vestment in research reflects different motivations, resulting in differences in style, focus, and time horizon;

Companies have little incentive to ˲
invest significant amounts in activi-
ties whose benefits spread quickly to
their rivals. Fundamental research of-
ten falls into this category. By contrast,
the vast majority of corporate R&D ad-
dresses product-and-process develop-
ment; and
Government funding for research ˲
has leveraged the effective decision
making of visionary program manag-
ers and program-office directors from
the research community, empowering
them to take risks in designing pro-
grams and selecting grantees. Govern-
ment sponsorship of research, espe-
cially in universities, also helps develop
the IT talent used by industry, universi-
ties, and other parts of the economy.

On the economic payoff of research:
Past returns on federal investment ˲
in IT research have been extraordi-
nary for both U.S. society and the U.S.
economy. The transformative effects
of IT grow as innovations build on one
another and as user know-how com-
pounds. Priming that pump for tomor-
row is today’s challenge; and
When companies create products ˲
using the ideas and work force that re-
sult from federally sponsored research,
they repay the nation in jobs, tax reve-
nue, productivity increases, and world
leadership.

inevitable Globalization of it Another significant trend, analyzed in detail in the report, is how the IT industry has become more globalized, especially with the dramatic rise of the economies of India and China, fueled in no small part by their development of vibrant IT industries. Moreover, India and China represent fast-growing markets for IT products, with both likely to grow their IT industries into economic powerhouses for the world, reflecting both deliberate government policies and the existence of strong, vibrant private-sector firms, both domestic and foreign. Ireland, Israel, Japan, Korea, and Taiwan, as well as some Scandinavian countries, have also developed strong niches within the increasingly globalized industry. Today, a product conceptualized and marketed in the U. S. might be designed to specifications in Taiwan, and batteries or hard drives obtained from Japan might become parts in a product assembled in China. High-value software and integrated circuits at the heart of a product might be designed and developed in the U.S., fabricated in Taiwan, and incorporated into a product assembled from components supplied from around the world.

Unfortunately, during a period of rapid globalization, U.S. national policies have not sufficiently buttressed the ecosystem or generated side effects that have reduced its effectiveness.

This is particularly true of such areas as IT education, U.S. government IT research funding, and the regulations that affect the corporate overhead and competitiveness of innovative IT companies. As a result, the U.S. position in IT leadership today has eroded compared to that of prior decades, and IT leadership may pass to other nations within a generation unless the U.S. recommits itself to providing the resources needed to fuel U.S. IT innovation, removing important roadblocks that reduce the ecosystem’s effectiveness in generating innovation and the fruits of innovation, and becoming a lead innovator and user of IT.

In 2009, the ecosystem also faced new challenges from a global economic crisis that continues to unfold. There has been a marked reduction in the availability of venture capital following losses in pension funds and endowments, as well as in initial public offerings by technology companies and a decline in mergers and acquisitions. There is also a steep decline in consumer confidence, suggesting that a consumer-driven recovery is unlikely in the near term. Significant layoffs and hiring cutbacks in IT firms and across the global economy seem all but certain to adversely affect the IT R&D ecosystem, undermining the partial recovery seen over the past few years. The magnitude, duration, and enduring effects on the ecosystem of the downturn are not yet clear.

Globalization is a broad and sweeping phenomenon that cannot be contained. If embraced rather than resisted, the committee concluded that it presents more opportunity than threat to the U.S. national IT R&D ecosystem. To thrive in this landscape, the U.S. should play to its strengths, notably its continued leadership in conceptualizing idea-intensive new concepts, products, and services the rest of the world desires and where the greatest increments of value-added are captured.

Toward this end, it is necessary for the U.S. to have the best-funded and most-creative research institutions; develop and attract the best technical and entrepreneurial talent among its own people, as well as those from around the world; make its economy the world’s most attractive for forming new ventures and nurturing small, in-

PhotograPh coUrtESy oF thE NatioNaL cENtEr For coMPUtatioNaL SciENcES

ultrascale scientific computing capability, like the world’s fastest supercomputer—Jaguar— in the u.s. Department of energy’s oak Ridge national Laboratory, is considered a top priority among government science funding.