a mounting interest in the demand side of the policy,
the sum of the total allocation of R&D expendi- relating to new technology applications. The Green
ture from the Framework Programmes and the Paper on Innovation (1995) made a strong argument
structural programs can account for more than concerning the relatively lagging ability of the Euro-
50% of the total public spending on R&D in pean organizations to commercialize new technolo-
some of the ‘cohesion’ member states on the gies. It proposed more diffusion-oriented priorities,
periphery. emphasizing human resources, labor mobility, regu-
6. The majority of the larger and many of the latory obstacles to enterprises, and finance.
smaller, technically proficient firms have partic- Following-up on the Green Paper, the First Action
ipated (many of them multiple times) in Euro- Plan for Innovation (1997) stressed the need for fos-
pean programs. The networks created in these tering an innovation culture and a framework condu-
programs are believed to offer significant value cive to innovation and for better articulating research
to these companies. and innovation. A more balanced technology-cum-
innovation policy era thus emerged in Europe.
The relative changes in the funding of different S&T The Green Paper on Innovation and the First Ac-
activities in the first four Framework Programmes tion Plan for Innovation set the stage for negotiating

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Technology policy in the US and the EU

FWP5, deeply influencing it with the significantly Energy, Environment and Sustainable Development
changed perspective for the Community’s S&T poli- The central aim of this program is to ensure satisfac-
cies. In addition to an effort to close the perceived gap tory long-term energy supplies and to help reduce the
through yet a greater push in new technologies, FWP5 impact of human activity on the environment. Both
places emphasis on the “socio-economic needs of the these areas are considered instrumental for quality of
European Union to which the Community research life and socio-economics, the linchpins of FWP5.
must respond” (European Commission, 1997, page This program is complemented by the Euratom pro-
508). gram with its focus on nuclear energy, and support
FWP5 is arguably organizationally simpler than its of fusion and fission generic research and research
predecessors, consisting of seven programs that alto- infrastructure.
gether reflect the Community activities set out in Arti-
cle 130g of the EC Treaty. Four of these are ‘thematic’ The horizontal programs were designed to cut across
(intended to cover a series of well-identified prob- all thematic programs. They are:
lems) and the remaining three are ‘horizontal’ (re-
sponding to common needs across all research areas). Confirming the International Role of European Re-
They are briefly reviewed below on the basis of a search The central aims of this program are: to fa-
recent Commission document elaborating on the cilitate the access of European entities participating in
Framework’s structure (European Commission, the Framework Programme to both the scientific and
1999). the technological potential existing outside the Union;
The thematic programs are: to implement strategically important activities with
non-European countries; to improve coordination
Quality of Life and Management of Living Resources with other Community programs and other, non-EU
The central aim of this program is quality of life, initiatives for cooperation, such as COST and
which for these purposes means the quality of individ- EUREKA; to increase the opportunities for researcher
ual peoples’ lives (especially in terms of health), envi- training; and to prepare for the accession of new mem-
ronmental quality, and quality of communal life, ber states. The program’s activities cover countries
including enjoying the economic benefits of the preparing for accession, East European countries,
expected developments in life sciences and technol- Mediterranean countries, developing countries,
ogies. This program has three specific objectives: to emerging economies, and industrialized countries.
meet socio-economic needs; to increase European
added-value in all fields covered by the program; and Promotion of Innovation and Encouragement of Par-
to support European competitiveness. The focus areas ticipation of SMEs In recognition that small and me-
are health, biotechnology, the management of living dium-sized enterprises (SMEs) account for the vast
resources, and creating the conditions for environ- majority of firms and for most employment in Europe,
mentally friendly economic growth. the central aims of this program are: to ensure the dis-
semination and exploitation of the results generated
User Friendly Information Society The central aim by Framework Programme projects and to stimulate
of this program is to reap the benefits from the emerg- technology transfer by coordinating the activities pro-
ing information society and to facilitate its advent in moted by the thematic programs’ innovation units;
Europe. Four complementary specific objectives have and to coordinate the implementation of the specific
been set: private individuals (to satisfy their needs and measures designed to encourage SMEs to participate
expectations); companies and workers (to innovate, in the programs to a larger extent than before.
and improve productivity and working conditions);
multimedia content (to allow Europe to express its Improving Human Research Potential and the
creativity and culture); and technologies (to accelerate Socio-economic Knowledge Base In contemporary
their development and to promote their application). developed economies, knowledge is driving the econ-
omy and shaping society. The quality of human re-
Competitive and Sustainable Growth The central sources, thus, becomes critical. The central aims of
aim of this program is to assist European industry to this program are: to develop the Community’s human
become more competitive and to attain sustainable potential, notably through the training and mobility of
development. This is considered necessary in order researchers (including towards industry and in partic-
for European industry to provide the source of eco- ular SMEs) and through innovation in the methods
nomic power of the EU, consisting of a range of envi- and technologies of education and training with a
sioned goods and services both competitive and view to creating new jobs; to help make the Commu-
environmentally friendly which will help improve the nity an attractive location for researchers and for in-
quality of life on the continent and beyond. The focus vestment in research and to promote European
areas are: the development of safe, economic, and en- research in the international arena; and to develop the
vironmentally-friendly transport; the development of socio-economic knowledge base for a better under-
high-quality materials and reliable methods of mea- standing of key social and economic topics linked to
surement and testing; and the optimum use of research the objectives of the Framework Programme, and for
infrastructure. the development of science and technology policy and

