Organizing for R

1
Organizing for RD in the 21st Century

• System Changes to Capture New Opportunities

2
THE IMPORTANCE OF ECONOMIC GROWTH

• Since the Civil War, Americas annual rate of
  growth, discounted for inflation, averaged 3.4
  annually
• Since 1973, however, the average rate of growth
  averaged just 2.3
• The decline in growth from the historic norm has
  striking consequences From 1973-1993, the
  accumulated losses in goods and services due to
  slow growth have come to nearly 12 trillion in
  lost production, or more than 40,000 per person.

Source Madrick (1995)
3
THE IMPORTANCE OF INNOVATION

• From at least the late 1950s, most formal models
  of economic growth have recognized that technical
  change is the key force driving the process.
• This has also been a central conclusion of the
  empirical research on the sources of growth.

Source Nelson (1996)
4
THE NEOCLASSICAL VIEW OF TECHNOLOGY

• Technology is a public good unlike private
  goods, the owner of a stock of technology cannot
  exclude others from using it.
• As a result, the producer of a stock of
  technology cannot fully capture the returns from
  it. Their will thus be under-investment in RD, a
  form of market failure.
• To offset the market failure, some neo-classical
  economists (i.e. Arrow, 1962) argue that the
  production of technology should be subsized.

Source Mowery (1995)
5
INNOVATION

• Innovations are new and improved products and
  processes, new organizational forms, the
  application of existing technologies to new
  fields, the discovery of new resources, and the
  opening of new markets.

Source Niosi et al. (1993)
6
SCHUMPETERS EARLY VIEWS ON INNOVATION

• Entrepreneurs and small firms are the key
  innovative actors, reacting to technological
  opportunities and taking risks to develop the
  technologies and bring them to market.

Schumpeter (1911)
7
Schumpeters Early Views on Innovation
Small Firms, Entrepreneurs
Innovation
Economic Growth
8
Schumpeters Later Views About Innovation

• Large firms with attached research and
  development laboratories are the principal
  sources of technical innovation.

Schumpeter (1942)
9
Schumpeters Later Views on Innovation
Large Firms with Industrial RD Labs
Innovation
10
STRENGTHS AND WEAKNESSES OF THE SCHUMPETERIAN
MODEL

• Strengths of the Schumpeterian model Sets up
  technical change as an evolutionary process.
• Weaknesses of the Schumpeterian model
• Fails to adequately comprehend the complex
  relationships between science and technology.
• Does not address the impact of institutions
  supporting technical advance in capitalist
  economies, some of which were around when
  Schumpeter wrote, and many of which emerged after
  World War II.
• Schumpeters prediction of an erosion of rivalry
  in technical advance as science becomes more
  powerful and innovation is reduced to routine has
  little evidence to support it. Though the
  governments role in the national innovation
  systems of most capitalist countries is
  significant, the bulk of the research carried out
  is still civilian-oriented RD funded by
  companies that expect to benefit from it.

Source Nelson (1990)
11
Over the last 50 years, the theory of industrial
innovation has broadened its perspective, no
longer focusing simply on the entrepreneur and
the firm, but also on elements of the firms
environment.
Source Niosi et al. (1993)
12
The last step in this broader theory of
innovation is the concept of a National
Innovation System.
13
The National Innovation System (NIS)

• The Complex Network of Agents, Policies, and
  Institutions Supporting the Process of Technical
  Advance in an Economy

14
The National Innovation System in a Narrow Sense

• Organizations and Institutions Directly Involved
  in Searching and Exploring Activities, i.e.
  Universities and Research Laboratories

15
The Narrow National Innovation System
Hybrid ST Labs
Private Firms with Corporate RD labs
16
The National Innovation System In A Broad Sense

• Includes, In Addition To The Components Of The
  Narrow NIS, All Economic, Political, And Other
  Social Institutions Affecting Learning,
  Searching, And Exploring Activities, i.e. A
  Nations Financial System, Its Monetary Policies,
  And Internal Organization Of Private Firms

17
The Broad National Innovation System
User-Producer Relationships
Monetary Policies
Organization of Financial System
Demand Conditions
Internal Organization of Firms
Natural Resources
Industrial Organization
18
The Components of the NIS Have Different Effects
and Operate Differently Across Industries For
Example

• University Science More Relevant to Some
  Industries than Others
• Different Extraindustry Sources of Technological
  Knowledge Across Different Industries
• Effectiveness of Patents Varies Across Industries

