What’s Missing From the Senate R&D Bill

The Endless Frontier Act can help reverse America’s decades-long decline in commercial research. But bridging the gap between universities and corporations won’t be easy.

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Roland Stephen is director of the Center for Innovation Strategy and Policy at SRI International, a nonprofit scientific research institute.

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The Senate is on the verge of passing a bill to increase U.S. research and development funding by $195 billion. The legislation, a pet project of Senate Majority Leader Chuck Schumer (D.-N.Y.) that’s intended to increase U.S. competitiveness with China, has gotten light coverage in the press. But for those of us who follow science funding, this is a very big deal— a once-in-a-generation opportunity to restore what was lost with the post-1970s decline of America’s industrial labs.

Remember industrial labs? First created by leading inventors like Alexander Graham Bell and Thomas Edison in the late 19th and early 20th centuries, industrial labs proliferated in the middle of the 20thCentury.  In their heyday, they delivered a variety of important industrial innovations, including nylon, the transistor, and various building blocks for the personal computer; Steve Jobs famously derived many ideas for Apple computers from a visit to Xerox’s Palo Alto Research Company. But after 1980, globalization and rising demand for quick returns by corporate shareholders put industrial labs in decline. 

The labs’ golden age was the middle decades of the 20th century, roughly concurrent with publication of an influential 1945 report by Vannevar Bush (pictured above), a professor of engineering at MIT and director of the federal government’s wartime Office of Scientific Research and Development. “Scientific progress is, and must be, of vital interest to Government,” Bush wrote.

Without scientific progress the national health would deteriorate; without scientific progress we could not hope for improvement in our standard of living or for an increased number of jobs for our citizens; and without scientific progress we could not have maintained our liberties against tyranny.

Bush’s report, titled “Science, the Endless Frontier” led to the creation of the grant-giving National Science Foundation. By way of tribute, Schumer titled his bill the Endless Frontier Act. (Schumer later changed its name to the “U.S. Innovation and Competition Act,” but nobody calls it that.) 

The NSF was founded amid intense Cold War pressure to compete with Russia: Schumer’s legislation would revamp the NSF to better compete with China. Under the bill, the National Science Foundation (NSF) would be renamed the National Science and Technology Foundation and would receive an additional $26.1 billion to expand beyond its existing basic-science mandate into applied technology to improve U.S. economic competitiveness. (Current NSF programs, meanwhile, would get $12.4 billion, a roughly 50 percent increase.) Another strong feature of the Endless Frontier Act is its near-doubling, to $17.5 billion, funding for the Defense Advanced Research Project Agency (DARPA), which was created after the Russians launched Sputnik in 1957 and famously bequeathed us the internet.

The NSF’s new applied-technology program managers would enjoy more grant-making discretion than their corresponding officers on the basic-science side, with less emphasis, for example, on peer review, and more emphasis on problem-solving. This approach has been shown to work well at DARPA and at ARPA-e, a sort of DARPA spinoff created within the Energy Department in 2007. The bill also allows the NSA to create technology-development competitions in which the winner receives a cash prize. The bill would also give the Commerce Department $10 billion to fund creation of technology centers at regional universities, with the aim of spurring innovation beyond existing tech hubs along the east and west coasts, in Raleigh-Durham, N.C., and in Austin, Tex.

But the Endless Frontier Act comes up short on a key question: How can it bridge the gulf between university research and the needs of the marketplace?

A program manager at DARPA wakes up every day knowing that he or she works for the Pentagon. Who are the end users for the NSF’s new applied-technology directorate? Well, business. But the NSF was set up to give dollars to universities and colleges, and that structure remains under the new bill: Grants can be made only to institutions of higher education or individual researchers, or to consortia led by institutions of higher education. How that research will be shaped by commercial needs, and made available to businesses so they might meet these, is not specified. 

The Endless Frontier Act addresses the funding deficit created by industrial labs’ decline, but furnishes no structure with which to replace them. That absence is a big problem. As a 2019 paper led by researchers at Duke’s Fuqua School of Business explained, the eclipse of industrial labs left corporations scrambling to apply to product development the “curiosity-driven rather than mission-focused” basic science research furnished by universities. “Spinoffs, startups, and university licensing offices have not fully filled the gap,” the authors concluded. Universities’ focus on “curiosity-driven” research is intrinsic to their mission. How will these institutions of higher education reorient themselves to commercial needs?

It’s a familiar riddle of public policy. Any arrangement wherein the U.S. government participates in choosing winners and losers among private companies is anathema to the public and vulnerable to corruption by business lobbyists. But unless you make such choices, you can’t target R&D funds very effectively. In the aftermath of World War II, the federal government maintained a tacit regulatory partnership between the federal government and large U.S. corporations— what the liberal economist John Kenneth Galbraith termed, approvingly, the New Industrial State. But that arrangement was on the ropes within a decade of Galbraith popularizing that phrase in 1967. Even in the New Industrial State’s heyday, feelings about it were ambivalent. 

Since 1980, merely uttering the phrase “industrial policy” has been enough to kill any proposal to guide business innovation. Instead, the U.S. embraced a de facto industrial policy of corporate concentration with a sharp cutback in antitrust enforcement and elevation of shareholders’ interests over those of workers. In effect, the government did with industrial policy what conservatives often accuse liberals of doing with the welfare state—it threw money at the problem, indiscriminately and inefficiently, with no visible benefit to American competitiveness. 

This laissez-faire consensus may be coming to an end, providing Congress with an opportunity to reshape the government’s relationship with big business. The Endless Frontier Act has enormous potential to restore American business’s commitment to research and development. But to do it, it will have to find a way to close the gap between university research and the demands of the marketplace in a way that the American public will tolerate.