104 Science and Public Policy April 2000


Technology policy in the US and the EU

other Community policies. industrial and S&T policy sophistication of member


states varied greatly. The biggest and the most indus-
In addition, the Fifth Framework Programme incor- trialized have had well established national S&T pol-
porates so-called “direct RTD actions” carried out by icy systems for quite some time (Nelson, 1993).
the Community’s own research facility (the Joint Re- Others on the periphery had used their industrial poli-
search Centre (JRC)) as part of its mission. The JRC is cies as surrogates until the mid-1980s when their
the scientific and technical body assisting the Com- accession to the Community forced them to set up
mission to exercise its prerogatives. The aim was for national S&T policy systems (the four ‘cohesion’
the JRC to “focus its activities on areas where the countries: Greece, Ireland, Portugal, Spain).
European added value is fully exploited. Its [JRC’s] Importantly, total R&D expenditure in the EU
activities would thus be very largely defined through region continues to be significantly lower than US
its client/supplier relations with the Commission’s R&D expenditure. Moreover, whereas almost all pub-
other Directorates-General, with the flexibility inher- lic R&D expenditure is in the hands of the federal gov-
ent in such relations”. ernment in the US, only a relatively small percentage
of public R&D expenditure in the EU is controlled by
the European Commission; national governments of
Policy dilemmas member states still account for the lion’s share. However,
whereas the US federal government is responsible for
The United States and the European Union entered the defense R&D (where it spends about 45% of its R&D
1990s from different positions. The US came out of budget), defense R&D is the direct responsibility of
the Cold War era with a very extensive, mission- EU member states. The R&D budget of the EU is
oriented federal S&T policy system focusing on solely devoted to civilian technology research.
national defense, nuclear energy, public health, space,
and basic research. The country boasted the most well Similar philosophies
established antitrust regulation and intellectual prop-
erty protection systems in the world. Industrial policy Despite these differences, a largely similar philoso-
has traditionally been left to state governments, with phy towards technology and innovation has devel-
large differences in the degree of policy aggressive- oped in the US and the EU during the 1990s. Both
ness and sophistication from state to state. Most state have made extensive efforts to balance the more
governments have lacked sophistication in S&T supply-side, traditional technology policies with
policy, apart from education and manufacturing ex- more demand-oriented, modern innovation policies.
tension programs. Technology policies on both sides of the Atlantic have
Total R&D expenditure in the country has changed focused on economic growth to a greater extent than
dramatically. While the US has kept its prominent in- ever before.
ternational position in terms of overall R&D expendi- The reasons for policy convergence have largely to
ture — reaching an estimated US$206 billion in 1997, do with the lower national security threat and the
nearly equal to that of the other G7 countries com- extraordinary changes in the international economic
bined — the sources of funding patterns have changed environment affecting industry all around the world.
extensively. The rates of increase in R&D investment The importance of this cannot be overestimated as the
in recent years have been the highest since the early private sector serves nowadays as both the major
1980s. The industrial sector has accounted for most of source and user of new technology. These changes
the increase; it now provides about two thirds of the include the rise of new high-technology sectors; the ac-
national R&D expenditure. Firms undertake about celerating pace of technological change and the shorten-
three fourths of the national R&D activity. ing product cycle; the increasing knowledge-intensity of
In contrast, the federal government has been losing industry; the globalization of technology; and the in-
ground both as a source of R&D funds and as an R&D creasingly decentralized nature of the sources of techno-
performer. Total federal R&D obligations in 1997 logical knowledge and innovation.
were approximately 12% below their 1989 level (in
constant prices). Federal agencies provided about
30% of all R&D funds in the country in 1997, com- In the 90s, there has been a largely
pared to approximately 46% only a decade ago. Simi-
larly, the federal share of total industry R&D similar philosophy towards technology
performance has declined precipitously, down from a in the US and the EU: they have made
high of 32% to an unprecedented 14% in 1997. (NSB, extensive efforts to balance the
1998).
The EU entered the 1990s with a 40-year long in- supply-side policies with more
terest in industrial policy, significant science collabo- demand-oriented ones and have
ration among member states (with institutions, focused on economic growth more
however, outside the EU’s control), and a fledgling
technology policy established only a few years than before
earlier. The EU was not a homogeneous region; the

