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8-144 RESEARCH AND DEVELOPMENT INSTITUTES: INSTITUTIONAL COUPLING General Remarks Every advanced country has research institutes, situated operationally between university research departments on the one hand and mission-oriented governmental and industrial laboratories on the other. The genesis of these institutes are as varied as their purposes, but there are some general factors lying behind their existence: the recognition of the need for research capabilities over and above those available in traditional university departments or in mission-oriented laboratories; the opportunity for individ- uals to devote full time to research; and importantly for our purpose, to facilitate multidisciplinary research programs unconstrained by traditional disciplinary boundaries. In many cases, needed research programs were judged to be too large for universities to manage properly, or for individual industries to support, or elaborate pieces of equipment or other facilities were needed. Whatever the reasons, there exists today in all advanced countries what might be called peripheral research systems, being neither wholly within any of the more traditional academic, governmental, or industrial sectors. Such peripheral systems of research institutes present obvious dangers - unless wisely established and managed - they can become closed universes, self-contained, and noninteracting with the broader scientific community. They can be set up with too much central control and governmental administra- tive procedures. On the other hand, too little care in management of the institute, particularly locally, can result in research programs of less than adequate effectiveness and insufficient exploitation of opportunities. The setting up of research institutes also tends to be a lengthy business, and once set up they often seem to be immortal - there is thus the danger that "when the need arises they are not there, when the need has disappeared they still go on." If research institutes are deemed necessary, therefore, they must have built-in flexibility and adaptability of management and programs, they must work synergistically with the greater scientific community and, in particular, there must be effective personal contacts among scientists in the research institutes and those in other pertinent institutions, departments, and disciplines. The most direct way of achieving these objectives is to site research institutes at universities and to use fully the opportunities for joint staff appointments, personnel exchanges, and joint research and education programs between the institute and the parent university. This also facilitates involvement of first-rate scientists at the universities. Though needs for research institutes are widely recognized, different countries adopt different approaches. Some of these (for France, Germany, and the U.K.) have been documented recentlyl2 "In Germany the financing and committees of the peripheral institutes (i.e. the Max Planck Institutes) are independent of the DFG; the Research Councils in the U.K. and the CNRS in = The Research System, Vol. 1, OECD, Paris, 1972.

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8-145 France combine the functions of aiding the universities and of running their own laboratories (like the NSF), and their financing and committees are common to the two functions. In the U.K., moreover, research is organized by sectors (there are five Research Councils, four of which are concerned mainly with oriented research), whereas the CARS in France and the DFG and the MPG in Germany are each responsible, in their own sphere, for the whole of fundamental research." Yet "methods of organization and financing do not yet seem to have succeeded in adjusting research to the new performance expected of it .... Specifically, it is the individualistic conception of research which has colored the whole system and governed the trend of university and peripheral research in each of the three countries. The result is that comparable behavior is found in dissimilar contexts." Despite a diversity of approaches in the three European countries "university research centers have rarely succeeded in conducting multidisciplinary research, and even more rarely than the peripheral centers." The materials field, however, should offer potent opportunities and needs for such multidisciplinary approaches and institutes. These needs for institutes include not only adding to the reservoir of knowledge about materials but also to effect coupling and knowledge transfer between research and engineering, between universities and industries, and, increasingly, between science and society. Large industrial companies generally support in-house nearly all the R&D they feel they need, and in most cases, proportionately much more R&D then do small companies. The latter, even when highly entrepreneurial, usually put most of their effort into product differentiation and development, engineering and marketing; if they need inputs of a more research type' they usually depend on the larger industrial centers of excellence (from which they have often spun-off or with which they are cross-licensed) and on expertise in the universities. In most countries, there are R&D institutes set up principally to serve the smaller or more backward or developing industries which, for various reasons, feel unable to support adequate efforts of their own. Various types of institute are described below. Large Government-Funded Institutes for Initiating Major Civilian Technologies The most obvious example in this category is nuclear energy, a techno- logical field that did not exist prior to World War II and for which there was no suitable industrial base. Furthermore, and importantly, such develop- ment programs are inherently of long duration and commercially risky; it is generally accepted that these factors make a field appropriate for large- scale and long-term governmental sponsorship. Thus, we see national laboratories such as Harwell in the U.K., Saclay in France, and Ju~ich in Germany, established to carry out R&D programs aimed at innovating nuclear- energy technology. They are, by and large, successful at achieving their technical objectives, but there are often problems in transferring the tech- nology into a suitable industrial and commercial framework. If such labora- tories are set up under governmental auspices' it appears necessary to

