supercomputers. It can either provide incentives to the nongovernment sector or it can conduct the research itself.

Government policy can provide broad encouragement to private industry to develop and commercialize supercomputing technology and affect the broader information technology marketplace. The government can influence the private sector by providing incentives for innovation and development investments, including grants or other subsidies, tax incentives, and intellectual property protection.

The government may subsidize private R&D activities. For example, a pervasive form of federal support for scientific and engineering research is grant and research contract programs, ranging from the peer-reviewed grant systems maintained by the National Science Foundation and other institutions to research contracts awarded by mission agencies such as DARPA. Such programs are particularly effective when the government would like to encourage basic research in specific areas but has limited information or knowledge about the precise nature of the outputs from research in that area. For example, grants and subsidies to the supercomputer center at the University of Illinois during the early 1990s were the principal form of support underlying the development of the Mosaic browser technology, an enormously beneficial innovation whose precise form, features, or impact could not have been forecast prior to its invention.⁴

Alternatively, R&D tax credits can provide important incentives for innovative investment. R&D tax credit programs provide direct incentives to private firms at a relatively low administrative burden.⁵ How-