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OVERVIEWAND COMPARISON 35 The international production and diffusion of knowledge by public and pri- vate research institutions are important and growing. In some areas (e.g., world- wide computer networks), the frontier between national and international activity is completely blurred. National R&D and technology transfer policies have to take this situation into account. There are many benefits to international collaboration in R&D and technol- ogy transfer. These include synergies as well as economies of scale and scope in R&D; risk and cost sharing; accelerated diffusion of new technology; more open markets with an accompanying stimulus to international trade, investment, and economic development; and the ability to tackle cross-border public R&D chal- lenges (e.g., global environmental challenges). This comparative study suggests that there are promising opportunities for mutually beneficial collaboration between public and private German and U.S. R&D organizations in areas of precompetitive applied research and technology. At the same time, there are significant impediments to international collaboration in these areas, particularly when public and private partners are directly or indi- rectly involved. Indeed, the negotiation of successful collaborative projects be- tween public- and private-sector entities in areas of industrially relevant research is complex enough within the confines of a single national innovation system. Issues that must be resolved relate to such things as the appropriate division of labor between public and private institutions, who pays for which part of the related R&D activities, and who will own the results of the research and under what conditions. However, when such collaboration is pursued at the interna- tional level, many other obstacles come into play. These include lack of aware- ness of opportunities due to inadequate exchange of information, differences in intellectual property regimes and practices, and the existence of different fund- ing, accounting, and administrative requirements and practices. In this context, new public policy challenges include capturing the economic benefits of public R&D spending, ensuring equitable access to other countries' public R&D investments, and ensuring adequate quid pro quo from foreign firms and foreign countries that gain access to a country's public R&D (National Acad- emy of Engineering, 1996b). Given these factors, it is not surprising that funding for transatlantic or international projects oriented toward applied research or tech- nology transfer is scarce. The absence of more explicit international policies or agreements is a significant impediment to transatlantic technology transfer. CONCLUSIONS AND RECOMMENDATIONS General Conclusions and Challenges This comparative assessment of major sectors of the German and U.S. tech- nology transfer systems reaffirms that many deeply interrelated factors shape the organization, conduct, and performance of technology transfer in an advanced

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36 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY industrialized country. Among the most important of these factors are the size and technical intensity of the nation's domestic market, the composition and dy- namics of its industrial base, the organization and performance of its capital and labor markets, its societal goals and priorities as expressed in its allocation of public monies, its public policies and established private-sector practices, and the culture of its people. The comparative study has helped the binational panel better appreciate simi- larities and differences of function, form, and context of the R&D and technology transfer activities in the two countries. Further, it has enhanced the panel' s un- derstanding of the relative strengths and weaknesses of the two national systems. In so doing, it has focused the panel's attention on a limited number of country- specific as well as shared opportunities for enhancing the performance of the two national systems. OBSERVATIONS REGARDING THE NATURE OF TECHNOLOGY TRANSFER Effective technology transfer is greatly facilitated by the close interaction of individuals involved in the development and/or application of the technology transferred. In spite of the global communications revolution and the prolifera- tion of multinational companies, technology transfer remains first and foremost a "contact sport," involving close, sustained interaction of individual scientists and engineers from different organizations.45 Mobility of technical personnel among institutions is an important facilitator of technology transfer. Indeed, one of the most important means of technology transfer in rapidly evolving technical fields is the movement of people (scientists and engineers) among organizations whether through temporary exchange or permanent transfer. Technology transfer is highly industry and technology specific. The pre- ferred mechanisms of technology transfer vary depending on the characteristics of the technology being transferred, the industry involved, and the rate of techno- logical change affecting the industry at the time. For example, patent licensing is a critical instrument of technology transfer in sectors where the time to commer- cialization is long (e.g., biotechnology). However, patent licensing is relatively less important in microelectronics, where current technology life cycles are short. Research publications, conferences, and the movement of research personnel from academic and related institutions to industrial research organizations are primary modes of technology transfer in highly dynamic, science-based industries such as biotechnology and software. However, they are relatively less important avenues of technology transfer in technologically more slowly advancing or mature sec- tors such as the automotive or electrical machinery industries. In these areas, industrial associations and contract research are effective instruments for the dif- fusion of knowledge.

