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OCR for page 62
62 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY
INTRODUCTION
The collective capacity of the United States to deploy technology and techni-
cal know-how constitutes the nation's technology transfer enterprise. The enter-
prise involves all of the individuals, public- and private-sector institutions, and
other resources (financial and physical capital) involved in the movement of tech-
nology within and among organizations operating in the United States. As in
other market economies, most of the resources and operational intelligence of
this enterprise resides in private companies and is organized and driven by the
logic of markets. In 1995, industry performed over 70 percent of all U.S. R&D
and employed more than 90 percent of all U.S. scientists and engineers. Simi-
larly, the volume of technology transfer that takes place within and between pri-
vate firms dwarfs that which takes place between industry and all other sectors of
the R&D enterprise combined. ~ Indeed, the annual patent royalty income of just
one large U.S. high-tech company such as IBM is greater than that of all nonin-
dustrial sectors together. Nevertheless, the structure, goals, and performance of
the U.S. technology enterprise are profoundly shaped by the contributions of a
spectrum of nonindustrial R&D performers that are not themselves directly en-
gaged in the commercialization of technology.
The specific focus of this report is on the institutions and mechanisms in-
volved in the transfer of technology from nonindustrial R&D performers to pri-
vate firms, which then use this technology to create new products and services.
These institutions include nonindustrial R&D performers: universities and affili-
ated institutions, federal laboratories, and an array of public, private, and mixed
(public/private) contract R&D institutes and consortia. Also implicated are a
diverse group of organizations that perform little, if any, R&D of their own, yet
play an important role facilitating technology transfer between the nonindustrial
R&D performers and private industry.
THE R&D ENTERPRISE
A major distinguishing feature of the U.S. R&D enterprise
is its colossal
size. In 1994, the United States spent roughly $169 billion, or 2.5 percent of its
gross domestic product (GDP), on research and development. Calculated in con-
stant 1987 dollars, this sum equaled the combined R&D expenditures of Japan,
Germany, France, and the United Kingdom (Figure 2.1~. As of 1993, there were
roughly 963,000 scientists and engineers engaged in R&D work in roughly 41,000
U.S.-based companies, 720 federal laboratories, 875 colleges and universities,
and upwards of 2,300 other nonprofit it&D-performing organizations (e.g., re-
search institutes, hospitals, consortia, etc.) (National Science Board, 1996; Na-
tional Science Foundation, 1996C).
As a percentage of GDP, R&D spending in the United States compared fa-
vorably with that of most of its major trading partners in 1994 (Figure 2.2~. How
OCR for page 63
TECHNOLOGY TRANSFER IN THE UNITED STATES
140
120
100
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1= United States
Japan
Germany
France
United Kingdom
Im::l Italy
Canada
FIGURE 2.1 International total R&D expenditures, 1994. SOURCE: National Science
Foundation (1996b).
ever, relative U.S. investments in R&D, estimated at 2.4 percent of GDP in 1995,
have been declining since 1991, as have those of Germany and Japan. Moreover,
international comparisons of the civilian R&D intensity of national economies
(nondefense R&D as a percentage of GDP) reveal a persistent gap between the
United States and other major industrialized countries.
R&D Funders and Performers
For statistical purposes, the U.S. R&D enterprise is divided into four major
sectors: (1) government (federal, state, and local), (2) private industry, (3) non-
profit colleges and universities, and (4) other private nonprofit R&D funders or
performers.
GOVERNMENT
Prior to 1980, the federal government was the leading source of R&D funds,
accounting for as much as 66 percent of the nation's R&D spending in the early
1960s. During the past decade, however, with the end of the Cold War and
declining defense budgets, the federal government's share has declined rapidly,
amounting to only 35.5 percent of the total, about $61 billion, in 1995 (Figure
2.3~. Less than one-third of federal R&D funds ($16.7 billion) were used to
OCR for page 64
64 TECHNOLOGY T^NSFER SYSTEMSIN THE UNITED STATES AND GERMANY
4.0
3.5
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FIGURE 2.2 Total and nondefense R&D spending as a percentage of GDP, by country.
SOURCE: National Science Board (1996~.
OCR for page 65
TECHNOLOGY TRANSFER IN THE UNITED STATES
175
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1970 1975 1980 1985 1990 1995
Total Rim/
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.................................. . . --
1970 1975 1980
65
1985 1990 1995
FIGURE 2.3 National R&D expenditures, by performing sector and sources of funds.
SOURCE: National Science Board (1996~.
support intramural R&D (i.e., R&D performed by the roughly 750 federal agency-
operated research laboratories in 1995~. The remaining two-thirds of the federal
R&D budget supported R&D performed by private industry ($20.3 billion), uni-
versities and colleges ($13 billion), a collection of industry- and university-ad-
ministered Federally Funded Research and Development Centers (FFRDCs) ($8
billion),2 and other nonprofit institutions ($2.7 billion) (Table 2.1~.
