RESEARCH WORLD TURNS TOPSY-TURVY : COMPANIES' DOWNSIZING FORCING FIRMS TO PURSUE PROFITABLE PRODUCTS.

Byline: Louis Uchitelle The New York Times

When Greg Blonder joined Bell Laboratories in 1982 as a physicist just out of Harvard, no one said a word about products or selling. ``They asked their usual job interview question,'' he said. `` `What would I work on if I had an empty room and an unlimited amount of money?' '' He spent his time measuring the behavior of electrons at 1 degree above absolute zero, which is very cold. ``Not many products exist in that situation,'' he conceded.

But now Blonder, whose two young sons often ask him where they can buy something he has invented, is making a transition from basic to more applied research characteristic of industry everywhere in America. At 41, he has traveled from quantum physics to consumer tastes, emerging as the improbable chief of Customer Expectations Research, a novel undertaking for the august Bell Labs based in this suburb 30 miles west of New York.

``I am using what I know about science to invent to order,'' Blonder said. ``I am working backward,'' he added, from what he used to do.

Corporations once spent big sums on basic research, the sort of open-ended inquiry that drew Blonder to physics and that can lead to innovations that spawn new industries and many thousands of well-paying jobs. A lot of basic research goes nowhere, of course, but AT&T, the owner of Bell Labs, knew that Blonder's fresh insights into electron behavior might someday make possible a momentous breakthrough, perhaps a new type of computer chip as revolutionary as the transistor, which came out of Bell Labs in 1947.

In the 1990s, though, corporate outlays for research and development have fallen significantly for the first time, with much of the decline coming out of basic research. The shift in emphasis to near-term development is paying off today as American companies excel at turning a generation of good ideas into profitable products. Yet many corporate executives have decided that basic research for tomorrow is simply too speculative. It should be done, they argue, by university scientists, paid mainly by government.

The problem is that in an era of deficit cutting, federal financing for basic research has suffered, too. As a result, total spending on research in the United States - basic or applied, whether federally or privately financed - has stagnated in the 1990s, when adjusted for inflation, according to the National Science Foundation.

The last time the government cut back on research - in the 1970s when military spending fell sharply - corporations held their own. But now industrial research has become a victim of downsizing, stiffer competition and the growing corporate view that the return from most research and development spending should come in three years or less.

``We are eating our seed corn,'' said Paul Romer, a Stanford University economist who argues that industry is still squeezing products from the aging cornucopia of breakthrough technologies that came during and after World War II. ``If this continues, we will no longer be the nation that is on the cutting edge of new technologies, new products and new markets. For the moment, we still are, but that can't last.''

The shift away from basic research shows up repeatedly in interviews with researchers, government officials and corporate executives like Dr. Edward Scolnick, the tall, courtly, Harvard-trained doctor and scientist who presides over research and development at Merck & Co., the huge pharmaceutical concern. ``We haven't the resources to do that work,'' he said.

Merck, for example, plans to spend $1.5 billion this year on drug research, but very little of that will be devoted to finding the viruses and wayward enzymes that must first be identified before new drugs can be designed to attack them. Tenneco Inc.'s huge auto division spends heavily to develop new features for catalytic converters. But no Tenneco scientist is seeking the next generation of emissions control, perhaps some not-yet-dreamed-of technology. Even Microsoft, which has opened a basic research center - mainly to seek new ways for people to interact with computers - still invests nearly 99 percent of its $2 billion research and development budget on elaborations of existing software, or testing.

For now, the focus on immediate results pays dividends. A rash of new products - another AIDS drug, a better catalytic converter, a new wrinkle on the Internet, a better automated teller machine - are visible evidence of the success of corporate spending on applied research. There have been gains as well from ``process R&D,'' the development of faster, more efficient, more sophisticated ways to manufacture.

By most estimates, 25 percent of corporate research and development spending is now going for process research, such as Tenneco's newly designed machinery for shaping metal pipes as if they were flexible plastic tubes. ``We design catalytic converters now taking this new flexibility into account,'' said Tom Evans, president of Tenneco Automotive's Walker division.

But many experts worry that in 20 years or so a shortfall of new technology could shackle the economy, even though the stock market does not show much concern. ``It doesn't reward basic research,'' said C. Richard Kramlich, managing partner of New Enterprise Associates, a venture capital firm. ``It rewards only the products that come out of research soon.''

Without the Cold War, a prime engine for basic research, the Pentagon, has cut back. And neither Democrats nor Republicans, eyeing the deficit, have filled the gap with more civilian research. ``President Clinton asked Congress for increases,'' said Mary Good, the Commerce Department's under secretary for technology, ``and if he had not asked, the cuts would have been greater.''

Caught in these crosscurrents is Blonder, an energetic, optimistic man who decorates his office with the sunny crayon drawings of his sons, 10 and 7. The split-up this year of AT&T into three companies also cut up Bell Labs. And soon Blonder will leave Bell's old home here, with its landmark pyramid copper roof, and move to a building leased on Exxon's nearby campus, once a larger research center.

Left behind will be colleagues with whom Blonder once interacted daily who will now work for Lucent Technologies, the spinoff from AT&T's old equipment manufacturing arm. It keeps the Bell Labs name. ``We had 20 projects going,'' Blonder said, ``and four had to be abandoned because they relied on a synergy between our software and their hardware people.''

The cutback in old-style basic research reflects a historic transition from a system that blossomed in the Eisenhower administration, fathered by Vannevar Bush, the science czar then. Bush sought to encourage among scientists ``the free play of intellects working on subjects of their own choice, in the manner dictated by their own curiosity.'' Such research was nurtured in huge corporate or federal laboratories with heavy government spending to keep ahead of the Soviet Union.

Nylon came out of this system. So did the silicon chip, the laser, cellular phones, color television, modern gene technology, fiber optics and other breakthroughs that eventually created new industries, which in turn helped to expand the national economy at a rapid pace.

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Chart: FOCUSING LESS ON THE FUTURE

The New York Times