Things have changed since the heyday of American technological dominance, when the Cold War defense establishment and corporate powerhouses including Bell Labs, General Electric, and IBM established today's familiar R&D paradigm, said Bloch, who contributed to Endless Frontier, Limited Resources: U.S. R&D Policy for Competitiveness, the latest report from the council in Washington, D.C. One fundamental shift, he explained, is the emergence of civilian and commercial interests as the primary drivers of leading-edge technology, rather than the defense sectors. Meanwhile, budgetary pressures make it more difficult for the nation's R&D enterprise to sustain its past claim on federal resources.

Research and development has at the same time become increasingly international as other nations develop the resources, infrastructure, and markets to support major R&D efforts, Bloch added. New information- and computer-based technologies, novel research strategies, and acute market competition are transforming the innovation process itself. The need to perform interdisciplinary R&D, for example, has increased substantially.

These growing incentives to cooperate have served to expose wide- ranging barriers to collaborative partnerships in the United States, the council's report states. While some stumbling blocks are being addressed, others remain.

The nature of these barriers to cooperation between industry and government labs, the political debate concerning collaborative R&D, and some early results of this interaction are the focus of this discussion.

Collaboration, Not Separation

A new approach is emerging for the way technological innovations are brought from laboratory to market in the United States, the study said. It is a pattern based on collaboration among - rather than separation between - industry, academia, and the federal- laboratory system, which are the principal players in the nation's research and development enterprise. The Council on Competitiveness calls for a new cooperative framework for the innovation and commercialization process in which members of the nation's entire R&D community share costs, resources, and experience. The idea is to draw strength from one another by leveraging each other's capabilities.

Equally, the study found that the United States has an urgent need to resolve the politically polarized debate over the proper federal role in R&D.

The use of the federal-laboratory system - particularly its "crown jewels," the Department of Energy weapons labs - to help U.S. companies strikes some in Congress as coming suspiciously close to a national industrial policy, something that has drawn fire from free-market advocates in the past. Technology transfer is considered by some to be a form of corporate welfare or even a bailout for hard-pressed contractors. The "favoritism" shown to one company doing joint research with government labs raises difficult questions about fairness for the rest of the competitors in the market.

Last year's influential Galvin Report, Alternative Futures for the Department of Energy National Laboratories, was blunt on this issue. The high-level task force, headed by Motorola Inc. chairman Robert Galvin, stated that "industrial competitiveness, broadly defined, has no place as a stand-alone mission of the laboratories." Citing the national labs' long-standing national security mission, the task force noted that "the idea that the labs are, or could become, cornucopias of relevant technology for a broad range of industries is a myth."

Others in the policy debate, such as Bloch, want to see R&D collaboration with industry made "an important, explicit mission of the national labs," along with its current core national-security, energy, and environmental-quality missions. "That kind of collaborative activity should be part of the criteria used to rate a lab's operations, when its future funding is being considered," he said.

A middle position on this issue is offered by Congressman Steven Schiff (R-N.M.), who chairs the House Science Committee's Subcommittee on Basic Research. "It makes sense to encourage the national labs to collaborate with industry on generic, precompetitive technologies of mutual interest," he said. "The emphasis should be on long-term, high-risk research, particularly in basic and energy-related sciences. Certainly, the rest of the world - our competition - has done so in establishing highly integrated government/ industry R&D efforts in many emerging fields. We can't pick winners, but we can boost U.S. competitiveness without distorting the market."

This disagreement on the role of government labs has not only fostered stop-and-go policies at the federal level but also injected a striking degree of unpredictability into the entire innovation process, the council's report contends. It calls for a national debate among R&D stakeholders to develop a national consensus on goals.

"Most government labs are very specific in their orientation," said Al Narath, president of the Energy and Environment Sector of Lockheed Martin Corp. in Albuquerque, N.M., the managing and operating contractor for Sandia National Laboratories in Albuquerque. Until recently, Narath was Sandia's lab director. "Roughly half of Sandia's activities, for example, are connected with maintenance of the nuclear-weapon stockpile and the underlying technology. The country needs that job done, and that's not going to change."

Narath noted that with the exception of very limited and specialized technical areas, there is no technology that the federal government needs that does not involve a significant private-sector activity. "Success or failure of that crucial mission depends on how well the national labs cooperate with the private sector. It just makes sense for the labs to work with industry," he said. The CRADA Process

Today, the cooperative research and development agreement (CRADA) is the preferred vehicle for transferring government technology to private industry. CRADAs were established by Congress in 1986 through the Federal Technology Transfer Act and modified three years later with the National Competitiveness Technology Transfer Act.

