Chapter 2:

U.S. and International Research and Development: Funds and Alliances

Inter-Sector and Intra-Sector Domestic Partnerships and Alliances

In the performance of R&D, organizations can collaborate, either within the same sector (e.g., a partnership between firms) or between sectors (e.g., a partnership between a firm and the Federal Government). Decisions by organizations to form these partnerships are based on economic considerations, legal and cultural frameworks, scientific and technological conditions, and policy environments.

Economic Considerations Underlying R&D Partnerships top

Collaboration allows individual partners to leverage their resources, reducing costs and risks and enabling research ventures that might not have been undertaken otherwise. In the case of intra-sector collaboration, the underlying theme is that more can be accomplished at lower cost when resources are pooled, especially if organizations can complement each other in terms of expertise and/or research facilities. For private companies, another advantage of partnerships is that they reduce (or eliminate) competition between the allied companies, which may thereby enjoy higher profits once their jointly developed product is marketed.

With regard to university-industry alliances, companies can benefit from the extensive research infrastructure (including the students), as well as the store of basic scientific knowledge, that exists at universities—which those firms would not be able afford on their own.[30] Universities, on the other hand, benefit from alliances with firms by being better able to channel academic research toward practical applications" (Jankowski 1999).

In the case of collaboration between Federal laboratories and industry—in the form of Cooperative Research and Development Agreements (CRADAs)—a wide range of economic benefits to both parties has been noted. The main reason for the creation of CRADAs was that industry would benefit from increased access to government scientists, research facilities, and the technology they developed. Government, in turn, would benefit from a reduction in the costs of items it needs to carry out its objectives (Lesko and Irish 1995, 67). Both would benefit from technology transfer, and Federal R&D in national labs would be more useful to U.S. industry. Some analysts have argued as well that Congress created CRADAs[31] to simplify negotiations between the Federal Government and industry in the process of technology transfer, by making the process exempt from Federal Acquisition Regulation (FAR) requirements.

With regard to collaboration between academia and the Federal Government, little exists in the strict sense of employees from both working together, side-by-side, on R&D projects. On the other hand, collaboration in a broad sense is quite extensive in that academia receives research grants to perform "targeted research."[32] (See "Federal Support to Academia.") Some of this research is designed to meet Federal needs, in cases in which the Federal Government does not have the physical or human resources to perform the research itself. In other cases, the Federal Government may support academic research (or research in other sectors) for the sake of creating a "public good" that would be expected to provide economic benefits to society. As many people know, one of the public goods that arose from this kind of collaborative effort is the Internet, which originated from a project funded by the Defense Advanced Research Projects Agency (DARPA) and then greatly advanced through NSF funding to universities.

Finally, international competition adds two additional considerations. First, Federal-industry partnerships and other types of partnerships in the performance of R&D in the United States may be desirable as a means of competing adequately against similar partnerships carried out in other nations. Second, the United States may choose to enter into international projects with the idea that, just like firms, nations may be able to pool resources that collectively enhance their R&D capabilities.

Federal Technology Transfer Programs top

The term "technology transfer" can cover a wide spectrum of activities, from informal exchanges of ideas between visiting researchers to contractually structured research collaboration involving the joint use of facilities and equipment. Only since the late 1980s, however, has technology transfer become an important mission component of most Federal labs. Some agencies, however, have long shared their research with the private sector (e.g., USDA's Agricultural Research Experiment Stations and NASA's civilian aeronautics programs), and several laws passed in the early 1980s encouraged such sharing—notably, the Stevenson-Wydler Technology Innovation Act of 1980. (See sidebar, "Principal Federal Legislation Related to Cooperative Technology Programs.")

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The emphasis, in the past decade, on technology transfer stems from practical considerations: Industry was interested in such programs, Federal money was available, and government defense labs were amenable to such activities as an alternative to their declining defense work (OTA 1995). Moreover, technology transfer was regarded as a means of addressing Federal concerns about U.S. industrial strength and world competitiveness. Another reason was that the Federal Technology Transfer Act (FTTA) of 1986 authorized government-owned and -operated laboratories to enter into CRADAs with private industry. Only after the 1989 passage of the National Competitiveness Technology Transfer Act (NCTTA), however, could contractor-operated labs (including DOE's FFRDCs) also enter into CRADAs. According to most available indicators, Federal efforts to facilitate private-sector commercialization of Federal technology have made considerable progress since 1987.

Four measures of the extent of Federal technology commercialization efforts and Federal-industry collaboration between 1987 and 1998 can be described as follows:

Differences in Motivations and Goals of CRADA Participants top

Studies have indicated that although partnerships between sectors offer economic and scientific benefits to the parties involved, those partnerships may be constrained by cultural differences between sectors. Some observers have argued that industrial scientists and engineers tend to place much greater emphasis than their government colleagues on profitability, international competitiveness, and turnaround time. Conversely, government scientists and engineers tend to have longer-range and more idealistic perspectives. For example, Lesko and Irish (1995) describe the Federal defense employee's "traditional view" as one in which "the primary to develop, produce, enhance, and support the military systems that provide a warfighting capability for the U.S. that is second to none" (Lesko and Irish 1995, 33--34).

