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I think it's fair to say that we could do a much better job. I think it's fair to say that there is something cockeyed with our transfer system. The obstacles to small companies, especially, are huge when they go after this technology. By comparison, I think many of our economic rivals, worldwide, do a much better job in commercializing the fruits of their government-sponsored research. Thanks to that, their industries may enjoy a competitive edge.

With the cooperation of your able staff, Mr. Chairman, my subcommittee has been looking into this for nearly a year, and we hope to explore some of these issues at a hearing on October 5. I would certainly invite you and any of my other colleagues on the committee to join us for that inquiry. And I'm hopeful that the results will be of use to you in the furtherance of your investigation of factors affecting competitiveness of U.S. small business.

Thank you again for your interest and leadership in this important area.

-Government University Industry Cooperation. This is a very
critical issue affecting our nation's small businesses. By
holding a hearing on this issue, we will be able to listen to new
ideas on how universities can work with small businesses to bring
new technologies that would enhance competition.

Also I would like to welcome and thank the panelists for

their testimony.

Mr. Chairman, I ask for unanimous consent that this

statement be considered for the record.

BANKING, FINANCE AND URBAN AFFAIRS
HOUSING AND COMMUNITY DEVELOPMENT

FINANCIAL INSTITUTIONS SUPERVISION.
REGULATION AND INSURANCE

INTERNATIONAL DEVELOPMENT, FINANCE.
TRADE AND MONETARY POLICY

GENERAL OVERSIGHT AND
INVESTIGATIONS

SMALL BUSINESS

SBA THE GENERAL ECONOMY AND MINORITY ENTERPRISE DEVELOPMENT

SELECT COMMITTEE ON HUNGER

MR.

SERIES

Congress of the United States

CHAIRMAN,

House of Representatives

FLOYD H. FLAKE

6TH DISTRICT NEW YORK

TESTIMONY OF
THE

HONORABLE FLOYD H. FLAKE
BEFORE THE

COMMITTEE ON SMALL BUSINESS

SEPTEMBER 28, 1989

EDWIN C. REED EXECUTIVE STAFF DIRECTOR

WASHINGTON OFFICE

1427 LONGWORTH BUILDING WASHINGTON, DC 205 15-3206 (202) 225-3461

JAMAICA OFFICE: 114-60 MERRICK BLVD JAMAICA, NY 11434 (718) 657-2968

ROCKAWAY OFFICE 20-08 SEAGIRT BLVD FAR ROCKAWAY, NY 11691

(718) 327-9791

YOU ARE TO BE COMMENDED FOR CONVENING THIS

OF HEARINGS TO EXAMINE THE PROBLEMS OF AMERICAN
COMPETITIVENESS IN THE GLOBAL ECONOMY. THE PROBLEMS OF SMALL
BUSINESS IN DEVELOPING NEW PRODUCTS AND PENETRATING NEW
MARKETPLACES MIRRORS THE DIFFICULTIES AND SHORTCOMINGS OF
AMERICAN INDUSTRY AS A WHOLE. IT SEEMS THAT THE FIRST PRIORITY
OF LARGE AMERICAN CORPORATIONS HAS BEEN TO LEVERAGE FUNDS ΤΟ
CANNABALIZE OTHER FIRMS FOR SHORT TERM BALANCE SHEET GAINS.

THE THREATS TO OUR COUNTRY AND OUR ECONOMY BY THE EVER
INCREASING ECONOMIC STRENGTH OF OUR ASIAN ALLIES AND THE
IMPENDING 1992 CONSOLIDATION OF THE EUROPEAN ECONOMIC COMMUNITY
WILL CHALLENGE OUR ABILITY TO REMAIN AN INDUSTRIAL POWER AND
COMPETE IN THE GLOBAL MARKETPLACE. OUR NATION'S INATE ABILITY TO
INNOVATE AND DEVELOP NEW PRODUCTS AND PENETRATE FOREIGN MARKETS
IS THE KEY TO OUR ECONOMIC SURVIVAL. GOVERNMENT-UNIVERSITY-
INDUSTRY COOPERATION IN DEVELOPING AND COMMERCIALIZING TECHNOLOGY
WILL BE A CRUCIAL LINK IN THIS PROCESS. THIS FOCUS ONLY SERVES
ΤΟ EMPHASIZE THE IMPORTANCE AND DEPENDENCE OF THE FUTURE OF OUR
COUNTRY ON THE EDUCATION OF OUR CHILDREN.

MR. CHAIRMAN, I WELCOME THE TESTIMONY OF THE WITNESSES AND
LOOK FORWARD TO YOUR REMARKS.

Testimony

Mr. Erich Bloch

Director, National Science Foundation

House Small Business Committee

September 28, 1989

"Bringing New Technology to Market: Government-University-Industry Cooperation"

I appreciate the opportunity to testify before your Committee on the importance of government-university-industry cooperation to U.S. competitiveness. I am also pleased to discuss the contribution that National Science Foundation (NSF) programs make to such cooperation and to competitiveness.

We live in a competitive world economy in which research and development (R&D) play an increasingly important role. The role of R&D in the creation of new industries and products has been well established. Investment in R&D contributes significantly to technological innovation, productivity growth, and corporate profitability.

Investment in research and transferring the knowledge that results from it are key to the economic competitiveness that we seek.

As a Nation, we recognize that in many areas we can no longer take our world leadership for granted. That is not only true with regard to product competition in the world marketplace but also in research and technology. We also recognize that knowledge has become a significant economic resource--perhaps surpassing in importance traditional natural resources and labor costs.

A consequence of these changes in global and economic dynamics has been an increased awareness of the importance of technological innovation in making the country internationally competitive. We recognize that long-term investments in science and enginineering education and in basic research lead to new knowledge and a technically trained workforce, which are key to our economic and general welfare.

BASIC RESEARCH

I want to discuss in particular basic research, which underlies applied research and development in our industry, national defense, and medical health fields.

Basic research has a powerful impact on productivity growth: A 1989 study by Professor Edwin Mansfield estimates that the annual social rate of return from investments in academic research is 28%.

U.S. universities and colleges are the major performers of basic research and the primary source of our technical workforce. The knowledge produced by university research is the primary fuel for innovation and our economic strength.

NSF plays a key role by supporting university research in the natural sciences and engineering. For example, NSF supported basic research in high temperature superconductivity long before major breakthroughs seemed likely.

Another example of such support is in the area of supercomputers. NSF provided the first widespread academic access to supercomputers through its national supercomputer centers. Academic access led to significant progress in computer visualization techniques. This increased access to

supercomputers provides impetus for new applications and for the development of new products.

While increased Federal funding for basic research has received significant attention by both the Administration and Congress, nevertheless Federal support for basic research, in constant dollars, has increased little over the past twenty-five years in relation to total R&D spending. (CHART #1)

We must invigorate basic research at universities and increase support for fields where the opportunities are greatest. Because basic research is the source of what is produced in the marketplace, it determines the competitiveness of U.S. industry.

HUMAN RESOURCES

Our human resources are also of great importance. In our country, an educated workforce must be top priority. NSF's programs seek to increase the numbers of young people who seek careers in science and engineering. Our programs strive to improve the quality of their education.

American students have not been pursuing careers in science and engineering in sufficient numbers to meet future needs. Unless we do a much better job of attracting students and giving them the best possible training, we cannot meet the challenges we face in international competition.