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Science Technology and the Economic Future edited by Susan Raymond
Susan U. Raymond and Rodney W. Nichols
Summary of paper delivered to the World Congress of Engineering Educators and Industry Leaders, Paris, July 3, 1996. Research funded by the Carnegie Corporation of New York and the John D. and Catherine T. MacArthur Foundation.
Experimentation with ways to link science and technology to plans for economic growth has been widespread in the last decade. Policy-makers and private executives m economic regions, individual nations, and even urban areas, large and small, have come to recognize that, as the World Bank has noted, technological progress fuels productivity and "Growing productivity is the engine of development." 1
A key philosophy running through all successful marriages of technology and economic development is partnership among industry, universities, and public policy. It is now widely recognized that it is both the "pull" of the market and the "push" of science and technology, all within a nurturing public policy environment, that have characterized the closest and most successful collaborative arrangements. What does it take to create such partnerships? What are the preconditions and what elements serve to increase the probabilities of success? An examination of the experience of several of the states of the United States, nearly all of which have now undertaken targeted technology policy initiatives, and that of many other countries from both the industrialized and industrializing world provides a starting point for understanding key ingredients for success.
Preconditions
Vibrant partnerships cannot be freeze dried and mass marketed. They are very much a product of the specific economic, cultural, and technological conditions of any particular geographic entity.
Social and Economic Context
It is important to recognize from the outset that policies targeted at creating partnerships rest within a larger context of social values and economic capacities. For example, the values embedded in different societies and cultures will affect not only choices among policies but also the perception of the importance of technology itself. Indeed, in some cases, technology-based initiatives may appear to be (and often, in fact, are) a threat to established economic or political power as well as a path to prosperity.
Overall economic policy, political stability, the rule of law, market competition, and myriad other macroeconomics policy decisions also set clear parameters within which science and technology policy can (or cannot) link effectively to economic objectives. Where tax policy is confiscatory, where property law is nonexistent, where monopoly is allowed to thrive, policies aimed toward harnessing corporate and university innovation to economic growth objectives will have little effect. Equally, feeble support for science and innovation can thwart economic initiatives. As Paul Romer has noted, "No amount of savings and investment, no policy of macroeconomic fine-tuning, no sort of tax and spending incentives can generate sustained economic growth unless it is accompanied by the countless large and small discoveries that are required to create more value from a fixed set of natural resources." 2
The Necessity of a Long-Term View
Successful partnerships are neither born nor matured in a matter of months. Indeed, strategies require years—and often decades—to bear fruit. Japan's experience provides a classic example. Japan's knowledge-intensive economic strategy dates to the late 19th century. Even by the 1960s, Japan had combined dedicated public investment with a clear policy understanding that full returns on those investments would not be seen until the 21st century. In Singapore, a decade of investment in the National University of Singapore was needed to create high-technology research and development capacity. In Hong Kong, a decade and a half of commitment was required to bring the new University of Science and Technology to full operation. The patience to measure time in units of ten is an important context for technology-economic development partnerships.
Therein lies a difficulty which, ironically, is enhanced by the very global changes that call for science and technology links to economic growth in the first place. The rise of democratic systems around the globe has created electorates empowered to hold public policy accountable for results. But electorates often do not take a long-term view. Action and results are expected to be immediate, and accountability is at the ballot box. In such an atmosphere, policy-makers may not be predisposed to patience. The obstacles that prevent firms, states, or nations from taking a long-term view extend beyond the electorate, however. In many developing countries, economic reform itself has shortened investment time horizons. Speculative and rent-seeking activities, focused on maximum gain in a minimum time frame, can become significant economic engines, crowding out technological investments that entail longer gestation periods for economic payoff. Even within thriving private R&D-based corporations, the pressure of global competition and the need to respond to markets interlinked by telecommunications as never before have compressed the time in which investments are required to pay off and provided disincentives for the long-term view.
