Time Horizons and Technology Investments (1992) / Chapter Skim
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5 The Influences of Government Investments and Regulatory Policies on Corporate Time Horizons
5 The Influences of Government Investments and Regulatory Policies on Corporate Time Horizons
Pages 59-70
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From page 59... ...
Government polices and investments are a pervasive, important, and often positive influence on the business environment and economic development of any industrialized nation. The following are among the many government polices and actions affecting the business environment: · The structure of taxes (several aspects of which were discussed in chapter 4)
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From page 60... ...
The impact of government polices and actions on business investment in technology and operating practices is the subject of a vast and continually growing body of scholarly literature and policy studies (see, as recent examples, Carnegie Commission on Science, Technology and Government, 1991; Council on Competitiveness, 1991; Lee and Reid, 1991; and Porter, 1990~. A comprehensive review of the literature and current debates in even one or two of these areas environmental regulation or product liability, for example-could easily run to several hundred pages and would require expertise not represented on the current study committee; a comprehensive treatment of the influences of government on corporate time horizons is clearly beyond the scope of the committee's work.
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From page 61... ...
Licensing procedures, patent lives, work place safety regulations, and environmental regulations can either extend or constrain the time hori zons of organizations depending on the situation and the manner in which government laws and regulations are implemented. Product liability concerns, for example, are often cited as a legal constraint that can indefinitely lengthen the payback time for new product development projects by creating significant uncertainty about a company's ability to recover investments.
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From page 62... ...
Among the government policies and actions that are the most consistently damaging to long time horizons are those which create disincentives for long-term planning and investment. Late or uncertain promulgation of environmental and workplace standards often unnecessarily diverts company investment capital from longer-term technology development.
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From page 63... ...
The importance of government policies with regard to the regulation and creation of markets needs to be acknowledged, and expertise in the use of such policies to support long-term investment should be cultivated. The government should make sufficient investments in its own expertise and in evaluation and improvement of systems to reduce significantly the time spent in carrying out such fundamental governmental responsibilities as environmental approval of new facilities, obtaining licenses on government controlled or regulated technologies, obtaining patent approvals, getting product approvals through the Food and Drug Administration, and obtaining final determinations on technology-based court cases.
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From page 64... ...
For example, government land grants, bond guarantees, and regulations designed to develop the nation's transportation infrastructures starting with canals and roads and then railroads created important, stable, complementary assets that allowed and supported the development of agricultural, manufacturing, and retail businesses. As the era of modern transportation and communications began, the government provided eminent domain for telegraph and telephone communications and helped coordinate standards for wireless radio, and later satellite communi
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From page 65... ...
The agricultural and massdistributed foods industries in the United States have been helped significantly by heavily supported government agricultural research, land use, water development and agricultural extension services, standards for foods and packaging, and enforced systems of standard weights and measures. The government's provision of infrastructures, implicit subsidies, and direct markets have provided the longer lead times, risk capital, and stable markets for a wide range of industries.
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From page 66... ...
semimonopoly privileges and the right to collect a user fee from telephone customers and to use this fee in advanced communications research, the government helped create very long-term investment time horizons in communications, and for years those long time horizons gave the United States a world leadership position in this technology. · The Defense Department's continued drive to find the highest possible performance materials and systems for military purposes has pushed ahead the frontiers of today's microengineering, test equipment, fiber-polymer composites, and scanning tunneling microscopy imaging capabilities.
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From page 67... ...
These assets stem from the upgrading of university faculty, the advanced training of students, and the diffusion of knowledge that results from publication and from students later building on their personal knowledge base from the projects. In summary, the government has the scale and stability of revenues to support the development of a wide variety of complementary assets, assets that allow private companies to adopt longer time horizons for their investment decisions, and without which many important industries would not have developed to their current degree.
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From page 68... ...
History shows that the federal government's investment portfolio has allowed or driven the development of important new technologies and, with the support of state and local governments, has funded physical infrastructures that could not have been justified on a return-on-investment basis by any single company or industry. Additionally, the federal government and, to a lesser extent, state and local governments, have provided funding and management for projects that were too large and had completion times too long for any single corporation or consortium of private enterprise.
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From page 69... ...
With regard to regulation and the legal framework for business, government policies can play a crucial role in creating a stable environment for investment. Frequent upheavals in the marketplace or uncertainty about the terms and directions of competition add a significant element of risk to longer-term business decisions, a condition that drives companies to seek recovery of their investments in the shorter period of time and dampens investment in activities that, by their very nature, will take substantial time to come to fruition.
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From page 70... ...
With regard to government investments, the government creates complementary assets publicly provided infrastructures or services that permit, support, or work in conjunction with private investments in physical or human capital or R&D. Such assets can reduce the risk of related private investments and allow private companies to adopt longer time horizons for their investment decisions.
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