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lated into practice in the new location, for the individuals involved are unlikely to be rewarded if they are not able to enhance the research capabilities of the organization into which they move.
A similarly potent incentive may exist when a fundamental research project sends its personnel to work with an industrial supplier from which critical components for an experimental apparatus are being procured. Ensuring that the vendor acquires the technical competence to produce reliable equipment within the budget specifications is directly aligned with the interests of both the research project and the business enterprise. Quite obviously, the effectiveness of this particular form of user-supplier interaction is likely to vary directly with the commercial value of the procurement contracts and the expected duration and continuity of the research program.
For this reason, big science projects or long-running public research programs may offer particular advantages for the collaborative mode of technology transfers, just as major industrial producers—such as the large automotive companies in Japan—are seen to be able to set manufacturing standards and provide the necessary technical expertise to enable their suppliers to meet them. By contrast, the transfer of technology by licensing intellectual property is, in the case of process technologies, far more subject to tensions and deficiencies arising from the absence of complete alignment of the interests of the involved individuals and organizations. But, as has been seen, the latter is only one among the economic drawbacks of depending upon the use of intellectual property to transfer knowledge from nonprofit research organizations to firms in the private sector.
Economic theory describing the reasons industry will underinvest in research was first developed in the late 1950s and early 1960s. See Nelson (1959) and Arrow (1962).
Economists refer to this characteristic as a form of nonconvexity or an extreme form of decreasing marginal costs as the scale of use is increased.
For further discussion of the inefficiencies of using intellectual property protection to stimulate innovation (especially in regard to the adverse effects on the use of existing knowledge that is relevant to research), see David and Foray (1996).
See, for example, Dasgupta and David (1987, 1994), David et al. (1992), and Grossman and Helpman (1991).