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3 Consortia Collaboration in industrial R&D takes many forms. Consortia are a form of collaborative venture more prevalent in Japan than the United States as vehicles for cooperative R&D, although the last decade has witnessed an increase in U.S.-based consortia formed, in many instances, as direct respons- es to competition from Japan. Although considerable interest exists today in consortia as a means of pooling talent and resources for joint technology development, the lack of a comprehensive assessment of consortia in either Japan or the United States makes it difficult to draw firm conclusions at this stage. Industry participants in consortia in both countries often downplay the benefits they have gained, fueling doubts that consortia do not live up to expectations. Nevertheless, consortia continue to be a prevalent mode of domestic and internationally based collaborative research, with an estimated 160 consortia in existence in the United States as of March 1990.26 In both Japan and the United States, consortia can be formed under gov- ernment, industry, or university sponsorships some combination of these. In the United States government-initiated consortia are not as prevalent as they are in Japan for a number of reasons, including antitrust considera- tions.27 There are, however, some notable examples of U.S. consortia, such as SEMATECH, a group of private firms conducting cooperative R&D in semiconductor manufacturing, and the National Center for Manufacturing Sciences, composed of those firms from the machine tool industry that were formed expressly by federal initiative and that obtain government funding to conduct their missions. Often, a primary motivation for joining these consor 14

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15 tie from the U.S. company perspective is the access to government funds it provides to support research in long-term high-risk areas. Along these lines, some industry-initiated consortia are looking increasingly toward government both as a research partner and source of financial support. University-industry based consortia are the predominant mode in the United States. In these consortia the research agenda is organized around technical themes (usually basic, "enabling" technologies), defined and led by academic teams with no specific product goals. For U.S. firms, particularly those in the same industry that have limited experience with joint technology development involving a number of rival firms, the environment of universi- ty-based consortia has been most comfortable. Through the university-based consortia, firms are able to acquire access to potentially valuable basic research with a relatively minimal commitment of resources and personnel. Most consortia of this type are staffed by students and technicians hired by the university, which often provides funding obtained both independently and through the government. Participating companies usually can gain access to the technology through patent rights or, in some cases, licensing.28 From the point of view of many participating U.S. companies, the main objective is expanded access to well-trained students and faculty. The 18 Engineering Research Centers (ERCs), established at U.S. univer- sities with funding support from the National Science Foundation, exemplify one type of university-industry consortium. In these centers, the universities provide the research and educational infrastructure, facilities, and manage- ment, and industry contributes funding (about 30 percent), advice, and exper- tise. The ERCs have contributed to linking academic engineering research and education to engineering practice, through researcher training and other mechanisms.29 Whereas university-industry consortia are the most prevalent form of con- sortia in the United States, industry associations are the least common. A basic impediment is antitrust considerations, which the U.S. government has attempted to address through the National Cooperative Research Act. Additional concerns are those endemic to any cooperative venture, such as fears that proprietary information may leak to competitors (or that those com- petitors will gain disproportionately) and impatience with the group process in general. Individual firms generally prefer to conduct research indepen- dently-and to derive the benefits independently as well. R&D consortia are very much the exception to the general pattern of industrial R&D in both countries. The sharp contrast In Japan IS tne prevalence of company-led consortia, often organized with government support as industrial research associations, foundations, or joint venture companies. Japanese professional associations . , .

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16 employ systems of cooperative research that provide for direct industry sup- port of and involvement in the associations' research projects, with some sup- port from the academic community.30 However, unlike the strong role uni- versities play in U.S. consortia, Japanese universities play a rather minor for- mal role compared to the government and individual companies in most industrial consortia. Since the postwar period, when Japanese industry needed to "catch up" to the rest of the world in technology and economic development, rival firms in the same industry joined together to pool resources and share ideas. Perhaps in part because traditionally there have been almost no recognized private, independent research institutes where companies can contract research, Japanese companies have been more willing to participate in consortia, usual- ly initiated by the government, than have their U.S. counterparts. In recent years the trend has been toward the formation of collective research groups involving firms from different industries in Japan. It is interesting to note that Japanese students of industrial R&D consortia explain them as "rational" in both technological and economic terms, whereas the general assumption in the United States has been that rivals cooperate only at their own peril. 31 In contrast to Me view held by many in the United States that consortia hold a key to the technological strength of Japanese companies, it is impor- tant to note that less than 1 percent of corporate R&D funds are allocated for consortia participation. Japanese corporate leaders say that Japanese corpora- tions join consortia primarily to gain access to government funds, to keep abreast of new trends in fundamental research, and to develop contacts in the industry that could be of potential value over the long term.32 Expanding con- tacts with Japanese universities has become an important motivation in recent years, according to leaders from biotechnology consortia. In fields such as biotechnology, where the line between precompetitive and competitive research can shift quickly and where basic research is the foundation for new businesses, there is an understandable drive to improve ties to university research. As a general rule, consortia in both Japan and the United States have been most effective in promoting long-term fundamental research, but there are consortia in both countries where work is directed more toward applications. In such mature industries as the Japanese automobile industry, consortia research themes are limited to concerns common to the industry, such as tech- nologies required to deal with environmental issues, new industry require- ments imposed by government regulations, and standards setting. In addition, participants note that research themes also include such subjects as advanced materials but focus on fundamental research not likely to be commercialized soon.

