National Academies Press: OpenBook

Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium (2008)

Chapter: I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century

« Previous: Front Matter
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 1
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 2
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 3
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 4
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 5
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 6
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 7
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 8
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 9
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 10
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 11
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 12
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 13
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 14
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 15
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 16
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 17
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 18
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 19
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 20
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 21
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 22
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 23
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 24
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 25
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 26
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 27
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 28
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 29
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 30
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 31
Suggested Citation:"I INTRODUCTION & Innovative Flanders: Innovation Policies for the Twenty-first Century." National Research Council. 2008. Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/12092.
×
Page 32

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.

I Introduction

Innovative Flanders: Innovation Policies for the Twenty-first Century 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 chapter highlights the main points of this conference. It begins with an overview of the changing landscape of global innovation and reviews the role Mrs. Moerman resigned as Flanders’ Vice Minister-President and Minister of Economy, Enter- prises, Innovation, Science, and Foreign Trade in October 2007. The conference reported here was held in September 2006. Titles and positions of all the participants reported in this volume are those of the date of the conference. 

 INNOVATIVE FLANDERS Box A What is Innovation? “Innovation is a strategy that provides resources to talented people in an a ­ tmosphere which promotes creativity and is focused on outcomes ranging from new products, to customer satisfaction, to new scientific insights, to improved processes, to improved social programs. [It is] designed to create wealth and/or improve the human condition.” Dr. Mary Good, University of Arkansas at Little Rock that public-private partnerships play in advancing American competitiveness. The chapter then turns to review the initiatives taken by the Flanders government to reinforce its position further as a global center of research and innovation. While the American and Flanders economies differ vastly in scale and struc- ture, both confront common challenges in innovation, including the need to transform existing institutions and invent new policies mechanisms for the future. A premise of the conference—and hence this report—is that a comparative per- spective is necessary to understand the global environment for innovation-based competition. A detailed summary of the insights, observations, and the status of current policies captured in the conference proceedings can be found in the next chapter. The Globalization of Innovation Since the Second World War, the high standard of living found in the United States and Western Europe has been built on competitive markets that reward the innovator while providing consumers with better and more affordable products. In the United States, this potential for innovation has been sustained by a culture of entrepreneurship that encourages risk-taking by providing substantial rewards buttressed by robust government funding for basic science and technology, and reinforced by an open research and development (R&D) system that attracts the best minds from around the world. While still a powerful model, this paradigm began to change with the emer- gence of a distinctly new competitive environment in the 1990s. The introduction of new information and communications technologies across the world and the rise of new low-wage, high-skill entrants on the global stage have altered the See the presentation by Dr. Mary Good in the Proceedings section of this volume.

INTRODUCTION  Box B Innovation in Flanders About the size of Connecticut and with a population of about six million, F ­ landers encompasses the Dutch speaking region of Belgium. Constitutional r ­ eforms in ­ Belgium, begun in the 1970s, now provide the Flanders government with considerable autonomy to pursue its own social and economic policies. Until the middle of the 20th century, Flanders lagged economically behind Belgium’s French speaking region of Wallonia. With the decline of Wallonia’s power­ ful coal and iron industries after the Second World War, more modern business growth came to Flanders. By the end of the 20th century, Flanders was home to dynamic auto assembly, pharmaceuticals, engineering, metal products, food processing, chemicals, and brewing industries. Exports of manufactured products accounted for nearly 80 percent of Flanders’ gross domestic product (GDP). Recognizing the need to secure its peoples’ future prosperity in a rapidly chang­ ing and competitive global environment, the Flanders government decided to strengthen its own high-technology base, and has since implemented a broad range of programs to enhance its innovation capacity—the focus of this volume. THE NETHERLANDS Flanders GERMANY Brussels BELGIUM Wallonia FRANCE LUXEMBOURG FIGURE B-1 Map of Belgium. Intro Fig Box B-01

 INNOVATIVE FLANDERS landscape of innovation, creating new challenges for the continued technological leadership of the United States. Technological Transformations The information and communications revolution, made possible in large part by faster and cheaper semiconductor products, has changed the economics of innovation. Taking advantage of the potential offered by new information and communications technologies, many large firms have transformed themselves from vertically integrated enterprises, often with significant in-house R&D capa- bilities, into flat, virtual, and globally networked enterprises. With Moore’s Law, which predicts the regular and rapid increase in micro­processor capacity, expected to continue for at least another 15 years, the continued decline in cost and increase in capacity of information technologies is likely to continue to underpin this revolution. In this new paradigm, talent does not necessarily have to be based in or drawn to the United States, but can be accessed from across the globe. As Mark Myers of the University of Pennsylvania noted in his conference remarks, large firms no longer invest in in-house scientific research as they once did, drawing instead on needed technologies through investment, partnerships, and acquisitions of small innovative firms. Production and sales are similarly fragmented, based on worldwide supply chains and a worldwide customer base. As Dr. Myers noted, this new reality means that each nation must have poli- cies that address the globalization dynamic. New models of cooperation among governments, industries, universities, and others are necessary to sustain the “knowledge commons” on which innovation depends. And new types of invest- ments in education are necessary to prepare the workforce of the future even as skilled workers migrate with increasing ease across the world. Theseconcerns are highlighted in a recent report of the National Academies. See National Acad- emy of Sciences, National Academy of Engineering, Institute of Medicine, Rising Above the Gather- ing Storm: Energizing and Employing America for a Brighter Economic Future, Washington, D.C.: The National Academies Press, 2007. Drawing attention to the possibility of an abrupt loss of U.S. leadership in science and innovation, this report led to the passage of the America Competes Act of 2007. This act, passed with bipartisan support in Congress, focuses on increasing research investment, strengthening educational opportunities in science, technology, engineering, and mathematics from elementary through graduate school, and developing the nation’s innovation infrastructure. For a review of some of the implications of the ongoing revolution in information and communi- cations technology for businesses, see William J. Raduchel, “The End of Stovepiping,” in National Research Council, The Telecommunications Challenge: Changing Technologies and Evolving ­Policies, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2006, p. 31. For an analysis of the nature of Moore’s Law and its impact on the U.S. productivity growth, see National Research Council, Enhancing Productivity Growth in the Information Age, Dale W. J ­ orgenson and Charles W. Wessner, eds., Washington, D.C.: The National Academies Press, 2007.

INTRODUCTION  Box C A Chinese Perspective on Innovation and National Competitiveness “In today’s world, the core of each country’s competitive strength is intellectual innovation, technological innovation, and high-tech industrialization.” President Jiang Zemin August 23, 1999 The Rise of New Entrants Another challenge to continuing U.S. leadership in innovation and com- petitiveness comes from newly competitive participants in the global economy. China, most notably, combines the advantages of high-skill and low-wage knowl- edge workers with substantial state and foreign investments backed by a strong sense of national purpose in acquiring new capabilities and participating in ­ roduct markets based on advanced technologies. p One element of this strategy focuses on attracting and developing high- t ­ echnology industries to the Mainland. As Alan Wolff of Dewey Ballantine LLP noted at the conference, China’s leaders see the acquisition of technological capabilities and control of national market as a means of maintaining national autonomy and generating political and military strength. (See Box C.) This high-level commitment is evident in the rapid rise in Chinese R&D expenditure. In 1999, China’s R&D spending accounted for 6 percent of the total world expenditures in R&D. By 2005, China accounted for 13 percent of the world total of $836 billion spent on R&D. Mr. Wolff reported that China plans to increase its R&D spending to 2.5 percent of GDP by 2010, raising it to international target levels. In addition to national focus and generous funding, China has also adopted powerful policies to encourage innovation. These policies include exemptions from sales tax income earned from the transfer of technology developed exclu- sively through foreign direct investment in R&D, a 50 percent discount in cor- porate income tax for foreign R&D investors with rising development expenses, For a comprehensive review of the innovation policies of India, another major new entrant, see National Research Council, India’s Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation, Charles W. Wessner and Sujai J. Shivakumar, eds., Washington, D.C.: The National Academies Press, 2007. Based on purchasing power parity. See Organisation for Economic Co-operation and Develop- ment, Main Science and Technology Indicators, Paris: Organisation for Economic Co-operation and Development, 2006.

