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--> Introduction The 1970s and the 1980s was a time of economic change and uncertainty in the United States—a period marked by slow economic growth relative to postwar norms, sluggish productivity performance, and a rapidly rising trade deficit. The causes of America's sub-par economic performance defied definitive analysis, but dire warnings of U.S. economic decline and the ''deindustrialization'' of key manufacturing sectors proliferated. 1 Looming large in the debate was the loss in competitive position of key U.S. industries, from steel and automobiles to televisions and semiconductors. U.S. trade competitors, such as Japan, seemed to have arrived at an economic model different in important respects from the traditional laissez-faire American approach.2 A key feature of that model was its emphasis on cooperation rather than competition. The ability of different arms of Japanese industry to work with one another, and the close relationship between government and industry in supporting key economic sectors had created substantial benefits for the Japanese economy.3 1 Questions persist concerning the degree of the U.S. decline in the 1980s, just as questions remain concerning the sustainability of the current recovery. The STEP Board has recently completed a review of the competitive resurgence of the U.S. economy. It includes an assessment of the factors which have contributed to the U.S. recovery with a focus on eleven U.S. manufacturing and service sectors. See: Mowery, D. ed. (1999) U.S. Industry in 2000: Studies in Competitive Performance. Washington, D.C.: National Academy Press. 2 For review of these issues see Conflict and Cooperation, op. cit. pp. 12–40. For a review of the main features of the East Asian economic success story, see The East Asian Economic Miracle: Economic Growth and Public Policy, World Bank Policy Research Report, Oxford University Press, New York, 1993. 3 For the best early analysis of the Japanese approach, see Chalmers Johnson, MITI and the Japa-
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--> One of the strategies adopted by the United States in response to its loss in competitiveness (at least in some sectors) was to encourage greater cooperation among industry and between industry and government. Such collaboration was by no means novel in the U.S. economy. Government funds had supported the demonstration and development of the telegraph in the last century, and after World War I, the federal government fostered an independent radio industry.4 As noted in the preface, the federal government also provided active support through a variety of mechanisms for military and civil aviation and the electronics industry.5 Yet the 1980s and early 1990s saw a conscious effort to expand cooperation, in part by using federal R&D funding more effectively, to meet what were seen as unprecedented competitive challenges. A series of public and private initiatives in the 1980s demonstrate the renewed emphasis on cooperation. The change in public policy is illustrated by the number of major legislative initiatives passed by the Congress. These included: the Stevenson-Wydler Technology Innovation Act (1980), the Bayh-Dole University and Small Business Patent Act (1980), the Small Business Innovation Development Act (1982), the Federal Technology Transfer Act (1986), the Omnibus Trade and Competitiveness Act (1988), the National Competitiveness Technology Transfer Act (1989), and the Defense Conversion, Reinvestment, and Transition Assistance Act (1992). These individual acts are summarized in the box on the following page. nese Miracle: The Growth of Industrial Policy 1925–1975. Stanford University Press, Stanford, California, 1982. D.T. Okimoto, "The Japanese Challenge in High-Technology Industry," in R. Landau and N. Rosenberg, eds., The Positive Sum Strategy. National Academy Press, Washington, D.C., 1986, and, by the same author, MITI and the Market: Japanese Industrial Policy for High-Technology Industry. Stanford University Press, Stanford, California, 1989. 4 Josephus Daniels, Secretary of the Navy during the Wilson administration, appeared to feel that monopoly was inherent to the wireless industry, and if that were the case, he believed the monopoly should be American rather than British. Britain had dominated prewar Atlantic wireless traffic as well as the undersea telegraph cable. With Navy sponsorship and participation, the patents of General Electric, AT&T, Westinghouse, and the Navy were pooled in order to create the Radio Corporation of America. See Irwin Lebow, Information Highways and Byways: op. cit., pp. 97–98 and chapter 12. 5 David C. Mowery and Nathan Rosenberg, Technology and the Pursuit of Economic Growth. Cambridge University Press, Cambridge England, 1989. See chapter seven especially pp. 181–194. The authors note that the commercial aircraft industry is unique among manufacturing industries in that a federal research organization, the National Advisory Committee on Aeronautics (founded in 1915 and absorbed by NASA in 1958) conducted and funded research on airframe and propulsion technologies. Before World War II, NACA operated primarily as a test center for civilian and military users. NACA made a series of remarkable contributions with regard to engine nacelle locations and the NACA "cowl" for radial air cooled engines. These innovations, together with improvements in engine fillets based on discoveries at Caltech and the development of monocoque construction, had a revolutionary effect on commercial and military aviation. These inventions made the long-range bomber possible, forced the development of high-speed fighter aircraft, and vastly increased the appeal of commercial aviation. Ibid. and personal communication with Albert Flax, National Academy of Engineering.
