TODAY’S STUDY: FREEING THE NATIONAL TREASURE IN U.S. NATIONAL LABS

Going Local: Connecting the National Labs to their Regions for Innovation and Growth

Scott Andes, Mark Muro, and Matthew Stepp, Sept. 2014 (Metropolitan PolicyProgram at Brookings)

Summary

Since their inception in the 1940s, the Department of Energy (DOE) national laboratories have been in the vanguard of America’s global research and development leadership. However, the national innovation system has changed in the past 70 years. Today, much technology development and application occurs in the context of synergistic regional clusters of firms, trade associations, educational institutions, private labs, and regional economic development organizations. Unfortunately, legacy operating procedures limit the DOE labs’ ability to engage fully with the regional economies in which they are located. This lack of consistent engagement with regional technology clusters has likely limited the labs’ overall contributions to U.S. economic growth.

This brief argues that, in order to improve the impact of the national labs, DOE, states, and Congress should:

➤ Improve the labs as an economic asset

➤ Open labs to small- and medium-sized businesses

➤ Increase labs’ relevance to regional and metropolitan clusters

➤ Provide greater flexibility in oversight and funding

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Introduction

U.S. economic prosperity revolves around the competitiveness of the nation’s advanced industry sector: innovation- and science-technology-engineering-mathematics (STEM) worker-intensive industries focused on advanced production and services.1 Central to the competitiveness of these critical industries is the U.S. innovation ecosystem, which functions most dynamically in U.S. metropolitan regions. Cities and their surrounding metro areas support innovation through concentrated knowledge flows, specialized workers, and dense supply chains that improve firm productivity through highly adaptive and specialized technology clusters.2 As such, the nation’s regional clusters are important sources of national problem-solving, innovation, and prosperity.

Located throughout the country, the Department of Energy’s (DOE) 17 national labs (labs) stand as potentially pivotal institutions in many metropolitan economies and for overall national innovation, growth, and competitiveness. As centers of basic and applied technology research and development (R&D), the labs are well-positioned to serve as unique focal points for technology exchange among regional firms, universities, and economic development intermediaries. However, to date, the labs have made neither technology commercialization nor regional cluster participation a top priority.3 As a result, they have been unable to optimally connect to the broader U.S. innovation ecosystem and deliver on their responsibility to contribute to national economic growth.

Recently, though, a number of lab system leaders—as well as policymakers—have become increasingly interested in optimizing the role of the labs as engines of national and regional growth. Congress has taken up bipartisan legislation to enhance lab flexibility when engaging with the private sector.4 Secretary of Energy Ernest Moniz has made lab reform a priority.5 And a congressionally-mandated commission is assessing potential areas of reform, including technology transfer, lab management, private sector engagement, and budget consolidation.6 What these developments have in common is a new recognition that regional economic development can (and ought to) be an important adjunct to- and expression of—the lab system’s larger national mission.

In keeping with these discussions, this report describes several barriers to—and opportunities for – DOE lab engagement within regions and suggests a number of possible policy responses to improve the labs’ connections to metropolitan economies. To be sure, the current level of regional engagement varies from one lab to the next, particularly given their diverse research missions; as such, not all critiques outlined here apply universally. Nevertheless, it would be generally beneficial overall for DOE, Congress, and state governments to take steps to ensure that the entire system becomes more attentive to those economic regions where the labs are located. As they did in the years following World War II, the labs must pivot once more to embrace a new mission that includes more active engagement with regional innovation systems within which they are located. Such engagement will not substitute for the labs’ critical national mission, but will instead complement and advance it…

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Moving Forward

Making progress on this agenda will not be easy, but it should be possible if all relevant actors are enlisted. To that end, DOE leadership, lab managers, Congress, and state and regional governments should all rethink their approach to the lab system in order to facilitate better engagement with the nation’s regional clusters.

Many of this paper’s administrative recommendations can be addressed by DOE. In particular, DOE should clearly prioritize the economic development mission of the labs and consider system-wide incentive structures for regional engagement. DOE management is also well positioned to scale technology transfer best practices amongst labs and streamline contracting procedures to better align with the economics of small firms.

At the same time, Congress is ultimately responsible for the funding silos that remain a binding constraint on the lab system, and will need to address them accordingly. Without better funding mechanisms that free lab managers to coordinate research efforts with regional technology clusters and work with SMEs and regional firms, the labs will likely remain inflexible and largely disconnected from their regional economies.

For their own part, lab managers do retain significant discretion in the overall direction of lab research. Some lab operators have prioritized regional engagements and actively worked with state and regional governments to create opportunities for researchers to support local businesses. Others, by contrast, have tended to discount calls for regional collaboration, claiming each lab is too distinct to learn from system-wide best practices. Given that, progressive managers should continue to develop new ways to situate lab research within a regional economic context (and seek greater discretion to do so), while other operators should take a new look at some of the emerging best practices.

Finally, state and local governments can do a lot to “pull” technologies out of the labs. By working with their labs to establish microlabs near local universities or business incubators, or by developing their own voucher programs, states can proactively partner with labs in their regions to amplify the exposure of lab research to the private sector.

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Conclusion

DOE and the national labs have a history of excellence in meeting national missions, making revolutionary scientific discoveries, and developing breakthrough technologies. However, the structures, incentives, and cultural norms that define the nation’s lab system must be updated to meet the new realities of the 21st-century innovation economy. In the years following World War II, the national labs were considered to have met their objective by producing technologically superior weapons for the United States and its allies. Yet, instead of closing their doors as war-time relics, the United States doubled down on the labs as national assets of innovation and economic advantage. Today, the labs must pivot once more to embrace the new economics of geography and engage more in the innovation systems within their home regions.

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