The global distribution of research and development (R&D) investments varies in size, areas of emphasis, and productivity. A global economy will increasingly require efficiencies in the utilization of R&D investments through cross-country public/private collaborations that leverage talent and resources and exhibit "strategic intent" -- a focused strategy that signals economic purpose. An overview of the international research economy is presented, together with examples of emerging strategies across private and public sector performers of R&D. It is suggested that international portfolios of research activity corresponding to regional clusters of innovation (as defined by the Council of Competitiveness, USA) provide unique opportunities to foster productive collaborations.
The themes of this paper derive from two basic premises: First, the global distribution of research and development (R&D) investments varies in size, areas of emphasis, and productivity. And, second, that a global economy will increasingly require efficiencies in the utilization of R&D investments through cross-country public/private collaborations that leverage talent and resources and exhibit "strategic intent" -- that is, a focused strategy that signals economic purpose.
Basic science has always been an international enterprise. Scientist to scientist collaborations and major internationally funded projects generally have dominated the nature of scientific collaborations throughout most of the 19th and 20th centuries. As we saw in the presentations during the first day of this conference, the increasing pace of globalization in the last 20 to 30 years is rapidly transforming science and technology flows, as "technological know-how is being transferred around the globe" . . . and as it becomes ". . . part of the economic development strategies of other nations." (Science & Engineering Indicators--2002, National Science Board, National Science Foundation, 2002, p O-4)
In addition, beginning in the 1970's the more rapid pace in which new discoveries from basic science are quantified in the asset ledgers of corporations has ensured that investment funds now track the flows of intellectual property developments around the world. And both are indicative of the growing interdependencies of the science and technology activities of nations. Whether in the acquisition of "patent families" by the bundling of related patents one-by-one, or in the garnering of unique competitive advantages through R&D, the globalization of markets is signaling new dimensions in how science is funded and how it is practiced. Indeed, The Wall Street Journal this morning puts it this way: "Open market innovation works for the same reason that free trade works: It enables the laws of comparative advantage to govern the allocation of R&D resources. In essence, a company gets lower cost, higher quality ideas from the best sources in the world, allowing it to refocus its own innovation resources where it has clear competitive advantages. With the right people in place to recognize beneficial trade-offs, the company is able to ‘export' ideas that other businesses could put to better use." (Darrel Rigby and Christopher Zook, Manager's Column, The Wall Street Journal, December 3, 2002, p. B-2)
Those of us in academic science who are faced with these forces of change, as Eric Bloch3 suggested, seem to be caught in a sort of scientific "midlife crisis," because 50 years of doing research one way has fostered the belief that it cannot be done another way.
Why? Because over the last two or three decades, we have seen . . . "changes in the financing, organization, and performance of R&D and technological innovations" . . . that " have affected the actions of industry, research performers, and governments . . ." in countries around the world. (Ibid, pp. O-14-15)
In this environment, "Universities have moved to increase funding links, technology transfer, and collaborative research activities with industry and government agencies." (Ibid, pp. O-14-15) The data are well known and can be found in many publication of the OECD as well as in the annual Science & Engineering Indicators published by the National Science Board of the United States through the National Science Foundation. However, I would encourage both the NSF and OECD to consider how we can develop data with a finer grain of resolution within major scientific disciplines that can support economic and policy studies; and I believe Dr. Menipaz, from Israel, may have some interesting mapping tools to share with us in his presentation later this morning.
Indeed, according to NSF data, ". . . numerous strategic research and technology alliances have been created over the past two decades, many involving international partners. During the 1980s, at least 3,800 such alliances were created; from 1990 to 2000, the number rose to nearly 6,500. Alliances between U.S. and foreign firms increased by about 1,000 between the two decades. In 2000, about one-third each were in IT, biotechnology, and other technology sectors. In the United States, about 800 formal research joint ventures were formally registered between 1985 and 1999. They involved about 4,200 organizations, nearly 90% of them industrial firms. Thirty percent were foreign-owned participants, indicating a broad interest in this form of activity. Universities were important partners in these research joint ventures. During the 1985-99 period they participated in 16 percent of them. Nearly one-third in the electronic and other electrical equipment sector involved academic partners, as did one in five industrial machinery and computer manufacturing ventures." (Ibid, pp. O-14-15)
During yesterday's presentations, much of the discussion was focused on broad policy and strategic issues dealing with the question of how do we think about organizing collectively?