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OVERVIEWAND COMPARISON MAJOR SIMILARITIES BETWEEN THE GERMAN AND U.S. SYSTEMS 37 There are many similarities between the German and U.S. technology trans- fer systems. The R&D portfolios of both countries are highly diversified and span the full spectrum of science and engineering fields. Technology transfer systems in both countries support a wide range of technologically nascent and well-established industries. The overall structure of the two national systems, as well as the functional roles of many of the major institutional players in each system, are roughly comparable. Comparable institutions in the two countries face many similar challenges. German and American research universities wrestle with reconciling new and traditional university missions, conflicts of interest, and tensions between aca- demic and industrial research cultures. To cope with these problems, universities in both countries have established special transfer-oriented research entities in addition to supporting traditional faculty research. In the United States, these include a diverse population of university-industry research centers. In Germany, the An-Institutes were created as legally independent bodies that could operate outside of the heavily regulated environment of universities. In both countries, the industry-oriented research institutes must try to meet the transfer needs of small companies, adapt to new demands of their clients, build competencies in emerging areas, and compete and cooperate effectively with other nonindustrial technology transfer institutions within their respective national R&D systems. The large German Helmholtz Centers and large U.S. national laboratories (Department of Defense and Department of Energy) are both under pressure to diversify their research portfolios and downsize in response to a contraction of their original national missions. These concerns were addressed at great length (and inconclusively) in several major recent studies46 but were considered by the binational panel to be beyond the scope of the current study. Nevertheless, the panel believes it is only logical that laboratories, which in the pursuit of their public missions conduct R&D of potential relevance to industry, have policies and procedures in place that facilitate technology transfer and collaborative R&D. In both countries, the large public laboratories have made positive strides toward improving the organizational and policy framework for collaboration with indus- try. However, the German and U.S. delegations believe that much more needs to be done in this area. These common challenges suggest the potential for greater mutual learning among functionally comparable institutions in the two countries. MAJOR DIFFERENCES BETWEEN THE GERMAN AND U.S. SYSTEMS At the same time, comparison of the two nations' technology transfer sys- tems underscores major differences in their scale, structure, organization, opera- tion, and performance.

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38 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY The scale and openness of the U.S. economy and innovation system overall, as well as the large size and technological intensity of relatively homogeneous segments of the U.S. domestic market, create more opportunities than exist in Germany for technology-driven firms. Despite significant progress toward inte- gration of national economies within the European Union during the past decade, European markets for many technology-intensive products and services still re- main much more fragmented by different national policies and practices than do U.S. markets. Per capita consumption of high-tech products and services is sig- nificantly higher in the United States than it is in Germany or the European Union as a whole. The German technology transfer enterprise is relatively stable, structured, and homogeneous within sectors compared to its U.S. counterpart. In general, the German technology transfer system relies heavily on organizations and insti- tutions that are national in scope, highly differentiated by industry and technol- ogy area, and, in many instances, well interconnected or coordinated. These characteristics are reinforced by the relatively stable composition of the German industrial production and R&D base over time. The integrated structure and sta- bility of the German system (compared with the U.S. system) have yielded en- hanced communication and cross-institutional learning among organizations, as well as rapid incremental innovation and technology diffusion in several techno- logically mature industries. To summarize: The German innovation system is organized to excel in the application of new technologies that increase the perfor- mance of existing industries. The U.S. technology transfer enterprise is more highly diversified, less coor- dinated, more flexible, and more rapidly evolving than its German counterpart. Technology transfer in the United States relies heavily on the movement of indi- vidual researchers between organizations and within and between different sec- tors of the nation's technology enterprise. Operational responsibility for technol- ogy transfer in the United States resides within a very large, highly distributed, rapidly evolving, and weakly coordinated set of organizations. The structure and dynamics of the U.S. system afford it greater flexibility than its German counter- part and thus make it better able to react to changing conditions. This flexibility has provided advantages to the United States, particularly in fast-moving fields. The major shifts in the sectoral composition of industrial production and indus- trial R&D in the United States during the past 20 years attest to the system's dynamism. To summarize: The U.S. innovation system is structured to excel in opening up new technological frontiers and launching new industries. In general, the science and engineering R&D workforce is more mobile in the United States than it is in Germany, particularly when movement between public and private institutions is considered.47 This reflects broad differences in the structure, culture, and regulation of labor markets in the two countries. In the United States, public policies and private strategies pose fewer barriers and offer more incentives and opportunities for the movement of research scientists and