Science and Public Policy April 2000 105


Technology policy in the US and the EU

Large corporations, still accounting for the major- largely on the grounds that the federal government is
ity of R&D expenditure around the world, are shifting too removed from the market to be able to assist the
strategies, cutting back or eliminating their central- private sector. These critics maintain that the new
ized research laboratories, focusing R&D on core ac- policy direction is simply a recipe for wasting tax
tivities, distributing R&D budgets to their operating payers’ money. This has become the great dilemma of
divisions in order to link it better to production and American technology policy.
marketing, and leveraging outside sources of technol- What about the solution of focusing government
ogy. Complex networks of industry–university– attention on relatively immobile resources such as in-
government collaborations centered on the creation frastructure and the labor force? Not only expected
and distribution of technological knowledge are spillovers would be largely domestic; the government
common. might not need to understand the market that well.
In addition, the fast pace of technological change There are problems with this approach too. First, the
has created massive opportunities for technological clientele becomes even more dispersed than it would
entrepreneurship at small firms that have also been have been if the policy focused on a few tangible ob-
able to exploit the increasing sensitization of universi- jectives. Second, fuzzier objectives may open up op-
ties to the opportunities in the private sector. The de- portunities for time-honored pork-barrel politics
centralization of R&D in larger corporations and the (clearly not the intent of the policy supporters).
rise of small high-tech firms imply a shorter-term per- Meanwhile, the EU has also had to grapple with
spective on R&D and a shift away from fundamental, several dilemmas of its own concerning the new tech-
high-risk, long-term research in the private sector. nology policy direction. Peterson and Sharp (1998)
Maybe governments need to compensate. distinguished between three dilemmas. The first
concerns the coherence of the policy goals and struc-
Best policy approach tures. The question is whether the objectives of
competitiveness, strengthening the science base,
There is more agreement on the usefulness of an ac- enhancing cohesion, and being alert to the social goals
tive government role in technological innovation than of R&D are attainable in tandem. An example is the
on the best policy approach. Take the example of the potential tension between the objectives of research
United States. Up to the early 1980s, when the US en- excellence and cohesion between the more and less
joyed a widespread technological lead across indus- advanced regions of the Community.
try, the federal government could bet on the domestic The gradual shift towards more technology
economy reaping the benefits from the spillovers user-oriented policies raises concerns over whether
from its relatively huge R&D expenditure. The US they can be addressed properly with policy tools de-
served as the launch pad for new technology products signed and implemented at the level of the Commis-
fostered by public spending, while domestic markets sion or whether they may be better addressed by
played a key role in the maturation of new products. national or local policies.10 There is still no consensus
Economic globalization, the increasingly distrib- on whether the essentially top-down practice of the
uted and decentralized nature of technology, and the Commission in setting priorities is preferable to a
convergence of industrialized countries in terms of bottom-up approach such as that of EUREKA in
technological capabilities have, however, weakened proposing important R&D programs for support.
the link between federal R&D and domestic spillovers The second dilemma concerns the risk of raising
and social benefits. Thus, whereas there is an argu- unrealistic expectations from the Framework Pro-
ment for an active government policy for technologies gramme whose size pales in comparison to national
aimed at economic growth, there is also concern over R&D expenditure. There are at least two arguments in
its efficacy in the current economic environment. A favor of EU R&D programs. First, the technology pol-
potential solution is to focus government investment icies and available resources of different member
on areas with higher likelihood of domestic states vary greatly; an umbrella planning instrument
spillovers, including investments in the technical and may be necessary for creating and sustaining a mean-
physical infrastructure and in the labor pool that are ingful European economic area. Second, if well tar-
less mobile (Borrus and Stowsky, 1998; Reich, 1991). geted, FWP funds can account for a significant
“[T]echnology policy, if it is to contribute to the portion of the available R&D funds across Europe in
economy, must be linked to economic policy” certain narrow areas and certain kinds of research.
(Branscomb and Florida, 1998, page 12). This means The shared-cost action method of supporting R&D
that technology policy should be explicitly concerned further leverages public funds. In addition, the Com-
with productivity and growth of the private sector munity has been conscious of the ‘subsidiarity’ prin-
(that is, the technology user). Which, in turn, means ciple, trying to complement member states’ activities
that the government is not its own customer anymore and add European value through its programs.11 Ways
(as it was in a defense-oriented R&D system) but it is of adding such value include promoting activities that
called to assist private firms to compete in world need to be undertaken at the international level,
markets. catalyzing national actions, and promoting the
Many critics have objected to this new direction of US diffusion of information among European research
technology policy during the Clinton Administration organizations.

