Page 111

Niche products are typically developed by small businesses led by innovative entrepreneurs. Speed in commercialization is crucial, and support consequently must be available when needed and without excessive delays for new funding cycles. Once the process technology, favorable economics, and product characteristics are established, market penetration can begin comparatively rapidly. Innovative entrepreneurs play a pivotal role in spearheading many new commercial developments.

Commodity Products

For commodity products the goal of research and development is to reduce the costs of raw materials and processing because these have a major effect on product cost. The raw materials are heterogeneous, and more than one product is generally produced. In fact, over time the number of products produced from the same raw material tends to increase. Thus, there is no single product; each product is actually a co-product. Policymakers should focus on public research investments to encourage development of a biobased industry for coproduction of biomass-derived fuels, organic chemicals, and materials. There is potential that coproduction will increase opportunities to create higher-value products from commodity crops.

Public Investments in Research and Development

In the United States, massive public investment in research and development began during World War II and continues to be supported in specific areas. For many years, basic research was regarded primarily as a responsibility of the public sector, while development and commercialization were regarded primarily as responsibilities of the private sector. A large proportion of public funds for research and development were directed toward national security. The federal government assumed special responsibility for ensuring the commercialization of specific identifiable products. For example, the United States adopted this approach for national defense (e.g., high-performance jet aircraft) and for public health (e.g., the polio vaccine). The national interest may be well served by a similar approach for specific biobased products such as biobased ethanol (Lugar and Woolsey, 1999).

Public investment in basic research continues to garner broad support with little controversy surrounding funds for basic research, including fundamental work on process engineering (essential to launch biobased industries). However, public support for development activities that private firms would undertake anyway is not justified (NRC, 1995), and even when private support is uncertain, the use of public funds for