The Government Role in Civilian Technology Building a New Alliance (1992) / Chapter Skim
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2 GOVERNMENT SUPPORT FOR CIVILIAN TECHNOLOGY
2 GOVERNMENT SUPPORT FOR CIVILIAN TECHNOLOGY
Pages 48-108
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From page 48... ...
This chapter then reviews the strengths and weaknesses of current federal programs to stimulate technology development, as well as programs aimed at the adoption and transfer of new technologies. An important part of federal investment in technology development, much of which is defense related, involves R&D performed at the federal laboratories and work sponsored by the Defense Advanced Research Projects Agency (DARPA)
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From page 49... ...
In agriculture, federal and state programs for research and extension (support for technology adoption) date back to the nineteenth century.2 Another source of federal support for civilian technology development has been an indirect one federal funding of basic research.
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From page 50... ...
This view of federal involvement in technology has held that public investments simply substitute for the investments that would be made by private firms in the absence of government incentives. Worse yet, it is feared that direct subsidies may distort private investment incentives, leading to the development of costly and commercially unsuccessful technology projects.
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From page 51... ...
Moreover, to improve U.S. performance in technology commercialization and adoption, a better balance between support for basic research and investment in pre-commercial R&D and technology adoption is necessary.
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From page 52... ...
One response to the globalization of basic research is to maintain current federal research investment priorities and attempt to reduce transfer of the results of such research to foreign firms. This is likely to be both ineffective and, ultimately, profoundly counterproductive.
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From page 53... ...
Progress during the 1900s, however, was shaped by a series of legislative initiatives that provided government funds for R&D and agricultural extension services. Many studies of agricultural productivity growth and federal investment have documented a high rate of return from these types of investments in pre-commercial agricultural research and technology.
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From page 54... ...
the need for a wide diversity of specific projects and flexibility in extension management; (2) the value of a continuing focus on the application of findings and technology adoption that affect a wide range of private sector actors; (3)
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From page 55... ...
Nevertheless, early federal support also included pre-commercial R&D and prototype development projects that assisted firms in moving beyond research into technology commercialization in civilian markets. The Biomedical Industry The growth of the U.S.
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From page 56... ...
First, current federal policy on biotechnology recognizes that collaboration between firms and universities is essential.27 Cooperation between the private sector and government-supported universities often involves long-term agreements between individual firms and a university. Federal funding of research, particularly of university-industry collaborative projects, has helped support a strong, internationally competitive U.S.
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From page 57... ...
.32 The number of NACA employees did not exceed 100 until 1925 and was less than 300 as late as 1935.33 Experience with federal technology developments in this program shows that significant accomplishments in pre-commercial and applied R&D do not necessarily depend on large expenditures of funds for each research project. Regulatory policies also had an impact on the development of the civil aviation industry.
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From page 58... ...
Private companies then took the research results and specialized in technology commercialization. Program managers at NACA facilities were not involved in specific decisions on product applications.
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From page 59... ...
An emphasis on production targets reduced research and program flexibility.40 Rapid turnover among SFC's high-level officials slowed administrative actions. The synthetic fuels program did demonstrate, however, that large-scale synthetic energy projects could be built and operated within specified technical parameters.
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From page 60... ...
2. Investments by government and industry in diffusion of new technologies: The success of federal efforts in agriculture and civil aircraft development and the failure of synthetic fuels development projects suggest that government involvement in commercial technology should include an emphasis on support for technology adoption and diffusion.
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From page 61... ...
This funding has important implications for civilian technology commercialization efforts. In the 1950s and 1960s, funding of R&D for defense-related technologies produced important civilian technology spin-offs in areas such as computers, semiconductors, and commercial airframes and engines.
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From page 62... ...
Approximately $91 million is spent on basic scientific research and $24 million is allocated for mission support.47 The agency often sponsors prototype development projects, such as for the Strategic Defense Initiative and the National Aerospace Plane, prior to the time the projects are transferred to one of the military services.48 Overall, DARPA is an efficient organization that has minimized bureaucratic obstacles to program success. It has been able to attract talented scientists and engineers from outside government.
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From page 63... ...
Leading-edge military technology developments are increasingly "spun on" from the private sector to the defense manufacturing base. This trend has been accompanied by growth in private R&D spending relative to defense R&D expenditures, for example, in microelectronics, integrated circuits, data processing, telecommunications, and software.Si The civilian infrastructure and commercial technology base is now much larger than that in defense and is important to defense systems.