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8-146 adopt a working partnership with industry right from the start in order to ease the subsequent technology transfer process. Government Research and Development Institutes for Technologies where the Government is the Principal Customer Defense and aerospace are prime examples of such institutes. Such institutes have many impressive technological achievements to their credit and these achievements, even if their cost-effectiveness can sometimes be questioned, were no doubt greatly facilitated by the steadiness of govern- mental support and the virtual certainty of a customer. In the civilian area, there exist many government-funded laboratories carrying out R&D in areas of national concern which may not have an appropriate industrial or commercial base (e.g. highways, pollution control) or are in state-owned and operated service or industrial areas (e.g. railways, electric power, coal- . . mlnlng . Government-Funded Institutes Directed at Civilian Industries There are several varieties of such institute. In the U.K. there are, for example, the National Physical Laboratory, the National Engineering Laboratory, and the Warren Spring (Chemical Engineering) Laboratories. The first performs activities rather similar to those of the National Bureau of Standards in the U.S. All three are primarily for serving the needs of industry through R&D programs, particularly in the application of techniques and discoveries to design' production, quality control, and distributions In France the laboratories of the CNRS, whose primary function is to promote the progress of science, tend to emphasize more basic areas of research, while the more applied institutions tend to be associated with various technical ministries. Government-managed institutes specifically aimed at enhancing civilian industries are for the most part conspicuously absent. In Germany, government-funded research establishments oriented towards industry are mainly diffused and scattered among Federal and Lander Ministries and Departments for support. Some applied research institutes are organized and supported rather like the Max Planck Institutes (the latter tending to be more basic-research oriented) and often have close associations with universities. Japan has a quite extensive array of government-funded laboratories. Those most relevant to the materials field are listed in Table 8.42. Many of these come under MITI, the Ministry of International Trade and Industry, which takes a leading role in coordinating governmental and industrial R&D programs. It is perhaps worth repeating that essentially no R&D in industry itself is supported by the government. In Canada, which by and large does not have large industrial research

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8-147 Table 8.42 Government Research Institutes in Japan (1971-1972) - Those that bear some relation to the field of materials science and . . en~lneerlna. Number of Personnel . Total Hokkaido Development Agency Civil Engineering Res. Inst. Scientific 103 Science and Technology Agency National Aerospace Laboratory 485 352 National Res. Inst. for Metals 479 320 National Institute for Res. in Inorg. Materials 131 79 Ministry of Agriculture and Forestry Forest Experiment Station 821 514 Pearl Research Laboratory 23 11 Ministry of International Trade and In. try Nat. Res. Lab. of Metrology 271 144 Mechanical Engineering Lab. 339 221 Govt. Chemical Industry Inst. 457 307 Govt. Industrial Technology Res. Inst. (Osaka) 264 182 Govt. Industrial Technology Res. Inst. (Nagoya) 298 215 Fermentation Res. Inst. 76 56 Res. Inst. for Polymers and Textiles 134 101 Geological Survey of Japan 461 248 Electrotechnical Lab. 814 585 Industrial Products Res. Inst. 157 113 Nat. Res. Inst. for Pollution and Resources 409 280 Govt. Industrial Develop. Lab. (Hokkaido) 110 78 Govt. Industrial Tech. Res. Inst. (Kyushu) 90 71 Govt. Industrial Tech. Res. Inst. (Sikoku) 39 28 Govt. Industrial Tech. Res. Inst. (Tohoku) 53 33 Ministry of Transport Ship Res. Inst. 299 209 Electronic Navigation Lab. 35 30 Port and Harbour Res. Inst. 264 139 Mateorological Res. Inst. 194 147 Traffic Safety and Nuisance Res. Inst. 61 40