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--> Principal Federal Legislation Related to Cooperative Technology Program6 Stevenson-Wydler Technology Innovation Act (1980) Required federally owned and originated technology to state and local government and the private sector. The Act includes a requirement that each federal lab spend a specified percentage of its research and development budget on transfer activities and that an Office of Research and Technology Applications (ORTA) be established to facilitate such transfer. Bayh-Dole University and Small Business Patent Act (1980) Permitted government grantees and contractors to retain title to federally funded inventions and encouraged universities to license inventions to industry. The Act is designed to foster interaction between academia and the business community. This law provided, in part, for tittle to inventions made by contractor if they are small businesses, universities, or not for profit institutions. Small Business Innovation Development Act (1982) Established the Small Business Innovation Research (SBIR) Program within the major federal R&D agencies to increase government funding of research with commercialization potential in the small high-technology company sector. Each federal agency with an R&D budget of $100 million or more is required to set aside a certain percentage of that amount to finance the SBIR effort. National Cooperative Research Act (1984) The National Cooperative Research Act of 1984 eased antitrust penalties on cooperative research by instituting single, as opposed to treble, damages for antitrust violations in joint research. The Act also mandated a "rule of reason' standard for assessing potential antitrust violations for cooperative research. This contrasted with the per se standard by which any R&D collusion is an automatic violation, regardless of an determination of economic damage. Federal Technology Transfer Act (1986) Amended the Stevenson-Wydler Technology Innovation Act to authorize cooperative research and development agreements (CRADAS) between federal laboratories and other entities, including state agencies. Omnibus Trade and Competitiveness Act (1988) In addition to establishing the Competitiveness Policy Council, designed to enhance U. S. industrial competitiveness, the Act created several new programs 6 Drawn, with NRC modifications, from Berglund and Coburn, op. cit., p. 485.
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--> (e.g., the Advanced Technology Program and the Manufacturing Technology Centers) housed in the Department of Commerce's National Institute of Standards and Technologies and to improve manufacturing techniques of small and medium-sized manufactures. National Competitiveness Technology Transfer Act (1989) Part of the Department of Defense authorization bill, this act amended the Stevenson-Wydler Act to allow government-owned, contractor-operated laboratories to enter into cooperative R&D agreements. Defense Conversion, Reinvestment. And Transition Assistance Act (1992) Initiated the Technology Reinvestment Project (TRP) to establish cooperative, interagency efforts that address the technology development, deployment, and education and training needs within both the commercial and defense communities. Private sector cooperation was encouraged by the reduction in antitrust concerns. In 1984, Congress overwhelmingly passed the National Cooperative Research Act, which eased antitrust penalties for companies conducting joint research and development. Responding to this new environment, the private sector also undertook a series of innovative approaches to address its competitive failings. For example, in 1983, fourteen companies—mostly computing manufacturers, but also semiconductor, aerospace, and defense firms—banded together to form the Microelectronics and Computer Technology Corporation (MCC), in part as a response to Japan's Fifth Generation Computer project.7 In 1987, two parallel study efforts in the public and private sectors recommended the establishment of a consortium to improve manufacturing technology in the semiconductor industry, which had lost leadership in manufacturing and was losing market share to Japanese firms at a rapid rate. The result was SEMATECH, a $200 million per year consortium funded half by the government and half by the private sector.8 While perhaps one of the most successful, SEMATECH was by no means the only technology development program launched by the federal government. Some of the other major federal efforts of this type are: the Department of Defense's Manufacturing Technology (MANTECH) program; the now defunct Technology Reinvestment Project (TRP); the Department of Transportation's Intelligent Vehicle Highway Systems (IVHS) Program and National Magnetic Levitation Initiative (MAGLEV); the National Science Foundation's Research 7 For a review of the origins of MCC and SEMATECH, see John Horrigan, op. cit. 8 In 1996, SEMATECH became a completely private sector consortium.
