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TECHNOLOGY TRANSFER IN GERMANY 341 always be limited, because from their perspective, cooperative research has a supply-oriented character, which is a generally unfavorable precondition for tech- nology transfer. All in all, cooperative research can be a useful instrument of technology transfer for SMEs, and it has especially positive effects for the actively participat- ing firms. Therefore, Lageman et al. (1995) judge its effect to be largely positive. TECHNOLOGY TRANSFER IN SELECTED AREAS Technology Transfer in Information Technology The German delegation believes that German educational and scientific stan- dards in information technology are excellent and internationally competitive. This assessment is confirmed by an above-average level of scientific publications as well as a high citation level. Furthermore, scientific publications in this area reveal a strong international orientation (Grupp et al., 1995~. In contrast, German information technology, comprising computer as well as software technology, is, with the exception of some internationally competitive companies such as Siemens and SAP, characterized by a low number of industrial technology providers. (In telecommunications, the German position is much stronger.) The German software industry is weak in prepackaged high-volume products; most such standardized software comes from the United States. Ger- man enterprises have strengths in information technology applications in all kinds of industries and in customized, value-added products, generally produced in low volume series. A large percentage of NTBFs 25 to 30 percent of about 300 created annu- ally in Germany (see "Conditions for New Technology-Based Firms," above)- are working in information technology (Kulicke and Wupperfeld, 1996~. But only about 20 percent of the founders of NTBFs come from universities or other research institutions, so that the spin-out from scientific institutions is limited. Due to the lack of industrial counterparts, the activities of German research institutions are oriented primarily toward projects and less toward products, a situation that is unfavorable for technology transfer. Conducting projects re- quires a stable institutional framework, so larger institutions dominate technol- ogy transfer. One Helmholtz Center (Gesellschaft fur Mathematik und Datenverarbeitung, with about 1,200 employees) conducts primarily basic research, mathematics, and computer science, and the Max Planck Society recently established an institute for computer science aimed at basic research. On the applied side, seven Fraunhofer institutes are partly or completely active in various areas of information technology such as software engineering, industrial automation, and business organization. Two of them were established only recently. Within these institutes, about 600 employ- ees work in information technology. Also participating in the area of applied re

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342 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY search are about five An-Institutes and some regional or state research centers for which statistics are not available. The An-Institutes generally focus sharply on a special application field such as industrial automation or office automation. Information technology research at universities covers all types of R&D from basic research to experimental development (see "Results of a German Survey," above). Some 30 universities run programs in computer science, with about 150 to 200 mostly small institutes involved. Thus, universities contribute substan- tially to research in information technology. In the applied research market, there is a strong competition between universities, Fraunhofer institutes, An-Institutes, and regional/state institutes, leading to a high quality of research. Even though the demand of information technology producers for scientific support is limited, there is a distinct need for the integration of information tech- nology into other products, especially in mechanical engineering, chemical plants, and consumer goods. For this reason, many research institutions pursue an appli- cation- and system-oriented strategy. The main channels of technology transfer are contract research for industry; collaborative research with firms participating in the European programs frame- work; and, first of all, collaborative research with projects on behalf of the BMBF. Technology Transfer in Microelectronics The situation of microelectronics, like software, is characterized by relatively little industrial activity apart from some long-established, internationally com- petitive companies like Siemens, TEMIC, Bosch, and the German subsidiaries of IBM, ITT Semiconductors, Philips, and Texas Instruments. Whereas the German market represents 7 percent of the world's demand for microelectronic devices, only 2 percent of the demand is met by German producers (see also "Orientation of Industrial R&D," above). Against this background, many German companies specialize in microelectronic applications for a wide variety of industrial branches, a situation that has a strong impact on the orientation of research institutions, too. Of about 300 NTBFs created annually in Germany (an already low number), only about 10 percent are linked to microelectronic devices or applications (Kulicke and Wupperfeld, 1996), so technology transfer through this channel is modest. The most important channel of technology transfer from universities is the provision of highly qualified personnel for industry. Each year in microelectron- ics, about 50 engineers with Ph.D.'s and 200 with diploma degrees move from universities to industry. At present, there are about 40 university research centers in microelectronics, many of which focus on microelectronic applications and Microsystems (e.g., the integration of mechanics and electronics so-called mechatronics). Many university professors come from industry, and many master's and Ph.D. theses are done in cooperation with industrial companies, mostly those by students in German engineering schools.