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OVERVIEWAND COMPARISON 39 engineers between academic, government, and commercial organizations than they do in Germany. In Germany, the inflexible regulation of civil service and public employment is substantially responsible for the low mobility of the sci- ence and engineering workforce. To a certain extent, the German system com- pensates for the limited intersector mobility of scientists and engineers through more extensive interinstitutional linkages, such as the dual appointment of out- standing researchers as research institute directors and university professors. High-technology start-up companies play a critical role in the transfer and commercialization of technology developed in universities, government labora- tories, private-research institutes, and large private companies in the United States but not in Germany. Many factors have contributed to the special role of start-up companies in the United States. Among the most important of these have been a highly mobile technical workforce; the availability of private venture capital; the existence of sophisticated public equity markets; and the large scale and high- technology intensity of relatively homogeneous segments of the U.S. domestic market. There is no counterpart in Germany to the prominent role that start-up companies perform in the commercialization of new technology in the United States. This is due to a range of social, legal, structural, and cultural factors in Germany, many of which have very little to do with the performance of German R&D and technology transfer institutions proper. These factors include weak venture capital and limited public equity markets; unsupportive labor, company, and bankruptcy laws; and impediments related to the tax code and other regula- tions. Small and medium-sized enterprises (SMEs) in technologically mature in- dustries have greater access to new technology in Germany than they do in the United States. The R&D and technology transfer infrastructure for technologi- cally evolving industries in Germany is relatively comprehensive in scope and well coordinated. It is sustained by a high degree of industrial self-organization and a significant level of public-sector support. By contrast, the U.S. R&D and technology transfer infrastructure for technologically mature industries is much more uneven, fragmented, and diversified in its organization, conduct, and per- formance. German industrial R&D consortia are generally structured within the frame- work of broad industry associations and organizations. The industrial R&D con- sortia in the United States are organizationally more differentiated, less wide- spread, and less comprehensive in scope than their German counterparts. They are ad hoc in character and, until recently, have been more limited to capital- intensive industries than have consortia in Germany. The German contract research institutes are more tightly networked and uniform with respect to size, organization, and administration across technology areas than their U.S. counterparts. Moreover, individual contract research insti- tutes in Germany appear to be more targeted to particular industries than such institutes are in the United States. The semipublic German Fraunhofer Society

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40 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY is an effective institution of technology transfer that has no direct organizational counterpart in the United States. Only a few of the private independent engi- neering research and technology transfer institutions in the United States are oriented toward industrial clients to a comparable extent. The Fraunhofer insti- tutes are more targeted to specific areas of technical expertise, more networked, and more closely linked to universities than the U.S. independent engineering institutes. Overall, the federal and state governments in the United States are much less involved financially and organizationally in industrially relevant, civilian applied R&D and technology transfer and diffusion than is the German public sector. Public attitudes toward the role of government in civilian R&D and technology transfer differ greatly in Germany and the United States. Government support of R&D in the United States is heavily concentrated in the defense and health areas (and associated industrial sectors). Outside of the health area, the U.S. federal government has invested few resources in direct support of the diffusion and use of industrially relevant civilian technology. The German public R&D portfolio is distributed over a larger number of public missions and industrial sectors than is the U.S. one. Civilian industrial development is a major objective of German public R&D spending. Moreover, German government support of effective dif- fusion and use of technology by industry is extensive. The technology transfer activities of publicly funded individual R&D-per- forming institutions in Germany appear to be more targeted to particular indus- tries than is true in the United States. Even the relatively small volume of state and federally funded R&D and technical-extension activities in the United States directed explicitly at the objective of industrial development tends to be oriented more toward regional economies and multiple broad technical fields than toward the needs of specific industries. Individual U.S. federal laboratories subordinate support for any particular industry to their broader public mission and tend to serve a broader population of industries through Cooperative Research and De- velopment Agreements, licensing, and other technology transfer activities than their German counterparts. In Germany, the semipublic Fraunhofer institutes have the explicit mission of technology transfer; many departments of the large Helmholtz Centers work in areas that are strategically relevant for industry, and many R&D programs of the Federal Ministry for Education, Science, Research, and Technology have an explicit focus on technology transfer through university- industry collaboration. CHALLENGES TO THE GERMAN AND U.S. SYSTEMS Drawing on their combined assessment of the relative strengths and weak- nesses of the German and U.S. technology transfer systems, the two delegations to the binational panel each identified priority challenges for their respective na- tional systems.