The federal government funded roughly 58 percent of all U.S. basic research,
36 percent of all applied research, and 29 percent of all development work in
OCR for page 66
66 TECHNOLOGYTRANSFER SYSTEMSINTHE UNITED STATESAND GERMANY
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OCR for page 67
TECHNOLOGY TRANSFER IN THE UNITED STATES
67
1995 (Figure 2.4~.3 That year, federal government laboratories performed 9.1
percent of all U.S. basic research ($2.7 billion), 12.3 percent of applied research
($4.9 billion), and 9 percent of development ($9.1 billion). In 1993 the federal
government employed over 60,000 scientists and engineers in R&D activity (Na-
tional Science Foundation, 1996b).
For the most part, national R&D statistics shed little light on the volume and
character of R&D funding and performance by U.S. state and local governments.
Nonfederal government entities collectively funded roughly 2 percent of all R&D
performed in the United States in 1993 (National Science Board, 1996~. Most
state and local R&D monies are used to support applied research at doctorate-
granting state universities. These funds come either directly in the form of re-
search grants and contracts or indirectly in the form of general-purpose funds that
end up being used for research by the recipient academic institutions. Collec-
tively, state and local governments funded between 12 and 17 percent of U.S.
academic research in 1995, 7.4 percent (or $1.6 billion) through research con-
tracts and grants and an additional 5 to 10 percent ($0.9 to $2.0 billion) through
general purpose funds (National Science Board, 1996~.
INDUSTRY
Since 1980, industry has been both the primary source of R&D funds and the
largest R&D performer in the United States, financing 59.4 percent ($101.7 bil-
lion) and performing roughly 71 percent ($121.4 billion) of all U.S. R&D in 1995
(Figure 2.3~. Industry performs the overwhelming majority of the research that it
funds, $99.3 billion in 1995, with the remainder, $2.4 billion, going to support
research in colleges and universities and other nonprofit research institutions.
Industry performed an additional $20.3 billion worth of R&D supported by fed-
eral funds in 1995; most of this was defense-related development work financed
by the Department of Defense (DoD).4 In addition to R&D performed directly
by private firms, federal agencies also funded about $1.8 billion of R&D at indus-
try-administered FFRDCs that year.
In 1995, industry funded 70.4 percent of all development work, 56.8 percent
of all applied research, and 25.3 percent of all basic research performed in the
United States. In turn, industry performed about 86 percent ($87.6 billion) of all
development work, 67 percent ($26.7 billion) of all applied research, and 24.2
percent of basic research ($7.2 billion) that year. Roughly 764,500 scientists and
engineers were engaged in R&D in U.S. industry in 1993.
COLLEGES AND UNIVERSITIES
Colleges and universities (both private and public) performed 12.6 percent,
or $21.6 billion worth, of R&D in 1995. That year, university-administered
FFRDCs performed an additional $5.3 billion of R&D. Institutions of higher
OCR for page 68
68 TECHNOLOGY T^NSFER SYSTEMSIN THE UNITED STATES AND GERMANY
100
80
60
40
20
O
100
80
60
40
20
Federal Government
Universities and colleges
[:::: ::::::::::::]
Industry ~ ~ Other nonprofit
.........................
.........................
222222222 1
1
............ 1
Development Applied research Basic research
Character of work
· Federal Government l=1 Universities and colleges
- ~ Industry ~ Other nonprofit
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Character of work
FIGURE 2.4 National R&D expenditures, by performing sector, source of funds, and
character of work, 1995. SOURCE: National Science Board (1996~.
OCR for page 69
TECHNOLOGY TRANSFER IN THE UNITED STATES
69
education are the primary locus of basic research in the United States, accounting
for roughly 49 percent of all basic research performed in 1995. Colleges and
universities performed about 14 percent of all applied research and only 1.6 per-
cent of total U.S. development work that year. Although 875 institutions of higher
education reported performing R&D in 1995, the 100 largest of these accounted
for 80 percent of all academic research conducted in the United States (National
Science Board, 1996~.
The federal government has long been the primary source of academic R&D
dollars (Table 2.2~. Although the federal share has fallen significantly since the
early 1970s, when it accounted for more than 70 percent of academic research
funds, federal agencies still financed over 60 percent of all academic research in
1995. Private universities, which represent an important, highly productive part
of the nation' s academic research enterprise, depend much more heavily on fed-
eral R&D funds than do public universities, which receive both targeted research
funding and general-purpose appropriations from state governments. In 1993,
federal agencies funded roughly 56 percent of all research at public universities
and 74 percent of research performed at U.S. private universities (National Sci-
ence Board, 1996~. The second largest source of research funding for colleges
and universities is their own institutional funds. This collection of general pur-
pose state or local government appropriations, general purpose grants from out-
side sources, tuitions and fees, endowment income, and unrestricted gifts totaled
roughly $3.9 billion in 1995. The share of academic research supported by insti-
tutional funds increased from 13.8 percent in 1980 to 18.1 percent in 1995. In
addition to their indirect investment in academic research through general pur-
pose appropriations to colleges and universities, state and local government di-
rectly funded 7.4 percent of U.S. academic research in 1995. Other nonprofit
institutions funded an additional 7.4 percent of the total. Industry accounted for
the smallest share (6.9 percent) of academic research support in 1995. However,
since the mid-1980s, industry support has increased more rapidly than any other
source of academic R&D funding.