 INNOVATIVE FLANDERS and (like many countries) procurement regulations that favor national producers. The central and regional governments are also spending substantial sums to support leading industries, such as the construction of advanced semiconductor fabrication facilities. Like governments elsewhere, albeit on a larger scale, the public authorities have set aside large tracts of land for information technology and biotechnology science parks, and are providing incentives for major U.S. and European firms to conduct research and development in China. While some of these efforts, particularly those involving a “top-down” approach, may face drawbacks from bureaucratic rigidities, the sheer scale of China’s efforts will continue to have a global impact. The Innovation Challenge for the United States The emergence of China as a rapidly growing economy offers major growth opportunities for U.S. firms just as China’s desire to acquire and develop advanced technology poses significant challenges for U.S. policymakers. In any event, for the United States to maintain its leadership as an innovative economy, it has to adapt its policies to address these new technological and competitive realities. Dr. Mary Good of the University of Arkansas underscored the nature of the challenge faced by the United States. These challenges include changing demographics and unfavorable trends in investments on science. Noting that over a third of the science and technology (S&T) graduate students in the United States are foreign-born, and that nearly 60 percent of engineering graduates are foreign-born, she said that U.S. innovation depends on the availability and con- tinued presence of these foreign-born students. The question is whether they will continue to come and stay as other countries quickly build up their own research universities and job opportunities and our own immigration system discourages them from staying. What is needed, she affirmed, are immigration policies that admit educated newcomers while restricting illegal immigrants. At the same time, Dr. Good noted, the United States is not investing suf- ficiently in its future innovation capacity. Funding for public universities has declined, making it more difficult to replace retiring generations of scientists and For a discussion of policies adopted by the People’s Republic of China to support its semi­ conductor industry, see Thomas R. Howell, “New Paradigms for Partnerships: China Grows a Semiconductor Industry,” in National Research Council, Innovation Policies for the 21st Century, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2007. For related analysis, see National Research Council, Policy Implications of International Graduate Students and Postdoctoral Scholars in the United States, Washington, D.C.: The National Academies Press, 2005. In 2003, international students earned 38 percent of the U.S.-awarded S&E doctorates and 58.9 percent of the engineering doctorates. See National Science Foundation, Science and Engi- neering Doctorate Awards: 2003, NSF 05-300, Arlington, VA: National Science Foundation, 2004. Data are available at <http://www.nsf.gov/sbe/srs/nsf05300/tables/tab3.xls>.

INTRODUCTION  Billions of Dollars Seed Startup First-stage Year FIGURE 1  The collapse of the U.S. seed and first-stage venture capital funding: dwin- dling high-risk investments. SOURCE: National Science Board, Science and Engineering Indicators 2004, Arlington VA: National Science Foundation, 2004.Fig 01 Intro engineers.10 Another factor weighing on the U.S. innovation system is declining investment in R&D from a variety of sources.11 While the federal investment has risen in constant dollars since 1976, almost all this increase has gone to the defense sector—where the focus is on development rather than on path-breaking research. Likewise, R&D spending by business is also characterized by a focus on development over research. Dr. Good pointed out that this focus on later stage development is also reflected in venture capital funding, where early-stage fund- ing for small R&D firms “is fast disappearing, and that’s got to change.” (See Figure 1.) According to Dr. Good, sustaining America’s innovative capacity requires that state and national policymakers pay attention to a set of three interlocking 10See Peter R. Orszag and Thomas J. Kane, “Funding Restrictions at Public Universities: Effects and Policy Implications,” Brookings Institution Working Paper, September 2003. The authors note that public educational spending per full-time equivalent student has declined at public institutions rela- tive to private institutions, from about 70 percent in 1977 to about 58 percent in 1996. Since roughly three-quarters of college students are enrolled at public institutions, they note that any decline in the quality of the nation’s public universities could have troubling implications. At the same time, they acknowledge that reductions in spending need not translate into a proportional reduction in quality. 11See Kei Koizumi, “Historical Trends in Federal R&D,” AAAS Report XXXII: Research and Development FY2008, Chapter 2, AAAS Publication Number 07-1A, Washington, D.C.: American Association for the Advancement of Science. Access at <http://www.aaas.org/spp/rd/08pch2.htm>.

10 INNOVATIVE FLANDERS Box D The Role of Public-Private Partnerships “Partnerships facilitate the transfer of scientific knowledge to real products; they represent one means to improve the output of the U.S. innovation system. Partnerships help by bringing innovations to the point where private actors can introduce them to the market. Accelerated progress in obtaining the benefits of new products, new processes, and new knowledge into the market has positive consequences for economic growth and human welfare.”a Government-Industry Partnerships for the Development of New Technologies A Report of the National Academies aFor an analysis of the conditions necessary for successful public-private ­ partnerships, see the findings and recommendations of the NRC Committee on Government-­Industry P ­ artner­ships, chaired by Gordon Moore. See National Research Council, Government- I ­ndustry Partnerships for the Development of New Technologies: Summary Report, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2003, pp. 2-3. priorities—expanding the nation’s talent base, investing in R&D of unexplored areas, and building the infrastructure for collaboration needed to bring new ideas to the market. She summarized the challenges faced by the United States as follows: • How do you get talent that does what you need it to do? • How do you raise sufficient support to give that talent opportunity? • How do you create an infrastructure capable of creating new and exciting things? In answering these questions, several conference participants pointed to the role that public-private partnerships—involving cooperative R&D activities among industry, universities, and government laboratories—can and have played in accelerating innovation in the United States. (See Box D.) The case of the semiconductor industry, seen next, illustrates how partner- ships have contributed directly to furthering the global competitiveness of a leading U.S. industry. The SEMATECH Research Consortium In the 1980s, American semiconductor industry leaders, facing growing competition from Japan, became concerned that they needed to improve manu- facturing quality and resolved to find a way to improve the situation collec-