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OVERVIEWAND COMPARISON The German delegation sees one primary challenge: 41 to change aspects of the nation's cultural and legal framework that cur- rently discourage innovation, commercialization of new technology, risk taking, R&D workforce mobility, and entrepreneurial activity generally within Germany. The U.S. delegation sees two primary challenges: to preserve and further leverage the core strengths of the U.S. technology transfer system, namely, its flexibility, adaptability, and diversity; and to better meet the technology transfer needs of SMEs and the "infra- structural" and "pathbreaking" R&D needs of technologically mature in- dustries.48 The recommendations of each delegation, presented in the next section, ad- dress specific aspects of these general challenges. Recommendations This comparative study has shown that the national institutional framework for technology transfer is very rich and diverse in both Germany and the United States. More important, the study has increased the binational panel's under- standing of the relative strengths and weaknesses of the two nations' technology transfer systems and highlighted important opportunities for both German and U.S. stakeholders to further diversify and strengthen their respective systems. Accordingly, the German and U.S. delegations to the panel have each arrived at a short list of recommended actions (addressed to public and private policymakers within their respective countries) designed to exploit the opportunities and ad- dress a number of the major challenges facing their respective national technol- ogy transfer systems. In addition, the full binational panel has developed a lim- ited number of joint recommendations aimed at expanding mutually beneficial international collaboration in basic and applied R&D and technology transfer among Germany, the United States, and other nations. RECOMMENDATIONS OF THE GERMAN DELEGATION The German delegation to the panel notes that efficient technology transfer is very important for the competitiveness of an economy and suggests a variety of related measures for Germany. At the same time, the delegation acknowl- edges the fundamental importance of basic, noncommercial research and the need to guarantee its future as prerequisites of successful and innovative tech- nology transfer.

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42 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY General Recommendations 1. The delegation recommends that German research policymakers foster cooperation between German and U.S. R&D institutions in the area of applied, transfer-oriented research. The delegation is aware of various funding sources for supporting German- U.S. cooperation in the area of basic research. However, obtaining support for bi- national applied R&D and transfer-oriented projects is problematic. To solve this problem, the German-American Academic Council Foundation should support these types of projects more intensively and establish a permanent committee to look for appropriate funding sources. (Specific suggestions for joint German-U.S. projects are made in the "Joint German-U.S. Recommendations" section, below.) 2. The delegation recommends that, beyond improving institutional mecha- nisms of technology transfer, changes be made in German cultural and legal frameworks in order to encourage individual professional mobility, risk tak- ing, entrepreneurial activities, and acceptance of technology. Changes should be considered in such areas as the social security system, enterprise law, and tax regulations. In addition, the delegation recommends that the government and industrial associations organize public campaigns to improve public acceptance of new technology, encourage more risk taking, and develop an improved entrepreneurial spirit. Specific Recommendations 3. The delegation believes that new technology-based firms are an impor- tant instrument forfostering the transfer and commercialization of technolo- gies thatfind their origins in universities, research institutes, and established companies. Therefore, the delegation suggests that incentives to foster such spin-offs be improved through changes in the German legal, tax, andfinan cial frameworks. The delegation recommends the creation of special tax deductions for and public reinsurance of venture capital, equivalent to the existing system for for- eign investment. In addition, the private liability of enterprise founders should be abolished, and the opportunities for small firms to go public should be improved. Furthermore, the delegation recommends introducing special tax deductions or even tax exemptions for new technology-based firms, especially in the first few years after their establishment. 4. The delegation believes that technology transfer is enhanced significantly by the temporary transfer of personnelfrom research institutes and universi- ties to industrial laboratories and vice versa. To foster this professional mobility, the delegation recommends that German regulations regarding civil service and public employment be made more;flexible.

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OVERVIEWAND COMPARISON 43 Existing regulations affecting the ability of civil service and public employ- ees to take temporary leave to work in private institutions are very rigid. The related administrative procedures are complex and a clear disincentive for this very efficient instrument of technology transfer. Improved regulations in this area should include the possibility for civil servants to participate actively in private enterprises. 5. The delegation believes that the U.S. model of industrial grants to univer- sities fosters creativity in research and technology transfer. Therefore, the delegation recommends that special tax incentives be introduced to support this form of open university-industry cooperation in addition to the presently dominant system of contract research. The delegation believes that industry grants in support of academic research have certain advantages over contract-supported R&D. For example, although deliverables may not be specified ahead of time, grant-supported research typi- cally involves the sponsors in determining the orientation of the research. Special tax incentives should be introduced to foster research grants. These should in- clude some mix of tax deductions (deductions from taxable income) and tax cred- its (direct deductions from taxes owed) for sponsored research, similar to the tax treatment of donations to political parties. In addition, the upper tax limits for donations to scientific institutions should be raised. A very interesting American model is the Industry-University Cooperative Research Centers program, which is cofunded by the National Science Founda- tion and a group of industrial enterprises through grants. German decision mak- ers should investigate whether a similar model can be introduced at German uni- versities. 6. The delegation recommends that contract research at universities and other research institutions be stimulated by special tax deductions. The recent decision of the Federal Financial Court (Bundesfinanchof) that no tax deductions can be applied to contract research at public research institutions is very detrimental to technology transfer. The related regulations (i.e., Abgaben- ordnung) should be amended as soon as possible in order to avoid problematic long-term effects.49 The delegation does not agree with some policymakers who want to impose sales taxes on the contract research of universities. 7. The delegation sees the need to enhance the entrepreneurial spirit in public and semipublic research institutions. To achieve this goal, the del- egation recommends increasing the;flexibility of the public wage system. The delegation sees the need for more incentives for research staff to work on contract research, as efficient technology transfer requires entrepreneurial be- havior of the involved researchers, which has to be supported by appropriate wage structures. The entrepreneurial spirit of young researchers should also be

