Nanotechnology and U.S. Competitiveness: Issues and Options
Nanotechnology and U.S. Competitiveness:
Issues and Options
May 15, 2008
John F. Sargent
Specialist in Science and Technology Policy
Resources, Science, and Industry Division
Nanotechnology and U.S. Competitiveness:
Issues and Options
The projected economic and societal benefits of nanotechnology have propelled
global investments by nations and companies. The United States launched the first
national nanotechnology initiative in 2000. Since then, more than 60 nations have
launched similar initiatives. In 2006, global public investment in nanotechnology
was estimated to be $6.4 billion, with an additional $6.0 billion provided by the
private sector. More than 600 nanotechnology products are now in the market,
generally offering incremental improvements over existing products. However,
proponents maintain that nanotechnology research and development currently
underway could offer revolutionary applications with significant implications for the
U.S. economy, national and homeland security, and societal well-being. These
investments, coupled with nanotechnology’s potential implications, have raised
interest and concerns about the U.S. competitive position.
The data used to assess competitiveness in mature technologies and industries,
such as revenues and market share, are not available for assessing nanotechnology.
In fact, the U.S. government does not currently collect such data for nanotechnology,
nor is comparable international data available. Without this information, an
authoritative assessment of the U.S. competitive position is not possible.
Alternatively, indicators of U.S. scientific and technological strength (e.g., public
and private research investments, nanotechnology papers published in scientific
journals, patents) may provide insight into the current U.S. position and serve as
bellwethers of future competitiveness. By these criteria, the United States appears
to be the overall global leader in nanotechnology. However, other nations are
investing heavily and may lead in specific areas of nanotechnology. Some believe
the U.S. leadership position in nanotechnology may not be as large as it has been in
previous emerging technologies.
Efforts to develop and commercialize nanotechnology face a variety of
challenges — e.g., technical hurdles; availability of capital; environmental, health,
and safety concerns; and immature manufacturing technology and infrastructure.
Some advocate a more active federal government role in overcoming these
challenges, including funding to aid in the translation of research to commercial
products; general and targeted tax provisions; incentives for capital formation;
increased support for development of manufacturing and testing infrastructure,
standards and nomenclature development, and education and training; creation of
science, technology, and innovation parks; and efforts to establish a stable and
predictable regulatory environment that keeps pace with innovation.
Some support a more limited federal role. Some who hold this view maintain
that the market, free from government interventions, is most efficient. They assert
that federal efforts can create market distortions and result in the federal government
picking “winners and losers” among technologies, companies, and industries. Others
oppose federal support for industrial research and applications, labeling such efforts
“corporate welfare.” Still others argue for a moratorium on nanotechnology R&D
until environmental, health, and safety concerns are addressed.
In troduction ......................................................1
Current and Anticipated Applications..................................3
U.S. Competitiveness Indicators......................................5
Research and Development Investments............................9
Private Sector Investments..................................11
Output of Peer-reviewed Papers.............................12
Citations to Peer-reviewed Papers............................14
Papers in “High-impact” Journals............................15
The Federal Role in U.S. Competitiveness: Issues and Options.............17
Technology Development ......................................18
Addressing Regulatory Concerns.................................22
International Coordination and Cooperation .......................24
Reassessing and Realigning Resources............................24
List of Figures
Figure 1.Nanotechnology Papers in the Science Citation Index,
by Region, 2000-2005....................................14
Figure 2.Relative Commitment of Ten Countries to Nanotechnology, 2003...15
List of Tables
Table 1. Top Ten Countries in Public Nanotechnology R&D, 2006..........11
Nanotechnology and U.S. Competitiveness:
Issues and Options
Nanotechnology is believed by many to be one of the most promising areas of
technological development and among the most likely to deliver substantialst
economic and societal benefits to the United States in the 21 century. With so much
potentially at stake, a global competition has emerged among nations and companies
to develop and capture the value of nanotechnology products.
Competitiveness generally refers to the comparative ability of a nation or
company to bring products or services to markets. Assessments of competitive
strength generally rely on indicators such as revenues, market share, and trade.
However, since nanotechnology is still largely in an early stage of development the
U.S. government does not collect this type of data for nanotechnology products. In
addition, nanotechnology is not a discrete industry, but rather a technology applied
across a wide range of products in disparate industries for which nanotechnology
products generally account for a small fraction of total sales. For these reasons, an
assessment of U.S. industrial competitiveness in nanotechnology — in the same
manner that analysts would assess the competitiveness of mature industries — is not
possible at this time. Alternatively, this report reviews national nanotechnology
research and development (R&D) investments, scientific papers, and patents as
indicators of current U.S. scientific and technological competitiveness and potential
indicators of future industrial competitiveness in nanotechnology products.
The federal government has played a central role in catalyzing U.S. R&D
efforts. In 2000, President Clinton launched the U.S. National Nanotechnology
Initiative (NNI), the world’s first integrated national effort focused on
nanotechnology. The NNI has enjoyed strong, bipartisan support from the executive
branch, the House of Representatives, and the Senate. Each year, the President has
proposed increased funding for federal nanotechnology R&D, and each year
Congress has provided additional funding. Since the inception of the NNI, Congress
has appropriated a total of $8.4 billion for nanotechnology R&D intended to foster
continued U.S. technological leadership and to support the technology’s
development, with the long-term goals of: creating high-wage jobs, economic
growth, and wealth creation; addressing critical national needs; renewing U.S.
manufacturing leadership; and improving health, the environment, and the overall
quality of life.
The United States is not alone in seeking to tap the perceived potential of
nanotechnology. Following the creation of the NNI, more than 60 nations have
established their own national nanotechnology initiatives, many based on the U.S.
model. Estimated global annual public investments in nanotechnology, including
those of the United States, reached $6.4 billion in 2006, with another $6.0 billion
invested by the private sector.1 In addition, some countries have established strategic
plans; nanotechnology-focused science, technology, and innovation parks; venture
capital funds; and other policies and programs to accelerate the translation of
nanotechnology research into products to exploit its economic potential. These
investments and policies, coupled with generally optimistic expectations, have raised
interest and concerns about the global competitive position of the United States in the
development and commercialization of nanotechnology.
In 2003, Congress enacted the 21st Century Nanotechnology Research and
Development Act (P.L. 108-153) assigning responsibilities and initiating research
efforts to address key challenges. In the act, Congress explicitly established global
technological leadership, commercialization, and national competitiveness as central
goals of the NNI:
National Nanotechnology Initiative
The National Nanotechnology Initiative is a federal government R&D initiative,
coordinated by the White House, involving 25 departments and agencies, including 13
that conduct nanotechnology R&D.
President Bill Clinton launched the NNI in 2000, and Congress provided $464
million in R&D funding to NNI agencies in FY2001. Since then, Congress has more
than tripled annual funding, providing $1.49 billion in FY2008, bringing cumulative
appropriations for NNI activities to $8.4 billion. President Bush has requested $1.53
billion for the NNI in FY2009.
The NNI budget is an aggregation of the nanotechnology components of the
individual budgets of NNI-participating agencies. The NNI budget is not a single,
centralized source of funds that is allocated to individual agencies. In fact, agency
nanotechnology budgets are developed internally as part of each agency’s overall budget
development process. These budgets are subjected to review, revision, and approval by
the White House Office of Management and Budget and become part of the President’s
annual budget submission to Congress. The NNI budget is then calculated by aggregating
the nanotechnology components of the appropriations provided by Congress to each
In 2003, Congress provided a statutory foundation for some of the activities of the
NNI through the 21st Century Nanotechnology Research and Development Act (P.L. 108-
153). The Act established a National Nanotechnology Program (NNP) and provided
authorizations totaling $3.7 billion over four years (FY2005-FY2008) for five NNI
agencies: the National Science Foundation, Department of Energy, NASA, National
Institute of Standards and Technology, and the Environmental Protection Agency. In
total, Congress appropriated $2.9 billion for these agencies during this period, or
approximately 79% of total authorized funding. The Act did not address the participation
of several agencies that fund nanotechnology R&D under the NNI, including the
Department of Defense, National Institutes of Health, and the Department of Homeland
1 Profiting From International Nanotechnology, Lux Research, December 2006. p. 2.
The activities of the Program shall include —
...ensuring United States global leadership in the development and application
advancing the United States productivity and industrial competitiveness through
stable, consistent, and coordinated investments in long-term scientific and
engineering research in nanotechnology;
accelerating the deployment and application of nanotechnology research and
development in the private sector, including start-up companies; ...and
encouraging research on nanotechnology advances that utilize existing processes
Congress has expressed interest in understanding whether the current level of
appropriations and the portfolio of activities pursued by the NNI is sufficient to
achieve these goals. There are a variety of perspectives on the sufficiency and
balance of activities and resources devoted to nanotechnology R&D, regulation, and
infrastructure. This report provides an overview of nanotechnology, current and
anticipated applications, indicators of U.S. scientific and technological strength, and
issues and options Congress may opt to consider for the federal role, if any, in
promoting the nation’s competitive position in nanotechnology.