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From page 64... ...
In semiconductor manufacturing and laser-based telecommunications, among other areas, DARPA has helped develop technology that was successfully transferred to the civilian sector by private companies.52 DARPA has not been successful in executing all of its objectives. The increasing complexity of Pentagon procurement policies has inhibited the agency's success in some instances.
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From page 65... ...
The Small Business Administration administers an important program that supports civilian technology development: the Small Business Innovation Research (SBIR) program.56 SBIR was established in 1982 to fund R&D at small and medium-sized firms and to stimulate the commercialization of new products and processes.s7 The program also provides small companies with managerial and technical advice as well as financial grants.
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From page 66... ...
The government is entitled to a proportion of licensing fees and royalties resulting from ATP projects.6i In addition to providing funds for cooperative R&D, the ATP will provide advisory services and will loan NIST equipment and facilities to support R&D ventures. The ATP is charged with coordinating its programs with other federal laboratories through cooperative research and development agreements.
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From page 67... ...
Role of Federal Laboratories in Commercial Technology Development and Transfer The federal laboratories are an important part of the national science and technology infrastructure.63 There are approximately 700 federal laboratories, with an overall budget in FY 1991 of $20.9 billion.64 The laboratories' potential for technology commercialization has, however, been overestimated. Any discussion of the utility of R&D conducted at the federal laboratories must first consider the high proportion of total federal R&D
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From page 68... ...
The primary mission of the federal laboratories will continue to be the fulfillment of traditional, agency-specific R&D objectives outlined above. TABLE 2-1 Selected Federal Laboratory Obligated Expenditures, by Department, for FY 1991 (billion dollars)
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From page 69... ...
Traditional Missions in a Time of Change The missions and funding of federal laboratories largely reflect the national priorities that existed as the national R&D infrastructure took shape after World War II. Most federal R&D resources have been directed to national defense purposes or, as is the case with the Department of Energy, 69 TV V i ~V, The ability of mc ed by this missic laboratories shou mercialization ef larger role in tee live branch expel .
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From page 70... ...
The Jet Propulsion Laboratory California Institute of Technology and the Goddard Space dedicated to space science. The Department of Agriculbillion annually on laboratory programs, much of it through Research Service.67 al budget of $7.6 billion, NIH allots $5.2 billion a year to and training grants.68 In 1991, NIH devoted about $1.5 ies in the federal laboratories.
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From page 71... ...
(Separately, NASA has continued to enter into long-standing collaborative arrangements under the pre-existing authority of the 1958 Space Act.74 ~ The Technology Transfer Act also established the Federal Laboratory Consortium to provide an interagency framework for technology dissemination.75 Executive Order 12591, issued in 1987, attempted to encourage the use of CRADAs by directing agencies to delegate authority for entering into these agreements to the laboratory and by issuing guidelines for the granting of intellectual property rights under such agreements.76 More recently, the 1989 National Competitiveness Technology Transfer Act extended authority for entering into CRADAs to contractor-operated government laboratories. Examples of Technology Transfer from the Federal Laboratories Some examples of government-industry technology transfer have proved of wide benefit to private industry.
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From page 72... ...
As noted earlier, almost all DOE laboratories are GOCOs: government-owned facilities that are operated by contracting firms and universities or other nonprofit institutions. Potential Contributions of Federal Laboratories to Private Sector Technology Goals Over the past decade, Congress and the executive branch have attempted to make civilian technology development an explicit mission of the federal laboratories.
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From page 73... ...
The amount of technology transferred from the laboratories is strikingly meager, particularly when compared to the $23 billion per year in total federal laboratory R&D expenditures. There are other measures of output that indicate limited progress in linking federal laboratories to private sector R&D at least in the initial stages of the development process.
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From page 74... ...
The primary difficulty with technology transfer from the federal laboratories to industry is that there is little organized, close collaboration between these various groups outside the defense area. In technology development programs for national defense, the government is the customer.
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From page 75... ...
In fact, the laboratories are both geographically and organizationally separate from their technology sources and potential collaborators in the private sector. Strong "cultural differences," reflecting attitudes toward scheduling, quality, profits, customers, and other factors, differentiate the federal laboratories from external organizations.79 Even those few federal laboratories that perform R&D in civilian technology are neither regular customers for goods produced by private sector manufacturers nor their suppliers.
