were developed with public R&D funds) not transformed into commercially successful innovations within reasonably short time frames?

3.5.4 Policy Options

To overcome the above deeply entrenched innovation barriers, the European Union’s KET Program proposes a broad range of coordinated support policies that cover the following stages of the “innovation chain,” from the transformation of fundamental research into globally competitive technologies, through product development to make innovative and cost-effective product development and prototyping, to globally competitive manufacturing.

Specifically, the EC KET Program identifies the following five priority areas for Europe’s evolving EU-wide innovation strategy: (1) sustain a critical mass in knowledge and funding through effective use of economies of scale and scope; (2) increase market focus of R&D projects; (3) invest in large-scale demonstrators and pilot test facilities; (4) provide post-R&D commercialization support; and (5) practice trade diplomacy, that is, reduce unfair subsidies and protect domestic companies from unfair trade practices.80 This last policy priority is of particular concern from a U.S. perspective. In fact, the European Union’s KET Program culminates in a fairly “techno-nationalist” notion of IPR protection and states that “the EU should clearly promote an ‘in Europe first’ IP policy” and that proposals require clear IP plans for “first exploitation of IP” and rules that “favour the EU exploitation of the results of projects.”81

3.5.5 Summary

The European Union has experienced a fundamental change in its innovation policy from government-centered national strategies to attempts to combine market-led innovation and public policy coordination across Europe. While government initiatives, such as the KET Program, attempted to bridge the perennial gaps that stymie Europe’s industrial innovation ecosystem, significant challenges remain. To a large degree, however, this transformation is still a work in progress, as European IT innovation and commercialization continue to lag.

In addition, there are signs that Europe’s fiscal crisis and increasingly severe austerity policies might slow down Europe’s move towards greater openness and internationalization of its innovation system.

3.6 Conclusions and Policy Implications

The diversity of economic and IT innovation policies across the United States, China, Taiwan, and Europe reflect their differing cultures and history, economic status and technical capabilities. The U.S. approach rests on government support for basic academic research and a vibrant capital market and private enterprise ecosystem for product innovation. The other countries and regions blend elements of private enterprise and central planning. Each is unique and not directly transferrable to another region. Nevertheless, there are some general principles that can be gleaned from this survey of policies, coupled with technical insights regarding semiconductor device fabrication, chip architecture, and software.

Some of the largest computing companies in the United States have internal multidimensional technological capabilities in chip design, process development, wafer manufacturing, and software and have demonstrated success tapping into foreign talent pools and markets. However, IT talent, capabilities, and facilities are increasingly distributed globally. Although research prowess is correlated with industry success, information flows globally via many sources. The lesson of basic research, both in industry and academia, has been that the discoverers are not always those who convert the ideas into economically successful products. Oftentimes, the likelihood that an idea can be successfully commercialized and implemented depends on a nation’s or region’s innovation policies and entrepreneurial climate.

Second, the cost of semiconductor fabrication facilities is rising exponentially, placing their construction beyond the economic reach of small- and mid-sized companies. Only the largest multinational companies and nation-states can fund their construction and operation. This suggests that the United States must be mindful of its global dependence on fabrication supply chains and that it develop realistic models that balance the need for the latest process technology versus multiaxis innovation and that combine reliability and resilience, programmability, and functionality. Although financial investment in fabrication facilities by a small number of U.S. companies, primarily by Intel, provides some domestic sourcing, most of the chips contained in devices sold in the United States are fabricated offshore. IBM does produce some chips in the United States, both for U.S. defense needs and its own products, but the volume is relatively small.

Third, there is no assurance that historical U.S. dominance in computing will transfer to new and emerging domains. The need for architectural and software innovation to deliver new features and greater

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80EC, 2011 KET, p. 33.

81EC, 2011 KET, p. 37.



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