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
shifted progressively from more supply-oriented
technology policies to a greater balance with
demand-oriented (technology-user-oriented)
innovation policies. The transition has pro-
gressed differently in the two regions reflecting
their institutional environments, policy tradi-
tions, and recent political developments. The
transition has also been controversial because
of the increased complexity of the policy and the
patchy success rate of past attempts of govern-
ments to intervene in civilian technology
markets.
Nicholas S Vonortas is in both the Center for International Sci-
ence and Technology Policy, and the Department of Economics,
in The George Washington University, 2013 G Street NW, Suite
201, Washington, DC 20052, USA; Tel: +1 202 994 6458; Fax: +1
202 994 1639; E-mail: vonortas@gwu.edu.
The author would like to thank the participants in the confer-
ence “EGM/Workshop on Science and Technology Policies and
Strategies for the 21st Century”, organized by the United Nations
Economic and Social Commission for Western Asia (ESCWA) in
Beirut, Lebanon, 10–12 March 1999, for comments on an earlier
version of the paper. Professors Robert Rycroft and Henry
Hertzfeld of the George Washington University have also made
very valuable comments. The usual disclaimer applies.
Science and Public Policy April 2000 0302-3427/00/020097-12 US$08.00 © Beech Tree Publishing 2000
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-
tiveness. Reflecting the changes introduced by in-
creasingly open international markets and a better
understanding of the innovation process, government
attention has gradually shifted from more supply-
oriented technology policies to a greater balance
with demand-oriented (technology-user-oriented)
innovation policies.
The US has tried to give innovation policy features
to an existing formidable science and technology
(S&T) policy system. The EU first legally established
a technology policy system in the 1980s and, more re-
cently, has tried to transform it into an innovation pol-
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-
cal developments. The US government first tried to
introduce radical changes in institutions (for instance,
antitrust and intellectual property rights systems) and
only later moved into programs providing active sup-
port to industrial research and development (R&D)
and technological innovation.
The European Commission first moved in the early
1980s to set up a formal policy system to support in-
dustrial R&D. Reflecting the dominant thinking at the
time (and the technology policy approach of influen-
tial mission-oriented member states), the resulting
97
Technology policy in the US and the EU
Framework Programme for Research and Technolo-
gical Development was more of a technology sup-
ply-oriented policy system. Later in the same decade,
the EU created the legal basis for the Framework
Programme (Single European Act). Since the
Maastricht Treaty in the early 1990s, the European
Commission has tried to redirect its technology policy
towards industrial innovation, introducing strong
user-oriented-technology features.
In both the US and the EU, however, the evolution
of technology policy at the ‘federal’ level towards
technology users has been met with skepticism, if not
outright criticism. Part of the skepticism is ideologi-
cal. It has to do with the traditional aversion to central
government intervention with the markets. Part of the
skepticism is realistic. It reflects concerns over the
effectiveness of governments far removed from
technology-creating and -using communities in
implementing this type of policy. Critics have alleged
that many demand-oriented aspects of the new tech-
nology policy approach are more effectively imple-
mented at the local level, leaving central government
agencies with traditional technology-push policy
objectives.
This paper comparatively examines the main de-
velopments in technology policy in the two regions
since the mid-1980s. Many of the differences between
the US and the EU can be explained by the historical
differences in the existing innovation systems. For ex-
ample, in the case of the United States, state govern-
ments have been trying to increase their capabilities
and involvement in technology policy in the past few
years, thus supplementing their long tradition in
industrial policy. They have often started from poor
beginnings.
The reverse is true for the European Union. All the
core member states have had long traditions of S&T
policy, as well as of industrial policy, and stand out as
very important R&D spenders in their own right.
Other differences between the two regions can be at-
tributed primarily to conceptual differences concern-
ing the role of the government in the ‘technical
enterprise’.
The paper proceeds as follows. The second section
deals with recent developments in US technology pol-
icy. The third section deals with developments in EU
technology policy. A fourth section critically dis-
cusses the new orientation of technology policies in
the two regions and addresses some of the challenges
facing the respective governments. Finally, the fifth
section concludes.
US technology policy
Recent changes
For much of the postwar period, the economic policy
of the United States has, more or less, been synony-
mous with macroeconomic policy. The federal gov-
ernment has largely shied away from industrial policy
98
and civilian technology policy.1 Various Presidents
since Herbert Hoover in the late 1920s have expressed
interest in technological advancement for economic
growth and in the difficulties of industry segments —
primarily small manufacturers — in producing and/or
accessing new technologies.
However, it was President Clinton and Vice Presi-
dent Gore that first issued an official document outlin-
ing an aggressive strategy on civilian technology
policy for the federal government directly focusing on
economic growth.2 Released only a few months after
the inauguration of the newly elected Democratic
Administration, this document proclaimed a radical
departure from the postwar policies of the US, as is
evident early on the first page:
“American technology policy must move in a
new direction to build economic strength and
spur economic growth. The traditional federal
role in technology development has been lim-
ited to support of basic science and mission-
oriented research in the Defense Department,
NASA, and other agencies. This strategy was
appropriate for a previous generation but not for
today’s profound challenges. We cannot rely on
the serendipitous application of defense tech-
nology to the private sector. We must aim
directly at these new challenges and focus our
efforts on the new opportunities before us, rec-
ognizing that government can play a key role in
helping private firms develop and profit from
innovations.” (White House, 1993a, page 1).
The ‘old’ orientation of US science and technology
policy had stood on two pillars. First, a very active ba-
sic science policy, based on the consensus built
around the suggestions of Vannevar Bush’s report to
the US President at the closing of World War II (Bush,
1945). Second, the development of advanced technol-
ogy by several federal agencies in pursuit of their stat-
utory missions (Ergas, 1987). The most important of
these missions has been national defense resulting in
large R&D expenditures by the Department of De-
fense — accounting until recently for more than the
expenses of all other government agencies combined
— and extensive military procurement.