106 Science and Public Policy April 2000


Technology policy in the US and the EU

A third dilemma is how to reconcile a skilled labor force, nurturing an overall entrepreneur-
‘user-friendly’ policy with the “established, techno- ial spirit and providing the necessary economic and
cratic and closed style of EU research policy- institutional support conducive to turning this spirit
making”. This questions whether the institutions in into flourishing new enterprises become priorities.
place for R&D policy making can meet the demands This message successfully penetrated policy deci-
of a more diffusion-oriented policy. The political as- sion-makers in both the US Administration and the
pect of this dilemma is that a more diffusion-oriented European Commission in the early to mid-1990s. Its
policy has a more dispersed clientele than a tech- implementation, however, has varied significantly
nology-push policy whose clientele can be largely between the two regions. While both the US and the
defined in terms of industry and, particularly, in terms EU have been busy with changing/building institu-
of large companies with political know-how. The tions to meet the new challenges, their tasks have dif-
reconciliation is not easy and the tensions created in fered greatly as a result of their different institutional
the negotiation phase of the Fifth Framework environments, policy traditions, and recent political
Programme were a good reflection of the difficulties. developments. Implementation differences aside,
both administrations had to face the fact that manag-
ing a balanced technology policy in support of eco-
Conclusion nomic growth is much more complex than managing
the traditional supply-side technology policies of the
The objectives of technology policy have changed past four decades.
dramatically in both the United States and the Euro-
pean Union. During the 1980s, both the US and the
EU made significant steps towards setting in place
policies directed to civilian technologies. The primary Notes
motivation had been to enhance the competitiveness 1. With exceptions, of course, particularly at times of widely per-
of the private sector in view of increasing inter- ceived national emergencies such as the response to the oil
national competition. The policy approach in both price increases in the 1970s. In addition, one must consider the
policies at the state level which have often been much more mi-
cases was basically supply-side: motivate/assist firms croeconomic in nature and much more explicitly concerned
to produce technological advances at an ever-faster with issues related to industry, investment, and technology
pace. (Rycroft, 1990).
2. The science advisor of President Bush (Clinton’s predecessor)
By the early 1990s, it had become evident that the was more sympathetic to an active government role in civilian
international economic environment had changed technology policy. For the first time, an Industrial Technology
drastically, reflecting increasing globalization and in- Division was established in the Office of Science and Technol-
ogy Policy (OSTP) of the White House. In addition, the dormant
ternational interdependence. In increasingly global- Federal Coordinating Council for Science, Engineering and
ized markets, competition involves more and more Technology (FCCSET) was revived and given authority to
direct competition among firms based in different identify program areas of interest across all major S&T agen-
cies. However, the effort to back up the identified ‘critical tech-
countries and multinational corporations. This, in nologies’ of high-performance computing and communication,
turn, affects policy. In industrialized open economies, biotechnology, advanced materials, and advanced manu-
at least, the role of the government now becomes less facturing with real budgets did not get very far. An OSTP
document of the time entitled “US Technology Policy” did not
one of supporting ‘national champions”, because ei- have much success either.
ther there are not any or they become difficult to rec- 3. See various reports by committees organized under the aegis
ognize (Reich, 1991). Moreover, spillovers from of the National Academy of Sciences, National Academy of En-