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--> Centers Program (which includes the Engineering Research Centers, the Industry/University Cooperative Research Centers, the Materials Research Science and Engineering Centers, and the Science and Technology Centers); and the Small Business Technology Transfer (STTR) program.9 The notion of additional government-industry collaboration was well-developed by the late 1980s, but by no means universally accepted. One of the earliest calls for increased collaboration, the President's Commission on Industrial Competitiveness, was released in 1983, but few of its recommendations were adopted.10 The recommendations for expanded cooperation of a subsequent study effort, the National Advisory Committee on Semiconductors (NACS) also met with limited success though it served to highlight the importance of this strategic sector to the U.S. economy.11 Even a broadly supported initiative such as SEMATECH, whose government funding in hindsight may have always seemed secure, encountered serious opposition at its inception.12 Another element in the economic and policy landscape at the time was the demise of the "spinoff" paradigm in defense procurement. For years it had been assumed, accurately or not, that investments in sophisticated defense systems had beneficial spillovers into commercial markets. Companies that developed and manufactured high-technology armaments were believed to be building a technological base that would enable them to compete effectively in commercial markets.13 For a number of reasons—from burdensome government procurement regulations to accelerating time to market demands in commercial markets—this paradigm no longer applied by the 1980s.14 In fact, it was increasingly recognized that only firms competitive in commercial markets were able to provide military systems with the most advanced capabilities, particularly in rapidly 9 Berglund and Coburn, op.cit., p. 488. 10 See President's Commission on Industrial Competitiveness, Global Competition: The New Reality. Government Printing Office, Washington, D.C., 1985, 2 vols. 11 See National Advisory Committee on Semiconductors, Semiconductors: A Strategic Industry at Risk. A Report to the President and the Congress, Semiconductor Industry Association, Washington, D.C., 1989. See also National Advisory Committee on Semiconductors, Toward a National Strategy for Semiconductors. Semiconductor Industry Association, Washington, D.C., 1991. 12 The 1992 renewal was undertaken in the era in which the President's economic advisors purportedly saw little difference between silicon chips (semiconductors) and potato chips. 13 In some cases, such as aircraft and computing in the early years, this assumption did hold. See David Mowery, op. cit., p. 184–189, and Funding a Revolution, op.cit., passim. 14 Some analysts argue that the U.S. defense acquisition system, far from being a guise for the support of commercially relevant industry, has in fact created disincentives and barriers to the operation of market forces. These include "the unique government oversight requirements, the unique procurement requirements, (and) the unique military specifications" associated with military procurement. See the presentations of Jacques Gansler in Charles Wessner, ed., International Friction and Cooperation in High-Technology Development and Trade. Washington, D.C.: National Academy Press, 1997.
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--> evolving sectors such as semiconductors.15 The Reagan administration also saw the creation of the Advanced Technology Program (ATP) in the National Institute of Standards and Technology. In addition to providing the initial funding for the ATP, the Bush administration cooperated with Congress in extending authority for Cooperative Research and Development Agreements (CRADAs) to some Department of Energy laboratories. This provided the legal framework which later permitted significant cooperative programs to be undertaken, such as AMTEX and the PNGV.16 Policymakers were therefore searching for ways to assist private sector commercialization rates, not only because of competitiveness concerns, but for national security reasons as well. It was in this environment of heightened concern about U.S. competitiveness and a desire to ensure the U.S. economy benefited from federal R&D investments that the Advanced Technology Program (ATP) was conceived. The legislation establishing ATP was part of the Omnibus Trade Act of 1988, a complex bill whose main objective was to provide policy instruments to address the rapidly growing U.S. trade deficit. The sponsors of the Advanced Technology Program initiative were Senator Ernest Hollings of South Carolina and Representative George Brown of California. The initial appropriation was small, only $10 million for 1990. ATP was initiated as a means of funding high-risk R&D with broad commercial and societal benefits that would not be undertaken by a single company or group of companies, either because the risk was too high or because the benefits of success would not accrue to the investors. In this regard, the program lacked the straight forward security rationale that had usually underpinned postwar U.S. technology programs. It did, however, reflect a general trend away from purely mission-oriented research and development towards facilitating more broadly based technological advances. In particular, it was seen as a means of facilitating the economic growth that comes from the commercialization and use of new technologies in the private sector. 15 In response to changing procurement needs, the Clinton Administration adopted a "dual use" strategy for defense procurement. See Conflict and Cooperation, op.cit., pp. 153–158. See also the presentations of Paul Kaminski and Jacques Gansler in International Friction and Cooperation in High-Technology Development and Trade, op. cit., pp. 130–152. For a discussion of the demise of the spinoff paradigm, see John Alic, et. al., Beyond Spinoff: Military and Commercial Technologies in a Changing World. Boston: Harvard Business School Press, 1992. 16 AMTEX stands for the American Textile Partnership, a consortium of five industry research, education, and technology transfer organizations, and eight national laboratories. Established in 1993, the agreement is designed to bring the resources of the DOE laboratories to the American fibers, textiles, and fabricated products industry. Research objectives for the multimillion dollar research agreement include improved materials and processes; simulation and computer integration for demand-activated manufacturing; waste minimization and automation. James Burroughs, "AMTEX—An Exciting Vision of the Future, "American Textiles International, May 1993. PNGV is the Program for Next Generation Vehicles; for a review of this program see National Research Council, Review of the Research Program of the Partnership for a New Generation of Vehicles: Third Report. Washington, DC: National Academy Press, 1997.