INTRODUCTION 11 tively.12 Despite the independence and fierce competitiveness among firms in the industry, the Semiconductor Industry Association took the unusual step of approaching the government and making the argument that active collaboration at the pre-competitive stage was necessary for the sake of long-term U.S. eco- nomic competitiveness and national security.13 SEMATECH, which brought together most of the largest semiconductor companies in the United States, was launched in 1987 as a new experiment in U.S. R&D strategy. This consortium has since been widely credited with playing a significant role in the resurgence of the U.S. semiconductor industry. 14 Its per- ceived success has stimulated similar cooperative efforts in Japan and Europe— including the Interuniversity Microelectronics Centre (IMEC), a microelectronics research facility on the outskirts of Leuven in Flanders. Today, SEMATECH continues to play a central role in developing the nanotechnologies necessary to move semiconductor research beyond CMOS and into the future.15 In his conference presentation, Kenneth Flamm of the University of Texas said that enhanced research collaboration, made possible by SEMATECH, helped to accelerate the rate of innovation in semiconductor technology and contributed to a rapid decline in the price of semiconductors.16 The development of a semi- conductor technology roadmap in particular helped “coordinate the complex process of technology development to a point where products could all come on 12See Jeffrey T. Macher, David C. Mowery, and David A. Hodges, “Semiconductors,” in U.S. Industry in 2000: Studies in Competitive Performance, David C. Mowery, ed., Washington, D.C.: National Academy Press, 1999. 13For a first-hand account of the formation of the SEMATECH consortium, see Gordon Moore, “The SEMATECH Contribution,” in National Research Council, Securing the Future: Regional and National Programs to Support the Semiconductor Industry, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2003. For a view from the Semiconductor Industry Associa- tion at that time, see also Andrew Procassini, Competitors in Alliance: Industry Associations, Global Rivalries, and Business-Government Relations, New York: Greenwood Publishing, 1995. 14For an overview of SEMATECH, see National Research Council, Conflict and Cooperation in National Competition for High-Technology Industry, Washington, D.C.: National Academy Press, 1996, pp. 148-151. For an analysis of the empirical evidence, see Kenneth Flamm, “SEMATECH Revisited: Assessing Consortium Impacts on Semiconductor Industry R&D,” in National Research Council, Securing the Future: Regional and National Programs to Support the Semiconductor Industry, op. cit. See also Peter Grindley, David C. Mowery, and Brian Silverman, “SEMATECH and Collaborative Research: Lessons in the Design of High Technology Consortia,” Journal of Policy Analysis and Management, 13(4):723-758, 1994. 15For a review of new product trends and the future research directions in semiconductor technol- ogy, see the remarks by George Scalise, President of the Semiconductor Industry Association, in the Proceedings chapter of this volume. 16See Kenneth Flamm, “Economic Impacts of SEMATECH on Innovation in Semiconductors” in the Proceedings chapter of this volume.

12 INNOVATIVE FLANDERS line when needed to advance manufacturing.”17 This enhanced pre-competitive research collaboration has been a source of strength to the U.S. semiconductor industry. In turn, the industry’s continued dynamism and growth is linked to a rise in the long-term growth trajectory of the United States.18 The Role of Innovation Awards As in the case of SEMATECH, innovation award programs were introduced in the 1980s to address concerns about the international competitiveness of the United States. Drawing on a growing body of evidence that small businesses were assuming an increasingly important role in both innovation and job creation, David Birch, a pioneer in entrepreneurship and small business research, and o ­ thers, suggested that national policies should promote and build on the competi- tive strength offered by small businesses.19 The Small Business Innovation Research (SBIR) program was established in 1982 as a way to channel federal R&D funds to small businesses. The program was designed to take advantage of the R&D expertise that is often unique to small businesses to meet the mission needs of various government agencies. 20 Moreover, as Charles Wessner of the National Research Council noted in his conference presentation, competitively awarded SBIR grants encourage new entrepreneurship. By signaling information about promising new technologies to 17For an analysis of the semiconductor roadmap experiment, see William J. Spencer and T. E. Seidel, “International Technology Roadmaps: The U.S. Semiconductor Experience,” in National Research Council, Productivity and Cyclicality in Semiconductors, Trends, Implications, and ­Questions, Dale W. Jorgenson and Charles W. Wessner, eds., Washington, D.C.: The National Academies Press, 2004. 18See Dale W. Jorgenson and Kevin J. Stiroh, “Raising the Speed Limit: Economic Growth in the Information Age,” in National Research Council, Measuring and Sustaining the New Economy, Dale W. Jorgenson and Charles W. Wessner, eds., Washington, D.C.: The National Academies Press, 2002. See also National Research Council, Enhancing Productivity in the Information Age, op. cit. 19David L. Birch, “Who Creates Jobs?” The Public Interest, 65:3-14, 1981. Birch’s work greatly influenced perceptions of the role of small firms. Over the past 20 years, it has been carefully s ­ crutinized, leading to the discovery of some methodological flaws, namely making dynamic infer- ences from static comparisons, confusing gross and net job creation, and admitting biases from chosen regression techniques. See S. J. Davis, J. Haltiwanger, and S. Schuh, “Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts,” Working Paper No. 4492, Cambridge, MA: National Bureau of Economic Research, 1993. These methodological fallacies, however, “ha[ve] not had a major influence on the empirically based conclusion that small firms are over-represented in job creation,” according to Per Davidsson. See Per Davidsson, “Methodological Concerns in the Estimation of Job Creation in Different Firm Size Classes,” Working Paper, Jönköping International Business School, 1996. Empirical evidence showing that equity-financed small firms are a key feature of the U.S. innovation ecosystem, serving as an effective mechanism for capitalizing on new ideas and bringing them to the market, was presented by Acs and Audretsch. See Zoltan J. Acs and David B. Audretsch, Innovation and Small Firms, Cambridge, MA: The MIT Press, 1990. 20For the first comprehensive review of SBIR, see National Research Council, An Assessment of the Small Business Innovation Research Program, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, forthcoming.

INTRODUCTION 13 potential investors, SBIR awards improve the market for downstream investors. SBIR awards appear to have a “certification” function and by acting as a stamp of approval, help them obtain resources needed to grow from outside investors. 21 Complementing the SBIR program, the Advanced Technology Program (ATP) was initiated in 1990 as a means of funding high-risk R&D with broad commercial and social benefits that would not be undertaken by a single com- pany, either because the risk was too high or because a large enough share of the benefits of success would not accrue to the company for it to consider the investment worthwhile.22 At the conference, Marc Stanley, the director of the Advanced Technology Program, described his mission as one of bridging the gap between the research laboratory and the marketplace, emphasizing that ATP funding is directed to technical research but not product development. Companies, whether singly or jointly, conceive, propose, and execute all projects, often in collaboration with universities and federal laboratories. ATP shares the project costs for a limited time. Single-company awardees can receive up to $2 million for R&D activities for up to 3 years. Larger companies must contribute at least 60 percent of the total project cost. Joint ventures can receive funds for R&D activities for up to 5 years. New Initiatives by State Governments Participants at the conference also discussed new initiatives under way in the United States at the state and regional levels to bring home the benefits of ­ innovation-led growth. Responding to the challenges of fostering regional growth and employment in an increasingly competitive global economy, leading American states have developed programs to grow companies as well as attract the talent and resources necessary to develop leading-edge technologies. 23 These state-based initiatives have a broad range of goals and increasingly include sig- 21With regard to the certification effect, see Joshua Lerner, “Public Venture Capital,” in National Research Council, The Small Business Innovation Program: Challenges and Opportunities, Charles W. Wessner, ed., Washington, D.C.: National Academy Press, 1999. 22In a recent assessment of ATP, the National Academies noted that the program’s cost-shared, industry-driven approach to funding promising new technological opportunities has shown consider- able success in advancing technologies that can contribute to important social goals such as improved health diagnostics (e.g., breast cancer detection), developing tools to exploit the human genome (e.g., colon cancer protection), and improving the efficiency and competitiveness of U.S. manufacturing. See National Research Council, The Advanced Technology Program: Assessing Outcomes, Charles W. Wessner, ed., Washington, D.C.: National Academy Press, 2001, p. 87. 23For an overview of key state innovation initiatives, see The Pew Center on the States, Innovation America: Investing in Innovation, accessed at <http://www.nga.org/Files/pdf/0707INNOVATIONINVEST. PDF> on September 10, 2007. See also the publication by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation, The 2007 State New Economy Index. Accessed at <http://www.kauffman.org/items.cfm?itemID=766> on September 10, 2007.