Following Branscomb (1993), it can be argued
that, since World War II, US policy had been based on
the following principles:
1. Basic science is a public good. Moreover, in-
vestments in science lead to new technologies
and, occasionally, new industries. Recognizing
the importance of basic science, but also its own
inability to direct it, the government entered into
a ‘social contract’ with scientists. The govern-
ment accepted to support scientific research at a
much grander scale than ever before, leaving the
specifics concerning direction and quality to be
decided on the basis of scientific meritocracy
(peer review).
Science and Public Policy April 2000

2. Federal agencies must aggressively pursue the de-
velopment of new technology for specific ‘mis-
sions’ in activities with extensive public good
characteristics, including national defense, nuclear
energy, space exploration, and public health.
3. The federal government must refrain from
‘picking winners’ through R&D investments di-
rected to technologies for commercial exploita-
tion and specific firms. It is the private sector’s
responsibility to try to benefit from govern-
ment-supported science (and education) and
from mission technology spin-offs.
4. A further role of the federal government is to
create the appropriate regulatory environment to
enable efficient markets and occasionally to
steer private sector investment in desired direc-
tions (for instance, toward environmentally
benign technologies). Science and technology
can be used to support the struggle against
communism.
This was essentially a supply-side approach. The
mechanism through which government investments
in R&D would assist industrial innovation was that of
a ‘linear’ (‘pipeline’) model according to which scien-
tific discoveries (and mission technology spin-offs)
inevitably lead to new commercial technologies. The
selection of technologies for development and the
timing of commercial innovation is left entirely to
market forces.
In contrast, the ‘new’ policy orientation of the early
1990s had the following objectives:
“ • Strengthening America’s industrial com-
petitiveness and creating jobs;
• Creating a business environment where
technical innovation can flourish and
where investment is attracted to new ideas;
• Ensuring the coordinated management of
technology all across the government;
• Forging a closer working partnership
among industry, federal and state govern-
ments, workers, and universities;
• Redirecting the focus of national efforts
toward technologies crucial to today’s
businesses and a growing economy, such
as information and communication, flexi-
ble manufacturing, and environmental
technologies; and,
• Reaffirming our commitment to basic sci-
ence, the foundation on which all technical
progress is ultimately built.” (White
House, 1993a, page 1).
Several of these objectives pointed at a radical shift in
the traditional policies of the US federal government.
Particularly striking were objectives one, three, and
five calling for an aggressive federal technology pol-
icy to improve the international economic competi-
tiveness of the country, to coordinate management
across agencies, and to aim for technologies explicitly
Science and Public Policy April 2000
Technology policy in the US and the EU
for economic growth (Vonortas, 1995). Objectives
two and four also called for an enhanced government
role in creating the necessary infrastructure and social
capital to attract and utilize efficiently private invest-
ment in areas of technology of strategic economic im-
portance. Objective six simply continued earlier
policies.
Again following Brancomb (1993), the basic prin-
ciples of this new S&T policy can be characterized as
follows:
1. The government must partly shift its priorities
from large government missions toward assist-
ing the technological prowess and international
competitiveness of the private sector. National
defense cannot anymore be driving technologies
in many cutting-edge fields. Government agen-
cies are encouraged to buy off-the-shelf,
state-of-the-art technologies from the private
sector. Agencies with significant S&T budgets
should try to develop, to the extent possible,
dual-use technologies.
2. The government must try to balance the supply
and demand sides of its technology policy. That
is, in addition to the creation of new technolo-
gies, significant weight must be placed on tech-
nology dissemination. The government must
pay attention to the ability of firms to locate,
access, adapt, and use new technologies.
3. State governments must increase their role in the
national technology policy. At a minimum, they
must be prepared to assist smaller firms, attract
capital, and diffuse innovation-related knowl-
edge (e.g., manufacturing extension services).
4. An increased dialogue with industry is neces-
sary to assist the government in making deci-
sions with respect to civilian technologies.
Specific technology policy goals can be
frequently pursued through public/private
cooperative R&D undertakings.
5. A more relaxed antitrust environment allows
firms to enter multiple strategic alliances to allay
the pressures from increased international com-
petition and to assist them in responding to the
demands of rapidly changing technologies.
Multi-firm research joint ventures for
precompetitive and infrastructural R&D must
be favored.
6. An increasingly stringent enforcement of intel-
lectual property rights by the court system pro-
motes the creation and rapid commercialization
of new technological knowledge for the compet-
itiveness of American industry. Intellectual
property matters can be linked with the efforts of
the US Trade Representative office to ensure a
‘level playing field’ for American companies in
foreign markets.
7. The system of national laboratories should in-
crease their interaction with the private sector in
order to expedite the transfer of innovation-
related knowledge and facilitate large-scale,
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-
ate an alternative source of funds for the univer-
sities and will speed up the commercialization of
good science to benefit industry.
9. Large science projects should be increasingly
funded and undertaken cooperatively with other
countries.
Greater attention to the demand side of technology
policy is, of course, tantamount to saying that the US
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
on understanding the demand side of a technology
(first application, diffusion), and not just the technol-
ogy’s initial production.
A large number of programs were set in place
during 1993–1994 to implement the new policy
principles. In addition, existing initiatives relating to
civilian technologies were given a significant boost.
Well known examples of new or enhanced programs
include the Advanced Technology Program (ATP),
the Technology Reinvestment Program (TRP), the
Environmental Technology Initiative (ETI), the Man-
ufacturing Extension Partnership (MEP), the Partner-
ship for a New Generation of Vehicles (PNGV), and
the Small Business Innovation and Research (SBIR)
program. Information technologies, advanced manu-
facturing technologies, and environmental technolo-
gies were considered areas of strategic importance,
needy of government intervention because of signifi-
cant infrastructure requirements and frequent market
failure.