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--> Attached to a popular trade bill, the program was enacted into law, although without the enthusiastic support of the Reagan Administration. From its modest first year funding of $10 million, the program grew with the support of a Democratic Congress to nearly $68 million in the final year of the Bush Administration. As noted above, the Clinton Administration proposed and initially won substantial increases in ATP funding, but this high profile approach also generated significant opposition to the program.17 One consequence of the sometimes intense debate about government-industry partnerships in general and the ATP in particular, has been a desire for objective analysis of the goals, operation and results of partnership programs. As a 1995 study observed: The federal government has undergone a sea change the past few years in its approach to the private sector. The broad awareness of and support for these activities in Congress and their spread throughout the $80 billion federal R&D system ensure that they will continue well into the next Administration and beyond. The debate should address not whether these programs will endure, but whether they are shaped properly—at the program and aggregate levels—to achieve the desired benefits.18 To carry out such an analysis, the National Academies have undertaken a broad gauge study entitled "Government-Industry Partnerships for the Development of New Technologies." As described in the preface, this project is being carried out under the auspices of the Board on Science, Technology, and Economic Policy, and is intended to contribute to improved understanding of partnerships through a series of conferences and workshops bringing together policy makers, program managers, academic experts, technologists, and representatives of industry. This volume, which is one in a series,19 summarizes the deliberations of a symposium undertaken at the request of the leadership of the National Institute of Standards and Technology (NIST), the agency which administers the Advanced Technology Program. The one-day symposium, held on March 29, 1999, brought together economists, ATP officials, and representatives of private industry to 17 As one observer put it, "the irony of White House leadership on this issue has been that what was once a nonpartisan issue in the Congress acquired a partisan undertone. Legislative objectives that. received broad support in both parties as recently as the early 1990s can now be cause, at times, for heated debate on the role of the government." Berglund and Coburn, op. cit. p. 484. 18 Ibid., p. 487. The 1993 passage of the Government Performance and Results Act requires federal agencies to set strategic goals and to use performance measures for management and budgeting. This is particularly challenging for agencies responsible for research activities and makes the NIST evaluation effort, as well as this study of government-industry partnerships, particularly relevant. For a review of the issues in applying GPRA to federal research, see Evaluating Federal Research Programs: Research and the Government Performance and Results Act, National Academy Press: Washington, D.C., 1999. 19 See Preface.