Current and Anticipated Applications
Nanotechnology — a term encompassing nanoscale science, technology, and
engineering — involves the understanding and control of matter at scales between
1 and 100 nanometers. A nanometer is one-billionth of a meter; by way of
comparison, the width of a human hair is approximately 80,000 nanometers.
At this size, the physical, chemical, and biological properties of materials can
differ in fundamental and potentially useful ways from the properties of individual
atoms and molecules, on the one hand, or bulk matter, on the other hand.
Nanotechnology research and development is directed toward understanding and
creating improved materials, devices, and systems that exploit these properties as2
they are discovered and characterized.
Most nanotechnology products currently on the market — such as faster
computer processors, higher density memory devices, better baseball bats,
lighter-weight auto parts, stain-resistant clothing, cosmetics, and clear sunscreen —
are evolutionary in nature, offering valuable, but generally modest, economic and
2 The National Nanotechnology Initiative Strategic Plan, Nanoscale Science, Engineering,
and Technology Subcommittee, National Science and Technology Council, The White
House, December 2007.
Over the next five to ten years, proponents see nanotechnology offering the
potential for additional evolutionary improvements in existing products. Beyond the
next ten years, they believe that nanotechnology could deliver revolutionary advances
that could transform or replace existing products and industries, and create entirely
new ones. Some hoped-for applications discussed by the technology’s proponents,
involving various degrees of speculation and varying time-frames, include: new
prevention, detection, and treatment technologies that reduce death and suffering
from cancer and other deadly diseases;3 new organs to replace damaged or diseased
ones;4 clothing that protects against toxins and pathogens;5 clean, inexpensive,
renewable power through energy creation, storage, and transmission technologies;6
universal access to safe water through portable, inexpensive water purification
systems;7 energy efficient, low-emission “green” manufacturing systems;8
high-density memory systems capable of storing the entire Library of Congress
collection on a device the size of a sugar cube;9 agricultural technologies that increase
yield and improve nutrition, reducing global hunger and malnutrition;10 self-healing
materials;11 powerful, small, inexpensive sensors that can warn of minute levels of
toxins and pathogens in air, soil, or water, and alert us to changes in the
environment;12 and environmental remediation of contaminated industrial sites.13
Proponents in government, academia, and industry also maintain that nanotechnology
3 National Cancer Institute website. [http://nano.cancer.gov/resource_center/tech_
5 Risbud, Aditi. “Fruit of the Nano Loom,” Technology Review, February 2006.
6 Nanoscience Research for Energy Needs, Nanoscale Science, Engineering, and
Technology Subcommittee, National Science and Technology Council, The White House,
7 Risbud, Aditi. “Cheap Drinking Water from the Ocean,” Technology Review, June 2006.
8 Selko, Adrienne. “New Nanotechnology-Based Coatings are Energy Efficient and
Environmentally Sound,” Industry Week, August 22, 2007. “Tomorrow’s Green
Nanofactories,” Science Daily, July 11, 2007.
9 National Nanotechnology Initiative — Leading to the Next Industrial Revolution,
Interagency Working Group on Nanoscience, Engineering, and Technology, National
Science and Technology Council, The White House. [http://www.ostp.gov/NSTC/html/
10 21st Century Agriculture: A Critical Role for Science and Technology, U.S. Department
of Agriculture, June 2003; Nanoscale Science and Engineering for Agriculture and Food
Systems, draft report on the National Planning Workshop, submitted to the Cooperative State
Research, Education, and Extension Service of the U.S. Department of Agriculture, July
11 Nanotechnology in Space Exploration, Nanoscale Science, Engineering, and Technology
Subcommittee, National Science and Technology Council, The White House, August 2004.
12 Nanotechnology and the Environment, Nanoscale Science, Engineering, and Technology
Subcommittee, National Science and Technology Council, The White House, May 2003.
13 Proceedings of the U.S. Environmental Protection Agency Workshop on Nanotechnology
for Site Remediation, U.S. Environmental Protection Agency, October 2005.
could make substantial contributions to national defense, homeland security, and
space exploration and commercialization.
Many areas of public policy could affect the ability of the United States to
capture the future economic and societal benefits associated with these investments.
Congress established programs, assigned responsibilities, authorized funding levels,
and initiated research to address key issues in the 21st Century Nanotechnology
Research and Development Act. The agency budget authorizations provided for in
this act extend through FY2008 (see text box, “National Nanotechnology Initiative,”
for discussion of authorizations and appropriations).14 Both the House and Senate
have held committee hearings related to amending and reauthorizing this act in 2008.
A companion report, CRS Report RL34401, The National Nanotechnology Initiative:
Overview, Reauthorization, and Appropriations Issues, by John F. Sargent, provides
an overview of nanotechnology; the history, goals, structure, and federal funding of
the National Nanotechnology Initiative; and issues related to its management and
As the state of nanotechnology knowledge has advanced, new policy issues have
emerged. In addition to providing funding for nanotechnology R&D, Congress has
directed increased attention to issues affecting the U.S. competitive position in
nanotechnology and related issues, including nanomanufacturing; commercialization;
environmental, health, and safety concerns; workforce development; and
international collaboration. Views and options related to these issues are presented
later in this report.
U.S. Competitiveness Indicators
Nanotechnology is, by and large, still in its infancy. Accordingly, measures
such as revenues, market share, and global trade statistics — indicators often used
to assess and track U.S. competitiveness in other technologies and industries — are
not available for assessing the U.S. position in nanotechnology. To date, the federal
government does not collect data on nanotechnology-related revenues, trade or
employment, nor is comparable international government data available.
Nevertheless, many experts believe that the United States is the global leader
in nanotechnology. For example, a survey of U.S. business leaders in the field of
nanotechnology showed 63% believe that the United States is leading other countries
14 Under the act, Congress authorized $3.7 billion over four years (FY2005-FY2008) for five
NNI agencies: the National Science Foundation, Department of Energy, NASA, National
Institute of Standards and Technology, and the Environmental Protection Agency. In total,
Congress appropriated $2.9 billion for these agencies during this period, or approximately
79% of authorized funding. Several NNI agencies — including two with large
nanotechnology R&D budgets, the Department of Defense and National Institutes of Health
— did not receive budget authorizations under the act.
in nanotechnology R&D and commercialization while only 7% identified the United
States as lagging behind other countries.15
However, some believe that in contrast to many previous emerging technologies
— such as semiconductors, satellites, software, and biotechnology — the U.S. lead
appears narrower and the investment level, scientific and industrial infrastructure,
technical capabilities, and science and engineering workforces of other nations are
more substantial than in the past. Charles Vest, president of the National Academies
of Engineering and a member of the President’s Council of Advisors on Science and
Technology (PCAST), asserted early in 2008 that nanotechnology was the first
emerging technology “where we [the United States] don’t have a huge lead.” Vest
added that it was also the first emerging technology in which the federal
government’s efforts included “commercialization as a specific goal” and thus was
“the first real test” of the United States’ “loosely-coupled public-private partnership
in the new competitive environment.”16
Evidence of commercialization of nanotechnology-based products is generally
available. For example, the Woodrow Wilson International Center for Scholars’
Project on Emerging Nanotechnologies counts more than 600 company-identified
nanotechnology products on the market, more than half of which are produced by
companies based in the United States.17 Some private organizations have attempted
to estimate current nanotechnology-derived revenues and to estimate future revenues.