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TECHNOLOGY TRANSFER IN GERMANY 343 The major nonindustrial institution in microelectronics is the Fraunhofer So- ciety, which supports eight institutes in microelectronics and Microsystems. Six of these cooperate under the umbrella of the Microelectronics Alliance, coordi- nating research within the Fraunhofer Society with the needs of industry. The Microelectronics Alliance has about 700 employees with regular contracts and about 300 with short-term contracts. Among the Helmholtz Centers, only the Julich Research Center carries out significant amounts of mostly basic research on microelectronics. This situa- tion applies also to the Max Planck Society and its MPI for Solid-State Research in Stuttgart. The Helmholtz Center in Karlsruhe conducts various activities in the closely associated field of Microsystems. In addition to universities, Fraunhofer institutes, and Helmholtz Centers, some Blue List institutes, several An-Insti- tutes, as well as a few state-run institutes are relevant actors in the field. The Association of German Electrical Engineers published a list of 17 institutes with a definite orientation toward technology transfer (VDE/VDI, 1994), including the Fraunhofer institutes, five university or An-Institutes, three state-run institutes, and four institutes run by industrial associations. Remarkably, these application-oriented institutes have enlarged their scope of activity. Whereas previously their goal was to develop prototypes, they re- cently have started to include pilot production, too. Another decisive trend of the last 10 years is the increasing integration of European research in microelectron- ics through programs of the European Commission and the EUREKA initiative, especially JESSI. Although these European activities have shortcomings, in par- ticular an enormous bureaucratic overhead, the German delegation acknowledges they have caused considerable change in the consciousness and international ori- entation of German researchers. Within this context, the German contribution is quite important, because it represents about 30 percent of all European activities in microelectronics. All in all, the analysis of microelectronics shows various specific mecha- nisms, like the appointment of professors from industry and the coordination within the Microelectronics Alliance of the Fraunhofer Society. Nevertheless, institutionalized forms of technology transfer, especially contract and coopera- tive research, dominate. Technology Transfer in Biotechnology For the purpose of this study, we defined biotechnology broadly to include genetic engineering, cell cultures, and microbiology. In more general terms, bio- technology was defined as the use of living organisms or parts thereof for the production, modification, or the decomposition of substances, or the modifica- tion of organisms; or services such as analytical services.33 At present, about 400 small and medium-sized enterprises and 30 large companies are engaged in the area of biotechnology. This estimate also includes firms in mechanical and pro

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344 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY cess engineering as well as distribution and service companies (Reiss and Husing, 1992~. NTBFs working in biotechnology play a negligible role; they represent barely 10 percent of the roughly 300 NTBFs created per year (Kulicke and Wupperfeld, 1996~. In the important application area of pharmaceutical products, the market is dominated by a dozen multinational, German-based concerns primarily in the chemical and pharmaceutical industry. (The description in this paragraph is largely drawn from Dolata, 1995.) For many decades, these firms have been very successful in pharmaceuticals and produce about 40 percent of the world's ex- ports in this sector. Their products are primarily based on research in organic chemistry. Because of their undeniable success in traditional areas, pharmaceuti- cal companies almost ignored the potential of genetic engineering for many years, although many German experts were already emphasizing its importance in the 1970s. Therefore, the first initiatives toward industrial applications for biotech- nology came from the government. This general assessment does not apply to all companies; firms like Boehringer Mannheim and Bayer have an internationally competitive position. Furthermore, many companies broadly use "traditional" processes with cell cultures, microorganisms, or enzymes. In some application areas outside pharamaceuticals, such as environmental technology and analytic kits, German industry's performance is very good. In