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242 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY EXECUTIVE SUMMARY Compared with other large industrialized countries, Germany supports a high level of research and development (R&D) activity in relation to its gross domes- tic product (GDP). Indeed, as a percentage of GDP, German investment in R&D is comparable to that of the United States. A major distinguishing characteristic of the German R&D system is the ex- istence of a broad variety of public and semipublic research institutions that complement and bridge the R&D activities of industry and universities. The most important of these institutions are the Fraunhofer Society (Fraunhofer-Gesell- schaft [FhG]), the Max Planck Society (Max-Planck-Gesellschaft [MPG]), the Helmholtz Centers (formerly called Gro/3forschungseinrichtungen [GFEs]), and the Federation of Industrial Research Associations (AiF). These institutions have different missions, different research focuses, and vary significantly with respect to the scope and conduct of their technology transfer activities. The participation of universities and other noncommercial research institutions in technology trans- fer to industry also varies greatly with respect to the four focal areas of this study: production technology (manufacturing), microelectronics, information technol- ogy, and biotechnology. German universities' major channels of technology transfer to industry are collaborative and contract research, consultancy, informal contacts, conferences, and the provision of qualified personnel. Scientific publications are intensively used, but prove to be a less effective channel of technology transfer. In contrast to U.S. universities, the temporary transfer of personnel is rarely practiced in Ger- many. Another effective transfer channel for German universities is external institutions such as technology centers and particularly An-Institutes (Institute an der Universitat; literally, institutes at the university). In the last 15 years, univer- sity efforts to further technology transfer have increased considerably and have reached a generally satisfying level. This assessment applies also to the transfer activities in the four focal areas. In software and especially in biotechnology, the volume of industry contacts is suboptimal, which partly reflects the lack of a sufficient number of competitive German enterprises in these areas. A new legal and institutional framework will be necessary to improve exploitation of patents at universities. The FhG is the principal German noncommercial organization conducting industry-oriented applied research. Unlike other German public research institu- tions, which rely almost exclusively on institutional funding to support their re- search, the FhG's budget includes only 20 to 30 percent public institutional fund- ing. Moreover, the amount of funding is linked directly to the FhG's success doing contract research for public and particularly private clients. Therefore, the FhG's research orientation is largely demand driven. The close relationship be- tween the FhG and German universities is institutionalized through the appoint- ment of FhG directors as regular university professors. Thus, the FhG is a real

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TECHNOLOGY TRANSFER IN GERMANY 243 bridging institution between academic and industrial research. The future suc- cess of the FhG model depends decisively on an appropriate balance between, on the one hand, institutional funds and public-sponsored projects to build up an adequate level of research competence, and, on the other hand, private contracts to maintain the orientation toward industrial needs and to perform effective tech- nology transfer. Except in biotechnology research, the FhG has a strong presence in the four focal areas, with special strengths in microelectronics and production technology. Complementary to German universities, the MPG is the major institution performing outstanding basic and long-term applied research. MPG's main areas of focus are physics, biology, and chemistry. Many Max Planck institutes per- form research in areas of strategic interest to industry. The most important chan- nel of knowledge transfer is the exchange of scientific personnel. However, col- laborative research with industry plays a modest but increasing role. Up to now, the intensity of contacts with industry has depended primarily on the willingness and interest of individual MPG scientists. With declining public funding, the usefulness and achievements of the MPG have to be proved, and the society has to approach technology transfer more actively. Helmholtz Centers conduct primarily research on long-term problems entail- ing considerable economic risks in areas of public welfare and in fields requiring large investments. Besides the classic instrument of scientific publications, the major mechanisms of technology transfer are the participation of industry in ad- visory boards and committees, and collaborative research uniting industry and the centers on large projects or programs. The centers are funded primarily with public money, but industry and the federal government are striving to increase the share of industrially relevant research these centers conduct. This can be achieved by reducing institutional funds in favor of project support and broader participa- tion of industry in the centers' research planning procedures. It is not clear to what extent these different measures suggested will be implemented. In any case, the centers will go through a process of considerable structural change within the next few years. The institutes of the Blue List and the departmental research institutes carry out numerous research activities, mostly in basic research or applied research directed at the needs of state and federal government departments. Only a few institutes in this group have close relations with industry and perform technology transfer. Cooperative research within the framework of industrial research associa- tions has proved to be an effective instrument for performing projects that ex- ceed the capacity of individual small and medium-sized enterprises (SMEs). The associations and their umbrella organization, AiF, have implemented an inten- sive collective evaluation procedure that guarantees effective selection of appro- priate research projects. Those companies that are directly involved in the defi- nition and supervision of projects benefit most from the results of cooperative

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244 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY research. Technology transfer to other member companies is limited, although many measures are undertaken to promote such activity. A major restriction of cooperative industrial research is its limitation to precompetitive problems, since several companies in the same industry have to cooperate. In some less-re- search-intensive industries, the share of cooperative research compared with their total R&D activities is quite large. However, in research-intensive industries like chemicals, electrical engineering, and aeronautics, the role of cooperative research is negligible. Up to now, the volume of research activities of the European Union (KU) has been relatively limited compared with the activities of individual countries. How- ever, the importance of EU funding is growing. Special initiatives are focusing on strategic areas in an effort to enhance European competitiveness. In areas such as biotechnology and information technology, the impact of EU-funded re- search is considerable. A characteristic of EU policy is a top-down approach to setting a research agenda through the use of so-called framework programs. In- ternational collaboration between industrial enterprises and research institutions is required, thus technology transfer is facilitated. In contrast, the so-called EU- REKA initiative is independent of the framework programs of the European Com- mission. It has no framework concept, follows a bottom-up approach to setting research priorities, and pursues market-oriented research. Major areas of activity are biotechnology and, in particular, information technology. The EUREKA project JESSI (Joint European Submicron Silicon Initiative) contributes consid- erably to the international competitiveness of European industry in the fields of microelectronics, high-definition television, digital audio broadcasting, and other communication and information technologies. Regarding the four focal areas, industrial R&D activities in Germany are focused on various fields of mechanical engineering. Industry gives less R&D attention to microelectronics, information technology, and biotechnology. In this respect, the German profile is almost the opposite of the American one. Only in the area of chemistry do the R&D activities of the two countries have similar structures and show positive specialization indexes. Technology transfer to SMEs is realized through various channels. One im- portant channel is through R&D cooperation with other companies (primarily customers of SMEs), consulting engineers, universities, and other research insti- tutions. About half of all German SMEs that perform R&D use this channel. There is, however, considerable potential for increasing R&D collaboration be- tween SMEs and other research institutions, particularly universities. In addition, SMEs profit from a dense network of non-A&D-performing institutions, the re- sult of a high level of industrial self-organization. The Chambers of Industry and Commerce, industrial associations, and other institutions effectively support the diffusion of technology and know-how, particularly in technologically mature industries, through innovation-oriented consultancy and by organizing knowl- edge exchange among firms through journals, meetings, and informal networks.