Skip all navigation and go to page content.

Chapter 4. Research and Development: National Trends and International Comparisons

Federal Programs to Promote Technology Transfer and the Commercialization of Federal R&D

Starting in the late 1970s, concerns by domestic policymakers about the strength of U.S. industries and their ability to succeed in the increasingly competitive global economy took on greater intensity. The issues raised included whether the new knowledge and technologies arising from federally funded R&D were being fully and effectively exploited for the benefit of the national economy, whether there were undue barriers in the private marketplace that worked to slow businesses in the creation and commercialization of innovations and new technologies, and whether better public-private partnerships for R&D and business innovation had the potential to significantly aid the nation’s economy in responding to these emerging challenges (Tassey 2007). As the reality of the global economic changes deepened throughout the 1980s and 1990s (and into the present), it became apparent that the United States’ global science and technology leadership needed to have a match in a dynamic economic system able to quickly absorb and capitalize on R&D advances in ways beneficial to the economic fortunes of U.S. consumers and businesses.

Numerous national policies and related initiatives have been directed at these challenges over the last 30 years, including how to better transfer and economically exploit the results of federally funded R&D. One major national policy thrust has been to enhance formal mechanisms for transferring knowledge arising from federally funded and performed R&D (Crow and Bozeman 1998; NRC 2003). Other policies have taken on strengthening the prospects for the development and flow of early-stage technologies into the commercial marketplace, accelerating the commercial exploitation of academic R&D, and facilitating the conduct of R&D on ideas and technologies with commercial potential by entrepreneurial small and/or minority-owned businesses. (For an overview of major federal policy initiatives in this realm since the early 1980s, see the sidebar, “Major Federal Policies Promoting Technology Transfer and Commercialization of R&D.”)

The sections immediately below focus on this theme of the transfer and commercial exploitation of federally funded R&D and review the status indicators for several major federal policies and programs directed at these objectives. (Chapter 5 contains related information about the knowledge diffusion and patents arising from academic research.)

Federal Technology Transfer

Technology transfer is “the process by which technology or knowledge developed in one place or for one purpose is applied and used in another place for the same or different purpose” (FLC 2011:3). As applied in the federal setting, technology transfer refers to the various processes through which inventions and other intellectual assets arising from federal laboratory R&D are conveyed to outside parties for further development and commercial applications. It can also involve linking R&D capabilities and the resources of federal laboratories with outside public or private organizations for mutual benefit, including flowing know-how and technologies developed on the outside into federal research facilities to better meet mission objectives and enhance internal capabilities.

The Stevenson-Wydler Act of 1980 (P.L. 96-480) directed federal agencies with laboratory operations to become active in the technology transfer process. It also required these agencies to establish technology transfer offices (termed an Office of Research and Technology Applications [ORTA]) to assist in identifying transfer opportunities and establishing appropriate arrangements for transfer relationships with nonfederal parties. Follow-on legislation in the 1980s through 2000 amending Stevenson-Wydler have worked to extend and refine the authorities available to the agencies and their federal labs to identify and manage intellectual assets created by their R&D and to participate in collaborative R&D relationships with nonfederal parties, including private businesses, universities, and nonprofit organizations (FLC 2011).

The metrics on federal technology transfer continue to primarily track the number of activities, that is, invention disclosures, patent applications and awards, licenses to outside parties of patents and other intellectual property, and agreements to conduct collaborative research with outside parties (IDA STPI 2011). Systematic documentation of the downstream outcomes and impacts of transfer remains a challenge. Also notably missing for most agencies and their labs is an accounting of the technical articles published in professional journals, conference papers, and other kinds of scientific communications. Most federal laboratory scientists, engineers, and managers continue to view these traditional forms of new knowledge dissemination as an essential technology transfer mechanism. (For further discussion of the current mechanisms and main metrics for federal technology transfer, see the sidebar “Federal Technology Transfer: Activities and Metrics.”)

Six agencies continue to account for most of the annual total of federal technology transfer activities: DOD, HHS, DOE, NASA, USDA, and DOC. Statistics for these six agencies in FYs 2006 and 2010, spanning the activity areas of invention disclosures and patenting, intellectual property licensing, and collaborative relationships for R&D, appear in table 4-16. (Similar statistics for a larger set of agencies, going back to FY 2001, appear in appendix table 4-40.)