19
THE RELEVANCE OF UNIVERSITY SCIENCE TO INDUSTRIAL
TECHNOLOGY
Source Rosenberg and Nelson (1994)
20
INDUSTRIES RATING UNIVERSITY RESEARCH AS
IMPORTANT OR VERY IMPORTANT

• Fluid milk
• Dairy products except milk
• Canned specialties
• Logging and sawmills
• Semiconductors and related devices
• Pulp, paper, and paperboard mills
• Farm machinery and equipment
• Grain mill products
• Pesticides and agricultural chemicals
• Processed fruits and vegetables
• Engineering and scientific instruments
• Millwork, veneer, and plywood
• Synthetic rubber
• Drugs
• Animal Feed

Source Rosenberg and Nelson (1994)
21
THE RELEVANCE OF SCIENCE TO INDUSTRIAL TECHNOLOGY
Source Rosenberg and Nelson (1994)
22
EXTRAINDUSTRY SOURCES OF TECHNOLOGICAL KNOWLEDGE
Source Levin et al. (1987)
23
EFFECTIVENESS OF PATENT PROTECTION ACROSS
INDUSTRIES WITH TEN OR MORE RESPONSES(MEAN
SCORE ON SCALE OF 1-7)
Source Levin et al. (1987)
24
The Evolution of the American National Innovation
System
25
The Evolution of the American National Innovation
System Four Periods

• Laissez-Faire (1790-1940)
• The War and Post-War Period (1940-1950)
• The Federalization Period (1950-1975)
• The Revisionist Period (1975-1990)

Source Crow (1994)
26
The Evolution of the American National Innovation
System Laissez-Faire Period1790-1940

• A Pre-Policy Period Government Has No Distinct
  Science and Technology Policy or Mission
• The Key Institutions in the National Innovation
  System Independent Corporate RD Labs
• Government Does Establish Some RD Labs to
  Support Weak Industries (i.e. Mining)
• Beginning of the Late 1800s Universities Emerge
  as the Home of Basic Science and Advanced Training

27
The Evolution of the American National Innovation
System The War and Post-War Period1940-1950

• To Support the War Effort, the Government
  Establishes Many New RD Institutions and a New,
  Expanded Role for Academic Science
• During the War, Large Scale Federal Investment,
  Federally Mandated RD Objectives, Targeted
  Funding, and Industrial and Governmental
  Cooperation are the Norm
• By the end of the War, Hundreds of New RD Labs
  had been established, and the potential of Large
  Scale RD for meeting national objectives is
  demonstrated

28
The Evolution of the American National Innovation
System The War and Post-War Period1940-1950

• Following the Dramatic Change in Science and
  Technology Policy During the War, Policy Makers
  Sensed the Potential of Science and Technology to
  Serve the National Interest

29
The Evolution of the American National
Innovation System The War and Post-War
Period1940-1950

• In 1944, President Roosevelt asked Vannevar Bush,
  the Director of the Wartime OSRD, to Look Ahead
  to the Role of Science in Peacetime.
• Bushs Design, Presented in Science the Endless
  Frontier, Became the Foundation for U.S. Science
  Policy

30
LINEAR TECHNOLOGY DEVELOPMENT MODEL
Pure Basic Research
FOCUSED RESEARCH AND PRELIMINARY DEVELOPMENT
FOCUSED DEVELOP-MENT
MARKET DRIVEN TECH. DEVELOP- MENT
FUNDAMENTAL RESEARCH AND DISCOVERY
Increasing Role of Universities
Increasing Role of Industry
Increasing Role of Government
31
The Evolution of the American National Innovation
System The Bush Design Was Built Around the
Following Characteristics

• Political Autonomy
• Self Regulation by Scientists
• Focus on science for sciences sake as well as
  problem solving
• Strong academic model of individual achievement
• General Accountability(linked to broad objectives
  of national well being)
• Single Major Basic Research Agency
• Limited resources for only the best scientists

32
The Evolution of the American National Innovation
SystemThe Bush DesignPolitical Autonomy

• Separation from Political Control
• Separate Governance

33
The Evolution of the American National Innovation
SystemThe Bush Design Self-Regulation by
Scientists

• Peer-Review

34
The Evolution of the American National
Innovation SystemThe Bush Design Focus on
Science for Sciences Sake As Well as Problem
Solving

• Basic Science/Fundamental Discovery
• Applied Science

35
The Evolution of the American National
Innovation SystemThe Bush Design Strong
Academic Model of Individual Achievement

• Scientists as Individual Thinkers

36
The Evolution of the American National
Innovation SystemThe Bush Design General
Accountability(Linked to Broad Objectives of
National Well-Bring)