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17 The Advanced Combustion Engineering Institute Co., Ltd. (ACE), was formed by the Ministry of International Trade and Industry (MITI), with the involvement of diesel engine vehicle manufacturers to develop higher-effi- ciency, lower emissions, and multi-fuel capability in response to new regula- tions imposed by the Japanese government. The Japanese auto industry is highly competitive, and participants explain that the primary motivation in this instance was to pool resources in fundamental research on control of emissions from diesel engines. The consortium was formed as a company at the request of MITI. It is financed by the Key Technology Center (70 per- cent), in the form of a loan to be paid back if profits ensue, and by 12 partici- pating auto manufacturers and auto parts makers (30 percent). Researchers dispatched from participating corporations carry out the R&D, but some of it is carried out as well by universities (see Figure 6, p. 18~. Since its establish- ment in 1987 (scheduled to conclude in 1992), ACE has applied for 10 patents in diesel engine comubstion technology. ACE's research has pro- duced a high-pressure fuel injection system prototype that is now being developed further by the member company research organizations and uni- versities.33 The Ion Engineering Center Co., Ltd. JECC), is another example of a com- pany consortium. IECC also was established with funding primarily from the Japanese government-in this case the New Energy Development Organization (30 percent) and loans (50 percent). The rest of the funding came from local governments and participating corporations. The purpose of the center, established to last for three years, is to provide basic R&D support and technical advice and to assist in cooperation among members. In such cases the government takes the lead in defining the research need and in providing funds, while the companies take responsibility for carrying out the R&D. The Japanese automobile industry also includes association-based consor- tia in the basic research areas of high-performance ceramics and fuzzy engi- neering. These organizations, because of their broad focus, also include member firms from a variety of (nonautomobile) industries. The Engineering Research Association for High Performance Ceramics, for example, has 16 member companies from the ceramics, steel, electric, electronics, automobile, and heavy machinery industries. The association was established in 1981 to conduct R&D over a 12-year period in high-performance materials, process- ing, and evaluation techniques. The Laboratory for Industrial International Fuzzy Engineering Research was formed in 1989 to conduct research in the applications of fuzzy theory to engineering and to promote domestic and international exchange on the study of fuzzy theory. Its 48 member compa- nies are derived from the electric, electronics, automobile, chemical, optical, computer, and heavy machinery industries.

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18 l I Treasurer I Department Section L 1 Directors ~;~R: 1 1 |~h Technical Committee 1 Research Evaluation r 8 members Committee from universities r it' Assigned AL I Research I Admission Section Research Section 4 Universities Projects 2 Companies Projects .... . -Hino (5.8%) _ Isuzu (5.8%) . _ Mitsubishi (5.8%) _ Nissan Diesel (5.8%) - Daihatzu (0.6%) _ Mazda (1.3%) - Nissan (1.3% - Toyota (1.3%) Budget -Patent ~ High-Pressure -Combustion in Engines _ Catalytic Conversion Diesel Kiki (0.6%) (0.6%) Nippon Denso (0.6%) _ Nihon Shokubai Kagaku (0.6%) _ Tokyo Roki (0.6%) ( %) shows share of stocks 30% owned by corporate members 70% owned by Key Technology Center FIGURE 6 Advanced Combustion Engineering Institute Co., Ltd. (ACE) organization chant