As is apparent in the distribution of the statistics across the activity types in table 4-16, most agencies engage in all of the transfer activity types to some degree, but there are differences in the emphases. Some agencies are more intensive in patenting and licensing activities (such as HHS, DOE, and NASA); some place greater emphasis on transfer through collaborative R&D relationships (such as DOD, USDA, and DOC). Some agencies have unique transfer authorities that can confer practical advantages. NASA, for example, can establish collaborative R&D relationships through special authorities it has under the NASA Space Act of 1958; USDA has a number of special authorities for establishing R&D collaborations other than through Cooperative Research and Development Agreements (CRADAs); DOE has contractor-operated national labs, with nonfederal staff, that are not constrained by the normal federal limitation on copyright by federal employees and can use copyright to protect and transfer computer software. In general, the mix of technology transfer activities pursued by each agency reflects a broad range of considerations such as agency mission priorities, the technologies principally targeted for development, the intellectual property protection tools and policies available, and the types of external parties through which transfer and collaboration are chiefly pursued.

Small Business Innovation-Related Programs

The Small Business Innovation Research (SBIR) program and Small Business Technology Transfer (STTR) program are longstanding federal programs that provide competitively awarded funding to small businesses for various purposes. These include stimulating technological innovation, addressing federal R&D needs, increasing private sector commercialization of innovations flowing from federal R&D, and fostering technology transfer through cooperative R&D between small businesses and research institutions. The U.S. Small Business Administration provides overall coordination for both programs, with implementation by the federal agencies that participate (SBA 2013). The attention devoted to smaller and/or startup R&D-based companies by these programs exemplifies the promotion of innovation-based entrepreneurship via public-private partnerships that enable not only financing but also R&D collaboration and commercialization opportunities (Gilbert, Audretsch, and McDougall 2004; Link and Scott 2010).

The SBIR program was established by the Small Business Innovation Development Act of 1982 (P.L. 97-219) for the purpose of stimulating technological innovation by increasing the participation of small companies in federal R&D projects, increasing private sector commercialization of innovation derived from federal R&D, and fostering participation by minority and disadvantaged persons in technological innovation. The program was reauthorized by the Small Business Reauthorization Act of 2000 (P.L. 106-544), extending the program through the end of September 2008. Subsequently, the program has received several extensions from the Congress, which now carries the program through 2017. Eleven federal agencies currently participate in the SBIR program: USDA, DOC, DOD, ED, DOE, HHS, DHS, DOT, EPA, NASA, and NSF.

The STTR program was established by the Small Business Technology Transfer Act of 1992 (P.L. 102-564, Title II) for the purpose of facilitating cooperative R&D by small businesses, universities, and nonprofit research organizations and encouraging the transfer of technology developed through such research by entrepreneurial small businesses. The program was reauthorized through the end of September 2009 by the Small Business Technology Transfer Program Reauthorization Act of 2001 (P.L. 107-50). Congress has likewise provided a number of extensions since then, with the program now continuing through 2017. Five federal agencies currently participate in the STTR program: DOD, DOE, HHS, NASA, and NSF.

For SBIR, federal agencies with extramural R&D budgets exceeding $100 million annually must set aside 2.5% (since FY 1997) for SBIR awards to U.S.-located small businesses (defined as those with fewer than 500 employees, including any affiliates). Three phases of activities are recognized. Phase I: A small company can apply for a Phase I funding award (normally not exceeding $150,000) for up to 6 months to assess the scientific and technical feasibility of an idea with commercial potential. Phase II: Based on the scientific/technical achievements in Phase I and continued expectation of commercial potential, the company can apply for Phase II funding (normally, not exceeding $1,000,000) for 2 years of further development. Phase III: Where the Phase I and II results warrant, the company pursues a course toward commercialization. The SBIR program itself does not provide funding for Phase III, but depending on the agency Phase III may involve non-SBIR-funded R&D or production contracts for products, processes, or services intended for use by the federal government. Several agencies offer bridge funding to Phase III and other commercialization support for startups (NRC 2008:208–16).

The initial round of SBIR awards was for FY 1983. This amounted to 789 Phase I awards, across all the participating agencies, for a total of $38.1 million of funding (table 4-17; appendix table 4-41). By FY 2011, the program had expanded considerably: 5,396 awards (3,626 Phase I; 1,770 Phase II), with total funding of $1.946 billion ($502 million Phase I; $1.444 billion Phase II). In FY 2011, the majority of the funding reflected awards by DOD (43%) and HHS (32%) (appendix table 4-42). NASA (9%), DOE (7%), and NSF (5%) accounted for smaller shares. The other six participating agencies were 1% or less of the total.