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--> discuss ATP's rationale, program strengths and weaknesses, and consider areas for improvement. The NIST request itself was in response to a congressional mandate to provide an independent review of program operations. The text which follows provides an overview of the day's proceedings. Overview Measurement and the Advanced Technology Program The symposium was fortunate to have Ray Kammer, Director of NIST, give opening remarks and contribute to the discussion during the entire day's proceedings. Mr. Kammer pointed out that measurement goes to the core of NIST's mission, so it should come as no surprise that NIST is greatly interested in measuring the outcomes of its programs, such as the ATP. ATP's mission—to promote the development of generic technologies that industry is unlikely to fund on its own, but which potentially have great payoffs to society—presents considerable measurement challenges. Government support in the early stage of a technology's development can enable society as a whole to reap great economic benefits. The Internet, springing from relatively modest investment from the Defense Department, the National Science Foundation, and universities, is a classic example.20 Such ex post analysis is useful, he noted, but the political climate often demands an ex ante demonstration of when a given investment will pay off and to what extent. Given that ATP's mission is to invest in technologies with long-range, broad-based economic benefits, the measurement task for a program such as ATP is intrinsically challenging. Nonetheless, measurement has been a part of the Advanced Technology Program since its beginning. The Economic Assessment Office has been an integral part of ATP since the program's inception and ATP's business reporting system closely tracks the progress of ATP awards. To date, ATP has funded 431 projects at a total of $1.39 billion; the private sector has essentially matched that amount, bringing total public/private expenditures on ATP projects to $2.78 billion. Many of these projects have multiple participants; over 1,000 organizations, 125 universities, and 20 national laboratories are involved in ATP projects. The assessment studies conducted for ATP have shown positive economic returns to these projects, most companies say that ATP grants have accelerated R&D cycles, and nearly two-fifths report that they would not have undertaken the research at all without the ATP grant. While quoting Commerce Secretary William Daley that recent ATP assessments present "a portrait of a program that works," Mr. Kammer said that an ongoing challenge "is to document how the ATP affects the economy, and by how much." 20 For an excellent review of the early funding for the internet, see Funding A Revolution, op.cit.
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--> History of ATP The symposium's first panel discussed the ATP's history and current legislative outlook for the Advanced Technology Program. In setting the context for the panel, Dr. Christopher Hill of George Mason University placed ATP's development squarely within U.S. economic conditions of the 1980s, during which time the expansion of Japanese firms' share of high and medium technology markets (e.g. semiconductors and automobiles) seemed to pose a major competitive challenge to the United States. Technology policy usually receives the greatest attention during periods of economic distress; consequently, policy experiments to encourage cooperation received relatively sympathetic hearings during the 1980s, even if government support of industrial R&D was far from an alien concept before then. The politics of ATP were notable, said Dr. Hill, because congressional staff played a major role in the program's creation. The likely business beneficiaries were initially "oblivious, lukewarm, and indifferent" to the program. 21 In this situation, the program's attachment to the Omnibus Trade Bill was instrumental to its enactment. The program did grow modestly during the Bush Administration, from $10 million to $68 million, and expanded rapidly under the Clinton Administration. The arrival of the Republican Congress in 1995 changed the political landscape, and the hostility of Robert Walker, then Chairman of the House Science Committee, seemed to threaten the program's existence. Perhaps reflecting these political realities, Dr. Hill noted that it is remarkable that the Clinton Administration, has not put forward major technology policy legislative initiatives.22 Dr. Hill attributed this lacuna to the strong U.S. economy in the Clinton years. In his view, to the extent that government programs have contributed to this performance, past investments in programs such as the Defense Advanced Research Projects Agency deserve the credit. The wide-ranging discussion following Dr. Hill's remarks focused on ATP's rationale, evaluation, and impact. Dr. Claude Barfield remarked that ATP is often talked about in terms of its benefits to specific companies, whereas the economic rationale for the program should concentrate on its social benefits—the externalities it creates that accrue to society. Evaluation of ATP, he said, should 21 This is no longer the case. There is active support for the program from both large and small companies, notably through the industry-led Coalition for Technology Partnerships, and numerous professional societies. 22 As Dr Hill notes, the mid-nineties were not a propitious time for new partnership initiatives. Elements of the new Congress advocated the elimination of entire departments, e.g. Commerce, and organizations, e.g. the Office of Technology Assessment (which was disbanded) as well as programs such as TRP and ATP. The budget deficit also contributed to a climate in which new partnership initiatives were difficult. The Clinton Administration did initiate the PNGV program and the Environmental Technology program. Recent initiatives include the expanded support for human genome research and information technology programs such as Next Generation Internet and IT2.
