 |
|
|
|
|
|
|
|
|
 |
 |
 |
 |
 |
 |
 |
 |
|
|
|
||||||||||||||||||
|
|
Understanding Private-Sector
Decision Making for Early-Stage
Technology Development
VI. ConclusionsOur research supports the view that large, industrial corporations continue to play an important role in converting new science into market ready innovations, especially when the innovations fit within the firm’s core business strategy and can be exploited within the basic manufacturing and marketing capabilities of the firm. At the same time, large firms are hesitant to support technology development projects that have the potential to be internally disruptive, even when the project would be compatible with core business goals. Yet today, even the largest firms cannot maintain all the capabilities internally—including research capabilities—required to compete at the technological frontier. Furthermore, even the most technologically dynamic regions, such as Silicon Valley and Boston’s Route 128, do not contain all of the talent locally—including research talent—to compete at all of the most interesting technological frontiers. The results of our survey of select high-tech firms, while limited in coverage, suggests that the more R&D intensive firms are spending an estimated $13 billion a year on early-stage technology development (ESTD)—funds specifically directed to projects that face barriers from internal disruption or barriers from the limited scope of the firm’s established lines of business. This works out to about 7.3% of total corporate R&D budgets ($180 billion invested in 2000) that are dedicated to ESTD investments. When internal development is resisted, excubation and partnering with others may be the answer. Or internal organizational structures such as “skunk works” may be used. Finally, joint ventures with firms that offer complementary capabilities may provide a way around the internal barriers that inhibit the development of some innovations. We found that spending on ESTD is concentrated in industries based on quickly developing technologies, like electronics, specialty chemicals and materials, and biopharmaceuticals. Mature industries based on well established technologies, like the automotive and computer software industries, typically spend less on ESTD and focus more of their resources on product development. Within individual industries, significant firm-level variation in ESTD spending also exists given the firm’s lifecycle position. Companies in the early stages of their lifecycle are more likely to invest more heavily into ESTD in order to establish a comparative advantage than more mature companies that focus instead on protecting existing product lines through heavy spending on product and market development. As companies grow, their technology investments become increasingly targeted and disciplined processes are put into place to evaluate all research projects. Another critical driver of ESTD spending is related to broader corporate strategies. Technology-centric companies for whom new technology is seen as a source of growth are more likely to invest heavily in ESTD than product-based companies for whom technology is a cost center. On the other hand, companies seeking to break out of their existing market positions or to rejuvenate their innovation resource base may make disproportionate investments into ESTD relative to their peers. Finally, and more importantly, many respondents reported that the ability of any one company to develop all of the technological elements required to deliver significant advances alone has rapidly diminished. According to a disk drive industry executive we interviewed, “[a]s technology advances, it costs more to solve successive problems. At some point, solving a new problem is beyond the capabilities of any one company.” There are simply too many potential ideas and too few resources to go it alone. There was a strong sense among our interviewees that the scale of research required to create new innovations has increased as technology becomes more complex, but a firm’s ability to capture the full benefits and exploit the full potential of new research has not kept pace, making decisions to invest in ESTD more difficult than ever before. In our opinion, government can promote economic growth by encouraging the development of disruptive innovations. Depending entirely on high-tech startups to develop disruptive innovations and introduce them to market—waiting for small technology firms to mature into, or merge with, larger firms, thereby transforming industries from the bottom up—is a strategy that is both slow and uncertain. Our research suggests that large firms increasingly also have a need for external partners to help them overcome internal, as well as external, barriers to the development of disruptive innovations. Government programs directed at promoting high-tech innovation across the economy that are “size” neutral may be the best strategy for encouraging firms and leveraging resources in pursuit of investments in ESTD to advance the technological frontier and promote long-term growth of our nation. Return to Table of Contents or go to next section. Date created: October 7, 2005 |
 |
ATP website comments: webmaster-atp@nist.gov / Technical ATP inquiries: InfoCoord.ATP@nist.gov. NIST is an agency of the U.S. Commerce Department |
 |