For example, Lux Research estimates that products incorporating nanotechnology
produced $50 billion in global revenues in 200618 (less than 0.1% of global
manufacturing output), and that by 2014 revenues will reach $2.6 trillion or 15% of
projected global manufacturing output.19
In the absence of comprehensive and authoritative economic output data (e.g.,
revenues, market share, trade), indicators such as inputs (e.g., public and private
research investments) and non-financial outputs (e.g., scientific papers, patents) are
now used to gauge a nation’s current and future competitive position in emerging
technologies. These indicators offer insights into nations’ scientific and technological
strength which may serve as a foundation for future product and process innovation.
15 “Survey of U.S. Nanotechnology Executives,” conducted by Small Times Magazine and
the Center for Economic and Civic Opinion at the University of Massachusetts-Lowell, Fall
16 Personal notes from PCAST meeting held January 8, 2008.
17 “Consumers Talk Nano,” press release, Project on Emerging Nanotechnologies, Woodrow
Wilson International Center for Scholars, October 22, 2007. [http://www.wilsoncenter.org/
18 The Nanotech Report, 5th Edition, Vol. 1, Lux Research, November 2007. p. iii.
19 Nordan, Matthew, president, LuxResearch, Inc. Testimony before the Subcommittee on
Science, Technology, and Innovation, Committee on Commerce, Science and
Transportation, U.S. Senate. Hearing on “National Nanotechnology Initiative: Charting thethnd
Course for Reauthorization.” 110 Cong., 2 Sess., April 24, 2008.
However, research and development investments, scientific papers, and patents
may not provide reliable indicators of the United States’ current or future competitive
position. Scientific and technological leadership may not necessarily result in
commercial leadership and/or in national competitiveness for the following reasons:
Basic research in nanotechnology may not translate into viable commercial
applications. Though no formal assessment of the composition of the NNI budget
has been made, there is general consensus that the NNI investment since its inception
has been focused on basic research. The National Science Foundation defines the
objective of basic research as seeking “to gain more comprehensive knowledge or20
understanding of the subject under study without applications in mind.” Therefore,
while basic research may underpin applied research, development, and
commercialization, that is not its primary focus or intent. In general, basic research
can take decades21 to result in commercial applications, and many advances in
scientific understanding may not present commercial opportunities.
Basic research is generally available to all competitors. Even when basic
research presents the potential for commercial exploitation, it may not deliver
national advantage. Open publication and free exchange of research results are
guiding principles of federally funded fundamental research22 and research conducted
by U.S. colleges and universities. This approach may allow for the rapid expansion
of global scientific and technical knowledge as new work is built on the scaffolding
of previous work. However, the information is available to all competitors, U.S. and
foreign alike, and thus may not confer competitive advantage to the United States.
U.S.-based companies may conduct production and other work outside of
the United States. In today’s economy, supply chains are global and the work
required to develop, design, produce, market, sell, and service products is generally
conducted where it can be done most efficiently. Even if U.S.-based companies
successfully develop and bring nanotechnology materials and products to market,
work may be conducted, and the economic value captured, outside of the United
States. Federal policies and investments may offer tools that can make the United
States the most attractive place for companies to conduct a greater share of value-
adding activities, contributing to U.S. economic growth and job creation.
20 Science and Engineering Indicators 2008, National Science Foundation, January 2008.
21 For example, the first working fuel cell was built in 1843, but the first semi-commercial
use of a fuel cell did not occur for more than a hundred years when the technology was used
in NASA’s Project Gemini space program. Even today, commercial production and use of
fuel cells is limited and federal technology development efforts continue.
22 National Security Decision Directive 189 states that, “It is the policy of this
Administration that, to the maximum extent possible, the products of fundamental research
remain unrestricted.” The directive allows for restriction of some results through national
security classification. Fundamental research is defined in the directive as including both
basic and applied research in science and engineering, but distinct from proprietary research
and industrial development, design, production, and product utilization. For further
information on U.S. policy toward unrestricted access to federally-funded fundamental
research, see CRS Report RL31695, Balancing Scientific Publication and National Security
Concerns: Issues for Congress, by Dana A. Shea.
U.S.-educated foreign students may return home to conduct research and
create new businesses. In the era following World War II, many of the most gifted
and talented students from around the world were attracted to the science and
engineering programs of U.S. colleges and universities. For many years, many of
those who graduated from these programs decided to stay in the United States and
contributed to U.S. global scientific, engineering, and economic leadership. Today,
many foreign students educated in the United States have economic opportunities in
their home countries that did not exist for previous generations. Some nations are
making strong appeals and offering significant incentives for their students to return
home to conduct research and create enterprises. Thus, federal support for
universities, in general, and scientific and engineering research activities, in
particular, may contribute to the development of leading scientists and engineers who
might return to their home countries to exploit the knowledge, capabilities, and
networks developed in the United States.
Small businesses may lack the resources needed to bring their
nanotechnology innovations to market. Federal programs, such as the Small
Business Innovation Research (SBIR) program and the Small Business Technology
Transfer (STTR) program, support leading-edge nanotechnology research by small
innovative firms. Federally funded university research can produce small start-up
ventures. These small businesses may develop commercially valuable technology,
and even successfully develop new nanotechnology materials, tools, processes, or
products, but lack the capital, infrastructure, or sales and distribution channels to
effectively bring such advances to market.
U.S. companies with leading-edge, nanotechnology capabilities and/or their
intellectual property may be acquired by foreign competitors. Foreign
companies may acquire leading-edge nanotechnology companies or their intellectual
property. This can take place, for example, as the result of an intentional business
strategy to be acquired (a common exit strategy for start-up companies), a hostile
takeover if the enterprise is a public company, or when a business has failed or is
failing. In the latter case, the company or its intellectual property might be acquired
at a fraction of its development cost or potential value.
U.S. policies or other factors may impede nanotechnology
commercialization, make it unaffordable, or make it less attractive than foreign
alternatives. Federal, state, and local policies (e.g., taxes, environmental and health
regulations, ethical restrictions) and other factors (e.g., availability, quality, and cost
of labor; proximity to markets; customer requirements; manufacturing infrastructure;
public attitudes) may prevent or discourage commercialization of nanotechnology
innovations in the United States. Companies may be prohibited from producing a
commercially viable product in the United States, may be unable to do so affordably,
or may find comparatively favorable conditions (e.g. lower taxes or tax holidays;
fewer regulatory restrictions; qualified, available, and less costly workforce) outside
the United States.
Comparisons of aggregate national data may be misleading. For example,
a small nation with limited resources may be unable to pursue leading-edge research
across a broad spectrum of nanotechnology-related disciplines and applications, and
instead opt to seek technological dominance in a discreet area by investing in a
limited set of disciplines and applications (or even a single one). In such a case, that
country may become the strongest competitor in a given area, while analysis of
aggregate numbers might obscure this strength. Alternatively, a rapidly developing
nation may invest substantial capital in nanotechnology research, but lack key
elements — such as a strong scientific and technological infrastructure; mature
industry, service, and private capital infrastructure; experienced scientists, engineers,
managers, and entrepreneurs; and/or a market-oriented business climate — needed
to fully capitalize on such an investment.
In addition, the concept of a national competitive position may differ from the
past as a result of increased globalization of research, technical talent, and
production. For example, the world’s leading-edge research in a field of
nanotechnology might be conducted at an American university, by Chinese students,
supported by research funds from a German-based corporation, with engineering
underway in Russia, plans to manufacture in Taiwan, shipping by Greek-flagged
vessels, and technical support provided online and by telephone from India. In such
an example, the global distribution of knowledge workers, investors, and producers
make the determination of national competitiveness more difficult.
Just as other countries might benefit from U.S. nanotechnology R&D, so too
might the United States benefit from nanotechnology R&D conducted in other
nations through a variety of means including studying published research results,
acquiring or licensing patents, conducting joint business ventures, and by fostering
a business environment that attracts production and related activities. Some
economists assert that international R&D collaboration can benefit the United States
as well by improving the productivity of the R&D process.23
With these caveats, the following section reviews input and non-economic
output measures as indicators of the U.S. competitive position in nanotechnology.
