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Measuring
ATP Impact
Program Impact on Private FirmsPrivate firms play a central role in ATP operations. The program seeks to attract these firms as partners, and relies on them for their:
At the same time, ATP seeks to create the conditions necessary to maximize the chances of project success. Recently, EAO compiled 13 studies that looked at the factors leading firms to seek funding from ATP for the development of new technologies — and how the program and its processes affected these firms. Table 2 lists these studies by author, with column headings indicating the six major sub-themes covered in the research. 10 Table 2. Studies Showing the Impacts of ATP on Private Firms
ATP Support Addresses the Financing Gap Private firms face important barriers to innovation because of the great amount of time it takes to make progress in the research lab and commercialize in the marketplace. In 1999 ATP commissioned a study by Lewis M. Branscomb (principal investigator) and others to look at the decision-making process for the funding of early-stage, high-risk technology R & D projects inside firms and with outside investors. The goal was to better identify projects not undertaken or pursued less vigorously by industry that would meet ATP criteria of having broad-based technical benefits and commercial success. ATP bridges what the study refers to as this “…serious gap…the ‘Valley of Death’ in R & D.” 11 In this desolate place between invention and innovation, the risk of failure may be too high to attract venture capital. In addition, the value to the individual company may not be high enough to warrant the investment, and the company may lack the infrastructure necessary to take it to fruition. A 1999 study by the Harvard Business School looked at seven small start-up companies in the Boston area that turned to ATP for funding. The goal of the study was “to identify the role played by ATP in the R&D activities of these companies, to determine whether their needs were adequately addressed by private venture capital investors alone, and to examine the interactions between venture financing and public initiatives in assisting these firms.” 12 This study found that, “The Advanced Technology Program has substantially expanded and enhanced the R&D activities of our seven-company sample.” 13 ATP helps to bridge the Valley of Death by providing participating companies with:
Table 3 illustrates the impact of ATP involvement on the goals of three ATP projects. As can be seen, goals established with ATP funding were far more ambitious than those without ATP funding. Table 3. The Impact of ATP Funding on Company Goals for Three Different Technologies
The Halo Effect From the first survey of ATP effectiveness, firms participating in the program have recognized the validity of a “halo effect"—the fact that an ATP award enhances the respect paid to such a firm. In fact, ATP’s second major survey, covering the first three competitions, replaced the term “halo effect” with “increased credibility.” This survey concluded that 90 percent of participants benefited moderately or greatly from enhanced credibility because of the award. 14 A study of BRS survey data in 2000 revealed that 93 percent of participating firms perceived that they had increased credibility due to the ATP award. This study stated that, “The ‘halo effect’ may be…of particular benefit to ATP-funded small businesses, which have little if any market presence and typically very limited financial resources at the time of the ATP award.” 15 Another study compared winners and non-winners, and found evidence that ATP encourages pursuit of new technical areas outside the scope of participating firms’ past R&D activities. This study found that 28 percent of all proposals were in a technical area new to the proposing firm. For award winners, that number jumped to 47 percent. In effect, ATP cost sharing enabled firms “to initiate risky projects in new technical areas.” 16 Acceleration of Technology Since ATP was established to accelerate the development and commercialization of technology, success in the area of acceleration has been tracked by surveys throughout the life of the program. A 1996 survey by Silber & Associates found that the R & D cycle was shortened by at least two years for 95 percent of participants. 17 Another study noted, “…nearly all companies expect some reduction in the time it will take to complete the R & D phase and bring their products to market/or implement new product processes as a result of ATP funding.…A reduction of at least two years is anticipated for 65 percent of all applications.” Based on BRS data, this study identified three aspects of timing: the estimated reduction in time to market, the importance of speed, and the perceived length of the window of opportunity. Figure 10 captures these aspects. 18 ATP also affects acceleration in terms of likelihood to proceed with R & D, as less than 40 percent of one control group of non-ATP winners had begun any aspect of their projects after not being chosen by the program. 19 Figure 10. Importance of Timing
An interview-based analysis of 28 companies funded in 1991 found that 96 percent of interviewees considered reduction of cycle time to keep pace with the competition to be “very important.” When asked for an estimate of time savings due to ATP, the median response was by 50 percent or three years. The economic value of shortening the research cycle by just a year was estimated by many firms to be in the millions of dollars, as shown in Table 4. As for ways that ATP cut cycle time, firms participating in the study identified five principal factors. These are summarized in Table 5. 20 Table 4. Estimates of Economic Value of a One-Year Reduction in Applied Research Cycle Time, in Order of Decreasing Value ($5 Million to $6 Million Median Value)
Source: Laidlaw Table 5 - ATP Effects that Helped Interviewees to Reduce Cycle Time
