Commercializing High-TemperatureSuperconductivity

June 1988

NTIS order #PB88-246442

——

Recommended Citation:U.S. Congress, Office of Technology Assessment, Commercializing High-TemperatureSuperconductivity, OTA-ITE-388 (Washington, DC: U.S. Government Printing Office,June 1988).

Library of Congress Catalog Card Number 88-600535

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)

Foreword

Less than two years ago, superconductivity—total loss of resistance to elec-tricity—could be achieved only at temperatures near absolute zero. Since the dis-covery of high-temperature superconductivity (HTS), research laboratories aroundthe world have pushed the temperature limits steadily upward, opening the wayto commercial applications with potentially revolutionary impacts. The scientificrace is becoming a commercial race, one featuring U.S. and Japanese companies,and one that the United States could lose. Indeed, American firms may alreadybe falling behind in commercializing the technology of superconductivity.

Japanese companies have been more aggressive in examining possible applica-tions of HTS, and what it might mean for competitive strategy. While payoffs onR&D may lie a decade or more in the future, managers in Japan have been willingto take the risks, Although a number of U.S. companies have also begun major ef-forts in HTS, most American managers, under pressure to show short-term profits,have been more inclined to wait and see.

So far, the U.S. Government has supported the development of HTS in its tradi-tional way—by putting money into R&D, mostly through the mission agencies. Fed-eral agencies moved quickly to channel money to HTS when news of the discov-eries broke. The breadth and depth of the response in government agencies andFederal laboratories, and in the university system, shows the continuing vitalityof the scientific enterprise in the United States. Although Federal dollars will helpsupport a technology base that the private sector can build upon, the U.S. Govern-ment is not providing direct support for commercialization. Nor have we any pol-icy or tradition for this kind of support—unlike countries such as Japan.

Postwar U.S. technology policy coupled R&D funding with indirect measures,such as tax policy, to stimulate commercial innovation. So long as American com-panies remained well ahead of the rest of the world in technical skills and manage-ment ability, this approach proved successful. With the continuing decline in com-petitiveness across many sectors of the U.S. economy, it no longer seems goodenough,

The Senate Committees on Governmental Affairs, Energy and Natural Resources,and Commerce, Science, and Transportation, together with the House Committeeon Science, Space, and Technology requested the assessment of which this reportis part. OTA’s Energy and Materials Program is also conducting a more compre-hensive examination of the science and technology of high-temperature supercon-ductivity, and the future research agenda, as the second part of this assessment.Their report will appear in 1989.

OTA is grateful for the assistance provided by many people inside and outsideof government during the preparation of this report. Full responsibility for the con-tents rests with OTA.

. . .///

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High-Temperature Superconductivity Review Panel

Claude BarfieldAmerican Enterprise Institute

Arden BementTRW, Inc.

Harvey BrooksHarvard University

Kent E. CalderPrinceton University

Jeffrey FreyUniversity of Maryland

Jacques S. GanslerThe Analytical Science Corp.

Donald A. HicksUniversity of Texas at Dallas

David A. HounshellHarvard Business School and

University of Delaware

Clifford K. JonesWestinghouse Electric Corp.

Henry KresselE.M. Warburg, Pincus & Co., Inc.

Harry KrogerMicroelectronics &Computer

Technology Corp.

Ira MagazinerTelesis

William D. ManlyConsultant

Edward MeadE. I. du Pont de Nemours & Co.

Egils MilbergsInstitute for Illinois

Thomas A. PugelNew York University

Maxine SavitzThe Garrett Corp.

David J. TeeceUniversity of California, Berkeley

James WongSupercon, Inc.

Donald L. WoodGeneral Electric Co.

Many other people reviewed various drafts of this report. Special thanks are due toH. Kent Bowen, Duane Crum, Simon Foner, Donald N. Frey, Henry H. Kolm, andAlexis P. Malozemoff.

OTA appreciates and is grateful for the assistance and thoughtful critiques providedby all the reviewers, none of whom, however, necessarily approve, disapprove, orendorse this report. OTA assumes full responsibility for the report and the accuracyof its contents.

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OTA Project Staff: Commercializing High-Temperature Superconductivity

Lionel S. Johns, Assistant DirectorOTA Energy, Materials, and International Security Division

Audrey BuyrnIndustry, Technology, and Employment Program Manager

John A. Alic, Project Director

W. Wendell Fletcher, Deputy Project Director

Dorothy Robyn

Martha Caldwell Harris

Clare Delmar

Jane A. Alexander

Carollyne Hutter

Contributors

Gregory Eyring

Laurie Evans Gavrin

Joan Lisa BrombergThe Laser History Project

Kenneth Flamm

Glenn R. Fong

Robert R. Miller

David C. Mowery

David Sheridan

Granville J. Smith, II

W. Henry Lambright, Maureen O’Neill Fellows, and Leslie A. JonesSyracuse University

Administrative Staff

Edna M. Thompson, Administrative Assistant

Diane D. White, Administrative Secretary

Workshop on High-Temperature R&D in Japan and the United States, January 1988

Ronald H. BaneyDow Corning

Fernand D. BedardU.S. Department of Defense

Justin L. BloomTechnology International, Inc.

Roger W. BoomUniversity of Wisconsin

H. Kent BowenMassachusetts Institute of Technology

Richard C. BradtUniversity of Washington

Donald W. MurphyAT&T Bell Laboratories

Jeffrey FreyUniversity of Maryland

William GallagherIBM

Edward MeadE.I. du Pont de Nemours & Co.

Charles T. OwensNational Science Foundation

Robert PohankaOffice of Naval Research

Richard J. SamuelsMassachusetts Institute of Technology

Roland W. SchmittRensselaer Polytechnic Institute

Joseph L. Smith, Jr.Massachusetts Institute of Technology

Larry SmithMicroelectronics & Computer

Technology Corp.

Nancy J. TigheMicrophage Systems Corp.

Theodore Van Duzer

Richard HarrisUniversity of California, Berkeley

National Bureau of Standards Harold Weinstock

Young B. KimAir Force Office of

University of Southern California

Scientific Research

M. Brian MapleUniversity of California, San Diego

CONTENTS

Chapter 1: Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2: Commercialization: Government and Industry . . . . . . . . . . . . . . . .

Chapter 3: Superconductivity in Japan and the United States . . . . . . . . . . . . .

Chapter 4: U.S. Technology Policy: Issues for High-TemperatureConductivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5: Strategies for Commercial Technology Development:

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51

83

High-Temperature Superconductivity and Beyond . .................,,123

Appendix A: Glossary. . . . . . . . . . . . . . . . ..., . . . ..., . . . . . . ..., . . . . . ., , ..151

Appendix B: The Technology of Superconductivity . . . . . . . . . . ........,.,154

Index ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................,,...167

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Chapter 1

Summary

CONTENTS

Commercialization: Public and Private Dimensions . . . . . . . . . . . . . . . . . . . . .High-Temperature Superconductivity: U.S. and Japanese Responses. . . . . . .Principal Findings. . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . .. ... ... ... .... .

Federal Funding for HTS R&D . . . . . . . . . ●

R&D and Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HTS in the United States and Japan. . . . . . . . . . 0 . . . . . . . . . . . . . . . . . . . . . .HTS and U.S. Technology Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

Federal Government Strategies . . . . . . . . . . . . . . . . . . . . . . . . .. . ... ......

Box

367789

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Box PageA. The U.S. Position in Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Chapter 1

Summary

During 1987, high-temperature superconduc-tivity (HTS) became a symbol—of the new andunexpected, of what was right and wrong inU.S. science, technology, and industry, of U. S.-Japan competition in high technology. In De-cember of the preceding year, two scientistsat IBM’s Zurich research laboratory caught theworld’s attention with their discovery of super-conductivity in the range of 35 to 40 ‘K (degreesKelvin, i.e., degrees above absolute zero)—nearly double the record temperature for totalloss of resistance to electricity. Within 2months, transition temperatures had doubledonce more—to over 90 “K—with near-simultan-eous discoveries of a second family of ceramicsuperconductors in the United States, China,and Japan.

In March 1987, thousands of scientistsjammed a hotel ballroom in New York to hearthe latest findings—a meeting dubbed theWoodstock of physics. The race to higher tem-peratures was on. With it came warnings thatthe United States could lose out to foreign com-petitors in commercializing a technology withpotentially revolutionary impacts. Indeed, oneof the principal findings of this assessment isthat American companies may already have be-gun to fall behind. Japanese firms have beenmuch more aggressive in studying possible ap-plications of HTS, and have more people atwork, many of them applications-oriented engi-neers and business planners charged withthinking about ways to get HTS into the mar-ketplace.

In the midst of the excitement, four congres-sional committees—the House Committee onScience, Space, and Technology, and the Sen-ate Committees on Governmental Affairs,Energy and Natural Resources, and Commerce,Science, and Transportation-asked OTA to ex-amine a series of questions that ranged frompublic and private sector responses to HTS(here and abroad) to the advantages and dis-advantages of a new Federal agency for sup-porting the development of commercial tech-nologies.

This special report begins with a look at U.S.strengths and weaknesses in technology devel-opment and commercialization (ch. 2), both ingeneral and for HTS. The analysis then goeson (in ch. 3) to the strategies of U.S. and Japa-nese companies, as managers in each countrylook ahead to the new opportunities. The fourthchapter presents 20 policy options for congres-sional consideration; the context is U.S. tech-nology policy as a whole, with HTS as a spe-cial case. Most of the policy options deal, inone way or another, with the management ofthe Federal R&D budget. Chapter 5, the last,considers three broad alternatives for speed-ing commercialization.1

IApp. B, at the end of this report, summarizes the technologyof superconductivity, including prospective applications, withestimates of time horizons for commercialization. (The glossaryin app. A includes many of the specialized terms that apply tosuperconductivity.) OTA will follow this special report with amore detailed examination of the science and technology of su-perconductivity, the research agenda, and potential applications,to be published in 1989.

COMMERCIALIZATION: PUBLIC AND PRIVATE DIMENSIONS

U.S. competitiveness in both smokestack andhigh-technology industries has been slippingfor years. Loss of technological advantage hasbeen one of the reasons (box A). On the faceof it, this seems paradoxical. The U.S. Govern-ment spends more on R&D than governmentand industry together in Japan. Federal R&Ddollars help create a vast pool of technical

knowledge that the private sector (including for-eign firms) can draw upon. Beyond this, U.S.technology policies have relied heavily on in-direct incentives for innovation and commer-cialization by industry.

This approach — leaving R&D prioritieslargely to the mission agencies, trusting to in-

3

4

direct policies to stimulate commercialization— declining competitive ability across much ofworked well in the earlier postwar period, when the U.S. economy, it no longer works wellAmerican corporations were unchallenged in- enough. In recent years, many U.S. companiesternationally. On the evidence of steadily have had trouble turning existing technical

5

knowledge into successful products and proc-esses, and getting new technology out of thelaboratory and into the marketplace (ch. 2).

Of course there is more to commercializationthan R&D and technology development. Gov-ernment policies affect business decisions andcompetitiveness, not only through technologyand science policy, but also through sector-specific measures (e.g., Government fundingfor the microelectronics consortium Sematech),and regulatory and macroeconomic policies.U.S. financial markets, for example, have beensteadily deregulated. Among the results: greaterpressures on industry for short-term investmentdecisions.

OTA has examined the broad range of pol-icy influences on U.S. competitiveness in manyother assessments. Here, the analysis focuseson those linked more or less closely to technol-ogy itself. They fall into two groups:

● policies that affect innovation and com-mercialization directly, notably the FederalR&D budget;

● those with indirect impacts.

Federal R&D helps create a technology basethat private firms draw on during commerciali-zation. Sometimes companies start develop-ment projects because of new research results;other times, they find they need critical piecesof knowledge, perhaps from earlier R&D, tocomplete a project, or to solve a manufactur-ing problem. Federally funded projects in low-temperature superconductivity (LTS), for ex-ample, laid the foundation for applications ofsuperconducting magnets in medical imagingequipment.

The second group of policies works indi-rectly-through incentives (or disincentives) forprivate firms. Some of these policies reduce fi-nancial or technical risks, or increase rewardsfor successful innovators. Tax treatment of cap-ital gains, for instance, affects decisions by pro-spective entrepreneurs; R&D tax credits makea difference for companies with profits that canbe offset. Other such policies work throughtheir influence on demand. Governments pur-chase military systems and computers, cars and

trucks, consulting and construction services.Sometimes, they regulate prices or allocate pro-duction among suppliers (as the U.S. Govern-ment has done for years in agriculture).

With the knowledge base ever larger andmore specialized, the great majority of Amer-ican firms, large and small, can no longer ex-pect to be self-sufficient in technology. The paceand complexity have simply outstripped theirability to keep up. Industry depends more heav-ily than ever before on the huge Federal R&Dbudget–$60 billion, about half of all U.S. R&Dspending. Nonetheless, the U.S. Governmenthas left most questions of R&D funding to themission agencies, with their focused interestsand immediate needs. While other countrieshave crafted policies for direct support of com-mercial technologies, the United States has not.policy makers here have argued that directmeasures lead to harmful economic distortions.Instead, many say, deregulation—removing theroadblocks to innovation—will tap reservoirsof American ingenuity and entrepreneurialvigor that would otherwise be stifled, But mostof the roadblocks have come down over the past15 years, while U.S. competitiveness has con-tinued to slip.

To be sure, Federal agencies are paying moreattention to the impacts of day-to-day decisionson competitiveness than during the 1970s. An-titrust enforcement reflects global, rather thansimply domestic, competition. The national lab-oratories—particularly those overseen by theDepartment of Energy (DOE)—have been seek-ing ways to work more effectively with indus-try. With recognition spreading that militaryR&D spending may not offer the spinoffs andsynergies of earlier years, Congress has beendebating the merits of a change in direction fortechnology policies. But it is fair to say that in-ternational competitiveness still plays a minorrole in U.S. policies compared with those ofcountries that have learned to export as effec-tively as Japan, West Germany, or South Ko-rea. The United States is still searching forworkable approaches to competing in a rela-tively open international economy, one inwhich American companies no longer have bigadvantages in technology or management skills.

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6

HIGH-TEMPERATURE SUPERCONDUCTIVITY: U.S. AND JAPANESE RESPONSESWhy all the excitement over HTS? The me-

dia have held out the promise of more efficientgeneration and transmission of electric power,magnetically levitated trains, electromagneticlaunchers for space weaponry. Perhaps moreimportant, HTS-based electronics could even-tually become building blocks for more sensi-tive medical diagnostic systems, and faster,more powerful computers. The most importantimpacts will probably be those that cannot yetbe anticipated–the point maybe facile, but itis true.

Even at liquid nitrogen temperatures—farbelow room temperature but far above the oper-ating temperatures of older LTS superconduc-tors—the prospects have attracted as much at-tention as any scientific development since thelaser or gene splicing. Although no one hadmade a practical conductor or electronic de-vice from the new materials, the Nobel Prizecommittee gave its 1987 physics award for theZurich discoveries—the quickest in history.Early 1988 saw the discovery of several morefamilies of HTS ceramics. Yet the ultimateprize—superconductivity at room tempera-ture—lies ahead, and no one knows whetherit can be achieved, even in theory.

Activity has been feverish on the policy frontas well as in the research laboratory. Withina few months of the initial discoveries, Federalagencies redirected $45 million in fiscal 1987funds from other R&D to HTS (ch. 4, table 8).The scientific breakthroughs prompted a dozenbills during the first session of the 100th Con-gress, proposals ranging from study commis-sions to a national program on superconduc-tivity. All reflected, in one way or another,concern over commercialization.

The policy drama reached a peak in July 1987,when President Reagan brought three rankingcabinet officers to the Federal Conference onCommercial Applications of Superconductiv-ity; in an unprecedented appearance, he an-nounced an n-point initiative for the supportof HTS (box B, ch. 2). In a similarly un-precedented move, the Administration closed

the meeting to all foreigners except represen-tatives of the press. Although the President’smessage focused on executive branch actions,he stated that the Administration would alsobe proposing new legislation.

The following months brought a sense of an-ticlimax, with no sign of the promised legisla-tive package. Questions of R&D funding thencame to the fore, as the end of the fiscal yearpassed with no resolution of the budget impassebetween the President and Congress. Only atthe end of the calendar year—several monthsinto fiscal 1988—did Federal agencies know forcertain how much money they would have forHTS R&D.

Taken together, Federal agencies will spendnearly $160 million for superconductivity R&Din fiscal 1988, over half ($95 million) on the newmaterials (and the rest for LTS). The Depart-ment of Defense and the Energy Departmenttogether account for three-quarters of the HTSbudget, and received most of the increase. DOE,for instance, will have nearly twice as muchHTS money as the National Science Founda-tion (NSF). With NSF a primary patron ofuniversity research, the government’s priori-ties seemed rather haphazard, given the greatstrength of the Nation’s universities in basicresearch. Most of the Federal HTS money willgo to government laboratories, contractors, anduniversities that are well removed from thecommercial marketplace.

The President’s legislative package, whichreached Congress in February 1988, did not ad-dress R&D funding. Consistent with the Admin-istration’s emphasis on indirect incentives forcommercialization, the package included pro-visions that would further liberalize U.S. an-titrust policies, and extend the reach of U.S.patent protection.

On the industry side, most American firms—viewing payoffs from HTS R&D as uncertainand distant—have declined to invest heavily (ch.3). A few major corporations—e.g., Du Pont,

7

IBM, AT&T—are mounting substantial efforts.A number of small firms and venture startupshave also been pursuing the new technology.By and large, however, American companieshave taken a wait-and-see attitude. They planto take advantage of developments as theyemerge from the laboratory—someone else’slaboratory—or buy into emerging markets whenthe time is right. Unfortunately, reactive stra-tegies such as these have seldom worked in in-dustries like electronics over the past 10 to 15years, while many American firms seem to haveforgotten how to adapt technologies originat-ing elsewhere.

Corporate executives in Japan, in contrast,see HTS as a major new opportunity—one thatcould set the pattern of international competi-tion for the 21st century. Japanese companieshave made substantial commitments of peopleand funds, pursuing research and applications-related work in parallel. Firms in more linesof business are at work than in the UnitedStates. Steel companies and glassmakers, aswell as chemical producers and electronicsmanufacturers, are seeking new businesses,ways to diversify. Japanese managers see inHTS a road to continued expansion and export-ing, and are willing to take the risks that fol-low from such a view.

For years, the claim was common that Japa-nese firms got a free ride from U.S. R&D. Morerecently, Americans have realized that Japanesecorporations have no need to imitate or to befollowers; they have highly competent and crea-tive technical staffs, fully capable of keeping

up or taking the lead in fields ranging from au-tomobile design to gallium arsenide semicon-ductors, opto-electronics, and ceramics. Giv-ing the Japanese the credit they deserve hasintensified U.S. anxieties over commercializa-tion. Only in science—in basic research—doJapan’s capabilities remain in question. For theJapanese, HTS presents an opportunity to showthe world—and themselves—that they can beleaders there too.

Companies like IBM and Du Pont—or Hitachiand NEC—have R&D budgets exceeding a bil-lion dollars. They have skilled engineers andscientists to put to work on the technical prob-lems of HTS, money to bet on new opportuni-ties. But these firms are a small minority in bothcountries, and the competitionon them alone.

will not depend

Photo credit: IBM

Conducting strips of HTS materialdeposited on substrate.

PRINCIPAL FINDINGS

Federal Funding for HTS R&D

It would be hard to criticize the magnitudeof U.S. Government spending on HTS. Federalagencies have about $95 million for HTS R&Din fiscal 1988, more than twice the 1987 total.Although little of this represents new budgetauthority, the U.S. Government will spend morethis year on HTS than Japan’s Government hasbudgeted for HTS and LTS together.

With the Administration seeking $135 mil-lion for HTS in fiscal 1989, current and pro-posed spending might seem more than enoughto support rapid commercialization. But totalscan be misleading. After all, the United Statesspends far more on R&D than competing na-tions, yet U.S. industry has been unable to keepa useful lead in technology. There are manyreasons, some of them having to do with theallocation of R&D funds. Nearly 70 percent of

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Federal R&D spending goes for national de-fense; some of this money helps build the tech-nology base for commercial industries, somedoes not. The story will be the same in HTS.

1. Of $95 million that the U.S. Governmenthas budgeted for HTS R&D during fiscal1988, the Department of Defense (DoD) willspend $46 million and DOE $27 million.NSF is next at $14.5 million. No otheragency has more than about $4 million.R&D funded by DoD and DOE will help sup-port commercialization, but a dollar spentby one of these agencies will probably buysubstantially less in terms of the Nation’stechnology base than a dollar spent by NSF.

A good deal of DoD’s R&D will go forspecialized applications in defensesystems—including the Strategic DefenseInitiative—with limited potential for com-mercial spinoffs; defense missions shapeeven the basic research supported by thePentagon. DOE will distribute most of itsmoney to the national laboratories; rela-tionships between DOE laboratories andthe private sector have begun to change—atrend to be applauded—but the laboratorysystem has yet to demonstrate the abilityto transfer technologies rapidly and effec-tively to the private sector. (See Policy Op-tions 1,2,4 in ch. 4, and discussion in chs.4 and 5.)

2. While the Federal R&D total for HTS mayseem impressive, little of it represents newmoney. This was necessarily the case infiscal 1987, when agencies had no choicebut to redirect existing funds. For fiscal1988, given the pressures on the Federalbudget, agencies have continued to takemoney from other R&D categories to payfor HTS. Congress may wish to examinethe trade-offs necessary at the agency levelto finance HTS R&D, and consider ap-propriating new money for fiscal 1989. (Op-tions 1, 2, 3, 9.)

3. R&D priorities and funding decisions—often made at relatively low levels in theagencies—have major and lasting impactson commercialization. So do mechanismsfor inter-agency coordination. The pres-

sures on the Federal budget make goodmanagement of agency resources evenmore important. (Options 1, 2, 3, 6, 8.)

But getting the most out of the Federalinvestment in HTS R&D will take morethan inter-agency coordination and effec-tive technology transfer. Successful com-mercialization will require continuity inR&D funding so that people and organiza-tions can plan ahead. The United Stateswill need graduate-level scientists and engi-neers educated in fields ranging from ma-terials processing to the physics of electrondevices. Most of these people get theirtraining in university programs that de-pend heavily on Federal support. Likewise,the national laboratories and Federal mis-sion agencies must know where they aregoing, and how much money they can ex-pect along the way. Industry needs to knowwhether and when it can look for new re-search results from Federal R&D. Multi-year R&D planning and budgeting for HTS,on a trial basis, could help set patterns forthe future. (Options 2, 3, 4, 5.)

R&D and Commercialization

No one can say whether superconductivityat room temperature will be possible in the nearfuture or in the distant future. Regardless ofprogress in finding materials with higher su-perconducting transition temperatures, 5 to 10years of R&D probably lie ahead before the tech-nology base will be able to support substantialcommercial development.

Successful commercialization, in any case,takes more than R&D. It depends on marketconditions—on a company’s ability to antici-pate or create demand, and to exploit it. Link-ing engineering development, marketing, andmanufacturing—somethin g Japanese compa-nies excel at—is crucial. So is managementcommitment to the long term.

1. Processing and fabrication methods willbe critical for applications of HTS. Amer-ican companies have fallen down in man-ufacturing skills across the board; the moreheavily process-dependent HTS turns out

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2.

3.

to be, the more difficult it will be for U.S.firms to keep up with the Japanese. Astrong processing emphasis in Federal R&Dcould help compensate for low priorities inAmerican corporations, a major source ofU.S. competitive difficulty. (Options 2, 6,15, 16 in ch. 4.)

The Defense Advanced ResearchProjects Agency (DARPA) solicited zooproposals on HTS during the summer of1987, hoping to have $50 million to spendon processing-related R&D. When the fi-nal 1988 budget figures came down (in De-cember 1987), DARPA found itself withonly $15 million. Nonetheless, even at thislower level the program should be able tomake a substantial contribution to com-mercialization, if well managed and sus-tained over a number of years. (As this re-port went to press, the Defense Departmenthad just imposed a freeze on new outsideR&D, including this program.)HTS R&D funded by defense agencies willhelp American companies, but the poten-tial for commercial spinoffs will diminishas military requirements become more spe-cialized and diverge from commercialneeds. The list of new technologies andnew industries that has emerged fromDoD-sponsored R&D is an impressive one:computers; semiconductors; lasers; muchautomated manufacturing know-how. Whyshould things be any different with HTS?Because both the United States and the restof the world have changed. The defensesector has grown apart from the rest of theU.S. economy; DoD money has less impactas other countries focus more of their re-sources, both public and private, on com-mercial technologies. At the least, continu-ing attention to technology transfer fromdefense contractors and Federal labora-tories will be necessary to take commercialadvantage of DoD (and DOE) spending. (Op-tions 11, 12, 13, 14, 15.)Just as for technologies like microelec-tronics, commercializing HTS will requirecontributions from many disciplines—physicists, chemists, materials scientists,electrical, electronic, and chemical engi-

4.

neers. Multidisciplinary research works inindustry because it must, but does not comeeasily in universities (here or in other coun-tries). Federal policies that help establishmultidisciplinary R&D within the univer-sity system will contribute to strong foun-dations for HTS and other technologies.(Options 9, 10.)

NSF has embarked on a renewed attemptto stimulate multidisciplinary R&D throughits program for Engineering ResearchCenters, and its proposed Science andTechnology Centers. Consistent supportwill be required for these centers to takehold and become a permanent feature ofthe R&D landscape.HTS will demand a good deal of trial-and-error development (as was true in LTS).With U.S. difficulties in commercializationmuch more a matter of technology than sci-ence, Federal policies that increase supportfor engineering research—even more, thatseek to redirect research and education inengineering toward practical industrialproblems—could have substantial long-term significance. (Options 4, 5, 9, 19.)

HTS in the United States and Japan

Japan’s Government took the better part ofa year to shape its policy response to HTS—aresponse that, when it emerged, looked not atall like the highly centralized program someAmericans had expected. Much of the efforthas been directed at getting the three parts ofthe R&D system—industry, the universities,Japan’s national laboratories–to work effec-tively together. The Japanese see HTS as a testcase for their turn toward basic research, andare giving it high priority. Moreover, lackingenergy reserves, they have strong incentives forR&D (in LTS as well as HTS) promising sav-ings in electric power consumption.

Japanese firms compete aggressively at homeand abroad; they get consistent governmentsupport—for instance, from national labora-tories that work effectively with the privatesector—but succeed in international marketson their own merits. In some if not all indus-

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tries, Japanese companies turn R&D into newproducts and processes faster than Americanfirms. They target markets effectively, linkingR&D to market needs better than many U.S.companies, and manage their factories at leastas well as they manage their R&D laboratories.These strengths will pay off in HTS.

1.

2.

A few large American companies are put-ting substantial resources into HTS. Butthe list is short: AT&T, IBM, Du Pont, afew others. The financial criteria that drivedecision-making in American corporationswork against a technology like HTS— onewith uncertain prospects, and profits thatlie well in the future; the short-term viewfostered by U.S. financial markets couldput American companies behind the Japa-nese within 2 or 3 years, if they are not be-hind already.

A handful of small U.S. companies andstartups with venture funding have alsobeen moving into HTS. Although smallerU.S. firms may well develop creative solu-tions to some of the practical problems ofthe new technology, these companies donot have the production and marketing ca-pabilities necessary for a major role. Theywill have a difficult time growing and com-peting with integrated Japanese multi-nationals.American managers, by and large, believeHTS should remain in the laboratory untilmore scientific knowledge is in hand. Theyemphasize the uncertainties—admittedlygreat—and the lack of evidence promisingquick returns from R&D investments. Tothem, uncertainty urges caution ratherthan signifying opportunity. Americanfirms have not made commitments to HTSthat compare to those in Japan in terms ofscale (as indicated by people at work) orscope (as indicated by people assigned toapplications-related projects).

Many American companies with thetechnical skills and the money to pursueHTS have taken a wait-and-see attitude.Typically, they have a few people track-ing progress in the field. Some of thesecompanies may be able to catch up and

3.

4.

compete when applications begin to ap-pear. Others will be left behind.Most Japanese managers believe HTS tobe closer to the marketplace than do theirAmerican counterparts. Seeking growthand diversification, they have assignedmore people to HTS than U.S. firms, andmay also be spending more money. TheJapanese have committed funds, not onlyto research, but to evaluating prospectiveapplications. Executives there see HTS asa vehicle for creating new businesses,while Americans are more likely to viewit in terms of existing lines of business. Andif American managers have been reluctantto commit resources to HTS, the Japaneseseem confident that investments now willpay off—some time and in some way.

The Japanese could be wrong. In spend-ing money on feasibility studies and engi-neering analyses, they may miss otheropportunities. But given the scale of cur-rent investments—in the range of $200 mil-lion dollars in each country (including bothgovernment and industry R&D), small com-pared to overall corporate R&D spend-ing—there is much to be said for taking therisks. OTA’s analysis suggests that com-mercialization of HTS will proceed some-what faster than many American managersanticipate, though not so fast as many inJapan expect. If this proves the case, Japa-nese companies could well come out aheadin the race to commercialize HTS.Japan’s Government will spend about $70million for superconductivity R&D (hightemperature and low) in 1988.2 Althoughministries and agencies spent much of 1987jockeying for position, Japan now has inplace a set of policies intended to compen-sate for the bottlenecks and weaknesses inthe country’s R&D system: universitieswith only a few islands of excellence; na-tional laboratories which, although some

‘Comparisons with U.S. Government spending must be treatedwith caution: fiscal years in the two countries are 6 months outof phase; Japanese budget figures leave out salaries for researchworkers in universities; national defense has little influence inshaping Japan’s HTS R&D.

5.

have enviable reputations, cannot claim thebreadth or depth of their U.S. counterparts.

If their system as a whole still showsweaknesses, in superconductivity, Japan’sR&D is broadly based and high in quality.With R&D centered in major corporations,government policies aim to strengthen theinfrastructure for developing HTS, andstimulate greater cooperation and interac-tion among industry, universities, and thenational laboratories.Japanese officials view international coop-eration in HTS research as a potential com-plement to their country’s own efforts.Much more than a matter of image, theysee in internationalization a means of stim-ulating creativity in Japan’s universitiesand government laboratories. In turn, U.S.industry stands to gain by testing Japan’swillingness to open up its research system.(Options 18, 19, 20 in ch. 4.)

HTS and U.S. Technology Policy

Japanese companies place high priorities ontechnology as a competitive weapon; it is notonly in HTS that U.S. companies risk fallingbehind. Business-funded R&D in Japan totals2.1 percent of gross national product, comparedwith 1.4 percent here. Fewer high-levelmanagers in American firms have technicalbackgrounds; they may not fully appreciate therole of R&D in business strategy and interna-tional competition. To executives fighting atakeover, research may look like a luxury; af-ter a merger, it may seem expendable.

Gaps in the U.S. technology base open whereneither Government nor industry has immedi-ate requirements for R&D results. The very un-expectedness of the discoveries in HTS pointsto the need for ongoing Government supportof long-term research. Failure by the privatesector to invest in generic R&D, much of it in-cremental, or in risky projects with potentiallybig payoffs, throws more of a burden on theFederal Government.

1. Many areas of science and technology, al-though vital for U.S. competitiveness, getadequate financial support from neither

public nor private sources. American cor-porations have been turning away fromlong-term, high-risk R&D–the kind of workcalled for in commercializing HTS. Knowl-edge that could help American firms com-pete is not available when needed. Under-investment has been most serious in fieldsthat lack glamour—e.g., manufacturing.(Options 6, 7, 8, 15, 16 in ch. 4.)Like industry, the Federal Governmentspends most of its R&D dollars on devel-opment. Government money goes primar-ily for mission-oriented projects. WhenFederal agencies pay for R&D on civilian,commercial technologies, they have oftenmade poor choices—particularly when theR&D goals are well removed from agencymissions. Without substantial changes inU.S. technology policies, industry can ex-pect only limited help from the Federal Gov-ernment in the commercialization of HTSand other new technologies. Recently, someState Governments have been more activethan the Federal Government in stimulat-ing industrial technology development.(Options 6, 8, 15, 16, 17.)Federal funding aimed at filling gaps be-tween fundamental research and prod-uct/process development could help speed

12

utilization of new technologies, includingHTS. Funding for long-term, high-riskprojects with potential commercial appli-cations could be even more important. Butpolicies during the 1980s have been mov-ing in the opposite direction; with theAdministration cutting budgets for civil-ian applied research, the overall thrust ofU.S. technology policy has turned awayfrom support for commercial R&D. In-stead, the Government has relied on in-direct measures for stimulating industrialinnovation and technology development.OTA’s analysis suggests that the indirectapproach, emphasizing measures such aslooser antitrust enforcement and strongerpatent protection, does not, by itself, go farenough.

Direct support for commercial technologieshas never had a fair trial in the United States.Indirect measures certainly have a place: forexample, incentives for corporate basic re-search could help U.S. competitiveness. So

could a supportive climate for cooperative R&Dventures (and, perhaps, Federal cost sharing).Even so, given that policies such as the R&Dtax credit (in place since 1981) have had littleapparent effect in filling the holes in the Na-tion’s technology base, it seems at least as im-portant for the Federal Government to recon-sider direct funding of applied industrial R&D.

When it comes to commercial technology de-velopment, the needs are two-fold:

● support for generic, pre-competitive tech-nologies—those that can help a wide rangeof companies compete more effectively,without giving any one of them a big advan-tage; and

● support for long-term, high-risk projects.

Much of the generic R&D would be relativelystraightforward—incremental research with astrong engineering focus. The long-term, high-risk thrust could be modeled to some extent onthe work DARPA undertakes for the military.

FEDERAL GOVERNMENT STRATEGIESThe last chapter of this report discusses three

strategies for commercialization. These strat-egies imply choices going well beyond the in-dividual policy options referred to above anddiscussed in detail in chapter 4–most of whichare discrete and relatively narrow.

The first of the three strategies—flexible re-sponse—the current, de facto approach, buildson the proven strengths of the U.S. system.These strengths include diversity in fundingand conducting R&D: NSF, with its mandatefor financing high-quality university researchregardless of field; defense agencies, with theirunmatched budgets; national laboratories,reservoirs of skilled professionals.

Despite its acknowledged strengths, the flex-ible response strategy seems unlikely to pro-vide adequate support for HTS. The fundingpicture summarized above for HTS and dis-cussed in detail in chapter 4 shows the draw-backs of the flexible response approach. Mostof the Federal dollars for HTS will go to mis-

sion agencies with little experience in commer-cialization—to DoD and DOE. NSF—primarysponsor of untargeted university research inscience and engineering—has not had themoney to fund many of the highly ratedproposals it has received. No one in Govern-ment has an overview of Federal support forHTS. Few mechanisms exist for debating anddetermining priorities.

Congress could, of course, choose a more ag-gressive response to HTS—the second of thethree strategies analyzed in chapter 5. Threeelements set this strategy off from the currentapproach:

●

●

more money to NSF for basic research onHTS (and perhaps for one or more inter-disciplinary university centers), an insur-ance policy against missed opportunities;Federal Government cost-sharing in col-laborative R&D programs organized andguided by industry (with the Federal moneyextending the R&D time horizons, ensur-

13

ing more support for generic work andhigh-risk research); and

● a working group of experts drawn fromuniversities, industry, and Government tohelp shape consensus on HTS R&D priori-ties, and make decisions on Federal cost-sharing.

This second strategy would direct Federalfunds into HTS R&D that might otherwise beunderfunded, and particularly into industry.The added cost would be modest—$20 millionor $30 million per year, well spent, should makea big difference.

The last of the strategies goes beyond HTS,taking up the question of direct Federal sup-port for commercial technology development.As part of such a strategy, OTA considers themerits of increased funding for engineering re-search, along with the advantages and dis-advantages of a Federal technology agency.