TABLE 2.2 Support for U.S. Academic R&D, Percent Shares by Sector
1970198019901995 (est.)
Federal government70.567.559.260.2
State and local government9.48.28.17.4
Industry2.63.96.96.9
Academic institutions10.413.818.518.1
All other sources7.16.67.37.4
TOTAL100.0100.0100.0100.0
SOURCE: National Science Board (1996).
OCR for page 70
70 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY
In 1993, universities and colleges employed nearly 150,000 doctoral scien-
tists and engineers, 10,500 individuals with professional degrees, 5,500 scien-
tists and engineers with degrees at the master's and bachelor's level, and roughly
90,000 graduate students in R&D activity (National Science Board, 1996~.
OTHER NONPROFITS
The least well-documented and well-measured sector of the U.S. R&D enter-
prise is that comprising a diverse population of "other nonprofit" R&D funders
and performers. Led by private nonprofit foundations, such as the Howard
Hughes Medical Institute, "other nonprofit" organizations funded 1.8 percent of
total U.S. R&D in 1995 (National Science Board, 1996~. That year, these organi-
zations funded 5.5 percent of all basic research, 2.6 percent of all applied re-
search, and less than 0.5 percent of development work in the United States. In
1995, private nonprofit foundations, independent R&D institutes, private research
hospitals, independent medical research centers, consortia, and their affiliates
(more than 2,300 institutions altogether) performed about 3.5 percent of all U.S.
R&D. In 1995, other nonprofits conducted 7.5 percent of basic research ($2.2
billion), 4.8 percent of applied research ($1.9 billion), and less than 2 percent of
development ($1.9 billion). Other nonprofit research institutions are particularly
prevalent in medical- and health-related research. In 1994, more than 45 percent
of all R&D funded by other nonprofit institutions was in the area of health, as was
nearly 42 percent of R&D performed by other nonprofit institutions. Other non-
profit institutions employed 10,200 scientists and engineers in R&D activities in
1993 (National Science Foundation, 1996b).
Distribution of Publicly Funded R&D
Since the 1940s, the federal government has focused its support of the
nation's technology enterprise on mobilizing technical resources to further spe-
cific national missions. These missions, championed by various federal agencies,
have included national security, the cure of disease, space exploration, food pro-
duction, and world leadership in basic science. National economic development
and international competitiveness have rarely been explicit objectives of federal
technology policies and investments.
THE DEFENSE IMPERATIVE
A defining feature of the U.S. government's R&D portfolio has long been its
heavy commitment to the needs of national security. In 1955, during the height
of the Cold War, defense-related R&D claimed over 85 percent of all federal
R&D dollars. During the 1980s, national security accounted for nearly two-thirds
of federal R&D spending and one-third of total national (public and private) R&D
OCR for page 71
TECHNOLOGY TRANSFER IN THE UNITED STATES
71
expenditures. In spite of a significant decline in defense spending during the past
5 years, defense-related R&D still accounted for 55 percent of federal R&D
spending, or roughly one-quarter of all R&D spending in 1995 (Table 2.3~.5 A1-
though federally funded R&D as a share of total industrial R&D has declined
rapidly since the late 1980s, from 33 percent in 1988 to 17 percent in 1995, DOD
remains the source of over 80 percent of all federal R&D dollars spent by private
industry.
During the past 4 decades, defense-related R&D and procurement have fos-
tered the development of important "dual-use" technologies (technologies having
both civilian and defense applications) and provided a powerful stimulus to inno-
vation in a select number of high-tech civilian industries such as m~croelectron-
ics, software, and aerospace.6 As of 1994, federal R&D dollars (predominantly
DOD funds) still accounted for 61 percent of industrial R&D in the aerospace
sector (Table 2.3~. Nevertheless, the overwhelming majority of this defense-
related R&D (an estimated 90 percent as of the early 1990s) has been for the
TABLE 2.3 U.S. Defense-Related R&D, Various Comparisons
1955 1960 1970 1980 1990 1995
Share of federal R&D that is
defense related
Share of total U.S. R&D that is
defense related
Share of federal support of academic
engineering research that is defense
related
Share of all government-funded R&D
in U.S. industry that is defense relatedC
Federal share of total R&D funds in
aerospace industry
Federal share of total R&D funds in
electrical machinery and communications 664 65
85 80 58 51 63 55
48 52
33 24 26 23
* * 45a 55 44 45b
* 81 68 63 83 80
88d 89 77 72
76 61e
52 41 38 14e
*Data not available.
al971 data.
bl993-1995 average federal academic research obligations.