The National Information Infrastructure (NII)
initiative was put in place. The Defense Advanced
Research Projects Agency (DARPA) was renamed
the Advanced Research Projects Agency (ARPA) and
focused on dual-use technologies. Government lab-
oratories (many of them part of the Department of
Energy’s research system) were strongly induced to
set up Cooperative R&D Agreements (CRADAs)
with industry. Manufacturing R&D was promoted
through collaborative agreements in the private sec-
tor, made possible by an increasingly relaxed antitrust
regulatory system. There were efforts to make the
Research and Experimentation (R&E) tax credit
permanent.
Policy continuity
The first Clinton Administration arrived with a grand
vision that turned technology policy into a front-
runner (White House, 1993b). Although it set out to
implement a serious policy shift, however, neither the
justifications of this shift nor the specific instruments
to achieve the main policy objectives were entirely
new. The ‘new’ policy orientation reflected issues and
solutions debated for years. A significant number of
high-visibility reports were produced during the
100
The penetration of information
technology, biotechnology, and
advanced materials throughout the
United States’ economy has changed
the basic meaning of high tech:
technology policy must be more
user-centered and demand-based than
ever before
1980s stressing the need for radical policy change.3
Even President Carter’s science advisor was consider-
ing several similar ideas.
Consider the position that a more balanced sup-
ply-side/demand-side technology policy is much
more appropriate today for the US than, say, 20 years
ago. The obvious justification relates to the change in
society’s perception of high technology (Branscomb
and Florida, 1998). The traditional perception of high
tech — still reflected in our indicators — has been re-
search-intensive manufacturing industries, such as
computers and aircraft.
The penetration of technologies such as informa-
tion technology, biotechnology, and advanced mat-
erials throughout the economy has, however, changed
the basic meaning of high tech. Rather than referring
to the output of R&D-intensive industries, high tech
now refers to a style of work applicable to just about
every business. We can have high-tech steel produc-
tion and low-tech steel production; high-tech machine
tools and low-tech machine tools; high-tech banking
services and low-tech banking services; high-tech
entertainment services and low-tech entertainment
services; and so forth.
This change is said to have revolutionized the fea-
tures of a successful technology policy. Distributed
knowledge, skill, entrepreneurship, together with new
forms of collaboration between firms, universities
and the government, can now result in more effective
products and services. Importantly for both firm and
worker income, they can result in significantly differ-
entiated products and services. In other words, tech-
nology policy must be more user-centered and
demand-based than ever before.
The S&T policy community in the US had ob-
served such changes since the late 1970s, slowly but
steadily moving towards a position of extensive S&T
policy modifications. The arguments often drew
strength from the signs of declining American com-
petitiveness in vital industries such as consumer
electronics, cars, machine tools, and computers from
the mid-1970s to the mid-1990s.
The signs were strong enough even to move the
Reagan Administration, in principle hostile to any-
thing that can be labeled microeconomic manage-
ment. At least two major steps were taken during its
time. One was the discontinuation of the long-term
Science and Public Policy April 2000

policies of the United States related to competition
and intellectual property rights. Another was the
initiation of an extensive public debate on economic
competitiveness, exemplified by the setup of the
President’s Commission on Industrial Competitive-
ness and its report in the mid-1980s (PCIC, 1985).
The activities around the first step culminated in
two concrete actions. First, there was a radical change
in the philosophy of antitrust (competition) regula-
tions, starting with the new “Merger Guidelines” is-
sued by the Antitrust Division of the Department of
Justice and the Federal Trade Commission in 1982.4
Second was the creation of the 11th Circuit Court in
the District of Columbia, the first Court dedicated to
the adjudication of issues related to intellectual prop-
erty, also in 1982. Essentially, the long-term US pol-
icy was being reversed from strict enforcement of
antimonopoly regulations (based on a ‘per se’ ap-
proach) and fairly lax enforcement of intellectual
property rights laws to more relaxed enforcement of
antimonopoly regulations (based on a ‘rule of reason’
approach) and much stricter enforcement of intellec-
tual property rights laws (Vonortas, 1997).
These actions were perfectly in line with the Ad-
ministration’s philosophy that, besides the big ‘mis-
sions’ like national defense, the role of the
government is limited to the general economic and
regulatory environment in which businesses operate.
Three successive Republican administrations in the
1980s became increasingly convinced that the world
had changed for American business and that this ne-
cessitated policy changes. They were willing to take
the initiative to help strengthen what the S&T policy
community was claiming to be the foundation of the
competitiveness of American business: its ability to
create and deploy technological innovations.
Often nudged by the Democratic Party-dominated
Congress, these administrations were willing to push
for the aforementioned changes in antitrust and intel-
lectual property rights policies, introduce a R&E tax
credit, maintain the government’s support of basic re-
search, and go along with supporting R&D in small
businesses through the SBIR program (requiring all
agencies with a R&D budget to allocate part of it to
small businesses). They were, however, much less
willing to offer direct assistance to civilian technol-
ogy development than many S&T experts had hoped.
The public debate on competitiveness culminated
in the passing of the Omnibus Trade and Competitive-
ness Act in 1988 by the American Congress. This was
an important piece of legislation which the Bush Ad-
ministration was basically forced to accept. Among
many other provisions, it radically changed the nature
of a little known agency — the National Bureau of
Standards (NBS). It was renamed the National Insti-
tute of Standards and Technology (NIST) and was
transformed into a much more formidable agency en-
veloping, in addition to its long-standing laboratories
for industrial standards, the newly established
Advanced Technology Program, Manufacturing
Extension Program, and Baldridge Quality Award.
Science and Public Policy April 2000
Technology policy in the US and the EU
The Clinton Administration reinforced the policies
of its predecessors and added some new, more inter-
ventionist policy instruments. It also added a new
strong vision of a more balanced supply-side/
demand-side technology-cum-innovation policy.
Perhaps its most significant contribution has been the
strong signal to American industry of a government
seriously concerned with technology for economic
growth.