23 Economic Report of the President, Council of Economic Advisors, The White House,
Research and Development Investments24
National research and development investment is an input measure that may
provide some perspective on how successful a nation and the firms within the nation
may become in producing scientific and technical knowledge that can lead to
innovative products and processes. However, the long-term value of these
investments may be affected by a variety of factors such as: the capability of the
scientists and engineers conducting the R&D and the tools available to them; the
efficiency of the system (e.g., businesses, supply chains, infrastructure, innovation
climate, government policies) for translating R&D results into commercial products;
the fields of nanoscience and nanotechnology pursued; the balance in fundamental
research, applied research, and development efforts; and balance in R&D directed at
exploiting commercial opportunities, meeting societal needs (e.g., health,
environment), addressing government missions (e.g., defense, homeland security),
and non-directed efforts to expand the scientific knowledge frontier.
Public Investments. The United States has led, and continues to lead, all
nations in public investments in nanotechnology R&D. However the estimated U.S.
share of global public R&D investments in nanotechnology has fallen as other
nations have established similar programs and increased funding. In the early part
of this decade, many nations followed the U.S. lead and established formal national
nanotechnology programs in recognition of the potential contributions
nanotechnology may offer for economic growth, job creation, energy production and
energy efficiency, environmental protection, public health and safety, and national
security. According to Mike Roco, past chair of the National Science and
Technology Council’s (NSTC) Nanoscale Science, Engineering, and Technology
(NSET) subcommittee, at least 60 countries have adopted national nanotechnology25
projects or programs. Japan, Germany, and South Korea are making substantial
sustained investments across a broad range of nanoscale science, engineering, and
technology and are strong competitors for global leadership. More recently, China
and Russia have increased investments in nanotechnology. In addition, others —
such as Israel, Singapore, and Taiwan — have focused their resources on either a
24 Comparisons and aggregations of investments in R&D across organizational and national
boundaries are fraught with imprecision and inaccuracy. One challenge with quantifying
public or private investment in nanotechnology R&D relates to the definition of
nanotechnology used by different governments and institutions. There is significant debate
in and among federal agencies with respect to what should be considered (and thus counted)
as nanotechnology R&D, not withstanding the NNI definition, as well as within and between
companies, industries, and governments. In addition to substantive definitional
disagreements about nanotechnology, some seek to take advantage of the cachet of the term
“nano” or “nanotechnology.” Strong interest in nanotechnology on the part of policymakers,
investors, and consumers may induce some to characterize non-nanotechnology activities
or products as nanotechnology, or to characterize an entire effort as nanotechnology R&D
when in fact only a portion of it is devoted to nanotechnology. Conversely, some firms may
not characterize nanotechnology research efforts as “nanotechnology” out of concern for
potential negative reactions from customers or unwanted regulatory attention.
25 Roco, M.C. “International Perspective on Government Nanotechnology Funding in 2005,”
Journal of Nanoparticle Research, 2005, Vol. 7(6).
specific nanotechnology niche or on technology development (in contrast to
Lux Research estimates that total 2006 public global R&D investments
increased 10% over the 2005 level, reaching $6.4 billion. International investment
levels can be compared using differing methods, producing substantially different
perspectives on leadership. For example, using a currency exchange rate comparison,
the United States ranks ahead of all others, with federal and state investments of
$1.78 billion in 2006 (27.8% of global public R&D investments), followed by Japan
($975 million, 15.2%) and Germany ($563 million, 8.8%). When national
investments are adjusted using purchasing power parity (PPP) exchange rates (which
seek to equalize the purchasing power of currencies in different countries for a given
basket of goods and/or services),27 China ranks second in public nanotechnology
spending in 2006 at $906 million, behind only the United States; Japan drops to third
as its PPP-adjusted investment falls to $889 million.28 Comparative international
public funding for nanotechnology R&D is provided in Table 1.
Table 1. Top Ten Countries in Public Nanotechnology R&D,
in millions of U.S. dollars in millions of U.S. dollars
using currency exchange ratesusing PPP exchange rates
United States1,775United States1,775
J a pan 975 China 906
Germany 563 J a pan 889
China 220 T a iwan 249
Russia 106 India 186
Canada 61 Russia 184
Source: Profiting from International Nanotechnology, Lux Research, December 2006.
26 Ranking the Nations: Nanotech’s Shifting Global Leaders, Lux Research, November
27 The use of PPP-adjusted numbers may distort the comparative value of national R&D
investments since the “basket of goods” used to adjust prices generally (which may include
food and other consumer items) may bear little resemblance to the goods and services
purchased for nanotechnology research and development. In addition, while salaries of
researchers in countries such as China may be lower than in other countries (i.e., more
research can be bought with a dollar in China than in the United States), the cost of
nanotechnology research equipment is likely to be essentially the same in all countries.
28 Profiting from International Nanotechnology, Lux Research, December 2006. pp. 8-9.
Private Sector Investments. Private investments in nanotechnology R&D
come from two primary sources, corporations and venture capital investors.
Globally, corporations invested an estimated $5.3 billion in nanotechnology research
and development in 2006. This figure represents a 19% increase over the 200529
estimate, a growth rate nearly twice that of global public R&D investments. Faster
growth in corporate R&D may be an indicator that nanotechnology research is
moving closer to commercial production.
As with public R&D investments, on a PPP comparison basis, the United States
led the world in 2006 in private sector R&D investments in nanotechnology with an
estimated $1.9 billion investment, led by companies such as Hewlett-Packard, Intel,
DuPont, General Electric, and IBM. Japan’s $1.7 billion in private investments in
nanotechnology R&D — led by companies such as Mitsubishi, NEC, and Hitachi —
ranks a close second behind the United States. The private investments of companies
headquartered in these two nations account for nearly three-fourths of corporate
investment in nanotechnology R&D in 2006. In contrast to its high PPP ranking in
public R&D investment, China ranks fifth in corporate investment, accounting for
only about 3% of global private R&D investments in nanotechnology.30
Strength in an existing industry base may be a driver for private investment in
nanotechnology innovations. For example, multi-walled carbon nanotubes
(MCWNTs) offer significant improvements in lithium-ion (Li-ion) battery life.
Japan’s strength in Li-ion batteries is seen as a driving force in Japan’s leading
position in the manufacture of MWCNTs and Japanese companies’ investments in
ton-scale production capabilities.31
Venture capital investment — early-stage equity investment, generally
characterized by high risk and high returns — provides another possible indicator of
international competitiveness. In 2007, venture capital for nanotechnology reached
an estimated $702 million worldwide of which U.S.-based companies received $632
million (approximately 90%).32
The quantity of peer-reviewed scientific papers published by scientists and
engineers of each nation is one indicator of the scientific leadership of that nation.
The scientific journals used to generate such counts tend to be considered among the
most reliable and prestigious in the fields. Nevertheless, as a tool for assessing
national competitiveness, this indicator has shortcomings. For example, paper counts
do not assess the level or significance of contributions made by each of the authors.
While an article may list a principal investigator, such as a university professor, as
the lead author, the other authors, possibly graduate students or post-grads from a
29 Profiting from International Nanotechnology, Lux Research, December 2006. pp. 25-26.
30 Profiting from International Nanotechnology, Lux Research, December 2006. pp. 9-10.
31 International Assessment of R&D in Carbon Nanotube Manufacturing and Applications,
World Technology Evaluation Center, Inc., June 2007.
32 Private communication between CRS and Lux Research, Inc., April 28, 2008.
country other than that of the lead author, may have made the most important
contributions to the work. Publication of a scientific paper may also represent a
recognition of its unique scientific insights, yet offer little or no potential for useful
applications or commercial relevance.
Output of Peer-Reviewed Papers. The United States leads all other
nations in peer-reviewed nanotechnology papers published in scientific journals. A
National Bureau of Economic Research (NBER) analysis reported that the United
States’ 24% share of global publication output was more than double that of the next
most prolific nation, China.33 However, this share represents a decline from the early
1990s when the United States accounted for approximately 40% of nanotechnology
papers. The NBER working paper concludes, “Taken as a whole these data confirm
that the strength and depth of the American science base points to the United States
being the dominant player in nanotechnology for some time to come, while the34
United States also faces significant and increasing international competition.”