For our discussion this morning, I would like to rephrase that question slightly and ask:
How do we go about organizing collectively . . . to enhance and optimize research competitiveness in a global economy?
I want to address that overarching question in three parts:
First, I want to characterize the global research economy and to outline the principal features of the U.S. R&D environment.
Second, I want to discuss academic research competitiveness in terms of some simple analyses of relative growth among institutions and of their comparative research portfolios.
Finally, I want to talk about competitiveness and collaboration as necessary and complementary elements of the new research economy . . .
. . . and to suggest that another necessary element is "strategic intent".
I also will provide four classes of examples to support the discussion of how we go about the business of organizing collectively across countries in public/private partnerships.
To be sure, we should remember that the environment for R&D is a complex and interactive one.
It is shaped not only by the quantity and sources of funds available to support research activities, but also by the talent pool and capabilities of the scientists and engineers who conduct research, and by the settings in which that research is conducted . . .
. . . that is, its "infrastructure" -- in the sense of its facilities, its institutional cultures, and those other related attributes governed by geographical location and interrelating organizations and facilities, many of which are increasingly global and devoid of boundaries!
The R&D environment also is shaped by prevailing public attitudes about the importance and usefulness of research in the broader context of societal pressures and economic opportunity.
So first, let us examine the size and shape of the research economy itself--the research marketplace, if you will.
Worldwide, R&D is a $570 billion industry ($518 billion among the 30 OECD countries), of which 85% is dominated by just seven countries, and 44% by the U.S. alone, which accounts for approximately $265 billion.
Of this $265 billion in U.S. R&D expenditures -- 68% is derived from industry, 26% ($70 billion) from the federal government and 6% from foundations, states and our own research universities.
Within the U.S. research economy, academic performers garnered about $30 billion, or 11% of the $265 billion U.S. total, in 1999. (or $36 billion and 14% if Federally Funded Research and Development Centers, FFRDC's, are included.)
This 11% academic "market share" for the United States is, of course, distributed among many of the nation's 3,611 colleges and universities. It should be noted that in other countries, university R&D market share varies between 5% in Russia to 25% in Italy.
In this regard, we should remember that the bulk of America's research universities are post-World War II phenomena and that many have emerged in just the last three decades. Just after World War II, fewer than 50 universities performed sponsored research. By 1980, however, the number had risen to 600 institutions and, by 1995, to 875 colleges and universities.
Still, marked asymmetries exist both geographically and among universities in the distribution of R&D wealth. And there continues to be a press for dispersion, as seen in the aspiration of so many institutions wishing to be designated as research universities.
For example, in their 1997 book, "The Rise of American Research Universities: Elites and Challengers in the Postwar Era", Hugh Davis Graham and Nancy Diamond use historical analysis and quantitative comparisons to identify 50 leading research universities as of 1990. Their list includes 32 "rising" institutions that previously were not highly ranked in national surveys. And, it excludes a dozen institutions holding membership in the elite Association of American Universities, an organization that has always felt that it alone defined what research universities were.
These changes amount to "seismic rumbles of change" (to use Chuck Vest's phrase) within the academy.4
But the fact is that, in 1995, the number of universities participating in the U.S. research economy was 875, although the top 100 captured 80% of the available funds.
So what are the practical consequences of these observations on R&D market share?
Obviously, academic institutions do not have a particularly notable share of this market -- only 11% to 14%. So, the bottom line question is this: Can we afford to ignore 86% to 89% of the market? I think not! And, considering the growing international dimensions of R&D, the opportunities to gain market share by "going global" are even larger!
