NISTIR-6098
Development, Commercialization, and Diffusion of Enabling Technologies Progress Report for Projects Funded 1993-1995

2. PATHS TO NATIONAL ECONOMIC BENEFITS

Of the 480 organizations in 210 projects providing business reports, 375 companies in 208 projects have reported plans for commercializing one or more applications of the ATP-funded technologies. Not surprisingly, most universities, non-profits, and government laboratories have not provided plans for commercialization, but they have reported plans for dissemination of non-proprietary information concerning technology developed with ATP funds. These plans of businesses for commercialization and of non-profits for knowledge dissemination are important because they point out two different kinds of pathways by which the technologies will have future economic impact.

Development of Enabling Technologies

The ATP funds technology development projects, on a cost-sharing basis with industry, through both General Competitions, open to all technology areas, and Focused Competitions, targeted to specified technologies and specified goals. Many projects and entire Focused Programs, consisting of sets of related projects, involve an interdisciplinary mix of science and technology fields. The ATP uses its own 5-digit, hierarchical technology classification system to identify technology areas under development by different organizations and projects. Individual companies self select primary and secondary codes which best describe their areas of R&D.

Figure 3 summarizes the technologies according to their first and second level code assignments. More than one-fourth of the technology development projects directly involve Information Technology/Computer Systems, either hardware or software. Discrete manufacturing and materials comprise major parts of the remainder. These three areas of concentration reflect the fact that seven of the 12 ATP Focused Program areas funded in FY 1993-1995 involve substantial information technology and/or materials processing and manufacturing technology. (This distribution differs somewhat from other Technology Area charts published by the ATP because the distribution shown in Figure 3 (a) reflects only the projects funded in FY 1993-1995; (b) reflects R&D activity at the organization level; whereas, organizations in a given joint venture project do not necessarily work in the same technology area; and (c) is based purely on the number of organizations working in a given technology area, not on the relative amount of funding to the technology area.)

Figure 3. Technologies Under Development

Further analysis of projects funded in these broad technology areas begins to capture the interdisciplinary nature of the work. For example, the second-tier analysis in Figure 3 shows that six percent of the work in Manufacturing (Discrete) involves "intelligent" manufacturing; 12 percent of the work in Information/Computer Systems is hardware. A third-tier analysis (not presented) would show that computer hardware has a strong electronics component. Digital data storage is one example. This next level of analysis also would reveal the overlapping of projects across disciplines and the difficulty of classifying them. For instance, some computer systems components and related manufacturing technologies are assigned to the Electronics category; e.g., Displays and Semiconductors and Microelectronic Fabrication technology.

Identification of Business Opportunities

Nearly 400 project participants have identified more than 1,000 applications of the technologies under development and provided detailed and current commercialization plans for nearly 800 applications spanning the spectrum of SIC industries. Figure 4 illustrates the diverse application areas of the enabling technologies funded in the Materials area. A detailed examination of individual reports reveals more explicitly the diverse linkages. For example, company reports for one project involving metal and alloy technology reveals planned applications in electrical power generation (SIC 49), chemical processing (SIC 28), and pulp and paper machinery and bearings (SIC 35). A single-company project involving coatings reports applications in seals (SIC 30), industrial machinery for printing rolls, pump components, bearings, and power transmission and computer displays (SIC 35), and sensors (SIC 38). Illustrations of linkages between other technology areas under development and their diverse application areas appear in the Appendices.

Commercialization will occur through eventual embodiment of the ATP-funded technology in a product, service, manufacturing process, or possibly some combination of these. Figure 5 summarizes the percentages that are expected to occur in each form. This figure suggests that most commercial deployment of ATP technologies will occur through manufactured products, with the focus on new, as compared with improved, products, processes or services. Responses to a follow-up question further indicate that for 35 percent of the applications, companies envision their application to be a "new-to-the world" solution to a market need or problem. Such applications represent opportunities to create totally new markets. Individual companies and projects are planning to use their new technical capabilities to achieve a mix of "new-to-the-world" solutions and cost reductions and performance improvements in products, processes, or services.

As shown in Figure 6, many companies envision that products and processes embodying the ATP-funded technology will be used in multiple stages of production extending from Raw Materials Production to End User. Sixty-three percent of the technology applications involve relatively early-stage Components Manufacturing.

The entry of the ATP technology into an early stage of the production cycle, in combination with the diversity of applications expected to result from individual projects and technologies, increases the opportunity for downstream customers/users to experience market spillovers (consumer surplus). This is, of course, especially true where an ATP-funded technology has significant cost or performance advantages over existing/defender technologies.