Characteristics of Successful Partnerships
In many countries, the conduct of science and technology is a multisectoral matter involving governments, corporations, universities, and, in some cases, not-for-profit research institutes. Figure 1 provides an illustration from the United States of the relative balance of these various "stakeholders" by various measures of R&D expenditure.
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Figure 1. Distribution of U.S. R&D Expenditures in 1994 (est. total $172.6 billion) Source: National Science Foundation, 1994. |
Beginning from the Beginning
Most successful partnerships are premised from the very outset on collaboration among institutions that all perceive mutual gain. Business, universities, and government join together not simply to solve a problem, but to identify and diagnose the problem. Both the analysis and the agenda for action are jointly developed, jointly accepted, and jointly implemented.
In the United States, several recent cases illustrate this approach. In the state of Kansas, for example, Kansas, Inc. was created as a private, not-for-profit organization with a joint board of directors from the public and private sector to analyze the state's economy and develop plans for action, including technological programs. Although the impetus to create Kansas, Inc. was government led, the actual assessment of the Kansas economy and its technological dimensions was financed and led by private corporations and banks. The ideas generated by the analysis are then passed on to the Kansas Technology Enterprise Corporation (KTEC), also a private nonprofit organization with a joint public, private, and academic board of directors, to develop program initiatives.
In England, the experience of the city of Birmingham teaches a similar lesson about the importance of a partnership spirit from the very beginning of policy formulation. Between the late 1970s and the early 1980s, Birmingham lost over 200,000 jobs, 30 percent of its employment total. Employment in manufacturing fell by more than half. Gross domestic product per capita in the region fell from third highest in Great Britain in 1977 to second lowest in 1983. In response, the city council, the University of Aston, and the Birmingham Chamber of Commerce and Industry joined together to encourage the development of technology-based industries, including small businesses, and to foster links between the university and private business. The city acquired the land for a science park; the university upgraded its science and technology capability; private enterprise identified likely industrial investors and joined the city as a full partner in ownership of the National Exhibition Center designed to attract corporate trade groups to the city and introduce them to its technological capacities.
New York City has also joined the partnership strategy. Faced with a difficult recovery from the most recent recession and a serious deterioration of real estate occupancy in the Wall Street area, the city joined with local business and universities to analyze the needs of the area. An unsung and growing sector of New York's economy was the information technology and multimedia industry. Small, creative entrepreneurs needed high-tech but affordable space to plant roots and grow. But they also needed links to the city's world-class R&D capability in order to attract the brightest of young technological talent and to bring new research to market. Through partnership of both analysis and action, a new nonprofit corporation was formed, the Information Technology District Corporation, Inc. To the partnership, the city brought tax incentives, the private sector brought investment, and universities brought research access and expertise. The result is a strategy to create a "silicon alley" in New York, which includes a "vertical incubator," the InfoTech Center, which is the "hottest wired" technology center in New York.
It must be recognized that partnership strategies, which are premised on mutual self-interest and joint effort from the very inception, face difficulties in many economic settings. Where economies are dominated by small businesses without a significant R&D base, for example, finding private sector "partners" can prove problematic. In many settings, moreover, the public policy tradition is not one of shared decision-making and flexible collaboration with the private sector, but one of "command-and-control" regulation and economic planning. Seeing business and universities as valuable stakeholders in both problem analysis and strategic action runs against the current of much public policy tradition.
The Entrepreneurial University
A second characteristic of nearly every successful partnership is the presence of one or more "entrepreneurial" universities. The university partner sees itself not as an impenetrable academic fortress but as a dynamic player both on the S&T/economic policy stage and in the commercialization process.