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From page 76... ...
The most successful technology transfer and commercialization projects at the federal laboratories have been characterized by an effort to attract the active participation of industry, including greater protection for patent rights and solicitation of management advice on project designed For example, in 1988 three high-temperature superconductivity pilot centers were established in the DOE laboratories at Los Alamos, Oak Ridge, and Argonne. Designed to involve industry from the start of initial research through commercialization, the pilot centers engage in application-oriented research that businesses (some 40 to date)
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From page 77... ...
Furthermore, an increased role for the laboratories in private firms' commercialization efforts must not lead to a situation in which technology transfer overtakes traditional missions in serving agencyspecific needs. Traditional missions of continuing relevance should continue to constitute the core functions of the federal laboratories.
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From page 78... ...
To convert all government labs to GOCOs, however, would be exceedingly difficult, requiring expenditures of federal resources in excess of potential gains. Because of the need for additional resources for commercialization ef forts, the funding constraints under which the laboratories operate, and the shift in national priorities from military to civilian challenges, it would appear appropriate to close some federal laboratories and redirect resources in other facilities.
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From page 79... ...
Finally, industry should be provided with sufficient incentives to commercialize federal technology. It should be clear that the primary responsibility for building relationships between federal laboratories and industry rests with the laboratories.
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From page 80... ...
In other cases, horizontal associations of firms within a single industry formed cooperative research organizations. Many of these promoted technology adoption and the diffusion of information and technology within member firms and were not focused on basic research.
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From page 81... ...
manufacturers with the capability to achieve world leadership in semiconductor manufacturing technology by 1993.9° Since 1988 the Defense Department has provided half of SEMATECH's $200 million operating budget. Congress has appropriated $100 million per year for five years for SEMATECH.
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From page 82... ...
A more recent program, the Engineering Research Centers (ERCsJ, also supported by NSF, has established multidisciplinary university R&D centers.94 A similar initiative, the Superconductivity Pilot Centers, has been funded by the Department of Energy. State funds support cooperation between industry and academia in the North Carolina Microelectronics Center, which fosters cooperation between semiconductor manufacturing firms and faculty from colleges and universities located near Research Triangle Park in North Carolina.
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From page 83... ...
The Japanese experience with collective research efforts dates to the 1961 Research Association for the Promotion of Mining and Industrial Technology Act. The act established Engineering Research Associations (ERAs' to increase the technical expertise of small and medium-sized companies.
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From page 84... ...
This type of R&D was supported by the government in order to strengthen the science and technology base, as well as to diffuse new, stateof-the-art technology. Government funding of cooperative R&D projects through ERAs and large-scale "national projects," such as the VLSI program, undoubtedly played a part in Japanese industrial success in technological innovation.~°~ Historically, however, few of these collaborative projects, including the large national projects, focused on research that could be characterized as "basic" in nature.
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From page 85... ...
There are two primary modes of operation for the KTC program: direct capital investment in consortia formed under KTC sponsorship and conditional loans offered at below-market interest rates to companies performing joint R&D. The KTC's loan program is targeted at applied R&D and prototype development projects.
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From page 86... ...
It had its beginnings in a 1980 MITIsponsored research project "Optical Measurement and Control System." This project produced the first-generation optoelectronic integrated circuits in Japan and demonstrated the capabilities of gallium arsenide devices. As is the case with other cooperative projects in Japan, successive generations of R&D projects are often built on past programs.
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From page 87... ...
Moreover, the importance of technology diffusion objectives in Japanese programs, including those targeted at research in generic R&D, is critical to understanding the utility of cooperative programs. In many cases, as the Japanese experience suggests, cooperative R&D may support technology adoption and dissemination as effectively as it supports technology creation.
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From page 88... ...
They also encouraged the adoption and diffusion of new technologies in Japanese firms. It is particularly in this last area technology diffusion-that some of the most important contributions have been made.
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The aim of RACE (Research and Development in Advanced Communications Technology for Europe) is to standardize telecommunications technologies into a digitized broadband network.~5 The BRITE (Basic Research in Industrial Technology)
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From page 90... ...
Other characteristics of European programs may also contribute to less than successful results. Collaborative programs have, in some cases, employed direct subsidies without requirements for matching industry contributions, which provides a weak link to market signals on promising technology applications.
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From page 91... ...