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8-148 Table 8.42 (Continued) . . . Number of Personnel . Total Scientific- Ministry of Posts and Telecommunications Radio Res. Lab. 446 259 Ministry of Labor Res. Inst. of Industrial Safety Nat. Inst. of Industrial Health Mini s try o f Cons true Lion 56 60 Public Works Res. Inst. 544 310 Building Res. Inst. 182 113 Mini s try of Autonomy Fire Res. Inst. 61

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8-149 laboratories, the National Research Council through its various establish- ments undertakes widespread R&D services for industry as well as for the Federal Government. Jointly- or Industrially-Supported Research Associations In France, Germany and the U.K., the governments help to finance research associations whose aim is to enable firms in the various sectors to carry out cooperative research which they could not have undertaken separately. These institutions are usually quite small and collectively they account for a very small percentage of national expenditures on R&D. "Apart from a few out- standing exceptions, the research associations have not had all the success hoped for: the conservatism of certain sectors of industry has often pre- vented them from undertaking more fundamental longer-term research than individual firms; they have thus been obliged to confine themselves to relatively short-term applied research which is too frequently of marginal significance because important subjects are ruled out by competition between the member firsm. Governments have so far been unable or unwilling to inter- vene directly to remedy this state of affairs."13 In the U.K. specialized research associations are now available for about 50 percent of British industry. These are listed in Tables 8.43A and 8.43B (government-industry supported) and in Table 8.44 (totally industry supported). Some of these laboratories are sited alongside relevant univer- sity departments (e.g. the Glass Research Association and the Glass Technology Department at Sheffield University). A novel venture to diversify the activities and develop a partially- supporting contract research base has been under way for some time at Harwell, the central R&D establishment of the U.K. Atomic Energy Authority. The principal purpose was to develop commercial spin-offs for expertise, techniques, and equipment resulting from their main nuclear energy program. Among the activities developed at Harwell under this policy are some which are particularly relevant to the materials field, such as a national center for nondestructive testing and another for ceramics. The commercialization program, perhaps viewed suspiciously at first by industry as a curious use for the tax-payer's money, appears to have been reasonably successful; a persistent problem, though, is finding areas of R&D which need tackling, which are potentially profitable and yet are not already being addressed by industry, or which industry regards as research which should be contracted to them. Furthermore, there is some danger of it being rather dispiriting to the talented scientists and engineers of a great establishment having to "hawk their wares and services" and undertake "odd-jobbing". One cannot help feel that a national asset such as Harwell functions best when coupled to an important national mission - recent world-wide developments in the energy field suggest, for example, a renewed, broadened, and continuing role that the establishment could play which would be central and vital to the national interest. The Research System, Vol. 1, page 158, OECD, Paris, 1972. : -

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8-150 Table 8.43A Annual Expenditure of Research Associations in the U.K. (1963) Research Association Iron and Steel Ships Cotton Production Engineering Electrical Coal Utilization Wool Ceramics Welding Nonferrous Metals . .. . Motor Vehicles Cast Iron Rubber & Plastics Printing & Packing Scientific Instruments _ Coke Timber Paper Food Manufacturing Tar Boots & Shoes Steel Castings Paint Machine Tools Water . Int. Combustion Engines Baking Flour-Milling Glass Line_ . . .. Leather Hosiery Laundry Hydromechanics Jute Furniture Civil Engineering Industrial Biology Expenditure (including depreciation) 1, 000 1,154 1,059 666 639 339 318 314 304 . . 273 226 207 184 182 167 161 147 141 128 125 114 107 100 95 94 91 91 90 88 77 69 6 49 48 l

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8-151 Tatole 8.4.3A (Continued) Research Association Expenditure (including depreciation) 1, 000 Heating and Vent. Fruit & Veg. Canning and Quick Freezing Lace Gelatine and Glue Lime Drop Forging Whiting kerD~ Cutlery Felt Files Brushes Total l .\ 45 41 33 30 . 29 27 26 23 9 19 18 12 9,870