A quantitative analysis of published scientific papers comparing the United
States to the Europe Union (EU) nations as a whole was prepared by United
Kingdom-based Evaluametrics, Ltd. following an inquiry from the Congressional
Research Service in December 2007.35 Evaluametrics’ analysis shows that the
number of nanotechnology papers more than doubled between 2000 and 2005. Using
a fractional count of papers,36 the United States maintained about a 22% share of37
papers from 2000 to 2005. The EU27’s share of papers fell from 32% to 25%
during this period, while China’s share rose from 11% to 20%. Viewed from this
perspective, the EU27 led the United States in output of nanotechnology-related
scientific papers, but the EU27 share has been in decline. China’s share is
approaching that of both the United States and the EU27 (see Figure 1).38
Using an integer count, with each paper assigned to the nation of the lead
author’s address, yields similar results. By this method, the EU27 led the world in
33 Zucker, L.G. and M.R. Darby. “Socio-Economic Impact of Nanoscale Science: Initial
Results and Nanobank,” National Bureau of Economic Research, March 2005.
35 Nanotechnology Research Outputs 2000-2007: Interpretation of Results, prepared for
CRS by Evaluametrics, Ltd. in December 2007. This analysis was performed using
information from Thompson Scientific’s Science Citation Index, selecting papers based on
two filters, a list of specialist journals and a list of key nano-related words in the title of the
36 Using a fractional count approach, if a paper has multiple authors of different nations, a
fraction of the paper is assigned to each country in proportion to the nations listed in the
authors’ addresses. Thus, a paper with three authors, two of which list U.S. addresses and
one of which has an address in the United Kingdom, would be allocated as 0.67 (two-thirds)
of a paper to the United States and 0.33 (one-third) of a paper to the United Kingdom.
37 The EU27 represents the combined output for the 27 nations of the European Union.
38 For purposes of this analysis, Evaluametrics attributes Taiwan’s data to China.
and China with approximately 23%. Evaluametrics’ analysis of preliminary data
shows that China may have surpassed the United States in share of papers in 2007.39
Evaluametrics’ analysis of the papers by scientific disciplines reveals regional
differences. The United States’ articles were more heavily weighted toward the
biological and medical fields, China’s toward chemistry and engineering, and the
EU27’s toward the biological and medical fields, similar to the United States, but
with a greater emphasis on physics and less on chemistry.
Figure 1. Nanotechnology Papers in the Science
Citation Index, by Region, 2000-2005
300 00V D
/ D RoW
250 00O M CN +T W
200 00C D - EU27
0P a p e
2 000 200 1 20 02 2 00 3 2004 2 005 c
Source: Evaluametrics, Ltd., December 2007.
Note: RoW = Rest of World, CN+TW = China, including Taiwan, EU27 =
nations of the European Union.
Evaluametrics also calculated for each country/region the share that
nanotechnology papers represented as a percentage of all scientific papers. Dividing
this percentage by the average for all nations yields a ratio the author calls a nation’s
“relative commitment” to nanotechnology. Of the 10 countries examined, South
Korea, China, and Japan showed the highest relative commitment, while the United
States and EU27 fell somewhat short of the world average (see Figure 2).
39 Nanotechnology Research Outputs 2000-2007: Interpretation of Results, Evaluametrics,
Ltd., December 2007.
Figure 2. Relative Commitment of Ten Countries to
t e chno
1t m e nt
K R CN J P D E F R W l d E U27 I T US UK N L CAe l a t
Source: Evaluametrics, Ltd., December 2007.
Note: KR = South Korea, CN = China (including Taiwan), JP = Japan, DE
= Germany, FR = France, Wld = World, EU27 = nations of the European
Union, IT = Italy, UK = United Kingdom, NL = The Netherlands, CA =
Ca na d a .
Citations to Peer-Reviewed Papers. Another measure of global
leadership in nanotechnology is the quality and value of peer-reviewed papers. One
measure of the quality and value of a paper is the frequency with which it is cited in
other peer-reviewed papers. Evaluametrics’ analysis shows that papers attributed to
the United States are much more frequently cited than those attributed to China, the
EU27, and the rest of the world as a whole. This held true overall and separately in
each of the four disciplines examined (biology, chemistry, engineering, and
physics).40 The U.S. lead was particularly pronounced in biology. China fell below
the world average number of citations in each of the four disciplines, as well as
overall. The EU27 performed near the world average in engineering and physics, and
somewhat higher in chemistry. Using a slightly different citation metric,41 56% of
U.S. papers have 10 or more citations, in contrast to only 38% for the EU27 and
approximately 30% for China. The Netherlands and Germany lead the EU27 in
papers with 10 or more citations with approximately 45% each.
Papers in “High-Impact” Journals. A second measure of the quality of
a nation’s papers is the share of its papers in influential journals. A review of
Science, Nature, and Physical Review Letters (which PCAST refers to as “high
impact journals”) shows the United States accounted for more than 50% of
nanotechnology-related papers in these journals in 2004. However, while the
absolute number of papers in these journals attributed to the United States has grown
40 Using the Potential Citation Index metric based on the mean five-year citation counts to
papers in the given journals.
41 Using the Actual Citation Index metric for papers published in 2003 and cited between
continuously since 1991, the U.S. share of papers has fallen as other countries
collectively increased their production at an even faster rate.42
Patent counts — assessments of how many patents are issued to individuals or
institutions of a particular country — are another indicator used to assess a nation’s
competitive position. According to the U.S. Patent and Trade Office (USPTO), a
patent grants ownership rights to a person who “invents or discovers any new and
useful process, machine, manufacture, or composition of matter, or any new and
useful improvement thereof.” By this definition, patents may be an indicator of
future value and national strength in a technology, product, or industry.
By this measure the United States position appears to be very strong. United
States assignees dominate all other countries in patents issued by the USPTO.
According to an analysis by the USPTO of patents in the United States and in other
nations, U.S. origin inventors and assignees/owners have:
!the most nanotechnology-related U.S. patents by a wide margin;
!the most nanotechnology-related patent publications globally, but by
a narrower margin (followed closely by Japan); and
!the most nanotechnology-related inventions that have patent
publications in three or more countries, 31.7% — an indication of a
more aggressive pursuit of international intellectual property
protection and, by inference, of its perceived potential value. By this
measurement, the United States is followed by Japan (26.9%),
Germany (11.3%), Korea (6.6%), and France (3.6%).43
There has been rapid growth in nanotechnology patents in the USPTO and
European Patent Office (EPO) patent databases. A 2007 study reports that the
number of U.S. nanotechnology patents in the USPTO and EPO databases grew at
a near exponential pace between 1980 and 2004. The study showed that each year
since 1990, U.S. assignees have accounted for approximate two-thirds of all patents
in the USPTO database. In 2004, U.S. assignees accounted for 66.9% of USPTO
42 The National Nanotechnology Initiative at Five Years: Assessment and Recommendations
of the National Nanotechnology Advisory Panel, President’s Council of Advisors on Science
and Technology, May 2005. [http://www.nano.gov/FINAL_PCAST_NANO_REPORT.pdf]
43 Eloshway, Charles. “Nanotechnology Related Issues at the U.S. Patent and Trademark
Office,” Workshop on IPR in Nanotechnology: Lessons from Experiences Worldwide,
Brussels, Belgium, April 2007. [ftp://ftp.cordis.europa.eu/pub/nanotechnology/docs/
44 Li, Xin; Lin, Yiling; Chen, Hsinchun; Roco, Mihail C. “Worldwide Nanotechnology
Development: A Comparative Study of USPTO, EPO, and JPO Patents (1976-2004),”
Journal of Nanoparticle Research, Vol. 9, December 2007.
An earlier study of USPTO data, covering patents from 1976 to 2002, also
indicated U.S. nanotechnology patent leadership, with the United States accounting
for more than 67% of patents (based on a full text search of patents for
nanotechnology-related key words), followed by Japan, Germany, France, and
Canada. In 2003, the United States, Japan, Germany, Canada, and France continued
to rank in the top five, with the Republic of Korea and the Netherlands jumping
several spots each to sixth and seventh places, respectively; Ireland and China made
their first appearance in the top 20 nations. With respect to patent citations by
subsequent patents — a possible indicator of the usefulness of a patent — the study
showed U.S. nanotechnology patents dominated citations and reflected strong
interactions with Japanese and German patents.45
Patent counts, however, have shortcomings in assessing future competitiveness.