In many countries, as well as in many U.S. states, governments and legislatures have been increasingly less willing to support higher education, at least as evidenced by the decreasing share of state budgets going to academe. Certainly, as evidenced by the program and policy initiatives reported in this conference, I think that the U.S. can learn from what many other countries are doing. However, I also think that some U.S. states hold lessons for other countries and for the U.S. itself. For example, although the U.S. federal government has a large and diverse framework for considering R&D policy and funding, most states lack a framework for considering R&D activities, or for integrating R&D at the state level with programs at the federal level. Notably, a 1995 report of The State-Federal Technology Partnership Task Force chaired by the Governors of Ohio and Pennsylvania (the Celeste-Thornburg Report, as it has come to be called) called attention to this disjunction and offered policy recommendation to remedy it.5 Yet, we now see that other countries are effectively solving policy disjunctions within their national boundaries and that even the brand new European Union is going beyond the U.S. in integrating its science and technology policies and strategies across its individual "states." In the U.S., the traditional benchmarking of one state against another is no longer sufficient. Regional clusters of innovation, as studied by the Council on Competitiveness, must today be benchmarked against other states, as well as against other world regions that support similar competitive industries. (See, for example, the1998 Technology 21 report of the state of Pennsylvania, http://sites.state.pa.us/PA_Exec/DCED/tech21/newframe.htm)
Moving on to the research competitiveness of universities and to the evolution of academic science, all of the indicators that I see on the horizon make me optimistic about the future of academic R&D, although not necessarily as we now know it.
First, as I have already suggested, we have a significant opportunity to gain market share. We cannot ignore 89% of the U.S. R&D market, nor the even larger global marketplace for research.
Second, other opportunities abound when we focus on the special role of universities. I believe opportunities exist for universities to create greater differentiation among themselves, either as individual institutions or through creative alliances that shape new dimensions of competitive and comparative advantages.
Focus and differentiation are respected elements of competitive strategy, and no university can afford to be truly comprehensive in today's environment.
Opportunity also exists in the very business that we are in, mainly education, if looked at from a research perspective. Educational R&D is an infinitesimally small fraction of educational expenditures, and we have not advanced the science of education nearly enough. That is, we can make an effective contribution to educational practice if we can perform significant research on educational practice that can service as the basis for educational reforms.
Third, the private sector has given us useful "leads" to follow . . . such as outsourcing businesses that are separate from core activities. So, for example, with so many performers of R&D, what will be the academic equivalent of mergers and acquisitions, of re-engineering, of managed health care plans, and of the emerging private practice corporations? What new and innovative forms of outsourcing will be considered? What alliances and coalitions will emerge to consolidate and expand market share? And what comparative and competitive advantages will be expressed as the new generation of research universities emerges in the years ahead, as indeed it surely will?
I suggest that key among the issues that will drive such radical changes is the concept of "strategic intent". . . derived from the book, "Competing for the Future" by Gary Hamel and C.K. Prahalad. They define "strategic intent" as "an ambitious and compelling ... sense of direction ... a sense of discovery ... (and) a sense of destiny ... (that) implies a significant stretch for the organization."
When strategic intent is derived from a sense of economic opportunity in the market, I think that the prospects are even greater, because it means that important informational elements have come together to signal economic opportunity--it means that clear benchmarking has been done. In the tradition of business, it means that we know ourselves, that we know our competition, that we know how to leverage, and that we know how to try new things on for size!
In its 1996 report, "Endless Frontier, Limited Resources: U.S. R&D Policy for Competitiveness", the Council on Competitiveness stated: "Over the next several years, participants in the U.S. R&D enterprise will have to continue experimenting with different types of partnerships to respond to the economic constraints, competitive pressures and technological demands that are forcing adjustment across the board."
As reported by many of the participants in yesterday's conference, the innovative responses to these constraints, pressures and demands include -- closer working relationships between research universities and industry, increased interaction between industry and the federal R&D establishment, and company-to-company R&D alliances among domestic competitors, suppliers and even foreign rivals.
What are some of the best existing and emerging examples of new university practices?
Clearly the most radical and most frequently encountered example involves the so-called "virtual universities." Of course, that is with regard to the traditional educational mission of universities, but we have heard already about virtual R&D consortia, made possible by the ability of many researchers to conference through the Internet and to also conduct experiments at a distance.