CDepartment of Defense only, data for 1962, 1981, and 1989.
41957 data.
el994 data.
SOURCES: National Science Foundation (1990; 1991; 1992a,b; 1994; 1996b).
OCR for page 72
72 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY
"development, testing, and evaluation" of weapons and other systems that have
no markets other than the military7 (Alic et al., 1992~.
National security has also long been the focus of government support for
engineering R&D in U.S. universities and government laboratories. Although
DOD accounted for only 12.2 percent of federal funding for all fields of academic
R&D in 1995, the agency remains a major funder of university-based engineer-
ing research. As of 1994, DOD accounted for over 49 percent of all federal
obligations for academic research in math, computer sciences, and all fields of
engineering combined. This included 60 percent of federal funds for academic
electronics and electrical engineering research, 54 percent for metallurgy and
materials research, 52 percent for aerospace engineering research, 41 percent for
mechanical, 47 percent for civil, and 4 percent for chemical engineering research
(National Science Foundation, 1997~.
Finally, the demands of national defense have largely determined the struc-
ture and objectives of the government's system of federal laboratories, particu-
larly in the physical sciences and engineering research. In 1995, DOD accounted
for nearly half of all obligated expenditures of federal laboratories and, as of
1993, employed more than half of all federal laboratory R&D scientists and engi-
neers9 (National Science Board, 1996; National Science Foundation, 1995a).
GOVERNMENT CIVILIAN R&D PRIORITIES
Between 1987 and 1994, the share of federal R&D funds dedicated to civil-
ian or nondefense-related agency missions increased from 31 percent to 45 per-
cent (Table 2.4~. In 1994, over 60 percent of the federal civilian R&D portfolio
was allocated to the missions of health and civilian space exploration. The shares
of federal civilian R&D funds dedicated to the missions of health, energy, the
"advancement of research," and agriculture all declined slightly between 1987
and 1994. These declines were offset by increases in the shares allocated for
research related to civilian space, infrastructure, environmental protection, and
industrial development. Of these four mission areas, industrial development R&D
has grown most rapidly since the late 1980s, albeit from a very small base.
More than two-thirds of federal civilian R&D funds went for basic and ap-
plied research in 1995. In contrast, 90 percent of federal defense-related R&D
went for exploratory development (Figure 2.5~. The vast majority of federal
support for basic research flows from a few civilian agencies. The Department of
Health and Human Services (DHHS), more specifically its National Institutes of
Health, is overwhelmingly the largest funder of basic research DHHS obliga-
tions in 1995 were $6.3 billion, three or more times those of the National Science
Foundation (NSF) ($2.0 billion), NASA ($1.8 billion), and the Department of
Energy ($1.7 billion). By way of comparison, DOD's obligations for basic re-
search were $1.2 billion in 1995 (National Science Board, 1996~. Likewise, that
year, civilian agencies accounted for over 78 percent of all federal obligations for
OCR for page 80
80 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
.............................................................................................................................
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,,,,,,,,,,,,,,,,,,,,,, l,, ,~,-,-,,, ,1:,~, . !,, ,:,:,1:,:,~,~.1:.:!.I--:5-:~-:!-:~-:Y:~ ~'~'~-~-
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(National Science Board, 1996~. In 1994, 19 companies each spent more than
$1 billion on R&D, and another 49 spent more than $200 million.
SHIFTING SECTORAL DISTRIBUTION OF R&D ACTIVITY
There has been significant change in the sectoral distribution of U.S. indus-
trial R&D in recent decades, reflecting changes in the composition of the nation's
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TECHNOLOGY TRANSFER IN THE UNITED STATES
81
industrial base, changes in the relative R&D intensity of different industries over
time, and changes in the way U.S. industrial R&D activity is measured (Figure
2.7~. The most notable change over the past 10 years has been the rapid increase
in the share of R&D claimed by nonmanufactunng (predominantly service) in-
dustnes. Until fairly recently, nonmanufactunng industries were believed to ac-
count for less than 5 percent of all industrial R&D spending. Since the early
1980s, however, their share of the total has increased rapidly, from 5.1 percent in
1983 to 26.7 percent in 1993. Much of the increase in nonmanufactunng R&D
over this period can be attributed to changes in NSF's survey of industrial R&D
in 1991, which changed and greatly expanded the sample of companies surveyed,
thereby incorporating more accurate information on the R&D performance of
smaller firms and firms classified in the nonmanufactunng sector. According to
NSF, these changes resulted in an upward revision of total nonmanufactunng
R&D in 1991 from roughly $10 billion previously reported to $21 billion. That
year, an additional $7 billion of R&D was reclassified from manufacturing to
nonmanufactunng categones. Much of this latter shift is believed to accurately
Industrial Chemicals
Pharmaceuticals
Fabricated Metal
Products
Nonelectrical
Machinery
Motor Vehicles
Aerospace
Electrical Machinery
and Apparatus
Office Machinery
and Computers
Electronic and Communi
cation Equipment
Instruments
Other Manufacturing
Nonmanufacturing
' 1
_
...............................................