Experience shows that not all patents have equal value. Some patents are
“blockbusters” that largely define products and industries, and result in substantial
wealth creation and competitive advantage for its owners. Other patents are useful,
but offer only moderate value. And some patents are never realized in materials,
products or processes. Patent counts do not attempt to assess the relative value of
each patent, instead assigning equal value to each. Thus, a nation with a high patent
count in nanotechnology may not benefit as much as a nation with fewer, but more
In addition, companies may choose not to patent a particular idea — even one
with significant value — for a variety of reasons. For example, public exposure of
the idea as required by the patent application process may enable other companies to
engineer around their patent, finding a way to do what the original patent
accomplished, but in a way that is sufficiently different that it qualifies for a new
patent. Alternatively, a company may be able to block the original patent holder from
further improvements by filing patent applications that essentially block out potential
improvements. Or, unscrupulous producers may ignore the patent and use the
intellectual property without compensating the patent holder. Instead of filing for a
patent, a company may choose instead to hold a valuable intellectual property as a
trade secret. In contrast to patents which provide protection for defined periods,
trade secrets can extend indefinitely. The Coca-Cola Company has held its
formula(s) for Coke as a trade secret for over 100 years.46
The Federal Role in U.S. Competitiveness:
Issues and Options
Congress has provided $8.4 billion in funding for nanotechnology R&D under
the National Nanotechnology Initiative, and more than tripled annual funding since
45 Huang, Zan, Hsinchun Chen, and Zhi-kai Chen. “International Nanotechnology
Development in 2003: Country, Institution, and Technology Field Analysis Based on
USPTO Patent Database,” Journal of Nanoparticle Research, Vol. 6, August 2004.
46 The Coca-Cola Company website. [http://www.thecoca-colacompany.com/heritage/
its inception. At the same time, other nations have established and bolstered their
nanotechnology investments, programs, and policies, stirring debate about how the
federal government can best ensure U.S. competitiveness in this field.
While there is broad consensus that U.S. competitiveness in nanotechnology is
important, there are a wide variety of views about the role the federal government
could or should play in supporting this objective. These perspectives are reflective
of long-running policy debates over the appropriate role of government in promoting
research, development, innovation, and industrial competitiveness. Some argue that
the federal role should be limited to funding basic research, R&D needed to meet
agency mission requirements, and development of the U.S. scientific and technical
workforce.47 Some believe the federal government should also fund development
efforts that move nanotechnology closer to commercial products, especially in light
of its potential economic and societal benefits.48 Others assert that the federal
government’s role in competitiveness should be limited to establishing a healthy
business environment and allowing market forces and the private sector to shape U.S.
competitiveness.49 Among those concerned about nanotechnology’s potential
adverse implications for health, safety, and the environment are those who support
a more active federal role in funding environmental, health, and safety (EHS)
research to better understand, characterize, and regulate nanotechnology,50 and those
who prefer the federal government act to slow the development and
commercialization of nanotechnology pending further EHS research.51
47 Vannevar Bush’s 1945 seminal report to President Truman, Science: The Endless
Frontier, advocated this approach to support both government mission needs and industrial
48 This perspective is exemplified by President Clinton’s first technology policy statement,
Technology for America’s Economic Growth, A New Direction to Build Economic Strength,
February 22, 1993. The Brookings Institution also advocates this position.
49 Organizations such as the Cato Institute and the Heritage Foundation generally support
such an approach.
50 This position is held by many organizations, including the Woodrow Wilson International
Center for Scholar’s Project on Emerging Nanotechnologies, Environmental Defense, and
51 The ETC Group and Natural Resources Defense Council are advocates for this approach.
Survey of Industry Views on the Federal Role
A survey of U.S. nanotechnology business leaders indicated this community was
divided on the desired level of government involvement in the development of
nanomanufacturing technologies with 45% wanting “government to take the lead in
R&D and commercialization incentives” and 43% wanting “limited participation.”
Another 11% of respondents said they wanted government to “stay out of it.”
Among the most significant barriers to growth identified by U.S. nanotechnology
business leaders in a survey conducted by Small Times magazine and the University
of Massachusetts-Lowell were: intellectual property issues (46%), lack of financing
(45%), lack of available prototype facilities (43%), and lack of nanotechnology safety
standards (36%). Ninety-two percent of respondents identified access to unique
equipment and facilities as very important, and 91% identified access to processes and
tools to reduce time-to-market from R&D as very important.
Nearly three of five respondents indicated that they use or planned to use shared-
use facilities at local universities, with science and engineering labs (25%), electronic
labs (24%), and biotech labs (17%) topping the list, followed by specific diagnostic
equipment (14%) and microfabrication labs (12%). More than three-fourths of the
nanotechnology executives surveyed identified internal R&D as the primary source of
expertise for the development of products and processes. Another 9% of executives
identified industry associations or consortiums as their primary source of expertise,
while only 7% identified collaboration with universities.
Source: “Survey of U.S. Nanotechnology Executives,” conducted by Small Times Magazine
and the Center for Economic and Civic Opinion at the University of Massachusetts-Lowell, Fall
Much of the public dialogue on how the government can advance U.S. strength
in nanotechnology has focused on federal technology funding. Advocates for
increased federal support put forth a variety of arguments.
Some believe that the federal government should provide increased funding for
“downstream research,” i.e., applied research and development closer to commercial
products, including production prototypes.52 Those who advocate this position
generally assert that many promising research breakthroughs and early technology
developments fail to make it to market. This failure, they argue, results from
inadequate funding mechanisms to bring the technology to a state of maturity in
which private corporations and other sources of capital are willing to invest in the
technology — or in the company that holds the technology — to bring it to market.
For example, they assert that investor demand for short-term returns can result in
companies being unable to invest in higher-risk, longer-term technology development
projects needed to sustain their viability in the future. Similarly, according to these
advocates, venture capitalists and other investors often have exit strategies and/or
seek returns in a timeframe (generally three to five years) inconsistent with the
52 This position is held by many small technology businesses and start-ups.
longer-term development horizons of emerging and enabling technologies. With
federal investments, say supporters, technical risk could be reduced to a level that
enables promising research and early-stage technologies to overcome “the valley of
death”53 and reach the marketplace where the nation would be able to capture their
economic and societal benefits.
One rationale offered by some economists for federal funding of R&D is that
the private sector underinvests in R&D because many of the benefits (economic and
societal) are captured by others, particularly where the results cannot be easily
appropriated for production and profit.54 However, as research moves closer to
commercialization, private sector incentives to invest increase and the rationale for
federal R&D funding is diminished.
Another argument for government R&D funding put forth by economists and
others is that the development of emerging and enabling technologies may be beyond
the ability of any single company or industry to develop due to high cost, high risk,
lack of requisite expertise, and an inability to capture adequate returns. While a
single company or industry may not be able to achieve adequate returns across its
limited line of products and services, the economic benefits that accrue across all
industries may be sufficient, even sweeping. Another justification for federal
funding, say advocates, is that institutional, legal, cultural and other barriers may
inhibit or prevent all parties from working together to share the costs and risks of
R&D. The National Cooperative Research Act of 1984 (P.L. 98-462) and the
National Cooperative Production Amendments of 1993 (P.L. 103-42) sought to spur
collaborative research and manufacturing efforts by lowering legal barriers.
Opposition to expanded federal R&D efforts stem from a variety of
perspectives, including those who believe that such efforts may be ineffective or
counterproductive, a view held by many economists.
The best way to deal with the many changes in demand that occur in a dynamic
economy is to allow investors and workers to respond to such changes....
Government allocation of investment that ignores market signals usually stunts
growth by diverting labor and capital from more productive uses....
An industrial policy that increases government planning, government subsidies,
and international protectionism would only be a burden on our economic life and55
a threat to our long-term economic prosperity.
53 The “valley of death” is a term applied to the period in the innovation process generally
between development of a laboratory prototype and its wide-scale commercial adoption. The
term is an analogy intended to highlight the difficulties in overcoming barriers to innovation
by evoking a comparison to the crossing of a barren desert strewn, as one writer says, with
the “carcasses of great innovations.”