The analysis emphasizes the problems ofdefining an acceptable mission for such anagency—one charged with supporting indus-

trial technologies—and of avoiding special-interest hand-outs. Without a mission statementthat can impose discipline over the agency’sdecisions, both day-to-day management and theestablishment of broad priorities pose realdifficulties. Nonetheless, a Civilian TechnologyAgency might be able to provide useful sup-port for commercialization if its activities werecentered on generic R&D, intended to fill holesin the Nation’s technology base, and on a menuof long-term, high-risk projects.

The three strategies in chapter 5 are by nomeans exclusive of one another. As Federal pol-icies shift in response to the new competitivecircumstances of American industry, and asthe science and technology of superconduc-tivity continue to evolve, Congress and theAdministration—along with private industry—will need to remain flexible and open to newideas. Technological innovation may demandpolicy innovation. Uncertainty makes planningdifficult for both public and private sectors—one of the reasons for a strategic frameworkto aid in the many decisions that lie ahead.

Chapter

CommercializationGovernment and Industry

2

• •

CONTENTS

PageSummary . . .The Government Role , . . . . . . ., . ,

Support for Industry: Direct and Indirect . . . , . . .R&D Funding and Objectives. . . . . . . ., . . . , , . . . .

Commercialization ●

Four Examples . . ● ✌

Inputs to Commercialization: Technology and theStrengths, Weaknesses, and Strategy . . . . . . . . . . . . .

Product/Process Strategies . . . +. . . . . . . . . . . . . . . .

, . . . 0 . . . . , . .

* * , * * * * * * . . ,

● . , . , * * * * * , ,

● ✎ ☛ ✎ ☛ ☛ ✌ ✎ ☛

● ☛ ☛ ☛ ✌ ☛ ☛ ✌ ☛

● ☛ ✌ ☛ ☛ ☛ ☛ ✎ ☛

✎ ☛ ✌ ☛ ☛ ✎ ☛ ✎ ☛

✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎

✎ ✎ ✌ , s . , . ,

. * . . . * . * .

● * * * * * * * *

● , * . * , * * *

172020232727283233343535404244

. .**..***,,*

. *.*...*.,*,* * * * * * * * * * * *Marketplace

● 4 * * * * * * * * * *

. , 0 . 9 9 . , . . . ,

Research, Development, and Engineering: Parallel or Sequential? . . . . . . .Commercializing HTS . . . . . . . . . . . . . . . . . . 0 . , , . . . , . 0 , . 0 , , , , , , . . , , , . , , .

Microelectronics, and Other Precedents , *******,,**..*..***..*.****,HTS Technologies . . . . . . ,,*, ***o*,***,**,*,.,

Concluding Remarks . . ,Appendix 2A: R&D and Commercialization: Four Examples. . . . . . . . . . . . . .

BoxesBox PageB. The Reagan Administration’s Superconductivity Initiative . . . . . . . . . . . . . 24C. The Discovery of High-Temperature Superconductivity ,.. .D. Commercialization in Europe ● ,.,,

● ☛ ☛ 26● * . 43

*,******● ✎ ☛ ☛ ✎ ☛ ☛ ✌

FiguresFigure1. U.S. Government R&D by Mission, 1988 . . . . . . . . . . . . . . . . . .

Page. . 25. . . 28● ** 30

. . . , . 0 0 0

. * * * * * . .

Systems2. The Process of Commercialization. . . . . . . . . . . . . . . . . . . . . . .3. Development Stages for Magnetic Resonance Imaging (MRI)

TablesTable1. R&D Budget by U.S. Government Agency, 1988 . . . . . . . . . . .2. Distribution of Costs for Development and Introduction

of New Products and Processes . . . . . . . . . . . . . . . . . ... , . . . .

Page, 25

32● . . 36

38

● ☛ ☛ ☛ ☛ ☛ ☛ ☛

✎ ✎ ✎ ✌ ✎ ☛ ✎ ☛

● ☛ ☛ ✌ ✎ ✌ ☛ ☛3. U.S.4. U.S.

Strengths and Weaknesses in Commercialization . . . . . .Advantages and Disadvantages in Commercializing HTS . . . . . . .

Chapter 2

Commercialization: Government and Industry

SUMMARY

The United States invents and Japan commer-cializes. So say some. Is it true? If so, this wouldsuggest not only that American companies failto capitalize on technologies developed here,but that Japanese firms get a free ride on Amer-ican R&D. Furthermore, if this has happenedin other industries and with other technologies,it could happen with high-temperature super-conductivity (HTS).

Has American industry really had that muchdifficulty in commercialization—in designing,developing, manufacturing, and marketingproducts based on new technologies? Yes—insome industries and with some kinds of tech-nologies. In other cases—for example, biotech-nology or computer software—American firmscontinue to do better at commercialization thantheir overseas rivals. Nonetheless, the competi-tive difficulties of American semiconductorfirms have long since shown that continuingU.S. advantages in high technology cannot beassumed. And sectors like consumer elec-tronics demonstrate that, when it comes to engi-neering, if not science, Japan has been a for-midable presence since the 1960s.

Commercialization is the job of the privatesector. Government plays a critical role in tworespects:

1. R&D funding. Federal agencies will spendsome $60 billion on R&D in 1988. Govern-ment dollars create much of the technol-ogy base that companies throughout theeconomy draw on. In 1988, the U.S. Gov-ernment will spend some $95 million onHTS R&D. This is about as much as theAmerican firms surveyed by OTA say theywill spend on superconductivity R&D (LTSas well as HTS) in 1988. (See ch. 3, box F).

2. The environment for innovation and tech-nology development. A host of policies—ranging from regulation of financial mar-kets, to protection for intellectual property,

and education and training—affect com-mercialization by companies large andsmall.

Private firms use scientific and technicalresults—more or less freely available, includ-ing knowledge originating overseas—in theirefforts to establish proprietary advantages.Universities and national laboratories createmuch of the science base. Some industrial re-search contributes to the storehouse of scien-tific knowledge. All three groups—universities,government laboratories, industry—contributeto the larger technology base (which includesscience but goes well beyond it).

Much technical knowledge remains closelyheld–protected by patents, by secrecy (classifi-cation for reasons of national security, tradesecrets), or simply as proprietary expertise.Much proprietary information resides in peo-ples’ heads, in organizational routines, man-agement styles, as tacit know-how. Companiesalso write down some of their organizationalknowledge: in product drawings and specifica-tions; in process sheets, manuals, and computerprograms for running production lines and en-tire factories. The manufacturing skills thathelped Japanese semiconductor manufacturersoutstrip their American competitors dependheavily on proprietary know-how, much of itembodied in the skills of their employees—skillsthat people often cannot fully articulate orexplain.

Commercialization of HTS will depend onscientific knowledge, much of this available toanyone who can understand it. It will also de-pend on know-how, hard-won learning andexperience—making good thin films, orientingthe grains in superconducting ceramics to in-crease current-carrying capacity. Knowledgeof markets will count too.

Government contributes directly throughsupport for the technology and science base.

17

18

Federal agencies may spend their HTS R&Dbudgets wisely, or not. National laboratoriesmay transfer technologies to the private sec-tors quickly, or only after long bureaucraticdelays.

Government policies also affect commerciali-zation indirectly. Patents and legal protectionof trade secrets help firms stake out proprie-tary technical positions. Education and train-ing policies (and immigration policies) affectthe labor pool from which companies hire peo-ple who can understand the science of HTS,envision new computer architectures based onsuperconducting electronics, grasp the marketopportunities created by the new materials.

No one anticipated superconductivity at 90or 125 0 K. No one can predict what will comenext. More likely than not, 5 to 10 years ofR&D—much of it supported by Federal agen-cies—lie ahead before HTS markets will havemuch size or begin to grow rapidly. A few nicheproducts could come sooner. So could somemilitary applications. New discoveries couldchange the picture radically. The ways in whichthe Federal Government spends its R&D dol-lars matter right now. Policy makers may havea bit more leisure to review the other channelsof policy influence on commercialization ofHTS. The stakes are high—for the private sec-tor, and for government decisionmakers.

Potential for dramatic breakthroughs, cou-pled with great uncertainty, makes for difficultdecisions. OTA sees no reason to rule out thepossibility of room-temperature superconduc-tivity (next month, next year). Room-tempera-ture superconductivity—in a cheap material,easy to work with—has almost unimaginableimplications. Companies with proprietary tech-nical positions could reap huge rewards. Therisks of inaction are high; on the other hand,progress could stall. High expectations and me-dia hype could be followed by disillusionment,difficulty in raising capital, inaction on the pol-icy front. Biotechnology has already livedthrough several such waves. HTS probably willtoo.

Early applications of new technologies tendto be relatively specialized, of modest economic

significance. The public may lose interest, fi-nancial markets downgrade the prospects. Noone can know, at this point, whether HTS couldturn out to be a solution in search of a problem.The laser—invented in 1960—never seemed tolive up to expectations. And yet solid-statelasers eventually made fiber-optic communica-tions possible—an innovation with vast impactson a worldwide scale (including, for example,a new source of competition for satellite com-munications systems). It was not that the pos-sibilities went unrecognized.1 Prospective ap-plications of the laser to eye surgery and opticalcommunications got immediate attention; butwhile ophthalmologists quickly began usinglasers, little progress was made in communi-cations for 15 years. It took, not only solid-statelasers, but low-loss glass fibers to make opticalcommunications a reality.

In the early years of laser technology, no onefully anticipated the possibilities for fiber-opticcommunications networks; they snuck in throughthe back door. The same could happen withHTS. One of the tasks for public policy is tobring stability to the early years of new tech-nologies, building a base for later commerciali-zation. Industry will not do this alone, absentthe potential for near-term profits.

OTA’s analysis suggests that commercializa-tion of HTS will proceed somewhat faster thanmany American companies expect, though notas fast as the Japanese companies that have beenmaking heavy investments seem to anticipate.(Ch. 3 outlines U.S. and Japanese business strat-egies toward HTS.) As American companiesmove down the learning curves that mark outaccumulated knowledge and experience inHTS, federally funded R&D will provide criti-cal support for the technology base that allfirms—but particularly smaller companies—draw from.

I“The Maturation of Laser Technology: Social and TechnicalFactors,” prepared for OTA by J.L. Bromberg, The Laser His-tory Project, under contract No. H3-521O, January 1988, pp. 7-9.Theodore Maiman, who built the first laser in 1960, stressed thecommunications possibilities—multi-channel capability, low costper channel—at the press briefing announcing his invention.

19

The analysis in this chapter leads to the fol-lowing conclusions:

● Small, entrepreneurial firms will be wellplaced to develop commercial applicationsof HTS. The conditions are right: a newscience-based technology; synergistic linkswith existing industries, including low-temperature superconductivity (LTS) andelectronics; venture capital for good ideas.But while small companies have been a ma-jor source of U.S. strength in high technol-ogy, few can assemble the financing, thetechnological breadth, or the productionand marketing capabilities to grow as fastas their markets.

● Larger American corporations may findthat they are starting out behind some oftheir Japanese rivals. The new HTS mate-rials are ceramics, Japanese firms have auseful lead in both structural and electronicceramics. Some of this expertise will trans-fer to HTS. So will a good deal of know-how developed for fabricating microelec-tronic devices—another field where Japa-nese firms have demonstrated themselvesto be at least as good and sometimes bet-ter than American companies.

● Processing and fabrication techniques willbe critical for commercialization. Amer-ican companies have fallen down in man-ufacturing skills across the board; the moreheavily process-dependent HTS applica-tions turn out to be, the more difficult itwill be for U.S. firms to keep up with theJapanese.

● Product as well as process technologieswill demand much trial-and-error develop-ment. Japanese engineers and Japanesecorporations are good at this. Americancompanies are not. To the extent that com-mercialization of HTS depends on step-by-step, incremental improvements—brute-force engineering–U.S. companies will bein relatively poor positions to compete.

● R&D funded by the U.S. Government willhelp American companies in commercial-izing HTS, but the spinoffs from defense-related R&D may not be large or long-lasting if military requirements become

●

highly specialized and diverge from com-mercial needs.Indirect policy measures—intended to re-move the roadblocks to commercializationand increase the rewards for innovatorsand entrepreneurs—can also help. But theindirect approach alone will not be an ade-quate response to the coming internationalcompetition in HTS.

What about U.S. commercialization in gen-eral—the backdrop for the statements above?

●

●

●

●

Mobility among scientists, engineers, andmanagers has spurred rapid growth andtechnological innovation in postwar U.S.high-technology industries ranging fromcomputers and semiconductors (starting inthe 1940s and 1950s) to biotechnology (be-ginning in the late 1970s). Venture capitalfor small, high-technology firms, likewise,has been a consistent source of competi-tive strength, one that will continue to workto U.S. advantage in HTS.Many larger American companies havepulled back from basic research and risk-ier technology development projects. Easein establishing new small firms compen-sates in part for these relatively conserva-tive investment decisions; indeed, negativedecisions on proposed R&D projects some-times spawn startups that go on to com-mercialize new technologies. Some of thiswill probably happen in HTS.With few American firms self-sufficient intechnology, a lack of long-term R&Din theprivate sector, and managements that lookfor home-run opportunities rather thanbuilding technologies and markets step-by-step, the Federal Government has, by de-fault, become a primary source of supportfor technology development. As yet, agen-cy missions do not reflect this new role.Despite the onslaughts of foreign firmssince the late 1960s, many American com-panies have not yet made the changes intheir own organizations necessary to com-pete more effectively. Paying little morethan lip service to well-known engineer-ing methods such as simultaneous prod-

-- .-

20

uct and process design, they fail to givemanufacturing high priority. Neither man-agers nor engineers in the United Stateshave learned to take advantage of technol-ogies originating overseas.

● Industry cannot justifiably blame the U.S.Government for its failures. Comparedwith most other industrial economies, U.S.policies create a favorable environment forinnovation and commercialization.

The indirect policy approach the U.S. Gov-ernment has traditionally relied on to stimu-late innovation and commercialization workedwell for many years. Today, with foreign com-petition stronger than ever before, it seems timeto explore new directions. The Federal R&Dbudget has grown rapidly over the postwarperiod. Management practices in governmentagencies, mechanisms for setting priorities, forensuring an adequate technology base, have notkept pace.

The climate for innovation can always be im-proved, the barriers reduced. But the barriersare low already, and limited scope remains forpolicies intended simply to unleash Americanindustry to compete more effectively. Indeed,the short-term perspectives of U.S. corpora-tions, many of which have been unwilling tokeep pace with foreign investments in new tech-nologies, stem in part from the removal ofanother set of barriers—deregulation in U.S. fi-nancial markets.

Unless the United States learns to match thekinds of supports for commercialization thathave proven effective elsewhere–topics treatedin more detail in later chapters—only small im-provements can be expected. U.S. industrycould fall behind in HTS, and in the uses thisnew technology will find.

THE GOVERNMENT ROLE

HTS is fresh from scientific laboratories, butmany commercial innovations begin with ex-isting knowledge, gleaned from textbooks, de-sign manuals, the schoolhouse of experience.The work of commercialization centers on engi-neering: development of new products and newmanufacturing processes. Companies supporttheir development groups with marketing peo-ple, and in some cases with research. Some-times new science is part of commercialization,but not always.

The process may begin with an idea that isold, but has never been reduced to practice be-cause of gaps in the technology base. The auto-mobile, the airplane, and the liquid-fueledrocket all had to await needed pieces of tech-nical knowledge. The Wright brothers learnedto steer and stabilize their flying machine. De-spite years of trial and error (and centuries ofspeculation), they were the first to find a wayaround these technical barriers.

Superconductivity itself, discovered in 1911,has a long history as a specialized field ofphysics, and a shorter history—beginning about

1960—as a technology that private firms soughtto exploit. Appendix B, at the end of this re-port, summarizes the science and technologyof superconductivity at both low temperatures(e.g., where liquid helium commonly providescooling) and high (above the boiling point ofliquid nitrogen).

Support for Industry: Direct and Indirect

What does this have to do with government?Today, governments finance much of the R&Dthat provides the starting point for commerciali-zation. Companies everywhere start with thispublicly available pool of technical knowledgein their search for proprietary know-how andcompetitive advantage. Second, public policiesinfluence the choices companies make in fi-nancing their own R&D, and in using the knowl-edge available to them. Tax and regulatory pol-icies encourage or discourage investments incommercial technology development. Patentscreate incentives, high capital gains taxes dis-incentives.

21

Smaller companies depend heavily on exter-nally generated knowledge; many manufactur-ing firms with hundreds of employees have fewif any engineers on their payrolls. But if smallercompanies have the greatest needs, science andtechnology move so fast today that big compa-nies also rely heavily on government R&D.Moreover, pressures for near-term profits haveforced many larger U.S. corporations awayfrom basic research. In the United States, a fewhundred large companies account for the lion’sshare of industry-funded R&D—three firms(IBM, AT&T, General Motors) for more than15 percent.

Half of all U.S. R&D dollars come from theFederal treasury. The fraction is smaller in mostother countries, but in all industrial economiespublic funds pay for a substantial share of na-tional R&D. The reasons begin with health andwith national defense, but competitiveness hasbeen one of the rationales: the first governmentresearch laboratories, established in the earlyyears of this century in Britain, Germany, andthe United States, were intended to help do-mestic industries meet foreign competition.

Foreign firms have access to many of the re-sults of federally funded R&D, just as U.S. firmscan tap some of the technical knowledge gen-erated with foreign government support. Gov-ernments seek to use technology policy to helpdomestic firms compete, while commercial en-terprises seek to take advantage of the worldstore of technical knowledge. Technology pol-icy begins with R&D spending—setting broadpriorities, making funding decisions at theproject level, agency management. Other toolsinclude intellectual property protection, whichcan help domestic firms establish and protecta technological edge. Of course, many coun-tries also provide direct funding for commer-cially oriented R&D.

The U.S. Position in Technology

Past OTA assessments have examined U.S.competitiveness in a number of industries, andlinked technological position with competitive-ness; the most recent found signs of slowdownin U.S. R&D productivity, as well as evidencethat newly industrializing countries have made

surprising gains in technology.2 Principal find-ings from these earlier assessments include:

●

●

●

●

Technology is vital for competitive successin some industries (including services likebanking). In others, it may be secondary.But in all or nearly all sectors, the techno-logical advantages of American firms havebeen shrinking for years. The United Statesmay be able to retain narrow margins insome technologies. Parity will be the goalin others. Regaining the advantages of the1960s will, in the ordinary course of events,be impossible.In newer technologies, those that have de-veloped since the 1960s, the Japanese havebeen able to enter on a par with Americanfirms, and to keep up or move ahead. Ex-amples include optical communications,and both structural and electronic ce-ramics. European firms, in contrast withthe Japanese, have had trouble turningtechnical knowledge into competitive ad-vantage.Today, U.S. military and space expendi-tures yield fewer and less dramatic spinoffsthan two decades ago. The U.S. economyis vast and diverse. Defense R&D—increas-ingly specialized when not truly exotic—cannot provide the breadth and depth ofsupport needed for a competitive set of in-dustries.Japan and several European countriesplace higher priorities on commercial tech-nology development than does the UnitedStates. R&D spending by Japanese indus-try reached 2.1 percent of gross domesticproduct in 1986, compared with 1.4 per-cent here.

Productivity, Innovation, Competitiveness,Commercialization

Import penetration in steel and consumerelectronics, going back two decades, marks thebeginnings of the wave of concern over lagging

zzn~erna~jona~ competition h Services (Washington, DC: Of-fice of Technology Assessment, July 1987), ch. 6. Also see “De-velopment and Diffusion of Commercial Technologies: Shouldthe Federal Government Redefine Its Role?” staff memorandum,Office of Technology Assessment, Washington, DC, March 1984.

22

U.S. productivity growth and competitiveness.Commercialization is simply the latest catchphrase for problems that are all of a piece. Theongoing policy debate has centered on theproper mix of policies in the United States,where government has been reluctant to inter-vene as directly or as deeply in the affairs ofindustry as, say, in Japan or France.

During the Carter Administration, an inter-agency task force, supported by a panoply ofprivate-sector advisory committees, labored for18 months to produce a Domestic Policy Re-view of Industrial Innovation (DPR). The rec-ommendations included:3

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●

●

●

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easier licensing of federally owned patents;stronger ties between universities and in-dustry;help for small, entrepreneurial firms throughsmall business innovation research grants;removal of unnecessary regulatory bar-riers;signals to industry that antitrust policy didnot bar cooperative R&D;tax incentives for R&D and innovation.

Plainly, the focus was on indirect policies. Inone form or another, most of these steps havebeen taken.

Other recommendations of the Carter DPR,dealing with direct support for technology de-velopment, were not implemented. After Con-gress passed the Stevenson-Wydler TechnologyInnovation Act in 1980, the Reagan Adminis-tration declined to act on the central provisionsof the legislation, which called for a networkof Centers for Industrial Technology chargedwith supporting commercial technology devel-opment.4

The Reagan White House began its own studyof the problems in mid-1983, creating a Com-mission on Industrial Competitiveness headedby John Young, president of Hewlett-Packard.When the Commission delivered its findingsa year and a half later, many of the recommen-dations were familiar: “balance” in regulations;better labor-management cooperation; strongerprotection for intellectual property.5 Althoughits leadoff recommendation called for a newDepartment of Science and Technology (whichgot a frosty reception from an Administrationcommitted to scaling back the Federal bureauc-racy), the Young Commission, like the CarterDPR, stressed the indirect influences of Fed-eral policies on technology development. TheCommission helped turn the spotlight on tech-nology transfer from the national laboratories,and urged use of the tax system to encourageprivate-sector R&D.

During the 1980s, then, the environment fortechnology development continued to evolvealong the lines mapped out by the Carter DPR.Congress included an R&D tax credit in the1981 tax bill, and extended it—although at alower level-–in 1986. In 1982, Congress passedthe Small Business Innovation DevelopmentAct, requiring Federal agencies to set aside 1.25percent of extramural R&D budgets exceeding$100 million for awards to smaller companies.With the executive branch adopting a much-relaxed enforcement policy for antitrust, theNational Cooperative Research Act of 1984 ex-plicitly permitted certain forms of joint private-sector R&D, while limiting private antitrustsuits to actual (rather than treble) damages. TheAdministration also began negotiations withthe governments of several foreign countries

‘For a brief summary, see J. Walsh, “What Can GovernmentDo for Innovation?” Science, July 27,1979, p. 378, together withN. Wade, “Carter Plan to Spur Industrial Innovation,” Science,NOV. 16, 1979, p. 800.

In addition to agency participants, several hundred people fromoutside government took part in the Carter DPR; for the reportsof the private sector committees and subcommittees, see Advi-sory Committee on Zndustriid Innovation: Final Report (Wash-ington, DC: Department of Commerce, September 1979).

4Section 6 of the Stevenson-Wydler Technology Innovation Actof 1980 (Public Law 96-480) directed the Secretary of Commerceto “provide assistance for the establishment of Centers for In-dustrial Technology.” Section 8 extended this authority to the

National Science Foundation, The centers were envisioned assupporting generic technologies at the pre-competitive stage—those that could benefit many companies and industries. Com-monly cited examples included R&D on welding processes, oron steelmaking. See Implementation of P.L. 96-480, Stevenson-Wydler Technology Innovation Act of 1980, hearings, Subcom-mittee on Science, Research, and Technology, Committee on Sci-ence and Technology, U.S. House of Representatives, July 14,15, 16, 1981 (Washington, DC: U.S. Government Printing Office);also International] Competition in Services, op. cit., pp. 364-365.

5Global Competition: The New Reality, vols. I and 11 (Wash-ington, DC: U.S. Government Printing Office, January 1985). Mostof the 30 members of the Young Commission were businessmen.

23

where pirating of U.S. intellectual property hasbeen at its worst.

At the same time, Federal laboratories—particularly those funded by the Departmentof Energy (DOE)—were seeking tighter linkagesand better working relationships with privateindustry. During the early 1980s, the Federallaboratory system had come in for some ratherharsh scrutiny.’ An outside review panel (headedby David Packard, one of Hewlett-Packard’sfounders and a former Pentagon official) calledfor closer interactions with the private sector,setting the stage for efforts still underway toopen up the laboratories and place their rela-tionships with industry on a new footing (ch.4). Meanwhile, State Governments began tak-ing more active roles in technology policy.

President Reagan’s proposed Superconduc-tivity Competitiveness Act (box B) continuesthe stress on indirect policies. The draft leg-islation—which would further relax U.S. anti-trust policy, while extending the reach of pat-ent protection—would apply quite generally toU.S. industry: there is little that is specific toHTS.

R&D Funding and Objectives

If the weight of explicit shifts in U.S. tech-nology policy during the 1980s has been on theindirect side, the direct role of the Federal Gov-ernment has also changed—though not in thedirection of support for commercial technol-ogy development. Government R&D has grownunder the Reagan Administration, but muchof the expansion has been for defense. Supportfor commercially oriented R&D has lagged, andin many cases been cut back.

%ee, for example, P.M. Boffey, “National Labs Reel UnderCriticism and Investigation,” New York Times, Aug. 24, 1982,p. cl.

The Packard report, below, appeared as Report of the WhiteHouse Science Council Federal Laboratory Review Panel (Wash-ington, DC: Office of Science and Technology Policy, May 1983).For more recent perspectives, see F.V. Guterl, “TechnologyTransfer Isn’t Working,” Business Month, September 1987, p.44; and E. Lachica, “Federal Labs Give Out Fruit of More Re-search For Commercial Uses,” WaJ] Street ]ourna], Feb. 1, 1988,p. 1.

Department of Defense (DoD) R&D went from$20.1 billion in fiscal 1982 to $37.9 billion in1988 (table 1). DoD R&D, plus the defense-related portion of DOE spending (about half theDepartment’s R&D), account for nearly 70 per-cent of all Federal R&D (figure 1); the greatmajority consists of applied research and theengineering of weapons systems.

As figure 1 suggests, the U.S. Governmenthas not paid much attention, relatively speak-ing, to R&D of interest to companies outsidethe defense, aerospace, and health sectors. Andin the 1980s, Federal agencies have backedaway even further (e.g., from energy R&D). TheReagan Administration has held that govern-ment has no business supporting commercialtechnology development. Fundamental research,yes, but anything more would be a subsidy—unjustified and likely to create harmful eco-nomic distortions.

The basic research portion of the DoD bud-get does contribute quite directly to the Nation’sstore of commercially relevant technical knowl-edge. The Pentagon, for example, providesnearly 40 percent of Federal support for univer-sity research in engineering.7 In constant dol-lars, however, DoD basic research (budgetedat $892 million for fiscal 1988) remains atroughly the same level as in 1967, while the to-tal DoD R&D budget has been steadily expand-ing in real terms.

Based on 1987 obligations, the Federal R&Dbudget breaks down as follows into the threebroad categories of basic research, applied re-search, and development:

Basic research . . . . . . . . . . . . . . . . . . . . ..$ 8.8 billionApplied research. . . . . . . . . . . . . . . . . . . . 9.0 billionDevelopment . . . . . . . . . . . . . . . . . . . . . . . 38.7 billion

$56.5 billion

The National Science Foundation follows, at about 30 per-cent. Universities carry out half of all DoD-sponsored basic re-search. See Directions in Engineering Research: An Assessmentof Opportunities and Needs (Washington, DC: National Acad-emy Press, 1987), pp. 46 and 63. Recently, the military has spenta little more than 2 percent of its R&D budget on fundamentalresearch; 5 percent of private industry’s R&D total goes for basicwork.

24

Many agencies subdivide these categories Basic research itself covers a wide range offurther.8 activities. Some of this really is “untargeted”

science—work that could be called pure re-8N0 figures for 1988 were available as this report was being search, Nobody expects that astrophysics or thecompleted. Distinctions between these categories are necessarily

arbitrary; for the Federal Government definitions, see ScienceIndicators: The 1985 Report (Washington, DC: National Science 6.3 Advanced DevelopmentBoard, 1985), p. 221. DoD subdivides its R&D budget into six 6.4 Engineering Developmentsubcategories, designated as follows: 6.5 Management Support

6.1 Research 6.6 Operational Systems Development6.2 Exploratory Development Several of these are further subdivided,

25

Table 1 .—R&D Budget by U.S. Government Agency,1988”

Obligational Percentage ofauthority total

(billions of Federal R&Ddollars) budget

Department of Defense(military functions only)

Department of Health andHuman Services . . . . . .

Department of Energy . . .National Aeronautics and

Space Administration .National Science

Foundation . . . . . . . . . . .

. . $37.9 b 63.20/o

. . 7.2 12.0

. . 5.1 8.5

. . 4.8 8.0

. . 1.5 2.5All others. . . . . . . . . . . . . . . . . 3.5 5.8

$60.0 100 ”/0aExclud~~ $2 billion in obligations for R&D facilities.%he three services expect to commit a total of $29.4 billion in fiscal 1988-$15.2billion for the Air Force, $9.5 billion for the Navy, and $4.7 billion for the Army.Adding in the rest of the DoD R&D budget (e.g., spending by agencies suchas the Defense Advanced Research Projects Agency) brings the total to $37.9billion.

SOURCE: Special Analyses: Budget of the United States Government, Fiscal Year1989 (Washington, DC: U.S. Government Printing Office, 1988), pp. J-3,J-5.

Figure 1.— U.S. Government R&D by Mission, 1988

Environment,natural

resources,E n e r g y , 2 %

Nationaldefense,

68%

SOURCE: Federal R&D Funding by Budget Function, Fiscal Years 1987-1989,NSF-813-315 (Washington, DC: National Science Foundation, 1988), p 4

Superconducting Super Collider will lead to re-sults of much practical use in the foreseeablefuture. Understanding is the motive.

Other projects, likewise defined as basic re-search for budgetary purposes, nonethelessbear quite directly on agency missions. Almostall the R&D funded by the National Institutesof Health (NIH, part of the Department of Healthand Human Services) could be termed directedresearch. NIH supports much fundamental sci-ence—e.g., in molecular biology—but it does sowith a view toward eventual improvements inhealth care; many NIH-sponsored projects havequite specific objectives such as a cure forAIDS, or better understanding of the growthof cancerous cells.

Likewise, DoD and DOE R&D serve agencymissions. Research in physics laid the founda-tions for nuclear weapons, with DOE inherit-ing much of the ongoing support for physicsfrom the Atomic Energy Commission. Whenthe armed services or the Defense AdvancedResearch Projects Agency (DARPA) sponsorwork in the behavioral sciences, they seek in-sights into the responses of fighter pilots to sen-sory overloads, or knowledge that will helpmake artificial intelligence a practical tool forbattle management.

Research carried on in industrial laboratories,almost by definition, has a practical orienta-tion. So does engineering research in univer-sities and nonprofit laboratories. Plainly, dis-tinctions such as that between untargeted anddirected research will always be arbitrary.Nonetheless, such distinctions help in think-ing about R&D and how it supports commer-cialization.

Within directed research, further distinctionscan be made. Incremental work, for example,takes a step-by-step approach toward reason-ably well-defined goals. The problems may betechnically difficult, but the territory has beenat least partially explored. Much of the workon synthesis of new materials that laid thegroundwork for the discovery of HTS (box C)falls in this category, as does the many yearsof R&D aimed at improving the properties ofLTS materials.

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Most research serves the needs of govern- petition have driven the scientific enterprisement or industry. Military needs, social objec- at least since the end of the 19th century.tives such as health care, and industrial com-

COMMERCIALIZATION

Both industry and government support di-rected research. Promising results lead natu-rally into development. Research and develop-ment then go on in parallel, with researchoutcomes suggesting new avenues for devel-opment, and problems encountered in devel-opment defining new research problems.

While the U.S. Government has a long tradi-tion of support for basic research and mission-oriented R&D, it usually leaves pursuit of com-mercial technologies to the private sector. Thispolicy worked well for many years. For in-stance, continued development of fiber-rein-forced composite materials–lighter and withgreater stiffness, strength, and toughness thanmany metals—builds on a technology base thathas been expanding at a rapid rate since the1950s. 9 The primary stimulus came from themilitary, where composites found their first ap-plications in missiles, later in manned aircraft.penetration into commercial aircraft followed.

When it comes to technologies where Fed-eral agencies have been less active, U.S. firmshave often fallen behind. Although the U.S.Government has spent several hundred milliondollars for R&D on structural ceramics sincethe early 1970s (app. 2A, at the end of the chap-ter), the effort has been a small one comparedwith fiber composites. Japan, meanwhile, hasestablished a useful lead in structural (as wellas electronic) ceramics. In semiconductors,American firms established a commanding leadduring the 1950s and 1960s, when militaryprocurement provided much of the demand (ch.4). In later years, as production swung towardscivilian markets, Japanese firms closed the gap.

BAdvanced Materials by Design: New Structural MaterialsTechnologies (Washington, DC: Office of Technology Assess-ment, June 1988).

Four Examples

In addition to summarizing Federal programson ceramics, appendix 2A outlines the evolu-tion of the video-cassette recorder (VCR)—aquite different case from any of those men-tioned so far. The appendix also reviews thedevelopment of magnetic resonance imaging(MRI) systems, a relatively new product of themedical equipment industry, and LTS magnets.Magnets wound with niobium-titanium alloy—the most widely used LTS conductor—find usesnot only in MRI, but in scientific research.

The examples in appendix 2A illustrate some-thing of the range and complexity of commer-cialization. Sometimes government R&D sup-port is critical (LTS magnets), sometimes nearlyirrelevant (the VCR—although much of theunderlying technology of magnetic recordingdid benefit from ongoing government-spon-sored R&D). Sometimes governments try topush a technology, to little avail (ceramics forgas turbine engines). For MRI, the major pol-icy impacts had little to do with R&D: commer-cialization depended on regulatory approvals,as well as Medicare and Medicaid paymentpolicies.

The starting point may be new science, cre-ating new opportunities (MRI, LTS magnets),or it may be the prospect of a huge market ifdevelopment problems can be solved (VCRs).Inter-firm competition may be intense and in-ternational (MRI, VCRs), or it may be largelyirrelevant (LTS magnets, where much of thework was undertaken within Federal labora-tories).

Government agencies supported R&D on LTSmagnets as part of larger, ongoing programs:high-energy physics research, nuclear fusion.Development of niobium-titanium wire for thesemagnets has been mostly a matter of painstak-

28

Photo credit: University of Kansas Medical Center

Magnetic resonance image of human face.

ing engineering. Federal funds paid for muchof the work.10

The U.S. Government pushed structural cer-amics technologies for different reasons. Mostrecently, DOE has supported work on ceramicsfor gas turbine engines, hoping to overcometheir efficiency limitations; with greater fueleconomy (and low enough manufacturing costs),the hope was that turbines could compete withgasoline and diesel engines for automotive ap-plications. While these objectives are consist-ent with DOE’s mission, there has been littlepull from the marketplace.

@’Superconductive Energy Storage,” vol. IV, DOE/ET/26602-35, Final Technical Report, January 1976 to October 1981, pre-pared by the Applied Superconductivity Center, University ofWisconsin-Madison, for the U.S. Department of Energy, July1983, ch. III.

Inputs to Commercialization:Technology and the Marketplace

Product or process development—whetheradapting LTS magnet technology for medicalimaging systems, or generic techniques forcomputerized process control to steelmaking—depends on at least two inputs from outside thedevelopment group itself. The first of these isknowledge drawn from the technology base,including science, engineering, and shopfloorknow-how (figure 2). The second input is knowl-edge of markets—what potential customerswant and need. Steelmaker may improve theirprocess control systems because their custom-ers want better formability, which requiresmore precise control of melt chemistry. Thepurchasers of steel maybe seeking to provide

Figure 2.—The Process of Commercialization

SOURCE: Office of Technology Assessment, 19SS.

