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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Comparative Innovation Policy Committee on Comparative Innovation Policy: Best Practice for the 21st Century Board on Science, Technology, and Economic Policy Policy and Global Affairs Charles W. Wessner, Editor The NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

THE NATIONAL ACADEMIES PRESS   500 Fifth Street, N.W.   Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by: Contract/Grant No. SB1341-03-C-0032 between the National Academy of Sciences and the U.S. Department of Commerce; Contract/Grant No. OFED- 381989 between the National Academy of Sciences and Sandia National Laboratories; and Contract/Grant No. NAVY-N00014-05-G-0288, DO #2, between the National Academy of Sciences and the Office of Naval Research. This material is based upon work also supported by the Defense Advanced Research Projects Agency Defense Sciences Office, DARPA Order No. K885/00, Program Title: Materials Research and Development ­Studies, Issued by DARPA/CMD under Contract #MDA972-01-D-0001. Additional funding was provided by Intel Corporation, International Business Machines, the Palo Alto Research Center, and Google. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13:  978-0-309-11606-0 International Standard Book Number-10:  0-309-11606-6 Limited copies are available from Board on Science, Technology, and Economic ­Policy, National Research Council, 500 Fifth Street, N.W., W547, Washington, DC 20001; 202‑334-2200. Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. Copyright 2008 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the a ­ uthority of the charter granted to it by the Congress in 1863, the Academy has a ­mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of E ­ ngineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examina- tion of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of ­Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the ­National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both A ­ cademies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

Committee on Comparative Innovation Policy: Best Practice for the 21st Century* William J. Spencer, Chair Alan Wm. Wolff, Chair (through August 2007) (August 2007-present) Chairman Emeritus, retired Partner SEMATECH Dewey & LeBoeuf LLP and STEP Board Kenneth S. Flamm, Vice Chair Dean Rusk Chair in International Mary L. Good, Vice Chair Affairs Donaghey University Professor Lyndon B. Johnson School of Public Dean, Donaghey College of Affairs Information Science and University of Texas at Austin Systems Engineering and STEP Board University of Arkansas at Little Rock and STEP Board Alice H. Amsden Professor of Political Economy Lewis S. Edelheit Massachusetts Institute of Senior Research and Technology Technology Advisor, retired General Electric Gail H. Cassell Vice President, Scientific Affairs and Bronwyn Hall Distinguished Lilly Research Scholar Professor of Economics for Infectious Diseases University of California at Berkeley Eli Lilly and Company Mark B. Myers Carl J. Dahlman Senior Vice President, retired Henry R. Luce Associate Professor Xerox Edmund A. Walsh School of Foreign Service Georgetown University *As of May 2008. 

Project Staff* Charles W. Wessner Study Director Sujai J. Shivakumar David E. Dierksheide Senior Program Officer Program Officer Alan Anderson Jeffrey C. McCullough Consultant Program Associate *As of May 2008. vi

For the National Research Council (NRC), this project was overseen by the Board on Science, Technology, and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and ­Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to ­integrate understanding of scientific, technological, and economic elements in the for- mulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP’s approach is its frequent interactions with public- and private-sector decision makers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board* and the NRC staff are listed below: Lawrence S. Summers, Chair Edward E. Penhoet, Vice Chair Charles W. Eliot Professor Director Kennedy School of Government Alta Partners Harvard University Amory Houghton, Jr. Timothy F. Bresnahan Former Member of Congress Landau Professor in Technology and the Economy David T. Morgenthaler Stanford University Founding Partner Morgenthaler Ventures Lewis W. Coleman President Joseph P. Newhouse DreamWorks Animation John D. MacArthur Professor of Health Policy and Management Kenneth S. Flamm Director, Division of Health Policy Dean Rusk Chair in International Research and Education Affairs Harvard University Lyndon B. Johnson School of Public Affairs Arati Prabhakar University of Texas at Austin General Partner U.S. Venture Partners Ralph E. Gomory President Emeritus William J. Raduchel Alfred P. Sloan Foundation Chairman Opera Software ASA Mary L. Good Donaghey University Professor Jack W. Schuler Dean, Donaghey College of Chairman Information Science and Ventana Medical Systems, Inc. Systems Engineering University of Arkansas at Little Rock Alan Wm. Wolff Partner Dewey & LeBoeuf LLP *As of May 2008. vii

STEP Staff* Stephen A. Merrill Charles W. Wessner Executive Director Program Director Sarah R. Carter Jeffrey C. McCullough Christine Mirzayan Program Associate Science & Technology Policy Fellow Sujai J. Shivakumar Senior Program Officer David E. Dierksheide Program Officer Mahendra Shunmoogam Program Associate *As of May 2008. viii