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19 Several nonprofit public-interest foundations formed in recent years are not R&D consortia in the strict sense of the word. These groups do conduct R&D as the major focus of their activity, but their functions also include pub- lic education and international researcher exchange activities, such as spon- sorship of symposia and surveys and collection and distribution of informa- tion. Because of their very general orientation, these foundations' rosters include member companies from a range of industries. The International Superconductivity Technology Center (ISTEC) is a primary example, with 111 member firms from the chemical, energy, electric, electronics, and trans- portation industries. Another foundation, the Association of Electronic Technology for Automobile Traffic and Driving, focuses on R&D on commu- nications technologies, holding exhibitions and publicity functions relevant to its 34 member firms in the automobile, automotive parts, and electric and electronic industries.34 As noted above, many Japanese consortia are funded and initiated primari- ly by the government, in some cases to encourage work on promising new technologies and applications, and in others (such as ACE) to help industry respond to new regulations or requirements. A central mission of the Key Technology Center is the former, and an example is the Protein Engineering Research Institute (PERI), founded in 1985 as the largest R&D project of the Key Technology Center. PERI is a consortium of companies and universities representing a variety of skills and expertise related to protein engineering technology. Fourteen firms in the chemical, pharmaceutical, food, and com- puter industries participate and provide 70 percent of the research staff; the remaining 30 percent is derived from universities. The Key Technology Center provides 70 percent of PERI's funding as a loan, with member compa- nies contributing the remaining 30 percent. A primary objective of PERI is to promote enhanced cooperation between industry and university researchers in the fundamental multidisciplinary technologies that form the base for protein engineering. PERI was established as a private corporation and is not obli- gated to disseminate information on research activities to parent companies. As in the situation with ACE, where intellectual property rights belong to the center, patent rights are also held by PERI.3s PERI is located in a newly built research facility, and the research staff comes from both industry and univer- sities. Six foreign researchers, one from the United States, are working at PERI. In most industry-based consortia in both Japan and the United States, the consortium, particularly if it has been established as a separate company, holds the patent and intellectual property rights. An exception to this is the university-based consortium, which grants more freely patent rights and licensing ability to member companies. At its initiation, ACE established in a

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20 memorandum to all member companies that all intellectual property rights related to design, devices, and inventions would be held by ACE. A U.S. consortium, the Microelectronics and Computer Technology Corporation (MCC), also holds title to the intellectual property rights to research. Procedures for licensing technology developed in MCC projects are deter- mined by agreement among participants at the outset of each research project.36 MCC was formed in response to the challenge to the U.S. computer indus- trv nosed bY the Japanese Fifth Generation computer project and by a grow- ing recognition of the difficulty U.~. firms nave In marshalling all R&D resources relevant to the numerous market segments in the computer/elec- tronics field. MCC is supported almost entirely by private sector funds; the remainder of funds are obtained from state and local sources. MCC is, how- ever, seeking to conduct more federal contract research, with the aim of obtaining up to 15 percent of its funding from the federal government in the . . ~ future. MCC's mission is defined by its corporate shareholders and participants. Currently, there are 22 shareholders and 28 associate members representing a diverse mix of both suppliers and users of microelectronics technology. Key research areas include software technology, computer-aided design (CAD), advanced computing technology, microelectronic and computer packaging and interconnect superconductivity, and optics in computing. Since its found- ing MCC has invested more than 1,200 person years of research and has obtained 50 patents in a range of "high-impact" technologies. MCC has established a strong record through effective consortium man- agement and through a systematic process of evaluating and selecting research subjects. Criteria for new initiatives include high-risk, high-payoff technologies that fit with MCC expertise. After a matrix of "needs" and "seeds" relationships is developed, industry workshops are used to focus pro- jects. Three new initiatives include work on large information networks, quick time to market for high-performance systems, and high-definition sys- tems. The consortium has a CEO and board of directors and a technical staff of 330, of which only 12 percent are from member companies. Programs are managed by program directors also hired from the outside and by participant advisory boards. Companies are motivated to join MCC in part because they can set the agenda and see clear results. A number of participants in the U.S.-Japan meetings stated the view that large amounts of government funding can weaken member companies' expectations about the results, especially short term economic payoffs. For example, the fact that Japanese companies devote less than 1 percent of their R&D budgets to consortia indicates that their expectations about the benefits

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21 are lower than might be expected. Japanese participants say their motivation for joining is to develop contacts, particularly to researchers from universi- ties, as is the case with PERI. It may be a strength of Japanese consortia, par- ticularly those receiving significant government funding, that they are estab- lished with finite durations and focused goals. ~ instances where the level of government funding is large, participants say expectations are adjusted accordingly, presumably to maximize the R&D subsidy gain as compared to the technology development benefit.37