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Technology, innovation and economic progress

MIT President Charles M. Vest gave the following speech at the Economic Forum at Baylor University on August 13, 2002.

America in the 21st Century must succeed by brainpower, not by geographic location, inexpensive labor or natural resources.

We are in the age of the knowledge economy, and innovation is both the key to our future and our competitive advantage on the world stage.

We must recognize this and foster the combination of science, technology, education and a free economy that makes it possible.


Innovation is the primary driver of US productivity growth, and therefore of our prosperity and competitiveness.

Our innovation system is the strongest in the world.

What do I mean by our "innovation system"?

The US innovation system is the combined effort of academia, private industry and governments that creates new knowledge and technology, and educates young men and women to apply this new knowledge and move it to the marketplace in the form of new goods and services.

In my view, Innovation - and all the issues and challenges surrounding it - must become a first-tier economic policy imperative for our nation.

This need is even more relevant in light of an environment with economic uncertainty and heightened security concerns.

The private sector and the federal government both have essential roles in sustaining a strong innovation engine in the US.


The strong burst of knowledge creation, innovation and productivity growth in the mid 90s was driven by a resurgence of US R&D spending, dominantly in industry. This productivity growth is continuing into the first years of the 21st century.

A prosperous economy has invigorated companies in both the manufacturing and service sectors, enabling them to allocate more resources toward the discovery of new knowledge and the application of that knowledge toward the development of new products, processes and services. The resulting upsurge in innovation continues to contribute to a flexible, buoyant economy.

Let me be specific. In 1976, industry funded 45 percent of our national R&D; the Federal Government funded 52 percent. In 2000, industry supported 68 percent of our national R&D, and the Federal Government supported 26 percent.

Thus as the private sector's role in maintaining the health of the US R&D enterprise has been expanding, the federal government's contribution has been receding, as the federal share has become less prominent in both the funding and the performance of R&D. As a result, the composition of the nation's R&D investment is slowly shifting.

Concurrent with these broad changes, the locus of R&D activities is also shifting.

Simply put, much more D - development - is being done, but less R - research at the frontier, or of longer-term potential - is being done.

Also, a growing amount of industry R&D is now undertaken in services, and much of the industry R&D growth has been in biotechnology and information technology.

Reflecting the political reality of tremendous increases in research funding for NIH relative to other federal agencies, the composition of these federal funds has shifted markedly toward the life sciences during the past several years.And while it is good news that US industrial R&D continues to increase as a percentage of GDP, it remains critically important for the nation that the federal government to:

Maintain and expand its commitment to frontier research

Address the imbalance in the nation's research portfolio, and

Work hard to stem the declining numbers of graduates in key science and engineering fields that puts at risk the nation's future innovation capability.


Partnerships are increasingly of critical importance to a strong system of innovation.

We are finding increasing opportunities for cross-fertilization and partnership among academia, industry and state and federal government agencies.

These partnerships renew the intellectual vitality of our universities, and are, in my view, increasingly essential to the development of new technologies that do not fit the traditional molds of specific academic disciplines or the framework traditional companies.

These are the very areas that will trigger the next waves of innovation.

I will have more to say about these opportunities in a moment.

Partnerships between universities and industry are increasingly effective in advanced education as well as research.

And partnerships between universities and primary and secondary schools, fostered by federal support can be enormously effective and should be strengthened and well funded.


One other important note:

As one who lives in the world of education, technology and innovation, I want to assure you that, despite the market shake outs that followed the "Dot Com boom," the spirit of entrepreneurship is now deeply engrained in our young people, and - if we maintain an environment that supports it - we will see it flourish in he years ahead.

Maintaining that environment will require that:

  • we increase our focus on education,
  • that the Federal Government invest strongly in frontier research, and
  • that we create the exciting environments that will reverse the trend of US students away from careers in advanced science and technology.

It also will require that we maintain the American strength of venturing to the frontiers of human knowledge and capability, of taking risks, and providing venture funding for bright young people to develop the next generation of technologies, goods, services, healthcare and security.

This is necessary across the spectrum from start-up companies, to our large manufacturing companies.

I am very optimistic that this will happen, because the opportunities are great.

To glimpse the future, one need only look at the new fields emerging from our universities and industry and government laboratories.

Indeed, I believe that we are entering the most exciting era in science and technology in human history.

The human genome has been sequenced. In essence, we have a vast catalog of the parts in a human cell.

Now we must learn how these and other parts are connected and operate.

In other words, we must invent a new systems biology that will enable us understand our molecular machines and cell circuitry. Then this knowledge must be used to develop new highly targeted and effective medicines.

Nanotechnology refers to our recently found ability to measure, manipulate and build things at the level of a few atoms or molecules.

This rapidly emerging world of nanotechnology will enable us to make new materials and devices whose weight is low, whose energy consumption is small, whose environmental footprint is small, and whose properties exceed those found in nature.

Scientific computing is poised for a giant leap in capability that will enable us to discover new medicines, better understand our environment, and design more efficient devices.

Advances in brain and cognitive science can be rapid and profound during the next decade - made possible our growing understanding of cells and genes, by recent developments instrumentation like functional magnetic resonance imaging, and by our ability to computationally model complex systems.

This should lead to new therapies for mental illnesses, and to improvements in human learning and communication.

The next generation of information technology will be more sophisticated in capability, but far easier to use and more human centered.


Yes, we face great economic challenges today, but this nation still leads in innovation.

Innovation is the key to productivity.

Productivity is the key to economic growth.

Economic growth is the key to jobs, health, quality of life and security.

The US innovation system combines science, technology and a free market. If all of us -the Federal government, our industries and our educational system - do our share, we will sustain and strengthen it.

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