In the United States, such roles are both historic and increasingly common. After the U.S. Civil War, the economy of the state of Georgia was totally devastated. Virtually every industry had been destroyed, little capital remained, and the markets for its traditional agricultural goods had disappeared. Business leaders and the state government, however, joined together to develop an economic recovery plan premised on technology. Georgia Tech University was conceived and born to be an entrepreneurial university, linked to industrial development through the quality of its research capability and the nature of its partnerships with private corporations for product development. More recently, the role of Stanford and Cal Tech in Silicon Valley, MIT in the development of Route 128, and the University of Texas in the creation of the technology initiatives of Austin, Texas all point to the growing importance of the aggressive university as a critical partner in successful partnerships.
The result in the U.S. has been a startling increase in the number of university-industry partnerships, stimulated and funded in part by the federal government. Figure 2 provides data on the growth of formal relationships over the last several years.
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Figure 2. Growth of University-Industry Research Centers (U.S. Trends) Source: National Science Foundation, 1994. |
Entrepreneurial universities are key partners around the world. The National Tsing Hua University in Taiwan, for example, is an aggressive collaborator with technology companies located in its home city of Hsinchu. University faculty act both as consultants to local corporations and as sources of research innovations, which are then commercialized by those corporations. In France, one of the critical magnets for attracting corporate investment in Sophia Antipolis, the booming science park in southern France, was the commitment of the University of Nice to invest heavily in mathematics, computer sciences, and physics. The willingness of the university to become an aggressive high-tech research partner for corporations, as well as a mechanism for expanding the skilled labor pool, provided assurance to corporate managers that a partnership with the region would be profitable.
In Japan, universities traditionally did not enter the commercial fray. Indeed, regulations prohibited corporate support for directed university research. Even today, faculty members generally are government employees, which results in conflicts over intellectual property rights. With changes in the corporate-university regulations, however, traditional academic detachment is shifting to closer industrial collaboration. Joint research projects between industry and universities numbered fewer than 100 in 1983, ten years later there were more than 1200 such projects.
Finding a balance between the culture and priorities of academia and those of industry poses a challenge in many settings. Concerns over publication rights, the setting of research priorities, access to intellectual property, and the continued health of the scholarly process have dampened the enthusiasm of many academic leaders about a more proactive partnership role. Yet, case experience indicates that the integrity of the academic enterprise and the pragmatic market-oriented priorities of industry need not be mutually exclusive. Partnership can lead not only to more competitive industry, but also to a renewed and revitalized university commitment to science and engineering.
Institutional Innovation
In most successful partnerships, new institutional vehicles are required to embody and implement partnership initiatives. No single sector business, government, or academia encompasses all of the networks and skills needed to link technology to economic growth. A collaborative organization is necessary, and it must embody a competitive attitude that will successfully respond to the marketplace along with the accountability that is incumbent upon any effort that involves government participation. Crafting innovative institutions that are credible to all partners and address each partner's need and motivations is essential to partnership success.
In the United States, a standard approach has been to create independent, not-for-profit umbrella organizations that integrate the interests and priorities of governments, universities, and private corporations, yet remain independent of any particular organization. These institutions normally are governed by a board of directors whose members are drawn from and are representative of industry, universities, and state government agencies. They act in their private capacity, not as representatives of their individual organizations, but reflect the views and interests of the sectors in which they work. The financing of the partnership organization can derive from several different streams of revenue, but usually is not linked to the state's general tax revenues. KTEC in Kansas, for example, is funded in part from a percentage of the revenues of the state lottery and in part from earnings for services it provides to business. The Montana Technology Alliance is a not-for-profit partnership technology foundation that is financed through a portion of the state's tax on the coal industry. The Partnership for Technology and Innovation of the state of Louisiana is funded through private industry, the state's economic development office, state utilities and infrastructure authorities, and private philanthropy. The nonprofit Science and Technology Foundation of the state of Maine has been given the legislative authority to raise funds through private donations, to market its own technical services to the private sector, to raise and invest capital, and to use investment earnings to finance its own operations.