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--> focus on social benefits. From the Congressional staff perspective, James Turner and David Goldston both underscored the importance placed on evaluating the ATP from the program's inception.23 As valuable as evaluation has been, Mr. Goldston noted its limits; policymakers often want to know the net economic benefits of a program such as ATP (sometimes even before committing funds), and evaluations of technology programs can rarely provide this information. Mr. Turner said that evaluation was built into the structure of the program when it was established, even though the inherent limits of evaluation were known. Mr. Turner emphasized that ATP was originally envisioned as a program with a limited scope—namely to address precompetitive generic technologies—and that drafters of ATP legislation chose to make the program industry led, meaning companies had to bring money to the table to receive funding. Finally, Mr. Turner responded to Dr. Loren Yager's comments that had policymakers known in 1988 how the U.S. economy would regain its preeminence, they probably would not have created ATP. Notwithstanding the growing belief that America has a "New Economy" with unparalleled growth potential, Mr. Turner noted that the Japanese experience underscores how uncertain such economic predictions can be.24 Programs such as ATP, which target high-risk technologies at modest levels of public funding, may be viewed as wise investments in the future. Program Operations Dr. Lura Powell, Director of the Advanced Technology Program, described the selection process that ATP proposals undergo. Industry submits proposals to ATP, and ATP undertakes a general review of a proposal to see whether it involves sufficient technical risk, is feasible, and promises the widespread economic benefits that ATP wishes to foster. Each proposal undergoes review by technical and business experts, such as retired industrialists and researchers. Because the criteria for awarding ATP grants require that technologies have significant risk and broad-based economic benefits, there is a low likelihood that ATP awards will replace private capital. Venture capitalists, said Dr. Powell, search for projects that will generate private benefits, whereas ATP, with the focus on precompetitive technologies, seeks out projects whose economic benefits will be significant, but also have the potential to diffuse across a sector or the economy as a whole. 23 In a recent article discussing the challenges facing the SBIR program, James Turner and the late Congressman, George Brown, argue that the ATP has addressed assessment issues more effectively than the substantially larger SBIR program. See George E. Brown, Jr. and James Turner, "Reworking the Federal Role in Small Business Research," Issues in Science and Technology, Vol. XV, no. 4 (Summer 1999). 24 The recent work of the STEP Board assessing the competitive position of U.S. firms in eleven sectors in the 1980s and today illustrates the inaccuracy of some contemporary assessments and, more broadly, underscores the dangers of complacency. See U.S. industry in 2000, op.cit., passim.
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--> Addressing the need for help in meeting the mission of the National Institutes of Standards and Technology, Jeffrey Schloss of the National Human Genome Research Institute, emphasized the ATP's relevance to the Human Genome Project. Given the complexity of mapping the human genome and the enormous amount of data involved, the genome project requires advanced information technology tools and multidisciplinary approaches to technology development. A program that looks across a number of technology areas, such as ATP, is therefore uniquely positioned to contribute. The National Human Genome Research Institute is already partnering with other agencies to create the technologies necessary to exploit our investments in genome research, yet ATP's cross-disciplinary, multicompany approach is especially attractive in meeting the special needs associated with genome research. Three industry representatives, all of whom had received ATP awards, were asked to discuss the technologies that ATP funded, the review process, and the social benefits of their companies' technologies and to give their views on how to improve the program. In the cases discussed, ATP funded a high-risk technology with commercial potential, a research tool that the company would not pursue on its own, and a cost-cutting technology with industry-wide benefits. In the first case, ATP funded X-Ray Optical Systems, a manufacturer of parallel and convergent beams that allow users (often semiconductor or pharmaceutical firms) to better understand the structure of materials. The company was founded to commercialize technology whose basic research had been conducted in the Soviet Union. Founders of X-Ray Optical reached into personal savings and resources of friends and family in the start-up stages, but they were unable to secure bank or venture financing because the technology was too far from commercial application. An ATP award was an attractive alternative, given that traditional sources were either unavailable or exhausted. Although X-Ray Optical System's first ATP application was rejected, the close technical scrutiny provided by the program proved beneficial. In retrospect, the initial rejection was appropriate. Once the company made the commitment to develop its business and technical plan further, it was able to win an ATP award. The program also funds proposals by larger companies with widespread applications. For example, at the Honeywell Technology Center, ATP funded a joint Honeywell-SEMATECH-Advanced Micro Devices effort to develop an Advanced Process Control Framework to reduce semiconductor fabrication costs. This is classic ''precompetitive generic technology'' in the sense that semiconductor companies compete on chip design, but are burdened with rapidly escalating fabrication costs. A process to reduce costs may be expensive to develop and distract companies from pursuing cutting-edge designs. It is therefore less likely to be undertaken by a single company. Using industry expertise, with ATP's assistance, AMD has reduced fabrication costs by $10 million, and the software developed under the ATP grant has been installed at other semiconductor companies.