Contents PREFACE xiii I. INTRODUCTION 1 II. PROCEEDINGS 33 Welcome 35 Peter Spyns, Department of Economy, Science, and Innovation, The Flemish Government Remarks on Behalf of the U.S. Delegation 36 William J. Spencer, SEMATECH (retired) Session I: Perspectives on the Flemish Innovation System 37 Moderator: Charles W. Wessner, U.S. National Research Council The Flemish Innovation System and its Components 37 Peter Spyns, Department of Economy, Science, and Innovation, The Flemish Government Affiliations as of September 2006. ix

 CONTENTS Implementing and Monitoring the Flemish Innovation System 38 Eric Sleeckx, Flanders Institute for the Promotion of Innovation by Science and Technology (IWT) Current EU Innovation Policy Challenges: From Lisbon to Louvain 41 Luc Soete, University of Maastricht, Netherlands, and UN Univ-MERIT Session II: Perspectives on the U.S. Innovation System 46 Moderator: Luc Soete, University of Maastricht, Netherlands, and UN Univ-MERIT Challenges and Current Developments in the U.S. Innovation System 46 Mary Good, University of Arkansas at Little Rock Global Competition, Corporate Policy, and National Interest 52 Mark B. Myers, Xerox Corporation (retired) Keynote Address 58 Fientje Moerman, Vice Minister-President of the Flemish Government Minister for Economy, Enterprise, Science, Innovation, and Foreign Trade Session III: Cooperative Research and Global Competition in Semiconductors 64 Moderator: Peter Spyns, Department of Economy, Science, and Innovation, The Flemish Government Current Trends: A U.S. Industry Perspective 64 George Scalise, Semiconductor Industry Association China’s Innovation Policies 67 Alan Wm. Wolff, Dewey Ballantine LLP Introduction to IMEC 70 Anton de Proft, IMEC Affiliations as of September 2006.

CONTENTS xi Economic Impacts of SEMATECH on Innovation in Semiconductors 74 Kenneth Flamm, University of Texas at Austin IMEC and SEMATECH: An Industrial Partner Perspective 77 Allen Bowling, Texas Instruments Session IV: Innovation Through Knowledge Diffusion 80 Moderator: Mark B. Myers, Xerox Corporation (retired) Leuven as a Hotspot for Regional Innovation 80 Koenraad Debackere, K.U.Leuven An Industry Perspective: The Case of the Chemical Industry 84 Erwin Annys, Federation of the Belgian Chemical Industries and Life Sciences (formerly Fedichem, now Essenscia) Innovation Through Knowledge Diffusion 87 Paul Ducheyne, University of Pennsylvania Session V: Meeting the Early-stage Finance Challenge 90 Moderator: Luc Soete, University of Maastricht, Netherlands, and UN Univ-MERIT The Texas Emerging Technology Fund 90 Pike Powers, Fulbright & Jaworski LLP Overview of TXAN: A New Model for Research Collaboration 91 Randal K. Goodall, SEMATECH From University Research to University Spin-off: Experiences of VUB 96 Bruno de Vuyst, Vesalius College, Vrije Universiteit Brussel (VUB) and Lawfort Brussels Commercializing University Research: The Role of the U.S. SBIR Program 98 Charles W. Wessner, U.S. National Research Council Funding Flemish Innovation: Goals, Mechanisms, and Results 104 Rudy Aernoudt, Department of Economy, Science, and Innovation Affiliations as of September 2006.

xii CONTENTS Young Technology-based Firms in Belgium: The Impact of Policy Instruments 106 Bart Clarysse, Vlerick Leuven Gent Management School, Ghent University Concept and Evaluation of the Advanced Technology Program 108 Marc Stanley, National Institute of Standards and Technology The Challenge of Collecting Good Evaluation Data 112 Bart van Looy, Flemish Policy Research Centre for R&D Statistics (SOOS) Session VI: Flemish Strategic Research Centers 116 Flanders Institute for Biotechnology (VIB) 116 Lieve Ongena, Flanders Interuniversity Institute for Biotechnology (VIB) Flemish Institute for Technological Research (VITO) 119 Dirk Fransaer, Flemish Institute for Technological Research (VITO) Interdisciplinary Institute for Broadband Technology (IBBT) 120 Wim De Waele, Interdisciplinary Institute for Broadband Technology (IBBT) III. RESEARCH PAPER China’s Drive Toward Innovation 127 Alan Wm. Wolff, Dewey Ballantine LLP IV. APPENDIXES A. Agenda, September 20-22, 2006 Symposium 153 B. Biographies of Speakers 158 C. Bibliography 175 Affiliations as of September 2006.