For the STTR program, federal agencies with extramural R&D budgets that exceed $1 billion annually must reserve 0.3% for STTR awards to small businesses. STTR operates within the same three-phase framework as SBIR. Phase I provides awards for company efforts to establish the technical merit, feasibility, and commercial potential of proposed projects; the funding in this phase normally does not exceed $100,000 over 1 year. Phase II is for continued R&D efforts, but award is conditional on success in Phase I and continued expectation of commercial potential. Phase II funding normally does not exceed $750,000 over 2 years. Phase III is for the small business to pursue commercialization objectives, based on the Phase I and II results. The STTR program does not provide funding for Phase III activities. Furthermore, to pursue Phase III, companies must secure non-STTR R&D funding and/or production contracts for products, processes, or services for use by the federal government.

The STTR program started with a single Phase I award for $100,000 in FY 1995 (table 4-17). In FY 2011, there were 708 awards (468 Phase I; 240 Phase II), with funding totaling $235 million ($64 million Phase I; $170 million Phase II). Fewer federal agencies participate in STTR, but those dominant in SBIR are also dominant in STTR. STTR awards from DOD accounted for 44% of the $235 million award total in FY 2011 (appendix table 4-43). HHS accounted for 36% of the STTR awards, and the remainder was from NASA (9%), DOE (8%), and NSF (4%).

Other Programs

The federal policies, authorities, and incentives established by the Stevenson-Wydler Act (and the subsequent amending legislation) and the SBIR and STTR programs are far from the whole of federal efforts to promote the transfer and commercialization of federal R&D. Numerous programs for these purposes exist in the federal agencies. Given the specifics of agency missions, they have a narrower scope and smaller pools of resources. Several examples are described below.

The Hollings Manufacturing Extension Partnership (MEP) is a nationwide network of manufacturing extension centers located in all 50 U.S. states and Puerto Rico. MEP was created by the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418) and is headed by the Department of Commerce’s National Institute of Standards and Technology (NIST 2013a). The MEP centers (nonprofit) exist as a partnership among the federal government, state and local governments, and the private sector. MEP provides technical expertise and other services to small and medium-sized U.S. manufacturers to improve their ability to develop new customers, expand into new markets, and create new products. The centers work directly with manufacturers to engage specific issues, including technology acceleration, process improvements, innovation strategies, workforce training, supply-chain development, and exporting. They also serve to connect manufacturers with universities and research laboratories, trade associations, and other relevant public and private resources. A recent MEP annual report (FY 2012) describes the program as operating with $300 million of annual resources: $100 million from the federal government, and $200 million from state and local governments and the private sector (NIST 2013b). The MEP report indicates that technical expertise and other services were provided during FY 2012 to 31,373 U.S. manufacturing companies and attributes impacts of $6.6 billion in increased or retained sales, 61,139 increased or retained jobs, and $900 million in cost savings for these businesses.

The Department of Energy’s Advanced Research Projects Agency—Energy (ARPA-E) provides funding, technical assistance, and market development to advance high-potential, high-impact energy technologies that are too early stage for private sector investment (DOE 2013). The main interest is energy technology projects with the potential to radically improve U.S. economic security, national security, and environmental quality––in particular, short-term research that can have transformational impacts, not basic or incremental research. ARPA-E was authorized by the America COMPETES Act of 2007 (P.L. 110-69), and it received $400 million of initial funding through the American Recovery and Investment Act of 2009 (P.L. 111-5). Federal funding (appropriations) for ARPA-E was $180 million in FY 2011 and $275 million in FY 2012. The program is currently authorized through FY 2013, although the FY 2013 funding level remains unresolved at this time (DOE 2013). ARPA-E reports 190 funded projects active as of November 2012, with a total of 275 projects funded since 2009. The program currently identifies 14 project areas, with topics including advanced batteries, energy storage technologies, improved building energy efficiencies, biofuels, and solar energy.

The National Science Foundation’s Industry/University Cooperative Research Centers (I/UCRC) Program supports university/industry partnerships for the conduct of industrially relevant fundamental research, collaborative education, and the transfer of university-developed ideas, research results, and technology to industry (NSF 2013). NSF provides support to I/UCRC through partnership mechanisms where, according to NSF, funding is typically leveraged from 10 to 15 times by business and other nonfederal funding. The I/UCRC Program reports there are currently 60 such centers across the United States, with over 1,000 nonacademic members: 85% are industrial firms, with the remainder comprised of state governments, national laboratories, and other federal agencies. NSF funding to I/UCRC was about $15 million in FY 2011. Research is prioritized and executed in cooperation with each center’s membership organizations.