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--> At Axys Pharmaceuticals, the company developed a drug development tool called "liquid arrays," a micro-ray technology that permits the company to develop high quality drugs faster and more cheaply. Such a tool is not central to Axys' core business, which is to develop new drugs, not tools to make them. Although promising, liquid array technology was speculative and too expensive for Axys to pursue on its own. Because venture capitalists have severely curtailed funding to the U.S. biotechnology sector, ATP filled an important gap for Axys. Although noting that the ATP administration should try to reduce the paperwork involved in the application process, William Newall added that Axys' development of liquid arrays using the ATP award was further facilitated by Axys being able to retain rights to the intellectual property developed with the award. From the congressional perspective, Jeff Grove, staff director of the House Committee on Science's Subcommittee on Technology, said he was pleased to hear that the industrial representatives were largely satisfied with the program. He added that he was interested in learning more about how the program could be better implemented. Research done by government auditors and at private think tanks had suggested that program implementation could be improved. The ATP Evaluation Program Evaluating ATP has been central to the program since its inception. Rosalie Ruegg, the Director of the ATP's Economic Assessment Office, outlined the ATP evaluation program, saying that the program evaluates projects in light of its congressionally authorized mission to support the creation of generic technologies with widespread economic impact to facilitate their rapid commercialization. Given the need for rapid commercialization, time figures prominently into ATP evaluation; if commercial benefits fall outside the window for a relevant market impact, then the benefits are likely to be seen as insufficient. As ATP conceptualizes evaluation, timely market impact is linked to long-run economic impact. Such long-run impact may take the form of direct marketplace outcomes, such as increased market shares for awardees or easily identifiable industry-wide benefits in a process technology. Indirect impacts are also explored, such as knowledge or institutional effects that may fall outside the boundary of the ATP project. An institutional effect, for example, may be better user-supplier communication channels established in the process of a joint venture carrying out ATP-funded research. These channels may endure long after completion of the ATP project. ATP's Business Reporting System has helped in evaluation of projects, and in-depth case studies have been indispensable in conducting evaluation. New tools and methods for evaluation, concluded Dr. Ruegg, are nonetheless needed. Dr. J.C. Spender reinforced this theme in his comments on Dr. Ruegg's presentation noting that if ATP is an experiment in technology policy, it is also an experiment in evaluation research. He urged that ATP evaluations guard against picking only the "low hanging fruit"; he encouraged researchers present to develop new
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--> evaluation tools for ATP and also to take a multidisciplinary approach to the program's evaluation. Capital Markets and ATP Even with the most well-thought out evaluation program, policymakers must still consider whether ATP appropriately fills a gap in the access to capital for certain kinds of technologies. In laying out some theoretical issues, Dr. Kenneth Flamm said that even with perfect capital markets, there may be under-investment in R&D because of appropriability problems (i.e., firms investing in R&D do not reap all its benefits). From a venture capitalist perspective, Mr. Todd Spener took a similar view, noting that an ATP award enhances the credibility of a given company's technology. By mitigating technology risk for venture capitalists, the program can help qualify potential candidates for venture funding. It can also provide initial, or "catalyst capital," to help bring in venture funding and the associated management support. In his presentation, Dr. Joshua Lerner pointed out that the venture capital industry, though very flexible, is still relatively small, at some $15 billion annually, in relation to the U.S. economy. Moreover, the venture capital investments are heavily concentrated by sector. For example, 80 percent of current venture funds go to information technologies. Given this concentration, he suggested a program such as ATP can serve as a useful countervailing force to this herding tendency. Several ATP award recipients described how the grant addressed their needs in ways that traditional funding sources did not. Dr. Mitch Eggers described his company, Genometrix, which makes an electronic DNA chip. When Genometrix first conceived of combining microelectronics and electrobiology in the 1990s, it approached companies such as Texas Instruments and Hewlett Packard for funding. While they found the DNA chip intriguing, the technology was too risky and too far from commercialization for the companies to finance. Genometrix thus turned to ATP for funding, and won $9 million, the largest award given in 1994. Genometrix and its collaborators then were able to obtain $9 million in matching funds. Shortly thereafter, the company received a modest amount of venture financing. In Dr. Egger's view, the venture financing would not have been forthcoming in the absence of the ATP award. Genometrix' technology has in fact proven to have substantial social benefits, as it provides a quick and inexpensive test for whether individuals may be allergic to certain drugs. For Osiris Therapeutics, a company commercializing mesenchymal stem cell technology for tissue regeneration, the ATP grant allowed it to pursue research in areas that its constrained resources would otherwise prohibit. Although Osiris' technology focuses on cancer therapy, bone, and cartilege regeneration, the company discovered an interesting use for stem cell technology in cardiac muscles. The technology was, however, far from commercialization, and the risk associated with the technology necessitated new resources. Because Osiris receives
