commercial innovations as spurring automatically from scientific research. The idea was that once
the government had provided the basic research, product development and production would follow
immediately thanks to the market mechanism. In addition, as a complement to the pipeline model,
policy makers assumed that technology created in pursuit of governmental missions, especially defense,
space and nuclear energy, would transfer itself to industry automatically and at no cost. This is the
‘spin-off hypothesis’ that together with the pipeline model formed the basic framework of the U.S.
technology policy during the Cold War, also known as the ‘Linear model’.
In this vision of the innovation process, policy makers could hit the primary target of the Soviet’s
security threat (through funds for defense research and mission-oriented development) while having
the “positive externality” of stimulating industrial innovation through the pipeline spin-off mechanism.
Hence, for policy makers, the linear model had the attractive feature of achieving economic innovation
goals without interfering with the autonomy of private firms - government did not have to ‘pick winners
and losers’.
While this model of science and technology policy was successful in containing Soviet expansionism,
in the late 1960’s there were early indications, as Japan and Germany recovered from the war and
the East Asian NICs became credible competitors on global markets, that defense-based policies were
not working equally well in promoting economic security. From the early 1970s to the late 1980s
several indicators document the erosion of the US global technological leadership. Between 1980 and
1991 the global market shares of the United States in the high-tech markets declined by 16 percent,
while Japan’s share increased by about 30 percent (NSF, 1998). Guerrieri and Milana (1991), using a
classification scheme for high-tech sectors different form the OECD scheme, found that Japan’s share
of high-tech export doubled from about 7 percent in 1970-73 to about 16 percent in 1988-89, while the
US share declined from 30 percent to about 21 percent. Interestingly, the data on global leadership in
R&D investment mirror the evidence on global market shares. More precisely, using OECD ANBERD
data on R&D investment for two and three-digit manufacturing industries, Impullitti (2008a) shows
that the U.S. share of global R&D investment declined from 52 percent in 1973 to 37 percent in 1991,
while Japan’s share increased from 17 percent in 1973 to 28 percent in 1991. Finally, the loss of U.S.
leadership in both markets and R&D shares is concentrated in the major high-tech sectors.5
Concerns over U.S. global competitiveness in the late 1970s and early 1980s led to a series of leg-
islative changes that collectively created an institutional environment more favorable to commercial
innovation. The introduction of this set of policies, explicitly targeted at improving the commercial-
ization of technological advances and thus clearly at odds with the linear model, can be considered
as a structural change in the U.S. system of innovation (Mowery and Rosenberg 1989 and 1993, Ham
and Mowery 1995, Krimsky 2003, and Mirowsky and Sent 2005). The new strategy involved both
innovation cost-reducing measures and demand-pull policies.
5 The erosion of the American position in global high-tech markets was especially pronounced in electronics, a sector
in which Japan and East Asian new industrialized countries scored dramatic gains; and in aircrafts and parts, where the
competitiveness of European products increased rapidly (Guerrieri Milana 1991, and Tyson 1992). The larger drop in
the U.S. R&D shares takes place in Office and Computing Machineries (OCM), which accounts on average for 8 percent
of total manufacturing R&D and in Radio, TV, and Communication Equipment (RTCE), which accounts on average for
16 percent of total R&D: the U.S. share dropped from 0.76 to 0.53 in OCM and from 0.54 to 0.4 in RTCE, while Japan’s
share rose from 0.06 to 0.32 in OCM and from 0.13 to 0.26 in RTCE (Impullitti 2008a).