Unfortunately for the Administration, an exten-
sively renewed 104th Congress quickly got busy
unraveling its technology policy objectives and
strongly pushed in reverse. The 105th Congress,
sworn in office in 1996, continued in the same direc-
tion. Although, strictly speaking a science policy
document, the report of the House of Representatives’
Science Committee did indicate the desired limits of
government involvement (US Congress, 1998). The
106th Congress, taking office in 1998, has seemed
much more willing to negotiate. Even so, the enthusi-
asm of the second Clinton Administration in the
technology policy area has seemed permanently
curtailed.
The extended set of programs that were pushed
forward in the first four-year term of the Clinton
Administration did not survive the 104th and 105th
Congresses intact. Some were eliminated (for in-
stance, TRP), others were weakened or neutralized
(for instance, ATP), and still others lost their direction
under a weakened Administration and became inef-
fective, even non-operational (for instance, PNGV).
Irrespective of what has happened to specific pro-
grams, however, one thing is clear: there is much more
awareness today of the changing international envi-
ronment of industrial technology and innovation, and
the place of US business in it, than ever before.
EU technology policy5
Historical background
In a similar manner to the United States, the European
Community (EC) entered the 1980s with increasing
anxiety over the perceived gradual loss of competi-
tiveness and the effects of globalization of high-
technology industries. In the EC’s case, however, there
were other factors influencing the policy landscape in
addition to the widely perceived change in the global
forces affecting R&D and innovation. These were:
· the continuing expansion of the Community and
the wide disparities between the industrial and
technological capabilities of the various member
countries;
· the already well established, but very different,
S&T policy infrastructures in a number of the
larger and richer member countries and the lack of
such infrastructures in the ‘cohesion’ members;
· the reluctance of public authorities to impose yet
another layer of policies and regulations on top of
101
Technology policy in the US and the EU
the national ones; and
· the absence of the appropriate legal framework and
institutions at the EC level for supporting a consis-
tent technology policy.
Very early in the decade, the Community started with
this last point.
The three treaties underlying the creation of the EC
(the European Coal and Steel Community Treaty of
1951, and the Treaties of Rome of 1957 establishing
the European Economic Community (EEC) and the
European Atomic Energy Authority (Euratom)) fore-
saw European-level funding of R&D only for coal and
steel, agriculture, and nuclear energy. The Treaty of
Rome provided policy powers to determine the regu-
latory framework and market conditions for European
industry.
The construction of a policy framework for Euro-
pean industry had thus progressed much sooner than
the construction of a policy framework for technol-
ogy. Already in the early 1970s, proposals were being
considered for eliminating technical barriers to trade,
opening up public procurement, harmonizing legal,
fiscal, and financial regimes, encouraging transborder
industry conglomerations, and speeding up industrial
readjustment and adaptation. The search for a consis-
tent EC framework for technology policy sprang up
later directly in connection with industrial concern
(restructuring, adaptation, international competitive-
ness). The technology policy framework materialized
only in the mid-1980s.6
This should not be taken to imply lack of concern
over technology during earlier decades. On the con-
trary, technology and the dependencies on foreign
countries have been part of the Community’s debate
since its creation. In the 1940s and 1950s, however,
the questions were different. Then, radically new
technologies arrived in spates — for instance., plas-
tics and polymers, antibiotics, transistors, computers
— and the technology to watch was nuclear energy.
Hence, the simultaneous creation of Euratom and of
the EEC in 1957.
By the late 1960s, the major European economic
powers had started to perceive a technological gap
with the US and a need for independence in strategic
industries (Servan-Schreiber, 1967). The United
Kingdom entered the EEC in 1973 largely on high
hopes concerning the country’s significant industrial,
scientific and technological capabilities.
European S&T activities were, however, organized
largely outside the EC policy framework until the
mid-1980s, including CERN (Centre Européen
Recherche Nucleaire), EMBO (European Molecular
Biology Organisation), ESRO (European Space Re-
search Organisation), and ESF (European Science
Foundation) in basic research, ESA (European Space
Agency) and COST (Co-operation in Science and
Technology Programme) in more applied research,
and Airbus, Arianespace, supersonic transport, and
EUREKA (European Research Co-ordination Agency)
in more commercially-oriented development research.
102
Even so, they promoted fairly extensive inter-Euro-
pean collaboration. Technology programs reflected
an effort to help create European industry ‘champi-
ons’ (in classic 1970s fashion) to compete effectively
with large American firms and the increasingly threat-
ening Japanese.
Against this backdrop, and with mounting con-
cerns over the international competitiveness of
European high-tech industry, a ‘Round Table’ was
organized in 1981 by Viscount Davignon, the
European Commissioner for internal market and
industrial affairs (1977–1981) and for industry and
S&T policy (1981–1985). The Round Table included
top representatives of the 12 strongest European elec-
tronics companies. The Commission offered assis-
tance through new programs to help industry raise its
competitiveness.
An important outcome of the Round Table was ES-
PRIT, instituted in 1983. This program was set up to
support pre-competitive research with broad applica-
tions in information technologies. ESPRIT served in
the early 1980s as a model for a series of other pro-
grams such as RACE (communications) and BRITE
(industrial technologies). Programs in biotechnology
and medicine were also set up. These were the first
truly EC-based R&D programs. They shared a num-
ber of characteristics (Vonortas, 1991):
· The research was to be carried out collaboratively
between firms, universities, and other research in-
stitutes across Europe.
· The research was to be pre-competitive and/or
pre-normative.
· The funding was on a shared-cost basis for indus-
trial participants (usually 50%).
· Applications for funding were judged by independ-
ent reviewers.
· The Commission determined only broad priorities
after consulting stakeholders.
With a set of (uncoordinated) programs now in place,
the need arose for an organized policy framework for
EC R&D. The first Framework Programme for
Research and Technological Development was es-
tablished in 1984 to stress the interaction among the
component program elements. The first Framework
Programme (FWP1) pre-dated the authority to allo-
cate finance and was more of a presentational exercise
aggregating a number of separate budgets. Neverthe-
less, it cast the mould for the future.