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--> financing through a strategic partnership with Novartis Pharmaceuticals, it has not sought venture financing. An initial public stock offering was planned, however, market conditions in 1998 led to a postponement. Applying for an ATP award thus became a logical route to pursue, not only because it focused on high-risk technologies, but because it was a competitive grant process. Winning an ATP grant serves has served as a useful bridge to other corporate financing for Osiris' cardiac stem cell application. Extending Assessment of ATP Notwithstanding the ATP's already extensive assessment program, extending and improving assessment remains a priority. As NIST's Dr. Maryellen Kelley observed, part of that effort involves collecting the appropriate information from ATP award recipients. Because the typical ATP project takes between three and five years to complete, ATP's business reporting system tracks firm performance during the life of the project and periodically for six years after the award. A key fact about ATP award recipients is that most of them go to groups of firms and organizations collaborating with one another. To the extent that assessment focuses on the ATP grant's impact on recipients, this presents a challenge because there are differential impacts among collaborators. To address that challenge, Dr. Kelley said, case studies are an important assessment tool. In discussing their research, Dr. William Lehr and Dr. Nicholas Vonortas emphasized the impact of indirect affects and the benefits of case study research. One objective in using case study techniques is to determine the indirect effects of the ATP, e.g., organizational or sectoral learning, which participants said are likely to be a substantial portion of all ATP impacts. By encouraging collaboration through the ATP application process, the program may foster collaboration and learning in ways not directly related to the research eventually undertaken under the ATP grant. Future Challenges The day's final panel on future challenges for the ATP focused further on the challenge of assessment, with additional discussion of the program's contribution to a broad and diversified U.S. technology policy. As Dr. Richard Nelson said, the ATP can fill a valuable niche in America's technology policy, yet it should by no means be seen as an all-purpose technology policy instrument. The industry-led character of ATP is a virtue, Dr. Nelson observed, but he cautioned that ATP-funded technologies must be widely disseminated for their full benefits to be realized. He expressed the concern that most of ATP's benefits were accruing to
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--> private parties, not the public at large.25 Dr. Christopher Hill echoed this point, suggesting that the profitability of a given ATP recipient is not the right metric with which to judge the program; rather spillover benefits to the public, as difficult to measure as they may be, is the right standard. Dr. Barry Bozeman remarked that the careful scrutiny and analysis to which ATP has been subject may well be valuable, but will not, by itself, create sufficient political support to sustain the program. He urged ATP officials to continue to modify the program's administrative procedures and management in light of assessment findings. In his closing remarks, Dr. William Spencer reminded the symposium participants that governments around the world, including the United States government, provide active support for R&D and technology development. In other countries, where the resources involved are sometimes greater, there is little debate about these types of programs; governments simply carry them out. The size and scope of the programs vary across and within countries, and for this reason, they are usually seen as experiments. Technology programs in this country, suggested Dr. Spencer, should be seen as experiments as well. The ongoing assessment of ATP, as well as efforts to improve our ability to carry out such assessment, are not only ways to improve the Advanced Technology Program, they are also an important means to improve future technology policy initiatives. CHARLES W. WESSNER 25 To address this and related points, the ATP assessment program has commissioned a study by Wesley M. Cohen and John Walsh, "Within and Across Industry Spillovers and Appropriability: A Survey Based Approach." Carnegie Mellon University Working Paper, Pittsburgh, 1998. The study examines the sources of the differences between social and private returns to R&D within industries, examining in particular the role of R&D spillovers.
Representative terms from entire chapter: