Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 29
III
PROCEEDINGS
OCR for page 30
OCR for page 31
Welcomer
Charles W. Wessner
National Research Council
Welcoming the symposium participants, Dr. Wessner introduced the day's
activities as the first element in a program examining "Government-Industry Part-
nerships for the Development of New Technologies." Being carried out under the
aegis of the National Research Council's Board on Science, Technology and Eco-
nomic Policy (STEP Board), direct responsibility for the meeting effort rests with
a distinguished steering committee chaired by Gordon Moore, chairman emeritus
of Intel Corporation; its membership includes Mark Myers, senior vice president
of Xerox Corporation, leading our discussion today; William Spencer, chairman
of SEMATECH; Gordon Binder, chairman of Amgen; Kenneth Flamm, senior
fellow at The Brookings Institution and a speaker at the symposium; and other
distinguished academics and industrialists.
The basic objective of the Government-Industry Partnerships project, as char-
acterized by Dr. Wessner, is to determine "best practice" in government-industry
partnerships taking into account sectoral differences with respect to issues such
as project selection, private-sector management, balanced technical contributions
among participants, effective intellectual property protection, and policies to
encourage the commercial exploitation of results. Neither the Government-
Industry Partnerships project nor today's symposium would "engage in ideologi-
cal discussions of whether the government should do what it has in fact done for
the last 200 years," but would instead seek to review accomplishments, identify
problems, and make specific, pragmatic suggestions.
~ This section summarizes the conference held at The National Academy of Sciences on February
28, 1998.
31
OCR for page 32
32
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
In addition to the issue of best practice, the project will examine:
· the rationale and national benefits to be derived from government support
to collaborative efforts by industry to bring new technologies to market;
· the principles that should guide such cooperation, demarcating the role
and contribution of the public authorities;
· the different types of cooperative programs, including the rationale for
strategic alliances among firms in sectors that are supported by publicly
funded programs; and
the sources of past successes and failures of government-industry coop-
erative programs designed to support the development of U.S. industries
based on promising new technologies.
.
.
Also among the objectives of the project as a whole are:
· promoting cross-fertilization among U.S. government programs, which
Dr. Wessner described as "very rare";
benchmarking U.S. practices against foreign practices, "not necessarily to
emulate foreign practices but to understand on one hand, what the compe-
tition is doing"; and on the other, identify opportunities for mutually ben-
eficial cooperation;
· arriving at recommendations for improved American policymaking on
national and international partnerships.
Several interesting trends are behind the interest and growth in government
partnerships. The cost of developing new technologies, the risks associated with
such development, the dispersal of technological expertise, the corresponding
"technological merge," and the difficulty for any one company to capture all the
benefits, all point to the need for cooperation between industry and government at
its various levels as the world enters the twenty-first century. To underscore the
importance of government-industry collaboration, Dr. Wessner challenged the
participants to "name one major, export-oriented industry in the United States
that has not received very substantial assistance through its growth period from
the government." Although it takes many forms some direct, some indirect-
support for industry has pervaded the economy, especially in high-growth, high-
technology sectors as semiconductors, computers, telecommunications, and air-
craft. American markets are among the world's most dynamic, with levels of
competition and innovation that have proved to be the source of remarkable eco-
nomic growth. Recognizing the important, sometimes decisive role the govern-
ment plays in devising a policy framework that supports innovation and sustains
cooperation is essential for our continued success.
Introducing Dr. Myers, a member of the STEP Board, Dr. Wessner described
him as "responsible for some of the best technology coming out of American
OCR for page 33
WELCOME
33
corporations today" as vice president for Corporate Research and Technology at
Xerox. Recalling a recent visit to the research facility Xerox PARC in Palo Alto,
Calif., Dr. Wessner said that he had left "impressed and encouraged about what
the unique blend of American capitalism and supportive government policies has
to offer" the next generation of Americas and the world.
OCR for page 34
Symposium Introduction
Mark Myers
Xerox Corporation
Speaking on behalf of the STEP Board, Dr. Myers welcomed the participants
to the symposium on the Small Business Innovation Research (SBIR) program,
extending particular recognition to White House representatives Dorothy Robyn
of the National Economic Council and Duncan Moore of the Office of Science
and Technology Policy (OSTP); Paul J. Hoeper of the U.S. Department of Defense
(DoD); Martyn Evans, Shadow Minister for Science and Technology from Aus-
tralia; and officials from other U.S. government agencies and the diplomatic corps.
Noting the very strong attendance, Dr. Myers remarked that we could legitimately
infer policy interest in the SBIR program as the source of "one of the best turn-
outs" for a STEP Board event.
The Need to Review SBIR
Introducing the day's discussions, Dr. Myers stated that the symposium
would review the types of benefits that the SBIR program "brings to small busi-
ness in the United States in particular and [to] the American economy in general,"
which is in line with a perceived desire "to make such programs effective so that
they can become even more useful in the future." Previewing the day' s program,
he listed the following as among its goals:
.
reviewing the SBIR program's history and rationale, including some
"common understandings and misunderstandings" surrounding it. In this
connection, he expressed gratitude for the participation in the panel on
"History and Current Legislative Perspective on the SBIR Program" of
34
OCR for page 35
INTRODUCTION
.
35
Roland Tibbetts, former Program Manager of the SBIR program at the
National Science Foundation;
· reviewing the "best research that's been done" on SBIR. He pointed to
the presence of Josh Lerner of Harvard Business School who would be
presenting his recent analysis of the SBIR program under the heading of
"Research Perspectives on the SBIR"; and
examining successful outcomes of SBIR awards, with a focus on elements
that have contributed to their success and that might contribute to the
success of future awards. He thanked Dr. Robyn for agreeing to moderate
the symposium's panel on "Case Studies" designed to bring the views of
industry directly into the discussion.
Identifying Challenges to SBIR's Effectiveness
Dr. Myers emphasized, however, that the symposium would not limit its
scope to the accomplishments of the SBIR program, which he said have been
many, but also would identify challenges it faces. "Clearly, no program is per-
fect," he stated. "Indeed, coming from the private sector, I can assure you that
perfection that is, always getting it right-exists neither in the public nor the
private sector." The key in the private sector is to do better than the competition
over time in serving one's customers, he noted, whereas the key in the public
sector is "to serve the citizens and to ensure worthwhile return on investments . . .
and to constantly find ways to improve them." Rep. Tom Davis (R-Va.), who
serves on the House Committee on Science and the House Committee on Trans-
portation, would offer thoughts on how to improve the SBIR program, as well as
on its importance in furthering innovation in the U.S. economy.
Dr. Myers pointed to the presence of such "expert practitioners" as Carl
Nelson, formerly of the Ballistic Missile Defense Organization, on the panel titled
"Program Challenges Operational Views," to be led by Dan Hill, the Small
Business Administration's Assistant Administrator for Technology.
He expressed his particular enthusiasm, as "someone who is responsible for
research and development (R&D) in a large corporation," for the panel on what
he called the "thorny questions" of "Improving Assessment and Selection," to be
moderated by Dan Roos of the Massachusetts Institute of Technology. Dr. Myers
observed that some might wonder why a discussion of the Advanced Technology
Program (ATP), which is managed by the National Institute of Standards and
Technology, is included in a program on SBIR. The answer is that one of the
objectives of the Government-Industry Partnerships project is to learn from the
experience of different U.S. and foreign technology development programs. "This
cross-fertilization, we believe, will prove quite valuable," he said.
Similarly, the day's program would draw on the experience of two of the
largest SBIR programs, those of the National Institutes of Health and those of the
Department of Defense, which some believe have significantly different objec
OCR for page 36
36
INTRODUCTION
fives and measures of accomplishment. Their comparison is intended to lead the
panel to suggest ways of improving understanding of the different agency require-
ments, the metrics for success, and the overall performance of the SBIR program.
To have a down-to-earth reaction to the day's discussion, the final panel, "Obser-
vations and Policy Issues: Agency Perspectives," includes program managers
from some of the largest SBIR programs.
Pointing out that "some of the best experts in the country on the development
of new technologies in a small business, entrepreneurial environment" were in
attendance, Dr. Myers said that he looked forward to a "rich exchange of views."
He then introduced Dr. Moore, the Associate Director of Technology at the White
House Office of Science and Technology Policy, noting that the two have known
one another for many years as fellow residents of Rochester. Dr. Moore's career
includes service as professor of optical engineering at the University of Rochester,
as director of the Institute of Optics and dean of engineering and applied sciences
at that institution, and as founder and president of Gradient Lens Corporation of
Rochester.
OCR for page 37
Opening Remarks
Duncan Moore
White House Office of Science and Technology Policy
The Contribution of High-Tech Firms to the Economy
Dr. Moore, introducing himself as a winner of SBIR awards from both the
NSF and the DoD, stated that he would talk about his personal experiences with
the program. First, however, he wished to put forward the contention that the
U.S. technical community has not taken enough credit for the reduction of the
federal budget deficit. This community has invested in R&D for the past 50
years, developing the engine that has created the country's economic growth.
This investment has contributed to a large number of jobs, particularly in the last
decade, that has increased the amount of wages paid and, therefore, taxes collected.
He pointed to an unemployment rate that he said was at "almost an all-time
low"; significantly, although the national jobless rate is at about 4.7 percent, it is
at about 1.9 percent for those with college degrees. Vigorous demand for
university-trained workers is contributing to the continued growth of the Ameri-
can economy.
He noted the fading of the conventional wisdom of a half-decade ago that
"the United States was great at basic science we won the Nobel prizes but
Japan was much better at taking these ideas to product." This has changed.
Although economic difficulties in Japan may account for part of the change,
another reason is that U.S. programs have been created at the federal and, in
particular, the state level to address the questions: "How do we get the ideas out
of the universities into the marketplace?" and "How do we create jobs locally?"