...........................................................................................................
_ ~
..............................
_
_
_
~-
_
0 5 10
1 993
L 1 983
~ 1 973
15 20 25 30
Percent
FIGURE 2.7 U.S. industrial R&D spending, by sector, 1973, 1983, and 1993. SOURCE:
Organization for Economic Cooperation and Development (1996a).
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82 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY
reflect changes in the output mix of companies formerly classified in manufactur-
ing industries (National Science Foundation, 1995b).
Three industries account for the majority of nonmanufacturing R&D: com-
puter programming and related services, including software (8.1 percent of total
R&D in 1993~; communications services (4.4 percent); and research, develop-
ment, and testing services (1.5 percent) (National Science Board, 1996~.~9
Two manufacturing industries pharmaceuticals and professional and scien-
tific instruments have also significantly increased their share of total industrial
R&D expenditures during the past 2 decades. Notably, the growth of these indus-
tries' share of industrial R&D tracks the growth in the share of federal R&D
dedicated to health-related research as well as the associated growth of the nonin-
dustrial research base in the life and medical sciences during the period. (See
Figure 2.6, p. 75.)
Four manufacturing industries aerospace, electronics and communications
equipment, office machinery and computers, and electrical machinery have seen
their shares of total industrial R&D contract dramatically during the past 10 to 20
years. Historically, these industries, particularly aerospace, have been the benefi-
ciaries of DOD R&D and procurement, which has declined dramatically during
the past decade. As of 1988, the aerospace industry absorbed more than 60 per-
cent of all federal R&D funds for industry. However, by 1994, industrial aero-
space R&D amounted to about 39 percent of the total (National Science Founda-
tion, 1996a). Moreover, data from the Aerospace Industry Association (1994)
also indicate a 25-percent decrease in revenues from sales of military-related hard-
ware from 1990 and 1993.
CHANGES IN THE COMPOSITION AND ORGANIZATION OF
INDUSTRIAL R&D
Changes in the sectoral distribution of industrial R&D spending over the past
2 decades have been accompanied by compositional and organizational shifts.
Relative Decline in Industrial Basic and Applied Research
First, there has been a change in the character of industrial R&D (i.e., basic
research, applied research, and development) since 1991. While the inflation-
adjusted industrial R&D expenditures overall declined 5.9 percent between 1991
and 1995, industrial performance of basic and applied research declined more
than did industrial exploratory development. Since 1991, industrial basic re-
search as a share of total industrial research has declined from 6.7 percent to 5.9
percent,20 that of industrial applied research declined from 23.5 to 22.0 percent,
while that of industrial development increased from 69.8 to 72.2 percent. These
shifts are explained, in part, by the dismantling of several companies' large cen-
tral research facilities and a general movement in several industries away from
long-term fundamental research toward more short-term applied research and
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TECHNOLOGY TRANSFER IN THE UNITED STATES
83
development in order to meet intensifying international competition (National
Science Board, 1996~. Accompanying this latter trend have been an increased
emphasis on R&D as a tool for scanning for and exploiting knowledge generated
or applied beyond national boundanes, as well as closer integration of R&D with
activities farther downstream in the value-added process (i.e., changes designed
to leverage scarce R&D dollars and speed commercialization of new technology)
(National Academy of Engineenng, 1993, 1996b).
Increased Cooperative R&D and R&D Outsourcing
Second, there has been an increase in both cooperative R&D and R&D
outsourcing among firms as well as between firms and nonindustrial R&D per-
formers during the past decade. This is in part explained by the rapid growth in
the number of R&D consortia, joint ventures, and other forms of strategic alli-
ances in R&D at the hands of U.S.-based companies during the past decade.2i
Though by no means a measure of all U.S. R&D consortia and joint venture
activity, the number of "joint research ventures" (JRVs) registered each year with
the Department of Justice (DOJ) has grown significantly since passage of the
1984 National Cooperative Research Act (P.L. 98-462~. As of 1995, more than
565 JRVs had been registered with the DOJ (Vonortas, 1996~. Likewise,
Hagedoorn (1995) has documented a marked increase in the level of U.S.-firm
participation in international strategic technology alliances since the early 1980s
(Figure 2.8~.
500
400
300
200
100
1 980-84
1 985-89
O
1 990-94
1
1
l _
am_
Europe-United States
Japan-United States
Europe Japan
Information technology
Biotechnology New materials
FIGURE 2.8 Number of new strategic technology alliances, by industry and region.
SOURCE: National Science Board (1996~.