29

their own customers with products (automo-bile fenders, dishwashers) that have better-looking painted surfaces.

R&D and Marketing

Innovations follow their own paths. Figure3 summarizes the later stages for MRI—thoseafter initial research and feasibility demonstra-tion. Science came first, the complete chronol-ogy beginning in 1936 with theoretical predic-tions of the underlying phenomenon of nuclearmagnetic resonance. Experimental demonstra-tions followed a decade later, with the first two-dimensional images (e.g., of a wrist) in 1973.

Heavy continuing involvement by physiciansand scientists made MRI something of an ex-ception. Normally, commercialization is a jobfor engineers, supported on the one side byknowledge flowing from the technology and sci-ence base, and on the other by information oncustomer, wants, needs, and perceptions.

Much of the early work in HTS will be un-dertaken by multidisciplinary groups includ-ing physicists, chemists, materials scientists,and ceramists, along with electrical, chemical,and mechanical engineers. The known HTSmaterials are oxide ceramics—brittle and dif-ficult to work with. Learning to use them meansdrawing where possible on past R&D—work un-dertaken earlier and for other purposes onstructural and electronic ceramics, as well asprocessing, fabrication, and design techniquesfrom microelectronics.

As applications come into view, companieswill call on marketing tools ranging from fea-sibility studies (which may include detailed pro-jections of manufacturing costs) to consumersurveys. Technical objectives shift as prospec-tive markets emerge; some firms use “technol-ogy gatekeepers” to help match research resultsand market needs. This is an area where U.S.and Japanese strategies in HTS contrastmarkedly, with Japanese companies muchquicker to begin thinking about applicationsand the marketplace (see ch. 3).

Judging market prospects can be harder thanjudging prospects for technical progress. Fur-thermore, market prospects often depend on

technological capabilities. Early efforts by Mat-sushita and Toshiba to design VCRs for house-hold use failed: production costs were high;recording times were short. Not many peoplewould pay upwards of $1000 for a machinelimited to 30 minutes per cassette. But improve-ment was steady. RCA’s VideoDisc died in themarketplace in part because the company mis-calculated the speed with which VCR manu-facturers could reduce their costs to matchRCA’s target price (initially, $500 at retail). RCAalso underestimated the weight consumerswould place on off-the-air recording capabil-ity, and, failing to grasp the implications of rap-idly growing rentals of videotapes, prohibitedrentals of its discs.

HTS Markets

It is too early to reach many conclusionsabout markets for HTS. The more obvious high-current, high-field applications—magnets, elec-tric generators, coil and rail guns for themilitary—have all been analyzed for feasibil-

Photo credit: Argonne National Laboratory

HTS wire, flexible before firing,

30

Figure 3.—Development Stages for Magnetic Resonance Imaging (MRI) Systems

I1

Technical analyses

Preliminary design,

Commercialization

● Primarily aimed at developing the technology of MRI and, learning to use it (establishing effkacy, subject safety, etc )•*pdm~~ aimed at tearing prototype MRI syetem

SOURCE: Baaed on Haalti Tactuwbgy Caaa Sfudy 27: Nuclear Magnetk Rtbsomrrcu knagkrg Tachrmbgy (kfhahington, DC (Mce of Technology Assessment, September19S4), ch 4

ity, but no one knows much about making prac-tical wire, cables, or current-carrying tapesfrom the new materials (app. B). These will needhigher current densities than yet in view.

Good thin film fabrication methods, the pre-condition for applications to sensors and elec-tronics, will probably be easier to achieve. Evenso, as of mid-1988, there had been no publicannouncements of reproducible HTS Joseph-son junctions (JJs). Many of the technical ques-

tions on which practical applications dependwill not be answered until R&D groups learnto fabricate JJs easily.

Later sections of the report discuss these tech-nical matters in more detail. Here the point issimply that, until the technological prospectscome into sharper focus, it will be impossibleto do more than speculate about markets. Andeven then, uncertainty will remain high. Noone—scientists, engineers, marketing special-

31

ists, science fiction writers—can predict withmuch accuracy how a new technology like thiswill eventually be applied. Nor can potentialcustomers say what they might want, or be will-ing to pay, if they cannot imagine the possibil-ities. It is the unexpected that will probably havethe greatest impact.

Success and Failure

What makes for success or failure in the mar-ketplace? Product and process engineering,marketing skills, luck, sometimes research re-sults. No one has a recipe, any more than a rec-ipe for room-temperature superconductivity.

Costs are central for some products, but forothers — MRI is one — competition revolvesaround non-price features. Many hospitals willreadily pay a premium of several hundred thou-sand dollars for an MRI system with superiorimaging performance. At the same time, smallprivate clinics or rural hospitals make up aniche market for which a number of manufac-turers have designed low-cost systems.

Products may come out too late or too early.A company may fall behind its competitors andnever get much market penetration. Early in-novators in the semiconductor industry havesometimes failed and sometimes succeeded.11

The pioneer minicomputer manufacturer, Dig-ital Equipment Corp., whose PDP-8 establishedthis part of the market, went onto become thesecond largest computer firm in the world, Onthe other hand, the microcomputer pioneers—Altair, Imsai, polymorphic Systems—disap-peared. Toshiba invented helical scan record-ing but the company ended up licensing Sony’sBetamax technology (which itself has lost muchground to VHS).

Cost and Risk

As firms move further along the developmentpath, mistakes become more costly. Only oneoften projects launched at the R&D stage ever

l~see, for example, lrlter~~tiOrA Competitiveness in Electronics(Washington, DC: Office of Technology Assessment, November1983), “Appendix C: Case Studies in the Development and Mar-keting of Electronics Products, Semiconductors: The 4K DynamicMOS RAM,” pp. 524-531.

brings in profits. Before reaching the market-place, half of all R&D projects fail for techni-cal reasons; poor management or financialstringencies kill two or three more. Of thosethat do enter production, some never earnenough to cover development costs.

The vast majority of project budgets go forproduct engineering, process design and de-velopment, tooling and production start-up, andtest marketing. Introducing an MRI systemmeans investments of $15 million and up forR&D alone; pilot production and field trials re-quire much larger financial commitments. Sel-dom does research account for more than 10percent of total project outlays, although thedistribution of costs varies a good deal fromproject to project and industry to industry. Thedistribution also varies between the UnitedStates and Japan.

As table 2 shows, Japanese companies (forthe industries and time period examined) spenta bit less on R&D than the average Americanfirm, and much less on manufacturing startupand product introduction. They budgeted morein gearing up for production—on facilities, tool-ing, and special manufacturing equipment (adifference that may also reflect higher projectedvolumes). Japanese firms no doubt have lowerstartup costs because they invest more in front-end process development. Yet a substantialdifference remains. Adding the percentages fortooling and equipment to those for manufac-turing startup gives a total of 40 percent for theU.S. companies, 54 percent for the Japanese.The greater proportion of total project expensesfor tooling and equipment reflects the higherpriorities Japanese managers place on manu-facturing as an element in competitive strategy.

Such priorities will make a difference in com-mercialization of HTS, which will depend crit-ically on process know-how. U.S. firms haveunderinvested in process technology for years—one reason for competitive slippage in indus-tries ranging from steel to automobiles to elec-tronics.

32

Table 2.—Distribution of Costs for Development and Introduction of New Products and Processesa

Percentage of total project cost

Research,development Prototypeor Tooling and Manufacturing Marketingand design pilot plantb equipment startup startup

U.S. companies . . . . . . . . . . . . . . . 26940 17% 23% 17% 17%

Japanese companies . . . . . . . . . . . 21 16 44 10 8asuw~y figureS from 1 g~ for 50 matched pairs of u,S, and Japanese firms, The total of 100 included ~ chemical companies, 30 machinery, 20 eleCtriCd and electronics,

and 14 from the rubber and metals industries.bFor cases of ~roduCt develo~rnent, the costs are for prototyping; for process development, they include investments in pilot plWltS.

NOTE: Totals may not add because of rounding.

SOURCE: E. Mansfield, “The Process of Industrial Innovation in the United States and Japan: An Empirical Study,” unpublished seminar paper presented Mar. 1, 1988in Washington, DC.

Competitive Advantage

What does it take to use technology effec-tively? The examples mentioned above, andothers, point to the following common factors:

● Appropriate use of technology and science,new and old—whether a company gener-ates the knowledge internally, or gets itelsewhere. Much of the science base forHTS will be available to everyone. To estab-lish a competitive advantage, companieswill have to develop proprietary know-how, and do it ahead of their competitors.

● Effective linkages between engineeringand marketing. Customers for many of theearly applications of HTS—in military sys-tems, electronics, or perhaps energy stor-age—will be technically astute. Marketingwill count, but not so heavily as for con-sumer products.

● Effective linkages between product devel-opment groups and manufacturing—apoint already stressed for HTS.

Ž Managerial commitment to risky and un-certain R&D projects. The next chapter ex-plores this dimension more fully for HTS.

What are the conditions under which Amer-ican firms have trouble in commercialization—in the effective utilization of technical knowl-edge, new or old? Under what circumstancesdo American firms perform best? Effective pol-icies depend on the answers to such questions.

Generally speaking, OTA assessments havefound the problems to be most acute when itcomes to applications of existing technologyby firms in older industries—and particularlywhen it comes to shopfloor manufacturing tech-nologies. In the earlier years of high technol-ogy, the United States had potent competitiveadvantages: entrepreneurship and venture cap-ital; a decentralized science infrastructure withmany centers of excellence both inside and out-side the Nation’s universities; flexible labormarkets, with high mobility among engineers,scientists, and managers. These strengths havebegun to wane. In many industries, Japanesecompanies are out-engineering Americanfirms. Even in high technology, the Japanesehave been able to move quickly from the lab-oratory to the marketplace. The days when U.S.companies could take their time in commer-cializing R&D are past.

STRENGTHS, WEAKNESSES, AND STRATEGYWhat does the discussion above (and in app. problems they failed to anticipate. Powertrains

2A) imply for U.S. abilities in commercializa- , wore out quickly in long-distance driving. Com-tion? The first point is simply that taking a new panics like Honda found themselves trying toproduct into the marketplace is always diffi- sell cars with fenders that would rust throughcult. In their efforts to penetrate the U.S. mar- after one or two northern winters. Federallyket, Japanese automakers suffered from many mandated recalls were frequent.

33

Product/Process Strategies

Japan’s automakers overcame these difficul-ties. They redesigned their products to suit U.S.needs and tastes, establishing deserved repu-tations for quality and reliability. They builtstrong dealer organizations that helped themunderstand American consumers. In contrastto European manufacturers, the Japanese be-gan developing vehicles specially tailored to theU.S. market—small pickup trucks, four-wheeldrive vehicles, sports and luxury models. Mostwere variants on products sold in Japan andother foreign markets, but a few—such as Nis-san’s Pulsar—were designed primarily in theUnited States to appeal to Americans.12

Japan’s automakers learned many lessonsfrom their American rivals, and learned themwell. The credit goes to the industry, which ben-efited from government policies, but not nearlyso directly as, say, Japanese computer manu-facturers. In the past several years, with theirupmarket moves and new brand names, Japan’sautomakers have taken another leaf from AlfredSloan: in turning their automobiles into high-fashion products, they have introduced newmodels much more quickly than American orEuropean firms—a necessary capability for im-plementing such a strategy.

Design/development/tooling cycles for Japa-nese automakers have shrunk to little more thanhalf those in the United States; Honda’s modelcycle is down to 40 months, while Americanfirms take 5 or 6 years.13 U.S. automakers have

‘2J, Yamaguchi, “Quick-change open-top car matches closedcoupe in body rigidity, ” Automotive Engineering, February 1987,p, 167.

When Toyota models got poor ratings on U.S. crash tests, thecompany quickly made design changes that upped their scores—L. McGinley, “Car Crash Rankings: Safety Guide Or NumbersThat Don’t Add Up?” Wa]] Street ~ournal, Dec. 1, 1987, p. 39.

la’’ Honda’s R&D Mastermind,” Automotive Industries, Novem-ber 1987, p. 52, More generally, see H. Takeuchi and 1, Nonaka,“The new new product development game,” Harvard BusinessReview, January-February 1986, P. 137; J. Bussey and D.R. Sease,“Manufacturers Strive To Slice Time Needed To Develop Prod-ucts, ” Wall Street ~ournal, Feb. 23, 1988, p. 1; R. Poe “AmericanAutomobile Makers Bet On CIM To Defend Against JapaneseInroads,” Datamafion, Mar. 1, 1988, p, 43; K.B. Clark and T.Fujimoto, “Overlapping Problem Solving in Product Develop-ment,” working paper, Harvard Business School, April 1988,Part of the Japanese advantage may come simply from putting

looked to computer-aided engineering to nar-row the gap. The Japanese, however, appearto succeed through quite conventional ap-proaches to engineering development, carefullymanaged. Certainly they do not have the leadin such computer-intensive techniques as nu-merical analysis of vehicle structures, aero-dynamic modeling and simulation, or analyti-cal predictions of vehicle ride, vibration, andhandling.

The high-fashion, product differentiationstrategy is new for Japanese companies onlyin the automobile industry. It is one the Japa-nese have used in the past in cases like con-sumer electronics and motorcycles. Success-ful targeting of markets—whether for consumergoods, for capital equipment (machine tools),or for intermediate products (semiconductorchips)—has been a hallmark of Japan’s competi-tive success.14

As discussed in the next chapter, Japanesecompanies have already put a good deal of ef-fort into thinking about new applications of su-perconductivity; they may well locate some ofthe possible market niches before Americanfirms. The Japanese have often carved out sub-stantial markets by starting from small niches;large, integrated Japanese firms have been more

more engineers to work: GM, Ford, and Chrysler employ a totalof 30,000 engineers, Toyota, Honda, and Nissan more than40,000—J, McElroy, “Outsourcing: The Double-Edged Sword, ”Automotive Industries, March 1988, p. 46.

While it takes much longer for American firms to introducenew products in some industries, according to a recent survey,the U.S.-Japan difference in design and development times doesnot hold across the board—E. Mansfield, “The Process of In-dustrial Innovation in the United States and Japan: An Empiri-cal Study, ” unpublished seminar paper presented Mar. I, 1988in Washin@on, DC. Professor Mansfield’s survey does show thatJapanese companies were generally much quicker than Amer-ican firms when product development efforts began with licensedtechnologies. Moreover, Japanese firms willingly absorb substan-tially higher costs to shorten their development cycles.

W% the Japanese approach to product planning and market-ing, see J.K. Johansson and I. Nonaka, “Market research the Jap-anese way,” Harvard Business Review, May-June 1987, p. 16;P. Marsh, “The ideas engine which drives Japan, ” FinancialTimes, May 29, 1987, p. 14; P. Marsh, “why research is in the

driving seat,” Financial Times, June 2, 1987, p. 12; C. Lorenz,“ ‘Serum and Scramble’—the Japanese Style, ” Financial Times,June 19, 1987, p. 19; P.S. Leven, “Repatriate product Design,”

Across the Board, December 1987, p. 39; C. Rapoport, “HowHonda research runs free and easy, ” Financial Times, Feb. 16,1988, p. 10.

34

aggressive than their American counterpartsin pursuing specialized products, including ad-vanced materials. Japanese companies are will-ing to start with small-volume production andgrow with their markets—a strategy likely toprove successful in HTS, indeed one that mayprove necessary.

How do companies based in Japan do so wellat defining and attacking market segments, par-ticularly in countries foreign to them? Most Jap-anese companies do use market research tech-niques, although table 2 showed they spend lesson this than American companies. As someU.S. firms also realize, the best marketing re-search often remains as informal today as it was50 years ago—a matter of good judgment fromwithin the company more than consultingfirms, focus groups, and consumer surveys.

Japanese firms in many industries have alsocapitalized on the quality of their goods. Lag-ging quality not only leaves customers unhappy,it raises manufacturing costs. Quality and relia-bility problems have plagued American indus-tries ranging from automobiles to semiconduc-tors. Careful control of the production processwill be necessary for fabricating the new HTSmaterials, as it is for high-technology electronicand structural ceramics, or for integratedcircuits.

The primary point is this: by the 1960s, Amer-ican firms had come to think of their skills inengineering and marketing as far and away thebest in the world. If this was true then, it is trueno longer. Many U.S. companies have not yetfaced up to the need to do better. Others peri-odically rediscover such well-known manage-ment and engineering practices as simultane-ous engineering, design for production, orquality engineering, but fail to follow throughwith actions that institutionalize them. Somestill look to techniques like quality circles formiracle cures.

Research, Development, and Engineering:Parallel or Sequential?

Simultaneous engineering means nothingmore than tackling product and process devel-opment in parallel, with overlapping respon-

sibilities in design and manufacturing groups,if not a fully integrated approach. Simultane-ous engineering may be hard to achieve in amodern American corporation, but in princi-ple is nothing but common sense. A hundredyears ago, technology was simpler and no onehad discovered any need to separate design andmanufacturing.

The chain can be extended back to research.But given the uncertainties that accompany thesearch for new knowledge, and the high costsof downstream development, many U.S. execu-tives have come to view research, development,and product planning as sequential processes.Only when consistent, verifiable, and poten-tially useful results begin to emerge from thelaboratory do American companies think aboutincorporating engineers into the effort. Evenat this point, research may remain separatedfrom development: the scientists pass alongtheir findings, but the two groups continue towork independently. Under these circum-stances, the entire process can become almostpurely sequential—running from applied re-search to product planning and developmentto manufacturing engineering, with littleoverlap.

Technology-based Japanese companies, incontrast, have developed simultaneous or par-allel processes to a high level. Many are nowbusy integrating backward into research–a taskthey see as necessary for commercializing hightechnologies like HTS. Already, they do a bet-ter job of responding to design and marketingrequirements through incremental, applied re-search.

Japanese managers, moreover, tend to be op-timistic about research in general and aboutHTS specifically (ch. 3). Perhaps because theymix development and engineering personnelinto project groups at an early stage, the beliefseems pervasive that useful results of one sortor another will inevitably emerge from HTSR&D. Japanese managers have strong convic-tions on these matters. They believe it wrongto think about technical developments as pro-ceeding more-or-less linearly from basic re-search to applied research, then to developmentand product design, and finally to process engi-

35

neering. More to the point, they are acting onthese beliefs in HTS.

American managers know just as well thatmany of the steps should take place in parallel.But for reasons ranging from trouble in learn-ing to manage parallel processes effectively (one

reason for longer product development cycles),to the characteristics of U.S. financial markets,they do not always act on this knowledge, Whenit comes to HTS, American managers have beenrelatively cautious; they want to see results fromthe laboratory before taking the next step.

COMMERCIALIZING HTS

There is a bright side. The United States re-tains major sources of strength in commer-cializing new technologies. Table 3—whichdraws heavily on past OTA assessments ofcompetitiveness —summarizes advantages anddisadvantages of U.S. firms. Table 4 outlinesthe implications for HTS. Later chapters ex-pand on many of the points in these two tables,particularly where the Federal Government haspolicy leverage.

Table 3 has a simple message: the UnitedStates has a number of areas of advantage, cou-pled with several serious handicaps. Thosehandicaps—emphasis on short-term financialpaybacks, low priorities for commercial tech-nology development and for manufacturing—have put U.S. firms at a severe disadvantagein competing with Japan. Some of the conse-quences can already be seen in HTS.

On the other hand, American firms have oftenbeen successful—at least in the past—when newscience has led to new products and new in-dustries, especially where fast-growing andvolatile markets promise rich rewards (table 3,factor 1). American companies perform lesswell, and often poorly, at incremental innova-tion—more-or-less routine improvements to ex-isting products and processes. These kinds ofproblems have been much more prevalent insteel than in chemicals, in machine tools thanin computer software, in automobiles than incommercial aircraft.

Most of the success stories came in the yearsbefore U.S. industry had much to worry aboutfrom international competition. Table 4 sum-marizes the lessons that past performance andevents thus far hold for HTS, and compares thestrengths and weaknesses of American com-panies with those in Japan. Some of the U.S.

entrants will be new companies, started spe-cifically to exploit HTS and staffed by peoplewith strong credentials in related fields of sci-ence and technology. Other firms will move infrom a base in LTS. Both kinds of companiesshould be able to respond effectively to the prob-lems and opportunities that emerge in the earlyyears of HTS—with good ideas and a strongscience base, together with venture capital andentrepreneurial drive, leading to success in spe-cialized products and niche markets.

The picture could change as the technologystabilizes and financial strength becomes moreimportant. When production volumes increase,manufacturing capabilities will grow more im-portant. Companies will have to carefully tailorproducts to emerging markets, and find capi-tal for expansion. U.S. industries that flourishedas infants have run into difficulty as competi-tors—primarily the Japanese—caught up andpulled ahead in the race to capitalize on newapproaches to factory production or new knowl-edge concerning electron devices; in the yearsahead, the biotechnology industry could stum-ble, just like the semiconductor industry.15

Microelectronics, and Other Precedents

A decade ago the semiconductor industry stillseemed a bastion of U.S. strength. The Japa-nese were nibbling at the margins, no more.Today, the Federal Government finds itself put-ting money into the new consortium Sematech,trying to help American firms regain a techno-logical lead lost seemingly overnight.

15s0 far, however, there has been little sign of such slippage.See New Developments in Biotechnology: U.S. Investment inBiotechnology (Washington, DC: Office of Technology Assess-ment, July 1988).

36

Table 3.—U.S. Strengths and Weaknesses in Commercialization

U.S. strengths U.S. weaknesses Comments

Factor 1. Industry and market structure: market dynamics.In the past, U.S. firms performed well in rapidlygrowing industries and markets, especiallyduring the early stages in R&D-intensive in-dustries.

American companies have had trouble copingwith slow growth or contraction. Although newtechnologies promising greater productivitymight improve competitive Performance in in-

Other countries frequently look to public pol-icies to help companies and their employeesadjust to decline.

dustries like steel, ’corporate executives fre-quently choose to invest in unrelated busi-nesses. Where foreign firms might take a moreactive approach to managing contraction,American companies sometimes let troubleddivisions struggle along, without new invest.ment, until profits disappear. Then they shutthe doors.

Factor 2. Blue and gray collar labor force.High labor mobility helps American companies Many development projects depend on crafts- In the past, U.S. wage rates worked to the dis-attract the people they need. men who can fabricate prototypes and modify advantage of American firms, while creating in-

them quickly based on test results and field ex- centives for investments in R&D and new man-perience. In some U.S. industries, shortages of ufacturing technologies that could raiseskilled Iabor—e.g., technicians, modelmakers productivity. Today, international differences in—have begun to slow commercialization. labor costs are less of a factor than in the

U.S. apprenticeship programs have been in de- 1970s.cline. Vocational training reaches greater frac-tions of the labor force in nations like West Ger-many; large Japanese companies invest moreheavily in job-related training for blue- and gray.collar employees than do American firms.

Factor 3. Professional and managerial work force.Mobility among managers and technical pro- American companies underinvest in processfessionals has stimulated early commercial- (as opposed to product) technologies. This isization in high-technology industries. New part of a bigger problem: too many managersproducts have reached the marketplace more and engineers in the United States avoid thequickly because people have left one company factory floor:and started another to pursue their own ideas. ● for managers, marketing or finance has beenDeep and well-integrated financial markets— the road to the top.e.g., for venture capital—have helped. s engineers—schooled according to an applied

science model—have been insensitive, notonly to role of manufacturing, but to the sig-nificance of design and marketing. Put sim-ply, the engineering profession has divorceditself from the marketplace, and the needsand desires of potential customers (particu-larly when it comes to consumer products).

Compounding these problems, many Americancompanies underutilize their engineers. Finally,many U.S. firms provide little support for con-tinuing education of their technical employees.

Managers and professionals in the UnitedStates sometimes place individual ambitionover company goals. Competition among indi-viduals may make cooperation within the orga-nization more difficult (e.g., between productengineering and manufacturing).

More upper level managers in Japanese andWest German firms have technical back-grounds than in the United States; they appearmore sensitive to the strategic significance ofmanufacturing, and in at least some cases tonew technological opportunities.

Factor 4. Industrial Infrastructure (also see Factor 6 below).American companies can call on a vast array of U.S. competitiveness in capital goods like ma- At present, the independent computer softwarevendors, suppliers, subcontractors, and service chine tools has slipped, compounding the prob- and services industry is perhaps the preemi-firms for needs ranging from fabrication of pro- Iems in manufacturing technology. nent illustration of U.S. infrastructural strength.totypes to financing, legal services, and mar- Arms-length relationships between Americanketing research. Few other countries have a firms and their vendors and suppliers may notcomparable range Of capabilities so easily be as conducive to commercialization as theavailable. a

relationships found in Japan (relations whichmight be classified as close and cooperative,or perhaps with equal accuracy as coercive anddependent).

% the importance of specialty firms for the U.S. microelectronics industry, particularly those supplying semiconductor manufacturing equipment, see h’rterrrat/orra/CornpetWveness In Electrons (Washington, DC: November 19S3), PP. 144-145. On sewice inPuts, see Irrternatlonal Conwet/t/on In Services (Washington, DC: JulyI@~, pp. 32-34 and 55-57.

37

Table 3.—U.S. Strengths and Weaknesses in Commercialization—Continued

U.S. strengths U.S. weaknesses Comments

Factor 5. Technology and science base (alsoU.S. strength in basic research—both scienceand engineering—has been a cornerstone ofcommercialization.

The national laboratory system is a major re-source, although one that has not been turnedto the needs of industry.

Multidisciplinary R&D—essential in industrial(and government) laboratories–has been theexception rather than the rule in Americanuniversities. Foreign university systems, how-ever, have probably been even worse at multidis-ciplinary research.

see Factor 7 below).U.S. strength in basic research has not alwaysbeen matched by strength in applied research,nor in the application of technical knowledge.The Nation depends heavily on a relatively smallnumber of large corporations for industrial R&Dand the development of new commercial tech-nologies. When R&D is not close enough to any-one’s interests, gaps open in the technologybase. Moreover, U.S. firms seem to be fallingbehind in their ability to move swiftly from theR&D laboratory to the marketplace. Diffusionof technology within the U.S. economy has beena persistent and serious problem.

American engineers and their employers haveoften remained unfamiliar with technologies de-veloped elsewhere, reluctant to adopt them.This reluctance is evident, for instance, whenit comes to rules of thumb and informal pro-cedures—sanctioned by experience if not byscientific knowledge. Examples include shop-floor practices for job scheduling and qualitycontrol.

The science base and technology base are notidentical. The latter spreads much morebroadly, encompassing, for instance, the intui-tive rules and methods—many of them tacitrather than formally codified—that lie at theheart of technological practice. The semicon-ductor and biotechnology industries have bothsprung from scientific advances. But the theo-retical foundations for each remain relativelyweak. As a result, progress depends heavily onexperience and empirical know-how—again,part of the technology base but not the sciencebase.

Japanese and German firms give commercialtechnology development higher priorities. Gov-ernments in these countries also give more con-sistent support to generic, pre-competitiveR&D.

Factor 6. The business environment for innovation and technology diffusion (also see Factor 7 below).— ----Clusters-of-knowledge and skills such as foundin the Boston area, or Silicon Valley, help speedcommercialization. While some of this en-trepreneurial vitality can be linked to major re-search universities, other regions have becomecenters of high-technology development eventhough lacking well-known schools like MIT orStanford.

The size and wealth of the U.S. market, and thesophistication of customers—especially busi-ness customers—work to the advantage of in-novators; indeed, foreign companies some-times come to the United States simply to tryout new ideas.

Many American firms seem preoccupied withhome runs—major breakthroughs in themarketplace—unwilling to begin with nicheproducts and grow gradually.

Poor labor relations sometimes slow adoptionof new technology. Reluctance among Amer-ican engineers and managers to learn fromshop-floor employees hurts productivity andcompetitiveness.

Companies in other parts of the world may besomewhat more willing to cooperate in R&D.

Linkages between universities and industrycould be stronger, but nonetheless probablyfunction better in the United States thanelsewhere.

Business and consumer confidence encourageinnovation and rapid commercialization. Overthe past few years, business confidence ap-pears to have ebbed somewhat–a casualty ofFederal budget deficits, trade imbalances, rapidexchange rate swings, and the evident inabilityof the Government to address these issues. Atthe same time, the political stability of theUnited States remains a major strength.

Factor 7. The policy environment for innovation and technology development.The United States h-as a deeply rooted commit-ment to open markets and vigorous competi-tion. (So does Japan, when it comes to domes-tic markets and domestic competition.) Withwidespread economic deregulation since theearly 1970s—pIus a tax system and financialmarkets that reward entrepreneurs—startupsand smaller companies have often been leadersin commercializing new technologies.

Purchases by the Federal Government havestimulated some industries, particularly in theirearly years. Examples range from aircraft andcomputers to lasers and semiconductors.

A broad range of other U.S. policies—e.g.,strong legal protections for intellectual prop-erty-helps companies stake out and exploitproprietary technological positions.

Deregulated U.S. financial markets bear some Many government policies act on commercial i-of the blame for the risk aversion and short-term zation indirectly. Industries have evolved indecisions common in American business. different ways in different countries, in part be-

Sometimes U.S. regulatory policies delay com- cause of these influences:

mercialization. Examples include approvals for • Along with antitrust, financial market

drugs and pharmaceutical products. regulations—e.g., rules covering holdings ofstock in one company by others—affect theextent of vertical “and -horizontal integration.

● Tax policies—treatment of capital gains, R&Dand investment tax credits—influence cor-porate decisions on investments in new prod-ucts and processes.

● Antitrust enforcement helps set the environ-ment for inter-firm cooperation in R&D.

. Trade protection can reduce the risks of newinvestment, thereby stimulating commerciali-zation. On the other hand, protected firmsmay grow complacent and decline to investin new technologies.

● Technical standards sometimes act to speedthe adoption of new technologies. If prema-ture or poorly conceived, however, they canimpede commercialization.

● Education and training have enormous longrun impacts on commercialization and com-petitiveness.

SOURCE: Office of Technology Assessment, 1988.

38

As yet, no one knows very much about thetechnical problems that will have to be over-come in commercializing the new supercon-ductors. Still, parallels have begun to emerge.In microelectronics, product and process know-how are closely tied.16 This will also be the casein HTS, where the companies that move downlearning curves the fastest will reap competi-tive advantages.

Semiconductor firms must grapple with dif-ficult technical problems in the heat of fiercecompetitive struggles: understanding the effectsof purity and defect population in the silicon

IeInternatjona] competitiveness in Electronics, OP. cit., ch. e.As the example of Trilogy Systems illustrates, firms must be able,not only to design, but to build new types of devices; Trilogyhad to abandon its planned line of computers after finding itcould not fabricate the wafer-scale integrated circuits required.

crystals with which production begins; proc-ess variables for the steps in diffusion or for-mation of oxide layers. Costs depend on yield—the fraction of functional chips produced. Bothyield and quality depend on the design of thechip as well as control of the manufacturingprocess. With the technology of semiconduc-tor devices ahead of the underlying science,chip designers and process engineers must pro-ceed on a largely empirical basis as they worktoward ever denser and more powerful circuits.New applications of HTS will likewise requiretailoring of material properties on a micro-scopic scale, probably without much theoreti-cal guidance.

Companies in the semiconductor industrymust solve problems today so they can com-pete in the marketplace tomorrow. HTS is not

Table 4.–U.S. Advantages and Disadvantages in Commercializing HTS

U.S. advantages U.S. disadvantages Comments

Factor 1. Industry and market structure; market dynamics.New science and technology make for condi- At some point, financing constraints may make Past U.S. successes in high technology cametions under which American firms should be it difficult for startups and smaller U.S. compa- when international competition was a minorable to commercialize quickly and compete ef- nies to continue in HTS on an independent ba- factor. Foreign firms have now proven they canfectively. sis. Mergers may be necessary for growth. move quickly from the R&D stage to the mar-

ket place.

Mergers or other arrangements driven byfinancing needs sometimes help, sometimeshurt. Ties with larger companies may stifle in-novation. In biotechnology, linkages betweensmall firms and larger companies have helpedwith regulatory approvals and process scale-UPS. American semiconductor firms, however,have seldom been willing to sacrifice their in-dependence for new capital—one reason theyhave fallen behind large, integrated Japanesecompetitors.

Factor 2. Blue and gray collar labor force.Some American companies start with a core of Japanese companies with ceramics businesses So far, few American ceramics firms have beenemployees having experience in low-tempera- can draw on larger numbers of people with rele- prominent in HTS R&D.ture superconductivity (LTS). A portion of these vant skills. These employees will help give Ja-skills will translate to HTS. At the same time, pan a head start in certain kinds of HTS R&D–given that the new HTS superconductors are e.g., mechanical behavior, processing and fabri-fundamentally different materials—ceramics cation. Japanese firms also have many workersrather than metals—a wide array of quite differ- with extensive and transferable experience inent skills will be needed. Some of the skilled microelectronics.employees may come from related industries,including electronics.

Factor 3. Professional and managerial work force.Managers, engineers, and scientists moving Decisionmakers in American companies, large At least initially, HTS startups will haveinto U.S. HTS companies from industries like and small, may not be willing or able to make managerial staffs with strong technical back-microelectronics will bring new insights and long-term commitments to HTS-related R&D, grounds. Some larger U.S. firms with the re-new ideas. particularly more basic work. sources to compete in HTS-related markets

—

39

Table 4.—U.S. Advantages and Disadvantages in Commercializing HTS—Continued

U.S. advantages U.S. disadvantages Comments

Processing and fabrication will pose difficulttechnical problems, of a sort that Americancompanies have not been very good at solving.

Much of the R&D needed to develop HTS willbe empirically-based engineering, with heavydoses of trial and error. Japanese companiesdo very well at this kind of development, oftenbetter than their American counterparts.

may chose other investments because man-agers fail to understand the technology or rec-ognize the opportunities.

Managers with previous experience in LTS maytend to err on the side of conservatism. On theother hand, HTS has had more than its shareof exaggerated publicity already. A cautiousview of HTS, born of past experience in LTS,could prove realistic.

Factor 4. Industrial infrastructure (also see Factor 6 below).The generally strong U.S. infrastructure for high When it comes to the science and technology Japan’s HTS infrastructure exists mostly insidetechnology should be an advantage in HTS. of ceramics, specifically, the U.S. infrastructure large, integrated companies. In the United

is weak. American HTS companies with States, startups will have to rely heavily on helpceramics-related technical problems may have from outside. The US. approach has advan-trouble finding help. tages in flexibility and creative problem-solving,

while Japan’s reliance on internal resourcescreates reservoirs of skills and expertise thatwill be very effective over the longer term.

Factor 5. Technology and science base (also see Factor 7 below).Despite lack of attention to ceramics compared Military and civilian applications of HTS will di- In 1966, U.S. engineering schools granted 3700with Japan, the United States has a relatively verge rapidly, limiting the spillover effects from PhDs—but only 14 in ceramics.strong base in materials R&D. DoD R&D spending. Without major policy shifts, Federal agenciesIn the early years of HTS development, the de- will fund little R&D that directIy supports com-fense emphasis of federally supported R&D will mercialization. Nonetheless, the United Stateswork in some ways to the U.S. advantage. Fund- is beginning to address the problems of trans-ing from the Department of Defense (DoD) will ferring federally funded R&D to industry.help train engineers and scientists, and may American companies will probably be at a dis-support the development of some dual-use HTStechnologies (e.g., powerful magnets). DoD

advantage for years to come in solving the

support for processing R&D could be especiallymanufacturing-related problems of HTS. To

important.make progress here, American scientists andengineers—including those engaged in univer-

A number of national laboratories have the re- sity research—must be willing to spend moresources, including specialized equipment, to of their time working on industrial problemshelp with the technical problems of HTS. (even if the scientific and university communi-

ties continue to view practical work as less thanfully respectable). Without substantial effortsin manufacturing R&D, some American compa-nies could be forced into partnerships with Jap-anese firms simply to get access to process-ing know-how.

Factor 6. The business environment for innovation and technology diffusion (also see Factor 7 below).U.S. markets should prove receptive to newproducts based on HTS. Some foreign compa-nies could find they need an R&D presencehere simply to keep up.

With Japanese firms starting on a par withAmerican companies, know-how from abroadmay prove essential for keeping pace. ManyAmerican companies have been unable or un-willing to reach useful technology transferagreements with Japanese firms. Lack of ex-perience in doing business with the Japanesecould become a significant handicap in HTS.

University-industry relations in the UnitedStates seem to be following patterns similar tothose in biotechnology, with strong andproductive linkages developing.

Small U.S. firms have begun devising strategiesfor commercializing HTS. Many larger Amer-ican firms with the resources to compete inHTS, however, seem to be adopting a wait-and-see attitude.

Factor 7. The policy environment for innovation and technology development.So far, the U.S. policy approach seems con- After the initial announcement of the Adminis- While Federal procurements helped the U.S.ducive to entrepreneurial startups in HTS. tration’s 1 l-point superconductivity initiative, semiconductor industry get off the ground inThere is little indication that the 1966 changes little was heard for 7 months—a long time in the 1960s, poor experience with demonstrationin U.S. tax law—which increased rates on cap- such a fast-moving field. Budgetary uncertain- projects in energy and transportation hasital gains—have choked off funds for HTS ties, moreover, delayed decisions on Federal soured prospects for some kinds of policystartups. R&D funding well into the 1966 fiscal year, ham- options that otherwise might provide stability

pering progress in universities, industry, and and support for HTS during a long period ofthe national laboratories. gestation.

Some companies continue to express concernthat U.S. antitrust policies will limit opportuni-ties for consortia and other forms of joint R&D.However, OTA has not learned of any case inwhich U.S. antitrust enforcement has in factstopped firms from cooperating in R&D.

SOURCE: Office of Technology Assessment, 1988.

40

yet at this stage. There is no market. The raceis still a scientific race. But if HTS lives up toexpectations, some of the history of microelec-tronics may be replayed.

Commercialization, indeed, may begin withspecialized electronic devices—perhaps verysensitive detectors of electromagnetic signals,or high-speed digital circuits (app. B). HTS-based devices maybe used in conjunction withsemiconductors. Other parallels are non-technical—matters of industrial structure, cor-porate decisionmaking, and public policy. Rela-tively small U.S.-based semiconductor firmsfind themselves competing with vertically in-tegrated Japanese multinationals, enterpriseswith far more money and manpower. Thesesame Japanese firms have made heavy commit-ments to HTS R&D. Government policies forHTS in Japan, while far removed from the (false)stereotype of industrial targeting, show manyfamiliar features: notably, pragmatic attentionto bottlenecks that might slow commercializa-tion by Japan’s very aggressive private sector.

The Japanese firms that have made so muchprogress with electronic and structural ceram-ics will be well placed when it comes to fabricat-ing wires, cables, tapes, and other forms of con-ductors made from the new HTS materials.Learning to make practical conductors fromthe new materials—for the circuitry inside com-puters, or for electrical windings in generatorsor energy storage systems—will require a greatdeal of trial-and-error development. Japanesecompanies do well at this kind of engineering.Some of the specific skills in ceramics proc-essing they have developed will transfer, justas will some of their skills in semiconductorprocessing. American firms, in contrast, havefallen down badly in processing and manufac-turing skills over the past two decades.

HTS Technologies

Appendix B outlines prospective applicationsof HTS (table B-l), including estimated timeframes for commercialization (table B-3). Earlyapplications of HTS will be highly specialized—military equipment, niche markets on the com-mercial side (perhaps in scientific apparatus,

or for nondestructive inspection). Japanesefirms will provide strong competition from thebeginning.

High-Current, High-Field Applications;Electrical Machinery and Equipment

Japan’s lack of energy resources means strongmotives for commercializing HTS in order toconserve electrical power. Even though super-conductivity offers relatively small efficiencyincrements (because large-scale conventionalequipment is highly efficient already), Japanesecompanies may make more rapid progress thanAmerican firms in superconducting motors andgenerators, as well as transformers and energystorage systems. Similar forces are at work formagnetically levitated trains, where the moti-vation comes from a heavy existing commit-ment to fixed-rail passenger transportation—natural in a small and crowded nation like Ja-pan. Summarizing:

●

●

●

●

Both the United States and Japan start froma roughly equivalent experience base inLTS motors and generators, but the Japa-nese have more work underway at present,and will probably pull ahead when and ifsuitable HTS conductors become available.Each country has one or more active LTSenergy storage projects (large supercon-ducting rings in which electrical currentcirculates indefinitely, to be withdrawnwhen needed). With SDI funding, two U.S.firms are designing a prototype ring thatwould quickly dump the stored energy intopowerful lasers. Japan’s R&D has beendirected at storage for electric utilities,where discharge rates will be much lower.While the U.S. effort will yield some les-sons for utilities, design trade-offs will biasthe prototype—and the knowledge gainedfrom it–towards the quick-discharge mil-itary application.DoD R&D aimed at coil and rail guns andother high-power, high-field applications(e.g., ship propulsion) could strengthen thegeneric technology base in HTS, helpingcommercial industries indirectly.When it comes to possible applicationssuch as magnetically levitated trains, the

41

United States starts out behind, havinghalted R&D in 1975 (see box K, ch. 3). How-ever, it is not yet clear that HTS would of-fer much advantage here.

● In medical electronics—e.g., MRI—theUnited States has a substantial lead inknow-how and experience, one that shouldpersist (although LTS might again continueto be the technology of choice for sometime).

Pursuing most of these applications will de-mand technical resources and experience, aswell as financing, on a scale beyond that of thesmall, entrepreneurial firms that emerged inthe early years of LTS, and those being startedtoday to exploit specialized HTS applications.If big U.S. companies prove reluctant to moveinto markets for electric power equipment—andsmaller entrants cannot—integrated foreignproducers will probably take the lead, interna-tionally and perhaps in the U.S. market.

Superconducting Electronics

Progress in thin films for electronics shouldbe more rapid than for the conductors neededin high-power applications. When it comes toelectronics, the Japanese will probably benefitto some extent from R&D on Josephson-basedcomputers; government and industry in Japancontinued work on JJs for computing after U.S.companies dropped most of their own activity(see box J in the next chapter).

Josephson junctions, however, function onlyas two-terminal devices, weak amplifiers atbest. No one knows how to make useful three-terminal devices like transistors from supercon-ducting materials. A practical three-terminalsuperconducting device, even one restricted toliquid helium temperatures, could open up abroad range of opportunities. Whether this willbe possible is an open question. JJs also makefor highly sensitive detectors of infrared andother electromagnetic radiation. LTS sensors—and in the future perhaps HTS sensors (e.g.,for satellites, where passive cooling should keepoperating temperatures below the transitiontemperatures of the new materials)—have po-tentially important military applications. As a

result, DoD has funded a good deal of R&D overthe years on these devices, as well on super-conducting components for very powerful com-puters. AS DoD R&D increasingly focuses onHTS, some of its work—perhaps in sensors—will contribute to commercial spin-offs.

Japanese companies will prove able competi-tors over the long run in both devices and sys-tems applications of HTS. In their efforts tocatch up with IBM and other U.S. computerfirms, Japan’s integrated manufacturers—sev-eral of which make chips, computers, andtelecommunications hardware—have beenspending heavily on R&D for years. They areseeking a technological window that wouldhelp them overtake the United States in high-technology electronics, and particularly incomputers—a field where American firms re-main broadly superior. The Japanese see HTSas a possible window.

Smaller American firms will probably findelectronics markets attractive. Hypres, for ex-ample, founded by an ex-IBM physicist afterthe computer manufacturer scaled back its LTSJJ computer project in 1983, introduced a veryhigh-speed LTS-based data-sampler in 1987.The company hopes its experience base willgive it advantages in HTS. Other small LTSspecialists also plan to move into HTS by build-ing on their past work with the older materials.

42

CONCLUDING

The next chapter looks in some detail at cor-porate strategies toward HTS in the UnitedStates and Japan. European countries, too, haveexcellent science and engineering capabilitiesin both private and public sectors. But long-standing problems in capitalizing on thesestrengths suggest that European firms will notbe able to keep up in the race to commercializeHTS. Box D summarizes the reasons.

Companies everywhere look for proprietaryadvantages from R&D—patentable inventions,expertise they can protect through trade secrets.Semiconductor companies, for example, eachhave their own process technology. Much ofthe information is closely held; some of it is em-bodied in the skills of their employees. In LTSas well, proprietary know-how helped smallcompanies stake out positions in the manufac-ture of wire and in specialized electronics.

The Japanese developed a great deal of pro-prietary technology in commercializing theVCR. The story is one of Japanese success ininnovation—engineering design and develop-ment, market research, mass production man-ufacturing. But in related markets like personalcomputers there is little evidence of slippage,despite many past predictions of a Japanesetakeover. Nor have the Japanese been able, forinstance, to move from success in high-densitymemory chips to microprocessors. U.S. leadsin computer software, or biotechnology, mayhave narrowed in the last 5 years, but not bymuch. Japan’s bet on structural ceramics maynot pay off; the technical problems of achiev-ing reliability in very brittle materials couldprove too difficult.

Scientific knowledge and technological un-derstanding–not the same–interact through-out such development efforts. Sometimes newscience leads to new technology. This has beenthe case in superconductivity, beginning withits discovery in 1911, but especially since the1960s. In other cases, demand for new tech-nology spurs scientific advance. Much militaryR&D works this way.

Corporations are more likely to invest theirown money in R&D, and take the risks of com-mercialization, if they expect rapid marketgrowth. Government policies can reduce theserisks. Trade protection does so, along with fi-nancial subsidies, and government purchasesof a company’s products. Strong legal protec-tions for proprietary technology make R&Dmore attractive. Some governments go so faras to give financial help to customers for newtechnologies (computers and industrial robotsin Japan). But with new knowledge eventuallybecoming available everywhere and to every-one, those who use it fastest and most effec-tively will come out ahead in international com-petition.

U.S. industry has been falling behind in theuse of new technical knowledge, in part becauseof slow product development cycles. In manyfields, the Japanese are not only doing a betterjob of engineering than their American rivals,they are doing it faster. Speed in moving fromresearch to production and the marketplace willbe a major factor in competitive success in HTS,just as in industries like automobiles or semi-conductors. American firms have also had trou-ble as production volumes rise, and been poorat incremental product/process improvements.Their production capabilities enabled Japan’ssemiconductor manufacturers to establishthemselves in world markets and compete suc-cessfully with American firms that had the leadin many of the functional aspects of circuit de-sign. Many of the manufacturing techniquesneeded for HTS electronics will be similar tothose for semiconductor devices (and ceramics).

Still, at the level of R&D and product devel-opment teams, Japanese firms do not seem tooperate in greatly different fashion from suc-cessful American companies. The differencesthat do exist are important, however:17

ITK. Imai, I. Nonaka, and H. Takeuchi~ “Managing the NewProduct Development Process: How Japanese Companies Learnand Unlearn,” The Uneasy AIJiance: Managing the Productivity-Technology Dilemma, K.B. Clark, R.H. Hayes, and C. Lorenz[eds.) (Boston, MA: Harvard Business School Press, 1985), pp.372-373. Also see the “Commentary” by J.L. Doyle, p. 377.

43

●

●

American firms tend to proceed through narrow technical expertise; Japanese com-a more analytical and sequential approach, panics staff their development groups withone of narrowing down the alternatives. greater numbers of generalists, includingJapanese firms operate in a looser style, people from sales and marketing. They maywith more room for trial-and-error. also involve the firm’s suppliers.product development groups in the United • Japanese companies use product develop-States rely more heavily on engineers with ment groups as a device to break down

44

some of the rigidities in their corporatecultures—e.g., the seniority system—andto create a place where creativity can flour-ish. Many American firms would like tothink they don’t suffer from such problems,but probably do.

At the same time, all of the attributes of Japa-nese product development efforts can be foundin some American firms. It is the more success-ful Japanese firms that are visible in the UnitedStates: we seldom hear about the failures.

HTS poses difficult technical challenges. Jap-anese companies will, no doubt, solve some ofthe purely technical problems before Americanfirms. Japanese companies will also do well at

scaling up HTS manufacturing processes. Somewill succeed in defining profitable markets. Inshort, they will prove highly capable and com-petitive in HTS. And while many large U.S. cor-porations have been turning away from long-term, high-risk R&D—the kind of work that willbe called for in commercializing HTS–-the Jap-anese are making a major effort to show theworld they can be as creative and innovativein science as they are in technology. It wouldbe a grave mistake to assume that Americanfirms will have a head start in HTS because ofU.S. skills in research. The suddenness of theturnaround in microelectronics should havepounded home the message that both industryand Government will need to do things differ-ently in the future.

APPENDIX 2A: R&D AND COMMERCIALIZATION: FOUR EXAMPLES

Ceramics for Heat Engines1

The U.S. Government has spent perhaps $300 mil-lion since the early 1970s pursuing ceramic engines.Much of the money has gone for applied researchand development on components, and for demon-strations. Success has been elusive.

Over the past two decades, advanced ceramicshave come into widespread use in electronics, aswell as for specialty applications such as wear partsand cutting tools. Ceramics hold their strength athigh temperatures much better than metals, but arebrittle. If reliable ceramic combustors and rotorblades could be made for gas turbines, operatingtemperatures could be raised, making possiblesmaller, lighter, and more efficient powerplants.

Increased Automobile Fuel Efficiency and Synthetic Fuels (Washing-ton, DC: Office of Technology Assessment, September 1982), pp. 144-145; T. Whalen, “Development Programmes–USA,” Proceedings of theFirst European Symposium on Engineering Ceramics, Feb. 25-26, 1985(London: Oyez Scientific and Technical Services Ltd., 1985), p. 177; K.H.Jack, “Silicon Nitride, Sialons, and Related Ceramics,” High-TechnologyCeramics: Past, Present, and Future, W.D. Kingery (ad.) (Westerville, OH:American Ceramic Society, 1986], p. 259; Ceramic Technology for Ad-vanced Heat Engines, Publication NMAB-431 (Washington, DC: NationalAcademy Press, 1987); J. Zweig, “Deja vu–yet again,” Forbes, NOV. 16,1987, p. 282; “Case Studies of ‘Flagship’ Technology,” prepared for OTAby W.H. Lambright and M. FeUows, Syracuse Research Corp., under con-tract No. H3-5565, Dec. 31,1987, ch. IV; R.P. Larsen and A.D. Vyas, “TheOutlook for Ceramics in Heat Engines, 1990-2010: Results of a VVorld-wide Delphi Survey,” Paper No. 880514, prepared for the 1988 Interna-tional Congress, Society of Automotive Engineers, Detroit, Feb. 29-Mar.4, 1988; Advanced Materials by Design: New Structural MateriaJs Tech-nologies, op. cit., ch. 2.

possible defense applications include stationarypower units and engines for tanks, trucks, andcruise missiles (ceramic components may never bereliable enough for manned aircraft).

In 1971, DoD’s (Defense) Advanced ResearchProjects Agency embarked on a ceramics R&D pro-gram, funding mission-oriented work of interest tothe Army and the Navy on ceramic gas turbines,as well as research into design methodologies forbrittle materials. The DARPA program continuedinto 1977, with funding that averaged slightly over$10 million annually. The Army continued someceramic engine work thereafter, but DOE (then theEnergy Research and Development Administration,ERDA) soon emerged as the primary source of sup-port for applications-oriented ceramics R&D.

The ERDA program, in which NASA also par-ticipated, aimed at a gas turbine engine for trucks,seeking better fuel economy. Gas turbines makemore sense for trucks than for passenger cars,which operate most of the time at light loads, whereturbines give poor fuel economy. However, the fo-cus on truck engines did not last. In 1980, respond-ing to a high-level political call for the “reinventionof the automobile,” DOE created a new program—one that would demonstrate small gas turbines forpassenger vehicles. Initially funded at $20 millionannually, the incoming Reagan Administrationsought to scale the effort back (along with otherenergy R&D); lobbying by industry contractorshelped keep things going.

45

Recent Federal spending (for all structural cer-amics R&D) has averaged about $50 million per year(figure 2A-1), but the turbine programs appear tohave moved prematurely into development anddemonstration, before establishing an adequatetechnology base, Industry cost sharing has beenrelatively low; companies that saw more value inthe work presumably would be willing to kick inmoney at a higher level.

Rather than turbines, Japanese firms have putmuch of their effort into piston engines, both gaso-line and diesel. While brittleness is a serious prob-lem in ceramics for piston engines, it is easier todeal with than in highly stressed rotating blades.Moreover, ceramics can be introduced incremen-tally, substituted for a few parts in an otherwise con-ventional design.

Some of the technical problems of structural cer-amics overlap those that will be encountered incommercializing HTS ceramics. A stronger basicresearch effort in ceramics, rather than the dem-onstration projects of recent years, might have putthe United States in a better position to commer-cialize the new superconductors.

Video-Cassette Recorders*

Beginning in the 1950s, and through the follow-ing decade, half a dozen and more Japanese com-panies raced to develop low-cost VCRs. Commer-cialization meant solving a long chain of toughengineering problems, so that VCRs could beproduced cheaply with the features consumerswanted.

Helical scan video-tape recording technology–first patented by Toshiba (table 2A-1)—became acritical feature in VCRs, although Toshiba itselfnever capitalized on its early lead in helical scan-ning. Matsushita entered pilot production first, in1973, but shortly withdrew, deciding its technol-ogy was not good enough. Two years later, nearly20 years after the U.S. firm Ampex built the first

21nternational Competitiveness in Electronics, op. cit., pp. 70, 119-123,and 186-187; R.S. Rosenbloom, “Managing Technology for the LongerTerm: A Managerial Perspective,” The Uneasy Alliance: Managing theProductivity-Technology Dilemma, op. cit., p. 297; R.S. Rosenbloom andM.A. Cusumano, “Technological Pioneering and Competitive Advantage:The Birth of the VCR Industry,” California Management Review, vol.XXIX, summer 1987, p. 51.

Figure 2A-1.-- Federal Funds for Structural Ceramics R&D

—

—

46

Table 2A-1.—Chronology of Video-TapeRecorder Developments

1951

1953

1954

1956

1958

1962

1969

1970-71

1971

1971

1972

1973

1975

1976

1988

R&D begins at RCA.

RCA demonstrates fixed head scanner.

Toshiba files patent applications for helicalscanning; prototype follows in 1959. (EarlierU.S. and European patents were never reducedto practice.)

Ampex introduces broadcast model videotaperecorder (VTR) with rotating scanning heads.(VTRs use reel-to-reel tape, rather thancassettes.)

Several Japanese firms, including Sony andMatsushita, embark on R&D directed at VTRsfor consumer markets; RCA drops its work onconsumer model VTRs.

Sony introduces its first helical-scanning VTR,intended for institutional markets (business andindustry, schools); JVC follows in 1983.

Sony announces first video-cassette recorder(VCR), replacing reel-to-reel tape with acartridge.

Ampex Instavideo camera/recorder systemshown in prototype form—never marketedbecause of production problems.

Sony U-Matic marketed for institutional use at$1000.RCA resumes VTR R&D, drops out again in1974.

JVC develops prototype of its VHS system.

Matsushita enters pilot production with aconsumer VCR, but withdraws after a fewmonths.

Sony introduces Betamax for home use.

JVC brings VHS recorders to market.

Sony to begin selling VHS machines alongsideits lagging Betamax system.

SOURCES: W.J. Abernathy and R.S. Rosenbloom, “The Institutional Climate forInnovation in Industry: The Role of Management Attitudea and Prac-tices,” The 5-Year Outlook for Science and Technology 1981: SourceMater/a/s, Volume 2, NSF 81-42 (Washington, DC: National ScienceFoundation, 1981), p. 407; R.S. Rosenbloom, “Managing Technologyfor the Longer Term: A Managerial Perspective,” The LJneasy A//iance:Managing the Productivity-Technology Dllenrma, K.B. Clark, R.H.Hayes, and C. Lorenz (eds.) (Boston, MA: Harvard Business SchoolPress, 1985), pp. 317-327; R.S. Rosenbloom and M.A. Cusumano,“Technological Pioneering and Competitive Advantage: The Birth ofthe VCR Industry,” California Management Review, vol. XXIX, sum-mer 1987, p. 51.

broadcast recorders (the size of a closet and sellingfor $50,000), Sony’s Betamax opened the consumermarket.

That an American firm produced the first video-tape recorders for broadcast applications was closeto irrelevant. The Betamax represented the fourthgeneration of Sony’s engineering development—the seventh generation if the company’s earlier in-dustrial and institutional models (e.g., the U-Matic,

which appeared in 1971) are included. Japanesecompanies, competing fiercely with one another,persisted with the VCR for years, in the face of manydisappointments.

It may be true in a narrow sense to say that theUnited States invented the videotape recorder andthe Japanese commercialized it. But in fact, some15 companies — American, Japanese, European—demonstrated 9 different technical approaches tohome video in the early 1970s. It took many yearsof money and manpower commitments by Japanesecompanies to win the race, and a great deal of highlycreative engineering—focusing on manufacturing,as well as product design. Once the VCR becamea commercial reality, competition centered on costreduction, better image quality (where manufac-turers of magnetic tape made major contributions),and longer recording and playing times.

Firms like Zenith and RCA—which now put theirlabels on foreign-made machines—never pursuedconsumer VCRs with the doggedness of the Japa-nese. After about 1980, no American companycould have entered without some sort of break-through—a product that would have opened a newround of competition. The Japanese were simplytoo far down the learning curve. South Korean firmswere in a different position: with wage rates wellbelow those in Japan, they had potential cost ad-vantages. When the Japanese refused them licenses,Korean firms developed their own VCRs.

The essential ingredients in Japanese success?First, willingness to make long-term investments inrisky and expensive product development efforts.Second, the manufacturing capability to mass-produce precision electro-mechanical componentssuch as the helical read-write heads that proved akey in turning the video-tape recorder into a house-hold product. Commercialization of the VCR exem-plifies the kind of incremental improvement andmarket-oriented engineering that the Japanese havebeen so good at.

Is the VCR story exceptional? Not really, and cer-tainly not in the context of consumer electronics,an industry that had stagnated in the United Statesby the mid-1970s. Price competition in traditionalproducts like color TVs was fierce, imports wereflooding the marketplace, and the stronger U.S.firms like RCA and GE were diversifying into otherlines of business.

Still, the risks did not stop RCA from investingin the VideoDisc.3 Indeed, the VideoDisc was a bold

3M. B.W. Graham, RCA and the VideoDisc: the business of research(Cambridge, UK: Cambridge University Press, 1986]. The company ulti-mately lost more than half a billion dollars.

47

choice. If successful, it would have given RCA aunique product—something that none of its Japa-nese rivals had. In contrast, pursuit of VCR tech-nology would have meant competing in a class ofproducts that the Japanese plainly would be ableto build cheaply and well. RCA managers knewfrom experience in color TV production how diffi-cult this would be, particularly given the Japanesestrategy of attacking consumer electronics marketsworldwide (whereas RCA’s consumer sales hadbeen confined to the U.S. market).

MRI Systems4

Magnetic resonance imaging has been the biggestmarket for conventional superconducting technol-ogies over the past few years. In 1987, two dozencompanies worldwide sold a total of 500-plus MRIsystems to hospitals and clinics. At roughly $2 mil-lion each, industry sales came to perhaps $1 billion.Both production and sales are concentrated in theUnited States. Commercialization took many years,following research showing that nuclear magneticresonance (NMR)—a discovery made by physicists—could be a powerful tool for medical diagnosis.

To construct an MRI image, the patient must beplaced within a strong magnetic field—commonlyproduced by an LTS magnet. A computer processesthe resulting NMR signals, creating an image thephysician can examine (like an X-ray). MRI providesbetter contrast and resolution, particularly for thebrain and spinal cord, than competing diagnosticimaging techniques, including ultrasound and CTscanning.

During the middle 1970s, more than a dozen com-panies in the United States, Europe, and Japan be-gan working to commercialize MRI. Some droppedout along the way. Others were bought by strongerfirms, or merged with competitors. Japanese com-panies entered late, and have not been very activeoutside their home market.

European firms led the way in engineering de-velopment. The British company EMI built the firstprototype in 1978, and Bruker, a West Germanmanufacturer, followed the next year. Both thesecompanies had prototype systems operating in clin-ical settings by 1981. Shortly thereafter, EMIdecided to leave the medical equipment business,and sold its technology to a competitor. By the end

4Health Technology Case Study 27: Nuclear Magnetic Resonance Im-aging Technology (Washington, DC: Office of Technology Assessment,September 1984]; “Superconductive Materials and Devices, ” BusinessTechnology Research, Wellesley Hills, MA, September 1987, pp. 38-50.

of 1983, eight firms had commercial prototypesavailable—three American companies, four Euro-pean, and one based in Israel,

Early in design and development—e.g., during thestage labeled alternative conceptual design in fig-ure 3 (earlier in the chapter)—each firm faced deci-sions on its magnet system. The alternatives—permanent magnet, resistive (non-superconduct-ing), superconducting—carried advantages and dis-advantages in terms of factors such as initial andoperating costs, as well as field characteristics likestrength and stability. Most companies chose LTSmagnets, with several pursuing conventional mag-net designs in parallel. Because the design of themagnet affects image quality—a central concern inpurchasing decisions by hospitals–feedback from theclinical studies and clinical testing stages (figure3 played a vital role in refining prototype designs.)

This brief description illustrates, first, the waysin which research may enter the commercializationprocess. In this case, the R&D ranged from nuclearphysics (the NMR phenomenon itself), to the medi-cal studies demonstrating that MRI could be a val-uable diagnostic tool, to computerized signal proc-essing and superconducting magnet design,

MRI systems emerged as viable commercial prod-ucts in 1984. It was only then that designs stabi-lized and production became relatively routine, atleast in the leading companies. It took 38 years togo from scientific discovery (experimental verifi-cation of NMR) to marketplace success. Commer-cialization in the sense of engineering developmentspanned the years 1977 to 1984.

Regulatory approvals were an early hurdle. TheU.S. Food and Drug Administration spent severalyears evaluating the new technology. Manufac-turers had to estimate the effects of third-partypayment policies on market growth: Would Gov-ernment agencies responsible for Medicare andMedicaid give a quick okay to the new technology?Or would they delay? How about the big insuranceplans like Blue Cross/Blue Shield? In fact, hospi-tals were not generally reimbursed for MRI serv-ices until late in 1985. Furthermore, with MRIsystems costing several million dollars, State gov-ernment certificate-of-need approvals became aprecondition for many sales.

U.S. firms did not have the initial lead. Nonethe-less, they quickly emerged in the forefront as thetechnology moved out of the laboratory and becamea practical tool for medical diagnosis. A major rea-son for U.S. success was simply that this countryis the biggest market in the world by far for medi-cal equipment. That the U.S. economy is the world’s

48

largest and most diverse is both an advantage anda disadvantage for American firms. They are athome here, but their domestic markets are a mag-net for foreign firms—who may be willing to losemoney in the United States for the sake of learningand experience.

Designing and developing a new product fromscratch, as in the case of the first MRI systems, rep-resents a major corporate commitment. An all-newproduct takes much more time and money than theincremental redesigns, improvements, and newmodels that come later and constitute most of theroutine work of product/process development. Theall-new product (or manufacturing process) willalso, in the ordinary course of events, depend moreheavily on new knowledge—e.g., research results.Feedback from the R&D laboratory and the market-place remain important even for routine develop-ment work, however. Once the medical communityaccepted MRI, competing firms quickly began dif-ferentiating their products through stress on imagequality, good service, and reliability.

LTS Magnets5

Federal R&D, much of it for high-energy physicsexperiments and research into nuclear fusion, un-derlies development of the LTS magnets found inMRI systems. Wound with cable made from niobium-titanium alloy filaments embedded in a copper ma-trix, and cooled with liquid helium, the magnet ac-counts for up to a quarter of the cost of an MRIsystem.

‘D. Larbalestier, et al., “High-field Superconductivity,” Physics Today,March 1986, p, 24; L. Hoddeson, “The first large-scale application ofsuperconductivity: The Fermilab energy doubler, 1972 -1983,” HistoricalStudies in the Physical and Biological Sciences, vol. 18, 1987, p. 25; “Su-perconductive Materials and Devices,” op. cit., pp. 33-61; “Technologyof High Temperature Superconductivity,” prepared for OTA by G.J. Smith11 under contract No. J3-21OO, January 1988; “Government’s Role in Com-puters and Superconductors,” prepared for OTA by K. Flamm under con-tract No, H3-6470, March 1988, pp. 56ff. Also see app. B.

Until MRI markets began to grow, most super-conducting magnets were custom-designed for sci-entific equipment. The late 1960s saw the first majorapplication of niobium-titanium, a bubble chamberbuilt at Argonne National Laboratory. A muchlarger federally supported project—the Tevatronparticle accelerator, completed in 1983 at the FermiNational Accelerator Laboratory—consumed morethan 30,000 miles of niobium-titanium wire for itsnearly 1000 magnets. Most of the wire came fromIntermagnetics General Corp. (IGC), established byseveral former General Electric employees in 1971.

IGC and other small, specialized firms had begunmoving into LTS as major corporations—Westing-house as well as GE—withdrew, finding that mar-ket growth did not live up to their expectations. De-velopment of the processing techniques for LTSmagnet wire was a lengthy and complex task, onethat would have taken much more time without thedemand provided by the Tevatron. Private firmsdrew on the publicly supported technology base,and also helped to extend it, as they developed theknow-how needed for manufacturing LTS wire andcable (the Fermi Laboratory designed and built themagnets internally).

It took many years to raise the critical current den-sities of niobium-titanium wire to the levels neededfor the Tevatron and for MRI. The task hinged onthe relationship between fluxoids (each of whichcontains a magnetic flux quantum)—a matter ofphysics—and the microstructure of the wire.Through careful microstructural control–speciallytailored sequences of wire drawing and heat treat-ment—metallurgists and materials specialists wereable to create fine dispersions of second-phase par-ticles. These particles pin the fluxoids, keeping themfrom moving, The pinning can raise the critical cur-rent density—hence current carrying capacity—by10 times or more. R&D aimed at optimizing the proc-essing technology began in the late 1960s, and stillcontinues, with engineering development guidedby theoretical understanding.

Chapter 3

Superconductivity in Japan and the United States

CONTENTS

Summary ● .,, ,, , . . . . . . .Corporate Strategies ● .

R&D and Business Planning in the United States , , . . . . . . . .U.S. Strategies in High-Temperature Superconductivity . . . . .Japanese R&D ●

Japanese Strategies in High-Temperature Superconductivity .U.S. and Japanese Strategies Compared. . . . . . . . . . . . . . . . . . .

Japan’s HTS Initiatives ●

Government Resources for Superconductivity . . . . . . . . . . . . .Who Has the Lead Role, Government or Industry? . . . . . . . . .Rivalry or Cooperation? The Internationalization of Japanese

Superconductivity R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Concluding Remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BoxesBoxE.F.G.H.I.J.K.L.

R&D in U.S. Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Superconductivity R&D in U.S. Companies, . . . . . . . . . . . . . .Venture Startups in HTS .*.**.* ● . , * . * . * ● * * . . . * * * , * * * . ,

Superconductivity R&D in Japanese Companies . . . . . . . . . . .HTS R&D at Nippon Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Josephson Junction Computer R&D: From the United StatesJapan’s Magnetically Levitated Train Program . . . . . . . . . . . .

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68

Chapter 3

Superconductivity in Japan and the United States

SUMMARY

The first 10 weeks of 1988 saw the discoveryof two more copper-oxide based superconduct-ing materials—one with bismuth as a criticalingredient, the other thallium. These two com-positions—both with critical temperatures inthe range of 100 degrees Kelvin—joined thosecontaining rare earth elements (e.g., lanthanum,yttrium) that scientists around the world hadbeen studying for a year. Laboratory resourceshad been heavily committed to the yttrium-barium-copper-oxide family–the so-called 1-2-3superconductors —and the scientists had beenmaking good progress in improving currentdensities and learning to make thin films. Then,all of a sudden, two entirely new composi-tions—equally complex, five elements in each,partially understood structures and phase dia-grams. Two new worlds to explore. Heaven forthe scientist (though more sleepless nights). Hellfor the businessman.

Business planners and government strate-gists–at General Electric and Sumitomo, MITIand the Pentagon—now faced still more choices.Superconductors came in at least threevarieties:

1. The old, low-temperature superconducting(LTS) materials–metal alloys like niobium-titanium, well understood but calling forcooling to near liquid helium temperatures—might still remain the material of choicefor some applications. Very sensitive de-tectors of enemy submarines or brainwaves might have to be operated at liquidhelium temperatures in any event, to getnoise levels down.

2. The 1-2-3 ceramics—brittle, not very sta-ble, but with properties that people had be-gun to understand.

3. The latest high-temperature superconduct-ing (HTS) compounds—those containingbismuth or thallium–still a mystery, butpotentially easier to work with and perhapshaving better combinations of propertiesthan the 1-2-3s.

Then there is the fourth category—everythingas yet undiscovered.

With no theory, only enlightened empiricismto guide the search, not even the biggest lab-oratories can explore all the possibilities.Choices must be made, priorities set, resourcesallocated. For a company, 50 people workingon HTS means 50 people who cannot work onother projects that might, in the long run, beequally important.

This chapter is about those choices, and howthey are made, in U.S. and Japanese compa-nies, and in Japan’s Government. Chapters 4and 5 deal with the choices facing the U.S. Gov-ernment.

Corporate managers in the United States andJapan look at the world differently. In seekingstrategies for profits and growth, they makedifferent kinds of choices, set different priori-ties, because they operate in contrasting eco-nomic, political, and social environments. Com-panies that do business on a global scale—IBM,Du Pont, Nippon Steel, Hitachi–may have muchin common in their view of the world, but thereare important differences between them as well.It may be a cliché to say that Japanese firmsput more weight on growth and market sharethan on short-term profits, but it is true, andit makes a difference in R&D strategies, busi-ness plans—the entire array of competitivechoices. The U.S. startups, financed with ven-ture capital, that sprang up during 1987 haveno counterparts in Japan. Nor do the small LTSspecialists mentioned in the preceding chap-ter. Japan’s joint government-industry R&Dprojects—a fixture of that country’s industrialand technology policies—have no counterpartshere.

Business planners must decide how manypeople and how much money to put toward su-perconductivity. They must decide how tospend that money, and what kind of people toassign. Is it too early to think about applica-

51

52

tions? Does it make sense to continue explor-ing LTS technologies? Managers in the UnitedStates and Japan have made diverging choices:

●

●

●

●

A few large American companies arepumping substantial resources into HTS.But many other U.S. firms—organizationswith the resources to pursue HTS if theywished—have taken a wait-and-see atti-tude. They may have a few people work-ing on HTS R&D, but mostly just to keeptrack of the technology.Most of the effort in the United States isgoing toward research. American manag-ers believe HTS should remain in the lab-oratory until more scientific knowledge isin hand.Perhaps a dozen large, integrated Japanesemultinationals—manufacturers not only ofelectrical equipment and electronic sys-tems, but of ceramics, glass, and steel—are pursuing multi-pronged R&D strategiesin superconductivity. As in the semicon-ductor industry, these resource-rich com-panies could prove potent rivals for smallerAmerican firms hoping to stake out a po-sition.Japanese companies are conducting re-search but also thinking about applications.They are putting more effort than U.S.firms into thinking through what HTSmight mean for the company’s strategy. Ingeneral, managers in Japan believe thatHTS is closer to the marketplace than doAmerican managers. They also see HTSas a means of creating new businesses,while American managers are more likelyto view it in the context of their existingbusiness. The breadth of the Japanese ef-fort substantially exceeds that of the UnitedStates.

Managers in the larger American companiesbelieve that if HTS takes off, they will be ableto catchup or buy in. Japanese managers want

CORPORATE

What place does R&D have in the strategiesof American firms? How do managers think

to move down the HTS learning curve in realtime. They believe that advantages establishednow will last. Scientists, managers, and ven-ture capitalists involved in the HTS startupsin the United States believe the same thing, butthey are few, small, and weak compared withthe Japanese companies.

Taken as a whole, the U.S. approach—drivenby the need to show financial paybacks in theshort term—could leave American industry be-hind Japan within a few years. Such an out-come is not assured. HTS could languish in theresearch laboratories. Or HTS could evolve likethe laser industry—never quite matching theexpectations of the enthusiasts, driven heavilyby military needs, lacking the revolutionary im-pacts of the computer or the semiconductorchip.

On the other hand, HTS could grow andspread and expand like the digital computer.Computers—especially the microprocessorsand single-chip microcomputers found inmicrowave ovens and TV sets, banking ma-chines and machine tools, Chevrolets and767s—have penetrated innumerable productsand manufacturing processes. The same couldeventually happen with HTS technologies.

American companies, by and large, havetaken the conservative view; Japanese compa-nies have taken the optimistic view. If techni-cal developments in HTS proceed as swiftlyover the next 2 or 3 years as they did during1987, then Japanese companies that have beenlaying the groundwork for commercializationwill be in a stronger position.

Superconductor fever has swept throughJapan’s Government too, with ministries vyingwith one another for the lead in policy. The pic-ture has now stabilized, but 1987 saw many ac-tors seeking center stage—and few signs of thecoordinated, monolithic policy machine thatsome Americans still think of as Japan, Inc.

STRATEGIES

about HTS? How does the business culture inthe United States differ from that in Japan? Ef-

53

fective government policies depend on an un-derstanding of the attitudes and practices ofmanagers, the forces that condition their deci-sions. As it happens, there is substantial truthto the commonplace observation that Japanesemanagers take a longer view than Americans.This difference shows up in R&D decisions onHTS.

For years, American firms have been criti-cized for short-sightedness.1 Managers are un-der pressure from Wall Street and institutionalinvestors (pension and mutual funds, insurancecompanies) to show high and increasing quar-terly earnings. Failure to do so can lead to aloss in stock values, and vulnerability to hos-tile takeovers. Jobs and egos are on the line, sothe argument goes; few chief executive officersor division heads can survive many mediocrequarterly reports.

Techniques used by American managers forevaluating investment alternatives—discussedin the next section—reinforce the pressures tosacrifice long-term opportunities for short-termprofits. Instead of investing in R&D that willincrease their firm’s storehouse of proprietaryknow-how, managers cut R&D to reduce costs.Instead of investing in new plant and equip-ment to increase productivity and flexibility,

I More than a dozen years ago, an experienced U.S. R&D man-ager wrote that “ . . . the root cause of the present and futuredecline of U.S. technological prominence is a temporal mismatchbetween the natural pace of innovation and the time horizonof most U.S. industrial corporations . . . . this root cause is over-looked by the managers of major U.S. industries because theyhave a warped set of values’ ’–R.D. Dean, Jr. “The TemporalMismatch—Innovation’s Pace vs Management’s Time Horizon,”Research Management, May 1974, p. 12.

A recent survey of nearly 140 U.S. companies found “greateremphasis on near-term lower-risk results-oriented work” in theirR& D–’’Trends in the Chemical Industry,” Results of the March-May, 1987 Survey of ACS Corporate Associates. (ASC is the Amer-ican Chemical Society. The survey covered corporate membersfrom other industries as well.)

For 1988, the National Science Foundation has forecast thelowest rate of real, inflation-adjusted growth in R&D since 1977.Even the Electric Power Research Institute, financed by regu-lated utilities, evidently feels many of the same pressures as pub-licly owned corporations. According to the Institute’s president,“We now must clearly demonstrate that there is value in whatwe are doing and that it falls in an acceptable business time frame,This is a remarkable difference from when we started” [1973]–“EPRI’s New President Looks to the Future,” New TechnologyWeek, Feb. 1, 1988, p. 8.

they slash payrolls, keep the old equipment run-ning while spending no more than absolutelynecessary on maintenance, and move labor-in-tensive production offshore or to the Sunbelt.Rather than putting money into core businesses,managers diversify (from steel to real estate,from manufacturing to services), buy up othercompanies rather than build their own, andseek paper profits. The picture may be a carica-ture, but it has a good deal of truth in it.2

How have these pressures affected corporatedecisions on HTS? What other factors enter intoR&D decisions? How, specifically, do U.S. man-agers view HTS compared with their Japanesecounterparts? The next section of this chapterexamines the R&D strategies of American firms.Later sections turn to Japan.3 The findings inbrief:

●

●

American managers have been notablymore reluctant to commit resources to HTS—a technology with highly uncertain pros-pects. They view profits as lying well inthe future.Japanese executives, in contrast, seem con-fident that investments now will pay off–some time and in some way. Their viewof the future is quite a different one fromthat of American managers.

These contrasting views reflect the businessenvironments and investment climates in thetwo countries—indeed, the entire complex offactors that affects management decisions.

2A typical example: Tektronix, a leading manufacturer of in-strumentation and computer work stations, will fire 1,000 white-collar employees “in a bid to boost earnings. ” When the com-pany announced that it would close down some R&D projects,and scale back its marketing and sales staff, a stock market ana-lyst said, “They’re addressing the right issues.” See J.P. Miller,“ Tektronix Plans To Dismiss 6 percent Of Its Workers, ” WallStreet Journal, Mar. 7, 1988, p. 12.

sMost of the information on company views of HTS comesfrom interviews in the United States and Japan during late 1987and early 1988, and from surveys of U.S. and Japanese firms.The U.S. National Science Foundation, through its Tokyo of-fice, conducted the survey of Japanese companies for OTA.

54

R&D and Business Planningin the United States

Funding Decisions

American firms approach R&D much like anyother investment. With some exceptions, a de-cision on individual R&D projects or divisionalR&D budgets will be viewed in the same lightas a decision to invest in new production equip-ment, acquire another company, or sell thefirm’s Manhattan headquarters and move toNew Jersey. Box E describes the process.

R&D carries higher risks than many other cor-porate investments, in the sense that outcomesare less certain. Moreover, the projects withthe greatest uncertainty tend to be those withlonger payback periods. As explained in boxE, such projects must promise exceptionallylarge rewards, or the investment money willgo elsewhere.

Research that loses out in private corpora-tions might nonetheless benefit the country asa whole. If no one company can reap the re-wards, none may invest. That is why the Rea-gan Administration has continued relativelyliberal funding for basic research, even thoughcutting back on more applied work. Companiesdo little basic research because, from their per-spectives, it does not pay. But the social returnsfrom a portfolio of such investments can begreat.

R&D Management

American companies normally engage inR&D to support existing business activities, orthose that have emerged from reasonably care-ful planning exercises. Even the two remain-ing giants of U.S. corporate research—IBM andAT&T—seek, in their own quite different ways,to guide and manage R&D in support of over-all corporate goals.

Oriented toward results, American execu-tives see corporate R&D as an activity to beguided by the firm’s overall objectives. Onlyrarely do they look to R&D as a means of un-covering wholly new business opportunities.When they do, they tend to seek home runs (likethe Xerox copier or Polaroid photography)

rather than the incremental advances that havea central place in Japanese corporate strategies.

Du Pont would dearly love another productlike Nylon, and Intel another invention withthe impact of the microprocessor, but whoknows where these might come from? Inven-tions cannot be planned, and no company willspend much money on an unguided search.Furthermore, in big organizations with ampleR&D budgets, projects that might be excitingtechnically can get lost in the corporation’sgrand strategy. Even though they might prom-ise high rates of return, if the overall marketlooks relatively small, a big company may notbe tempted. Low-temperature superconduc-tivity provides a number of examples, and HTSwill probably bring more.

Most firms give their R&D managers latitudein initiating work on their own, hoping for re-sults that will eventually contribute to the bot-tom line.4 Individual managers, moreover, donot always follow corporate policy. Working-level people bootleg research that might not beapproved higher up. Top management nor-mally lets project leaders and departmentalmanagers follow their own judgment, so longas not too much money is involved. Star re-searchers, likewise, may be left alone to pur-sue their hunches and intuitions (which is howHTS was discovered in IBM’s Zurich labora-tory). A few companies let people spend somefraction of their time–usually small–followingpersonal research interests.

Such policies tend to be pursued for reasonsof morale. They help create a more comforta-ble environment for industrial scientists, a moreacademic setting. If the results bring in moneyfor the company, this will normally be viewedas a lucky accident; in most U.S. firms, mostR&D scientists and engineers work within care-fully managed groups, on projects that cor-porate management first approves and thenmonitors.

qThis latitude seems increasingly circumscribed. For instance,many U.S. research managers must take such decisions aswhether to spend, say, $250,000 to join an R&D consortium, allthe way to the top of the management hierarchy. See “Round-table: Physics Research In Industry,” Physics Today, February1988, p. 54.

55

But things have~ in 'ract,C.b.8ltlgEKt the 1960s or 1970s might not go fOO'1war have lost sight of their company', vestment analysis, the short-tenll DlV'ODlla,a

Present-VaIue Method.

Most American companies make mO.:4;JtcSS1C). _MU ... pen"~ forward financial criteria: they colnp~ue P")I*~tttl~".I: funds. If the R&D promises a high en()tlg[b,8Jl)8C:k; else with the money.

This means that in many if not most4!berlcan 0'4 C)'J wratilonl. budgets in much the same way as operatiiig, IpiJlaJ~rs. use stal1C11lt<1 making, normally based on the present va!tJt tf,~lt flqws an1jcil~at1ed]tM!ft nies estimate expenses and revenues Qyet ""',:. tIlen "discount' metllllllU on the firm's cost of capital. For an R ' , ~,the exl)en,ses COl'"P 2 (in ch. 2): they begin with the R&,D its ,,~8ttd ~QlamJ~~~·tJ.lrIO~'fj begin when the product reaches the ~P.ce. on prevailing interest rates in capital' ~.J

The basic decision rule is simple:ac.Prt' ~*' .~t. with negative present values. Put anothet ~Y. th.,.p(,. rates of return greater than the compaDfs:~o't of and when it comes to R&D, it can ~ highly un~ertaip.~ uncertain alternatives. ' . ,

Two conclusions follow 1. Investments that shoW­

cash flows ,eCrUid will be UUlllCWlt,

hav, loBi.,.,. at ~ ~a.1iDI taet$

with straight­uses of their

do something

,value, reject those with predicted

ays uncertain-firms to compare

than those with -cornm()n in R&D­greater those reve-

.. the years throU8h turnIna so that they became

and Library. deV'e101)ment and research

IUIIIJtu'UI1lll. He views GE', Thomson emphlr

Edison continued to to have reversed in the

*On cOlts of capital. includiD8 In ~(W ....... ton, D.C.: Office of TechnololY A_tmei.ttt.... .. 1.. .. . .. -, : ; 1;, ;

Return on investment as a dectalon criteriOn 8!Id.. . of corporate performance oriatnatedwithta .. Poait earl, in the _ .Cf:IdUrr' and quickly replaced such ratios as return on sales as the fiaaDdal mebUre in use. See R.S. Kaplan. f. Mcouatina Lag: Tb, ObeOIetcence of Cost Accounting Sy&tems," Tbe Uneasy AlJilUJC8: Managtng tbe Productivity-Technology Dilemma, K.B. Clark.R.H. Hayes. and C. Lorenz (eds.) (Boston. MA: Harvard Business School Press. 1985). pp. 196-197.

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It has been intentionally omitted.If a replacement page image of higher quality

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found on one of the OTA websites.

5 7

These practices follow quite naturally fromaccepted business practices in the UnitedStates. They are part of the received wisdom—wisdom that says the rare inventive genius willin any case strike out on his or her own, found-ing a new company to exploit whatever is reallynew.

U.S. Strategies in High-TemperatureSuperconductivity

As the survey results in box F indicate, at least28 American companies are spending at thelevel of $1 million or more on superconductivityR&D. On the average, they have nearly 20 pro-fessionals at work. Many of the companiesworking in HTS have LTS experience. During1987, most of HTS R&D went toward under-standing the 1-2-3 ceramics, and toward proc-essing-related work. The high proportion of sci-entists compared to engineers reflects the basiccharacter of the research.

A number of American companies, big andsmall, have been conducting R&D on super-conductivity—and perhaps producing LTS wireor magnets—for two decades or more. Someattempted to commercialize LTS products, laterto scale back or abandon their work. In the1970s, LTS-based Josephson junctions (JJs) ex-cited considerable interest in U.S. electronicsand computer companies. The enthusiasmfaded, and much of the U.S. work was eventu-ally dropped. (The Japanese persevered withJJs, as discussed in box J, later in chapter.) Inother cases, companies like GE—with its lineof medical imaging equipment incorporatingLTS magnets (ch. 2)—have gone onto becomemajor forces in the marketplace. Still, some ofthe Americans with experience in LTS viewthe new ceramic superconductors with consid-erable skepticism. Earlier disillusionment mayhave affected the current strategic posture ofsome American firms.

Indeed, many U.S. R&D managers feel it istoo early even to think about applications ofHTS. They think much more research will beneeded to characterize the new materials.Moreover, they believe that commercial payoffsare likely to be in the distant future. Media hype

has had little influence on them, These viewsaffect funding for HTS R&D.

But if research in HTS is called for, who, onthe American side, will do it? With few excep-tions, U.S. industrial R&D laboratories avoidscience. Their job is to support the operatingunits. U.S. industrial research grew rapidly dur-ing the early 20th century—led by companieslike GE (which established a corporate R&D fa-cility in 1900), Du Pont (which followed in1902), AT&T (1911), and Eastman Kodak (1912),But decline has set in, for reasons that rangefrom corporate decentralization to the short-ening of time horizons. Today, few Americancorporations pursue much basic research withtheir own funds. Thus, when American manag-ers state that HTS belongs in the laboratory,they often mean someone else’s laboratory.

Two strategic scenarios, then, encompassmost American firms:

1. The first includes the companies that havetaken a careful look at how HTS might af-fect their businesses, assuming continuingadvances in the technology. Such assess-ments often entail a complete review of thefirm’s product lines—a process some firmshave begun by revisiting earlier evaluationsof LTS.

At this stage, such an assessment is noeasy task, given the uncertainties. No onecan predict which of the new families of

Photo credit” Westinghouse

Rotor for prototype LTS generator

~[4_r/54 f - ?IR - j : ’21, i

58

59

materials might prove most useful, whatkinds of problems the design of practicalmagnets or Josephson junctions mightbring, whether three-terminal devices willemerge (ch. 2)—much less the costs.

There is a second problem, one creatingeven more uncertainty. Will somebody dis-cover superconductivity at room temper-ature this year? Next year? In 2050? Thismakes all the difference for any economicevaluation. In fact, most U.S. companieshave based their assessments on liquid ni-trogen operating temperatures—an as-sumption leading to relatively pessimisticevaluations except for quite specialized ap-plications. The typical view goes some-thing like this:●

●

●

●

The primary need is for materialscharacterization, work that can be car-ried out (and is) at literally hundreds ofacademic, government, and corporatelaboratories around the world.Our company could spend a lot of moneyon HTS without much chance of a break-through. Even then, the research wouldprobably not result in proprietary ad-vantage.In any case, the first applications arelikely to be in defense systems, wherecost constraints are less severe.Under these circumstances, the beststrategy is to hedge the company’s betsby tracking the science and technologyworldwide, without investing heavily.

Such a strategy implies willingness toalter course if someone else makes a ma-jor breakthrough (not necessarily in oper-ating temperatures—a big increase in crit-ical current densities might be enough forat least some U.S. firms). These companies—many of them currently spending at the$1 million to $5 million level (box F), andwith perhaps a dozen people assigned toHTS—will keep a core group at work. Butthey are not ready to jump into the HTSR&D race.

2. The second strategic scenario includesthose companies, most of them large, withstrength in research and the ability to pur-sue HTS R&D on a significant scale. The

list is short: AT&T, IBM, Du Pont. Bellcore,Westinghouse, GE, and a few others mightbe added, along with several major defensecontractors.

Here, the presumption that HTS shouldremain in the laboratory is not a bar. Ofcourse, not even IBM or AT&T can doeverything; these companies too face thechoice of investing money and manpowerin HTS or in alternative R&D projects. ButHTS exerts a powerful attraction, not onlyon working scientists, but on those whomanage research. Finally, for some of thesecompanies, success in HTS R&D couldhave pervasive impacts on their businesses.In a company like IBM, which alreadymaintains a portfolio of equally uncertainR&D—most with far less potential impact—HTS quite naturally gets a high priority.A few American firms, then, have 50 or60 people assigned to HTS, and some workunderway that verges on development.

There is also a third group, not large, consist-ing of startups with venture financing (see boxG), plus other small firms.

Government money for R&D could pull a fewmore American firms into HTS R&D. But muchof this money will go for defense projects. Evenin companies that include military or space di-visions along with other operations—as IBM,AT&T, and many other large corporations do—the two sides of the company normally oper-ate largely separated from one another (ch. 4).

In summary, most U.S. companies haveadopted a wait-and-see attitude toward HTS.They may have assigned a group of people tomonitor developments. Perhaps they conductresearch on a small scale. But few major U.S.firms have placed superconductivity amongtheir top R&D priorities. The others see goodreasons for their decisions, of course. Risks anduncertainties are high; judgments differ. Butif HTS develops more rapidly than they antici-pate, few U.S. companies will be able to re-spond as quickly as the aggressive Japanesefirms that have already begun laying ground-work for commercialization.

60

Japanese R&D

As in the United States, the R&D strategiesof Japan’s corporations flow from more gen-eral managerial attitudes. In important respects,Japanese executives exhibit decisionmaking be-havior that differs from that here. As noted inthe preceding chapter, U.S. and Japanese man-agement styles also show many similarities, par-ticularly in high-performing companies, butsome strategic choices that make sense in anAmerican context may be incompatible withJapanese views.

Corporate Research in Japan

Patterns of industrial R&D have been chang-ing rapidly in Japan. American firms, accus-

tomed to advantages in technology, must alsoadapt—perhaps to being first among equals. Jap-anese firms have a tougher job. They are try-ing to catch up and take the lead—and tryingto do so with people and organizations that,until recently, started by licensing and adapt-ing foreign technologies. s This takes money,and Japanese industry has been willing to spendit.

Table 5—showing the rapid rise in business-funded R&D in Japan–demonstrates the strengthof that commitment. Japanese firms see tech-nology development as a key ingredient in com-

5See International Competition in Services (Washington, DC:Office of Technology Assessment, July 1987), ch. 6.

61

Table 5.—R&D Funded by Business and Industry

Business-fundedR&D expenditures

1981 1983 1986a

United States:Billions of dollars . . . . . . . . . . . $35.9 $43.2 $58.2As percentage of all

U.S. R&D . . . . . . . . . . . . . . . . 50.0 % 50.0% 49.8%Japan:Billions of yen . . . . . . . . . . . . . . Y 4364 Y 5451 X 7000Billions of dollars . . . . . . . . . . . $19.8 $22.9 $41.6As percentage of all

Japanese R&D. . . . . . . . . . . . 72.9% 75.9% 77.8%aEstimated.SOURCE: International Competition in Services (Washington, DC: Office of Tech-

nology Assessment, July 1987), p 205

petitive strategies. While business-funded R&Din the United States has been going up almostas fast in real terms, the overall lead of theUnited States in private sector R&D stems sim-ply from the greater size of the American econ-omy; on the average, Japanese firms spend sub-stantially more on R&D as a percentage of sales.

In earlier years, major Japanese corporationsbegan by scanning the world for technology,often with the aid of Japan’s large trading com-panies, as well as the government. When pos-sible, they set one potential source for technol-ogy against another to minimize licensing costs.Japanese companies followed with engineer-ing excellence, highly developed manufactur-ing systems, and carefully targeted marketingstrategies—often competing aggressively athome before launching their export drives.

But the world has changed for Japanese com-panies. In many technical fields, they havereached parity with the West. American andEuropean firms, in any case, are much morewary of licensing than even 10 years ago. Thereis little more for Japan to assimilate. Japanesefirms must either wait for new ideas to appearelsewhere or step up their own research. Evenfor companies not pressed by increasing com-petition from newly industrializing countrieslike South Korea, the first choice is a recipe fordisaster at home. Thus Japan’s major corpora-tions are working hard to generate new tech-nical knowledge.

This search for proprietary technologiesmeans more basic research.6 As American com-panies turn away from relatively fundamentalwork, Japanese firms are turning toward it.Many American R&D managers give the Japa-nese little chance of accomplishing much, atleast over the next 5 or 10 years. They viewJapan’s culture–and the organizational envi-ronment in Japanese firms—as hostile to crea-tive research. Many Japanese would agree.Their engineers may be superb at painstakingproduct development efforts, but, at leastaccording to the stereotype, research demandsindividuality and creativity—qualities dis-couraged in Japan.

This stereotype is greatly exaggerated: acloser look suggests that creativity in engineer-ing—something the Japanese have amply dem-onstrated—differs little from creativity in re-search and in science. In fact, U.S. scientistsand R&D managers directly involved in HTSresearch give their Japanese counterparts highmarks for their work. Moreover, in related fieldslike ceramics, the Japanese already have thelead in commercialization.7 While Americansstill see Japan as lagging generally in science,

Wee, for instance, S.K. Yoder, “Japanese Launch Bid to Leadthe World in Pure Science,” Wall Street )ournal, June 3, 1987,p. 26, Also P. Marsh, “The search for some home-grown heroes,”Financial Times, July 6, 1987, p. 15, which quotes Tokyo Univer-sity’s Professor Shoji Tanaka, Japan’s best-known superconduc-tivity expert, as follows: “For a long time the Japanese peoplehad the feeling they were behind in science. But now the inferi-ority complex is starting to vanish. We do have a relatively in-flexible university system. But . . . young people are changingand will force their professors to adopt different ideas. ” In search-ing for creative scientists and engineers to staff their researchlaboratories, Japanese companies are hiring more women andforeigners—M. Kanabayashi, “An Acute Shortage of EngineersThreatens Japan’s Research Goals,” Wall Street )ourna], Oct. IS,1985, p. 32; “Poor lab facilities hamper plan to attract foreignresearchers,” Japan Economic Journal, Apr. 16, 1988, p. 5.

Industry and government in Japan have put considerable em-phasis on the life sciences in their overall drive for research ex-cellence. See Commercial Biotechnology: ArI International Ana)-ysis (Washington, DC: Office of Technology Assessment, January1984), pp. 505-510. Later sections of this chapter discuss gov-ernment policies in support of basic research in Japan.

‘High-Technology Ceramics in Japan, Nh4AB-418 (Washing-ton, DC: National Academy Press, 1984); Ceramic and Semicon-ductor Sciences in Japan, 1987, PB 88-122478 (Washington, DC:Department of Commerce, 1987); Advanced A4ateria]s by De-sign: New Structural Materials Technologies (Washington, DC:Office of Technology Assessment, June 1988).

62

there is no basis for complacency—and cer-tainly not when it comes to superconductivity.

Time Horizons

How about the longer term view that Japa-nese managers reputedly take? This stereotypeholds up–as can already be seen in HTS. Thereasons begin with notions of success and fail-ure that differ substantially between the busi-ness cultures of the United States and Japan.

In the United States, management perceptionsof the factors that determine the value of a firm’sstock heavily influence decisions. When sur-veyed, U.S. managers rank profits (as measuredby return on investment), and increase in shareprice, as their primary objectives. Japanese ex-ecutives also view return on investment as im-portant, but put it below another goal—marketshare—which appears no better than third inrankings by American managers.8

Furthermore, Japanese companies need notworry too much about the price their stock com-mands, given the way Japan’s financial mar-kets work. Equity remains less important thandebt in corporate financing, and new stock is-sues are the exception in raising funds. Thenow-standard—and often oversimplified—argu-ments concerning costs of capital also comeinto play here; plainly, on a present value ba-sis, or indeed almost any reasonable criterion,lower costs of capital in Japan make long-termprojects more attractive.9

Japanese companies, then, typically usedifferent decision rules in evaluating invest-ment alternatives. Managers in Japan see R&Das a means for maintaining or increasing mar-ket share, both at home and abroad, with mar-ket share a necessity for holding on to a com-

8J.C. Abegglen and G. Stalk, Jr., Kaisha: The Japanese Corpo-ration (Tokyo: Charles E. Tuttle, 1987), pp. 176ff.

While decision criteria in Japan certainly differ from those here,there is little consensus in the Weston the extent to which Japa-nese firms rely on financial measures—or, more precisely, onwhat kind of measures they use, and for what purposes. See,for example, “Part Two Discussion Summary,” The Llneasy Al-liance: Managing the Productivity-Technology Dilemma, op. cit.,p. 283.

ozn~erna~jon~ competitiveness in Electronics (Washington, DC:Office of Technology Assessment, November 1983), ch. 7.

petitive position in dynamic markets. Japan’srapid postwar economic growth, and successin exporting, has made market share the toppriority; when sales are expanding rapidly,grabbing as big a share as possible, and hold-ing on to it, become the key to profits.

The emphasis on growth reflects a beliefamong Japanese executives that only large com-panies can remain financially viable in inter-national competition. Japanese industry hasspawned few of the entrepreneurial startupsso much a part of the scene in U.S. high-tech-nology industries—although many policymak-ers in Japan would like to create a place forthem.

Other factors and practices reinforce the viewthat growth is all-important. Larger Japanesecompanies historically have attempted to pro-vide “lifetime” employment for a portion oftheir work force. Managers continue to viewthis as an obligation, and growth makes it eas-ier to sustain employment. Layoffs tend to beseen as evidence of management failure, ratherthan—as in the United States—a consequenceor symptom of economic downturn. This senseof obligation helps shape corporate goals andmanagerial behavior. Where American execu-tives would slash payrolls, Japanese companieswill often accept lower profits.

What does this mean for R&D? A continuoussearch for new products and new markets, in-cluding those that might not fit very comforta-bly into ongoing operations. Where Americancompanies look to R&D to support existing bus-inesses, Japanese companies are just as likelyto see it as a means of creating new businesses.Where American firms look for home-run op-portunities, their Japanese counterparts havebeen more willing to start small and grow newbusinesses gradually.

Government-Industry Relations

The antagonism with which so many U.S.corporate managers view government also con-trasts with typical Japanese attitudes. Americanmanagers feel, by and large, that the FederalGovernment’s role should be tightly circum-

63

scribed. Wherever possible, economic mattersshould be left to the private sector.

Later sections of the chapter describe howgovernment and business in Japan have workedtogether to promote HTS. Here, the point is sim-ply that Japanese executives have relativelycomfortable working relationships with govern-ment. Japanese managers tend to feel that em-ployees of their government are competent anddeserving of respect, even when they disagreevehemently on matters of policy.

Managers in Japan pay attention to goals andobjectives announced by the Ministry of Inter-national Trade and Industry (MITI), or the Min-istry of Finance. This does not mean they willnecessarily follow the paths that MITI or otherministries attempt to lay down. Contrary be-havior is common. On the whole, Japanese ex-ecutives would prefer to go along with govern-ment, while working to mold policy in waysthey regard as desirable.

R&D Management

Traditionally, Japanese R&D has focused onengineering—product/process development,rapid transfers to manufacturing. Despite theengineering perspective, managers put lessweight on short-term outcomes, and show morewillingness to invest in projects that will notyield positive cash flows until well into the fu-ture. Japan’s national goal of technological in-dependence pushes companies in the samedirection.

Personal opinions by managers carry greatweight—especially when the advocates of par-ticular projects enjoy high standing as research-ers or managers. One man’s recommendationcan lead to a major new R&D project in Japan—something that would be highly unusual in anAmerican company.

Competition among Japanese firms combineswith cultural characteristics to yield anothercontrast with the United States. Japanese com-panies tend to emulate one another; when onebegins research in a field like HTS, others fol-low. Few executives will risk letting a directcompetitor engage in R&D without investigat-

ing the subject themselves. Similarly, compa-nies are uncomfortable at the thought of clos-ing down a research program that others arecontinuing. For such reasons, Japanese firmsspend a good deal of effort tracking their com-petitors’ day-to-day R&D efforts. Americancompanies, which tend to look to R&D formeans of differentiating themselves, show moreinterest in products soon to hit the market.

Finally, given the way Japanese firms makedecisions, it should be no surprise to learn thatthey stick with R&D efforts once begun. Oneexecutive commented in an OTA interview, “InJapan, we continue research projects unlesspersuasive reasons are mustered against them.In the United States, I get the feeling thatprojects are cancelled in the absence of goodarguments supporting continuation. The differ-ence is subtle, but important. We tend to be op-timistic on research results; you tend to be pes-simistic.” Such attitudes may be remnants ofan earlier time, when success came easier. Still,they contribute to the persistence that has beenso important to Japan’s accomplishments incommercialization.

The typical Japanese approach to R&D car-ries disadvantages as well as advantages. Withlittle systematic guidance for comparing oneproject to others, and subject to the influenceof strong personalities, Japanese firms risk baddecisions. This weakness could become moreimportant in the future; given their lack of ex-perience in managing fundamental research—particularly if companies follow one anotherdown blind alleys. But for now, the freer handthat Japanese managers have in allocating re-sources to long-term, high-risk projects is a nota-ble strength.

Japanese

Japanesemously, see

Strategies in High-TemperatureSuperconductivity

R&D managers, almost unani-HTS as a revolutionary technol-

ogy, one that promises radical change. Skepti-cism, common in the United States, has beenrare in Japan. Implicit in some Japanese views,explicit elsewhere, has been the assumptionthat room temperature superconductivity is not

—.

6 4

far away. (Otherwise, even the more optimis-tic Japanese scientists and engineers see the po-tential as relatively limited.)

A corollary follows: Japanese executives be-lieve that HTS will be a major battleground forinternational competition over the next two orthree decades.10 All those interviewed by OTAbelieved that Japan would have to depend onhome-grown technologies in the future. It fol-lows that early exploitation of HTS holds a rareopportunity. Japanese managers—in sharp con-trast to their U.S. counterparts—have littledoubt that HTS will be a central element in com-petitive strategies.

Not surprisingly, then, commitments in Japan—as indicated by industrial employees assignedto superconductivity R&D—substantially ex-ceed those here. Box H, based on a survey ofJapanese firms conducted for OTA by the U.S.National Science Foundation (NSF), reveals thefollowing contrasts with the United States:

● Although reported budgetary outlays byU.S. industry exceed those in Japan (at $97million compared with $90 million), Japa-nese firms reported 900 people working onsuperconductivity (versus 625 here).

● Total Japanese R&D spending on supercon-ductivity for 1988—industry plus govern-ment—should exceed $160 million, U.S.spending $250 million. Such comparisonsmust be treated with caution, however. Thecompany surveys are incomplete, the fis-cal years for the two governments are 6months out of phase, and the exclusion ofsome salaries from the Japanese Govern-ment budget figures makes the estimate for

Iosixty percent of 167 Japanese companies responding to a mid-1987 survey expected a $2o billion world superconductivity mar-ket by 2000–’’Superconductor Industry Survey Conducted,”JPRS Report–Science & Technology, Japan, JPRS-JST-87-068-L, Foreign Broadcast Information Service, Oct. 29, 1987, p. 1[translated from Nikkei Sangyo Shindmn, July 28, 1987]. Elec-tronics applications were ranked most promising, followed byenergy storage, and then by a variety of other electric powerapplications. Nearly 85 percent of those responding to a differ-ent survey foresaw applications of room temperature supercon-ductors in industrial equipment by 2010–’’Waga kuni ni okeruGijutsu Kaihatsu no Hoko ni kansuru Chosa” [Survey of Trendsin Technology Development in Japan], no. 4, Kagaku Gijutsucho[Science and Technology Agency], 1987, p, 12.

●

Japan low by some unknown amount. Fi-nally, spending levels say nothing about theoutputs of R&D. Given all these uncertain-ties, the contrast in numbers of industrialemployees takes on the greatest weight.Japanese firms are emphasizing prospec-tive applications more heavily. Many com-panies in Japan are continuing to investin LTS projects, most of them heavily de-velopmental. They have more engineers as-signed to superconductivity R&D than theAmerican firms.

The strength of the Japanese commitment isvisible not only in numbers of people, but inthe range of businesses represented among thecompanies that have begun to invest. HTS R&Dspans glass and ceramics, shipbuilding andsteel, in addition to microelectronics, computers,consumer electronics, and electrical equipment.

The Japanese firms can nonetheless begrouped into two classes:

1.

2.

Some have relatively extensive experiencein LTS. This group includes manufacturersof superconducting magnets (e.g., for med-ical imaging systems). A number have beeninvolved in Japan’s magnetically levitatedtrain project (see box K later in this chap-ter). Toshiba, Mitsubishi Electric, andHitachi have all built and tested prototypeLTS generators. Sumitomo Electric, Japan’sleading producer of wire and cable, sup-plied superconducting wire for many ofthese projects. Sumitomo is also Japan’s(and the world’s) leader in small synchro-trons—which may emerge as a critical tech-nology for production of next-generationintegrated circuits. Finally, a number ofJapanese firms have continued to pursueR&D on LTS Josephson devices, with high-performance computers in mind (see boxJ, later in the chapter).Others, new to superconductivity, begantheir research programs only after the dis-coveries in Zurich, Houston, and Tokyo.Some view HTS as important for existingbusinesses; others seek diversification. Thefirst group includes electrical equipmentmanufacturers and other suppliers of cap-

65

●

●

●

IBy May 19SS, 4!# j~ , M had j@ned f$l%C @e Ml members+epwt Memwtmdum 41S5, Tokyo Office of the U.S. National*~~ pom#atiun# * $3,1-. m$yayreac%ed dy 25 of thwe, and an even mwller fraotion (5 of 45) of aaaociate members. For somaof thtwe compasdee, ofwmree, _*@~@ MY b @ new WCM of R&D, with Mtle internal a~tity.

AR currency aonvemione in tbfr hex, aa dttawhere in the chapter, have been made at 130 yen to the dollar.

66

ital goods. It also includes steelmaker,who have begun speculating, for instance,that magnetic levitation of strand-castproducts could lead to better surface qual-ity and higher yields (box I). The steel-maker are also trying to diversify, alongwith glass companies and shipbuilders. Allthese industries are in decline; opportuni-ties for diversification and continued growthhold great attractions in Japan.

Regardless of industry, many Japanese firmsare pursuing research and applications devel-opment in parallel fashion.ll They have basicwork underway, mostly in characterization,and people searching for materials with betterproperties. Development projects include workon thin films and efforts to fabricate wires. Inthese activities, the Japanese are proceedingmuch like their counterparts at the leading U.S.industrial laboratories.

Japanese efforts differ in one major respectfrom those in the United States. Many firmsin Japan have groups at work on feasibilitystudies and exploratory “what if” exercises.(Government programs, treated later in thechapter, show the same thrust.) These groupshave a specific task: to think about possiblecommercial applications. In some cases, the ef-forts have already been carried to the stage of

IIAs Sumitomo Electric Vice President Nakahara explains it,Japanese companies and other research organizations shouldpursue basic research and applications on “parallel tracks” toensure cross-fertilization of efforts—Choc/endo to wa IVankawhat is Superconductivity], Nihon Keizai Shimbunsha, 1987,p. 91.

preliminary designs and marketing analyses.The work is highly speculative, of course, butthe Japanese believe it will help prepare forcommercialization. Only a few U.S. companieshave begun similar efforts.

U.S. and Japanese Strategies Compared

The Japanese see applications coming rela-tively quickly. When queried in the spring of1987, scientists and research managers in Ja-pan called for more basic research in their coun-try, and efforts to develop applications basedon patents filed in the United States.12 LikeAmericans, they viewed superconductivity aslargely a research enterprise for now—with theresearch laying groundwork for commercialcompetition that would come soon, perhaps assoon as one to three years. In essence, Japa-nese companies are pursuing a three-prongedR&D strategy: 1) basic research; 2) development,aimed mostly at processing; and 3) productplanning and market evaluation. The last ofthese carries the gravest potential consequencesfor U.S.-Japan competition. If technical devel-opments in HTS proceed as rapidly over thenext two or three years as during 1987, Japa-nese firms will be in better positions to movetoward commercial applications than Amer-ican companies.

If U.S. firms wait to think about product andprocess developments until the research results

IZ’’Chodendo Busshitsu: Nichibei Gokaku no Kaihatsu Kyoso”[Superconducting Materials: Japan and the U.S. on a Par in Com-petition for Development], Nikkei Sangyo Shimbun, May 12,1987.

6 7

Box I.—HTS R&D at Nippon Steal

Why did the largest steel producer in the world put 40 people to work on HTS in February 1987?Nippon Steel may be the leader in market share, but its sales have been declining—partly the resultof structural changes in the Japanese economy, leading to declining demand for steel, and partly aconsequence of greater competition in international markets. Company strategists have two majortasks: 1) finding ways to make steel more cheaply, thereby helping the company compete in its pri-mary if shrinking businesses; and 2) identifying new opportunities. Superconductivity fits both ob-jectives.

Planners see Nippon Steel as bringing three primary technical strengths to HTS. First, the com-pany has always designed much of its own production equipment. It has process engineering skills,not only for making steel, but for titanium and other metals as well. Second, the firm has expertisein wire manufacture-a technology that could turnout to be important as HTS matures. Finally—andmost important-Nippon Steel has worked hard over the years to develop technical capabilities inceramics. Originally, most of this work was in refractories for furnaces. More recently, the companyhas sought to diversify into high-technology ceramics, and also into silicon production for the semi-conductor industry. To the extent that the new superconducting materials will demand expertise inceramics and other advanced materials, Nippon Steel believes it will be well-placed.

None of these perceived strengths may turn out to be sufficient to place the firm in the forefrontof HTS. Nippon Steel’s executives might be grasping at straws. Nonetheless, the company has lookedwith some care at 50 or more potential applications of HTS. Some of these analyses have been takento the point of comprehensive feasibility studies. For example, company engineers have evaluatedthe prospects for continuous strand casting using superconducting magnets to confine and float mol-ten steel, followed by in-plant materials handling

are in, they may lose out competitively. Japanesecompanies will already have thought throughthose steps, weighed the potential problems,considered al ternat ives—perhaps anticipatedsome of the follow-on technical work and evenbegun to pursue i t . The Japanese approachprobably costs more —some R&D groups willpursue false trails, companies may be payingthe salaries of too many people working on

also based on magnetic levitation.

overlapping projects—but the eventual rewardscould more than make up for this. Japanesemanagers find it strange that American com-panies believe they can track a technology’s de-velopment, waiting for the right time to beginproduct development, without actively and ag-gressively pursuing that technology in theirown laboratories. (Of course, many Japanesefirms did just this not so many years ago.)

JAPAN’S HTS INITIATIVES

Many countries are pursuing HTS research,but talk of a superconductivity race has focusedon the United States and Japan.13 Sumitomo’smany hundreds of patent applications, for ex-ample, have drawn widespread attention. The

13See, for example, “Two Different Cadences in the Supercon-ductor Race,” Washington Post, May 20,1987, p. Al; “U.S. ‘Lead-ing Slightly’ in Superconductor Race, ” Japan Economic Jour-nal, June 13, 1987, p. 15.

This section is based in part on interviews with governmentofficials in Japan during the fall of 1987. For background on Jap-

race is certainly a real one in terms of science.Laboratories around the world confirmed su-perconducting behavior in the thalium-basedmaterials in a matter of hours.

anese industrial policy, see International Competitiveness in Hec-tronics (Washington, DC: Office of Technology Assessment, No-vember 1983), pp. 413-422.

On patenting, below, see S.K. Yoder, “Rush to Exploit NewSuperconductors Makes Japan Even More Patent-Crazy,” WaZlStreet Journal, Aug. 27, 1987, p. 18.

—

68

Preoccupation with Japanese efforts is hardlya surprise, given Japan’s huge trade surpluswith the United States, and the longstandingview by some that Japanese companies havebeen getting a free ride from American re-search.14 Press reports have suggested that Ja-pan is taking off in superconductivity, with gov-ernment agencies in the lead.15

MITI asked for 3.5 billion yen (about $27 mil-lion at 130 yen to the dollar) for superconduc-tivity in fiscal 1988, well above the previousyear’s level (550 million yen, $4.2 million). (Jap-anese budget figures do not include breakdownsfor high- and low-temperature superconduc-tivity.) But the image of a government-coordi-nated, crash program in HTS is false. The policyenvironment for superconductivity remainedin flux in Japan during 1987. The differenceis this. After the middle of the year, the out-lines of Japanese Government policies beganto solidify. By early 1988, they had taken shape.U.S. policies, in contrast, remain in a state ofconsiderable disarray.

Government Resources for Superconductivity

In Japan, four principal agencies have com-peted with one another for resources to supportHTS (table 6): the Science and TechnologyAgency (STA); MITI; the Ministry of Educa-tion (Monbusho); and the Ministry of Trans-port. Key players in government, industry, anduniversities have been seeking to get into thesuperconductivity game, looking for money andthe authority to expand their programs.

Much of the substance of Japanese industrialand technology policies emerges from behindthe scenes, the product of long-standing tiesamong government officials, corporate execu-tives, and, in a case like HTS, senior profes-sors in the leading universities. A host of advi-

lqThiS perception is m exaggeration. See ]nternatjona] Com-

petition in Services, op. cit., pp. 202-203.]5For example, ‘ton one hand, companies vie to beat each other

to the patent office and marketplace. But at the same time, arch-rivals join forces on certain tasks when speed is essential andthe research is risky. And the MITI orchestrates it all.” See S.K.Yoder, “Superconductivity Race Shows How Japan Inc. Works,”Wall Street Journal, Aug. 12, 1987, p. 6. The same article callssuperconductivity a Japanese “obsession. ”

Table 6.—Major Japanese Government Programs andActivities in Superconductivity

Science and Technology Agency (STA):●

●

●

●

Multicore Project ‘- - -

Nine laboratories and other government organizations par-ticipating in work on theory and database development,materials characterization, processing, and technologytransfer. The lead laboratories are the National ResearchInstitute for Metals (NRIM, with work on theory, databases,thin films, and a superconducting generator) and the Na-tional Institute for Research on Inorganic Materials (mate-rials synthesis and new material development, crystalstructure determination, microstructure control).Japan Atomic Energy Research InstituteR&D on superconducting magnets and applications.Japan Research Development CorporationPrimarily measurement work.New Superconductivity Materials Research Association(Forum)Primarily information exchange.

Ministry of International Trade and Industry (MITI):● Electrotechnical Laboratory (ETL), plus other MITI facilities

R&D on superconducting electronics (e.g., Josephsondevices), as well as new materials (including superconduct-ing polymers).

● Moonlight ProjectSuperconducting generator.

● Support for Technologies Needed for Research and Proc-essingThin film fabrication techniques; low temperature process-ing of bulk materials.

. Research Associations(See text.)

. International Superconductivity Technology Center (ISTEC)

Ministry of Education (Monbusho):● University research support

Examples: Professor Tanaka’s group at Tokyo University,working particularly on new materials; Professor Muto’swork on theory at Tohoku University; support for the Cer-amics Center at Tokyo Kogyo University.

Ministry of Transportation:● Support for the Magnetically Levitated Train project at the

Railway Technical InstituteSOURCE: Office of Technology Assessment, 1988.

sory committees, reports, and budget proposalsalso contributed to the rise of superconductivityon Japan’s policy agenda. The statements of theCouncil for Science and Technology—an advi-sory group chaired by the Prime Minister andincluding the directors of MITI, STA, and othermajor ministries—are typical. In August 1987the Council issued a report on superconduc-tivity calling for “hybrid” basic research, in-volving experts from many fields. Japan’s na-tional laboratories should promote cooperationwith industry and universities, and reward in-

6 9

dividual excellence, the Council urged, envi-sioning HTS R&D as a major step in improvingJapan’s creative research capabilities.

STA and the Multicore Project

Each agency is independently pursuing thesebroad goals. In the summer of 1987, when HTSbecame the focus of attention worldwide, STAset up a Committee for the Promotion of Re-search and Development of SuperconductingMaterials. The nine members represent the ma-jor STA laboratories, the Japan Research De-velopment Corporation, and the InterministerialR&D Division of the STA Research and Devel-opment Bureau. The Committee’s report stressedthe many unknowns concerning superconduc-tivity, and recommended a high priority forbasic research–not surprising, given the STAmission. 16

Highlighting the role of government, particu-larly STA, the Committee urged that Japan’snational laboratories, already credited with sig-nificant contributions in HTS, accelerate theirefforts even more. While emphasizing the needfor research, the members also advocated prep-arations for commercialization of new prod-ucts. Their report touches on opportunities forinternational cooperation, recommending thatJapan’s joint government-industry R&D pro-grams be opened to foreign participation, andthat Japan seek to make a global contributionto HTS. At the same time, the Committee un-derscored the importance of making researchresults from STA laboratories—of which thereare five—widely available.

The STA Committee sees these laboratories,and the agency’s new Multicore Project, as thebridge between university science and cor-porate applications. Companies and universi-ties participate through the New Superconduc-tivity Materials Research Association, whichhad about 130 members at the end of 1987. TheMulticore Project, with a budget of more than2 billion yen (about $16 million) for fiscal 1988,aims to strengthen the capabilities of STA lab-

I“’’New Developments in Superconducting Materials R& D,”Science and Technology Agency, Tokyo, Sept. 21, 1987.

oratories in HTS, and to speed transfer of re-search results to industry.17

A number of STA laboratories will get moremoney for HTS—notably the National ResearchInstitute for Metals (NRIM), which plans a ma-jor thrust in materials characterization. NRIMscientists discovered the bismuth oxide HTScomposition in January 1988. The National In-stitute for Research on Inorganic Materials andthe Atomic Energy Research Institute will getmost of the rest of the STA money. Nine lab-oratories in total will participate in the Multi-core Project, with “core” research work goingon in each.

Given this decentralized approach (no phys-ical relocations are planned), STA will rely ona steering committee with representatives fromindustry and universities, as well as govern-ment, for coordination. The steering commit-tee’s job will be a difficult one, the more so if—asSTA officials hope—MITI laboratories can alsobe pulled into the Multicore Project. At present,however, MITI has its own quite independentplans.

MITI Programs

A recent report by the Advisory Committeeon Superconductivity Industrial TechnologyDevelopment, made up of representatives fromindustry and universities, reflects the perspec-tive of MITI—to Western eyes, the most visi-ble agent of Japanese industrial policy .18 LikeSTA, the MITI committee sees the governmentrole as one of helping industry make use of re-search results from the national laboratoriesand universities. But MITI goes further in ad-

ITChodendo Zairyo Kenkyu Muruchikoa Projekuto 63 nendoKisan Yokyu Sokatsuhyo [Budget Request for Multicore Projectfor FY1988]; also “Superconductor R&D to Industrial Applica-tion,” JPRS Report-Science& Technology, Japan, JPRS-JST-88-007-L, Foreign Broadcast Information Service, Mar. 11, 1988,p. 100 [translated from Nikkan Kogyo Shimbun, Jan. 1, 1988].The Multicore name signifies that multiple organizations formthe core of the project, emphasizing the thrust toward coordina-tion and reorientation rather than an all-new initiative. Theproject accounts for about two-thirds of STA’S fiscal 1988 bud-get request for superconductivity, which totals 3.1 billion yen.(Japan’s fiscal year begins in April.) STA has also sought fund-ing for a superconducting generator project.

Iechodendo sangyo (lijutsu Kaihatsu Kondankai (1988).

70

vocating national projects, not only for R&Don the new materials, but for applications inelectronics and electrical machinery. Box Jnotes the Ministry’s support for Josephson com-puting technologies—a field where Japan be-gan by following the path laid down by IBMand other U.S. companies, then persisted afterAmerican firms cut back their efforts.

A good portion of MITI’s 1988 superconduc-tivity budget will go toward applications. Ex-amples include a new project on thin films andJosephson devices, part of the “Technologiesfor Next Generation Industries” program of theAgency for Industrial Science and Technology(AIST is part of MITI). The Ministry’s 70megawatt (MW) generator project, based onLTS technology and also scheduled for morethan $10 million—a hefty slice of the 1988 MITIsuperconductivity budget—follows severalyears of feasibility studies. Motivated in partby the search for energy savings, goals for the8-year project range from improvements inmethods for processing superconducting wireto construction of a complete prototype.19 Offi-cials say that HTS technologies will be utilizedif available.

Late 1987 saw a major step for the 70 MWgenerator project, the formation of a researchassociation (kenkyu kumiai). As is typical of

Iochodendo Hatsuden Kanren Kiki-Zairyo Gijutsu no FizabiriteChosa Kenkyu, March 1987. The original proposal, advancedin 1985, was much more ambitious, calling for a 200 MW gener-ator to be built in 5 years.

Photo credit: IBM Corp.

Memory cells in experimental Josephson junctionintegrated circuit chip

these research associations—central mecha-nisms of Japanese technology policy—MITI notonly helped with the planning, but will assistwith administration and furnish ongoing finan-cial support. Likewise typical of MITI projects,the research association brings together par-ticipants with a range of technical strengths,and companies from different industries: themembers include two cryogenic engineeringfirms, the Fine Ceramics Center, the CentralElectric Power Research Institute, and a num-ber of major electric power and electronicsfirms. MITI sees its role as supporting indus-try not only by creating incentives for applica-tions-related R&D, but by spurring productiveinteractions among firms and industries thatmight not otherwise collaborate.

MITI, like STA, also runs its own labora-tories. The Electrotechnical Laboratory—whichhas won worldwide respect for its research-–has been involved in superconductivity sincethe middle 1960s, when the laboratory beganR&D on LTS magnets for MHD (magnetohydro-dynamic) power generation under the Moon-light Project. More recently, ETL has attractedparticular notice for its work on niobium-basedJosephson devices (box J). ETL’s overall 1987budget came to $57 million; like many organi-zations in the United States, the laboratory wasable to reprogram funds internally for HTS dur-ing 1987; MITI will get $2.5 million for ETLresearch on the new superconductors in 1988.The laboratory has several groups, and about40 people in total, working on superconduc-tivity (the ETL research staff numbers 560).

The Ministry seeks to involve private corpo-rations in its efforts through mechanisms rang-ing from research associations to advisoryboards and symposia. Industry is MITI’s ma-jor constituent, and the Ministry’s HTS pro-grams will follow patterns laid down over theyears for supporting other industries and othertechnologies-e. g., semiconductors, computers,biotechnology.

The Ministry of Education

The Monbusho, which supports universityresearch, has a larger R&D budget than anyother arm of the Japanese Government. Sup-

71

Box J.-Josephson Junction Computer R&D: From the United States to Japan1

The pursuit of a Josephson-based computer has taken quite different paths in the United Statesand Japan since the early 1970s. Josephson devices provide the fastest electronic switches known,hence—in principle-the fastest digital computers. Because they are Superconducting devices, withvery little power dissipation, JJs can be packed tightly together. Theoretically, therefore, a computerbuilt with JJs could be very compact, as well as extraordinarily fast and powerful.

U.S. Efforts

Three U.S. corporations pursued JJ R&D for computer applications: AT&T, IBM, and Sperry Univac(which later merged with Burroughs to form Unisys). Each made significant contributions to the JJtechnology base. Beginning in the 1960s, more than 10 years of research at AT&T’s Bell Laboratoriesproduced a much better understanding of the physics of JJs. IBM went much farther, building a proto-type of the circuitry for a complete computer, as well as exploring fabrication methods for JJ logicand memory chips. Sperry concentrated on JJs made from refractory materials such as niobium andniobium nitride (instead of the lead alloy used by IBM), and developed processing methods for high-performance, all-niobium circuits.

All three companies had scaled back or abandoned their JJ projects by the early 1980s–each forits own reasons. AT&T terminated the Bell Laboratories program in 1979 after deciding that the tech-nical hurdles to practical applications were formidable. Sperry abandoned its effort to develop a JJcomputer in 1983, after closing its Sudbury, Massachusetts, research center, the focus of the work.(JJ research by Sperry’s Defense Systems Division, aimed at sensors, continued.)

IBM, with the most ambitious program, was spending about $20 million annually by the early1980s, with the National Security Agency (NSA) providing about $5 million of this. Although NSAurged continuation, IBM drastically scaled back its effort in 1983, ending pursuit of a working com-puter, after its Yorktown Heights Laboratory was reorganized and the JJ work came under new man-agement. Logic chips based on IBM’s experimental production technology performed adequately,but the memory did not; the new management team estimated that improving the memory chips wouldadd another 2 years to the schedule. By that time, management reasoned, continuing progress withmore conventional silicon and/or gallium arsenide chips would make it hard for a JJ-based machineto offer compelling advantages in speed or processing power.

Before ending its JJ program, IBM came close to an agreement with Sperry for joint developmentof Josephson technologies. IBM had the most advanced. designs but was struggling to fabricate them,while Sperry had proven processing technologies. The agreement was almost 18 months in the mak-ing, and had apparently cleared the antitrust hurdle after the NSA proposed taking the project underits wing. But the agreement was never consummated because Sperry’s management decided to de-centralize its R&D among its operating divisions, and reassigned its JJ computer group to the DefenseSystems Division--a reassignment that key technical employees declined.

*Much of fhe information in thia box is based on interviews. Also see A.L. Robinstm, “New Superconductors for a Supercomputer,” Science,Jan. 1, 1S82, p. 40; A.L. Robinson, “IBM Drope Superconducting Computer Project,” Scfence, Nov. 4, 1983, p. 492; “JTech Panel Report onOpto-& Microelectronics,” Japaneee Technology Evaluation Program, Science Applications International Corp. under contract No. TA-83-SAC-02294 from tbe U.S. Department of Commerce, May 1985, $action 11; “Govemrnent’s Role in Computers and Superconductors,” preparedfor OTA by K. Flamn under contract No. H3-6470, March 1988, pp. 47-52.

72

port for superconductivity is relatively new,however, going back only to 1984. In 1987,Monbusho funded 41 mostly small projects onsuperconductivity at Japanese universities, withspending totaling $4.3 million.20 For fiscal 1988,Monbusho spending on superconductivity will

ZODaigaku Kankei ni okeru Chodendo Kenkyu no Tsuishin nitsuite [Concerning Support for Superconductivity Research inUniversities], Monbusho. The Ministry of Education’s figuresfor support of university R&D normally exclude salaries, whichare paid out of other accounts. (Other Japanese Government agen-cies typically include salaries in their published R&D budgetfigures, just as in the United States.)

reach about $14 million. Although the Educa-tion Ministry has placed superconductivity atthe top of its list for greater support, it ranksthird behind MITI and STA in its 1988 budgetfor direct support of superconductivity.

In addition to the many small projects itfunds, Monbusho provides much of the sup-port for a few large programs headed by in-ternationally known scientists. For instance,Professor Shoji Tanaka’s group at Tokyo Uni-versity will receive more than $700,000 during1988. Professor Tanaka (who recently retired

73

from the university to direct research at MITI’sInternational Superconductivity TechnologyCenter, ISTEC), has also been awarded a 3-yeargrant of $1.6 million for “Specially promotedDistinguished Research.” Professor YoshioMuto, at Tohoku University, whose group hasbeen designated one of 30 priority researchprojects, will get more than $2 million over the3-year period 1988-1990. These large university-based efforts generally include participantsfrom a number of universities, selected by thelead professor.

Taking university research as a whole, thescope in Japan is narrower than in the UnitedStates, and the quality substantially lower. Ja-pan has fewer centers of excellence, and a morerapid drop-off in quality as one moves downthe scale. The best institutions in Japan are verygood. There simply are not that many of them.

Superconductivity, however, has been an ex-ception. Before the discoveries in HTS, the fieldhad been something of a backwater. Interesthad been declining in the United States, moreso than in Japanese universities. Recently,American scientists have given the Japanesehigh marks for research in superconductivity.

Tokyo, Tohoku, and Kyoto Universities havebeen getting about three-quarters of Monbushosuperconductivity funding. Some of the re-search groups at these schools—e.g., TokyoUniversity’s in superconductivity—are on a parwith the best in the world. And even in theirless known schools, the Japanese excel at somekinds of work—notably painstaking empiricalresearch. Most important, R&D in Japan’s uni-versities is improving rapidly, in part becauseof the efforts of the younger faculty memberstrained in the United States.

The Ministry of Transport and the Maglev Train

Japan’s magnetically levitated (maglev) trainproject—box K—which has been underway fortwo decades, is scheduled to get more than $4million during 1988 from the Ministry of Trans-port, which oversees the effort. While currentprototypes use LTS magnet systems for bothsuspension and propulsion—and a relativelysmall fraction of the program’s funds go toward

superconductivity R&D—the engineers leadingthe project hope that HTS materials can even-tually be incorporated.

The maglev program typifies the kind of long-term, continuing effort—in this case beginningin the 1960s—that Japanese decisionmakers ex-pect will pay off in eventual commercialization.Although maglev R&D supported by the U.S.Government ended in 1975, the Japanese havepersevered. To Japan, the linear motor car hasbecome a symbol of indigenous technology de-velopment.

Summarizing the Government Role

As the many different programs mentionedabove suggest, the scene has changed rapidlyin Japan. Major ministries involved in super-conductivity R&D steered more money to HTSduring 1987, and have substantially higherbudgets for 1988. A superconductivity city haseven been proposed, where research would becentralized and applications tested.21 Increasesin government spending send unmistakable sig-nals to industry, as well as to the universitiesand national laboratories.

Japanese industrial policy works primarilythrough incentives. Ministries seek advice from

zINo agency has linked itself with the proposal, which seemsto be a trial balloon—’’Superconductivity City Project, ” Scienceand Technology in Japan, November-December, 1987, p. 43.

Photo credit: Japan External Trade Organization

Japan’s prototype linear motor car, a magneticallylevitated train.

7 4

75

business leaders in the early stages of policydevelopment. The processes through whichofficials in government and the private sectorinteract, and informal encouragement of indus-try efforts by government, arguably play a roleat least as important as direct financial support.Government funding for R&D projects tendsto be modest; consistently, private industry haspaid for three-quarters or more of all JapaneseR&D, compared with about half in the UnitedStates (table 5).

At the same time, public funds for the maglevtrain provided a stimulus for companies likeSumitomo Heavy Industries to build their ex-perience base in superconductivity and relatedproblems in cryogenic engineering. Japanesecompanies participate as members of consor-tia formed by MITI to undertake projects suchas the 70 MW generator. In the Japanese view,such projects leverage public investment, help-ing break technological bottlenecks and diffuseresults to industry. Companies participating inJapan’s government-sponsored R&D efforts nor-mally contribute about half of the projectfunding.

When it comes to basic research, the govern-ment share is about 50 percent in Japan, versustwo-thirds here. As pointed out earlier in thechapter, many leaders in business, government,and universities in Japan are pushing for im-provements in basic research, seeking greatercreativity and originality. Because of budgetpressures, Government support for basic sci-ence has been growing at an annual rate of only3 percent, slower than the overall rate of R&Dgrowth in Japan. Thus the government shareof basic research funding has been declining.

As the yen rises relative to the dollar, Japa-nese spending, when translated into dollars, ap-pears more impressive. Calculated at exchangerates current at the end of 1987, direct Japa-nese Government support for superconductiv-ity—exclusive of salaries—seems likely to beabout $70 million during 1988. Budget figuresin Japan do not break out LTS and HTS, buta good portion of the total will no doubt sup-port ongoing work with low-temperature ma-terials. Funding increases have been sharp,coming after a period of relatively low spend-

ing on superconductivity (leaving aside suchprojects as the linear motor car, where super-conductivity is a means to an end). In fiscal1986, for example, MITI spent about $2 mil-lion on LTS technologies. And set against over-all Japanese Government R&D support—itselfrelatively small compared to corporate R&D—superconductivity remains a minor item.22

MITI’s 1988 HTS budget exceeds that of theother agencies, but it would be a mistake to con-clude that MITI is tightly coordinating Japan’ssuperconductivity policies. In OTA’s inter-views, MITI officials argued that, at this stagein the development of HTS, competition amongministries and research groups should be seenas healthy. STA staff, meanwhile, hopes thatMITI laboratories will eventually join the Mul-ticore Project—while conceding that this is un-likely in the near term.

Who Has the Lead Role,Government or Industry?

Westerners often misconstrue relationshipsbetween government and industry in Japan.MITI and other ministries may try to influencecorporate decisions, but Japan’s Governmentdoes not issue directives to industry. A moreaccurate picture of Japanese policymaking seesgovernment-industry interactions based onprocesses of “reciprocal consent’’—continuingdiscussion and negotiation.23 Corporate leadersare heavily involved in building consensus andhelping shape government programs. HTS willbe no exception.

In superconductivity, industry has influencedgovernment policies through frequent meetingswith ministry officials. At least a third of themembers of MITI’s Advisory Committee on Su-perconductivity Industrial Technology Devel-opment come from the private sector. Morethan a hundred Japanese corporations belongto the STA’s newly formed Shin Chodendo

22The Japanese Government budget for all science and tech-nology activities totals 1,700 billion yen for fiscal 1988—about$13 billion. See Report Memorandum #147, Tokyo Office of theU.S. National Science Foundation, Feb. 5, 1988.

z3R,J, Samuels, The Business of the Jzqmnese State (Ithaca, NY:Cornell University Press, 1987).

76

Zairyo Kenkyukai [New Superconductivity Ma-terials Research Association], best known asthe superconductivity forum.

The forum, chaired by Dr. Shinroku Saito,serves as a “window” between corporate mem-bers (who pay an annual fee of about $1,000)and the universities and national laboratoriesinvolved in the Multicore Project. Accordingto the director of STA’s Research and Devel-opment Bureau, the forum will hold workshopsand symposia, undertake “brainstorming” insupport of the Multicore Project, and encouragecooperation in research, both domestically andinternationally. Many participants, includingDr. Saito, also advise other ministries; thus theforum helps build linkages within the JapaneseGovernment.

The Fine Ceramics Center (FCC) illustratesa different mechanism. Government and indus-try have both provided money for an extraor-dinarily well-equipped laboratory in Nagoya,with participating companies sending scientistsand engineers. In contrast to some other MITI-sponsored R&D efforts, many of which havehad staffs viewed as second rate, the FCC ap-pears to have attracted highly qualified people.The companies continue to pay their salaries,and they help transfer technology from theNagoya laboratory back to their employer.

When it comes to Japan’s national labora-tories, opinions differ as to whether corpora-tions give more than they receive. For instance,at the National Research Institute for Metals,which normally hosts a half-dozen people fromindustry who work alongside NRIM scientists,laboratory officials contend that they have beenahead of industry in at least some areas of su-perconductivity. Organizations like NRIM alsolet contracts to companies, including large cor-porations (New Japan Steel, Toshiba). While lab-oratory managers view contract research as amechanism for helping industry, the companies—which make little profit on such work—tendto see it as part of their contribution to the largernational effort.

In the future, government scientists may havea chance to spend time working in corporatelaboratories—some of them much better

equipped than government facilities—but so farthis has been rare. Legal provisions, only re-cently relaxed through new legislation, havelimited such arrangements.

Direct cooperation in research between com-panies and universities has likewise beenlimited. This is also changing, however. Profes-sor Tanaka recently had 10 scientists from agroup of private companies working in hisTokyo University laboratories. The Monbushoreports a total of 300 cooperative projects link-ing universities and companies during 1987,11 of them (all with Monbusho sponsorship) insuperconductivity. 24 In some contrast to effortsin the United States, many of which seek topush universities into doing industrially rele-vant work (see the next chapter), rhetoric in Ja-pan stresses cooperation in projects of inter-est to both sides.

Japanese leaders, like those in many coun-tries, view ties among universities, industry,and government as weak. Statements on sci-ence and technology policy continually high-light the need for more effective working rela-tionships. Industry tries to help by donatingequipment to the universities, but professorsworry aloud that industry will steal their bestresearch workers. At the same time, seniorprofessors typically help steer their graduatesto particular companies, helping build long--lasting informal communications networks.Professional societies and study groups alsobring people together, providing opportunitiesfor working-level scientists and engineers fromindustry, government, and the universities toshare information. In this respect, they repli-cate the function of high-level advisory com-mittees involving senior professors, corporateexecutives, and ministry officials.

Recent changes in the law—for instance, mak-ing it easier for faculty members to consult—encourage interactions with industry, but manyJapanese officials think further steps will beneeded. Broad success in basic research wouldseem to demand such cooperation. Given the

Z“’Sangaku Ittai e Hirogaru Koryu” [Expanding Exchange Be-tween Industry and Universities], Nihon Keizai Shirnbun, Jan.20, 1988, p. 1,

77

slow growth in the government R&D budget,the industry role is a critical one; superconduc-tivity promises to be a prime test case.

As noted earlier in the chapter, many Japa-nese companies–Sumitomo Electric is a goodexample—have been expanding their basic re-search efforts, while also pursuing parallel pro-grams of applied R&Din HTS. The new oppor-tunities have pushed many firms toward morebasic work—which they see as the necessarypreliminary to commercialization—and sensi-tized them to the importance of university sci-ence. Even so, a major reorientation of Japa-nese R&D toward fundamental research willrequire institutional, cultural, and politicalshifts. The university system is widely viewedas hierarchical and stifling, offering inadequateincentives to bright young researchers. Changehas begun, but it is not clear how far it will goor how deeply it will penetrate.

Rivalry or Cooperation? The Internationalizationof Japanese Superconductivity R&D

International cooperation in HTS has beena central theme in pronouncements by govern-ment officials in Japan. MITI has opened itsHTS programs to foreign companies. The STAstates that it will promote international collabo-ration under the Multicore Project. In addition,the Key Technology Center–sponsored by MITIand the Ministry of Posts and Telecommunica-tions—has provided financial support for for-eign engineers and scientists who wish to workin Japan. Finally, the Ministries of Foreign Af-fairs and Education have announced a postdoc-toral fellowship program that will bring recentgraduates of overseas universities to Japan forresearch. Possibilities for U.S.-Japan coopera-tion in HTS also exist on an agency-to-agencybasis. The U.S. National Bureau of Standardsand ETL have been exchanging scientists fora number of years. Both have informally ex-pressed interest in cooperation on HTS-relatedstandards.

Why the stress on “internationalization”?There are two major reasons:

● The United States, along with other na-tions, has been pressing Japan to make a

●

greater contribution to global welfare—onecommensurate with the size of the Japa-nese economy and Japan’s technologicalcapabilities (box L). Among other things,this implies a greater commitment to sci-ence—the fruits of which should benefitall—and to the transfer of technologies toother parts of the world. Opening Japaneseresearch institutions to greater foreign par-ticipation would be a first step. In manyofficial policy statements—including thoseon HTS—Japan has pledged to take suchactions.More than just altruism, internationaliza-tion would-serve Japan’s interests as well.Foreign scientists and engineers will helpinvigorate Japanese laboratories, encourag-ing new approaches to research, and break-ing down some of the traditions which—particularly in the universities—seem road-blocks to creativity. Japanese leaders alsorealize that they may have to open theirown doors to retain access to R&D fromother countries. With science and technol-ogy holding the keys to continuing eco-nomic growth in the 21st century—a firmbelief in Japan—internationalization canbe viewed as a strategic and economic im-perative.

The stress on international cooperation doesnot signify any slackening in Japan’s efforts todevelop indigenous technologies. The Japaneseview it as a complement to these efforts—farmore than a matter of image, it is an intrinsicelement in Japan’s strategy for competing ina world of intensifying global rivalries.

So far, as box L indicates, rhetoric has over-shadowed results. MITI’s pitch for interna-tional collaboration focuses on the Interna-tional Superconductivity Technology Center,established in January 1988. ISTEC, which getsfinancial support from MITI, will be locatednear Tokyo on a site formerly owned by TokyoGas. More than 85 Japanese companies havesigned on as founding members. Although theinitial fee for full members is about $800,000,with annual charges of about $100,000, the costsare considered donations and earn the compa-nies tax benefits. Associate members, who pay

78

7 9

much less, will not be able to participate in re-search or have immediate access to R&D re-sults, but simply to ISTEC publications andsymposia.

ISTEC plans not only to conduct research inits own facilities, but to support R&D in otherinstitutions, review and evaluate research forits members, and carry out feasibility studieson applications of HTS. To benefit from fullmembership, foreign companies would needJapanese-speaking employees, skilled in rele-vant technologies, on site in the ISTEC labora-tory. As of May 1988, no foreign companies hadjoined as full members, although several hadsigned on with associate status.

Are American companies missing a bet bynot joining ISTEC? For smaller firms, the costs

pose a major barrier. But a number of U.S. com-panies with R&D operations in Japan could cer-tainly afford them. Some form of jointly spon-sored membership—e.g., through an industryassociation, or a joint venture such as Microe-lectronics & Computer Technology Corp.–might also be possible. If ISTEC yields impactscomparable to past MITI-promoted R&D efforts—e.g., the very large-scale integrated circuitproject of the late 1970s—then participationcould pay off. Even if the results in terms ofresearch outcomes prove meager, active par-ticipation helps keep tabs on the competition.This, after all, has been a primary motive forJapanese firms to join in such group efforts.

CONCLUDING REMARKS

The U.S. business culture differs from thatin Japan, R&D strategies in American compa-nies tend to be driven by hard-headed calcula-tion of risks and rewards—which does not en-courage aggressive commitments to HTS. MostU.S. firms hope that someone else will do thefundamental research. Many American execu-tives feel uncomfortable with this short-termapproach, sometimes defensive. But they seelittle choice, given the way U.S. financial mar-kets operate.

Japanese executives work in a society and aneconomy with a different set of traditions andrules. They too must worry about profit levels,but these are not the most important influenceon their behavior, Japanese managers think firstabout growth and market position. Further-more, they are acutely aware that they can nolonger depend on technologies from the UnitedStates and Europe. Managers in Japan are at-tempting, often with some fumbling, to increasetheir firms’ research capabilities, seeing this asone road to continued expansion.

Given the differences in attitudes and in ap-proach to R&D, HTS has stimulated contrast-ing responses. As a generalization, large Japa-nese companies have more people at work on

HTS, doing a greater variety of things. Japa-nese managers see HTS as a technology of para-mount importance for global competition in the1990s and beyond. U.S. executives might agree,but they also see the risks and uncertaintiesmore starkly. They believe commercial prod-ucts are farther off—that HTS will remain inthe laboratory for some years to come.

Thus, most U.S. R&D efforts could be de-scribed as selective and probing. In contrast,most of the Japanese efforts are relatively broad,with people already assigned to think about ap-plications. In pursuing their strategies, Japa-nese companies are studying superconductivitynow as a potential commercial technology.American companies are not. The Japanesecompanies could be wasting their time andmoney. At this point, no one knows. But if thepace of discovery in the future matches thatof the past year, Japanese companies will bebetter positioned.

In the United States, some of the first HTSapplications may well come from small, startupfirms–financially weak, and likely to facedifficulties in growing. The pattern is clear inbiotechnology, where startups have had to linkwith larger companies to proceed with com-

80

mercialization. Thus far, of course, the startupsare outnumbered by big American companieslike Du Pont and IBM. In Japan, the large, diver-sified, and financially strong companies havethe field largely to themselves.

These Japanese f i rms are poised to movequickly into production and marketing, on aworldwide scale if they choose. In the past, thisa symmet ry i n i ndus t r i a l s t r uc tu re ha s hadpowerful impacts—e.g., on competition in micro-electronics, where American firms have fallenbehind for reasons that include lack of finan-cial muscle. It remains to be seen how the storywill unfold in biotechnology—or in HTS.

In the United States, cooperation betweenGovernment , industry, and the univers i t iestends to be ad hoc, motivated by particular cir-cumstances. There is no indication that HTSwill be an exception. Japanese companies com-pete intensely with one another, but are none-theless quite capable of cooperating on projectsjudged to be in their interests, especially whenMITI or government agencies seek to fosterthese projects.

Japanese Government funding for R&D in su-perconductivity will not match spending by the

U.S. Government (although the exclusion of sal-aries from some of the Japanese budget figuresmakes comparisons difficult). Including bothLTS and HTS, the U.S. Government will spendmore than twice as much in fiscal 1988. Moreimportant, however, Japanese firms have manymore people at work on HTS than Americanfirms. Companies commercialize, and compa-nies in Japan have stronger commitments tosuperconductivity.

Neither country has a coordinated nationalinitiative. Both seek to promote cooperationamong universities, industry, and national lab-oratories. While business and government inJapan do not always find it easy to cooperate,they do exchange views and work toward con-sensus. And, if Japan’s policy cannot be de-scribed as a coordinated plan, policy directionshave been debated much more thoroughly thanhere. By the beginning of 1988, policy objec-tives in Japan had been reasonably clearly de-fined. They show a clear recognition of spe-cific needs and specific problems impedingcommercialization, and the Japanese Govern-ment aims to help solve them.

Chapter 4

U.S. Technology Policy: Issues forHigh-Temperature Superconductivity

——

CONTENTS

PageSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Government Support for HTS R&D..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Funding Levels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Defense-Related R&D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93HTS R&D in the Energy Department Laboratories. . . . . . . . . . . . . . . . . . . . . 99Other Miss ion Agencies : NBS and NASA. . . . . . . . . . . . . . . . . . . . . . . . . . . .101

NSF and the University Role. . . . . . . . . . . . . ............................102Disciplinary Boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........102NSF Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................103

Technology Transfer: The Federal Laboratories . . . . . . . . . . . . . . . . . . . . . . . .110New Rules for the Laboratories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...110Transferring HTS R&D . . . . . . . . . . . . . . ..............................111Laboratory Personnel 112Cooperative R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................113State Programs and Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....114

Technology Interchange With Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..115Participation and Monitoring, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115Language Training; Fellowships in Japanese Laboratories . .............116Technical Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............117F o r e i g n A c c e s s t o U . S . T e c h n o l o g y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 7

Concluding Remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............118

BoxesB o x PageM. Coordinating the Federal Effort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90N. DoD and Postwar High-Technology Development . . . . . . . . . . . . . . . . . . . . 960. Multidisciplinary Research in American Universities. . ...............105P. Reciprocity in Flows of Technology and Information. . . . . ............118

FigureFigure Page4. National Science Foundation Research Support . ..................,..104

TablesTable Page

7. Summary Guide to Policy Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 848. Federal Funding for HTS R&D... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879. Issue Area I: Funding Levels and Priorities for Federal R&D . . . . . . . . . . 88

10. Department of Defense Funding for HTS R&D . . . . . . . . . . . . . . . . . . . . . . 9411. Energy Department Funding for HTS R&D . . . . . . . . . . . . . . . . ., ...,...10012. National Science Foundation Funding for HTS R&D . ................10313. Issue Area II: Strengthening Interactions Among Universities, Industry,

and Government .****** ● ******* ● ******. ● m.***** .* .***** ● .***.*. ● 10814. Issue Area HI: Technology Interchange with Japan . ...............,.116

Chapter 4

U.S. Technology Policy: Issues forHigh-Temperature Superconductivity

SUMMARY

The preceding chapter discussed companystrategies toward high-temperature supercon-ductivity (HTS) in the United States and Japan,as well as the policies of the Japanese Govern-ment. The question now becomes: How canU.S. Government initiatives help Americancompanies with commercialization? Both thischapter and the next deal with Federal policiesand what they mean for HTS. Both also go be-yond superconductivity, taking up broader is-sues that affect commercialization and competi-tiveness,

Many of these policy issues are matters ofongoing concern to Congress and the execu-tive branch: the Federal R&D budget and itsmanagement; the health of university research;technology transfer from national laboratoriesto industry. Table 7 provides a guide to some20 policy issues and options discussed in thischapter; tables 9, 13, and 14, which follow later,give more detail. As a glance at table 7 makesclear, many of the issues and options have rele-vance that goes far beyond HTS. By the sametoken, many of the policy questions importantfor HTS can only be understood in the broadercontext of U.S. technology policy.

Federal agencies will spend some $60 billionon R&D this year (ch. 2). Industry will spendabout as much, with private firms also conduct-ing more than half the Government-funded to-tal under contract. All companies that use tech-nology live to some extent off the publiclyfinanced storehouse of technical knowledge.The path to commercialization begins with thistechnology base.

The overall size of U.S. R&D expenditures—more than twice as much as Japan, and far morethan any of the Western European nations—presents something of a paradox. How is it pos-sible, given spending on science and technol-

ogy exceeding $125 billion, that the UnitedStates has a problem in technology? Whydoesn’t American industry have what it needsto compete? The question has two kinds of an-swers, both partially true. The first is that tech-nology is not, in fact, the problem—that difficul-ties in commercialization and competitivenesslie elsewhere. The analysis in chapters 2 and3 indicated that technology is part of theproblem—though far from the whole problem.The second answer is that not enough of theR&D money goes toward commercially relevanttechnology development.

Any analysis of the Federal role in commer-cialization must begin with a look at how theGovernment spends its $60 billion:

●

●

●

Nearly 70 percent goes for defense, up from57 percent at the beginning of the ReaganAdministration. The United States devotesa much larger share of total R&D outlaysfor military projects than most other coun-tries. Defense gets less than 5 percent ofthe Government R&D budget in Japan.Much of the Federal money—this year,about $20 billion—goes to the 700-plus na-tional laboratories. For the most part, theselaboratories do not have a good track rec-ord in transferring technology to civilianindustry. While recent initiatives by Con-gress and the Administration have soughtto strengthen interactions between the lab-oratories and industry, the process ofchange is just beginning.Outside of defense, aerospace, and health,Federal agencies spend little on applied re-search and development. Given the short-term orientation of most of the R&D paidfor by private industry, a wide gap oftenseparates basic research and commercialtechnologies —a gap that neither Govern-ment nor industry has been filling.

83

.

84

Table 7.—Summary Guide to Policy Options

Issue area Option Relevance

1. Funding Levels and Priorities for Federal R&D (seeTable 9 for details)A. Funding Levels for HTS

● New money, agency priorities . . . . . . . . . . . . . . . . . .B. Continuity of Funding

● Multi-year benchmark plan. . . . . . . . . . . . . . . . . . . . .

● Two-year funding trial . . . . . . . . . . . . . . . . . . . . . . . . .

C. National Science Foundation Budget. Overall NSF budget increase. . . . . . . . . . . . . . . . . . .● Funding for university laboratory equipment . . . . .

D. Weaknesses in the Industrial Technology Base● Review of U.S. technology base . . . . . . . . . . . . . . . .

● Basic research tax credit . . . . . . . . . . . . . . . . . . . . . .E. Setting Priorities for Federal R&D

● Strengthen the Office of Science and TechnologyPolicy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Il. Strengthening Interactions Among Universities, In-dustry, and Government (see Table 13 for details)A. University-Industry Interactions; Multidisciplin-

ary Research● Funding for NSF centers . . . . . . . . . . . . . . . . . . . . . .• Postdoctoral fellowships . . . . . . . . . . . . . . . . . . . . . .

B. Government-Industry Interactions: TechnologyTransfer and Joint R&D●

●

●

●

●

●

●

Oversight on technology transfer from the nation-al laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Pilot program for transfers of HTS technologyresulting from DoD-sponsored R&D . . . . . . . . . . . . .

Technology transfer demonstration projects . . . . .Personnel exchanges . . . . . . . . . . . . . . . . . . . . . . . . .

Cooperative R&D with industry. . . . . . . . . . . . . . . . .

Sharing costs with private R&D consortia . . . . . . .

Support for State Government initiatives . . . . . . . .

Ill. Technology Interchange with Japan (see Table 14for details)

• Seed grant for office in Japan to monitor develop-ments in HTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

● Research participation and language training . . . .Ž Japanese technical literature. . . . . . . . . . . . . . . . . . .

1 . . . . .

2 . . . . .

3 . . . . .

4 . . . . .5 . . . . .

6 . . . . .

7 . . . . .

HTS

HTS, but potentiallybroader

HTS, could bebroader

generalgeneral

ail commercialtechnologies

general

8 . . . . . general

9 general10 : : : : : general

11 . . . . . general

12 . . . . . HTS, but potentiallybroader

13 . . . . . general14 . . . . . HTS could get

special attention15 . . . . . HTS, but potentially

broader16 . . . . . HTS, but potentially

broader17 . . . . . general, but HTS

could get specialattention

18 . . . . . HTS19 . . . . . general20. . . . . HTS, but potentially

SOURCE: Office of Technology Assessment, 1988.

At present, the Federal Government maybespending as much on HTS as the private sec-tor. The agencies expect to spend $95 millionon HTS in fiscal 1988. OTA’s industry survey(ch. 3) found that 55 U.S. firms plan to spendabout $97 million on superconductivity R&D(LTS as well as HTS) in 1988.

While $95 million sounds like a lot, nearlyhalf will go for military projects. Departmentof Defense (DoD) objectives shape R&D goalseven at the level of basic research. Nonethe-less, much of the fundamental understandingof HTS that results from DoD-sponsored re-search will support the overall technology base

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for HTS. Moreover, the Defense Advanced Re-search Projects Agency (DARPA) has empha-sized processing in its HTS R&D; this workshould yield commercial spinoffs.

In general, however, civilian and militarytechnologies have been diverging, as DoD’sneeds grow ever more specialized. This patternis already evident in HTS, where prospectiveapplications include passive shielding for pro-tection from nuclear radiation, or sensors forthe Strategic Defense Initiative (app. B). More-over, in a period of tight budgets, DoD decision-makers—from project and program managersto laboratory directors and Under Secretaries—scrutinize the R&D budget to make sure thatimmediate military needs get the highest pri-ority. Basic research suffers in such periods,along with other work that might be of use onthe civilian side of the economy.

The Department of Energy (DOE) and its lab-oratories will get the lion’s share of the non-military funding—nearly 30 percent of the Fed-eral total. Ten DOE laboratories may have moreto spend on HTS in 1988 than NSF will distrib-ute to the Nation’s universities. DOE’s basic re-search, like that of DoD, will help support thetechnology base. As for commercial technology,the laboratories are trying to develop new coop-erative ties with U.S. industry. However, itcould take years for effective working relation-ships to develop; in the absence of such relation-ships, DOE R&D may not make a major contri-bution to commercial technology development.

The National Science Foundation (NSF) shareof the HTS R&D budget, going almost entirelyfor university research, declined from 25 per-cent of the Federal total in 1987 to 15 percentin 1988. The universities do get some fundingfrom DOE and DoD (especially through thebasic research programs of the Air Force andthe Navy). But the allocation of Federal R&Dfunds seems out of balance, given the greatstrength of American universities in basic re-search.

Continuity of funding over the next 5 to 10years will be just as important as the level andallocation in any one year (Options 1, 2, 3). The

Federal budget for HTS is really nothing morethan the cumulation of agency decisions andappropriations. Both Congress and the Admin-istration could benefit from a better sense ofthe overall dimensions of the Federal effort, sothat priorities could be weighed rather than sim-ply emerging at the end of the yearly budgetprocess. A benchmark, multi-year funding planfor HTS, which could be adjusted periodically(not at alla rigid blueprint), would help in mak-ing good decisions. Congress might also chooseto experiment with multi-year authorizationsand 2-year budgeting. These steps could helpavoid too much duplication in agency R&D(some overlap can be desirable), as well as cutsin other needed R&D to provide money for HTS(little of the Federal total represents new moneyspecifically appropriated for superconductivity).

Many fields of science and technology vitalfor competitiveness do not get adequate re-search support; technical knowledge that couldhelp American firms compete is not availablewhen they need it. Often, the underinvestmentis most severe in fields that lack glamour andthe promise of immediate payback (examplesrange from materials synthesis to corrosion andwear)—just those likely to suffer when moremoney must be found for an exciting new op-portunity like HTS. Given the constraints onthe Federal budget, any decision to begin fill-ing some of these gaps by spending more oncivilian R&D must begin with good informa-tion and a government-wide perspective, mat-ters addressed in Options 6 and 8.

Commercializing HTS will require multidis-ciplinary R&D—physicists, chemists, materialsscientists, and engineers. NSF can play a vitalrole in supporting multidisciplinary researchin universities, where such work has seldomcaught on (Options 9 and 10). While the Rea-gan Administration proposed doubling theFoundation’s budget over a 5-year period, Con-gress gave NSF very little increase for fiscal1988. Sustained growth in the NSF budget willbe needed if the agency is to increase its sup-port of traditionally underfunded areas, includ-ing engineering research—a critical priority forcompetitiveness.

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If the Federal laboratories, in their turn, areto provide much help in commercialization,they will need to make sustained commitmentsto working with the private sector (Options 11through 17). Congress, in several recent laws,has stressed the need for closer linkages betweenthe laboratory system and industry. Agencyresponses have been mixed. With experiencelimited, it might be prudent for the DOE lab-oratories to adopt an experimental approach,beginning with pilot projects, rather than plung-ing into a full-fledged program of cooperativeendeavors. Personnel exchange programs couldalso help shift the culture of the laboratories;scientists and engineers working in the labora-tory system need to understand how industryfunctions and how the marketplace works if theyare to help in commercialization.

Chapter 3 outlined Japan’s proposals for in-ternational cooperation in HTS research. Sofar, American firms have not responded withmuch enthusiasm. Options 18, 19, and 20 sug-gest steps the Federal Government could take

to help industry and professional groups testJapan’s openness to foreign R&D participation,and to monitor Japanese technical developments.Given the importance of person-to-person con-tact in technology transfer, early steps shouldinclude language training for U.S. engineersand scientists, so they can work inside the Jap-anese research system.

Although the analysis that follows covers abroad range of issues related to HTS, it doesnot pretend to be a comprehensive discussionof U.S. technology policy. Nor do the 20 policyoptions address all the problems identified inearlier chapters—short-term decisionmaking inU.S. industry, for example. This chapter hasa more modest aim: examining alternatives formanaging the Federal R&D budget to more ef-fectively support the Nation’s commercial tech-nology base without detracting from agencymissions. Most of these are incremental pol-icy adjustments; chapter 5 looks at more com-prehensive alternatives.

GOVERNMENT SUPPORT FOR HTS R&DFunding Levels

Funding for HTS R&D has grown dramati-cally since the end of 1986; table 8 gives thebest available estimates.1 It is hard to criticizethe totals; indeed, the increases shown in table8 seem generous in a time of budgetary pain.Although little of the money represents newbudget authority, in 1988 the U.S. Governmentwill probably spend more on HTS alone thanJapan’s Government will spend on HTS andLTS together. The 1988 total approaches the

ILow-temperature superconductivity (LTS) has shared in theexpansion. For years, DOE and DoD have funded LTS projectssuch as energy storage and superconducting machinery (e.g.,for ship propulsion–Appendix B). Federal spending for LTS in-creased from $40 million in fiscal 1987 to $84 million in 1988.Agency requests for LTS in the 1989 budget come to about $83million. (Both the 1988 and 1989 figures include Strategic De-fense Initiative (SDI) contract work on superconducting mag-netic energy storage.)

recommendation—$100 million—of a NationalAcademy of Sciences (NAS) panel.2

But the totals do not tell the whole story. HTScould remain in the laboratory for many years.During much of this time, the Federal Govern-ment will remain a primary source of R&Dfunds. Effective support for commercializationwill require stability in Federal funding, atten-tion to priorities, and good management ofagency budgets.

In their fiscal 1988 budgets for HTS, someagencies fared much better than others. DOEand NSF spent roughly equal amounts on HTSin 1987; the Energy Department will have morethan twice as much this year, while NSF’s in-

~“Research Briefing on High-Temperature Superconductivity,”Committee on Science, Engineering, and Public Policy, NationalAcademy of Sciences, Washington, DC, 1987, p. 19. The panel,noting that corporate funding might add a comparable amount,termed this” . . . a good beginning in addressing the challengesand opportunities offered by the new materials. ”

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Table 8.–Federal Funding for HTS R&D

Fiscal year budget (millions of dollars)

1987 1988 1989(actual) (estimated) (requested)

Department of Defensea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 9 . 0 $46 .0 $ 6 3 . 0Department of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5 27.2 38.7National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 14.5 17.2National Bureau of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8b 9.3National Aeronautics and Space Administration . . . . . . . . . . . . . . . . . . 4.2 6.7Bureau of Mines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 0.1

$ 4 4 . 9 $ 9 4 . 8 $ 1 3 5 . 0awOrking figures, subject to change.bExcludes$lsO,Ooo correlated work.

SOURCE: Preliminary agency data and budget estimates provided to the Subcommittee on Superconductivity of the Committee on Materials, May 1988

crease is only 25 percent. NSF officials havesaid they have received many more highly-ratedproposals on HTS than they can support in fis-cal 1988. Meanwhile, the DOE laboratories—which typically get nearly two-thirds of the De-partment’s basic research funds—may havemore money for HTS than NSF will providethe Nation’s universities.

The NAS panel emphasized the need for newmoney for HTS to avoid cuts in other, perhapscomparably important, R&D. When the excite-ment over HTS reached a peak early in 1987,the fiscal year was well underway. Thus almostall the 1987 funding came through redirectingof dollars originally allocated to other research.In many cases, scientists and engineers withFederal contracts and grants took the lead inthis process, seeking approval from agency con-tract monitors to move into HTS.

Faced with little growth in R&D budgets, mostagencies have had little choice but to continuepulling money from other fields to pay for HTS.The National Bureau of Standards (NBS)–witha budget that grew 16 percent from 1987 to1988— is probably alone in being able to fundits HTS work without sacrifices elsewhere.

In a period of tight budgets, when there maybe no way to avoid sacrificing one kind of re-search to pay for another, good decisions onpriorities within and across agencies becomemore important than ever. Doing a better jobof formulating R&D budgets could help iden-tify conflicts earlier, and perhaps ease their

resolution. For HTS, stability over time will beas important as next year’s R&D totals. a

At present, most of the funds for HTS comefrom the general R&D authorizations of theagencies. Rather than this piecemeal approach,Congress could take a broader look at the Fed-eral effort in HTS, and provide overall guid-ance, through such mechanisms as a singlepiece of legislation that would provide multi-year authorizations of appropriations, definingthe responsibilities in HTS for each agency.This approach is discussed in more detail intable 9 (Option 1). It carries dangers: for exam-ple, possible micromanagement by Congress.On the ether hand, if implemented in too weaka form, the effort could end up as little morethan a paper exercise, with little or no influ-ence on the actual allocation of HTS R&D sup-port across the agencies.

As a further step, Congress could direct theAdministration to prepare a multi-year estimateof funding expectations for HTS R&D (see Op-tion 2 in table 9). Some of the proposals on HTSbefore the 100th Congress–e.g., H.R. 3217, as

sIn a well publicized episode, a recent NSF effort to reduceuncertainty in university research programs backfired. Managersin the Foundation’s Materials Research Division, expecting asubstantial funding increase in fiscal 1988, made too many long-term commitments during 1987, When the Federal budget wasfinally approved, and the money was not there, NSF cut backon ongoing multi-year grants (which are conditional on avail-ability of funds) in order to support some new starts. See “State-ment on Funding Levels for the Division of Materials Research, ”National Science Foundation, Mar. 3, 1988.

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Table 9.–issue Area 1: Funding Levels and Priorities for Federal R&D

Issue Options for Congress Advantages Disadvantages

A. Funding Levels for HTSOn the surface, Federal funding for HTSR&D seems generous–$95 million for fis-cal 1988. The difficulties lie beneath thesurface:● Little of the total is new money. Few

agencies got the increases in their R&Dbudgets they had planned on for fis-cal 1988. They have taken money forHTS from other research.

. Universities have had difficulty in lin-ing up funds. Ten DOE laboratoriesmay well get more for HTS during fis-cal 1988 than NSF will have for all theNation’s universities.

. The Administration is requesting ahefty increase for HTS–to $135 mil-lion in 1989–and is calling for a sub-stantial rise in non-defense R&D. IfCongress pares back the R&D budgetto accommodate other needs, the newmoney issue, along with allocations ofR&D funds among the agencies, couldbe central issues, not just for HTS, butfor R&D generally.

B. Continuity of FundingHTS could easily require a decade or moreof steady R&D support before a technol-ogy base adequate to support commer-cialization emerges, with a continuingneed for Congress and the executivebranch to assess funding levels, as wellas allocations across agencies–e.g.,support for processing R&D, and whetherit is adequate to support commerciali-zation.

Stop-and-go funding has been a commonproblem for U.S. science and technologypolicy–and a serious one–in part be-cause of year-by-year budgeting for Fed-eral R&D. A period without newsworthyresearch results could lead to a dry spellin HTS R&D budgets.

C. National Science Foundation BudgetDespite the Administration’s announcedobjective of a doubling in the NSF budg-et between 1988 and 1992, the Founda-tion’s fiscal 1988 appropriation grew byonly 6 percent (compared with a requestof 17 percent). NSF has had to postponeincreases in funding for multidisciplinaryR&D centers and for research in engineer-ing, traditionally underfunded.

Laboratory equipment in many Americanuniversities is inadequate for eitherresearch or teaching.

OPTION 1. Provide a legislative frameworkdefining the overall Federal commitmentto HTS–for example, a single bill provid-ing specific multi-year authorizations forHTS R&D by agency. The authorizationswould signal the congressional appropri-ations and budgeting committees, as wellas the agencies, concerning the relativeshares of funds for HTS R&D to be givento each agency.

OPTION 2. Direct the Administration toprepare a multi-year estimate of Federalfunding expectations for HTS R&D. Thismight be a rolling 5- to 10-year plan,directed at commercial (rather than mili-tary) applications, and intended to be re-vised periodically (not a rigid, inflexibleset of research targets). Private sector in-put could be built into the process.

OPTION 3. Direct the Administration to ex-periment with a 2-year funding cycle forHTS–possibly beginning with a pilot pro-gram at NSF. (Section 201 of Public Law100-119 encourages congressional com-mittees to experiment with multi-yearauthorizations and 2-year appropriations. )

OPTION 4. Consider substantial increasesin the NSF budget over the next fewyears. Budget increases along the linesof President Reagan’s proposal for a dou-bling of the Foundation’s budget over 5years would permit NSF to double or tri-ple its funding for engineering research–to the $400 million to $500 millionlevel–without sacrifices elsewhere.

OPTION 5. Appropriate substantially moremoney to NSF–an added $100 million ormore per year–for equipment grants tothe Nation’s universities for both researchand teaching.

A single framework for funding decisionscould help keep Congress aware of poten-tial imbalances among the R&D agencies.Multi-year authorizations, along with themulti-year planning exercise discussed inOption 2, and the experiment in multi-yearfunding discussed in Option 3, could helpmake the point to universities, the labora-tories, and to industry that Congress intendsto sustain the Government’s commitment toHTS over time.

As a mechanism for helping policymak-ers gain perspective on annual budgetproposals, multi-year estimates should beuseful both to Congress and the agencies.The effort could improve agency coordi-nation, limit overlap in R&D funding, im-prove the quality of scientif ic andtechnical advice to Federal agencies, andreduce the likelihood that money for su-perconductivity will come at the expenseof other needed R&D. If successful forHTS, the approach might become a modelfor other fields.

Uncertainty over funding for HTS during1987 and early 1988, and particularlyover the prospects for new money, madeit hard for research groups in govern-ment, universities, and industry to plan,and delayed some projects. Such prob-lems cannot be totally avoided in a fast-moving field like HTS. But a 2-year budg-et cycle would help keep R&Don a steadycourse.

More money for engineering would be amajor step, not only in commercializingHTS, but in supporting U.S. industrialcompetitiveness across the board. NSFwill spend $171 million on engineeringresearch in fiscal 1988, only 10 percentof the agency’s research budget.

Gifts from the private sector can help, butthe problem is far too big to be solved inthis way alone. Government action wouldhelp improve the Nation’s technologicalcapabilities,

Congressional guidance could turn intomicromanagement of Federal R&D, orpork-barreling.

Without proper oversight from upper lev-els in the Administration, such an exer-cise could turn into an agency wish list,with little utility for making tough budgetdecisions. Moreover, any effort to developa government-wide perspective wouldprobably be seen by some as top-downplanning–threatening agency autonomyand flexibility. Multi-year budget esti-mates, finally, would probably have limit-ed utility unless the agencies supportedthe concept–which few do now.

In the absence of improvements inmechanisms for establishing R&D priori-ties, a 2-year budget cycle would do lit-t le to overcome the fundamentalbudgeting problems posed by competitionfor limited funds, To some extent, a2-year cycle might reduce the flexibilityof the system, with potentially seriousconsequences in periods of rapid techno-logical advance.

Given the size of the Federal budgetdeficit, a significant increase for oneagency could well come at the expenseof others. The increases in civilian R&Dincluded in the President’s fiscal 1989budget request–$300 million for NSF,$400 million for DOE, $2.5 billion forNASA–cannot be accommodated withinthe framework agreement worked out be-tween Congress and the Administrationin late 1987 unless Congress adjustsother budget items downward.

Unless accompanied by an overall in-crease in NSF’s budget (see Option 4),more funds for equipment could cut intothe Foundation’s research budget.

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Table 9.—Issue Area 1: Funding Levels and Priorities for Federal R&D—Continued

Issue Options for Congress Advantages Disadvantages

D. Weaknesses in the Industrial Technology BaseDespite the size of the U.S. R&D budget, -

gaps open in the technology base whereneither industry nor government providesupport. Prior OTA assessments havepointed to some of the problems; manymore certainly exist. The first step towarda solution is to characterize the weak-nesses more fully

American companies conduct relatively lit-tle basic research. Under the Tax ReformAct of 1986 (Public Law 99-514) compa-nies get a more favorable tax credit forbasic research they fund in universitiesthan for work performed internally. Boththe general R&D tax credit and the basictax credit for work sponsored at univer-sities expire at the end of 1988.

E. Setting Priorities for Federal R&DCompetition for Federal R&D dollarsseems bound to grow more intense, withconflicting demands between big scienceand small, defense and civilian R&D, andbasic research and more applied work.Establishing priorities and sticking tothem–e g , weighing the pros and consof expenditures such as required for a Su-perconducting Super Collider, or the Na-tional Aerospace Plane–requires agovernment-wide perspective. This is thejob, in principle, of the Office of Scienceand Technology Policy (in the ExecutiveOffice of the President).

OPTION 6. Request a detailed review of Given the budget deficit, it is more im- Studying the problem without takingthe U.S. technology base by the National portant than ever that R&D decisions be steps to solve it would accomplish little,Academies of Science and Engineering. based on sound analysis, Less glam-Such a review might encompass: orous. less visible fields tend to suffer●

●

funding levels for both basic and ap- most in such periods, with harmful im-plied research across the broad range pacts that show up only in later years,of scientific and technical disciplines when the damage has been done.important for industrial competitive-ness, with particular attention to ac-tual and potential bottlenecks and totechnical fields (like manufacturing)that historically have been under-funded;processes for setting research priori-ties and determining funding levels wi-thin and across Federal agencies.

OPTION 7. Permit a separate tax credit forbasic research conducted within the firm.To have much impact, an in-houseresearch credit would have to be asfavorable as current rules applying to bas-ic research paid for by industry but con-ducted at universities, and more favorablethan tax credits for internal R&D under the1986 tax act, A basic research creditcould supplement the overall R&D taxcredit if Congress decides to make it per-manent for 1989 and beyond. If Congresslets the existing credit expire, a specialprovision might be crafted-perhaps ona trial basis–for basic research within in-dustry.

OPTION 8. Give the Office of Science andTechnology Policy access to the staffresources and advisory processes need-ed, not only to monitor science and tech-nology issues in the agencies, but toassume an effective decisionmaking rolewithin the executive branch.

A basic research credit for work withinthe firm would create stronger incentivesfor attacking technical problems that failto excite much interest in universities.

A strengthened OSTP would permit theExecutive Office of the President to de-velop and articulate priorities for scienceand technology–backed up with analyt-ical depth and detail that have not beenpossible, given the Office’s current staff(about 30) and budget (about $1.9million).

Creating new tax credits runs counter tothe spirit of tax reform, while enforceableguidelines for basic research could bedifficult to define,

OSTP will have little influence unless thePresident wants it to, Lacking this, con-gressional action to strengthen the Officewould make little difference,

SOURCE: Office of Technology Assessment, 1988.

introduced—would direct the executive branchto provide, on a one-time basis, a Federal pro-gram plan for superconductivity, including esti-mated funding levels by agency for a five-yearperiod. H.R. 3217 would assign the overallresponsibility to the Executive Office of thePresident, with roles for the Office of Scienceand Technology Policy and the National Criti-cal Materials Council. It provides for consul-tation with the mission agencies, as well asuniversities and industry. The proposal would

also create a more formal structure for coordi-nation among agencies, (Box M discusses inter-agency coordination of HTS R& D.) Any effortto develop Government-wide estimates risks be-ing seen as top-down planning—threatening

agency autonomy, professionalism, and flexi-bility. Nonetheless, viewed as a mechanism forhelping policymakers gain perspective on an-nual R&D budget proposals, multi-year esti-mates could be useful both to Congress and tothe agencies.

84-754 0 - 88 - 4 : QL 3

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With Congress appropriating money annu-ally for research programs that may go on foryears, the ups and downs in R&D funding havealso stimulated frequent proposals for multi-year authorizations and/or appropriations. 4 A l -though Congress has been reluctant to movein this direction, growing concern over the bud-get process as a whole has led to discussion ofa two-year budget cycle. As a more modest steptoward a longer-term perspective on R&D de-cisions, Congress could experiment with multi-year funding in a single agency—perhaps NSF(Option 3). The experiment might be under-taken by programs in, say, the engineeringdirectorate or the materials research division—both of which support HTS.

Neglect by Government and industry of com-mercial R&D has slowed the passage of tech-nology from laboratory to marketplace, harm-ing U.S. productivity and competitiveness. Lessglamorous fields, particularly in engineering,seldom at tract funding commensurate withtheir potential economic significance. Chapter2 stressed U.S. underinvestment in processingR&D; other examples include materials synthe-

4For discussion of some of the possible mechanisms, see U.S.Science and Engineering Base: A Synthesis of Concerns aboutBudget and Policy Development, GAO/Reed-87-65 (Washington,DC: U.S. General Accounting Office, March 1987), pp. 22-34.

sis (box C, ch. 2).5 For such reasons, and despitethe huge U.S. investment in R&D, the technol-ogy base no longer seems adequate to supporta competitive set of industries.

In government, lack of mechanisms for set-ting priorities, coupled with stop-and-go fund-ing for some kinds of R&D, have contributedto the problems. Gaps and holes in the tech-nology base emerge particularly in fields thatFederal agencies— DoD, DOE, NASA (the Na-

*On the lack of R&D in construction technologies, see Interna-tional Competition in Services (Office of Technology Assessment,July 1987), pp. 138-144. Other examples include:

●

●

●

●

●

●

Direct reduction of iron to steel.Railway technology. (Given the importances of rail trans-portation for the Nation’s economy, support has been woe-fully inadequate compared to, say, aeronautical engineering.)Process control models for the fabrication of microelectronicdevices.Theoretical foundations for software engineering. (Betterunderstanding could lead to greater productivity in program-ming, helping break a major bottleneck in U.S. industry.)Fundamental understanding of combustion processes. (Envi-ronmental pollution from stationary powerplants, burningof solid wastes, and automotive engines costs the UnitedStates billions of dollars each year. Lack of a research basein combustion—in terms of thermodynamics, chemical ki-netics, fluid mechanics, heat transfer—makes it difficult todevelop inherently clean combustion processes.)Corrosion and wear. (These processes, so familiar and per-vasive as to seem inevitable, have economic costs measuredin billions of dollars annually; wear, in particular, has neverattracted much scientific attention or research support.)

Also see Directions in Engineering Research: An Assessmentof opportunities and Needs (Washington, DC: National Acad-emy Press, 1987].

.

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Photo credit: Argonne National Laboratory

HTS superconducting wire, ready for testing.

tional Aeronautics and Space Administra-tion)—view as too far from their missions, andthat, in the view of corporate managers, willnot yield f inancial returns in the short ormedium term. Among the other causes: rela-tively low levels of support for engineering re-search, and Federal R&D programs that haveoften gone astray when not tightly linked toagency missions.

Congress could begin to enlarge the pool ofcommercially-relevant technology by appropri-ating additional funds to NSF, allowing theFoundation to expand its support for engineer-ing research without taking money from otherareas (Option 4). NSF’s mission embraces thestrengthening of the Nation’s science and engi-neering base; yet its current spending on engi-neering research ($171 million) does not amountto three-tenths of a percent of the overall Fed-eral R&D budget.

Congress might also provide additionalmoney to NSF specifically for laboratory equip-ment. Equipment in the Nation’s engineeringschools averages 20-30 years old; a quarter ofit cannot even be used.6 An additional $100 mil-lion annually, to supplement NSF’s currentspending of $250 million a year—would help(Option 5).

NSF ranks no better than fifth in R&D spend-ing among Federal agencies. Any search fora broad solution to the problems in commer-cial technology will have to look beyond NSFand the university research it sponsors. Giventhe pressures on the Federal budget, a realisticfirst step might be to identify the weaknessesin the existing technology base, and begin estab-lishing priorities for allocating the limited fundsavailable. Congress could ask the NationalAcademies of Sciences and Engineering to be-gin this task (Option 6).

As a complementary measure, aimed at en-couraging American firms to undertake morefundamental research, Congress might con-sider changes to the Research and Experimen-tation Tax Credit.7 At present, industry financesonly a fifth of all U.S. basic research. Federalagencies—which pay for two-thirds (universi-ties fund the remainder)—do not set prioritiesbased on commercial relevance. Giving com-panies greater incentives to conduct work in-house would help focus basic research on in-dustrial needs.

Congress could institute a special basic re-search tax credit for work conducted within

8P. Doigan and M, Gilkeson, “Engineering Faculty Demo-graphics: ASEE Faculty & Graduate Student Survey, Part II,”Engineering Education, January 1987, p, 212. The National Re-search Council suggests that an increase of $3o million or morefor engineering equipment alone would be appropriate—Directions in Engineering Research: An Assessment of Oppor-tunities and Needs, op. cit., pp. 50-51. Also see “Scientific Equip-ment for Undergraduates: Is It Adequate?” staff paper, Science,Education, and Transportation Program, Office of TechnologyAssessment, Washington, DC, September 1986.