In the United States, SEMATECH may play a role in the diffusion and adoption of semiconductor manufacturing equipment. Collaborative R&D may also be useful in projects beyond basic research, in pre-commercial technology development.
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From page 92... ...
The Japanese experience suggests that such projects supplement innovative efforts and investments made in a stable economic environment with a relatively low cost of capital and a highly skilled labor force. Technology Adoption As noted in Chapter 1, the adoption of new technologies is an important part of the processes through which innovation contributes to economic growth and rising standards of living.
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From page 93... ...
Over the past two decades, state governments have moved to establish a dominant role in programs to facilitate technology adoption and diffusion. State governments design and administer most industrial extension programs and are collectively the largest provider of funds for extension activities.
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From page 94... ...
The MTC program has been in operation for only three years, and its impact on small and medium-sized firms in technology adoption and transfer remains uncertain. The panel that conducted the third-year review concluded that the centers were meeting general technical objectives and recommended continued funding.~3i In addition to the MTC program, $1.3 million in federal funds was appropriated in FY 1991 for the State and Local Extension Initiatives programs.~32 The remainder of the current federal effort in technology extension includes the Trade Adjustment Assistance program funded at $12.9 million, which is designed to help firms adversely affected by imports.~33 There are few examples of U.S government program to diffuse manufacturing technologies.
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From page 95... ...
performance in technology adoption.
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The effects of rapid technology adoption on productivity, product quality, and ultimately, living standards are likely to be much greater in the competitive environment in which U.S. firms now find themselves.
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From page 97... ...
Specifically, although the MTC program at NIST has the potential to serve a limited client base in regions where it is established, a more comprehensive, nationwide service for the 350,000 small and medium-sized firms is necessary to impact technology adoption rates in the United States in a significant manner. This new program could leverage the resources available through the MTCs, as well as state-based programs, to better accomplish technology adoption and extension goals.
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From page 98... ...
A new federal role in support of private technology efforts should be shaped through investments in precommercial R&D, as well as projects to increase the rate of technology adoption in U.S. firms.
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From page 99... ...
performance in technology generation remains strong, the nation's industries are having increasing difficulty incorporating new technology into the production process, particularly the rapid introduction of incremental improvements in product and process technologies. Better information and analysis are necessary on technology adoption in the United States and overseas, with the goal of providing a basis upon which new federal responsibilities in this area can be determined.
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From page 100... ...
11. For example, there are restrictions on "foreign participation" in SEMATECH, the National Center for Manufacturing Sciences, federal laboratory R&D programs, and the Advanced Technology Program at the National Institute of Standards and Technology.
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From page 101... ...
John S Wilson, Productivity and Competitiveness: Industrial Extension Services and Technology Transfer Programs in the U.S.
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From page 102... ...
U.S. Congress, Congressional Research Service, "Synthetic Fuels Corporation," Congressional Research Service Review (September 1984)
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From page 103... ...
U.S. Congress, House Committee on Small Business, Subcommittee on Regulation, Business Opportunities, and Energy, Technology Transfer Obstacles in Federal Laboratories: Key Agencies Respond to Subcommittee Survey (Hearing, March 1990)
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From page 104... ...
U.S. Congress, House of Representatives, Technology Transfer Obstacles in Federal Laboratories: Key Agencies Respond to Subcommittee Survey (Washington, D.C., March 1990)
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From page 105... ...
Indeed, officials of several member companies contacted for information about NCMS report benefits from NCMS projects to in-house R&D objectives. They cite especially the leveraging of internal R&D resources in projects in support of manufacturing technology, such as a computer-integrated factory, next-generation controllers, and improved manufacturing techniques for fabrication of printed wiring boards.
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From page 106... ...
Included in the discussions were officials of the Optoelectronic Technology Research Corporation and Optoelectronics Technology Research Laboratory. See also The Japan Key Technology Center, Program Prospectus (Tokyo, Japan, 1989)
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From page 107... ...
For additional information on the MTC program, see National Institute of Standards and Technology, The Manufacturing Technology Centers Program: A Report to the Secretary of Commerce by Visiting Committee on Advanced Technology (Gaithersburg, Md.: NIST, 1990)
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From page 108... ...
The decentralized, extensive, and "user-friendly' structure of the agricultural research and extension services has made it difficult for federal policymakers to redirect and improve the quality of agricultural research, especially in cutting-edge areas such as biotechnology. An integrated research and extension organization in agriculture may have important costs, therefore, as well as some important advantages.
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