Many firms stated that ATP’s requirement of well-laid-out R & D and business plans meant even more to acceleration than ATP’s funding. The same study found that 86 percent of those interviewed expected the time saved in the R & D stage to flow through to later project stages, including commercialization. 21 Increasing Productivity Within Firms Tracking changes in the number of patents secured by ATP participants helps to measure increases in productivity due to ATP. One study looking at changes in the number of patents secured by ATP firms estimated an increase in patenting that averaged between 5 and 30 patents per firm per year of participation, attributable to ATP. 22 Another study also used patent data to measure productivity increases among ATP participants. The authors compared ATP participants with a control group and found that taking part in ATP joint ventures increased patenting in the targeted technology areas above those levels established prior to participating in the project. The rate of increase in productivity due to an ATP project, as measured by patents, was 8 percent per year. Productivity was found to be highest among consortia with members expert in the same area of technology. 23 Participation of Small Firms ATP’s mission specifications include the line, “Ensure appropriate small-business participation.” Since this is the case, ATP’s self-evaluations address the following question: “Have small firms been able to compete successfully against larger firms for ATP awards?” A study by the ATP Economic Assessment Office analyzed BRS data to help answer the question. These data show that the majority of ATP-participating companies, including subcontractors, are classified as “small,” with fewer than 500 employees, and that 61 percent of awards have gone to projects led by small firms. 24 ATP’s year 2000 survey of firms applying for funding also addressed company size. Figure 11 shows the number of employees per firm applying to ATP in 2000. 25 The study looked for signs of commercial success and economic impact from the small companies that received awards from ATP. Results showed that small firms were making solid progress toward early stage commercialization. 26 Table 6 shows results from the study’s comparison of small and larger firms in terms of earning revenue, adopting process improvements, and filing for patents. Figure 11. Number of Employees Among Year 2000 ATP Applicants
Table 6 - A Comparison of Small and Larger Firms in ATP
Impact on Private Companies As they make progress toward commercialization, innovating firms that participate in a project cost shared by ATP may experience growth, higher sales, and increases in capitalized value, revenue, and return on investment. Figure 12 shows the employment change at 64 small companies receiving a single-company award from ATP. 27 Collaborators and licensees close to such firms are also positioned to make early commercial progress. Figure 12. Employment Change at 64 Small Companies Receiving a Single-Company Award
The activities of awardees and their collaborators and licensees constitute ATP’s “direct path to impact.” A study of the first 100 completed ATP projects shows that 64 of these projects yielded a total of 122 new products or processes. Employment changes were profound for the small companies involved — 59 companies at least doubled in size; 11 companies grew by more than 1000 percent. Table 7 looks at the progress of the first 50 projects in reaching the commercialization of new technologies. 28 Table 8 provides examples of products and processes realized from the first 50 completed ATP projects. 29 Table 7. Progress of Participating Companies in Commercializing New Technologies
A recent study looked at the impact of new closed-cycle air refrigeration (CCAR) technology developed with cost-shared ATP funding by Air Products and Chemicals, Inc. of Allentown, Pennsylvania, and Toromont Process Systems, Inc. of Houston, Texas. (See also page 27.) This technology uses dry air as the working fluid for ultracold refrigeration. Applications include food processing, uses in liquid natural gas, and recovery systems for volatile organic compounds. The base case net present value of CCAR as of 2001 was $459 million, or $220 in returns for each dollar invested by ATP in the technology ($2.1 million total). CCAR also provides benefits across several industries, as well as significant reductions in harmful emissions of carbon monoxide, nitrogen oxide, and particulates. At the same time, direct economic benefits for the two companies involved were more modest, with $64.8 million projected from CCAR installations. 30 Such returns to companies — versus industries and the economy as a whole — are brought about because of the strict criteria used by ATP in choosing technologies with the potential for broad impact. Table 8. Examples of Products and Processes from the First 50 Completed ATP Projects
____________________ 11 Branscomb et al., Managing Technical Risk: Understanding Private Sector Decision Making on Early Stage, Technology-based Projects, NIST GCR 00-787, 2000, p.2. 12 Gompers and Lerner, Capital Formation and Investment in Venture Markets: Implications for the Advanced Technology Program, NIST GCR 99-784, 1999, p. iv. 13 Gompers and Lerner, p. 20. 14 Silber and Associates, Survey of Advanced Technology Program 1990-1992 Awardees: Company Opinion About the ATP and its Early Effects , 1996, pp. 41-43. 15 Jeanne W. Powell and Karen Lellock, Development, Commercialization, and Diffusion of Enabling Technologies: Progress Report, ATP, 2000, p. 31. 16 Maryann Feldman and Maryellen Kelley, Winning an Award from the Advanced Technology Program: Pursuing R & D Strategies in the Public Interest and Benefiting from a Halo Effect, NISTIR 6577, 2001, pp. 18-19. 17 Silber and Associates, Survey of Advanced Technology Program 1990-1992 Awardees: Company Opinion About the ATP and its Early Effects, ATP, 1996, pp. 37-40. 18 Powell and Lellock, pp. 11-12. 19 Feldman and Kelley, p. 29. 20 Frances Jean Laidlaw, Acceleration of Technology Development by the Advanced Technology Program: The Experience of 28 Projects Funded in 1991, NISTIR 6047, 1997. 21 Ibid, p. 25, pp. 34-35. 22 Michael R. Darby, Lynne G. Zucker, and Andrew Wang, Program Design and Firm Success in the Advanced Technology Program: Project Structure and Innovation Outcomes , NISTIR 6943, 2000, p. 10. 23 Mariko Sakakibara and Lee Branstetter, Measuring the Impact of ATP-Funded Research Consortia on Research Productivity of Participating Firms: A Framework Using Both U.S. and Japanese Data, NIST GCR 02-830, 2002, p. vi. 24 Jeanne W. Powell, Business Planning and Progress of Small Firms Engaged in Technology Development through the Advanced Technology Program, NISTIR 6375, 1999, with the percentage participation figure updated by Powell in 2002. 25 ATP, Survey of Applicants 2000, fact sheet 11. 26 Ibid., p. 45. 27 Performance of 50 Completed ATP Projects, Status Report-Number 2, NIST SP 950-2, 2001. 28 Extracted from the Performance of 100 Completed ATP Projects , Status Report – Number 3. 29 Ibid. 30 Thomas Pelsoci, Closed-Cycle Air Refrigeration Technology: For Cross-Cutting Applications in Food Processing, Volatile Organic Recovery, and Liquid Natural Gas Industries , NIST GCR 01-819, December 2001. Return to Table of Contents or go to next section. Date created: March
10, 2005 |
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