Other countries have also developed institutional innovations to link technology to industrial growth. In Indonesia, significant emphasis has been placed on the creation of "business incubators," microfacilities with a trained management staff dedicated to providing the physical work space, shared facilities, and access to technical and business support services that are required to encourage small business growth. A national Incubator Steering Committee has been created and comprises senior government officials from the relevant agencies and private business executives. This dedication to creating early communication and joint stakeholding between government and private business is a fundamental strategy for ensuring the sustainability of what is intended to be a nationwide network of such incubators.
Human Resources
An essential ingredient in virtually every successful partnership is concerted attention to strengthening human resources capacity. In the U.S., human resources weaknesses have presented particular challenges to many state partnership strategies. The state of Montana, for example, ranks fourth in the nation in terms of secondary education graduation rates but 23rd in terms of college graduation and 47th out of 50 in terms of scientists/engineers per 1000 in population. The technology partnership is devoting considerable attention to addressing these human resources deficiencies. Indeed, its technology investments have begun to attract back to the state technically trained Montanans who had left the state for lack of job opportunities. Similarly, in Oregon in the 1980s, two of the largest R&D-based employers, Hewlett-Packard and Intel, had to import 90 percent of their senior scientists and 50 percent of their technical labor force from out of the state. Creating human resources capacity within the state was a critical element in the technology strategy.
Such problems are mirrored in many countries. In Thailand, for example, severe shortages of skilled personnel represent a critical roadblock to further development progress. Colleges and universities graduate about 4,000 engineers per year, but current demand is closer to 7,000 per year. Trained technicians are in even shorter supply. Similarly, in Brazil in the mid-1980s, the industrial expansion strategy was engendered when internal technical capacity in the labor force inhibited both growth and the deepening of internal industries.
Key Questions for Future Analysis
However well-designed a partnership effort may be, history teaches that the partnership process is never complete. Especially in pluralistic political systems, the relationships between public policy and private action are fluid. Science and technology initiatives require constant attention and must be resilient in the face of changes in political realities. The policy process is not always deliberate; it is opportunistic and hence best serves institutions that are flexible and innovative. As one decision-maker in Louisiana has observed in tracing the history of the Louisiana Partnership, "Policy is made in the context of too many choices, too few dollars, and too little information." 3
Many of the partnership initiatives currently under way are relatively young. Time is needed for data to emerge that will raise and/or answer a set of key questions about the ultimate utility of various partnership approaches. One critical question will involve employment effects. Does targeted technology policy created and implemented by public-private partnerships result in net job creation? Or are jobs simply displaced from one industry to another? Similarly, do such partnerships result in increases in investments in research and development? And can R&D productivity be shown to improve because of closer industry-university-public policy collaboration? In sum, the "vital signs" for technology partnership strategies relative to economic growth are underdeveloped at this time. Careful thought about how to measure net impact will be essential as partnerships mature and there is greater demand from both public and private sources of finance for partnerships to demonstrate results.
A Concluding Thought
Knowledge, and innovation derived from knowledge, will underpin future growth and prosperity around the world. Knowledge is now as much an economic factor as land, labor, or capital. Those who make the effort to integrate institutions and interests into cohesive strategies for technology-based economic growth will emerge as leaders in the next century. Those who do not may be left behind. Effective innovation—to improve economic performance today and to create economic progress tomorrow—requires a partnership not only among academic, government, and private institutions, but also between science and technology and economic policies.
Note 1: World Development Report 1994: Infrastructure for Development. The World Bank, Washington DC, 1994. Back.
Note 2: Paul M. Romer, "Implementing a National Technology Strategy with Self-Organizing Industry Boards," Brookings Papers on Economic Activity, Microeconomics, No. 2: 345-397. 1993. Back.
Note 3: . J. Trent Williams, "Science and Technology Policy Making in Louisiana," Science-Based Economic Development: Case Studies around the World. Annals of the New York Academy of Sciences. 789: 89-109, 1996. Back.
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