A second example is that of R&D Limited Partnerships. Here, I think that the classic example is the practice pioneered by the first plant biotechnology company, Agrigenetics, Inc. and its CEO, David Padwa. At one time in the early 1980s, Agrigenetics probably supported financially something in the order of 70% to 80% of the world's best and most promising research in plant molecular biology, using that support as its own "feedstock" of proprietary intellectual capital. Similar approaches are still practical and in use today. Such was the case of the semiconductor alliance described for us by Alexander Pepe from the Motorola Corporation in his Crolles example yesterday. And the Hewlett-Packard Company has kept track of leading edge researchers in its key areas of industrial focus as a means of guiding its university research alliances.
The new research economy also requires increased university-industry strategic partnerships. A prime example is the strategic partnership between Purdue University and Caterpillar, which we effected while I was associated with Purdue.
The essence of the partnership is simple:
Of course, students are involved in every aspect of the partnership, gaining practical experience in a dynamic industry and having the opportunity for substantive job placements upon graduation.
Finally, as we heard yesterday from Deborah Wince-Smith, President of the Council on Competitiveness, much of the future U.S. competitiveness will hinge not just on policies and investments at the national level, but on the capacity to foster differential rates of learning and clusters of innovation in regions across the country. The Council's recent report, "Clusters of Innovation: The Regional Foundations of U.S. Competitiveness," published in 2001, focused on five U.S. regions in a powerful analytic study guided by Professor Michael Porter of Harvard University. Moreover, OECD itself has done a number of cluster studies that parallel those in the U.S. Again, it would be helpful if data elements were available at finer levels of resolution than those presently available for R&D.
Equally, the business literature is reflecting these trends. For example, in the May 31, 1999 issue of Forbes magazine, Tim Ferguson writes, "In the new economy, a cluster is made out of brainpower . . . a critical mass of skilled workers, established employers, and entrepreneurs in vital sections of the economy." In the old economy, he states, " . . . . proximity to water or rail mattered a lot. Today, proximity to a university campus matters a lot."
Clearly, research universities can be expected to lead these clustering efforts.
Let me conclude, therefore, with an example from my own university--The University of Akron, located in the Northeast corner of the state of Ohio. Although it is not one of the large research universities, The University of Akron enjoys some distinct competitive advantages.
Founded 132 years ago, in 1870, the university grew up alongside the rubber industry that emerged in Akron in the mid 1870s. It offered the world's first academic program in rubber chemistry and continued to shape its R&D interests alongside those of industry. Today, The University of Akron has the largest and best-known academic center focusing on polymer science and polymer engineering--areas in which we compete better than better-known universities such as MIT, CalTech, or Case Western Reserve.
Moreover, according to the Association of University Technology Managers (AUTM), we also patent far more effectively than others. AUTM conducts a world survey on patent productivity per million dollars of research activity and ranks The University of Akron 2nd in the world.
Although tire manufacturing has moved to other nations, the base of talent that the rubber industry left behind in Akron, together with the continuing evolution of basic and applied research at The University of Akron, has enabled the emergence of a large and vibrant polymer industry in Ohio. Today, we are situated at the heart of a dynamic regional economy, surrounded by 2,500 polymer-related companies with shipments valued at $50 billion (U.S. Cy.) annually. This is the Ohio polymer cluster!
Notably, The University of Akron's intense focus on polymers has enabled us to take significant leadership among our industrial partners. As a result, in 2001 Newsweek identified Akron as a "new technology city" and the role of the University was prominently recognized. The University has taken leadership roles in the formation of an industry association, Polymer Ohio, Inc., and an industry-led public/private strategy council that advises the Governor of Ohio and the Ohio Department of Development, The Ohio Polymer Strategy Council.
In the context of this major polymer industrial cluster and its interrelated historical context, the university has called for a commitment so bold as to signal strategic intent by undertaking four major initiatives:
First, we have initiated a plan to double the size of our R&D base in polymer science and polymer engineering as well as to make investments in related areas such as chemistry, physics and biomedical engineering.
