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OVERVIEWAND COMPARISON
29
trast, the more comprehensive, institutionalized character of the German AiF ap-
pears to facilitate organizational learning among participating industries and con-
sortia.
SELECTED TECHNOLOGY TRANSFER ISSUES
IN A COMPARATIVE CONTEXT
Role of Start-Up Companies in Technology Transfer
Start-up companies play a critical role in the transfer and commercialization
of fast-moving, science-based technologies in the United States via movement, or
"spin-out," of researchers and technology from universities, large established
companies, and government laboratories. There is no counterpart in Germany to
the prominent role that start-up companies perform in the commercialization of
new technology in the United States.
Many factors have enabled high-tech start-up companies to perform their
unique roles in the U.S. innovation system.34 The following are among the most
important.
· The existence of sophisticated financial markets, particularly access to a
large volume of venture capital and highly developed public equity mar-
kets.
· The large scale and technological intensity of relatively homogeneous seg-
ments of the U.S. domestic market.
· The large size, high mobility, accessibility, and entrepreneurial orienta-
tion of the U.S. technical workforce.
· The sheer scale and accessibility of U.S. publicly funded nonproprietary
research, particularly university-based research.
· The scale of federal government procurement combined with explicit pref-
erences or set-asides for small and medium-sized vendors and suppliers.
A history of regulatory and public policy commitments conducive to high-
tech start-up companies, including the competition-oriented or technol-
ogy-diffusion-oriented enforcement of intellectual property rights and an-
titrust law (competition policy), as well as the relatively risk-friendly
system of company law, particularly bankruptcy law.
· A highly individualistic, entrepreneurial culture nurtured in industry and
many U.S. research universities by private practices, public policies, and
various institutional mechanisms such as technology business incubators
and venture capital firms that encourage risk taking.
.
Many, if not most, of these supporting factors are either muted or nonexistent
within the German innovation system. German venture capital markets and pub-
lic equity markets are underdeveloped.35 Entrepreneurial activity and career
mobility of much of the German technical workforce are circumscribed by civil
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30 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
service regulations and institutional practices (e.g., reward structures, compensa-
tion schedules, conflict of interest restrictions) that govern university and other
public-sector scientists and engineers. Unlike their counterparts in U.S. universi-
ties or federal laboratories, most university- or public-laboratory-based German
researchers/entrepreneurs lack access to the institutional resources needed to pur-
sue and defend patents.36 German public policies in the areas of company law
(including bankruptcy law), taxation, capital markets, and so forth are decisive
disincentives to the establishment of high-tech start-up companies and entrepre-
neurial risk-taking behavior in general.
The U.S. experience shows that many start-up companies fail and only a very
few are extremely successful. Therefore, venture capital firms have to invest in a
sufficiently large number of start-up companies to produce a "winner" and must
count on the few highly profitable outliers to compensate them for losses incurred
throughout the rest of their portfolio (Scherer, 1996~. This type of high-risk-
high-potential yield strategy is rare in the German business culture.
Technology Transfer to Small and Medium-Sized Enterprises
in Technologically Mature37 Industries
The R&D and technology transfer needs of German small and medium-sized
enterprises (SMEs) in more technologically stable manufacturing industries are
supported by a dense, comprehensive, and highly institutionalized network of
industry-oriented R&D institutes and non-A&D-performing technical organiza-
tions. These institutions support the technology transfer, technology commer-
cialization, and industrial modernization requirements of many SMEs. By con-
trast, the U.S. R&D and technology transfer infrastructure serving SMEs in these
industries is relatively piecemeal, fragmented, and weak.
German SMEs in technologically mature industries are served by highly net-
worked, publicly funded R&D institutions and industry-organized R&D consor-
tia that are heavily oriented toward the incremental product and process R&D
needs of a national industrial base dominated by technologically mature indus-
tries. While many of these publicly funded R&D institutions serve the needs of
technologically dynamic industries, the institutes of the Fraunhofer Society, state
laboratories, and institutes based at or affiliated with universities also perform
near-term, industry-specific, applied contract research for large companies and
SMEs in traditional areas of German industrial strength such as mechanical and
electrical engineering. Moreover, through participation in robust industrial asso-
ciations, which have a significant influence on public R&D policy at the state,
federal, and European Commission levels, German SMEs are considerably in-
volved in the shape and resource allocation of their national R&D enterprise.
A large population of industry-led organizations, including the Chambers of
Industry and Commerce, industrial associations, Technical-Scientific Associa-
tions (Technisch-wissenschaftliche Vereine und Gesellschaften), the Organiza
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OVERVIEWAND COMPARISON
31
lion for the Rationalization of German Industry (Rationalisierungskuratorium der
Deutschen Wirtschaft), and the Steinbeis Foundation, provide SMEs with a wide
range of industry-tailored technology-related services. However, various studies
show that SMEs still make insufficient use of these rich opportunities for support
(Beise et al., 1995~.
At least some of the German institutions that support SMEs have counter-
parts in U.S. professional and technical societies. Services provided by the Ameri-
can societies include technical and business consulting, technology brokering,
workforce training, and apprenticeships, as well as testing and evaluation facili-
ties and the establishment of new-business incubators. However, compared with
their German counterparts, U.S. SMEs in technologically mature manufacturing
industries operate on the periphery of the nation's R&D enterprise. The R&D
portfolios of U.S. research universities, federal laboratories, and most nonprofit
research institutes do not overlap very much with the process and product R&D
needs of U.S. SMEs (or of large U.S. firms, for that matter) in these industries.
Factors that have helped disconnect SMEs in many industries from the nation's
research enterprise include the high-tech, public-mission orientation of federal
R&D funding; the fragmented structure and low levels of industrial self-organi-
zation of many technologically mature U.S. industries; and changes in the indus-
trial composition of the U.S. economy (i.e., the increasing shares of total U.S.
industrial output accounted for by service and high-tech manufacturing indus-
tries).
Similarly, the technology transfer infrastructure supporting U.S. SMEs in
more stable industries appears to be much less well developed than its German
counterpart. Indeed, the poor performance of U.S. companies relative to firms
(SMEs in particular) based in other advanced industrialized countries in adopting
advanced manufacturing technology and production techniques has been widely
documented (National Academy of Engineering, 1993; National Research Coun-
cil, 1993~. U.S. SMEs in most manufacturing industries have traditionally relied
on large industrial customers, vendors of hardware and software, and to a lesser
extent on private consultants as primary sources of new technology, technical
assistance, and advice. For the most part, U.S. industrial and trade associations
and chambers of commerce have provided very little in the way of technical-
extension and industrial-modernization services to their memberships.
In recent years, several industry-led initiatives, some with limited public
funding, have begun to address innovation and technology diffusion challenges,
particularly those related to manufacturing, that face SMEs as well as larger firms
in a number of technologically mature U.S. industries. For example, in response
to new "lean" retailing strategies enabled by advances in information technology,
segments of the U.S. textile and apparel industry have orchestrated (through in-
creased industry self-organization and support from federal agencies and university-
based researchers) a revitalization of their entire design, supply, and marketing
chain through effective application of modern information technology (Abernathy
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32 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
et al., 1995~.38 Similarly, many of the manufacturing challenges facing the U.S.
automotive industry in the late 1970s and early 1980s have been addressed effec-
tively through a combination of firm-specific and industrywide initiatives, often
in partnership with federal agencies or academic researchers.39 Other examples
of successful or promising industry-led efforts to meet the manufacturing and
other technology diffusion needs of SMEs include the National Center for Manu-
facturing Sciences and SEMATECH's work with semiconductor equipment and
material manufacturers.40
Of the many industry-led initiatives in this area to date, the committee con-
siders the technology road mapping exercise of the Semiconductor Industry As-
sociation begun in the early 1990s to be a particularly promising instrument for
advancing both the development and diffusion of new technology in industries
where technological advance is more evolutionary than revolutionary (Rea et al.,
1996~. By inventorying the industry's sources of technology and forecasting
technological needs throughout the industry's value-added chain, the semicon-
ductor industry technology road map has been successful, in the view of U.S.
panel members, at focusing the attention and resources of the industry and the
federal government on a shared conception of technological challenges and op-
portunities.
In addition to these industry-specific initiatives, state and federal govern-
ments have attempted to strengthen the existing but relatively weak network of
private and public service providers with more comprehensive industrial-mod-
ernization and technical-extension programs.4i To date, however, the level of
public resources dedicated to these programs and their current reach measured in
terms of the number of companies they serve remain quite modest (National Acad-
emy of Engineering, 1993; Shapira, 1997~.
Intellectual Property Rights and Technology Transfer to Industry
A wide range of government laws and policies shape the dynamic of technol-
ogy transfer in Germany and the United States. These include, among others,
R&D and technology transfer policies proper, bankruptcy law, competition policy,
intellectual property law, different regulatory environments, labor law, and laws
structuring capital markets. The U.S. and German country reports consider how
these policies and laws interact in different ways in different sectors. Of the
many public policies that affect technology transfer, those concerning intellectual
property rights have a particularly important impact.
The U.S. and German governments have taken steps since the early 1980s to
remove legal and administrative impediments to private-sector commercializa-
tion of technology developed with public funds. However, to date, the U.S.
government's actions in this regard have been more comprehensive and, argu-
ably, more effective than those of its German counterpart. In the judgment of
U.S. panel members, the Bayh-Dole Act of 1980, the Technology Transfer Act of
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OVERVIEWAND COMPARISON
33
1986, and subsequent U.S. legislation affecting the disposition of intellectual
property developed with public funds in research universities, federal laborato-
ries, and other R&D institutions have removed impediments to and provided an
important stimulus for technology transfer and R&D collaboration between U.S.
public R&D performers and U.S. companies.
In Germany, the initiatives for removing legal and administrative barriers to
the transfer of publicly funded R&D results from universities and government labora-
tories to private industry have been less aggressive and less consistent. On the
one hand, German university professors are allowed to exploit their inventions
privately, if the inventions are the result of research financed by base funds. In
particular, they can sell their patents or give exclusive licenses to industrial firms.
On the other hand, they can grant only nonexclusive licenses if the research was
funded by the federal government, especially the BMBF.42 Furthermore, licens-
ing income earned on inventions based on research funded by the federal govern-
ment must be partly transferred to the original funding agency. The contradictory
requirements also apply to Helmholtz Centers, Blue List institutes, and depart-
mental research institutes.43 These restrictive policies regarding the transfer of
intellectual property rights are obviously not consistent with the explicit focus of
many public R&D programs on industrial technology and technology transfer.
An important advantage of the U.S. system is the existence of a grace period
for patent applications, a particular advantage for researchers, who often publish
first and decide to patent later (Becher et al., 1996; Straus, 1997~. As the Euro-
pean patent system has no grace period, even U.S. researchers cannot use their
national grace period if they intend to file their patents abroad.44 German panel
members believe that the absence of a grace period in Germany is a significant
barrier to technology transfer from scientific institutions to industry in fields
where proprietary rights are considered critical to the subsequent development
and commercialization of innovations by private firms.
Since the early 1980s, the U.S. government has taken a number of steps both
domestically and in international forums to strengthen the legal claims of patent
and copyright holders and develop more effective (sui generic) legal protection
for new types of intellectual property in areas such as software, biotechnology,
and microelectronics. These efforts have been paralleled in Europe by efforts to
strengthen intellectual property regimes at the national and European Commis-
sion levels. Yet, in some technology fields, most notably software and biotech-
nology, significant differences remain in the extent of protection for intellectual
property rights in the United States and Europe.
There are other general differences between the German/European and U.S.
patent systems, such as the U.S. first-to-invent versus the European first-to-file
approach, differences in the interpretation of patent claims, and differences in
disclosure requirements. Although both the European and American systems
provide effective incentives for innovation and technology transfer, their differ-
ences create obstacles to transatlantic technology transfer. Because of these dif
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34 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
Prances, inventors who wish to seek intellectual property protection on both sides
of the Atlantic are required to accommodate the often conflicting/competing le-
gal requirements and standards of the two patent systems.
A decisive shortcoming of the European patent system is the fragmented
responsibility of national and international authorities. For patent applications at
the European Patent Office, only the application and granting procedures are rec-
ognized transnationally; the granted patents are valid only in the designated coun-
tries. As a result, there are no central European courts with jurisdiction over
cases of patent challenges or infringement; national courts are responsible. Fur-
thermore, the European Patent Organization is not an organ of the European
Union; other non-European Union countries are members. Therefore, the Euro-
pean Commission has an advisory, rather than an executive, function and has a
limited influence on the development of European patent protection. Legal
changes are within the competence of the member countries of the European
Patent Organization; however, in many cases, forging consensus among member
countries in support of such changes has proved extremely difficult. This frag-
mentation of authority leads to administrative barriers, legal uncertainty, and enor-
mous costs associated with patent protection, for both European and non-Euro-
pean patent applicants (Straus, 1997~.
International R&D Collaboration and Technology Transfer
Comparative analysis of the technology transfer systems of the United States
and Germany has underscored the potential for mutually beneficial transnational
collaboration in various areas of R&D and technology transfer. The cooperation
between the two countries cannot be viewed in isolation from the general process
of internationalization, which was not the focus of the present study. Therefore,
this topic will be addressed only briefly.
The internationalization of R&D and technology transfer is a trend with con-
siderable momentum. There are many past and current examples of successful
international technology transfer and R&D collaboration. The recent history of
the internationalization of industry through foreign direct investment, trade, and
the proliferation of transnational technical alliances is rife with examples of tech-
nology transfer and collaborative R&D involving firms based in different coun-
tries. Growth of international collaboration among university-based researchers
in science and engineering is well documented by the explosion in the number of
jointly authored research papers. Government-to-government collaboration is
well established in certain areas of basic research such as the human genome
project, fusion, and global climate change. Development of international stan-
dards and conformity assessment regimes by collaborating public and private
standards bodies from different countries also has a long history. There has even
been limited international collaboration involving governments and industry in
precompetitive research such as the intelligent manufacturing systems initiative.
Representative terms from entire chapter:
technologically mature