Preface Recognizing that a capacity to innovate and commercialize new high-­technology products is increasingly a part of the international competition for economic leader­ ship, governments around the world are taking active steps to strengthen their national innovation systems. These steps underscore the belief that the rising costs and risks associated with new potentially high-payoff technologies, and the growing global dispersal of technical expertise, require national research and development programs to support new and existing high-technology firms within their borders. What is the impact of this new international competition for the United States? In a recent report, the National Academies warned that “this nation must prepare with great urgency to preserve its strategic and economic security,” add- ing that “the United States must compete by optimizing its knowledge-based resources, particularly in science and technology, and by sustaining the most fertile environment for new and revitalized industries and the well-paying jobs they bring.” Responding to this challenge requires that we recognize that the nature and terms of economic competition are shifting. U.S. policymakers need to be aware National Academy of Sciences/National Academy of Engineering/Institute of Medicine, Rising Above the Gathering Strom: Energizing and Employing America for a Brighter Future, Washington, D.C.: The National Academies Press, 2007. Kent Hughes has argued in this regard that the challenges of the 21st century require new strate- gies that take account of new technologies, new global competitors, as well as new national priorities concerning national security and the environment. See Kent Hughes, Building the Next American Century: The Past and Future of American Economic Competitiveness, Washington, D.C.: Woodrow Wilson Center Press, 2005, Chapter 14. xiii

xiv PREFACE of the wide variety of innovation and competitiveness policies that many nations have adopted. These policies are designed to build research capacities and to acquire knowledge, and then to transition that knowledge directly to companies and support their development. Some nations have developed well-financed and integrated national programs that are designed to shift the terms of international competition. Other national programs, while more modest in scale, provide essentially market-based incen- tives to encourage the transition of new technologies to the market. Yet, even these can have a significant impact on the terms of competition. While institutions and the scale of funding vary across the globe, a comparative perspective is neces- sary to help us understand what policies are succeeding and why, how selected policies might be successfully adapted in the U.S. context, and what existing U.S. programs might be enhanced. With these objectives in mind, the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) has embarked on a study of selected foreign innovation programs in comparison with major U.S. programs. Recognizing the importance of targeted government promotional policies relative to innovation, the analysis, carried out under the direction of an ad hoc ­Committee, is to include a review of the goals, concept, structure, operation, funding levels, and evaluation of foreign programs designed to advance the innovation capacity of national economies and enhance their international competitiveness. Definitions of Innovation and Competitiveness We define innovation as the transformation of an idea into a marketable product or service, a new or improved manufacturing or distribution process, or even a new method of providing a social service. This transformation involves an adaptive net­ work of institutions that encompass a variety of informal and formal rules, norms, and procedures—a national innovation ecosystem—that shape how individuals and corporate entities create knowledge and collaborate to bring new products and services to market. If we define competitiveness as the ability to gain market share by adding value better than others in the globalized economic environment, the ability of these actors to collaborate successfully within a given innovation ecosystem gains significance. Recognizing this, policymakers around the world are supporting a variety of initiatives to reinforce their national innovation ecosystems as a way of improving their national competitiveness.