Recent changes
The legal basis for the EU S&T policy was provided
by the Single European Act (SEA), ratified in 1987.
This set in motion the process for the creation of the
single European market of 1992 by removing all bar-
riers to the free movement of goods, services, capital,
and people in the EU within five years. One important
objective of SEA was to promote competition.
Another was to create the legal basis for an active
Science and Public Policy April 2000

Community role in science and technology.
The Maastricht Treaty, ratified in 1993, further
elaborated the purpose of this ‘new’ Community role.
The goals of EU S&T policy were determined to be
strengthening European capabilities in science and
technology and promoting the international competi-
tiveness of European industry. Other goals of S&T
policy included ‘cohesion’ — narrowing the gap be-
tween the richest and the poorest European regions.
The SEA and the Maastricht Treaty made it neces-
sary for the Commission to formulate S&T policy
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
mould laid down by FWP1. Five Framework
Programmes on RTD (research, technology and de-
velopment) have been implemented to date: FWP1
(1984–1987); FWP2 (1987–1990); FWP3
(1990–1994); FWP4 (1995–1998); and FWP5
(1999–2002).
Although the budgets of the Framework
Programmes have grown substantially,7 caution
should be exercised in their interpretation:
1. R&D is a distant third priority in the EU budget.
With an approximate yearly expenditure of
ECU 3 billion in the mid-1990s, R&D trailed ag-
riculture with ECU 42 billion and the structural
programs for regional development with ECU
31 billion.
2. Total spending on R&D accounted for 4% of the
EU budget in the mid-1990s.
3. The Framework Programme accounted for only
a very small percentage of total government
spending on R&D in member states.8
4. However, if the Framework Programme expen-
diture is focusing on pre-competitive research,
its contribution to the total European expendi-
ture on such research is much larger than the
above numbers indicate. Adding industry’s
share (and assuming that this is ‘new’ rather than
‘replacement’ funds), the contribution may be
even larger.
5. The contribution of these funds to the different
member states varies widely. While not very im-
portant for the larger industrialized countries,
the sum of the total allocation of R&D expendi-
ture from the Framework Programmes and the
structural programs can account for more than
50% of the total public spending on R&D in
some of the ‘cohesion’ member states on the
periphery.
6. The majority of the larger and many of the
smaller, technically proficient firms have partic-
ipated (many of them multiple times) in Euro-
pean programs. The networks created in these
programs are believed to offer significant value
to these companies.
The relative changes in the funding of different S&T
activities in the first four Framework Programmes
Science and Public Policy April 2000
Technology policy in the US and the EU
The European region’s failure to
match the high growth rates of other
regions (namely East Asia) or the high
rates of employment creation in the
United States became probably the
most serious policy concern for the
European Union
have been illustrated extensively in European Com-
mission (1997). Essentially, there has been a sub-
stantial reduction in spending on energy, and a
tremendous increase in the late 1980s and early 1990s
and a subsequent decline in the share of information
and communication technologies. Support for life sci-
ences has increased steadily but it still amounts to less
than half the support for information and communica-
tion technologies. Human capital and mobility
has also grown substantially more recently, as have
activities related to the study of the socio-economic
effects of new technology.
The Fifth Framework Programme (FWP5) has
been promoted as a significant advance over previous
ones. Its design reflects the changes in the policy
agenda of the EU in the 1990s. As mentioned earlier,
the SEA and the Maastricht Treaty defined the overall
objectives of the Community’s S&T policy to be the
strengthening of the scientific and technological basis
of industry and the encouragement of industry to be-
come more internationally competitive. In the early
1980s, when FWP1 was designed, this was encapsu-
lated in a more supply-side policy, a push to close a
perceived technology gap in certain areas with major
competitors (US, Japan).
Gradually, however, the region’s failure to match
the high growth rates of other regions (namely East
Asia) or the high rates of employment creation in the
United States became probably the most serious pol-
icy concern of the EU.9 While competitiveness is still
considered a key factor and technology policy one of
the available policy tools to improve it, there has been
a mounting interest in the demand side of the policy,
relating to new technology applications. The Green
Paper on Innovation (1995) made a strong argument
concerning the relatively lagging ability of the Euro-
pean organizations to commercialize new technolo-
gies. It proposed more diffusion-oriented priorities,
emphasizing human resources, labor mobility, regu-
latory obstacles to enterprises, and finance.
Following-up on the Green Paper, the First Action
Plan for Innovation (1997) stressed the need for fos-
tering an innovation culture and a framework condu-
cive to innovation and for better articulating research
and innovation. A more balanced technology-cum-
innovation policy era thus emerged in Europe.
The Green Paper on Innovation and the First Ac-
tion Plan for Innovation set the stage for negotiating
103
Technology policy in the US and the EU
FWP5, deeply influencing it with the significantly
changed perspective for the Community’s S&T poli-
cies. In addition to an effort to close the perceived gap
through yet a greater push in new technologies, FWP5
places emphasis on the “socio-economic needs of the
European Union to which the Community research
must respond” (European Commission, 1997, page
508).
FWP5 is arguably organizationally simpler than its
predecessors, consisting of seven programs that alto-
gether reflect the Community activities set out in Arti-
cle 130g of the EC Treaty. Four of these are ‘thematic’
(intended to cover a series of well-identified prob-
lems) and the remaining three are ‘horizontal’ (re-
sponding to common needs across all research areas).
They are briefly reviewed below on the basis of a
recent Commission document elaborating on the
Framework’s structure (European Commission,
1999).
The thematic programs are:
Quality of Life and Management of Living Resources
The central aim of this program is quality of life,
which for these purposes means the quality of individ-
ual peoples’ lives (especially in terms of health), envi-
ronmental quality, and quality of communal life,
including enjoying the economic benefits of the
expected developments in life sciences and technol-
ogies. This program has three specific objectives: to
meet socio-economic needs; to increase European
added-value in all fields covered by the program; and
to support European competitiveness. The focus areas
are health, biotechnology, the management of living
resources, and creating the conditions for environ-
mentally friendly economic growth.
