Inadequate investment in innovation is particularly costly in today's globally competitive environment where continued technological advancements are critical to sustaining economic prosperity. The government has a critical role in ensuring that society's general interest in innovation, and the public good associated with innovation, is represented in private-sector decision making. This can be accomplished through a variety of programs and initiatives that reward innovation at all levels. The various activities that make this possible fall into two general categories: (1) the creation and maintenance of a legal environment that encourages private sector investment in innovation (patents and the relaxation of antitrust); and (2) the provision of incentives to overcome the natural inclination of private parties to consider only their private benefits when choosing the level of innovation in which to invest (governmental grants and contracts to targeted tax incentives). The role of government, more specifically, can be found in three key areas: (1) funding of research and development performed in the private sector; (2) funding of Federal laboratory research activities and the effective transfer of that knowledge to the private sector; and (3) encouraging the industry-university collaboration in research and development. It is these three areas of research that generate technologies fundamental to increasing the rate of technological development in the private sector, and it is these areas that are the focus of this book.

1 Defining Government's Role in Innovation.- 2 The Influence of Federally-Financed R&D.- History of Federal R&D Support.- The Effect on Private R&D.- The Effect on Productivity Growth.- 3 The Production of Technical Knowledge.- Theoretical Framework.- Empirical Evidence.- Conclusions.- Appendix:Government as a Risk-Averse Bureaucrat.- 4 Investments in Infratechnology Research.- Investments in Infratechnology.- Infratechnology and Productivity.- Conclusions.- 5 Economic Impact of Federal Investments in Infratechnology.- Evaluating Infratechnology Research.- NIST's Investments to Implement Standards for Optical Fiber.- NIST's Research Program on Electromigration Characterization.- Conclusions.- 6 The Impact of External Research Relationships.- Description of the Data.- External Research Relationships.- Empirical Analysis.- Conclusions.- 7 Policy Initiatives to Support Innovation.- The Research and Development Tax Credit.- Conclusions.- 8 Restating Government's Role in Innovation.- References.