CRADAs negotiated with Department of Energy (DOE) labs, the Commerce Department's National Institute of Standards and Technology, and various Defense Department labs incorporate a wide variety of collaborative interactions, including technical assistance, extension work, and personnel exchanges. CRADAs are desirable because they are relatively flexible in structure and free of the many legal conditions placed on alternative arrangements such as contracts, grants, and patent assignments.

The Energy Department claims its CRADA process has been streamlined in recent years to avoid red tape. "It's tolerable," Narath said about the time and effort it now takes to set up CRADAs, "but it could be better."

DOE also says that the criteria used in selecting collaborative research projects have been fine-tuned. The current criteria are claimed to be rooted squarely in competition, driven by technical merit and scientific peer review, and aligned with the needs of cost-sharing partners, according to agency literature. In choosing a CRADA, DOE now considers the overall significance of potential benefits to the United States and the level of technical difficulty, and whether private industry will pursue it in a timely fashion, whether a company will be able to recoup its investment, whether the industry is so fragmented that R&D spending on an important technology will be too low, and whether proprietary sensitivities might effect competition.

But criticism of the national-lab bureaucracy continues. "The system has not been streamlined enough to avoid micromanagement, overspecification, and red tape," Bloch said. "It still takes too long to set up a joint research arrangement, and some questions about intellectual property rights are still unresolved. One first-line manager at a national lab told me that he's so swamped with paperwork that he comes in on weekends to do his own research."

A government researcher displays an optimized air-bag design developed in a cooperative research and development agreement between Sandia and Precision Fabrics Group.

Goodyear and Sandia Partnership

Designing CRADAs so that both industry and government laboratories benefit needs improvement. "The term `technology transfer' is a misnomer since it implies a one-way street in the traffic of scientific knowledge," wrote Schiff in the fall 1995 Issues in Science and Technology. "The development of dual-use technology is increasingly important because as budgets are reduced, it is not possible to maintain the critical mass of researchers and technicians at the labs to accomplish core missions. It is necessary to find partners who can help provide the expertise."

Through a partnership with Goodyear Tire and Rubber Co., for example, Sandia (which is located in Schiff's district) has been able to improve the modeling and simulation codes it uses to solve weapon-component design problems that previously could not be accomplished. In turn, Goodyear has benefited from access to experimental techniques used and developed in the nuclear- weapons program, he said.

"The most important factor in setting up a cooperative research and development agreement is that it be fair to both sides," said Nissim Calderon, vice president of corporate research at Goodyear in Akron, Ohio. "You greatly enhance the chances of success by making it a win-win situation for both the lab and the company. Say Goodyear has a two-component project: A and B, while Sandia has another project characterized by A and C. Why not do A together and share the risk, share the effort, share the cost? And while we're at it, their scientists rub elbows with ours, and naturally they exchange expertise and suggest changes in current procedures, so the laboratory is also acting as a consultant, while the lab personnel get a reality check from business."

Calderon described the research issue addressed by the Sandia/Goodyear CRADA. When the company designs a tire, a variety of performance requirements involving durability, noise, rolling resistance, tread hydrodynamics, and so forth have to be met. "Until recently, we would build a tire and then test it, build and test it, build and test."

Today, he said, Goodyear is trying to design tires by going to first principles - developing a fundamental understanding of what's needed and then working from the bottom up. To accomplish this new task, researchers have developed a set of computationally based software simulation tools, each of which can analyze and predict a specific aspect of the tire design.

"After a designer produces a tire and tube, he might do a durability evaluation, followed by an examination of its noise characteristics, a prediction of its rolling resistance, and then a simulation of the flow of water around the tread," Calderon explained. "Each software tool is, however, based on entirely different physics - mechanical dynamics, acoustics, thermal-transfer properties, fluid dynamics. They're not connected, but they need to be."

It soon became clear that Goodyear needed to develop an integrated facility whereby a designer could go from one modeling session to another and then to another until the design evaluation is completed. "The problem is how do you connect or link these separate tools together into one integrated facility?" Calderon said. "It's a difficult problem in database management: You have a lot of raw data in different databases, but if you cannot make them talk to each other, you're out of luck.

"It turns out the Sandia had the same general need in developing whatever they develop [nuclear-weapons systems], so that's why we're working together in a CRADA to develop the capability to integrate dissimilar software systems," he said. Tires developed using the new technology are expected to be in production in three years.