User Friendly Information Society The central aim
of this program is to reap the benefits from the emerg-
ing information society and to facilitate its advent in
Europe. Four complementary specific objectives have
been set: private individuals (to satisfy their needs and
expectations); companies and workers (to innovate,
and improve productivity and working conditions);
multimedia content (to allow Europe to express its
creativity and culture); and technologies (to accelerate
their development and to promote their application).
Competitive and Sustainable Growth The central
aim of this program is to assist European industry to
become more competitive and to attain sustainable
development. This is considered necessary in order
for European industry to provide the source of eco-
nomic power of the EU, consisting of a range of envi-
sioned goods and services both competitive and
environmentally friendly which will help improve the
quality of life on the continent and beyond. The focus
areas are: the development of safe, economic, and en-
vironmentally-friendly transport; the development of
high-quality materials and reliable methods of mea-
surement and testing; and the optimum use of research
infrastructure.
104
Energy, Environment and Sustainable Development
The central aim of this program is to ensure satisfac-
tory long-term energy supplies and to help reduce the
impact of human activity on the environment. Both
these areas are considered instrumental for quality of
life and socio-economics, the linchpins of FWP5.
This program is complemented by the Euratom pro-
gram with its focus on nuclear energy, and support
of fusion and fission generic research and research
infrastructure.
The horizontal programs were designed to cut across
all thematic programs. They are:
Confirming the International Role of European Re-
search The central aims of this program are: to fa-
cilitate the access of European entities participating in
the Framework Programme to both the scientific and
the technological potential existing outside the Union;
to implement strategically important activities with
non-European countries; to improve coordination
with other Community programs and other, non-EU
initiatives for cooperation, such as COST and
EUREKA; to increase the opportunities for researcher
training; and to prepare for the accession of new mem-
ber states. The program’s activities cover countries
preparing for accession, East European countries,
Mediterranean countries, developing countries,
emerging economies, and industrialized countries.
Promotion of Innovation and Encouragement of Par-
ticipation of SMEs In recognition that small and me-
dium-sized enterprises (SMEs) account for the vast
majority of firms and for most employment in Europe,
the central aims of this program are: to ensure the dis-
semination and exploitation of the results generated
by Framework Programme projects and to stimulate
technology transfer by coordinating the activities pro-
moted by the thematic programs’ innovation units;
and to coordinate the implementation of the specific
measures designed to encourage SMEs to participate
in the programs to a larger extent than before.
Improving Human Research Potential and the
Socio-economic Knowledge Base In contemporary
developed economies, knowledge is driving the econ-
omy and shaping society. The quality of human re-
sources, thus, becomes critical. The central aims of
this program are: to develop the Community’s human
potential, notably through the training and mobility of
researchers (including towards industry and in partic-
ular SMEs) and through innovation in the methods
and technologies of education and training with a
view to creating new jobs; to help make the Commu-
nity an attractive location for researchers and for in-
vestment in research and to promote European
research in the international arena; and to develop the
socio-economic knowledge base for a better under-
standing of key social and economic topics linked to
the objectives of the Framework Programme, and for
the development of science and technology policy and
Science and Public Policy April 2000

other Community policies.
In addition, the Fifth Framework Programme incor-
porates so-called “direct RTD actions” carried out by
the Community’s own research facility (the Joint Re-
search Centre (JRC)) as part of its mission. The JRC is
the scientific and technical body assisting the Com-
mission to exercise its prerogatives. The aim was for
the JRC to “focus its activities on areas where the
European added value is fully exploited. Its [JRC’s]
activities would thus be very largely defined through
its client/supplier relations with the Commission’s
other Directorates-General, with the flexibility inher-
ent in such relations”.
Policy dilemmas
The United States and the European Union entered the
1990s from different positions. The US came out of
the Cold War era with a very extensive, mission-
oriented federal S&T policy system focusing on
national defense, nuclear energy, public health, space,
and basic research. The country boasted the most well
established antitrust regulation and intellectual prop-
erty protection systems in the world. Industrial policy
has traditionally been left to state governments, with
large differences in the degree of policy aggressive-
ness and sophistication from state to state. Most state
governments have lacked sophistication in S&T
policy, apart from education and manufacturing ex-
tension programs.
Total R&D expenditure in the country has changed
dramatically. While the US has kept its prominent in-
ternational position in terms of overall R&D expendi-
ture — reaching an estimated US$206 billion in 1997,
nearly equal to that of the other G7 countries com-
bined — the sources of funding patterns have changed
extensively. The rates of increase in R&D investment
in recent years have been the highest since the early
1980s. The industrial sector has accounted for most of
the increase; it now provides about two thirds of the
national R&D expenditure. Firms undertake about
three fourths of the national R&D activity.
In contrast, the federal government has been losing
ground both as a source of R&D funds and as an R&D
performer. Total federal R&D obligations in 1997
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-
pared to approximately 46% only a decade ago. Simi-
larly, the federal share of total industry R&D
performance has declined precipitously, down from a
high of 32% to an unprecedented 14% in 1997. (NSB,
1998).
The EU entered the 1990s with a 40-year long in-
terest in industrial policy, significant science collabo-
ration among member states (with institutions,
however, outside the EU’s control), and a fledgling
technology policy established only a few years
earlier. The EU was not a homogeneous region; the
Science and Public Policy April 2000
Technology policy in the US and the EU
industrial and S&T policy sophistication of member
states varied greatly. The biggest and the most indus-
trialized have had well established national S&T pol-
icy systems for quite some time (Nelson, 1993).
Others on the periphery had used their industrial poli-
cies as surrogates until the mid-1980s when their
accession to the Community forced them to set up
national S&T policy systems (the four ‘cohesion’
countries: Greece, Ireland, Portugal, Spain).