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84 TECHNOLOGY TRANSFER SYSTEMSIN THE UNITED STATES AND GERMANY
Between 1985 and 1995, industry funding of R&D at universities and col-
leges (in inflation-adjusted dollars) nearly doubled, and industry research fund-
ing at other nonprofit organizations grew nearly 65 percent. During the same
period, company-financed R&D performed within industry grew less than 27
percent in constant 1987 dollars. Consistent with these trends has been a signifi-
cant increase in the level of industrial involvement in collaborative research with
academic researchers via university-industry research centers as well as rapid
growth (albeit from a very small base) in the volume of technology licensed by
industry from academic research institutions during the past decade (Association
of University Technology Managers, 1996; Cohen et al., 1994~.22 Similarly,
there has been rapid growth in the number of CRADAs between companies and
federal laboratories since the mid-1980s.23
Yet another indicator of the growth of research collaboration between indus-
try and nonindustrial research institutions is the rapid increase in the share of
scientific and technical articles that are coauthored by individuals in industry and
researchers based at nonindustrial research institutions. Between 1981 and 1993,
the share of scientific and technical articles that had industry-based authors grew
from 27.3 percent to 47 percent (National Science Board, 1996~. Most of this
increase was accounted for by growth in the volume of academic-industry coau-
thored literature.
Internationalization of U.S. Industrial R&D
Third, the past 2 decades have witnessed a growing internationalization of
U.S. industrial R&D activity, predominantly at the hand of foreign direct invest-
ment (multinational companies) and international strategic alliances (National
Academy of Engineering, 1996b). Between 1985 and 1993, U.S.-owned compa-
nies increased their investment in overseas R&D three times faster than their
investment in U.S.-based R&D activity. As of 1994, these investments amounted
to roughly 10 percent of all company-financed R&D in the United States. Even
more pronounced has been the growth of foreign participation in the U.S. indus-
trial R&D enterprise since the early 1980s (Figure 2.9~. From 1984 to 1994,
R&D spending by the U.S. affiliates of foreign-owned companies24 increased as
a share of all company-financed U.S. R&D from 9 percent to nearly 16 percent.
As of 1994, foreign-owned companies financed roughly 2 percent of all research
conducted at U.S. universities and federal laboratories (National Academy of
Engineering, 1996b).
THE SPECIAL ROLE OF START-UP COMPANIES
A unique feature of the U.S. industrial technology enterprise is the critical
role start-up companies play in the transfer and commercialization of fast-mov-
ing, science-based technologies. This happens generally via movement, or "spin-
out," of researchers and technology from universities, large established compa
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TECHNOLOGY TRANSFER IN THE UNITED STATES
20
15
5
85
13.8
0 10 - 9.2 9.2 9.1 9.0
as _
_
l l l l l
l l l l l l
O l l l _ l l l ~ l
9.5
12.6
11.5
10.4
14.4
12.8
15
15.7
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Year
FIGURE 2.9 R&D spending by U.S. affiliates of foreign-owned firms as a percentage of
all privately funded U.S. R&D, 1982-1994. SOURCES: National Science Board (1996)
and U.S. Department of Commerce (1996a).
nies, and government laboratories. U.S.-based high-tech start-ups are credited
with commercializing the technologies that launched the new biotechnology and
computer software industries. Although growth in the number of new U.S. high-
tech companies established during the past decade is considerably slower than
that from the mid-1970s to the mid-1980s, nearly half of all U.S. high-tech com-
panies operating in 1994 were established during the past 15 years (Table 2.6)
(National Science Board, 1996~. More than one-quarter of all new businesses
started since 1980 (and operating in 1994) were software companies, and soft-
ware continues to create more new start-ups than any other technology field.25
Similarly, the rate of formation of new firms dedicated to the exploitation of one
or another aspect of recent advances in biotechnology has been phenomenal: 800
new enterprises were founded in the 1980s, and the industry currently includes
more than 1,200 firms. A few of these firms have become large, successful oper-
ating companies (e.g., Amgen), however, the vast majority are still small, inves-
tor-funded ventures. From 1980 to 1994, the shares of start-ups in computer
hardware, advanced materials, photonics, optics, and telecommunications also
increased.26
High-tech start-ups have played important roles in the U.S. technology enter
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86 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
TABLE 2.6 High-Tech Companies Formed in the United States, 1960-1994
All High- Auto- Biotech-ComputerAdvanced Photonics
Period Formed Tech Fields mation nologyHardwareMaterials and Optics
Number of Companies
1960-1994 29,358 1,939 7352,8451,045 977
1980-94 16,660 917 5461,907487 507
1980-84 7,727 483 213842212 221
1985-89 6,510 331 225756194 191
1990-94 2,423 103 10830981 95
Percentage of all high-tech companies formed during each period
1960-1994 100.0 6.6 2.59.73.6 3.3
1980-94 100.0 5.5 3.311.42.9 3.0
1980-84 100.0 6.3 2.810.92.7 2.9
1985-89 100.0 5.1 3.511.63.0 2.9
1990-94 100.0 4.3 4.512.83.3 3.9
Percentage of all U.S. high-tech companies
1960-1994 100.0 100.0 100.0100.0100.0 100.0
1980-94 56.7 47.3 74.367.046.6 51.9
1980-84 26.3 24.9 29.029.620.3 22.6
1985-89 22.2 17.1 30.626.618.6 19.5
1990-94 8.3 5.3 14.710.97.8 9.7
aOther fields are chemicals, defense related, energy, environmental, manufacturing equipment,
medical, pharmaceuticals, test and measurement, and transportation.