"We're paying cash for much of this new capability," Calderon continued. "So if this difficult integration exercise fails, the taxpayer doesn't have to pay for it. We get billed by the month, and I wouldn't want it any other way. I don't want the federal labs to subsidize Goodyear."

Narath had watched the Sandia/Goodyear partnership from the other side of the fence. "This CRADA exercised a set of computer codes in structural dynamics, fluid mechanics, and other areas that Sandia was developing for weapons design," he said. A nuclear weapon could get crushed in an accident, for example, so Sandia researchers developed software that could predict what would happen if a weapon were subjected to large-amplitude structural deformations. In the Goodyear project, the structural dynamics code was applied to a different regime: large deflections of the treads and internal structure as a tire rolls. The physics is the same in both cases.

The different analysis and simulation packages were not previously linked, said Narath, adding that the integration will be useful in other Sandia research projects. "By working together, we basically doubled the size of the research team at no extra cost to the government," he concluded.

"If you have a generic center of excellence in a science," Calderon said, "the clever thing to do is to find out how many market areas you can leverage from it." For instance, the basic fluid dynamics discipline used to help develop the modeling tool that projects water flow under the tread is the same Sandia researchers used to design the special parachutes used to slow the fall of bombs sufficiently so that airplanes can get out of the way. "That same expertise," Calderon added, "was used in another CRADA [with the Precision Fabrics Group in Greensboro, N.C.] to optimize a new, more efficient air-bag design. I do not think the taxpayer is compromised in this case."

The effort to develop the Precision Fabrics air bag has been cited by DOE as a prime example of a CRADA that benefited both Sandia and Precision Fabrics. The three-year collaboration resulted in an automotive air bag that is less than half the packed volume and weight of current air bags, yet provides the same protection to passengers. One of Sandia's fea codes was a key factor in analyzing the bag's characteristics, as was lab experience with supersonic parachutes. In turn, lab personnel reportedly learned things that will feed into future parachute design.

Avoiding Market Dislocations

"The fundamental problem in establishing CRADAs is the requirement in our country that there be a level playing field," said Narath. Minimizing the effect of cooperative R&D on a market can be a difficult and subtle task. Most national-lab collaboration is conducted with individual companies, so there are often complaints from competitors who didn't benefit from the joint research. "We try to work on projects that are precompetitive in nature, but sometimes the interaction results in a truly innovative product," Narath said. Some other vendors in the air-bag market, for example, were less than thrilled with Sandia's assistance to Precision Fabrics. Most projects, however, do not yield this kind of result, he said.

"We have thought about various alternatives to lower the potential for this kind of situation," Narath noted. Among the possibilities is "to compete the opportunities to work with the lab" among those interested in pursuing joint research. Another method is "to keep the projects fairly small and make them with lot of companies so there is little market effect."

The alternative is to address clearly precompetitive issues in a larger organization that spans an entire market segment so no individual firm is singled out. One of the best examples is the federally sponsored Partnership for a New Generation of Vehicles (PNGV) initiative, of which the Goodyear CRADA is a part. High costs, regulatory burdens, and an increasingly complex research agenda have drawn rival U.S. automakers into closer R&D collaboration. Starting in 1988 with an initial research consortium to work on composite materials, the network of the Big Three joint R&D efforts has grown to comprise 14 projects, including PNGV. This policy issue comes down to whether it is better to grow small firms or pursue big winners. Nobody really knows the best way to go, and the evidence in this area is meager at best.

Effective Interaction?

Another key point in the debate concerns measuring the effectiveness of technology transfer interaction. As the controversy about the market role of government labs rages, the federal bureaucracy has displayed the self-serving tendency to count CRADAs (which have multiplying at an alarming rate), parade out licensing agreements, and derive exhaustive lists of industrial partners. Schiff called this the "Have CRADA, Will Travel" mentality. But nearly everyone agrees that it is not at all easy to measure the impact of cooperative R&D efforts.

There is some evidence concerning the effectiveness of industry/government lab collaboration, however. The National Institute of Standards and Technology (NIST) in Gaithersburg, Md., claims that its introduction of software-error-compensation (SEC) techniques to the makers of coordinate measuring machines (CMMs) had a tremendous economic impact during the period, for example.

SEC is a computer-based mathematical technique for cost- effectively increasing the accuracy of CMMs and other machine tools. When NIST research on SEC began in 1975, the reigning technical approach to improved CMM accuracy was error avoidance, which later proved to be too costly. Error compensation, on the other hand, improved accuracy, enabling faster and relatively low-cost CMMs to be produced.