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44 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY supported by the establishment of more chairs and professorships for innovation management. Up to now, only a few university business departments have estab- lished these positions. 8. The delegation supports German initiatives to increase the commitment of all public or semipublic R&D institutions to conduct contract research. The delegation, however, recommends that equitable conditions for all these in- stitutions be ensured to prevent unintentional distortions of the contract re- search market. Present political initiatives encourage various types of institutions to engage more actively in contract and cooperative research. The delegation believes that the competition provided by these institutions will enhance the quality of technol- ogy transfer. However, these institutions have different frameworks regarding base funding, overhead costs, research infrastructure, facilities, and so forth. A balanced framework will be necessary to prevent unintentional distortions of the research market in particular through cross-subsidies of contract research at in- stitutions with high levels of base funds. 9. The delegation suggests that legal andfinancial requirements be changed to support a more active role for universities and public research institutions in the area of intellectual property rights and licenses. Due to lack of an appropriate infrastructure and financial incentives, most German universities do not protect adequately the intellectual property devel- oped by their researchers, nor do they promote effectively the commercial ex- ploitation of research results emanating from their laboratories. The delegation believes that universities and polytechnical schools need to get special funds and personnel to actively apply for patents and market licenses. In addition, the government should consider whether university professors should share in li- cense revenues, according to the law for employed inventors (Arbeitnehmerer- findungsgesetz, ArbEG), instead of being subject to the present personal exploi- tation privilege. Like American universities, German universities should be able to obtain full title to inventions developed with public support, be completely relieved of return flows of license fees to publicly sponsored institutions, and should be allowed to license patents exclusively to private enterprises. The delegation also recommends a more active patent policy for departmen- tal research institutes and Blue List institutes, based on measures similar to those suggested for universities. In Helmholtz Centers, the present patent policy can be improved by allowing centers to completely retain license revenues and giving them more flexibility to use those revenues. For general support of patents at research institutions, the grace period for patents should be reintroduced, comparable to the present patent law in the United States.

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OVERVIEWAND COMPARISON RECOMMENDATIONS OF THE U.S. DELEGATION 45 This comparative study has deepened the U.S. delegation's understanding of the fundamental strengths and weaknesses of the U.S. technology transfer sys- tem. Specifically, the delegation recognizes that the greatest strengths of the U.S. system are its large size, diversity, and decentralized and distributed organiza- tion; the high mobility of resources critical to R&D, technological innovation, and technology transfer (i.e., science and engineering personnel, capital, and other factors of production); and the system' s extraordinary flexibility and adaptability to changing circumstances. At the same time, comparison with Germany has heightened the U.S. delegation's awareness of the relative weakness of the U.S. system in meeting the R&D and technology transfer needs of technologically mature industries small and medium-sized enterprises in particular. In an effort to reinforce and leverage the fundamental strengths of the U.S. enterprise and address areas of weakness, the U.S. delegation makes six specific recommendations. 1. The U.S. delegation recommends that the federal government do more to facilitate privately led initiatives aimed at strengthening the R&D base and technology transfer infrastructure of both technologically emerging and tech- nologically mature industries. In particular, the government should seek to further encourage collaborative industrial R&D, including industrial R&D consortia, in technology areas that are precompetitive, noncompetitive, or related to standards. The U.S. R&D and technology transfer infrastructure for American industry, particularly for technologically mature industries, is highly uneven, fragmented, and diversified in its organization, conduct, and performance. Recently, through self-organization often augmented by limited financial and technical support from government and universities, several major technologically mature U.S. indus- tries have revitalized their it&D-base and technology transfer infrastructure. However, there are many other U.S. industries in which such a revitalization is needed. Steps toward this objective could include the development of technology road maps by federal agencies, working in collaboration with industry, that would encourage private industry to engage in similar exercises50 (see Recommenda- tion 2, below); working with industry associations to identify regulatory changes that might promote the collective definition and diffusion of best practices in regulated industries; and amendments to the R&D tax credit that would foster collaborative R&D in technology areas, including those defined above. 2. The U.S. delegation encourages more U.S. industries to prepare dynamic technology road maps similar to the one prepared by the U.S. semiconduc- tor industry.