Importantly, total R&D expenditure in the EU
region continues to be significantly lower than US
R&D expenditure. Moreover, whereas almost all pub-
lic R&D expenditure is in the hands of the federal gov-
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
member states still account for the lion’s share. However,
whereas the US federal government is responsible for
defense R&D (where it spends about 45% of its R&D
budget), defense R&D is the direct responsibility of
EU member states. The R&D budget of the EU is
solely devoted to civilian technology research.
Similar philosophies
Despite these differences, a largely similar philoso-
phy towards technology and innovation has devel-
oped in the US and the EU during the 1990s. Both
have made extensive efforts to balance the more
supply-side, traditional technology policies with
more demand-oriented, modern innovation policies.
Technology policies on both sides of the Atlantic have
focused on economic growth to a greater extent than
ever before.
The reasons for policy convergence have largely to
do with the lower national security threat and the
extraordinary changes in the international economic
environment affecting industry all around the world.
The importance of this cannot be overestimated as the
private sector serves nowadays as both the major
source and user of new technology. These changes
include the rise of new high-technology sectors; the ac-
celerating pace of technological change and the shorten-
ing product cycle; the increasing knowledge-intensity of
industry; the globalization of technology; and the in-
creasingly decentralized nature of the sources of techno-
logical knowledge and innovation.
In the 90s, there has been a largely
similar philosophy towards technology
in the US and the EU: they have made
extensive efforts to balance the
supply-side policies with more
demand-oriented ones and have
focused on economic growth more
than before
105
Technology policy in the US and the EU
Large corporations, still accounting for the major-
ity of R&D expenditure around the world, are shifting
strategies, cutting back or eliminating their central-
ized research laboratories, focusing R&D on core ac-
tivities, distributing R&D budgets to their operating
divisions in order to link it better to production and
marketing, and leveraging outside sources of technol-
ogy. Complex networks of industry–university–
government collaborations centered on the creation
and distribution of technological knowledge are
common.
In addition, the fast pace of technological change
has created massive opportunities for technological
entrepreneurship at small firms that have also been
able to exploit the increasing sensitization of universi-
ties to the opportunities in the private sector. The de-
centralization of R&D in larger corporations and the
rise of small high-tech firms imply a shorter-term per-
spective on R&D and a shift away from fundamental,
high-risk, long-term research in the private sector.
Maybe governments need to compensate.
Best policy approach
There is more agreement on the usefulness of an ac-
tive government role in technological innovation than
on the best policy approach. Take the example of the
United States. Up to the early 1980s, when the US en-
joyed a widespread technological lead across indus-
try, the federal government could bet on the domestic
economy reaping the benefits from the spillovers
from its relatively huge R&D expenditure. The US
served as the launch pad for new technology products
fostered by public spending, while domestic markets
played a key role in the maturation of new products.
Economic globalization, the increasingly distrib-
uted and decentralized nature of technology, and the
convergence of industrialized countries in terms of
technological capabilities have, however, weakened
the link between federal R&D and domestic spillovers
and social benefits. Thus, whereas there is an argu-
ment for an active government policy for technologies
aimed at economic growth, there is also concern over
its efficacy in the current economic environment. A
potential solution is to focus government investment
on areas with higher likelihood of domestic
spillovers, including investments in the technical and
physical infrastructure and in the labor pool that are
less mobile (Borrus and Stowsky, 1998; Reich, 1991).
“[T]echnology policy, if it is to contribute to the
economy, must be linked to economic policy”
(Branscomb and Florida, 1998, page 12). This means
that technology policy should be explicitly concerned
with productivity and growth of the private sector
(that is, the technology user). Which, in turn, means
that the government is not its own customer anymore
(as it was in a defense-oriented R&D system) but it is
called to assist private firms to compete in world
markets.
Many critics have objected to this new direction of US
technology policy during the Clinton Administration
106
largely on the grounds that the federal government is
too removed from the market to be able to assist the
private sector. These critics maintain that the new
policy direction is simply a recipe for wasting tax
payers’ money. This has become the great dilemma of
American technology policy.
What about the solution of focusing government
attention on relatively immobile resources such as in-
frastructure and the labor force? Not only expected
spillovers would be largely domestic; the government
might not need to understand the market that well.
There are problems with this approach too. First, the
clientele becomes even more dispersed than it would
have been if the policy focused on a few tangible ob-
jectives. Second, fuzzier objectives may open up op-
portunities for time-honored pork-barrel politics
(clearly not the intent of the policy supporters).
Meanwhile, the EU has also had to grapple with
several dilemmas of its own concerning the new tech-
nology policy direction. Peterson and Sharp (1998)
distinguished between three dilemmas. The first
concerns the coherence of the policy goals and struc-
tures. The question is whether the objectives of
competitiveness, strengthening the science base,
enhancing cohesion, and being alert to the social goals
of R&D are attainable in tandem. An example is the
potential tension between the objectives of research
excellence and cohesion between the more and less
advanced regions of the Community.
The gradual shift towards more technology
user-oriented policies raises concerns over whether
they can be addressed properly with policy tools de-
signed and implemented at the level of the Commis-
sion or whether they may be better addressed by
national or local policies.10 There is still no consensus
on whether the essentially top-down practice of the
Commission in setting priorities is preferable to a
bottom-up approach such as that of EUREKA in
proposing important R&D programs for support.
The second dilemma concerns the risk of raising
unrealistic expectations from the Framework Pro-
gramme whose size pales in comparison to national
R&D expenditure. There are at least two arguments in
favor of EU R&D programs. First, the technology pol-
icies and available resources of different member
states vary greatly; an umbrella planning instrument
may be necessary for creating and sustaining a mean-
ingful European economic area. Second, if well tar-
geted, FWP funds can account for a significant
portion of the available R&D funds across Europe in
certain narrow areas and certain kinds of research.
The shared-cost action method of supporting R&D
further leverages public funds. In addition, the Com-
munity has been conscious of the ‘subsidiarity’ prin-
ciple, trying to complement member states’ activities
and add European value through its programs.11 Ways
of adding such value include promoting activities that
need to be undertaken at the international level,
catalyzing national actions, and promoting the
diffusion of information among European research
organizations.