NIST claimed its research reduced the eventual cost of commercial R&D efforts and accelerated the adoption and diffusion of SEC technology in CMMs. Between 1975 and 1985, NIST's total costs for SEC technology research were about $431,000. The research cost savings to CMM producers - the first-level beneficiaries of NIST's research - and the related efficiency gains in production together was estimated to be about $93 million. It is difficult to say, however, if this a legitimate interpretation.

Another approach to rating industry/government-lab interaction is to survey the companies involved. Of course, to a private firm that has substantially expanded its research program by entering into a CRADA, what's not to like?

Consider the assessment of the Commerce Department's Advanced Technology Program (ATP), which was established in 1990 to "offer cost-sharing awards to industry on a competitive basis for R&D projects to advance high-risk enabling technologies with the potential for broad-based economic benefits." A survey of 125 companies and nonprofit organizations participating in ATP projects (which were awarded during the first three years of the program) concluded that the program is succeeding.

Seventy percent of the companies interviewed reported that there was little or no chance they would have pursued the technology currently under development without support from the ATP. Of the balance, 90 percent said that if they had in fact gone ahead, they would have done so with significantly lower goals and/or at a slower pace. "We would have been much slower, probably three years out," said one respondent, "which in this industry is forever."

The study also claimed that the ATP fostered collaboration and the formation of strategic alliances between companies, accelerated commercialization, created new business opportunities, and increased company credibility with competitors and customers.

A perhaps more objective assessment of the effectiveness of industry/government R&D collaboration comes from a study conducted by Barry Bozeman, professor of public policy and director of the School of Public Policy at the Georgia Institute of Technology in Atlanta and Michael Crow, professor of public policy and vice provost at Columbia University in New York. The chief resource for the pair's research is the set of findings developed under the National Comparative R&D Project (NCRDP), which was established in 1984 to provide a baseline of empirical knowledge about the R&D laboratory systems of the United States and other nations. Researchers have visited 150 labs in seven nations for the NCRDP, which is supported by the National Science Foundation, and obtained data from thousands of scientists, engineers, administrators and policy makers.

A Sandia engineer holds
a cutaway model of the downhole temperature probe the national
laboratory developed with
oil-industry research partners
Flexbar Inc. and Onset
Computer Corp.

"About 10 years ago, we decided that there really isn't much systematic knowledge about this issue except for a lot of self- serving anecdotes," Bozeman said. "As a result of the limited empirical knowledge about the system, R&D policy making is poorly rationalized. We're trying to determine what works."

Phase 5 of the survey project gathered data from more than 200 companies that collaborate with federal labs to determine the nature and value of those interactions. According to Bozeman and Crow's Federal Laboratories in the National Innovation System, 83 of 120 projects surveyed were focused on basic research. The most common reason for collaborating were the skills and knowledge of federal-lab personnel. Almost as important were the unique facilities of the laboratory. The companies' most important objectives were engaging in strategic precommercial research, access to unique lab expertise, and the desire to develop new products and services.

The average level of economic benefit to each firm was about $1.6 million, while the average cost was calculated to be about $417,000. Bozeman stressed, however, that this does not indicate a 4-to-1 multiplier effect because many companies invested no money in their project. "There is tremendous variation in the economic value of the interactions," Bozeman said. On average, only 1.6 new jobs were created by each industry/lab interaction. It seems that this kind of activity does not - as is often advertised - create many new jobs, he said.

The survey participants indicated that barriers to technology transfer and commercialization are not substantial. The main problem was the slow "speed of administrative actions." One of the more telling results was a high satisfaction rate among the participating companies. A whopping 89 percent of respondents were happy with the results of their interaction with federal labs.

Finally, at the time the industrial respondents were queried, 47 interactions had already led to a product being marketed, and there were 79 instances of products being under development. Existing products had been improved in 52 cases. (The numbers of respondents to each question varied.)

In the aggregate, wrote Bozeman and Crow, the federal- lab/industry interactions do appear to create significant economic value and, from the standpoint of the firms involved, receive a quite positive assessment. In the next phase of their research, Bozeman and Crow plan "to look at cooperative research projects that worked out well to find out why."

Technology-transfer experts say that the most critical point in technology commercialization is before investors are willing to make risky investments and after government research funding sources consider the project too commercial to fund. Technology often withers in the gap. The ongoing debate about government/industry research cooperation is really about who is going to fill that gap and how. An answer must be found soon.

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© 1996 by The American Society of Mechanical Engineers