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8-152 Table 8.43B Numbers of Staff in Research Associations in the U.K. (1963) Key to Staff Categories A - Qualified Scientists or Engineers B - Holders of Higher National Diploma or Higher National Certificate C - Other Technical Workers D - Workshop Employees E - Other Staff Research Association Baking Boots and Shoes Brushes Cast Iron Ceramics Civil Engineering Coal Utilization Coke Cotton Cutlery Drop Forging Electrical Felt Files Flour-Mil~ing Food Manufacturing Fruit & Veg. Canning and Quick Freezing A 20 10 4 54 67 2 81 37 146 4 5 101 3 23 41 1'2 Total B , 10 11 2 46 4 6 17 _ 1654 356 1729 690 1612 6041 Numbers C 24 43 2 50 108 63 59 184 3 10 96 3 24 25 10 D 2 8 16 9 58 13 63 24 2 2 4 (27%) 2085 (35%) E 17 28 41 23 2 64 18 89 2 4 112 3 17 24 8 Total 63 99 9 172 209 4 312 131 488 10 19 350 15 8 66 99 34

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8-153 Table 8.43B (Continued) Research Association Furniture Gela tine and Glue Glass Heating and Vent. Hosiery Hydromechanics Industrial Biology Int. Combust. Engines Iron and Steel Jute Lace Laundry Leather Lime Linen Machine Tools Motor Vehicles Nonferrous Metals Paint Paper Printing and Pack. Production Eng. Rubber and Plastics Scientific Instruments Ships 1 ~ A 12 9 14 11 20 13 13 10 172 14 8 14 20 18 14 34 55 30 30 32 94 45 42 106 Numbers B C 2 4 3 3 8 14 3 9 _ 29 1 8 2 11 5 11 68 108 5 17 _ 15 _ 27 _ 34 _ 6 1 33 6 _ 18 45 10 78 1 40 2 40 _ 26 51 106 4 52 8 18 16 30 D 2 2 2 5 8 24 75 4 8 16 2 19 18 3 32 10 16 138 E l3 19 8 15 16 20 190 10 6 35 5 14 14 47 31 20 15 42 129 52 42 133 Total 33 22 57 33 69 46 33 70 613 50 - ~4 84 70 19 82 36 163 192 98 90 105 412 163 126 423

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8-154 Table 8.43B (Continued) Research Association Springs Steel-Castings Tar Timber Water Welding Whiting Wool Total Numbers Percentage of Total . Numbers A 8 24 22 15 23 44 5 59 1654 27 . B C D 1 3 _ 6 27 13 19 27 3 2 24 14 _ 12 3 19 6 50 38 _ 9 1 2 104 12 _ . 356 1729 690 2085 11 27 . ~ E 1 37 21 31 70 70 1612 Total 13 107 92 86 57 208 20 247 6041 100

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8-159 Another example of a materials program in which Harwell was involved is carbon fibers for fiber-reinforced materials. This program illustrates the synergistic effect of research being carried out in the same place and, in many cases, by the same people. Harwell was originally interested in graphite as a moderator in gas-cooled reactors and this led them naturally into carbon fibers. They are examining a range of possible uses for carbon fibers in the atomic energy field. Thus, a laboratory like Harwell can have a large number of objectives without fragmenting the whole. It is the scientific content of the research which links all the projects together. Increasingly Harwell now finds industry bringing its ideas and problems to them, demonstrating the acceptance of Harwell's role by the industrial community after an initial, somewhat suspicious period. There are also examples of coupling with universities as well as industry where Harwell has, in essence, developed the ideas of university people, collaborating closely with them, and then made the appropriate connection with-industry. Regarding the costs of R&D performed at Harwell, auditing has shown these to be rather similar to those of industrial partners. One substantial advantage of a large laboratory like Harwell is its ability to construct sizeable pilot plants quickly. But the main advantage is the synergistic effect of all its activities and the ability to bring wide ranges of disci- plines and techniques to bear on a specific project. Germany Max Planck Institutes: The majority of the 53 Max Planck Institutes are devoted to fundamental research, particularly in the natural sciences, although some institutes do embrace applied research as well. Research in the institutes is complementary to that in the universities, and the organi- zation can be compared in some ways to the laboratories operated by the Research Councils in Great Britain, the CNRS in France, and the Academy of Sciences in the U.S.S.R. Institutes are built around highly qualified and productive scientists as directors, when a new director has to be appointed, the Max Planck Society reassesses whether continuance of the institute in its current or a different research field is justified. Sometimes it is concluded that the institute should be handed over to a neighboring university, particu- larly if no suitably qualified successor can be found for the directorship. The purposes of the Max Planck Society are: (a) to support new trends as well as new methods in research, in partic- ular where these are developing on the borderlines between traditional disci- plines and have not yet found a place in the universities because of the institutional ties between research and teaching; (b) to develop new types of institutes, projects which demand equipment of such size universities do not take them on for fear of balance; I .. and to take charge of research and specialization that the disturbing their internal