54 Economic Report of the President, Council of Economic Advisors, The White House,
55 Economic Report of the President, Council of Economic Advisors, The White House,
Some economists assert that public R&D funding displaces private R&D
investment. In his book, The Economic Laws of Scientific Research, Cambridge
University scientist Terence Kealey argues that public R&D funding actually
decreases overall R&D funding as companies reduce their R&D investments and rely
on public investments.56 Other research suggests that evidence of displacement is
Opponents also argue that industry, not government, is best suited to make
commercial technology decisions, citing the failure of some high-profile
commercially-directed government efforts, such as the Concorde supersonic transport
aircraft, a failed effort of the governments of the United Kingdom and France.
Opponents further contend that governments — responding to political interests, not
market signals — have often continued to invest in technologies — such as those
supported by the U.S. synfuels program — that have been proven by markets and
technological developments to be economically unsound.58
Libertarian opposition to increased federal R&D, such as that put forth by the
Cato Institute, is grounded in a philosophy of limited government and reliance on the
free market. Libertarians generally assert that markets, free from government
interventions, are the most effective mechanism for allocating resources to the most
promising opportunities. In their view, government interventions represent an
industrial policy in which the preferences of politicians and bureaucrats are
substituted for market forces and/or objective criteria. When the federal government
provides direct and/or indirect financial support to a particular technology,59 assert
these advocates, it may not only provide a direct benefit to the technology —
especially with respect to existing technology or alternatives — but it may also signal
technology developers and investors that the technology may receive future
preferential treatment by government as well. This may, as a result, skew corporate
development activities and private investments toward less-promising directions
producing more costly and/or less beneficial results.
Many libertarians also see government financial support for technology
development as an inappropriate involuntary transfer of wealth from taxpayers to
private interests — including large, highly profitable companies. The Cato Institute
has labeled such efforts “corporate welfare” and has expressed concerns that such
56 Kealey, Terrence. The Economic Laws of Scientific Research. New York: St. Martin’s
Press, 1996. pp. 246-247
57 David, Paul A., Brownyn H. Hall, and Andrew A. Toole. Is Public R&D a Complement
or Substitute for Private R&D? A Review of the Econometric Evidence. August 1999.
58 Economic Report of the President, Council of Economic Advisors, The White House,
59 “Technology” is used in this instance, but these arguments apply to companies and
industries as well.
efforts may “create an unhealthy relationship between government and industry that
might corrupt both.”60
Options for federal efforts to support technology development include both
direct support and indirect support:
Direct Support. There are a variety of mechanisms that the federal
government might use to support downstream research. Some favor a direct approach
with the federal government providing grants or loans to companies, universities, and
or consortia to support research and development activities that move their work
closer to commercial production. Examples of this approach include the National
Institute of Standards and Technology’s (NIST) Technology Innovation Program
(TIP); its defunct predecessor, the Advanced Technology Program (ATP), also
administered by NIST; and the multi-agency Small Business Innovation Research
(SBIR) program. According to NIST, the mission of TIP is to “accelerate innovation
in the United States through high-risk, high-reward research in areas of critical61
national need.” As originally conceived, ATP was intended to support the
development of emerging and enabling technologies that offered the potential for
significant economic and/or societal returns to the nation. The SBIR program,
operating at each of the major R&D funding agencies, provides funding to help
advance technology development with a goal of commercialization. (For additional
information, see CRS Report 96-402, Small Business Innovation Research Program,
and CRS Report RS22815, The Technology Innovation Program, both by Wendy H.
Indirect Support. In addition to direct funding mechanisms, a variety of
indirect approaches might be used by the federal government if it chose to support
additional nanotechnology research and development. The tax code could be used
to increase private investment in nanotechnology companies, or to create incentives
for companies to expand and accelerate their research, development, and production
activities. Tax options might include general provisions to induce greater corporate
investment, such as the current research and experimentation (R&E) tax credit;62
targeted tax provisions that support a particular technology, application, industry, or
sector; consumer tax deductions or credits designed to induce the purchase of
targeted technologies and products, such as tax credits currently provided for the
purchase of hybrid and flex-fuel vehicles; or incentives for the formation of capital
pools to support R&D, such as favored tax treatment for research and development
limited partnerships (RDLPs). (For additional information, see CRS Report
RL31181, Research and Experimentation Tax Credit: Current Status and Selected
Issues for Congress, by Gary Guenther.)
60 Cato Handbook on Policy, 6th Edition, The Cato Institute, 2005.
61 NIST website. [http://www.nist.gov/public_affairs/tip.htm]
62 The “R&E tax credit” is often referred to as the “R&D tax credit,” though its provisions
do not extend to development activities.
Another option for federal support, proposed by some in industry, is increased
investments in infrastructure and supporting technologies to reduce the cost of, and
to accelerate, applied research and development. Candidate activities for such
support include modeling, prototyping, testing, and materials characterization
facilities; measurement tools and sensors; standards; reference materials; and
In addition, state and local governments in the United States, as well as foreign
governments, have established science, technology, and innovation parks, both
specialized and general, to foster innovation. Some nanotechnology advocates
believe the federal government should provide funding for the planning and
development of nanotechnology-focused parks that offer land, facilities, equipment,
and services to new, emerging, and established companies, and that bring together
a variety of stakeholders with unique capabilities and interests.
Some in the private sector have also sought increased federal efforts to protect
the intellectual property rights of inventors and companies, including increasing the
speed and quality of the patent process and protecting the rights of U.S. patent
holders against infringement and abuse by actors in other nations. The USPTO, an
NNI-participating agency, has undertaken efforts to educate its patent examiners on
nanotechnology, established a separate class for nanotechnology (Class 977), and
created over 250 cross-reference sub-classes to improve the ability to search and
examine nanotechnology-related patent documents.63
Addressing Regulatory Concerns
Environmental, health, and safety (EHS) concerns also present potential barriers
to nanotechnology commercialization and U.S. competitiveness in nanotechnology.
The properties of nanoscale materials — e.g., small size; high surface area-to-volume
ratio; unique chemical, electric, optical, and biological characteristics — that have
given rise to great hopes for beneficial applications have also given rise to concerns
about their potential implications for health, safety, and the environment. EHS issues
have become a specific concern of the National Nanotechnology Initiative. In
FY2008, the NNI will spend $58.6 million on EHS research, accounting for about
3.9% of NNI funding. President Bush has requested $76.4 million for NNI EHS
research in FY2009, or 5.0% of NNI funding. Some believe that these funding levels
are too low and should amount to 10% or more of NNI funding.
The potential for adverse effects on health, safety, and the environment may
discourage investment in, and development of, nanotechnology resulting from the
possibility of regulations that bar products from the market or impose excessive
regulatory compliance costs, and the potential for costly product liability claims and
clean-up costs. If U.S. regulations are restrictive and expensive, companies may
move nanotechnology research, development, and production to nations that do not
impose or enforce regulations, or take a less stringent approach to regulation. Many
63 USPTO website. [http://www1.uspto.gov/web/patents/biochempharm/crossref.htm]
advocates in industry, academia, and environmental non-governmental organizations
believe the federal government should increase its EHS R&D investments to reduce
uncertainty, inform the development of regulations, and protect the public.
Regulation of nanotechnology products may fall under the authorities of several
federal agencies, including the Environmental Protection Agency, Food and Drug
Administration, Occupational Safety and Health Administration, and Consumer
Product Safety Commission. (For additional information, see CRS Report RL34332,
Engineered Nanoscale Materials and Derivative Products: Regulatory Challenges,
and CRS Report RL34118, The Toxic Substances Control Act (TSCA):
Implementation and New Challenges, both by Linda-Jo Schierow.)
