SCIENCE & TECHNOLOGY MATERIAL WORLD Reichmanis' employer, Bell Labs, is one of the U.S. companies that still supports long-term research.
WHITHER LONG-TERM INDUSTRY RESEARCH? A shift in support for basic research in industry raises questions about the U.S.'s ability to compete MADELEINE JACOBS, C&EN WASHINGTON
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HE CONVENTIONAL WISDOM
holds that the ability to compete in the world marketplace depends on robust research and development programs within industry. But is the conventional wisdom correct? The answer, according to a group of experts from industry academia, and government, is yes, no, and maybe. This group came together at the American Chemical Society meeting in New Orleans in late March to discuss the question, "Can the High-Technology Enterprise Grow Without Long-Term Research? A Multisector Perspective." The symposium, sponsored by ACS President Eisa Reichmanis, was organized by Ed Chandross, recently retired from Lucent Technologies' Bell Laboratories, and MichaelJaffe, research professor in biomedical engineering at New Jersey Institute of Technology. "Investment in science and engineering—and the practical use of scientific insights and discoveries—has produced more than half of our nation's economic growth
in the last 50 years," according to Reichmanis, director of materials chemistry at Bell Labs. "Many of the innovations we take for granted today— such as advanced semiconductors, computers, and the lasers that read DVDs—are based on research that was started more than 25 years ago." Reichmanis is "troubled by some of the trends I've seen lately in how we fund research in the U.S. Our nation seems to lack a holistic, balanced approach to funding basic and applied research and development. Neither of the two largest sources of R&D funding—industry and the federal government—is sufficiently investing in long-term research that could be the basis of future advanced technologies." She contends that "we need to develop a new model. The Vannevar Bush postwar model of 50 years ago, based on his vision of'Science—The Endless Frontier,' needs to be updated." Reichmanis reviewed R & D funding over the past 25 years. The U.S. is still the largest investor in R&D in the world, supporting about 4 0 % of the world's R&D
investments, but the federal share of R&D has actually declined as a total share of the U.S. economy Industry has gradually increased its share of R&D funding so that it now accounts for nearly two-thirds of the total U.S. investment in R&D. But most of the industrial funding, she noted, is "dedicated to research programs that promise near-term applications and products." "It is clear that most companies, regardless of their size, cannot afford to indulge in the luxury of expensive, long-term research," she continued. "Bell Labs and a few other companies are exceptions. But it is becoming more difficult for industry to rely on federally supported fundamental research to help develop new technologies, since the government has in real dollars decreased its investments in this area." Academia and the national labs, where most basic research is carried out, are also hurting from reduced support. THE CURRENT DILEMMA was explored by Henry W Chesbrough, assistant professor and a Class of 1961 Fellow at Harvard University Business School. An economist who worked in Silicon Valley before launching an academic career, Chesbrough claims that the high-tech sector cannot grow for long without long-term research. But the real question is: Can industry make money from doing its own long-term research? "If the answer to this question is yes," he said, "why has there been a downturn in long-term research? If the answer is no, how can industry continue to innovate?" Chesbrough chose to answer the second question by noting that industry can continue to innovate by employing "more use of others' ideas and letting others use more of your ideas." For many years, he said, industry has been using a "closed innovation system."This is based on the concept that from a basic science and technology base, research and development go through a funnel and a few new products and services emerge. This model involves hidden assumptions including, "If I discover it, I will find a market for it; if I discover it first, I will get it to market first; if I discover it first, I will own it; the most important technologies I will need can be an-
"Research should be driving the company. It cannot be performed in a monastery on a hill." HTTP://WWW.CEN-ONLINE.ORG
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SCIENCE & TECHNOLOGY must prime the pump." Rather than R&D ticipated in advance; and the best people being the key to long-term growth for cor in this field work for us." porations, "intellectual property is now far But increasingly today, Chesbrough said, more important," he concluded. good ideas are not found in just one organ ization. Citing National Science Founda Picking up on those themes, James C. tion statistics, he said that, in 1981,71% of McGroddy who retired in 1996 from IBM all R&D was performed in companies with as a senior vice president for research, more than 25,000 employees; in 1999, only 41% of all R&D was be ing performed in companies of that size, while 23% was being carried out in companies with fewer than 1,000 employees. "People now leave large compa nies to form many new companies," he said. Although it's true that many of the ideas that form these new companies fail miserably the process breaks the so-called virtuous circle of industrial innovation described by the closed innovation system. Hopps Chesbrough THE ALTERNATIVE is a new para agreed that "industry can gain great bene digm for industrial R&D that Chesbrough fits from research if it's managed right." calls "open innovation." (His book of the But, he reminded his listeners, "compared same title has just been published.) In the to the good old days, the world is different. open innovation paradigm, the funnel is There are fewer monopolies, bigger uni now a semipermeable membrane where versities, and fragmented value chains. In ideas flow in and out. The logic of open in dustries that were vertically integrated novation, he said, is that "good ideas are found themselves facing a lot of competi widely distributed today and that not all of tion. Companies also realized that cus the smart people in the world work for us." tomers wanted not only hardware, but "Finally, the implication of open inno someone who can help them succeed with vation," Chesbrough said, "is that the lo their business. The harder question to an cus of innovation is shifting out of corpo swer is what does it take in industry to rate R&D labs. A division of innovative labor is arising: Universities generate the R, maintain a focus on long-term research." Research is a great investment, Mc corporations focus on the D, start-ups fo Groddy said, "if and only if it aims to erecus on the disruptions, and government