SOURCE: National Science Board (1996).
prise because they can accept a level and type of risk that larger companies usu-
ally cannot. Able to serve highly dynamic niche markets, start-ups often serve as
a "test-bed" for new products and services, a few of which might develop into
large-volume businesses (National Academy of Engineering, 1995c). Further-
more, start-ups are considered particularly adept at drawing effectively upon new
product ideas of customers, suppliers, universities, research laboratories and oth-
ers as well as at rapidly commercializing innovations.27
Many factors have enabled high-tech start-up companies to perform their
unique roles in the U.S. innovation system.28 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
markets;
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TECHNOLOGY TRANSFER IN THE UNITED STATES
)-1994
87
Advanced Photonics ElectronicTelecom- Other
Materials and Optics SoftwareComponentsmunications Fieldsa
1,045 977 7,6612,9231,556 9,677
487 507 5,1961,293933 4,874
212 221 2,467629408 2,252
194 191 1,962508370 1,973
81 95 767156155 649
3.6 3.3 26.110.05.3 33.0
2.9 3.0 31.27.85.6 29.3
2.7 2.9 31.98.15.3 29.1
3.0 2.9 30.17.85.7 30.3
3.3 3.9 31.76.46.4 26.8
100.0 100.0 100.0100.0100.0 100.0
46.6 51.9 67.844.260.0 50.4
20.3 22.6 32.221.526.2 23.3
18.6 19.5 25.617.423.8 20.4
7.8 9.7 10.05.310.0 6.7
.
· 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 orientation
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 procurement combined with explicit preferences or
set-asides for small and medium-sized vendors and suppliers;
a history of regulatory and other public policy commitments conducive to
high-tech start-up companies, including the competition-oriented or tech-
nology diffusion-oriented enforcement of intellectual property rights and
antitrust law (competition policy), as well as relatively risk-friendly sys-
tem of company law, particularly bankruptcy law; and
· 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.
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88 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
COMPARATIVE STRENGTHS AND WEAKNESSES OF THE INDUSTRIAL
R&D ENTERPRISE
The U.S. technology enterprise excels in the development and exploitation
of new commercial technologies. Major shifts in the sectoral composition of
U.S. industrial R&D and industrial production during the past 2 decades, as well
as the large and rapidly expanding population of U.S. high-tech start-up compa-
nies, attest to this fact. Further evidence of the dynamism and future growth
orientation of the U.S. industrial technology base is offered by the U.S. patent
and export statistics.
The patent activity of U.S. companies encompasses a broad spectrum of tech-
nologies and new product areas. However, recent patenting by U.S. companies
demonstrates a strong emphasis on technologies or fields medical and surgical
devices, telecommunications, aeronautics, electricity transmission, advanced
materials, biotechnology that are expected to serve as engines of future eco-
nomic growth29 as well as technologies associated with the extraction and use of
the nation's abundant natural resources (Table 2.7~. Not surprisingly, these areas
of patent emphasis reflect the competitive strength of U.S. industry in global
high-technology product markets. In 1994, 25 percent of U.S. manufacturing
exports were high-tech manufactured goods, and 3 of the 10 classifications of
high-technology products accounted for nearly 85 percent of these technology
exports: information technology (computers, software, and communications)
(35.5 percent), aerospace (29.0 percent), and electronics (21.3 percent) (National
Science Board, 1996~. By way of comparison, U.S. patent activity by German
companies in 1993 indicates an emphasis on technology areas associated with
heavy manufacturing industries (motor vehicles, printing, power generation, and
new chemistry and materials) that have long been a source of German compara-
tive industrial strength in world markets.30
In contrast to the relative strength of the U.S. industrial R&D enterprise and
its supporting nonindustrial R&D infrastructure in opening up new technological
frontiers and launching new industries, the U.S. enterprise appears to be less ef-
fective than some of its trading partners at serving the R&D and technology trans-
fer/diffusion needs of technologically mature industries.