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8-160 (c ~ to provide scientists of exceptional ability, who wish to devote them- selves to pure research, with working facilities adapted to their specific requirements so that they can bring to bear their entire energy towards achieving their scientif ic aims . The Max Planck Society is subsidized by the Federal and State Governments which share equally in the cost (which, for 1970, was 320 million DM) of supporting the institutes. These subsidies are not earmarked by the government for specific research projects but can be allocated by the Society as it sees f it . There are also private donations . The sizes of the institutes vary greatly, depending on their research areas. The numbers of personnel range from very few to several hundred. In 1969 the Society employed 7000 personnel of whom 1750 were scientists. The Directors and Scientif ic Members are free to choose their scientif ic research topics and to manage them as they wish. All that is required is a simple annual accounting by the Director to the Society. There is no f ixed form for the internal organization of an institute; it can be adapted to varying requirements at any time. It is claimed that one advantage of this internal flexibility is a close interdisciplinary cooperation. Those institutes wholly involved in various aspects of materials science. and engineering include: Metallurgy (stuttgart2; Iron and Steel cDusseldorf 2. ; and Solid State Physics (Stuttgart). Other institutes partly involved in MSE include: Chemistry CMainz2; Physical Chemistry CGo'tt~ngen); Inorganic Chem.istry (Frankfurt); the Fritz-Haber-Institut CBerlin-Dahlem), and Spectroscopy (Gottingen) . The fact that a Solid State Institute Cstuttgart2 was recently formed indicates the importance attached by the Max Planck Society to this field, Together with the large and wells own Metals Institute tints represents a major concentration in materials science at Stuttgart. Organized somewhat similarly to the Lax Planck Institutes but demo ted more. to applied science is the recently-formed Fraunhofer Gesellschaft for Applied Solid State Physics at Freiburg where solid-state electronics is emphasized. There is also an Institute f or Ceramics at W.urzburg . With the shift in emphasis from nuclear physics towards materials in Germany, the well-known nuclear installation at Julich has recently established an enlarged solid-state laboratory whose. activities are. coordinated with those in materials science at Stuttgart by a joint council. A summary of the research specialties in the metals f ield at various German institutes and universities is given in Table 8. 4S. U. S e S eRe Coupling Science and Technologv:l5 The view is now generally accepted in the UeSeSeRe that research, development, and production must be. brought more closely together. A variety of organizational forms are the subject of active experiment e Of particular interest are: (a) What has been called the "factory center," in which research ~nsti- tutes, design bureau, and production enterprises are brought together in a Science Policy in the U.S.S.R., ONCE, Paris, 1969.

