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TECHNOLOGY TRANSFER IN GERMANY 245 Structural change of an economy is easier to accomplish with the help of small, new technology-based firms (NTBFs). Such firms display distinctive fea- tures connected to flexibility, innovation, and competitive advantages. There is a widely felt, obvious lack of NTBFs in Germany. NTBFs need assistance in the form of equity and managerial know-how, since most founders of such firms possess only technological skills. The failure of NTBFs to raise capital has not been reversed with the advent of new instruments like equity stock or venture capital. The supply of public funding has proved necessary. Although the risk- averse mindset of most founders of German companies cannot be overcome in- stantly, various steps (e.g., the formation of a transnational European stock ex- change for NTBFs) are being taken to improve the current unfavorable conditions. To summarize, highly elaborate institutionalized forms of technology trans- fer have been developed in Germany; examples are the An-Institutes, the AiF, and the FhG. Even universities at least their technical faculties show a high level of active involvement. Although the MPG and the Helmholtz Centers are developing a more active role, there is still much room for progress. A special characteristic of the German technology transfer system is that public and semi- public research institutions including universities have a high level of direct contract research and research cooperation with industry. This is one of the main reasons for the long-demonstrated comparative strength of the German innova- tion system in supporting incremental innovation and rapid technology diffusion in many industries. In the next few years, there will be an increasing need for industry to cooperate with nonindustry research institutions. At the same time, more research institutions will offer their services to industrial clients, and the competition in the research market will grow. Generally, the trend toward greater competition is a positive one. However, unfair competition among institutions due to their different levels of public base funding remains a problem. This imbal- ance may, under changing circumstances, disturb mechanisms that previously func- tioned well and require appropriate changes in national research policies. INTRODUCTION Part III of this binational study describes the technology transfer system in Germany. It first describes the R&D landscape in Germany in order to provide an overview of the institutional context of technology transfer. Selected R&D-per- forming institutions that are major players in technology transfer are then ana- lyzed in more detail. Finally, the report examines technology transfer in four areas of technology selected by the binational panel for deeper investigation: production technology (manufacturing), microelectronics, information technol- ogy, and biotechnology. The performance of German R&D institutions in these focal areas is addressed insofar as related data and information are available. The authors tried to present the relevant information as concisely as possible, drawing largely on the existing literature. In some sections, however, the de