Rogers et al. (1998) surveyed participants in CRADA partnerships at Los Alamos National Laboratory. They found that, according to private companies in these partnerships, the top five objectives of CRADAs were (in descending order of importance) to obtain new technology/information/patents, to save money in developing a process/product, to save costs, to improve research ability within the company, and to obtain a new product. In contrast, the top five objectives according to Federal R&D laboratory partners were to improve the research ability of the Federal R&D laboratory, such as adding capabilities; to obtain new funding; to obtain technology/information/patents; to gain credibility/prestige/employee satisfaction; and to develop or gain access to new facilities/tools. According to Rogers et al., such differences in orientation have been a major obstacle to further increases in the number of CRADAs. Rogers et al. conclude, "Since 1994, Federal funding for establishing new CRADAs has almost disappeared, mainly due to partisan differences about the role of the Federal Government in its relations with private companies" (Rogers et al. 1998, 87).

On the other hand, Lesko and Irish (1995) are more optimistic about the future ability of scientists and engineers from these different cultures to get along:

Significant differences in the perspectives of government and industry can and do impede progress in cooperative ventures. As both sides realize that they need each other's perspectives and combined resources to survive global competition and effectively manage shrinking resources, their goals and procedures will change toward becoming more and more cooperative. Good communications can be a key to identifying, understanding, and overcoming culturally derived barriers to this process (Lesko and Irish 1995, 29).

Scientific and Technological Conditions Underlying R&D Partnerships top

The complexity and interdisciplinary nature of R&D has continued to increase in recent years, as discoveries in one area of science or engineering (e.g., modular robotics systems) have had bearing on other areas (e.g., space exploration). As the scope of R&D on any topic expands, researchers from individual institutions may find themselves less able to approach the topic as broadly as they think they should; they may therefore search for collaborators who can complement their knowledge or research facilities. For example, academic researchers increasingly have sought to leverage resources and talents in the conduct of R&D. Not only does such an approach offer opportunities for alternative funding, such partnership provides an essential means for undertaking work that is becoming ever more complex and multidisciplinary (Jankowski 1999).

At the same time that scientific and engineering developments are increasing the need for—and the benefits of—R&D partnerships and alliances, advances in communication equipment and software are creating new tools that make such collaborative efforts much easier. Hazlett and Carayannis (1998) describe recent developments in "virtual teams"—especially between industry and academia—whereby communication, data acquisition, data sharing, and document sharing can all take place virtually among individuals in distant organizations. In effect, the operational costs of collaborating have been reduced enormously, thereby encouraging increased collaboration among researchers of the same or similar topics.

Current research on expanding Internet capabilities offers even more powerful tools for collaborative efforts. DOE and NSF have been sponsoring research that has been moving scientists and engineers closer to having the ability to collaborate in virtual laboratories or conference rooms through "telepresence." That is, researchers at remote physical locations interact with one another in a virtual, three-dimensional environment, experiencing each other's artificial presence as though everyone were in the same room. Such capabilities will undoubtedly enhance collaboration potential.[33]

Industrial R&D Consortia top

In the early 1980s, increasing international competition and the resulting erosion in U.S. technological leadership led legislators and policymakers to conclude that existing U.S. antitrust laws and penalties were too restrictive and could be impeding the ability of U.S. companies to compete in the global marketplace. U.S. companies were at a disadvantage relative to their foreign counterparts because an outdated antitrust environment—designed to preserve domestic competition—prohibited them from collaborating on most activities, including R&D.

Restrictions on multi-firm cooperative research relationships were lifted with the passage of NCRA in 1984. This law was enacted to encourage U.S. firms to collaborate on generic, precompetitive research. To gain protection from antitrust litigation, NCRA requires firms engaging in RJVs to register them with DOJ.[34] In 1993, Congress again relaxed restrictions—this time on cooperative production activities—by passing the National Cooperative Research and Production Act, which enables participants to work together to apply technologies developed by their RJVs.

The advantages of RJVs over individual firms conducting R&D on their own have been identified as follows:[35]

By the end of 1998, 741 RJVs had been registered; organizations such as Sematech have helped U.S. industries regain leadership in global markets for high-tech products such as semiconductors. On the other hand, by 1998 the number of new RJV filings per year had fallen sharply to 31, after reaching a peak of 115 in 1995 (Link 1999). (See figure 2-25.) Other observations include:

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[30] On the topic of firms benefiting from the tacit knowledge of universities, Prabhu (1997)—citing earlier work by Tyler and Steensma (1995)—suggests, "The greater the tacitness of technology (hard to document in writing, residing in individuals, systems and processes of the firm, and difficult to transfer through market mechanisms), and the greater the complexity of technology (variety and diversity of technologies that must be incorporated into the development process), the more likely it is that executives will consider technological collaboration a mode of technology development."

[31] See the next section on the legal reasons for partnerships and alliances.

[32] Targeted research as a policy goal is discussed in U.S. Congress, House Committee on Science (1998).

[33] See Smith and Van Rosendale (1998), Larson (1998), and chapter 9 of this report.

[34] According to NCRA, an RJV is "any group of activities, including attempting to make, making, or performing a contract, by two or more persons for the purpose of (a) theoretical analysis, experimentation, or systematic study of phenomena or observable facts, (b) the development or testing of basic engineering techniques, (c) the extension of investigative findings or theory of a scientific or technical nature into practical application for experimental and demonstration purposes... (d) the collection, exchange, and analysis of research information, or (e) any combination of the [above]." RJV members can be from different sectors as well as from different countries.

[35] These points are taken from Vonortas (1997); however, Vonortas credits these ideas to Douglas (1990).

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