14 INNOVATIVE FLANDERS nificant resources, often in partnership with established companies and universi- ties. As described by several conference participants, these efforts in support of regional development are playing an increasingly significant role in sustaining U.S. technological leadership. One of the larger state efforts in this regard is the $300 million Texas Emerg- ing Technologies Fund. According to Pike Powers of Fulbright and Jaworski, this fund is designed to help create jobs and to develop the economy of Texas over the long term by expediting the development and commercialization of new technolo- gies and attracting and creating jobs in advanced technology fields. It focuses on increasing research collaboration through new Regional Centers of Innovation and Commercialization, matching research grants funds, and attracting more top-notch research talent to the State of Texas. Another state-level initiative, introduced by Randall Goodall of ­SEMATECH, is the Texas Alliance for Nanoelectronics (TxAN). In his remarks, Dr. Goodall described TxAN as a statewide partnership for building innovative, virtual nano- electronics capability “that leverages world-class researchers and R&D infrastruc- ture and drives regional commercialization of technology.” He described TxAN’s new training paradigm, which includes a $4 million nano­electronics development initiative to support 160 internships in advanced technology, a $3 million Nano- electronics Research Initiative Center to provide university research in innovative ideas, and the Nanoelectronics Infrastructure Network that will link SEMATECH and TxAN with Texas universities in a $500 million collaborative effort.24 In addition to reinforcing policy successes at the state and federal levels, the United States can also learn from new policy initiatives under way around the world. As we see next, the innovation challenges facing Flanders and the poli- cies adopted by the Flemish government to enhance competitiveness are directly relevant to the United States, just as U.S. experience may hold some implications for current policy development in Flanders. Innovation in Flanders Flanders is a leading innovator of technology policy in Europe. Through a cohesive strategy that combines bottom-up input and top-down guidance with substantial public support, the Flemish government has promoted a technology- based national innovation system on a par with other highly effective global competitors such as Finland and Sweden. 24International SEMATECH R&D participation with regional governments includes the State of New York as well as the State of Texas. Expanding from its base in Austin, SEMATECH has put its new, $403 million research center in upstate New York. The state, in turn, has contributed in $210 mil- lion for equipment, construction, and specialized tools. New York has targeted nano as a key element in its future economic growth. In addition to $750 million in state funding in nano projects, many of them focused on the semiconductor industry, New York has received $7.25 billion in private invest- ments. See Stephen Baker, “New York’s Big Hopes for Nano,” Businessweek, February 4, 2005.

INTRODUCTION 15 Flanders’ Innovation Advantages This innovation strategy leverages Flanders’ inherent advantages. As Peter Spyns of the Flanders Department of Economy, Science, and Innovation noted at the conference, Flanders’ existing strengths include an excellent transportation and logistical infrastructure that takes advantage of Flanders’ central location in Europe. Flanders is also blessed with a well-educated, multilingual, hard-­working populace. It benefits from a strong educational and research infrastructure that includes 7 universities, 22 non-university institutions of higher education, 5 university­-based institutes of higher education designed specifically to diffuse knowledge out of the university, and several publicly supported research centers, including the Royal Academia and Musea. Flanders, he added, is also able to draw on substantial financial support from the European Union to develop its capacities in science and technology. Flanders’ Innovation Challenges Flanders also faces challenges in innovation. Technological Lags and Political Cycles. A major challenge in promulgating an effective innovation policy in Flanders—no less than for other democracies—is that the benefits of investing in innovation are usually realized over the longer term,25 while popular expectations and the fortunes of elected policy­makers run on shorter cycles. As Bart van Looy of the Faculty of Economics and Applied Economics at the Flemish Policy Research Centre for R&D Statistics (SOOS) explained at the conference, the time lag between investment and payoff poses a political liability.26 Many people in Flanders expect the government to use its resources to create jobs directly and quickly, rather than to take the long and unfamiliar road of investing in R&D. A Shortage of Seed Funding. Another challenge for Flanders is that even the most promising small and medium enterprises find it difficult to finance the developmental work needed to take a new idea to market.27 Indeed, as Rudy 25Mark Myers of the University of Pennsylvania noted that at Xerox, where he had been director of research, the average time between the first expenditures on a new product to the first sales was 8 years; in pharmaceuticals, he said, this lag was about 13 years. 26In 2007, the Flanders government approved a second generation of policy research centers, resulting in, among other things, SOOS (Steunpunt O&O Statistieken) becoming SOOI (Steunpunt O&O Indicatoren). 27As Paul Ducheyne of the University of Pennsylvania noted in his conference presentation, the cost of initial research, particularly in the medical arena, is often dwarfed by the costs involved in developing and readying a product for the market. See a summary of his conference remarks in the Proceedings chapter of this volume.

16 INNOVATIVE FLANDERS Aernoudt, then Secretary-General of the Flemish Department of Economics, Science, and Innovation, noted in his conference presentation, venture capital firms, so familiar to inventors in the United States, are practically nonexistent in Flanders.28 Because startups find so few private investors interested in taking a chance on a new business enterprise, he added, banks play an important role in providing private equity. However, as Professor Bruno de Vuyst of the Free Uni- versity of Brussels (VUB) noted later, the amounts of capital the banks provide are also very small. Cultural Aversion to Risk. Small firm formation in Flanders is also inhibited by a cultural aversion to risk and, more generally, relative inexperience with business formation and ownership. As a result, few individuals or groups are comfortable investing in new high-technology firms. A Lack of Trust in Scientific Advance. A final challenge for Flanders, as for Europe, is a popular suspicion of some elements of science, such as genetic engineering, and especially genetically modified organisms (GMOs). “We have a population which is afraid of our industry,” said chemist Erwin Annys of the Federation of the Belgium Chemical Industries in his conference presentation. “GMO is treated like a curse; nano-materials are frightening people. We need to work much harder on societal acceptance.” A Strategic Approach to Promoting Innovation The Flanders government has sought to overcome these limitations with an integrated strategy (Box E) to prepare this small, but vibrant open economy for the rigors of global competition. The government’s strategy is explained in a policy document, Science, Technology, and Innovation, which describes the roles that the Government of Flanders, the Federal Government of Belgium, and the European Union must play to support Flanders’ innovation agenda.29 The “great challenge,” it says, is to turn Flanders “into a region where businesses establish their research centers and where high-tech companies can develop. The welfare and well-being of the Flemish people depend on this.” Providing Effective Political Leadership The Flanders government is playing a leading role in developing policies to drive the future growth of its economy. Its leadership takes a sustained and 28Mr. Aernoudt resigned his post of Secretary-General of the Department of Economics, Science, and Innovation in September 2007. 29Under the Fifth Framework Programme, Flanders received more than 278.8 million Euros for research and innovation.

INTRODUCTION 17 Box E Flanders’ Integrated Strategy for Innovation Flanders is making significant investments in university training and in new government-funded structures to develop human resources, catalyze the commer­ cialization of knowledge, and evaluate how well its various initiatives are working. Specifically, Flanders has designed a set of integrated strategies, including: • Effective political leadership that is able to articulate challenges and is willing to provide resources commensurate with potential opportunities; • Broad support for focused university-based research with incentives for patent­ ing and commercialization; • Programs that provide early-stage financing for SMEs; • Systematic outreach, both in schools and via the commercial media, to explain the advantages of investing in research to drive the economy and raise the quality of life. detailed interest in innovation policy. As Minister Moerman noted in her keynote address at the conference, “Investing in knowledge and innovation is crucial to economic growth.” Mrs. Moerman offered a succinct description of Flanders’ innovation strategy, which includes: • Generous funding from the Flemish government and EU; • Steady public encouragement and policy attention; • Intermediary institutions, including public-private partnerships; • State schemes to compensate for weaknesses in market mechanisms. An important element of the innovation policy is an extensive publicity and public awareness campaign. The government takes advantage of newspapers, television, classroom lectures, school trips to research facilities, and other mecha- nisms to explain the importance of research, innovation, and the government’s programs. Indeed, as Peter Spyns observed, “the word ‘innovation’ is everywhere these days. We are pushing its importance into the minds of people.” Encouraging Partnerships, Centers, and Networks In recent years, Flanders has initiated a variety of new partnership programs described in a recent report authored by Greta Vervliet.30 The Vervliet report 30Greta Vervliet, Science, Technology, and Innovation, Ministry of Flanders, Science and Innovation Administration, 2006.

18 INNOVATIVE FLANDERS describes multiple and overlapping mechanisms in Flanders to support both basic and applied research, create academia-industry-government partnerships, promote commercialization of new ideas, and inform the public about the values of research and innovation. Other stakeholders, including chambers of commerce and labor unions, are also assigned roles in this national scheme as well as their own innovation-enhancing organizations. These organizations include: • Regional innovation “cooperation networks”; • Centers for collective research (these serve traditional industrial sectors); • Competency “poles” (multidisciplinary centers, often located near universities); • Four strategic research centers (for microelectronics, biotechnology, energy/environment, and broadband technology). 31 Bridging Universities and Communities An allied strategy has been to add to the traditional university functions of teaching and research, the task of bringing knowledge to the community. This function represents a radical departure from centuries-old academic custom. As Professor de Vuyst remarked at the conference, this third factor, “is a very big sea change,” one that “brings new attitudes to these institutions.” Creating Non-Hierarchical Models of Collaboration Emphasizing the importance of collaboration in advancing innovation, Mrs. Moerman described her ministry’s effort to foster a “non-hierarchical” struc- ture in which scientific and technological ideas flow from the bottom up. She also referred to the role of “horizontal administration,” with both universities and institutes granted “a large degree of autonomy.” Proposals for scientific work come from researchers, not policy makers, and are selected by traditional peer review. The government provides funding in the form of block grants to institutions that strive to meet performance metrics such as increased numbers of spin-offs, patent applica- tions, and contracts. “Performance-based funding,” she concluded, “is the key.” She also described a recent study by the Catholic University of Leuven, which sends, she said, “very positive signals” about the interaction between industry and academia. (See Box F.) It is roughly estimated, she said, that in 2005 approximately 10 percent of all R&D expenditures in Flanders were generated by industries that were in col- laborative partnerships with academia. This exceeded the figures estimated for the 31See the presentation by Peter Spyns in the Proceedings chapter of this volume.

INTRODUCTION 19 Box F A Win-Win Proposition for Knowledge Generation A focus on commercial results does not necessarily reduce the amount or ­ quality of basic research. Research conducted by Van Looy and Koenraad D ­ ebackere among others at SOOS has found that groups involved in tech transfer publish more, not less, basic scientific work.a As Professor Debackere reported at the conference, “We found that groups that collaborate have a reinforcing effect and generate more fundamental scientific output as well as developmental research, as measured in number of publications. And industrial R&D feeds academia R&D in providing real problems.” aBart Van Looy, Koenraad Debackere, et al., Research Policy, 2004. The researchers used data based on ISI-SCIE figures. EU of 6.9 percent and the United States of 6.3 percent.32 Also, she said, during the period from 1991 to 2004, universities and public research centers in Flanders had created 101 spin-off companies, 54 of them in the past 5 years. Encouraging Innovation from Academia Flanders has long encouraged the transfer of new ideas from universities to the marketplace. As long ago as 1972, the Flemish government allowed professors to reinvest their earnings from their inventions to create a more ­entrepreneurial climate in universities.33 In 1991, the Flemish Innovation Agency (IWT) was established as a “one- stop shop for innovation,” offering direct financing for technology-related R&D and coordinating other innovation efforts of the Flemish government. IWT also provides services for new business and advice for the government. In 2003, the Flemish government drew up an Innovation Pact between aca- demia and industry, asking all parties to adopt the 3 percent Barcelona target.34 The Flemish Science Policy Council (VRWB) was designated to monitor the Pact, using 11 key indicators. The first findings, published in 2005, found that Flanders was having limited success in transforming excellence in academic research activities 32European Commission, 3rd S&T Indicators Report, Luxembourg: Office for Official Publications of the European Communities, 2003. 33See the presentation by Koenraad Debackere, Catholic University of Leuven, in the Proceedings chapter of this volume. 34This target challenges all EU nations to raise their total investment in R&D to 3 percent of GDP by 2010. According to the independent web portal EurActiv, however, this target is increasingly unlikely to be met (<http://www.euractiv.com>).

20 INNOVATIVE FLANDERS into useful and profitable applications. It also drew attention to the fact that a few international companies accounted for most of the region’s industrial research. Acting on these findings, Mrs. Moerman said, the government redoubled its efforts to spur innovation, beginning with a program to “reduce the innovation paradox” of good research and falling competitiveness. It was clear, she said, that the “old barrier” between academia and industry had persisted despite early bridging efforts. “There is still a strong feeling among academic researchers that working in industry corrupts a career and taints the principle of academic freedom,” she told the conference. “And for its part, industry says that academia doesn’t understand its needs.” Creating New Mechanisms for Technology Transfer Accordingly, the government added two more innovation mechanisms. The first, in 2004, was an Industrial Research Fund (IOF) of €11 million to encourage universities to hire postdoctoral staff to perform research on findings with high potential for near-term market application; each university was allowed to decide on and create its own portfolio of industry-oriented projects. The second mechanism places technology transfer offices (TTOs) at each university to help exploit research findings through spin-offs and patents and to provide advice to academic researchers on intellectual property issues. The Flanders government efforts to bridge the university-industry gap do not stop there. At the time of the conference, the government additionally planned to enhance mobility among sectors by placing young academic researchers in indus- trial environments and support PhD students who plan to set up their own spin-off companies. It also planned to identify the scientific and technological areas with highest potential for future economic payoff, although Mrs. Moerman expressed some reservations about this process. She warned that the results should not be used to “reinstate thematic [top-down] priorities,” which could be “an unfortunate return to the past when Flanders had several research programs defined from the top down. This didn’t leave enough breathing space for bottom-up initiatives or for smaller research players.” Broadening the Concept of Innovation In addition to addressing the innovation paradox, Mrs. Moerman noted that a second continuing policy challenge is to broaden the concept of innovation to include its non-technological aspects, including regulations, standards, training and education, patent and copyright issues, tax and economic policies, and labor market organizations. As noted in the Vervliet report, “innovation policy will be on the agenda of the Flemish Government as a whole.”35 Mrs. Moerman said that her 35Greta Vervliet, Science, Technology, and Innovation, op. cit., p. 19.

INTRODUCTION 21 effort to “mainstream” innovation would include ensuring that it “becomes a hori- zontal dimension in all fields for which the Flemish government is responsible.” Investing in World-Class Research The Flanders government provides direct support for basic or investigator- driven research, strategic or policy-oriented research, and research with an eco- nomic focus. As we see below, all three approaches are expected to play essential and complementary roles in Flanders’ innovative strategy. Funding Basic Research The Vervliet policy document recognizes the importance as well as “unpre- dictable character” of basic research.36 The Fund for Scientific Research-­Flanders (FWO) provides funding for basic kinds of research through competitive peer review. Research topics are proposed by the investigators themselves, in a ­bottom- up strategy. In 2006, the core funding for the FWO consisted of €108 million, with another €11 million added from the National Lottery. In addition, smaller amounts are allocated for international projects, United Nations University programs, international research facilities such as CERN, and the “Methusalem programme,” which provides stabilizing long-term funding for senior researchers. Finally, in response to the general shortage of researchers in Flanders, the Odysseus Programme uses €12 million to attract top researchers from abroad, including expatriate Flemings. Flanders’ Strategic Research Initiatives As Peter Spyns noted in his conference presentation, new firms in Flanders have lacked mechanisms for accessing knowledge developed in the universi- ties. A large strategic research program, budgeted at €232 million for 2006, addresses this impasse by funding more basic research that generates knowledge for industry, the non-profit sector, and government and to strengthen research that is relevant to policy. The largest investments by this program support the three high-level research institutes: • Interuniversity Microelectronics Centers (IMEC), • The Flemish Interuniversity Institute for Biotechnology (VIB), and • The Flemish Institute for Technological Research (VITO). A new and fourth strategic research center, the Research Center for Broad- band Technology (IBBT), was being formalized at the time of the conference. 36Greta Vervliet, Science, Technology, and Innovation, op. cit., p. 43.

22 INNOVATIVE FLANDERS These research centers represent innovative and, especially in the case of IMEC, world-class initiatives to encourage collaborative research. IMEC IMEC, established in Leuven in 1984, is the crown jewel of Flanders’ research efforts. Recognized as a world-class microelectronics research center, IMEC strives to be a “worldwide center of excellence.” As Anton de Proft, IMEC’s Chairman, noted at the conference, it is “the world’s largest industry commitment to semiconductor research in partnership—even though Belgians are hesitant to say they’re the biggest anything.” IMEC emphasizes pre-competitive research and attempts to address the “innovation paradox” by bringing researchers from academia and industry together under the same roof. This provides focus for university researchers and basic solutions for industrial partners. Research subject areas include chip design, processing, packaging, microsystems, and nanotechnology. IMEC’s stated mission is “to carry out R&D programs which are 3-10 years ahead of today’s industrial needs.”37 In doing so, noted Mr. De Proft, IMEC consciously takes risks, but can afford to do so by sharing them among many partners. IMEC now has “core partnerships” with Texas Instruments, ST Microelectronics, Infineon, Micron, Samsung, Panasonic, Taiwan Semiconductor, and Intel, and “strategic partnerships” with major equipment suppliers.38 In July 2005 IMEC produced its first 300mm silicon disks with working tran- sistors, using its second clean room, a new 3200-m2 facility. A production ASML 170i immersion 193nm lithography system was installed in fall 2006, offering capabilities even beyond those available at the U.S.-based SEMATECH. 39 Expressing the view of a U.S. core partner, Allen Bowling of Texas Instru- ments noted in his presentation that partnerships such as those with IMEC are now essential to sustain the semiconductor industry. He noted that a new product takes at least 4 years to develop fully, so that two or three products must be in development at one time, requiring more R&D capability than single companies have. One result is that costs of semiconductor research are increasing by more than 12 percent per year, while revenues are growing at 6.5 percent per year. Moving a new material or device into production requires 7 to 12 years of pre- competitive research, requiring the kind of intensive university input found at IMEC. “We leverage our dues substantially and gain great value from the IMEC focus on fundamentals,” said Dr. Bowling. “There are more than 1,000 process steps in making an integrated circuit, so we need lots of help.” 37IMEC Mission Statement. 38Greta Vervliet, Science, Technology, and Innovation, op. cit., p. 59. 39Allen Bowling of Texas Instruments, one of IMEC’s international partners, personal communication.

INTRODUCTION 23 Box G Open Innovation and the IMEC Payback for Flanders In a key exchange during the conference, Kenneth Flamm of the University of Texas asked Dr. de Proft what he termed an “impolite question” about the partici­ pation of large multinational semiconductor companies in IMEC. “Was not IMEC essentially subsidizing research for these firms, none of whom had production facilities in Flanders?” Calling the question “astute and pertinent,” Anton de Proft, the Chairman of IMEC, noted that the grants were not discounts on commercial contracts, but were meant to support fundamental research as a basis for further research programs with industry and with a view on long-term spill-over effects for the region. When you dig deeper, he went on, you see payback for the region at many levels. He emphasized the presence of the residents, about 300 bright minds from around the world, spending their creative years here, and building up networks. They are all people likely to move up in their organizations, where they will be in positions to make decisions about where to put their R&D centers or other activi­ ties. Over 200 PhDs, he added, are performing their doctoral research at IMEC. IMEC also is interacting with local industry and has created over 25 spin-off companies, among which are some very fast growers. IMEC’s activities are also generating a strong secondary economic impact in the region, with over €42 million in subcontracting to the local industry. The overall economic impact, he concluded, is a multiple of the government funding. “Our government is smart enough to understand not to look for direct matches, but to promote some formative behaviors without trying to steer the economy.” The 2005 budget of IMEC was about €235 million, about half of which came in the form of revenues from contracts with international industry; the remainder came from Flemish industry, the Government of Flanders, the Euro- pean Commission, and several smaller organizations.40 In all, IMEC has about 1,500 ­employees, including nearly 500 non-payroll industrial residents and guest researchers representing approximately 50 nationalities. Flemish Interuniversity Institute for Biotechnology (VIB) A second research institute that shows every sign of becoming another IMEC is Flanders’ biotechnology facility. As Dr. Lieve Ongena, Senior Science Adviser to the Flemish Interuniversity Institute for Biotechnology (VIB), noted in her presentation to the National Academies delegation, the motivation for focusing on biotechnology is straightforward: “We had a lot of activity, but no transla- 40Greta Vervliet, Science, Technology, and Innovation, op. cit., p. 57.

24 INNOVATIVE FLANDERS tion from the universities to the economic growth of Flanders.” VIB was given a compound mission designed to overcome that problem. Formed in 1995 as a not-for-profit institute, VIB’s mission is fourfold: to invest in basic research, to train young researchers, to commercialize discoveries, and to explain science to the public. It is an “institute without walls,” staffed by scientists from Antwerp, Gent, Brussels, and Leuven. The plan has been success- ful, and the VIB now has 60 research groups in nine departments, and a 50/50 cost- and profit-sharing partnership with its four universities. Addressing these missions, VIB has developed three core activities: 1. Biomolecular research focusing on molecular mechanisms of life. The broad objective is to concentrate on work of “strategic importance,” including cancer research, cardiovascular biology, neurodegenerative disorders, inflamma- tory diseases, growth and development, proteomics, and bioinformatics. 2. An active patenting and licensing function whose goal is to transform the results of strategic basic research into industrial and social value. 3. A program to convey accurate and interesting information about science to the public. The VIB supports 850 scientists and technicians, of whom 300 are PhD stu- dents. The total research budget is €60 million, half of which is a “strategic grant” from the government; the rest comes from the EU, the U.S. National Institutes of Health, and industry, with the proportion from industry growing. The VIB uses two routes to transfer knowledge into societal benefits. For discrete discoveries, it may file a patent and license the technology to companies. If the “platform is wide enough,” it may spin off its own company. The VIB has done this in four cases—for dVGen (using a microscopic worm for drug dis­ covery), Peakadilly, 41 CropDesign, and Ablynx (using camel antibodies as a tool for drug targeting). Profits are used to promote growth and generate additional money for research. A fifth startup, SoluCel, is a small company in Finland, and during the Leuven conference a sixth spin-off was announced, ActoGeniX, which uses a bacterium as a living drug delivery tool. To date, these startups employ more than 280 people and represent more than €220 million in venture capital. To aid in firm formation, the VIB now plans to open its own small business incubator. Said Dr. Ongena, “If we have an idea, we want to be able to start a business tomorrow.” To date, she added, the VIB had been efficient at commer- cializing, operating at the favorable cost of €1 million per record of invention and €2 million per patent. 41Since the time of the conference reported in this volume, Peakadilly (a biotech company located in Ghent, Belgium) has changed its name to Pronota.

INTRODUCTION 25 Finally, the VIB places a high priority on communicating its work to society. The goal is to reach all levels of society, including the press and media, policy makers, teachers, students, doctors, patients, and scientists in other fields. For example, the “Scientists@work” school project invites groups of 10 to 15 students to the labs to work on a project for half a day. The immediate goal is to give them an authentic feel for careers in biology. The longer-term goals are to attract more bright students to science and to educate the public about controversial issues, such as the debate now raging in Europe over the safety of biotechnology. Flemish Institute for Technological Research (VITO) The third Strategic Research Initiative, VITO, is Belgium’s largest and best- equipped multidisciplinary research center for energy, the environment, and materials. Its objective is to develop and encourage sustainable technological developments for government, industry, and SMEs. VITO seeks to do as much of this in partnership with industry as possible, and has recently increased contract research for industry to about 25 percent of income. VITO has its roots in a Belgian agency started in 1988 to focus on nuclear and non-nuclear energy issues. It was overhauled in 1991 as an autonomous public research company, with the Flemish government as its sole shareholder. More than 80 percent of its work is performed on behalf of the Flanders Ministry of Environment and Energy. It has a staff of 510, 90 of whom hold PhDs, and a budget of €35 million for 2006. As VITO’s Managing Director, Dirk Fransaer, noted in his presentation to the National Academies delegation, VITO focuses on nine technology fields in addition to Exploratory Strategic Research (SBO) and strategic support tasks. The technology fields include decentralized energy systems, power technology, surface treatment, soil cleaning technology, innovative water purification, reactor technology, environment and health, air quality, and remote sensing. The SBO is medium-term research that aims to build up scientific capacity as a basis for economic and/or social applications. Research Centre for Broadband Technology (IBBT) This new center, opened in 2004, is a dispersed “virtual” center that focuses the missions of 13 existing research groups with the goal of becoming Flanders’ fourth Strategic Research Initiative. It was founded on the premise that Flanders needs to be a leader in information and communications technology (ICT), and that to be a leader it requires large public investments in multidisciplinary basic research. According to Dr. Waele, IBBT’s general manager, the mission of IBBT is to develop multidisciplinary human capital and perform demand-driven research for industry and government. Its primary emphasis is on ICT innovations for the health care industry, which is seen to have the greatest potential for marketable

26 INNOVATIVE FLANDERS ICT uses. Research funded by the program will be primarily pre-competitive, requiring business partners to contribute at least 50 percent of costs. Major ICT firms working in Flanders include Philips, Siemens, and Alcatel. IBBT intends to recoup its investments by both licensing and spin-offs. According to Dr. Waele, it does not seek to hold a portfolio of companies, but to create as many new firms as possible. Once a company has revenues, IBBT will take a low percentage—typically 5 percent. IBBT gauges its success based on value added for companies and for the Flemish economy. It also uses secondary academic excellence indicators, as measured by spin-offs, and has plans to launch a business incubator. IBBT has the freedom to work with foreign companies without restriction, as long as they are active in Flanders. “Our goal is to stimulate economic activity,” said Dr. Waele, IBBT’s general manager. “Borders are a thing of the past in terms of scientific collaboration.” Funding for Research with an Economic Focus This last category of funding from the Flanders government goes to compa- nies, research institutes or universities, and individuals who seem likely to pro- mote “greater technological innovation in Flemish companies.” They are designed to advance the goals of the Flanders government by: • Creating conditions that increase technological innovation in companies; • Creating conditions to achieve greater cooperation between academia and companies, and between companies themselves; • Promoting a climate of innovation. University Interface Services The goal of this program, according to Mrs. Moerman, is to encourage universities to use their knowledge and expertise for the benefit of the ­Flemish economy and to develop a university culture where excellence in education and research is linked to innovative enterprises. The Flemish government supports university interface activities that encourage co­operation between university and industry and promote the creation of spin-off companies. Cooperative Ventures Funding for industry-initiated cooperative ventures includes various R&D subsidies for companies operating in Flanders and wishing to commercialize or otherwise add value to their research; support postdoctorate research; and create of economic networks that encourage innovation.

INTRODUCTION 27 TABLE 1  Summary of Key Innovation Funding Sources and Institutes in Flanders Innovation/Funding Agency Role Budget Flanders Fund for FWO finances basic Annual budget €119 million (2006) Scientific Research research, carried out in which includes approximately €50 (FWO) the universities of the million to fund individual researchers, Flemish Community and €50 million to support Research Teams, in affiliated research and €2 million to promote Scientific institutes. Contacts.a Flanders Institute Government agency Annual budget €240 million (2005) for the Promotion providing funding including approximately €75 million of Innovation for industrial and for R&D projects, €15 million for SME by Science and technological R&D, innovation projects, €37 million for Technology (IWT) and technology transfer strategic basic research, and €30 million services. for Cooperative Innovation Networks.b Interuniversity The IMEC mission is “To The 2005 budget of IMEC was Micro-Electronics perform R&D, ahead of approximately €235 million, about half Centers (IMEC) industrial needs by 3-10 of which came in the form of revenues years, in microelectronics, from contracts with international nanotechnology, design industry; the remainder came from methods and technologies Flemish industry, the Government of for ICT systems.” Flanders, the European Commission, and several smaller organizations.c The Flemish VIB is a non-profit Total income of €62 million in 2006, Interuniversity scientific research with the Flanders government funding Institute for institute. €31 million.d Biotechnology (VIB) The Flemish Institute Research organization €61 million in 2006. Own income for Technological to stimulate sustainable generated is €32 million, with the Research (VITO) resource development. balance of funding from government grants.e Research Center IBBT focuses on €17 million grant from the Flanders for Broadband applied research in ICT government.f Technology (IBBT) in cooperation with companies and the government. aMinistry of Education and Training, Higher Education in Flanders, 2007. Access at <http://www. ond.vlaanderen.be/publicaties/eDocs/pdf/298.pdf>. bIWT Brochure. Access at <http://www.iwt.be/downloads/publicaties/brochure/brochure_iwt_eng. pdf>.. cGreta Vervliet, Science, Technology, and Innovation, op. cit., p. 57. dVIB, Annual Report 2006. Access at <http://www.vib.be/NR/rdonlyres/640AE8DE-5DCE-49F3- A46D-AD44E4AEAAE1/0/VIB_AnnualReport2006b.pdf>. eVITO, Annual Report 2006. Access at <http://www.vito.be/english/who/vito_en2006.pdf>. fIBBT, Annual Report 2006.

28 INNOVATIVE FLANDERS Support is also provided for developing sustainable technologies, prepar- ing spin-off companies, and incentives to encourage innovation in SMEs. The F ­ lemish Innovation Cooperative Ventures (VIS) program supports collective research, technological services, projects that simulate innovation for particular issues, and activities to stimulate subregional innovation. For 2006, the budget of the program was estimated at €160 million. New Experiments in Financing R&D In 2001, the government created a program called Arkimedes, which tries to overcome cultural aversions to risk by providing government guarantees and tax credits for people who invest in several kinds of small-denomination bonds. As described by Rudy Aernoudt, the money raised by these bonds (“a pool of pools”) goes into several R&D funds, whose effectiveness is measured by the number of innovative companies produced. Risk is said to be low because the loans are spread among numerous companies, although the program is still too young to draw firm conclusions about its effectiveness. The Role of the Catholic University of Leuven The Catholic University of Leuven (K.U.Leuven), the oldest university in Belgium, plays a significant role in Flanders innovation strategy. K.U.Leuven’s R&D mission is “to promote and support knowledge and technology transfer to industry.” According to Professor Koenraad Debackere of K.U.Leuven, this mission is carried out at three levels. At the top are researchers on the payroll. As of 2005, he reported, K.U.Leuven supported 974 researchers, a number that had doubled in 5 years. Many of these do research for industry. At the middle level, the univer- sity is actively involved in three areas: contract research, spin-off formation and regional development, and IPR and licensing. The third level is industry itself. Traditionally, he said, the university had two basic missions: research and teaching, which are still fundamental. But in that traditional academic environment, faculty research was done in “almost a pure ivory-tower setting.” ­Nowadays, how- ever, universities in many European countries are charged by the government to cre- ate structures and activities that support the commercialization of their research. K.U.Leuven’s Matrix Structure At K.U.Leuven, which Dr. Debackere considered an unusual case for Europe, there is a “full matrix-like structure” that gives academic researchers incen- tives to collaborate with industry. The academic subjects are divided into three groups: biomedical research, the other exact sciences, and the arts and humani- ties. Within each are the faculty members and the different departments, “the

INTRODUCTION 29 Box H Growing the University’s Economic Role According to Dr. Debackere, Leuven’s success at commercializing R&D is based on: • A critical mass of high-quality, internationally competitive research. “This is why IMEC is very strict in its performance assessments.” • An integrated approach to technology transfer, such as incentives for multi­ disciplinary teams and high value-added services. • Clear incentives and policies to encourage individuals, research groups, and departments to pursue spin-off opportunities. • Creation and acceptance of an entrepreneurial climate in a university context. • A Flemish legal context that is positive with respect to the exploitation of aca­ demic research and IP. normal ­hierarchy where people are recruited and promoted on the basis of their teaching and research abilities.” At the same time, the university has a horizontal structure with about 50 research divisions under the umbrella of a central office of R&D. The divisions are organized on an interdepartmental basis, and professors of research become members of one of those divisions, under which they can organize their indus- trial involvement. Any proceeds from their work remain within the division. What drives them, said Dr. Debackere, is a desire to be part of a strong research environment where they can compete and collaborate with the best of their colleagues. In order to promote a strong collaborative research environment, the univer- sity lets the faculty reinvest the income in infrastructure, equipment, and post- doctoral scholars. “Although this has been criticized as ‘social welfare’,” he said, “we regard it as the best kind of social welfare, because everything is reinvested in the research.” In order to support the divisions and their activities—which include applied research, technology transfer, and the generation of new compa- nies—about 40 people are employed to provide management support, IT support, and consulting on the incubation of new companies. “Leuven Inc.” Dr. Debackere said that in Leuven, more than 100 spin-off companies had already been created, leading to the nickname “Leuven Inc.” Part of its success in expanding entrepreneurship, he said, grew out of the formation of effective networks. Some of these were horizontal: contact between universities, IMEC,

30 INNOVATIVE FLANDERS startups, and other “innovation actors.” Others are vertical: technology clusters, such as DSP Valley that focus on design of hardware and software technology for digital signal processing, and L-SEC (Leuven Security Excellence Consor- tium), an international non-profit network dedicated to promoting the use of e-security. Evaluating the Impact of Policy Instruments Given the challenges in accelerating innovation in Flanders, and in the European Union more generally, Flanders pays special attention to evaluating its efforts to spur innovation. It has found that despite the magnitude of its invest- ment, not all efforts are fully successful. The Flanders government in 2000 charged SOOS, the Policy Research ­Center for R&D Statistics, with answering such questions as whether the new commer- cializing role assigned to universities would add value for society and whether it would crowd out private investment. So far, the Policy Research Center has found a positive impact in patenting activity and increased technological activity and no crowding out effect, as tested by numbers of transfers of ownership rights. In all, reported Professor Van Looy, “the findings suggest a distinctive and considerable positive impact.”42 He added that more important than any single mechanism would be the sustained long-term political commitment of the government. Another evaluation study attempted to identify factors that produced success- ful new firms, and found some ambiguous answers. They found, for example, no “straight relationship” between equity financing and growth. They also found that rapid growth correlated with high failure rates. Small firms benefited from having teams of two or three founders, whose members had commercial experience, but more important seemed to be early involvement in international activities. One researcher observed that most Flemish policy measures have been designed to address the equity gap, but the mix of human resources is overlooked, and early- stage internationalization is the key.43 Conclusion The United States and Flanders differ enormously in scale, politics, and cul- ture. The U.S. population is about 50 times that of Flanders, and 30 times that of all Belgium. The people of Flanders assign a more prominent role to government, take a cautious view of risk-taking, and experience relatively little venture capital activity. Even so, the Flemish government has found that the process of innova- 42See presentation by Bart Van Looy in the Proceedings chapter of this volume. 43B.Clarysse, Policy Research Centre of Entrepreneurship, Enterprises and Innovation, conference presentation.

INTRODUCTION 31 Box I Growing a Regional Innovation Economy According to Luc Soete of the University of Maastricht, four conditions are necessary for stronger innovation-led growth and development. Most of these, he said, are already in place in Flanders: 1. High-quality human capital formation. Core elements for Flanders, he said, were universities, polytechnics, and professional training schools, including lifelong learning programs. These emphasized high quality, reduced failure and dropout rates, improving attractiveness to students from other regions and use of ­exchange programs as benchmark learning tools. 2. Open research practices. “IMEC is the clearest example of this,” he said. “Texas Instruments brings eight people here, and assumes that they learn as much as they ‘leak’. This openness attracts people.” It also strengthens the research pres­ ence, stimulates joint public-private initiatives, benefits from “foreign” knowledge and collaboration, and strengthens the regional research infrastructure. 3. Stronger innovation performance. He emphasized the importance of support­ ing local science spin-offs and entrepreneurs, for which Flanders has created spe­ cific policies. Flanders has also strengthened innovation by linking public research institutions, teachers, and local SMEs; embedding large multinational corporations in the public research infrastructure; and sponsoring public information projects to explain innovation. 4. Regional capacity to absorb innovation. Flanders’ support for regional “beta users,” or early adopters helps grow the seeds of innovation. Capacity absorption is also hastened by procurement policies, a regional presence abroad (e.g., at fairs), a focus on regional diffusion of knowledge, and cooperation with other “foreign” regions. tion seems to be less a function of scale than of human resources, a conducive environment, and political will. While many of the Flanders region’s policies and programs to support inno- vation are too recent to allow conclusive evaluation, some outcomes are already apparent. These include an increase in numbers of spin-off companies, high numbers of publication and patents in biotechnology, and the growing reputation and impact of microelectronics research conducted at IMEC. These initiatives, described in the conference proceedings found in the next chapter, are worthy of broader notice. Some of the policy measures discussed at the symposium may be of interest to countries and regions around the world, although this would normally be for adaption and adoption, rather than direct copying. To adapt them to the specific contexts and conditions of different national or regional innovation systems, it is necessary to understand considerably more about the specific designs of the dif-

32 INNOVATIVE FLANDERS ferent policy measures discussed, as well as their roles in their specific innovation system and policy contexts. In addition, innovation policies and programs that address important challenges must be scaled in relation to the entire system or parts of the system they address. Innovation policies and the resources devoted to them often suffer from a “tyranny of small scale.” Even well-conceived programs cannot make a meaningful contribution to innovation performance unless the program and resources allocated are adequate to the task. Taking into consideration these caveats, policymakers in the United States can find instructive lessons in the broad goals, multiple instruments, significant funding, sustained activity, and regional branding found in the Flanders experi- ence. Such a comparative perspective is essential if we are to respond manfully to this century’s innovation imperative.

Next: II PROCEEDINGS & Welcome »
Innovative Flanders: Innovation Policies for the 21st Century: Report of a Symposium Get This Book
×
Buy Hardback | $62.00 Buy Ebook | $49.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

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.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!