Science and Public Policy April 2000

A third dilemma is how to reconcile a
‘user-friendly’ policy with the “established, techno-
cratic and closed style of EU research policy-
making”. This questions whether the institutions in
place for R&D policy making can meet the demands
of a more diffusion-oriented policy. The political as-
pect of this dilemma is that a more diffusion-oriented
policy has a more dispersed clientele than a tech-
nology-push policy whose clientele can be largely
defined in terms of industry and, particularly, in terms
of large companies with political know-how. The
reconciliation is not easy and the tensions created in
the negotiation phase of the Fifth Framework
Programme were a good reflection of the difficulties.
Conclusion
The objectives of technology policy have changed
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
motivation had been to enhance the competitiveness
of the private sector in view of increasing inter-
national competition. The policy approach in both
cases was basically supply-side: motivate/assist firms
to produce technological advances at an ever-faster
pace.
By the early 1990s, it had become evident that the
international economic environment had changed
drastically, reflecting increasing globalization and in-
ternational interdependence. In increasingly global-
ized markets, competition involves more and more
direct competition among firms based in different
countries and multinational corporations. This, in
turn, affects policy. In industrialized open economies,
at least, the role of the government now becomes less
one of supporting ‘national champions”, because ei-
ther there are not any or they become difficult to rec-
ognize (Reich, 1991). Moreover, spillovers from
government-sponsored R&D are increasingly diffi-
cult to keep domestic. Either way, supply-side policy
measures start losing their efficacy.
Still, the role of the government in fostering a
vibrant domestic innovation environment seems to
increase in a globalized world. That role, however,
becomes more tightly linked to general economic pol-
icies to create an environment that helps industry
remain, and hopefully become even more, inter-
nationally competitive.
This obviously involves much more than technol-
ogy policy. It involves many policy aspects encased in
the concept of the ‘system of innovation’ such as com-
petition, regulation, intellectual property rights, edu-
cation, and finance (Edquist, 1997; Lundvall, 1992;
Nelson, 1993). As far as technology policy is con-
cerned, the objective becomes not only the creation of
new technologies but also their diffusion and the en-
couragement for their widespread use. Maximizing
overall economic growth, creating a versatile, highly
Science and Public Policy April 2000
Technology policy in the US and the EU
skilled labor force, nurturing an overall entrepreneur-
ial spirit and providing the necessary economic and
institutional support conducive to turning this spirit
into flourishing new enterprises become priorities.
This message successfully penetrated policy deci-
sion-makers in both the US Administration and the
European Commission in the early to mid-1990s. Its
implementation, however, has varied significantly
between the two regions. While both the US and the
EU have been busy with changing/building institu-
tions to meet the new challenges, their tasks have dif-
fered greatly as a result of their different institutional
environments, policy traditions, and recent political
developments. Implementation differences aside,
both administrations had to face the fact that manag-
ing a balanced technology policy in support of eco-
nomic growth is much more complex than managing
the traditional supply-side technology policies of the
past four decades.
Notes
1. With exceptions, of course, particularly at times of widely per-
ceived national emergencies such as the response to the oil
price increases in the 1970s. In addition, one must consider the
policies at the state level which have often been much more mi-
croeconomic in nature and much more explicitly concerned
with issues related to industry, investment, and technology
(Rycroft, 1990).
2. The science advisor of President Bush (Clinton’s predecessor)
was more sympathetic to an active government role in civilian
technology policy. For the first time, an Industrial Technology
Division was established in the Office of Science and Technol-
ogy Policy (OSTP) of the White House. In addition, the dormant
Federal Coordinating Council for Science, Engineering and
Technology (FCCSET) was revived and given authority to
identify program areas of interest across all major S&T agen-
cies. However, the effort to back up the identified ‘critical tech-
nologies’ of high-performance computing and communication,
biotechnology, advanced materials, and advanced manu-
facturing with real budgets did not get very far. An OSTP
document of the time entitled “US Technology Policy” did not
have much success either.
3. See various reports by committees organized under the aegis
of the National Academy of Sciences, National Academy of En-
gineering, and the Institute of Medicine, for instance, Commit-
tee on Science, Engineering and Public Policy (1992, 1993);
and Committee on Technology Policy Options in a Global
Economy (1993). See also National Science Board (1992),
Council on Competitiveness (1991), and Competitiveness Pol-
icy Council (1993).
4. Subsequent versions of these guidelines have followed in the
same direction.
5. Parts of this section draw extensively on European Commis-
sion (1997, 1999), Guzzetti (1995), and Peterson and Sharp
(1998).
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-
dustry only indirectly through a ‘trickle down’ process of S&T
knowledge flows.
7. The budgets of the four-year Framework Programmes have
been: FWP1, ECU 3,730 million (or about US$4.4 billion);
FWP2, ECU 5,396 million; FWP3, ECU 6,600 million; FWP4,
ECU 13,100 million; FWP5, estimated at EURO 14,960 million.
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
spending by European countries, amounting to approximately
US$60 billion in 1997 alone.
9. Unemployment was the major focus of one of the last important
documents of the ‘Delors era’ in the Commission: the White
Paper on “Growth, Competitiveness, and Employment”
(1993). This paper put technology policy in the front line to
107
Technology policy in the US and the EU
assist the necessary changes in the Community’s economic
structure.
10. The European Commission has been addressing the issue of
communication of S&T programs at the regional, national and
the EU levels.
11. The extent of success of the Commission’s efforts is question-
able because of the difficulties in influencing national policies.
An example is the case of the UK that operates a system of at-
tribution according to which the country’s contribution to FWP
budgets is attributed to and deducted from the budget of the
national ministry which is responsible for the area concerned.
Everything else being constant, this can easily result in crowd-
ing out of national investment. Other less obvious examples
have also been suspected.
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