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46 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY In 1994, the U.S. Semiconductor Industry Association published The Na- tional Technology Roadmap for Semiconductors, which inventoried the industry's various sources of technology (e.g., raw material suppliers, equipment vendors, universities, federal labs), forecast technological needs and developments for all elements of the industry's value-added chain, and prioritized the industry's basic, precompetitive, noncompetitive, and standards-related research needs. Both the development of the road map and the ongoing follow-up to the initial exercise have been deemed successful and constructive by all parties involved (see Rea et al., 1996~. The U.S. delegation believes that for many industries (particularly industries based on technologies that are more established and advancing incre- mentally) technology road map exercises such as this can be very useful for fo- cusing the industry's attention on changing technological opportunities and chal- lenges as well as for encouraging public- and private-sector investments to exploit or address them.5i 3. The U.S. delegation recommends that industrial leadership organizations such as the Council on Competitiveness, the Business Roundtable, and the National Association of Manufacturers do more to assess and disseminate lessons regarding the value and effective organization and operation of in- dustrial R&D consortia in the United States. During the past decade, industrial R&D consortia have become increasingly important vehicles of industrial technology transfer in the United States. Despite their proliferation across a growing number of industries, there has been remark- ably little knowledge transfer concerning successful organizational and opera- tional practices among the diverse, highly distributed, and relatively autonomous population of consortia. While the task of cross-industry or cross-institutional learning is complicated by the sheer diversity of the organizational types of such consortia, the documented experiences of a few highly publicized consortia sug- gest that there are many generalizable lessons to be learned. In the absence of a national "clearinghouse" for cross-industry learning in this area, like the German AiF, the U.S. delegation believes that U.S. organizations with significant industry participation such as the Council on Competitiveness, the Business Roundtable, and the National Association of Manufacturers are particularly well equipped to document, assess, and disseminate lessons learned to U.S. industry. 4 . The U.S. delegation encourages all U.S. research universities to define policies to guide technology transfer and research collaboration with indus- try that are transparent and predictable. Such policies must be attuned to the diverse needs and circumstances facing different industrial sectors as well as different academic institutions (e.g., medical schools versus engi- neering schools) and the schools and departments within them. To this end, the delegation recommends that the National Academies' Government- Uni- versity-Industry Research Roundtable address the issue of establishing a

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OVERVIEWAND COMPARISON 47 national effort to collect and disseminate information regarding the diversity of university good practices in this area. A number of U.S. research universities or constituent graduate schools ap- pear to have developed effective policies and practices for managing their R&D and technology transfer interactions with industrial partners. However, consider- able evidence suggests that many more of the nation's research universities are still struggling to develop policies and practices that will engage industry more extensively in mutually beneficial research and technology transfer. For this rea- son, the delegation believes that academic research institutions need to work to- gether to identify, develop, and disseminate the variety of good policies and prac- tices that support effective university-industry collaboration. The U.S. delegation considers the current diversity and decentralized nature of the U.S. university research enterprise to be sources of strength. Accordingly, the delegation does not believe that a one-size-fits-all approach to best practices in university-industry technology transfer or collaborative R&D makes sense. At the same time, the delegation recognizes that the very diversity and decentralized character of the university research enterprise make cross-institutional learning difficult to achieve. The delegation believes that the charter of the Government- University-Industry Research Roundtable and its previous work, particularly in the area of university-industry partnerships, well equip it to take the initiative in advancing the learning process in this area.52 5. The U.S. delegation recommends that the National Science Foundation expand the existing network of collaborative university-industry research centers (e.g., Industry-University Cooperative Research Centers, Engineer- ing Research Centers, Science and Technology Centers) and continue to ex- periment with other institutional and organizational forms. The U.S. delegation believes that university-based multidisciplinary centers sponsored by the NSF have on the whole proved to be cost-effective mechanisms for promoting university-industry research collaboration. For a relatively small federal investment, they can provide high educational value, contribute to the research needs of a broad spectrum of industries (both technologically dynamic and technologically mature), and provide valuable technical-extension services to regional industry. The federal government should be relatively unconcerned about some industries being served by more than one center, provided there is sufficient industry support for additional centers and there is a clear demand for more graduates in the field supported. Moreover, NSF should experiment and encourage others to experiment with new institutional and organizational modes that promote university-industry research collaboration. In this regard, the struc- ture, conduct, and performance of the German independent, university-linked An-institutes and Fraunhofer institutes would seem worthy of further study and analysis.