Beyond support for research and development, the federal role in a variety of
other policy and programmatic activities might be strengthened. For example, some
argue for the use of specialized extension centers, both university-based and
independent centers, to provide technical and EHS best practices information to small
and medium-size manufacturers that lack the in-house expertise and resources of
larger enterprises. USDA’s Agricultural Extension Service and NIST’s
Manufacturing Extension Partnership (MEP) may serve as possible models for such
In addition, some experts advocate efforts to create regulatory processes that can
keep pace with rapid technological change and help create a more predictable
environment for those investing in nanotechnology development and
commercialization. Another potential regulatory barrier to nanotechnology
development and commercialization is over-regulation of the export of
nanotechnology and nanotechnology-related products due to their potential military
applications. Such restrictions, or even the anticipation of them, might impede
investment in, and development of, nanotechnology since global revenues may
account for a significant share of expected return on investment. In this regard, the
Department of Commerce asked the President’s Export Council (PEC), a presidential
advisory committee, to undertake efforts to ensure that nanotechnology products were
not unnecessarily restricted from sale to other nations under export control
regulations. In December 2005, the PEC sent a letter to President Bush
recommending principles for the federal government’s approach to export controls
to maximize U.S. companies’ access to global markets consistent with the protection
of national and homeland security.64 In February 2008, the Commerce Department’s
Bureau of Industry and Security announced its intent to establish an Emerging
Technologies and Research Advisory Committee (ETRAC) comprised of
representatives of research universities, government laboratories, and industry to
make recommendations regarding emerging technologies, including
64 Transcript of President’s Export Council meeting, Dirksen Senate Office Building,
Washington, DC, December 6, 2005. [http://www.ita.doc.gov/td/pec/12605transcript.html].
65 Private communication between CRS and the Bureau of Industry and Security, U.S.
Department of Commerce, May 9, 2008.
Ensuring the United States has a cadre of world-class scientists, engineers, and
technicians — an asset deemed critical to U.S. innovation and competitiveness —
has been an enduring concern of Congress, generally,66 and now specifically with
respect to nanotechnology. Advocates for this position assert the need for federal
support for curricula development, as well as scholarships and expanded efforts to
encourage students to pursue associate, bachelor’s and advanced degrees in
International Coordination and Cooperation
Some nanotechnology advocates want the federal government to work with
other nations to ensure a “level playing field” for nanotechnology development and
commercialization (i.e., to ensure they are not put at a disadvantage by government
subsidization of their foreign competitors, less stringent regulatory standards, fewer
worker protections, and/or imposition of tariffs and non-tariff trade barriers), to
develop common international standards and nomenclature, to harmonize regulations,
and to open markets for nanotechnology products.
Reassessing and Realigning Resources
As discussed above, the federal government is engaged in fostering the
advancement of nanotechnology across a broad range of activities, including:
conducting and supporting nanotechnology R&D; seeking to address environmental,
health, and safety issues; preparing students and workers for nanotechnology job
opportunities through investments in education and training; fostering public
understanding and engagement; coordinating and cooperating with other nations; and
promoting the development of standards, nomenclature, and reference materials.
These activities involve substantial investments of capital, personnel, facilities,
equipment, and other resources.
Many NNI activities have developed over time to address new challenges and
opportunities as the NNI advanced. Resource allocation decisions have been made
piecemeal, generally without consideration for alternative uses of the resources.
Over time, such an approach may produce a portfolio of activities that is out of
balance with current needs. More than seven years into the NNI, some observers
believe that reassessing and realigning resources with opportunities and challenges
would improve the efficiency and effectiveness of federal investments and activities.
However, there are substantial barriers to such an effort. First, the NNI is not
funded centrally, but rather is an aggregation of the resources provided to agencies
to meet their mission requirements. Moving funds from one program or agency to
another might meet with resistance within agencies, between agencies, or from the
Congressional appropriations subcommittees with jurisdiction for these programs and
agencies. Second, agencies participate in the NNI on a voluntary basis. If it appears
66 For additional information, see CRS Report RL34328, America COMPETES Act:
Programs, Funding, and Selected Issues, by Deborah D. Stine.
that participation in the NNI might reduce funding, an agency may choose to no
longer participate or may not classify its activities as nanotechnology. Third, the NNI
seeks to meet multiple goals, including scientific leadership, meeting agency mission
requirements and national needs, and fostering U.S. commercial leadership. No
relative values have been explicitly set for these and other goals making comparative
resource allocation choices subjective.
The National Research Council (NRC)67 and the National Nanotechnology
Advisory Panel (NNAP)68 have each conducted assessments of the NNI at the
direction of Congress as specified in the 21st Century Nanotechnology Research and
Development Act. The act requires assessments to be performed triennially by the
NRC and biennially by the NNAP. Past assessments have addressed U.S.
competitiveness in nanotechnology as part of wider reviews. To clarify the U.S.
competitive position, Congress could opt to direct the NRC, NNAP, or the U.S.
Government Accountability Office to conduct a focused assessment of: the
effectiveness of the NNI in achieving the global technological leadership,
commercialization, and national competitiveness goals established under the act;
whether the current portfolio of NNI resources and activities are appropriately
balanced; and whether additional resources activities may be required to achieve
Nanotechnology is expected by many to deliver significant economic and
societal benefits. The United States launched the first national nanotechnology
initiative in 2000, but has since been joined by more than 60 other nations. Tens of
billions of dollars have been invested in nanotechnology research and development
over the past eight years by governments, companies, and investors.
While it has been estimated that there are more than 600 nanotechnology
products on the market today, most involve incremental improvements to existing
products. Much of the investment has been focused on fundamental research to gain
scientific understanding of nanoscale phenomena and processes, and to learn how to
manipulate matter at the nanoscale. These investments are expected by many to
deliver revolutionary changes in products and industries with implications for global
technological, economic, and military leadership. The potential implications of
nanotechnology, coupled with the substantial sustained investments, have raised
concerns and interest in the U.S. competitive position in nanotechnology.
The data typically used to assess technological competitiveness in mature
industries — e.g., revenues, market share, trade — is not available to assess the U.S.
67 The National Research Council functions under the auspices of the National Academy of
Sciences, the National Academy of Engineering, and the Institute of Medicine.
68 In July 2004, President Bush designated the President’s Council of Advisors on Science
and Technology to serve as the NNAP by issuing Executive Order 13349, Amending
Executive Order 13226 To Designate the President’s Council of Advisors on Science and
Technology To Serve as the National Nanotechnology Advisory Panel.
position in nanotechnology because it is a new technology, commercial products are
just beginning to enter the market in a significant manner, and it is incorporated in
wide array of products across many industries. Accordingly, the federal government
currently does not collect this data on nanotechnology, nor do other nations. The
number of nanotechnology products in the marketplace is increasing quickly though.
Congress may elect to ask federal agencies to assess what data (e.g. economic, labor
force, students) would be useful in formulating federal policies and making resource
allocation decisions and direct federal statistical agencies to collect, analyze, and
make public such data. The federal government may also seek to foster data
collection efforts in other nations.
In the absence of such data, assessments of nanotechnology depend largely on
alternative indicators, such as inputs (e.g., public and private investments) and non-
economic outputs (e.g., scientific papers, patents). By these measures, the United
States appears to lead all other nations in nanotechnology, though the U.S. lead in
this field may not be as large as it has been in previous emerging technology areas.
This is due to increased investments and capabilities of many nations based on
recognition that technological leadership and commercialization are primary paths
to increased economic growth, improved standards of living, and job creation.
Nevertheless, these alternative indicators may not present an accurate view of
technological leadership and economic competitiveness for many reasons. Nor does
national technological leadership alone guarantee that the economic value produced
by nanotechnology innovations will be captured within a nation’s borders. In today’s
global economy, companies have the option of locating work — e.g. research,
development, design, engineering, manufacturing, product support — where it can
be done most effectively.
A variety of federal policy issues may affect the development and
commercialization of nanotechnology in the United States, including the magnitude
and focus of research and development efforts, the regulatory environment, and
science and engineering workforce development. Some support an active federal
approach; others believe that a more limited federal involvement is likely to be more
successful and equitable. In addition to these factors, U.S. competitiveness in
nanotechnology will depend not just on the efforts of the United States, but also on
the speed and efficacy of foreign nanotechnology development efforts.
Congress established a legislative foundation for some of the activities of the
National Nanotechnology Initiative and to address key issues associated with
nanotechnology thorough enactment of the 21st Century Nanotechnology Research
and Development Act, 2003. The act provided funding authorizations for five NNI
agencies through FY2008. Action is being considered in both the House and Senate
on possible amendments to and reauthorization of the program. Congress may opt
to address some or many of the issues identified in this paper in the course of
deliberation on the reauthorization of this act or, alternatively, in separate legislation.