Business Goals

In the Baseline Reports, companies are asked to categorize, define, and quantify their business goals for their parts of the ATP-funded R&D projects. As shown in Figure 7, performance improvements appear to be a somewhat more commonly expected and significant goal than cost reduction. For 29 percent of applications, a performance improvement in the range of 100-500 percent or more is anticipated. For 28 percent of applications, a cost reduction of 25 percent or more is expected. Improvements of these magnitudes, particularly when combined with the emphasis on "new" products or lines of business, are consistent with definitions of "discontinuous" or "breakthrough" innovations used in the joint Rensselaer Radical Innovation Research - Industrial Research Institute Project funded by the Sloan Foundation (Leifer, 1997). (Of course, for some projects, even a small cost reduction or performance improvement can represent a significant achievement and important competitive advantage when measured across a large production volume.) Other data show that one-third of applications are expected to involve some combination of cost reduction and performance improvement over existing technologies.

Table 2 provides an illustrative list of quantitative examples of how ATP funding is expected to affect the technological capabilities of companies as measured by expected changes in value for the attribute identified as most critical to commercialization for a specific application. Quantification of cost and performance advantages of the ATP-funded technology, such as provided by this business goals analysis, is useful in tracking project progress as well as assessing business opportunities and estimating the potential magnitude of economic spillovers. Both "with" and "without ATP" goals are needed to assess the potential for ATP funding to make a difference relative to what would have occurred without government funding. An ex ante comparison of baseline values with project goals for key technology parameters/attributes helps to identify the anticipated degree of technological advancement and to assess the expected impact of the project. An ex post comparison of progress made against cost/performance targets will make it possible to assess the level of actual technical accomplishments within a business and economic context.

Acceleration of R&D is another commonly cited business goal of ATP projects. As shown in Figure 7 (above), nearly all the 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 production processes as a result of ATP funding. A reduction of at least two years is anticipated for 62 percent of applications; with a reduction of four or more years expected for 19 percent of applications and a reduction of two to nearly four years expected for 43 percent of applications.

The importance of the acceleration aspect of ATP funding is reflected in Figure 8. For 98 percent of applications, speed-to-market is considered "important" or "critical;" it is considered "critical" for more than half. Further emphasizing the importance of acceleration, the window of opportunity for 75 percent of the applications to enter the marketplace is considered to be within two years after ATP funding ends; i.e., it appears that companies believe they would miss the opportunity, or a significant part of it, without the acceleration enabled by ATP funding.

The following are some additional business goals cited in company business reports:

"Achieve broad adoption..."
"Be #1 supplier of ... technology"
"Expand applications into ... industry"
"Obtain a licensee by end of ATP"
"Become global expert in ... technology"
"Diffuse technology to cover 5 technology niches"
"Increase market share by ..."
"Be recognized as leading vendor of ..."

Identification of Commercialization Strategies

As their primary means of commercialization, most ATP-funded companies plan to achieve commercialization for at least one application through production of a product or service in-house, in their own existing or planned facilities. As shown in Figure 9, in-house production is the focus for 65 percent of applications. For 24 percent of applications, licensing to others is the primary strategy; for 43 percent of applications, licensing is the primary or secondary means of commercialization. For 79 percent of applications, including some of those where in-house production is the primary means, licensing to others is a possible supplementary means, if not the primary focus. Thus companies recognize the opportunity to increase their revenues beyond what their internal production facilities can support, while at the same time increasing opportunities for diffusion of the technology to other firms and potentially other applications and industries. Jaffe confirms that potential for licensing the technology to others is a factor that makes economic spillovers relatively more likely (Jaffe, 1996).

Close supplier-customer linkages are important to successful technological innovation. Among the work that addresses this issue, von Hippel suggests that such linkages can increase the productivity of the innovation through more efficient communication of technological and market information (von Hippel, 1994). Given the large number of small companies involved in the projects, and the rather early stages of production they address, one would expect a large number to pursue strategic alliances for commercialization. But Figure 10 shows that only for a relatively small percentage of applications (one-fourth or less), do the commercialization plans indicate heavy reliance on strategic alliances with customers, suppliers, partners in joint production, or distributors.

Further analysis at the company level, however, reveals that (a) 91 percent of companies plan at least one of these types of alliances and (b) at least one of these types of alliances is planned in pursuing 88 percent of applications (graph not presented).

The subset of reports from small businesses reveals that strategic alliances to pursue commercialization are more important for small businesses than for larger ones, as one would anticipate. Small businesses plan alliances with customers as a primary strategy for 31 percent of applications and as a primary or secondary strategy for 54 percent of applications (compared with 25 and 41 percent respectively for all respondents); small businesses plan alliances for joint production as a primary strategy for 21 percent of applications and as a primary or secondary strategy for 47 percent of applications (compared with 17 and 32 percent respectively for all respondents); small businesses plan alliances with distributors as a primary strategy for 22 percent of applications and as a primary or secondary strategy for 38 percent of applications (compared with 15 percent and 27 percent respectively for all respondents).

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Go to Chapter 3: R&D STATUS REPORT

Date created: December 1997
Last updated: August 3, 2005

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