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48 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY 6. The U.S. delegation recommends that allfederal agencies no matter the extent to which their mission relates directly to private industry develop more effective mechanisms for ensuring appropriate industrial input into the formulation, execution, and evaluation offederal laboratory R&D and tech- nology transfer activities. The U.S. delegation recognizes that virtually all federal agencies with R&D portfolios are coming to rely more and more heavily on private-sector R&D capa- bilities and outputs to advance their public missions. Irrespective of whether a given federal laboratory considers the development and diffusion of industrially relevant technology a central, ancillary, or negligible part of its overall public mission, it is increasingly critical that the laboratory develop the capability for drawing effectively on private-sector R&D and R&D management and evalua- tion capabilities, as well as contribute to those capabilities. Joint German-U.S. Recommendations for Fostering Transatlantic Collaboration in R&D and Technology Transfer The binational panel believes significant opportunities exist for building on the learning process initiated by this study. The panel recommends that steps be taken in both countries to facilitate and enhance the exploitation of these opportu- nities. Specifically, the panel encourages mutually beneficial collaboration be- tween German and U.S. public- and private-sector institutions in areas of basic and applied R&D and technology transfer. The panel acknowledges that various impediments to transatlantic collabora- tion in the area of technology transfer remain. These include simple lack of awareness of opportunities; obstacles posed by different funding, accounting, le- gal, and administrative practices in different countries; differences in intellectual property regimes and practices; and structural as well as public-policy-induced barriers. The panel believes that many of these impediments are surmountable and that transnational R&D arrangements are, in the long run, a necessary com- ponent of free trade in a global economy. The following three recommendations are aimed at fostering mutually ben- eficial transatlantic (European Union-United States) as well as global coopera- tion in R&D and technology transfer. 1. The panel recommends that the German and U.S. governments catalyze transatlantic efforts to develop a set of mutually agreed-upon principles that will help the United States and member states of the European Union to recognize and implement arrangements for mutually beneficial transatlantic collaboration involving public and private institutions in R&D and technol- ogy transfer. The panel recognizes that many of the seemingly intractable impediments to

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OVERVIEWAND COMPARISON 49 enhancing collaboration between Germany and the United States involve mani- fold differences in national law and public policy in such areas as intellectual property rights; competition and antitrust policy; corporate law; health, safety, and environmental regulations; international trade and investment policy; and R&D, technology, and industrial policies. Many of these policy differences and the associated obstacles they pose to international collaboration are often poorly understood. Moreover, the international policy challenges raised by these na- tional differences are weighted differently by different countries, and viewed as tightly interconnected. For these reasons, the panel believes that these policy-related impediments will and should be addressed at the bilateral or multilateral level as intercon- nected policy challenges.53 The ongoing negotiations among member states of the Organization for Economic Cooperation and Development to develop a Mul- tilateral Agreement on Investment could be an appropriate location for the devel- opment of such principles. The panel believes that successful negotiations within these forums would serve as a useful starting point for more comprehensive glo- bal negotiation of these policy challenges within the World Trade Organization, the World Intellectual Property Organization, international standards-setting or- ganizations, and other relevant international organizations. 2. The panel strongly urges public- and private-sector institutions that per- form andfund R&D in Germany and the United States to adhere mutually to the generally accepted principles of national treatment (nondiscrimination on the basis of nationality) and transparency (full disclosure of terms) in their interactions with organizations based in other countries. The panel believes that mutual observance of these principles by German and U.S. organizations will help overcome many of the impediments to mutually beneficial transatlantic collaboration in R&D and technology transfer identified above and will encourage it&D-funding and it&D-performing institutions based in other countries to follow their lead. 3. The panel recommends that research and technology transfer organiza- tions in Germany and the United States be encouraged to experiment with a number of different types of transatlantic collaborative activity. The panel believes that, in the near term, experimentation with specific participant- driven collaborative projects (i.e., learning by doing) is the most promising approach to understanding and overcoming obstacles to enhanced bina- tional, transatlantic, and global collaboration, particularly in the areas of applied research and technology transfer. In this context, the panel believes that the German-American Academic Council Foundation could play a con- structive role in bothfostering and evaluating participant-driven experiments with transatlantic collaboration, as well as in identifying and disseminating best practices in this area.