Reminding the audience that economic development is in the end always "a local
. . . not a federal game," he pointed to the political imperative faced by mayors,
county commissioners, and state legislators to create jobs.
37
OCR for page 38
38
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
Another lesson from recent experience is that, given the diversity of needs
among both geographical and industrial sectors, no one program is appropriate
for all circumstances. For example, policymakers have recognized that "biotech
is very different from automobiles," yet both may face challenges requiring
partnering.) The emphasis on spin-offs, whether of jobs or companies, has
evolved into emphasis on partnering. "The implication of 'spinoff' is, that an
idea is conceived and it is hoped that a company will develop from that idea," Dr.
Moore explained, "whereas 'partnership' implies that the partnership is going to
be there for a longer period of time than it would in the case of when an idea is
transferred to a new company."
He pointed to such programs as SBIR, ATP, NSF' s Experimental Program to
Stimulate Research, and the Experimental Program to Stimulate Technology, the
latter being designed to help the 17 states that have attracted lower-than-average
amounts of research funding. Initial skepticism on the part of Dr. Moore, as a
resident of New York State, toward programs aimed at helping smaller states has
given way to strong support. The belief that "economic survival is based on
having good R&D and having good universities in your home state," as well as
the desire "that all regions of the country move forward," must be backed, he
said, by "processes" allowing states with fewer resources "to move forward in
these wonderful economic times." He noted that SBIR's total annual budget
represents a "relatively small number of dollars as a percent of total R&D": At
about $1.1 billion, it amounts to between 2 and 3 percent of the federal R&D
portfolio, depending on how the portfolio is calculated.
Personal Experience with SBIR
Dr. Moore then summarized the experience with SBIR awards he had gained
through his own company, founded in 1980. He recalled turning to the program
in the technology development stage, after finding neither venture capitalists nor
banks willing to back a firm without a product. A New York State program that
offered funding to help winners of Phase I SBIR grants bridge the gap to Phase II
made the SBIR program more attractive to Dr. Moore; his firm submitted two
SBIR proposals to the NSF, and both eventually won funding.
The Phase I - Phase II Gap
Nonetheless, to stay in business, the "huge" gap between Phase I and Phase
II caused his firm to take consulting jobs and other work that were not part of the
~ For a review of one such program, see Review of the Research Program of the Partnership for a
New Generation of Vehicles (PNG V): Fifth Report, National Academy Press, Washington, D.C.,
1999.
OCR for page 39
OPENING REMARKS
39
firm's main mission. There were other difficulties: Corporate and personnel
changes disrupted agreements the firm had made to work with large corporations
on Phase III of both of its SBIR projects, and a shift in the market undermined a
third arrangement.
Dr. Moore called on his experience to compare the NSF's SBIR program
with that of the DoD, to which his firm turned at a later stage. From the comments
he received on his proposals to NSF, he concluded that the ideas the reviewers
favored were "further from the product . . . They're looking at the five-, ten-year
ideas, not the ones that are going to be products 18 months from then." He
characterized DoD's SBIR program as "very directed" in comparison: His firm
pursued work in one of the DoD program's categories, and the DoD would have
been guaranteed as a customer had the Cold War not ended. Dr. Moore's technology
finally yielded a product in 1995, 26 years after he had begun research on it.
Key SBIR Issues
Dr. Moore then highlighted a number of issues often discussed in relation to
the SBIR program:
.
SBIR mills: Some companies are alleged to exist entirely for the purpose
of winning grants while lacking any serious intent to commercialize.
Speaking personally rather than on behalf of the White House, he advo-
cated that firms should first write their business plans, then indicate how
SBIR-backed research might fit with the plans;
R&D tax credits versus SBIR: Dr. Moore noted that a tax credit would
have been of no value to his firm, which was not generating profit and
"needed the cash flow" to make payroll; and
Universities versus SBIR: Opposition from academics who see money
that goes to SBIR as reducing funds available for their research was char-
acterized by Dr. Moore as "very short sighted." SBIR grants offer profes-
sors and students an "ideal" opportunity for spinning off a company, and
the university community should be looking at the program in a positive
light "as part of economic development."2
Employment Generation: Dr. Moore also stressed the employment gen-
eration that is derived from the small business community. For example,
Small Business Administration figures show that companies with fewer
than 500 employees contributed 10.5 million jobs to the U.S. economy
from 1991 to 1995. In the same period, employment in companies with
2 See Audretsch, David B. et al., "Does the SBIR Foster Entrepreneurial Behavior? Evidence from
Indiana." In The Small Business Innovation Research Program: Assessing DoD's Fast Track Initia-
tive, National Academy Press, 1999.
OCR for page 40
40
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
more than 500 employees fell by 3.2 million. Underscoring the Clinton
administration' s support for the SBIR program, Dr. Moore welcomed this
effort to review the program, noting that "every program can benefit from
continuous improvement," a principle he called "part of the business cli-
mate today."
Representative terms from entire chapter:
business innovation