Second, we have formed a Global Polymer Academy, leveraging our own strength in distance learning technologies and our close association with the Rubber Division of the American Chemical Society, which is resident at The University of Akron. The Global Polymer Academy is headed by Dr. Byron Pipes, former President on Rennsalear University. It uses automated broadband technologies in synchronous and asynchronous modes and is linked to major industry sites around the globe.
Third, we are creating an industry-led, but university-managed and university-situated National Polymer Processing Center (NPPC). The NPPC will house talent in basic and applied R&D to focus on small- and mid-sized polymer processing companies as well as on the development of valued-added products and opportunities.
Finally, we have initiated two commercialization engines: (1) The Ohio Polymer Enterprise Development Corporation (OPED) funded by the state of Ohio, and (2) The University of Akron Research Foundation consisting of our own technology transfer personnel coupled with our programs in intellectual property law and business.
In short, our ability to focus within the university and to focus on a correspondingly large industrial cluster is enabling us to innovate university practices.
Examples of the interesting things that this is enabling us to do are the following: First, as industries adjust their talent and space utilization during this economic downturn, we are managing their vacant space to accommodate incubator needs of new start-up companies and expanding research programs. Likewise, we are consolidating industrial research equipment within our own facilities or managing equipment within industrial facilities, thereby making important instrumentation available both to ourselves and to other industrial partners within the Ohio polymer cluster. We are assembling technical libraries, allowing us to expand our holdings as well as to manage the holdings of industrial partners. We also are managing industrial talent and providing industry with the equivalent of academic research and teaching assistants--namely, industrial assistants. At the graduate student level, this is effectively the same as cooperative educational opportunities that have long been the hallmark of effective talent searches for industry where undergraduate students are concerned. We also have created an exceptionally exciting form of international scholarship opportunities. Working with the multinational firms in our area, we have obtained funding to bring to The University of Akron, students from the overseas locations of these companies. Students are typically the sons and daughters of employees of these multinational firms, who will return from their studies at our university to become the next generation of leadership for those same companies where their parents now work. Finally, we are exploring strategic partnerships that tie our research activities more closely with those of industry as well as partnerships that enable bundled intellectual property portfolios to create new enterprises that benefit industry and the university.
In summary, this morning I have reviewed the global research economy and discussed how university-based research is changing as we adapt to market demands and create strategic intent in relation to clusters of industrial activity. Among the lessons learned are these three principal ones: First, it takes considerable time to create the kind of focused activities that constitute an industrial cluster in close synergy with a university research program. Decades appear to be the measurement dimension, although time is rapidly shortening (particularly when a dedicated funding stream can be brought to bear on an issue). Second, a clear sense of focus and strategic intent can help to make a strategy successful. Finally, just as the strategies of some countries hold important lessons for the U.S., so, too, can the state-directed strategies help assist some countries and the European Union in the pursuit of successful science and technology strategies for economic development.
The R&D environment is certainly dynamic. And, among the many changes, we can glimpse many exciting and intriguing opportunities. I am confident that we are structuring the vision and strategy to grasp them, and moving forward with determination, boldness and, most important, strategic intent.
I leave you with just one thought:
In this environment, there is no other option but to be cheerful, and plunge ahead!
1 I am indebted to my colleagues on the President's Council of Advisors on Science and Technology and the Council on Competitiveness for background discussions that influenced the ideas expressed in this paper. Data sources include several OECD publications and the 2002 edition of Science & Engineering Indicators, among others. Some of the ideas expressed here were part of my 1999 Merrill Research Conference invited keynote address at The University of Kansas.
2 I also wish to acknowledge our Mexican colleagues in CONACYT and OECD for their hospitality and organization of this conference. Their invitation provided a venue for me to renew a long-time friendship with Dr. Pablo Rudomin, as well as to initiate new collaborations with Ing. Parada Avila and his colleagues at CONACYT.
3 Eric Bloch is a former director of the National Science Foundation and a Fellow of the Council of Competitiveness.
4 Chuck Vest is President of the Massachusetts Institute of Technology (MIT).
5 The State-Federal Technology Partnership Task Force, Final Report, September 5, 1995, Battelle Technology Partnership, Cleveland, OH. The task force was established by the Office of Science and Technology Policy as a joint effort with the National Governor's Association.
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