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50 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY To this end, the panel has identified several types of binational, transatlantic, and international collaboration, both prospective and ongoing, that it considers particularly promising in the German-U.S. context. In some cases, the panel recommends specific actions to facilitate experimentation with a particular type of collaboration. In others, the panel merely identifies an opportunity or a proof of existence to illustrate the potential of a particular mode of collaboration. Establishment of transatlantic networks of R&D institutes for the shared use of facilities and infrastructure, especially information infrastructure. As an ex- ample of what form such collaboration might take, two panel members developed a brief prospectus for a joint project to facilitate involvement of small and me- dium-sized companies in the development of computer-supported cooperative work (CSCW) applications to exploit emerging high-speed global telecommuni- cations networks. (See Annex I.) Here again, the panel views limited transatlan- tic initiatives such as this as a useful starting point for more extensive global initiatives. Transatlantic collaboration of university-based institutions in the areas of ap- plied, transfer-oriented research. In particular, the panel sees promising oppor- tunities for mutual learning through collaboration between the U.S. UIRCs and the German An-Institutes. Both sets of institutions represent efforts to overcome some of the administrative and cultural barriers to closer university-industry re- search collaboration. Admittedly, there are significant organizational and fund- ing differences between these two groups of institutions (not to mention profound differences among the highly heterogeneous population of U.S. centers). An- Institutes are legally independent of the universities and rely primarily on re- search contracts with industry and government agencies. The diverse assembly of U.S. UIRCs, by contrast, tends to be more closely tied administratively with host universities and rely almost exclusively on research grants to support its work. Because of these differences, the panel views transatlantic collaboration between UIRCs and An-Institutes as a particularly promising opportunity for cross-institutional learning. Development of a transatlantic network of technical information centers. The panel believes that Germany, the United States, and other countries would benefit significantly from the development of a transatlantic network of technical infor- mation centers that could develop common technical standards and interfaces, enable interconnection, foster collaboration in database building, and so forth. Bi- national and multinational initiatives linking centers based in the United States, Ger- many, and the rest of the European Union could serve as a stimulus (demonstration projects) to enhanced interconnection of technical information centers based in other countries worldwide. (See, for example, the panel' s suggestion in Annex I for devel- oping linkages between the U.S. Department of Defense, Information Analysis Centers, and corresponding German technical information centers.)

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OVERVIEWAND COMPARISON 5 International collaboration in R&D and technology transfer related to health, safety, environmental, and other technical standards. International collaboration in these areas currently involves a multiplicity of public- and private-sector orga- nizations worldwide, including national and international standards bodies, pro- fessional societies, government agencies, industrial associations, and international organizations. An example of this type of collaboration is the industry-sponsored International 300 mm Initiative, which is developing standards for 300-mm wa- fers for microcircuits. Transatlantic collaboration of industrial R&D consortia and industrial research associations on research projects of common interest. The panel believes there are opportunities for mutually beneficial binational and international collabora- tion of industrial R&D consortia and industrial research associations in areas of generic application-oriented research, generally of a precompetitive character. A binational effort to enhance information exchange regarding cooperative indus- trial R&D activities in Germany and the United States could serve as a stimulus to further transatlantic as well as global collaboration among national consortia and research associations on generic precompetitive research projects of common interest. A member of the German delegation has prepared a list of specific projects suggestions in this area. (See Annex I.) Transatlantic collaborations of small and medium-sized enterprises and R&D institutions. Considering the relative strengths and weaknesses of the German and American technology transfer systems, the panel believes that transatlantic collaboration involving SMEs in one country with R&D institutions based in the other could be mutually beneficial. Large companies are already engaged in transatlantic R&D collaboration of this type. However, SMEs are generally less well informed about the capabilities of foreign research and technology transfer institutions, let alone specific opportunities for collaboration with them. A bina- tional effort to disseminate information to German and American SMEs regard- ing the research and technology transfer capabilities of R&D institutions in the two countries could facilitate mutually beneficial collaboration as well as encour- age other nations to engage in such information exchanges. Concluding Observations The results of this joint study confirm the many important roles that the pub- lic sector plays in the R&D and technology transfer systems of advanced industri- alized nations. Of the many technology-transfer-related issues facing the Ger- man and U.S. governments, the panel believes that special attention should be given to the issue of publicfundingfor R&D that is of an infrastructural, or long- term nature. In the panel' s view, this type of R&D activity is critical to a nation' s economic growth and industrial competitiveness but tends to be underfunded by private-sector organizations because its outputs new knowledge, know-how,

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52 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY skills, and generic technology are broadly diffused without direct compensa- tion to the R&D performer. Furthermore, given the pace and magnitude of efforts currently under way in both Germany and the United States to adapt their respective technology transfer systems to rapidly changing political, economic, and technological circumstances at home and abroad, the panel encourages the German-American Academic Coun- cil to consider sponsoring a reexamination of the two countries' technology trans- fer systems 5 years hence and expand the comparison to include one or two other countries. The present study has documented the role that effective technology transfer institutions, mechanisms, policies, and practices play in the competitiveness of industrial nations. The comparison of the German and U.S. technology transfer systems has helped the panel appreciate and understand the strengths and weak- nesses of the two nations' systems and has suggested new approaches to specific technology transfer challenges faced in each country. Equally important, the binational study has underscored the potential for continued mutual learning be- tween U.S. and German technology transfer institutions and has identified sev- eral promising opportunities for mutually beneficial transatlantic and international collaboration in applied research and technology transfer.