• Success Measured by Overall National Achievement

37
The Evolution of the American National
Innovation SystemThe Bush Design Single Major
Basic Research Agency

• NSF in original design

38
The Evolution of the American National
Innovation SystemThe Bush Design Limited
Resources for Only the Best Scientists

• Small Budgets

39
The Evolution of the American National Innovation
System Federalization Period1950-1975

• By the end of the period, five types of
  institutions
• were important in the NIS
• Hundreds of Large Industrial Labs
• Dozens of Large Federal Labs
• Thousands of Small Technology Oriented Labs and
  Companies
• Hundreds of Unconnected and Unplanned Federal
  Labs
• Researchers at Universities

40
The Evolution of the American National Innovation
System The Revisionist Period1975-1990

• Economic and Technological Position of the United
  States began to slip
• The Bush model prevailed Research dollars
  concentrated on defense and on basic science
• However, pushed by local political demands,
  Congress did make some attempts to make to U.S.
  more competitive and to improve upon the Bush
  model

41
The Evolution of the American National Innovation
System The Revisionist Period1975-1990Major
Efforts to Change Science Policy

• Stevenson-Wydler Technology Act (1980)
• Bayh-Dole Act (1982)
• National Productivity and Innovation Act (1983)
• Federal Technology Transfer Act (1986)

42
The American NIS Today

• Today, the design parameters for basic science
  and the cultural design for basic science and
  technology remain essentially those suggested by
  Bush.

43
The American NIS Today

• The Bush design is in serious need of updating
  and improvement, and has been for some time. The
  rationale for updating is simply that Bush failed
  to build into the system the feedback and
  response mechanisms needed for a post-industrial
  democracy.

44
The American NIS Today

• In updating the Bush design, we must keep in mind
  that the NIS today is a complex web of
  institutions, actors structures, and
  relationships.
• We cannot completely overhaul it while it is in
  motion.
• We must be aware of the size and the complexity
  in the system before prescribing change

45
The American NIS TodayExamples of Size,
Complexity

• Interactions between Public, Private, and Hybrid
  Science and Technology Labs
• Government Funding of Academic Basic Research,
  Applied Research, and Development
• Percentage of New Products and Processes Based on
  Recent Academic Research

46
Distribution of RD Laboratory Type circa
1995-2005
Hybrid Technology Labs
Public Technology Labs
Private Science Labs
Public Science Labs
Private Technology Labs
Private ST Labs
Public ST Labs
Hybrid Science Labs
Hybrid ST Labs
Public Knowledge and Technology Products
Private Knowledge and Technology Products
47
SUPPORT FOR ACADEMIC RD, 1935, AND 1960-1990
(MILLIONS OF CURRENT DOLLARS).
Source Rosenberg and Nelson (1994)
48
PERCENT OF FEDERAL RESEARCH FUNDS ORIGINATING
WITHING PARTICULAR AGENCIES
Source Rosenberg and Nelson (1994)
49
FEDERAL AND NONFEDERAL RD EXPENDITURES AT
UNIVERSITIES AND COLLEGES, BY FIELD AND SOURCE OF
FUNDS, 1989
Source Rosenberg and Nelson (1994)
50
EXPENDITURES FOR BASIC RESEARCH, APPLIED
RESEARCH, AND DEVELOPMENT, 1960-1990(MILLIONS OF
CURRENT DOLLARS)
Source Rosenberg and Nelson (1994)
51
UNIVERSITY-INDUSTRY RELATIONS

• Over the past two decades, there has been a
  significant increase in the fraction of academic
  research funded by industry and in the number and
  size of university-industry research centers.
• Some academics, while welcoming this trend, do
  not want industries to influence the research
  orientation of universities.
• Other academics both welcome industry funding and
  are eager to re-orient their research to make it
  more commercially relevant and rewarding.
• In the 1980s, industry leaders were enthusiastic
  about the ability of academics to contribute to
  technical advance in industry. Today, however,
  there is considerable skepticism in industry a
  prevailing view is that academics should stick to
  basic research and training young scientists, and
  to stop thinking of themselves as the sources of
  new technology.

Source Rosenberg and Nelson (1994)
52
OF NEW PRODUCTS AND PROCESSES BASED ON RECENT
ACADEMIC RESEARCH, U.S., 1975-1985
Source Rosenberg and Nelson (1994)
53
The American NIS TodayUpdating the Bush Design
54
FREEMANS THREE PHASES OF SCIENCE POLICY
Source Crow (1994)