In particular, U.S. companies in many technologically mature manufacturing
industries appear to operate increasingly on the periphery of the nation's nonin-
dustrial R&D system. The R&D portfolios of U.S. research universities, federal
laboratories, and most nonprofit research institutes have not overlapped much
with the process and product R&D needs of firms, particularly small and me-
dium-sized firms, in these industries. Many observers have noted gaps in the
R&D portfolios of major technologically mature industries (Competitiveness
Policy Council, 1993; National Academy of Engineering, 1993~. Of particular
concern have been perceived emerging gaps in these industries' "infrastructural"
R&D portfolios R&D directed at the discovery and development of low-techni-
cal-risk, difficult-to-appropriate technologies that have the potential to enhance
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TECHNOLOGY TRANSFER IN THE UNITED STATES
89
TABLE 2.7 Top 20 Most-Emphasized U.S. Patent Classes for Inventors from
the United States and Germany, 1993
Ranking
of class United States
Germany
1
6
7
8
9
10
11
12
13
14
15
16
18
19
20
Wells
Mineral oils; processes and products
Surgery, patent class 604
Surgery, patent class 606
Chemistry, hydrocarbons
Special receptacle or package
Surgery: light, thermal, and electrical
applications
Chemistry: analytical and immunological
testing
Fluid handling
Liquid purification or separation
Error detection/correction and fault
detection
mumination
Chemistry: natural resins or derivatives
Receptacles
Amusement devices: games
Communications: directive radio wave
systems and devices
17 Information processing system
organization
Surgery
Hydraulic and earth engineering
Supports
Fluid-pressure brake and analogous systems
Plant protecting and regulating compositions
Printing
Internal combustion engines
Organic compoundsa
Synthetic resins or natural rubbersb
Organic compoundsa
Conveyors: power-driven
Organic compoundsb
Winding and reeling
Organic compoundsa
Land vehicles
Plastic articles
Organic compoundsa
Synthetic resins or natural rubbersb
Organic compoundsa
Fluid sprinkling, spraying, and diffusing
Organic compoundsa
Compositions: coating or plastic
Material or article handling
apart of the class 532-570 series.
bPart of the class 520 series.
SOURCE: National Science Board (1996).
the performance of a broad spectrum of firms within an industry or related indus-
tries. Also of concern are gaps in these industries' "pathbreaking" R&D base-
R&D aimed at discovering and developing high-technical-risk technologies with
the potential for transforming existing industries (Alic et al., 1992~.
Factors that have helped weaken the connection between firms in many in-
dustries and the nation's nonindustrial research enterprise include the highly con-
centrated (by industry and technology field) and mission-driven nature 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.
Output accounted for by service and high-tech manufacturing industries). Nu-
merous federal industrial technology initiatives of the past decade have sought to
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90 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY
strengthen government-university-industry R&D cooperation as well as foster
industrial consortia in selected industries (e.g., semiconductors, automotive).
However, the volume of federal R&D dollars devoted to these initiatives has been
small, and it is not yet clear whether these programs have been effective at forg-
ing tighter linkages between industrial and nonindustrial R&D performers in es-
tablished technologically mature industries.
Another relative weakness of the U.S. industrial it&D/technology transfer
enterprise is its limited capacity for diffusing new technology and know-how,
particularly manufacturing or production technology, within technologically ma-
ture industries and SMEs in particular (National Academy of Engineering, 1993~.
In recent years, there has been a concerted effort at both the federal and state
levels to develop a more far-reaching network of private- and public-sector pro-
viders of technical extension/industrial modernization services to SMEs. Ex-
amples of this are NIST's manufacturing extension partnership and related state
initiatives. (See Part II, pp.76-79, and Annex II, pp.205-209.) There are indica-
tions that a growing percentage of U.S.-based manufacturers are adopting ad-
vanced manufacturing technologies more rapidly (National Science Board, 1996~.
Nevertheless, compared with its German counterpart, the U.S. infrastructure for
diffusion of production technology and other technologies to established indus-
tries is much more uneven and fragmented.
Technology Transfer to U.S. Industry in Context
In order to begin to place technology transfer from nonindustrial R&D per-
formers to U.S. industry in context, it is important to recognize that the volume of
technology transfer that takes place internally among divisions of large private
firms and externally between firms is by far the largest segment of U.S. technol-
ogy transfer. This activity occurs through formal measures (such as mergers and
acquisitions, and licensing of patents, software, and trade secrets) as well as
through less formal mechanisms (such as sharing technical know-how, exchanges
of personnel, and technical and marketing assistance). Data collected by the U.S.
Internal Revenue Service show that in 1992, corporate royalty income in the U.S.
manufacturing sector alone was almost $33 billion, roughly 100 times the royalty
income of all of U.S. universities and federal laboratories combined. Indeed, that
year several large technology-intensive firms reported royalty incomes of over $1
billion (e.g., IBM, Texas Instruments, and Bellcore).
Several recent surveys of it&D-intensive companies shed light on the per-
ceived relative importance of industrial and nonindustrial sources of commercial-
izable ideas end technology. A 1992 survey by Roessner (1993) of member
companies of the Industrial Research Institute (mostly large, research-intensive
firms) found that respondents considered other companies (U.S. and foreign) to
be the most significant sources of external technology, with universities second,
private databases third, and federal laboratories fourth. Similarly, a 1994 pilot
Representative terms from entire chapter:
cooperative technology