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8-163 single administrative complex -- this has particularly found application in the heavy engineering and machine-tool industries; (b) The "research complex" in which research institutes in related fields are brought together and associated closely, through contracts and other means, with industry. Soviet publications stress here the advantages of combining research and teaching activities into a single, interdisciplinary unit -- the Leningrad Polytechnical Institute and the Novosibirsk Science Center and University provide examples of this form of organization; (c) The "research corporation," an enterprise with research and experi- mental production facilities which works for industry on a self-supporting basis, either providing the know-how for new production processes or else offering a complete new plant. It appears that the traditional Soviet form of research organization, with a large research institute and attendant design bureaux in each industry separated from the production factories, is partly being replaced by a variety of arrangements of kinds familiar in the West and particularly in the U.S.: the large industrial firm with its own complete R&D facilities, the university with its attendant research facilities working closely with industry; the contract-research firm; and the civil engineering company. But all this is being done cautiously and gradually, with the object of retaining the economies of scale and the ability to concentrate effort on major objectives which are a prominent feature of Soviet R&D organization. What emerges in the next decade or so is likely to be an interesting combina- tion of traditional Soviet and Western arrangements. While Soviet administrators are devising means of bringing research and production more closely together, there is much less certainty about the way to provide an organic connection between innovation and the industrial or individual consumer of new products. Two proposals have now received general acceptance. The first is that industrial research establishments and design bureaux, or any new forms of R&D organizations which are created, must be financed not by direct grants but by some form of contract funds being provided to the user of the research and not directly to the research institute. It is felt, however, partly as a result of the experiments with contract research since 1962, that dependence on individual enterprises for finance would narrow and subdivide the activities of research institutes; the agreed solution is, therefore, that most contracts should be made with ministries or other large organizations rather than with individual enterprises. The second agreed proposal is that in any field no one research institute should have a monopoly and that an element of competition between R&D organi- zations responsible for new products and processes is desirable. The intention seems to be that the ministry in which the research organi- zation is located should be responsible for awarding contracts or choosing between alternative proposals. The main consumers of new products may be represented on the committee which makes the decision, but the administrative responsibility will apparently rest with the ministry producing the new product. Moreover, the competition between R&D organizations will only be taken to the mock-up or at most the prototype state -- commercial production ,1 i

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8-164 of a new product will apparently then be transferred to a single production firm. The argument for this mode is that, while there is a case for "conscious duplication" of R&D concerning new products, there is no case for the losses in economies of scale which would result from the duplication of expensive production facilities. These proposals are intended to provide strong incentives for invention and for the carry-over of invention into practical forms. The measures so far undertaken to encourage the commercial production of new products are primarily designed to compensate industrial enterprises for losses due to the introduction of new products and processes, e.g. through the special Funds for the Assimilation of New Technology in each ministry, rather than to provide positive incentives to innovate. Numerous proposals have been made to enlarge the scope of these arrangements; some authors have suggested that the initial costs should be met, as is usual in the West, from profits and bank loans, and thus be treated in effect as an investment cost. Such arrangements are, however, difficult to introduce successfully at present, because industrial prices are unsatisfactory. Prices of new products, which like other prices are usually fixed centrally by the State, do not provide an adequate margin, either in the short or in the longer term, for initial costs to be met. A number of Soviet specialists have instead proposed that prices for new products should be fixed by negotiation between producer and consumer, so that what amounts to a limited market for new products would be introduced. Together with economic incentives for research establishments and factories, strenuous efforts have been made to introduce individual economic incentives, both to R&D staff and to production personnel, which are simi- larly intended to encourage rapid application of research results. These range from special lump-sums promised in advance to leading scientists and designers for the prompt fulfillment of major projects, to bonuses to factory workers for successfully-completed prototypes. Attempts are being made to relate the size of the bonus to the economic return received from the research project or the new product. Paradoxically, therefore, Soviet government leaders and administrators appear prepared to rely to a greater extent on the economic calculus and on the desire of enterprises and individuals to maximize their earnings in their planned economy than many Western Ministers of Science and Technology would be prepared to propose even in their own largely private-enterprise economies. The recent Soviet stress on automatic economic incentives provides a healthy corrective to past emphasis on detailed administrative control from the center; but is is unlikely to provide a complete solution to Soviet problems. Our knowledge of the mainsprings of innovation is limited; but it seems certain that successful innovations in the West cannot be explained entirely in terms of the higher profit-margins obtainable from innovation. Innovation often emerges in a competitive context: the innova- ting firm is driven by the need to forestall its rivals and to maintain its share of the market. In a modified form, this often also applies in the case of governmentally-financed R&D, where competitive bidding for contracts encourages innovation by industrial firms. Soviet efforts in the next few years to measure and reward the economic return on R&D are likely to be relevant and interesting to Western countries.

