Measuring ATP Impact
2004 Report on Economic Progress

Private and Social Returns of ATP Projects

Spillovers

ATP delivers technology impacts and achieves broad-based benefits to society via two pathways:

1. An indirect route by which knowledge, leading to private and social returns, is diffused through publications, presentations, patents, and other means of knowledge communication.
2. A direct route by which award recipients and their collaborators accelerate development and commercialization of technologies, resulting in private and social returns, and also in spillovers — products and processes that benefit other companies, other industries, and the American people.

Impact in the form of spillovers can take many forms. ⁴⁵ For example, looking at products resulting from ATP projects:

• More than 8 out of 10 products reduce their customers’ cost of production.
• On average, products have more than 250 customers.
• Half of companies with products have customers outside their own industry.
• Products resulting from ATP technologies are finding their way into a host of downstream products.

Because these spillovers get at the heart of ATP’s mission, the ATP Economic Assessment Office has devoted considerable effort to measuring them. Proof of large spillovers supports the wisdom of a public investment in high-risk, high-impact technologies. A number of studies have looked at two important types of spillovers that benefit the nation: knowledge spillovers and market spillovers .

Estimating Knowledge Spillovers

Data revealed by both the ATP Business Reporting System and the S tatus Report of Completed Projects strongly indicate that as a portfolio, ATP-funded projects are generating outputs with the potential to lead to both knowledge and market spillovers. ⁴⁶ These outputs include publications, patents, patent citations, collaborative linkages, and products and processes — all of which can lead to spillovers.

The 2000 study by Feldman and Kelley found that ATP is selecting projects likely to generate large knowledge spillover effects because of:

• Ties of proposing firms to other organizations.
• Positive attitudes of award winners toward information sharing and knowledge transfers to other firms.

The authors point out that, “The more embedded a firm is in a network of such inter-organization ties, the more quickly the knowledge generated by the firm is expected to be absorbed by other organizations in the system." ⁴⁷ They confirmed the idea that award-winning firms exhibit “a tendency toward openness (30 percent), compared to non-winning applicants (19 percent)." This, in turn, “suggests that the public interest is being served by enabling R & D activities that are more likely to generate knowledge which benefits both the participating firm and other firms not directly involved in the project." ⁴⁸

Another study from the same time frame, by Cohen and Walsh, focused directly on the measurement of knowledge spillovers. This study linked spillovers to appropriability—economic factors limiting a company’s ability to capture profits from its own innovation—and the strategies they use to secure those profits. Results showed that information flowing inside an industry help the R&D efforts of individual firms.  The finding is consistent with the core propositions that led to ATP’s establishment and its key design features. In particular, by selecting generic technologies applicable to many firms both upstream and downstream, and by supporting specific joint ventures, ATP can foster the generation of knowledge spillovers, and thus increase the productivity of a firm’s R&D. ⁴⁹

Other studies provide additional evidence of the potential of projects for large knowledge spillovers. Figure 14 displays the distribution of the first 50 completed projects by the number of patents filed—including those granted and not yet granted.

Figure 14. Distribution of Projects by Number of Patents Filed

Estimating Market Spillovers

Several ATP-funded evaluations have sought to estimate the magnitude of market spillovers related to ATP projects. An early study by Research Triangle Institute (RTI) measured market spillovers for a portfolio of seven ATP-funded products in tissue engineering, focusing on the gap between estimated social and private returns. Table 12 shows the estimated social and private returns on investment for these projects. The market spillovers—the gap between social and private returns—are seen to be large due to estimates of the value of changes in quality-adjusted life years for patients from the new and improved medical treatments developed, in addition to treatment cost differences. RTI concludes that the private sector might under-invest in high-risk R & D due to the fact that “the social returns far outweigh the returns to the companies developing, commercializing, and producing these high-risk projects." This in turn indicates the importance of ATP in pursuit of such technologies to offset the lack of private investment. ⁵⁰

The Pelsoci study of CCAR technology also looked at market spillovers and found, based on sales of CCAR units, a large gap between the estimated social and private returns of the breakthrough. Another study of two digital data storage technologies funded in part by ATP produced an estimate for consumer welfare gains over five years of $1.5 billion and $2.2 billion for each of the two technologies. ⁵¹

Table 12. Spillovers Imputed by Comparing Composite Social Returns, Public Returns,  and Composite Private Returns on Seven Tissue Engineering Projects

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45. ATP Fact Sheet: Customers Across Many Industries Enjoy Significant Benefits .

46. Powell and Lellock, Development, Commercialization, and Diffusion of Enabling Technologies: Progress Report, 2000; and Advanced Technology Program, Performance of 50 Completed ATP Projects, Status Report 2, 2001.

47. Feldman and Kelley, Winning an Award from the Advanced Technology Program: Pursuing R & D Strategies in the Public Interest and Benefiting from a Halo Effect , 2000, p. 11.

48. Ibid, p. 17.

49. Wesley N. Cohen and John P. Walsh, R & D Spillovers, Appropriability and R & D Intensity: A Survey Based Approach , ATP, 2000.

50. Sheila A. Martin et al., A Framework for Estimating the National Economic Benefits of ATP Funding of Medical Technologies , NIST GCR 97-737, 1998.

51. David Austin and Molly Macauley, Estimating Future Consumer Benefits from ATP-Funded Innovation: The Case of Digital Data Storage , NIST GCR 00-790, 2000.

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Date created:  March 15, 2005
Last updated: August 15, 2005

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