ate, acquire, and deliver value. An important corollary is that research can and should play a significant role in the ongoing success of the company's main investor." Research, he said, should be "driving the company. It cannot be performed in a monastery on a hill. When research meets these criteria, it attracts the best people, it moves basic science to in vention to new technologies, which garner key patents, and the compa ny also gains key insights into the future." John H. HoppsJr., deputy direc tor of defense research and engi neering and deputy undersecretary of defense in the Department of Defense, looked at the question of high-technology growth without long-term research from a different perspective. "Cutting to the chase, the answer is yes, we can grow with out long-term research," he said, "but can we do it at a rate that will keep us competitive?" Hopps said that DOD's investment in science and technology has shrunk from about 25% of the world's research base ("the world" being defined as the U.S., the Euro pean Union, andJapan) since 1965 to about 5% today DOD's strategies to maximize what research investment there is involve transforming the defense laboratory sys tem and basic research programs, and in vesting in educational programs at the sec ondary college, and graduate school levels to ensure a sufficiently trained workforce for industry, universities, and government. "Defense laboratories should have the
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same attributes as our transformed uni formed military forces," he said. For the military these attributes are speed, agility lethality and knowledge. For the laborato ries, these translate to, respectively, pro ductivity; responsiveness and adaptability; relevance, programming, and execution; and generation, application, and perpetuation ofknowledge. Hopps said this transformation will lead to increased investment in break through activities and thus increase the reach of the defense labs into university basic research programs. ie We, too, in the defense establish ment have to be committed to longterm research because this is a driv er of the transition that we're trying to achieve in the military" Frank E. Karasz, Silvio O. Conte Distinguished Professor in the de partment of polymer science and Fox engineering at the University of Massachusetts, Amherst, highlighted in his remarks a growing trend of companies to locate major research centers outside the US. 'After World War II," he related, "every major company had a satellite research lab oratory in Europe. They didn't work out. They assumed a life of their own and be came less integrated" into the mission of the company's R&D efforts. "Today we may be making the same mistake," he said, not ing, for example, that General Electric has opened a major research center in Banga lore, India (C&EN June 3,2002, page 18). Marye Anne Fox, chancellor of North Carolina State University, described a way of bringing research back into the U.S. Fox described the highly successful public-pri vate research park at N C State that is home to 45 companies, eight government labs, and seven nonprofit organizations (C&EN, Oct. 28,2002, page 5). Seventy-three aca demic units from N C State are also in volved. Located on 1,334 acres adjacent to the main campus in Raleigh, the Centen nial Campus research park employs 1,500 people and involves 1,200 university em ployees and 2,050 university students. "WITHOUT SUPPORT for research in the U.S., we will struggle to invent the new technologies our nation needs to compete successfully in the world," she said. "The role ofresearch universities in building that future is irrefutable." Harvard University Mallinckrodt Pro fessor of Chemistry George M. Whitesides brought the symposium back to the initial question with a provocative ques tion: "Why should one innovate?" That question, he says, "depends on who is an HTTP://WWW.CEN-ONLINE.ORG
swering it. Ifyou're a worker, the answer is you want to have innovation so you main tain your job and standard of living. If you're the head of a company, it's a way to keep your stock value high." But, he queried, are there alternatives to innovation? For some countries, being
McGroddy the low-cost manufacturer of a product might be the way to keep both the standard of living and stock value high, but in the U.S., due to high wages, this is not a likely scenario. 'Ά company can also be a fast fol
lower and buy what it needs. That is hap pening more frequently," he said. "I would argue that the idea that a cor poration should be responsible for innova tion is the wrong idea," Whitesides said. "Indeed, large corporations tend to reject innovation because customers reject inno vation. If you listen to the voice of customers in a time of technologi cal innovation, you're doomed." Whitesides thus questions whether the model for future inno vation is in large corporations. He believes that the most important supporters of long-term research will be the government, new foundations such as the Bill & Melinda Gates Foundation and the "vvellcome Trust, states using such partnerships as de scribed by Fox, and venture-capitalsupported companies. "Society," he concluded, "has a strong stake in innovation as it pro vides jobs, security, health, and a high stan dard of living. But it is not obvious that such innovation must come from indus try The challenge will be finding appro priate structures for the future." •
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