contrast to this generally slow response of industry, German scientific performance has always been good (Eichborn, 1985; Kircher,1993~. This is also reflected in the number of publications and their frequency of citation (Grupp et al., 1995~. In addition, in the early 1970s, German scientists contributed many discover- ies, new methods, and processes to the world's knowledge of biotechnology. Many German scientists went to the United States to establish spin-off companies. Today, the research landscape in biotechnology is quite diverse. About 30 percent of the staff of the Max Planck Society works in its biological-medical section with a strong focus on biotechnology. In addition, four Helmholtz Cen- ters are partly or fully engaged in the biotechnological area (Stiftung Deutsches Krebsforschungzentrum, Stiftung Max-DelbruckfurMolekulare Medizin, Gesell- schaftfur Biotechnologische Forschung, Forschungscentrum Julich). So are sev- eral Blue List institutes and some departmental research institutes, especially those of the Federal Ministry of Agriculture and the Ministry of Health. Of course, universities also play an important role in biotechnology. The university survey turned up more than 200 institutes involved in biotechnology. The Minis- try of Education and Research initiated the establishment of eight gene centers (Genzentren) or biotechnology centers where universities and Max Planck insti- tutes cooperate (see also "Universities, Transfer Channels," above). The activi- ties of the Fraunhofer Society in biotechnology are still limited; three institutes have partial involvement in this field. Since about the middle of the 1980s, the large pharmaceutical companies began to acknowledge the potential of biotechnology and started a catch-up strat

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TECHNOLOGY TRANSFER IN GERMANY 345 egy. It is based on cooperation with external scientific institutions, the building up of internal research capacities, and the acquisition of SMEs abroad (Dolata, 1995~. The cooperation with scientific institutions has a strong focus on Ameri- can partners, so the industrial funds for German university centers in biotechnol- ogy are still low, as the results of the university survey show (see Table 3.4~. Many experts believe that the stringent regulations affecting biotechnology and the debate on patentability of biotechnological products have been major reasons for this external orientation of the German firms. However, Hohmeyer et al. (1994) found recently that the legal approval procedures for biotechnology projects and facilities in foreign countries, especially America, are comparable to those in Germany and are no longer a decisive factor. Nevertheless, German regulatory and beaueaucratic requirements for the aproval and operation of facilites are considerable. The problems associated with the aforementioned regu- latory requirements led to a new law on gene technology and encouraged the states to make the approval processes for biotechnology projects and facilities less bureaucratic and thus shorter. Furthermore, most biotechnology processes and products are now patentable in Europe (Knorr et al., 1996; Schmoch et al., 1992~. Finally, the orientation of most German companies toward America and increasingly Japan has to be seen in the context of a general move toward interna- tionalization. All in all, the level of technology transfer between industry and research institutions is still quite low, but in the future, the intensity will increase. A recent study on the potential of contract research in biotechnology revealed a growing need on the side of industry, especially of SMEs (Reiss and Husing, 1992~. In the 1990s, some states started initiatives for supporting biotechnology, primarily for attracting start-up companies and already-existing SMEs with a new focus on biotechnology. Recently, the BMBF started a new initiative, "Bioregio," to identify sites with a high transfer potential in biotechnology. These various initiatives are too recent to give a reliable assessment of their actual impact. Technology Transfer in Production Technology The international competitiveness of German industry in production and manufacturing technology is very high, not only in the specific field of machine tools, but also in related areas such as material processing and handling (see also "Orientation of Industrial R&D," above). The knowledge in this area is primarily generated by three sources: in-house company research university laboratories Fraunhofer institutes The situation in industry is characterized by a high number of SMEs. In machine tools, about 94 percent of the firms are SMEs. This situation implies a