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8-165 In the latter, it is commonly held among most makers of science policy that the spur of competition no longer operates everywhere in innovating activity, and that therefore new economic relationships between government and industry, and new methods of governmental management of research, must be devised. Some doubt also exists about the feasibility of Soviet proposals to rely on personal economic incentives tied to the return on particular new products and processes. Western experience would seem to indicate that it is unwise to tie personal earnings too closely to the fate of particular projects. But here again experience in the West as well as in the U.S.S.R. is somewhat limited. Scandinavia Cooperative Research in the Materials Field - Internationally and Nationally: There are many similarities in the materials research interests of the four Scandinavian countries, but national pride works against efforts to pool research or to form one big institute in the interests of greater efficiency. Any new cooperative venture has to take into account the materials research activities that already exist as well as the geographic distribution of materials-related activities (the trend is toward greater geographical spreading of industry). Thus, each country probably has to support one or more centers of excellence in materials research. This must necessarily involve a degree of specialization to avoid undue overlap, and for the same reason, cooperation at the management level is needed. In addition, to facilitate the transfer of research information to user organizations the latter must have comparable expertise and must therefore conduct some of their own research. For several years, a group of Danish scientists sought support among several of the smaller European countries (e.g., Belgium, Denmark, Finland, Iceland, Luxemburg, Netherlands, Norway, Poland, Sweden) for setting up an interdisciplinary organization for graduate education and research in materials. They noted that few European institutes were organized to cover the broader field of materials research, whereas in the U.S. there was a concerted effort to establish materials research at the universities. It was proposed that such a center could serve as an important supplement to the existing university systems and might represent innovation in advanced education and research. Staff and students in such a center might acquire a broad understanding of the interrelationship between science and human welfare; they could benefit from association with scientists from many different disciplines; and a rich environment for creative ability should result. In the proposal, five research divisions were suggested -- Materials Preparation, Structure and Morphology, Electron Physics, Studies of Dislocations and Corrosion Problems, and Materials Theory. Emphasis was to be on fundamental research but with an openmindedness towards practical applications.

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8-166 It was visualized that the administrative organization might be patterned after that at CERN. An essential feature was that the center would be located close to an existing or prospective university and in or near a major city. To conclude, although the Danish government has supported the proposal, widespread agreement from other governments has not been forthcoming. All the Scandinavian countries are attempting to stimulate and create new industry, but government-university-industry cooperation is most evident in Norway and Finland. The technical university plays a role in Denmark and a lesser role in Sweden. Norway: SINTEF, the Engineering Research Foundation at the Technical - University in Trondheim, employs 475 full-time people (200 professionals). It is an integral part of the Technical University (which employs 1100 including 544 faculty members). SINTEF employs many of the faculty members on a part- time consulting basis. Electronics and computer application comprise 60% of the technical effort, the remainder being largely in chemistry, metallurgy, hydraulics, and tool and production engineering. Some new venture firms have been formed as a result of work in the Automatic Control Division -- one of these companies produces computerized typesetting systems. An interesting feature is that product development goes on in the university laboratories on behalf of the private company. A similar close-working relation is found near Oslo -- a company formed in 1965 to produce integrated circuits and semiconductor devices that was spun-off from the university- ndustrial research institute combination. Again one finds prototype development and production being carried on in the academic institute. Another new company that resulted from this interaction produces medical instrumentation. The university-institute arrangement has also made valuable contributions to the shipbuilding industry (computer- controlled flame cutting of steel plate) and the electric power industry (explosive joining of electric power lines). Risk capital for all these ventures stems from existing industries and the government. Finland: At Helsinki the State Center for Industrial Research is located on the campus of the University of Technology. Some of the laboratory heads at the Center are professors at the University and some of the University laboratories are used for industrial research, some product development and even some manufacture of products for sale. Spinoff companies are encouraged, and much of the early work of such a new company continues in the University laboratories. The laboratory does, of course, serve its primary purpose of research and educational functions and has several candidates working on their Ph.D. thesis. Denmark: The Technical University has led to some spinoff firms. For example, the Laboratory for Semiconductor Components has generated a company aiming to exploit ion-implantation techniques and is making semiconductor counters and pressure transducers. Another spinoff company from the same laboratory produces chemical reactors for the oxidation and doping of silicon. Sweden The role of the technical university in Sweden is rather different - from that in the other Scandinavian countries. Strong technical departments 1 '

