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NISTIR
6917
Different Timelines for Different Technologies:
Evidence from the Advanced Technology Program
Executive Summary
Case studies of the
first completed ATP projects have shown considerable variation in commercialization
patterns of ATP-funded technologies. These variations were apparent in
the timing of initial revenues, commercialization in more mature and multiple
applications, and diffusion of ATP technologies relative to the period
of ATP funding of R&D. This study is an effort to address the differences
in commercialization patterns for different technologies in a systematic
way. It seeks answers to the following questions:
- How do expected
commercialization patterns differ for ATP projects in different technology
areas?
- What factors appear
to account for at least some of the differences?
- To what extent
are actual commercialization patterns mapping to plans?
An understanding of
technology differences as they affect commercialization is critical to
proper evaluation of proposals for ATP project funding and to assessment
of performance of individual projects as they unfold. By examining the
different commercialization patterns for different technologies within
a broader innovation life-cycle framework, we hope to provide a greater
understanding of the broader technological and industry environments underlying
these patterns. This study demonstrates that in some highly innovative
technology areas, important technology differences cause commercialization
and impact to happen relatively quickly; however, other technologies require
much more time.
ATP’s Business
Reporting System (BRS) provides a comprehensive picture of business
planning and progress towards commercialization of projects funded since
1993. Over the course of ATP funding, award participants lay out business
plans and strategies for different commercial applications of their ATP-funded
technologies, provide an expected commercialization timeline,
and describe early commercialization activity. Additional surveys track
projects into the post-ATP period. Although most projects are still “young”
relative to their complete timeline for commercialization and economic
impact, they are beginning to generate a body of information about actual
commercialization patterns that affords a preliminary comparison of actual
commercialization progress with earlier expectations.
This study focuses
on business reports from 558 participants in 299 ATP projects funded from
1993 to 1998 that indicated business expectations and strategies for nearly
1,200 commercial applications of their ATP-funded technologies. The study
observed the following commercialization patterns:
1. Across all technologies
and commercial applications, revenues are expected:
- for one out of
six applications by the end of ATP funding
- for two out of
five applications within a year after ATP funding ends; and
- for four out of
five applications within three years after ATP funding ends.
2. Technology affects
timing:
- Information technology
(IT) applications are anticipated to earn revenues very quickly:
– 28% by the end of ATP funding, and
– 64% within another year.
- Materials-chemistry
and manufacturing applications are anticipated to be the slowest to
earn revenues. These are expected to lag IT by about a year:
– 8% of materials-chemistry applications are expected to earn revenues
by the end of ATP funding and 54% within two years after ATP funding
ends, and
– 12% of manufacturing applications are expected to earn revenues
by the end of ATP funding and 57% within two years after ATP funding
ends.
- Early biotechnology
applications follow the overall averages in the early years, but there
is a noticeable second spurt of activity five or more years out, when
regulatory requirements are expected to be met for health-care applications.
- Electronics applications
show a steep rise in activity in the second year of ATP, followed by
a rapid fall-off in activity:
– 71% of electronics applications are expected to earn revenues
within two years after ATP funding ends.
3. Expectations
about when commercialization and revenues will occur tend to mirror the
expected market windows of opportunity.
4. Preliminary
assessment of actual commercialization activity compared with expectations
shows:
- More applications
had been commercialized by the end of the ATP-funding period than expected—in
nearly all technology areas. Many companies introduced first-generation
products and services at the earliest opportunity. Higher-volume, higher-value
applications would come later.
- A large portion
of the projects that will ultimately achieve commercialization will
do so for their initial applications within
2 to 3 years after ATP.
An innovation life-cycle
model provides the framework for examining technology differences for
such characteristics as firm size, project structure, commercialization
strategy, technological advantage, and availability of capital that contribute
to differences in commercialization patterns. Many economists have published
evolutionary models. Our adaptation follows most closely J. M. Utterback,
Mastering the Dynamics of Innovation: How Companies Can Seize Opportunities
in the Face of Technological Change (1994) and extensions to collaborative
R&D in N. S. Vonortas, Cooperation in Research and Development
(1997).
The following is a
summary of findings:
- Information
technologies and biotechnologies support a host of “new-to-the-world”
applications in a number of industries, and they support formation of
new industries.
- Information technologies
enter the market quickly. This is consistent with the rapid pace of
the early phase of the innovation life cycle. In that phase, small
firms compete to open and capture new markets, and barriers to market
entry are relatively low. Service applications can offer a mechanism
for fast, initial market entry to end users in many industries, a
primary mechanism for technology advancement in mature manufacturing
industries, and a permanent strategy for addressing newer sectors
such as health care and telecommunications.
- Biotechnology
projects have a number of early opportunities for service applications
(for instance, research and testing services) that are useful for
market conditioning and validation even if these applications do not
generate large cash flows. Economic impact from applications for therapeutic
markets may be anticipated only in the longer run. For many health-care
applications, regulatory requirements prohibit fast market entry.
The market is expected to remain open for major applications for more
than five years after ATP funding ends.
- Innovation focuses
on achieving basic functionality and performance of new-to-the-world
products.
- Investment capital
flow suggests investors envision the broad future potential of the
markets expected to emerge.
- The precise nature
of the larger markets and distribution mechanisms is still blurred.
- Technology-based
competition is keen, and dominance changes rapidly in new/emerging
markets.
- Manufacturing
and materials-chemistry projects
more typically are developing new process technologies for existing
classes of products in mature, commodity-oriented industries. However,
manufacturing technologies and materials-chemistry technologies commercialize
slowly. Opportunities are expected to peak about two years after ATP
funding ends and then to decline relatively slowly compared with other
technologies.
- The focus is
on manufacturability and cost to gain advantage in cents-per-pound,
high-volume markets, as well as on higher performance products.
- Capital investment
and validation requirements are costly and lengthy. Financing is typically
from retained earnings.
- Product life
cycles and market windows are longer than for IT or electronics projects.
Technological change occurs more slowly than in new product areas,
particularly for commodity types of products.
- Joint ventures
are an important vehicle for sharing risks and technological uncertainties,
particularly in addressing interdisciplinary issues, for instance
in areas where different technologies converge, such as information
technology, electronics, and/or manufacturing.
- Electronics
(and related materials) projects tend to involve a mix of new and
established firms in transitional, rapid-growth stages of innovation
and company and industry development.
- Product applications are more common than process applications.
- Cost and manufacturability are critical objectives.
- Electronics product markets are extremely competitive; product
life cycles are short; and capital requirements for high-volume
production remain steep barriers to market entry.
- Nearly three-fourths of applications are expected to earn revenues
within two years after ATP funding ends. After two years, windows
of market opportunity are expected to diminish quickly.
Both expected
and actual commercialization patterns observed in ATP projects
appear consistent with the innovation life-cycle framework. This study
suggests that this framework may prove useful in the future for assessing
the credibility of business plans in ATP project proposals from different
technology areas, and for assessing the economic performance of funded
projects. Further work and additional data for the post-ATP period are
needed to examine actual commercialization patterns over the long run.
Return to Table
of Contents or go to I. Introduction
Date created: March
4, 2003
Last updated:
April 12, 2005
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