gineering, and the Institute of Medicine, for instance, Commit-
government-sponsored R&D are increasingly diffi- tee on Science, Engineering and Public Policy (1992, 1993);
cult to keep domestic. Either way, supply-side policy and Committee on Technology Policy Options in a Global
measures start losing their efficacy. Economy (1993). See also National Science Board (1992),
Council on Competitiveness (1991), and Competitiveness Pol-
Still, the role of the government in fostering a icy Council (1993).
vibrant domestic innovation environment seems to 4. Subsequent versions of these guidelines have followed in the
increase in a globalized world. That role, however, same direction.
5. Parts of this section draw extensively on European Commis-
becomes more tightly linked to general economic pol- sion (1997, 1999), Guzzetti (1995), and Peterson and Sharp
icies to create an environment that helps industry (1998).
remain, and hopefully become even more, inter- 6. Compare to the case of the United States where the framework
for federal S&T policy developed after World War II linked to in-
nationally competitive. dustry only indirectly through a ‘trickle down’ process of S&T
This obviously involves much more than technol- knowledge flows.
ogy policy. It involves many policy aspects encased in 7. The budgets of the four-year Framework Programmes have
been: FWP1, ECU 3,730 million (or about US$4.4 billion);
the concept of the ‘system of innovation’ such as com- FWP2, ECU 5,396 million; FWP3, ECU 6,600 million; FWP4,
petition, regulation, intellectual property rights, edu- ECU 13,100 million; FWP5, estimated at EURO 14,960 million.
cation, and finance (Edquist, 1997; Lundvall, 1992; 8. For example, the estimated total budget of FWP5 of US$17.5
billion (4 years) pales in comparison to the total civilian R&D
Nelson, 1993). As far as technology policy is con- spending by European countries, amounting to approximately
cerned, the objective becomes not only the creation of US$60 billion in 1997 alone.
new technologies but also their diffusion and the en- 9. Unemployment was the major focus of one of the last important
documents of the ‘Delors era’ in the Commission: the White
couragement for their widespread use. Maximizing Paper on “Growth, Competitiveness, and Employment”
overall economic growth, creating a versatile, highly (1993). This paper put technology policy in the front line to

Science and Public Policy April 2000 107


Technology policy in the US and the EU

assist the necessary changes in the Community’s economic C Edquist (editor) (1997), Systems of Innovation: Technologies,
structure. Institutions and Organizations (Pinter, London, UK.
10. The European Commission has been addressing the issue of H Ergas (1987), “Does technology policy matter?”, in B R Guile and
communication of S&T programs at the regional, national and H Brooks (editors), Technology and Global Industry: Com-
the EU levels. panies and Nations in the World Economy (National Academy
11. The extent of success of the Commission’s efforts is question- Press, Washington, DC).
able because of the difficulties in influencing national policies. European Commission (1997,) Second European Report on S&T
An example is the case of the UK that operates a system of at- Indicators: 1997 (Office for Official Publications of the European
tribution according to which the country’s contribution to FWP Communities, Directorate-General XII, Luxembourg).
budgets is attributed to and deducted from the budget of the European Commission (1999), “The Fifth Framework Programme
national ministry which is responsible for the area concerned. (1998–2002)” (Office for Official Publications of the European
Everything else being constant, this can easily result in crowd- Communities, Directorate-General XII, Luxembourg).
ing out of national investment. Other less obvious examples L Guzzetti (1995), A Brief History of European Union Research
have also been suspected. Policy (Office for Official Publications of the European Com-
munities, Directorate-General XII, Luxembourg).
B-A Lundvall (editor) (1992), National Systems of Innovation: To-
wards a Theory of Innovation and Interactive Learning (Pinter,
London).
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108 Science and Public Policy April 2000