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8-167 are building up at the Royal Institute of Technology which reports directly to the Swedish Board for Technical Development. Sweden's posture therefore appears rather traditional, maybe because Sweden is larger and more heavily industrialized than the other Scandinavian countries. Thus, the larger firms may be able to afford more of their own research (e.g. Volvo and Saab automobiles and aircraft; SKF -- ball bearings; ASEA -- Sweden's counterpart to General Electric, and L. M. Ericsson -- the world's second largest telephone manufacturer). The Size of Industrial Research and Development Organizations In the mid-sixties, the OECD gathered data ~on R&~ efforts as a function of size of firm in various countries. Among the findings: (a) In the larger industrialized countries, the major fraction of a country's industrial R&D is undertaken by a comparatively few large firms. (b) The average expenditure per qualified scientist and engineer on R&D in- creases with company size. (c) On the other hand, the "research intensity," as measured by the ratio of R&D personnel to total personnel, tends to be higher in the smaller firms than the larger. Several reasons for this were suggested: (i) "Small- and medium-sized firms are obliged to employ a relatively large number of researchers if they wish to stand up to the competition of large companies. Apparently a threshold exists below which R&D is not profitable." (ii) Large companies may provide higher salaries to research workers than small companies, perhaps partly due to employing more highly qualified (Ph.D. instead of B.S.) personnel. (iii) Research workers in small companies may often spend less than full time on research, in contrast to the situation in large companies. (d) The size of R&D programs, regardless of firm size, can vary considerably according to the nature of the activity. This point is worth amplification. The size of the R&D effort needed to bring to fruition a new material process is probably quite different from that required for a communication network. Table 8.46 suggests how typical sizes of R&D departments may vary. For any given area of technology there seems to be an approximate lower limit to the size of an R&D effort in order to be viable. (e) "There appears to be a very close relationship between the size of the firm and both the average number of researchers employed and the average expenditure per scientist." . Gaps in Technology - Analytical Report, OECD, Paris' 1970.

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8-169 (f) In international comparisons at the large-company level, average R&D expenditure per firm is much larger in the U.S. than in Europe, whereas at smaller-firm level, they are about the same. The OECD study goes on to observe that: (i) "The smaller firms first obstacle to the launching of an R&D program is the average cost per researcher, which remains relatively high, multiplied by the minimum number of qualified scientists and engineers required." Larger firms have greater facility than small ones for self-financing or drawing on outside sources. Also, the risks inherent in achieving long-term profit-ability of research weigh more heavily on the smaller firms. (ii) "In basic research the role of large firms is overwhelming." (ill) Possibly, "the large firm is better equipped than its smaller counterpart to sustain both the financial burden and the risks occasioned by the time-lapse necessary to find a practical industrial application of the theoretical knowledge acquired in basic research. It is wise for a small company to limit its R&D activity to projects which will become marketable within a short time limit and whose success is virtually assured. In addition, theoretical knowledge is more easily turned into a profit-making proposition by the large firm because of its greater diversification. A further advantage for large companies is the relative ease with which they can move into foreign markets. It is certain that the narrow limits of some domestic markets discourage a number of firms, particularly those in the smaller classes." In a recent detailed study* of factors determining success or failure in innovation in the chemical and scientific instrument industries, it was con- cluded that the most important size factor was the size of the project team at the peak of the R&D effort rather than the size of the firm or the size of the R&D department. Clearly, large firms can support more above-critical-size R&D projects than smaller ones; they thereby avoid "putting all their eggs in one basket" and, in addition, with a larger diversity of product interest there is more likelihood that any given R&D project will find an outlet some- where in the range of product interests. Furthermore, with the increasing complexity and sophistication of science and engineering, it is likely that the full innovation process, from R&D to successful commercialization, will increasingly be concentrated in the larger companies in the future. *"A Study of Success and Failure in Innovation", Project SAPPHO), carried out at the Science Policy Research Unit of the University of Sussex in England.