PREFACE xv The Context of this Report Since 1991 the STEP Board has undertaken a program of activities to improve policymakers’ understanding of the interconnections among science, technology, and economic policy and their importance to the American economy and its international competitive position. The Board’s interest in comparative innovation policies derives directly from its mandate. This mandate has previously been reflected in STEP’s widely cited vol- ume, U.S. Industry in 2000, which assesses the determinants of competitive performance in a wide range of manufacturing and service industries, including those relating to information technology. The Board also undertook a major study, chaired by Gordon Moore of Intel, on how government-industry partner- ships can support the growth and commercialization of productivity enhancing technologies. Reflecting a growing recognition of the importance of the surge in productivity since 1995, the Board also launched a multifaceted assessment, exploring the sources of growth, measurement challenges, and the policy frame- work required to sustain the New Economy. The current study on Comparative Innovation Policy builds on STEP’s experi- ence to develop an international comparative analysis focused on U.S. and foreign innovation programs. To open this analysis, the Committee held a symposium on April 15, 2005, which drew together leading academics, policy analysts, and senior policymakers from around the globe to describe their national innovation programs and policies, outline their objectives, and highlight their achievements. Follow-up symposia in Taipei and Tokyo in January 2006 focused on the evolu- tion of the Taiwanese and Japanese innovation systems over the past decade. The Committee also convened a major symposium in Washington in June 2006 that identified current trends in the Indian innovation system and the new U.S.-India innovation partnership. National Research Council, U.S. Industry in 2000: Studies in Competitive Performance, David C. Mowery, ed., Washington, D.C.: National Academy Press, 1999. This summary of a multivolume study provides the Moore Committee’s analysis of best practices among key U.S. public-private partnerships. See National Research Council, Government-Industry Partnerships for the Development of New Technologies: Summary Report, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2003. For a list of U.S. partnership programs, see Christopher Coburn and Dan Berglund, Partnerships: A Compendium of State and Federal Coopera- tive Programs, Columbus, OH: Battelle Press, 1995. National Research Council, Enhancing Productivity Growth in the Information Age: Measuring and Sustaining the New Economy, Dale W. Jorgenson and Charles W. Wessner, eds., Washington, D.C.: The National Academies Press, 2007. For a summary of this conference, see National Research Council, Innovation Policies for the 21st Century, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2007. For a summary of this conference, see National Research Council, India’s Changing Innovation System, Charles W. Wessner and Sujai J. Shivakumar, eds., Washington, D.C.: The National Acad- emies Press, 2007.

xvi PREFACE In September 2006, the Committee held a major international symposium on “Synergies in Regional and National Innovation Policies in the Global ­Economy” in Flanders, Belgium. This event reviewed European Union, national, and regional innovation policies in Europe. The Committee met with representatives from policy­makers and academics in Leuven, in the Flanders region of Belgium, a major university and research center with a strong commercialization record. Leuven is also home to IMEC, one of the leading microelectronics research facilities in the world and the flagship of Flemish technology policy. This report provides a summary of the symposium. Acknowledgments We are grateful for the support of the Defense Advanced Research Projects Agency, the National Institute of Standards and Technology, the National Science Foundation, the Office of Naval Research, and Sandia National Laboratories. We are especially grateful to our hosts in Flanders for their help in orga- nizing this conference. Foremost among them is the former Minister Fientje M ­ oerman, whose leadership on innovation policies has made a lasting contri- bution to ­Flemish growth and competitiveness. We are indebted to our hosts at IMEC, notably Jan Wauters and Imke Debecker. We are also grateful to Peter Spyns, Emmelie Tindemans, Lea De Pauw, and Marleen De Leenheer of the Flemish Department of Economy, Science and Innovation for their hos­pitality and attention to the many practicalities of the symposium. Bart Hendrickx, the former diplomatic representative of Flanders for the United States deserves s ­ pecial mention. Without his interest and commitment, the symposium would not have occurred. On the U.S. side, we are indebted to Alan Anderson for his preparation of this meeting summary and to Sujai Shivakumar and Alan Anderson for preparing the Introduction to this volume. Several members of the STEP staff also deserve r ­ ecognition for their contributions to the preparation of this report, including J ­ effrey McCullough and David Dierksheide for their role in preparing the confer- ence and getting this report ready for publication. NATIONAL RESEARCH COUNCIL Review This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process.

PREFACE xvii We wish to thank the following individuals for their review of this report: Daryl Hatano, Semiconductor Industry Association; Göran Marklund, VINNOVA; Luc Soete, Maastricht University; and Peter Spyns, Department of Economy, S ­ cience and Innovation, Flemish Government. Although the reviewers listed above have provided many constructive com- ments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. Responsibility for the final content of this report rests entirely with the authors and the institution. Alan Wm. Wolff Charles W. Wessner

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Recognizing that innovation is the key to international competitiveness in the 21st century, policymakers around the world are seeking more effective ways to translate scientific and technological knowledge into new products, processes, and businesses. They have initiated major programs, often with substantial funding, that are designed to attract, nurture, and support innovation and high-technology industries within their national economies.

To help U.S. policymakers become more aware of these developments, a committee of the National Academies' Board on Science, Technology, and Economic Policy undertook a review of the goals, concept, structure, operation, funding levels, and evaluation efforts of significant innovation programs around the world. As a part of this effort, the committee identified Flanders, a region of Belgium with substantial autonomy, which is recognized for its comprehensive approach to innovation. Based on initial meetings in Washington and Brussels, and with the endorsement of Flanders Vice Minister-President Fientje Moerman, it was agreed to organize a conference that would review regional innovation policies in the context of the policies and programs of the Flanders government, and their interaction with those of the European Union. This book provides a summary of that symposium.

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