‘Introduced in 1981, the credit was reduced from 25 percentof qualifying R&D expenditures to 20 percent in the 1986 TaxReform Act. On its effectiveness, see International Competitionin Services, op. cit., p. 364. Current law allows companies morefavorable tax treatment for support of basic research at univer-sities or other qualified R&D organizations than for work car-ried out at their own facilities,

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industry (Option 7). Assuming that Congressextends the existing R&D tax credit, now setto expire at the end of 1988, or makes it perma-nent, basic research conducted internally couldbe given more favorable treatment than otherqualifying R&D.

Finally, Congress could ask the Academiesfor recommendations on an R&D strategy aimedspecifically at strengthening the Nation’s com-mercial technology base (as noted in Option 6).Such an exercise might help OSTP carry outits policy and planning functions—includinglegislat ive mandates that the office has hadlimited success in fulfilling. As discussed un-der Option 8 in table 9, OSTP may need strength-ening if it is to be an effective arbitrator amongagencies and interest groups seeking FederalR&D funds. In a period of intense competitionfor scarce dollars, a Government-wide perspec-tive is needed more than ever in setting andenforcing pr ior i t ies .

Defense-Related R&D

Funding Patterns

DoD has been supporting superconductivityR&D for more than three decades because ofthe potential applications in military systems.In this light, the dominance of DoD in Federalsupport for I-ITS (shown earlier in table 8 )should be no surprise; much of the work is anatural follow-on to earlier sponsorship of LTSR&D.

The three services, together with DARPA andthe Strategic Defense Initiative Organization(SDIO), maintain their own programs–with theDARPA and SDIO efforts the biggest by far (ta-ble 10). Three-fourths of DARPA funds, and ahigh proportion from SDIO, go to industry.DARPA states that as much as 60 percent ofthe processing R&D contracts currently in ne-gotiation could go to firms that are not tradi-tionally part of the defense industry. As for theservices, about two-thirds of their HTS R&Dfunding is currently going to universities; ifHTS follows the typical pattern for basic re-search in the services, this fraction may even-tually decline somewhat (universities performabout half the 6.1 (basic) research paid for by

the services, with government laboratories andindustry sharing the remainder).

DARPA’s widely publicized processing ini-tiative accounts for nearly all that agency’s 1988total of $18 million. With no R&D facilities ofits own, DARPA will support processing-relatedwork in industry, universities, and laboratoriesoverseen by other agencies. The primary ob-jective: speeding development of fabricationtechniques for HTS coatings, thin and thickfilms, wires and other conductors. DARPA offi-cials view the effort as a natural extension ofthe agency’s ongoing program in manufactur-ing technology for advanced ceramics. Afterreceiving about zoo proposals during the sum-mer of 1987—responses to a solicitation thatassumed funding of up to $50 million for 1988—the agency announced in January that some16 companies and 4 universities had been se-lected to enter into contract negotiations. WhenDoD placed a temporary freeze on some of itsoutside R&D (including DARPA’s) in May 1988,nearly all of the contracts remained to beawarded. The freeze was in effect when thisreport went to press in June 1988.

SDIO’s HTS R&D—second to DARPA’s infunding–focuses on relatively near-term appli-cations. The organization works closely withthe services and other agencies, looking to“technology insertion working groups” for ad-vice on where to direct its R&D dollars. Likeother parts of DoD, SDIO contracts extensivelywith industry. In addition to HTS, the organiza-tion funds considerable work on LTS—for in-stance, a design competition on magnetic energystorage for powering large lasers, budgeted at$11 million currently and $13 million for fis-cal 1989.

R&D sponsored by the services reflects theirmissions. Much of the Air Force effort goestoward possible applications in electronics,funded (principally through the Air Force Of-fice of Scientific Research) in universities andthe Air Force’s own laboratories. The Officeof Naval Research is likewise putting most ofits current HTS money into basic research (6.1).While the Army also has a program underway,the level is low (as expected, given that the

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Table 10.-Department of Defense Funding for HTS R&Da

Fiscal year budget (millions of dollars)

1987 1988 1989(actual) (estimated) (requested)

Army . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 . 0 $ 2 . 0 $ 3 . 0Navy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 7.0 9.0Air Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 7.0 8.0Defense Advanced Research Projects Agency (DARPA) . . . . . . . . . . . . . . . . 4.0b 18.0 20.0Strategic Defense Initiative Organization (SDIO) . . . . . . . . . . . . . . . . . . . . . . . 5.0 12.0 23.0

$19.0 $46.0 $63.0aworking figures, subject to change. DoD also spends substantial Sumson low-temperature superconductivity.Dlncludes$2 minion from the Balanced Technology lnitiativO.

SOURCE: U.S. Department of Defense, April 1988.

Army traditionally funds relatively little R&Dcompared to the other two services). Each ofthe services has formed internal working groupsto coordinate its effort.

lmplications for HTS

With DoD paying for nearly half the govern-ment’s HTS R&D, the obvious question follows:What does this mean for commercial develop-ment, and for the civilian side of the economy?In the past, Federal dollars for both R&D andprocurement provided much of the impetus forvibrant commercial industries—aircraft, com-puters, microelectronics.

At the same time, as summarized in box M,DoD’s very success in driving technology for-ward has led to a split between military andcivilian applications, with defense systemsgrowing steadily more specialized. Some wouldclaim that military spending has underminedU.S. industry—distorting the technological en-terprise by diverting the best and brightest engi-neers and scientists from civilian industries,skewing university research (and, through theresearch interests of faculty, university curric-ula), and turning companies aside from the cost-driven discipline of the marketplace. In thisview, rather than providing fertile ground forspinoffs, DoD support for HTS might divert re-sources from commercial izat ion.

Indeed, there seems little reason to expect thatspinoffs from DoD funding for HTS will haveimpacts as significant as those that spurredearlier high-technology industries. Since the1950s and 1960s, technology transfer from the

military to the civilian side of the economy hasslowed, for reasons that include the expand-ing curtain of secrecy surrounding DoD andits contractors. With military systems growingsteadily more esoteric, it would be unwise torely on DoD support for HTS as a substitutefor civilian R&D. This does not mean that DoDR&D cannot be a valuable complement.

Two broad questions will determine the ef-fects of DoD spending on the commercialprospects for HTS: 1) What are DoD’s objec-tives with respect to HTS, and how do they com-pare with commercial needs? and 2) How muchmoney will go to generic R&D, and thus offerpotential for commercial spillover regardlessof ultimate system requirements?

In mid-1987, a DoD working group examinedthe R&D that would be needed to exploit HTSin military systems. The working group, in anoptions paper described as a “map of the ter-ritory” rather than a “predetermined itinerary,”concluded that an aggressive program to bringHTS to the point of military-specific applica-tions would cost about $500 million over a 5-year period. 8 The working group’s options pa-per, which assumes that technology, not money,

8“Superconductivity Research and Development Options: AStudy of Possible Directions for Exploitation of Superconduc-tivity in Military Applications, ” U.S. Department of Defense,July 1987. Summary figures for the 5-year program plan, totalling$506 million, appear on pp. 122 and 123. In the first 3 years (fis-cal 1988 to 1990], the working group called for $293 million—twice the $150 million DoD expenditure mentioned in the Presi-dent’s July 1987 superconductivity initiative, and far more thandefense agencies are likely to spend over this period, judgingfrom preliminary budget figures.

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would be the limiting factor, discusses R&D inseveral broad categories:

● materials characterizat ion, including ef-forts to find HTS compositions with highertransi t ion temperatures;

● processing R&D;● small and large scale applications and dem-

onstrat ions.

While there are no signs that the 5-year spend-ing plan will go forward as outlined in the work-ing group’s report, the budget estimates pro-vide a baseline for considering DoD’s view ofprospects and priorities in HTS. Sixty percentof the 5-year total would go for applications—$306 mil l ion. processing–which holds morepotential for commercially relevant R&D results—would get $129 million, or 25 percent; the op-tions paper allocates $71 million for materialscharacterization, equally generic. The break-down by budget category paints a similar pic-ture: basic research (6.1) accounts for 29 per-cent of the total, compared to 38 percent forexploratory development (6.2), and 33 percentfor advanced development (6.3A). Viewed ei-ther way, basic research and generic R&Dwould get a substantial share of the resources,as befits a new technology.

Most but not all of the applications workwould be of interest primarily to the military.Examples include infrared sensors, detectorsfor submarines, and electromagnetic coil/railguns. Some applications projects might gener-ate commercial spinoffs: electronic devices fordigital systems; motors, generators, and otherelectrical power equipment. (As discussed inapp. B, these applications could, in principle,be implemented with LTS technology; indeed,even were HTS reduced to practice, LTS mightprovide superior performance.)

Still, superconducting motors and generatorsfor military applications, to take one example,will differ fundamentally from those for civil-ian applications. DoD’s interest stems largelyf rom the advan t ages t ha t supe rconduc t i ngmotor-generator sets could have for ship propul-sion and on board aircraft. Such propulsion sys-tems would offer new freedom in packagingthe major systems within a ship’s hull; for sub-

marines, in particular, there would be moreroom for weapons. Compact design becomesa primary design criteria. For civilian powergeneration, in contrast, greater efficiency is theobjective, with size (and weight) of little import.From a design s tandpoint , superconduct inggenerators for the military and for electric util-ities would have relatively little in common.Only in the most general sense would know-how from one transfer to the other.

Processing technology will be particularly im-portant for HTS. Wire manufacture and fabri-cation received little emphasis in LTS R&D untilbecoming a bottleneck to applications. Yearswere then spent learning to produce niobium-titanium wires and windings with the neededproperties. A similar experience in HTS couldput U.S. firms behind, given that processingis an area in which Japanese firms will undoubt-edly excel. Here, DARPA’s processing programshould help. Many of the processing and fabri-cation methods ultimately developed will besimilar regardless of end-application, and DoDofficials have frequently stated that results willremain unclassified to the extent possible. (Inpart for such reasons, H.R. 3024, the proposedNational Superconductor Manufacturing andprocessing Technology initiative, would giveDARPA a lead role in the Federal Governmentfor processing-related work. The 100th Con-gress had taken no action on this bill, whichassigns subsidiary roles to DOE, NSF, and NBS,as OTA’s report went to press.)

DoD work aimed at high-performance com-puters, where applications will depend in parton thin-film fabrication capabilities—e.g., forJosephson junctions–could likewise have posi-tive impacts on the civilian economy. Not onlyDARPA, but the National Security Agency hastradi t ional ly supported work aimed at high-performance computing (box N).

If DoD were to follow a spending plan some-thing like that outlined by the working group—i.e., roughly half a billion dollars over five orsix years—civilian industry would surely ben-efit from some of the technology developed. De-spite the stress on applications—noteworthy,given the relative pessimism of U.S. industry

96

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97

Finally, DoD also funded a considerable amount of visionary research-one of (D)ARPA’s jobs.Here, the military mission did not always dictate R&D objectives, or even provide much guidance:(D)ARPA supported work in artificial intelligence and the behaviorial sciences inthe absence of near-term military applications.

Military and Civilian Technologies: Diverging ObjectivesDuring the Vietnam years, defense R&D growth slowed; DoD has never built its support for generic

technology development back to pre-Mansfield Amendment levels. (The Mansfield Amendment, partof the military authorization bill for fiscal years 1970 and 1971, sought to tie DoD R&D more closelyto defense needs.) Meanwhile, military high technology moved steadily away from civilian high tech-nology. In the face of pressures from the Pentagon, DARPA too has turned toward projects for whichit can more easily demonstrate military relevance, and steered a greater fraction of its funding totraditional defense contractors.4

As computers, for example, proliferated on the civilian side of the economy, prices dropped andthe government role as primary customer declined. Computer firms took more of the R&D burdenon themselves, adapting their products to the needs of banks, insurance companies, and manufactur-ing firms. Even so, defense agencies have continued to support both basic research and high-risk,high-cost development projects—work that could have major impacts in the future; as noted in chap-ter 3 (box J), the National Security Agency provided partial support for IBM’s research on supercon-ducting computer components. Military demand also continues to provide substantial support forsupercomputer manufacturers.5

In semiconductors, the story is similar. Military procurements accounted for about half of allU.S. production in 1960. By the middle 1970s, the military had become no more than a minor cus-tomer for all except the most highly specialized chips; today, military sales run at less than 10 percentof the U.S. market, In 1979, the Pentagon found itself forced to create the VHSIC (Very High-SpeedIntegrated Circuit) program, an effort to take advantage of advances on the commercial side of theindustry, where applications had long since outrun those in military systems.

The Pentagon likewise provided much of the early R&D support for lasers—in the early 1960s,twice the industry’s own spending—and today continues to pay for most of the work on high-powerlasers. 6 Military R&D, including fundamental research, has been conducted primarily in DoD’s ownlaboratories, or those of its contractors, not at universities. As customers, the services have soughtlaser rangefinders for tanks—the first significant application on the defense side-and beam weap-ons. Civilian applications, meanwhile, began with eye surgery.

Today, the growing divergence between military and commercial technologies is visible in at leastthree ways:

CDARPA has weathmod a number of thaee cy cka-tolerarwe for vtiionary research followed by a turn bwktoward applications, engineer-ing, and hardware. See Targeting the Cbnpter, op. cit., p. 190; &dao “The Advanced Reseamh Pr@acts AS$IW% 1S88-1974,” Richard J. BarberAssociataa, Washington, IX, Deoemk 1975.

W. Koameteky, “%percomputere and IWional E%@: M@@nins U.S. preemi-ce in ~ Eme@%I 1-D’S Su@rcomP~~ers: A KeYto U.S. Scientific, Tedmdogkxd, and &duut?&J Pmm&w@@, @ K&kknd and J,H. poo~ (ads.] (P&w Y@rk Praeger, 1987), P. 10.

@“The Maturation of Laser Technology; Social and Technical Factors,” prepared for OTA by J.L. Bromberfg, The Laser History Project,under contract No. H2-521O, January 1988; R.W. Seidel, “From glow to flow: A history of military laser research and development,*’ op. cit.

7Advanced Materials by Design: JVew Structund MateriaZs Twhnologies (Washington, DC: Office of Technology Assessment, June 1988).l%ose on the commercial side of the aircraft industry envision an airplane that could fly halfivay around the globe in z hours, reaching speedsof Mach 5 (i.e., 5 times the speed of sound). DoD aces the NASP as a possible launch vehicle for SDL among other things, and the militaryversion would have to reach Mach 25.

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—the options paper calls for a lot of money in the gap will grow: DoD has requested $63 mil-total, and a hefty infusion of funds for the more lion for HTS in fiscal 1989, much less than thegeneric work. working group’s recommendation. With funds

tight, defense agencies normally preserve theirBut DoD will almost certainly not have this applications programs as best they can; they

much money for HTS, as table 10 indicates. The will have to continue with materials characteri-fiscal 1988 total--$46 million--is well under the zation and processing to support downstream$68 million called for in the options paper, and development in HTS developments, but the

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temptation will be to go no further into basicwork than absolutely necessary.9

The final point is this. R&D management inany mission agency entails a continuous ser-ies of large and small decisions. These deal withsuch matters as funding levels and priorities,research targets, intramural versus extramuralprojects, contract and program managers cons-tantly weigh alternatives for expenditures rang-ing from a few thousand dollars to many mil-lions. Broad objectives are set at upper levels;people lower down make their choices guidedby these objectives (though often with consid-erable autonomy). But at a l l levels , D o Ddecisionmakers— from program managers tolaboratory directors and the Under Secretaryfor Acquisition (who has overall responsibilityfor DoD R&D)—have their eyes on militaryneeds, not those of the civilian economy. Thisis their job. Directives from outside the Penta-gon may influence these day-to-day decisions,but not by much.

HTS R&D in the Energy Department Laboratories

DOE laboratories have actively sought ma-jor roles in HTS, typically for reasons includ-ing diversification beyond their primary mis-sions. As table 8 indicated, DOE’s budget forHTS R&D exceeds that of NASA, NSF, and NBScombined; table 11 gives the allocation withinthe Department. If usual patterns prevail, two-thirds or more of DOE’s basic research dollarswill be shared among DOE’s nine multiprogram

laboratories (the “National laboratories”) anda number of more specialized research facilities,

The Energy Department and its predecessorshave been the patron of big science in the Fed-eral Government since the days of the Manhat-tan Project . While the Federal Governmentowns the DOE laboratories, most are operatedunder contract—some by universities, some byprivate corporat ions.10 The laborator ies havea collective budget well into the billions, andemploy about 15,000 scientists and engineers,Several have strong foundations in supercon-ductivity, stemming from years of work on LTSmagnets for high-energy physics and fusion re-search, along with projects such as Brookhaven’s10-year effort on superconducting power trans-mission. By one estimate, DOE has spent $100million on LTS R&D over the last two decades,in addition to $200 million for purchases of ma-terials and equipment. Given this history, andthe Department’s responsibi l i t ies for energyR&D, it is no surprise that the laboratories havegarnered the majority of non-DoD Federal dol-lars for HTS.

A number of the laboratories have excellentequipment for synthesizing and characterizingthe new HTS materials. They have physicists,chemists, and engineers with the skills and ex-perience to contribute to the science and tech-nology base for HTS. But while many of theselaboratories produce excellent science (as wellas mission-or iented weapons development) ,they have little experience in helping industry

‘The technical objectives of DoD 6.1 basic research are com-monly shaped to considerable extent by military needs. DoD’sown options paper notes:

while DOD will surely benefit significantly from efforts of otherorganizations (DOE, NSF, DoC, NASA) in areas of materialscharacterization, theory, and search for high-transition-temper-ature materials, it is essential that DSRD [Defense Superconduc-tivity Research and Development] itself include substantive activ-ity in these areas. Much of the remainder of DSRD activity is sohighly applications driven that DSRD characterization, theory,and search activities are essential as a means to provide focusin directions of greatest perceived impact on DoD applications.weight considerations are paramount in many DoD applications(as in those of NASA), and DoD has other stressing requirementsrelated to mechanical and thermal shock, as well as to radiationhardness, all of which dictate that DoD-specific characterizationinvestigations be pursued.

“Superconductivity Research and Development Options: A Studyof Possible Directions for Exploitation of Superconductivity inMilitary Applications,” op. cit., pp. 19-20.

IOEight multiprogram national laboratories have gotten mostof the DOE funds for HTS. These laboratories. and contractorsas of 1988, are:

LaboratoryArgonneBrookhavenLawrence BerkeleyOak RidgePacific NorthwestLawrence LivermoreLos AlamosSandia

ContractorUniversity of ChicagoAssociated Universities, Inc.University of CaliforniaMartin Marietta Energy Systems, Inc.Battelle Memorial InstituteUniversity of CaliforniaUniversity of CaliforniaSandia Corp. (a subsidiary of AT&TTechnologies)

Livermore, Los Alamos, and Sandia are weapons laboratories.Single-program DOE laboratories active in HTS include AmesLaboratory [operated by Iowa State University) and the SolarEnergy Research Institute (operated by the Midwest ResearchInstitute).

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Table 11.– Energy Department Funding for HTS R&Da

Fiscal year budget (millions of dollars)

1987 1988 1989(actual) (estimated) (requested)

Office of Energy ResearchBasic Energy Sciences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .High Energy&Nuclear Physics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Defense Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Conservation & Renewable Energy

Energy Storage & Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Energy Utilization Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Office of Fossil Energy Advanced Research &Technology Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10.2 $15.1 $16.70.2 0.2 0.31.6 6.7 6.7

0.2 4.4 12.90.1 0.4 2.0

0.2 0.3 0.2

$12.5 $27,2 $38.7aExCluding the De~artmentls Small Business Innovation Research Program. DOEcurrently spends more on LTSR&Dthanon HTS—$28.5miIIionon LTSinfiscal 1987,

S39.5million in 1988. lnfiscal 1989, the Department isseeking $52 million for LTSR&D (afigure that excludes $34 million forprocurement of materlalsandcomponents)NOTE: Totals may not add because of rounding.

SOURCE: U.S. Department of Energy, 1988.

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commercialize new technologies. DOE plansto require the laboratories to involve industryand the universities in their HTS work to agreater extent than usual; for DOE’s R&D tohave impacts on commercialization commen-surate with the Department’s budget alloca-tions, these efforts will have to succeed.

In 1988, more than half of DOE’s HTS bud-get—$15 million of $27 million total—will bechanneled through the Basic Energy Sciencesprogram (B ES, table 11). While some BES fundsgo to universities and to industry, most of theprogram’s HTS work during 1987 was under-taken within the laboratory system—a patternthat will probably continue.11 BES has estab-lished two joint programs in HTS, each involv-ing three laboratories. Under an arrangementworked out in 1987, Argonne, Ames, and Brook-haven will concentrate on processing R&D forbulk materials, while Oak Ridge, Los Alamos,and Lawrence Berkeley will work primarily onmaterials synthesis, thin films, and electronicdevices. The Administration’s 1989 budget re-quest would give BES a 10 percent increase forHTS.

Another DOE office—conservation and re-newable energy—will spend nearly $5 millionin fiscal 1988 for R&D related to possible elec-tric power applications. Initial activities in-cluded a number of feasibility studies, includ-ing a jointly funded effort with the ElectricPower Research Institute examining possibleend uses. If the president’s 1989 budget isadopted, conservation and renewable energycould find its HTS budget tripling. Most of thiswould go to the office’s energy storage and dis-tribution group. In April 1988, DOE announcedthat it would provide relatively small sums to10 DOE laboratories (eight of the multiprogramfacilities, Ames Laboratory and the Solar EnergyResearch Institute) for work related to electric

IiThe Division of Materials Sciences, which controls most ofthe money for HTS within BES, spent 63 percent of researchfunds totaling $155 million within DOE’s own laboratories dur-ing fiscal 1987. About 35 percent went to universities (includingsupport for graduate student research at national laboratories),and 1.8 percent to industry. See Materials Sciences Programs:Fiscal Year 1987, DOE/ER-0348 (Springfield, VA: National Tech-nical Information Service, September 1987), p. F-3. These figuresdo not include $15.5 million in equipment funds.

energy storage and distribution. Future fund-ing under this program will depend in part onthe ability of the laboratories to involve indus-try and universities.

As table 11 shows, the only other DOE pro-gram with significant funding for HTS engagesin defense R&D. Most of this work—budgetedat $6.7 million for 1988, with next year’s requestat about the same level—takes place at the threeweapons facilities.

The sections of this chapter dealing with tech-nology transfer consider DOE’s prospectivecontributions to commercialization of HTS—for instance, the likelihood of productive col-laborative efforts between the Department’s lab-oratories and private industry. If cooperativearrangements and rapid technology transfersto industry are to flourish, the laboratories willhave to change in style and culture. Table 13,later in the chapter, includes a number of spe-cific policy options for accelerating this shift.

Other Mission Agencies: NBS and NASA

For more than three decades, the NationalBureau of Standards, part of the Commerce De-partment, has been engaged in research on LTSmaterials. President Reagan’s superconduc-tivity initiative gave NBS the responsibility forestablishing a superconductivity center focus-ing on electronic applications. While NBS’stechnical achievements have been impressive—e.g., a precision voltage standard incorporat-ing 19,000 Josephson junctions—the Bureau issmall compared to many other Federal labora-tories, and superconductivity a minor part ofits work. The NBS appropriation for 1988 in-cluded $2.8 million for HTS projects (table 8)on measurement methods, standard referencematerials, and devices for measuring weak mag-netic fields. The Administration seeks a majorincrease for NBS—to $9.3 million—for fiscal1989.

The National Aeronautics and Space Admin-istration’s HTS R&D will aim at eventual ap-plications such as remote sensing, power and

—

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propulsion, and space communications.12 Inspace, simple passive cooling systems couldkeep the new materials below their transitiontemperatures. As a result, HTS holds consid-erable interest for NASA. At the same time,space missions demand very high reliability,thus painstaking development and testing; de-ployment on an actual mission is probablymany years in the future. In some contrast tothe other major R&D agencies, NASA has not

rushed into HTS; the agency’s R&D is still inthe planning stages.

NASA reprogrammed some $4.2 million forHTS during fiscal 1988—mostly for feasibilitystudies (table 8), and is seeking twice as muchfor 1989. The preliminary program plan citedabove calls for spending $48 million on HTSover the period 1988-94. Even at this level, how-ever, it seems unlikely that NASA R&D wouldhave much impact on commercialization of

IZNASA Technology Program Plan: High Temperature f%per- HTS: mission requirements are apt to be tooconductivity Technology, Preliminary Program Plan, Vol. Z, Na- specialized.tional Aeronautics and Space Administration, Feb. 3, 1988.

NSF AND THE UNIVERSITY ROLEThe National Science Foundation is a mis-

sion agency too, but its responsibilities differgreatly from those of DoD, NASA, or DOE. TheNSF mission: to support research because thisis in the public interest (for reasons includingeconomic growth and competitiveness). Almostall NSF’s research dollars go to the universitysystem, which the United States depends onfar more than other industrialized economies.

NSF expects to spend $14.5 million in fiscal1988 on HTS—table 12. With only a few U.S.companies putting much effort into basic re-search, many of the preliminaries to commer-cialization of HTS will take place on the Na-tion’s campuses.

Are the universities up to the job? In the shortrun, the answer is plainly yes. But the work ofcommercialization will go on for years, and asit shifts from research toward applications, aset of perennial problems in engineering re-search, and in university/industry relationships,could hinder the process. These problems stemfrom the inhospitality of universities to mul-tidisciplinary research, and the differing goalsof university and industry R&D.

Disciplinary Boundaries

Many of the Nation’s universities have strongif often small HTS research efforts. As HTStechnology moves ahead, multidisciplinaryR&D will be essential. Progress will depend on

the physics community—e.g., for theoreticalguidance and an understanding of the ways inwhich structure, particularly at the atomic level(crystallography, flux pinning sites) determinesproperties (critical current densities). Chemistswill add their skills, particularly in materialssynthesis and characterization, as well as inprocessing. Materials scientists will have thejob of understanding microstructural and sub-structural effects (grain boundaries, twins, dis-location structures), and of linking these withprocessing (e.g., thermal-mechanical se-quences). Materials engineers will developprocessing techniques that yield the neededstructures (hence properties) at reasonablecosts. Design of electronic devices will fallmostly to electrical engineers and physicists.Electrical and mechanical engineers will de-velop high-power/high-field applications—e.g.,for energy storage systems. Each group has itsown language, its own assumptions and pre-conceptions, its own world view.

To the lay person, science and technologymay seem all of a piece. They are not. In pri-vate firms, multidisciplinary groups functioneffectively because they must—otherwise thecompany would not be able to compete. Overthe past decade, American companies haveworked hard at this, as they have faced up tothe loss of technological advantages in worldcompetition. Firms like IBM and AT&T—leadersin HTS R&D—have been seeking better ways

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Table 12.–National Science Foundation Funding for HTS R&D

Fiscal year budget (millions of dollars)

1987 1988 1989(actual) (estimated) (requested)

Directorate for Mathematical and Physical Sciences:Materials Research $ 8 . 0 $10.0 $12.0Chemistry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.4 0.6Physics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 2.3 2.4

Engineering Directorate: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 1.9 2.2

$11,7 $14.5 $17.2NOTE: Totals may not add because of rounding

SOURCE: National Science Foundation, 1988.

of moving new technology from the researchlaboratory, through development, and into pro-duction. The steady advance of technical knowl-edge—which inevitably entails greater speciali-zation and fragmentation—only makes thismore difficult. The job is one for management,and a continual struggle.

Universities find it even more difficult to ac-commodate such work, lacking the imperativesof the corporation. Specialization and fragmen-tation begin on campus. Indeed, disciplinaryboundaries account for some of the technologygaps noted earlier in this chapter. No one un-dertakes needed R&D because no group of engi-neers or scientists looks on the problems as partof its territory (welding, wear, ceramic proc-essing). HTS will probably face some of thesekinds of problems.

NSF Centers

Federal agencies have tried to encourage in-terdisciplinary research in the universities,using the carrot of R&D money, but funds forprograms like NSF’s Engineering ResearchCenters (ERCs) remain small compared to thosefor single-investigator projects. Figure 4 showsthe trends over three decades at NSF. Individ-ual project support remains at about 70 percentof the NSF total—well above the level of themid-1960s. 13 Still, NSF-sponsored research

IsAbout 13 percent of NSF’s fiscal 1987 budget went for mul-tidisciplinary research centers—Department of Housing and Ur-ban Development–Independent Agencies Appropriations for1988, Part 4, hearings, Subcommittee on HUD-Independent Agen-cies, Committee on Appropriations, U.S. House of Representa-tives (Washington, DC: U.S. Government Printing Office, 1987),p. 74.

centers could number 80 or more by the mid-dle 1990s, if the Foundation gets the budget in-creases it has been seeking.

Currently, about one-fifth of the NSF engi-neering budget goes for the ERCs, the first ofwhich were established in 1985. In the Foun-dation’s 1988 spending plan, the ERCs accountfor $33 million ($15 million less than NSF origi-nally sought) of the $171 million allocated toengineering. 14

The ERC’s are relatively small and focused—e.g., on Optoelectronic Computing (Universityof Colorado). Annual funding levels haveranged from $1.5 million to $3.5 million. WhileNSF expects many proposals for HTS centersin the future, superconductivity does not fallwithin the purview of any of the 14 ERCs ap-proved through the end of 1987. Indeed, thisgroup of 14 includes only one center in the areaof materials (and it is scheduled to lose its NSFsupport)--perhaps because the Foundation alsofunds about a dozen interdisciplinary Materi-

lqIn the first z years of the program, the Foundation approved11 ERCs (expending $27.7 million, with industry, States, andlocalities more than doubling the NSF contribution). Currentplans call for up to 18 ERCs by the end of 1989. Under the pro-gram, NSF agrees to support centers for up to 11 years, withevaluations after 3 and 6 years. The Foundation recently an-nounced it will discontinue support for two of the initial centers,following their 3-year reviews. For further background, see TheNew Engineering Research Centers: Purposes, Goals, and Ex-pectations (Washington, DC: National Academy Press, 1986), andEducating Scientists and Engineers: Grade School to Grad School(Washington, DC: Office of Technology Assessment, June 1988),ch. 3.

On NSF’s proposed S&T centers, below, see Science and Tech-nology Centers: Principles and Guidelines (Washington, DC: Na-tional Academy of Sciences, 1987); also C. Norman, “NSFCenters: Yes, But . . . “ Science, July 3, 1987, p. 21.

—

104

Figure 4.—National Science Foundation Research Support

100

90

80

70

30

20

10

01960 1965 1970 1975

SOURCE: National Science Foundation, 1988

als Research Laboratories (MRLs) under a sep-arate program (see box O).

As discussed in box O, ARPA (later DARPA)—which, over the years, has financed a gooddeal of work in superconductivity–originallysponsored the MRLs. Five of the MRLs havemoved into HTS research, with $3.5 million ofNSF’s 1988 support for HTS going toward theseactivities.

The MRLs represent an early attempt by theFederal Government to change the ground rulesfor university research; the ERCs, along withNSF’s proposed Science and Technology (S&T)centers represent the latest. Announced byPresident Reagan in his 1987 State of the UnionMessage, the S&T centers could eventually be-come the largest NSF program for interdiscipli-nary research support. Universities submittedmore than 300 proposals after this program wasannounced (plus a comparable number of plan-ning proposals), a third of them in the generalarea of materials (and some of these on super-conductivity). Given the slow growth in its bud-get, discussed above (table 9, Option 4), the

1980 1985 1990

Foundation has not yet found money for theS&T centers. In February, the Administrationannounced that none would be funded duringthe 1988 fiscal year. Instead, the Administra-tion will seek a one-time appropriation of $150million in fiscal 1989 to fund 10 to 15 S&Tcenters for 5-year periods. If Congress providesthe money for these centers, it is possible thatone or two of those approved by NSF mighthave a focus on superconductivity.

Funding for the Industry/University Cooper-ative Research Center program—well on theway to proving its worth—has been flat in re-cent years. Nor has the ERC budget grown asNSF had hoped. As discussed under Option 9in table 13, additional funds will be needed toexpand the center programs. Growth in theseprograms will not have much impact on HTSunless one or more of the proposals that wouldfocus on superconductivity wins the competi-tion for funds. While Congress could direct NSFto launch a center specifically for HTS, thiswould bean unfortunate precedent, given thatthe Foundation has traditionally avoided tar-

105

Box O .. -M1Iitidi8Cipi~

The boom in Federal R&D since the first American science and engineering, and the 11-...."'--.11

emment spent about $600 million.for uniiVA1~JlH1t I'f!IA4 Yet some things have not changed. De1~ar1tm~lntlltqJ from chemistry. science from en'linl.rliDl'-~Im!dtt never caught on. Although the university stateD' the schools continue to train new people

NSF's ERCs and proposed SAT cen1tua: linkages with industry have also been a tiveResearch Centers~a lons...tandins IntEtrdtlsclt geted than the other center programs, and one EIlI ......... and Scieace In the· Uaivenlti ..

Since the latter part oftha 19th century. eD.itinee11l After World War II, American engineerinlSClllDO,18 iargeiy in consequence 'of the dominant -radar, computing, and the atomic bomb. ana.ly1ical tools of applied mathematics, ne.;QiG. factories, but not in research laboratorieS.

During the 19608, Sputnik and .the spaCfit race and curricula. Added work in the eIigineering iC8; thermodynamics-replaced design and DU!]n~act! replaced hands-on laboratory courSes. Ameli .... But many lost sight of the marketplace, and clUIle

Just as important. the profesaion-alwaY. . boundaries defined by 19th century technology steadily more specialized. Civil, mechanical, problems in structural analysis and gttB,lp.

tioned by tradition, of apl)rOtlcnmg simll8t electronics, electrical engineering <1el)ar1m,8DtS trical machinery (motors. Rel1leliltol'S)--a chanical engineeriDs. N CODttQl menta of electrical engmEN!Jrln system problems &&~ .. ~ ""''''''"'''" ...

Attempts to establish the gaps often increased _ .... h ...... ' .... __ ··~1

cb8.ngEt<1 the face of the Federal Gov­

to $6.7 billion. ~pal'at:ing physics

research has postwar period,

~',ng1n.eering courses and mechan-

(and computers) doing research.

trnltneJrlt money goes )8r1tmEtntJ-a pattern anctioIled, not only

UE,nC1les, mission­engineers. Those and their gradu­Federallabora ..

niinagement; RaD must be tightly . if it is' to· contribute. But· ... ........ . ... . . . . . . . is.· toll81p shape university curricula around narrow research topics; and to matntafn '.oostlng4l8ciplbulry boundaries.

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It has been intentionally omitted.If a replacement page image of higher quality

becomes available, it will be posted within the copy of this report

found on one of the OTA websites.

107

To the universities, the roJlias block gran,tlaeem8d A11tnnnmv in diurfhlltina mnds-and atiUdoes ... -------J - - .. ------0 ______ _.....- ___ ......,.....,.. C-.--,;,. . .,..,..-.."

MRL for support rather than to ext.,rnal. . ments of physics, chemistrt, Ofenlb1.ri ••• ··c:.1i11A1&J'Ui. about a third of MRL funtls'have gone 'to f8c1dt)t to materiels facultY, and tile: remalDder to ch8Dd8ts sponsored research differ. little from·other aC8l081nl nary coUaboration.

Other Precedents NSF's ERCs and S&T c;:ent,rsluive '

" .... _ ...... a tttTI"'Da\ 4 .... +a~dall.ft·'~,da.~ '?Jlg"'1tlJr:D1;I~'I'b \..IUU"U&D \&'-I\..I&'DI. "&'&,"v&'&uvu",,, .. "' .... .., .......

IUCRs must be co-funded by industry to QuatIIfY independent of NSF in 5 years. The FotmC1aUctn have successfully negotiated this transition by the 1987, industry and State Govemments provided an estimlltM lion NSF contribution.·

To encourage individual faculty members to an IndustrylUniverslty Cooperative Projects Program for projects-often running for 2 years or so-to be tists. Funding ceased in 1988.4

In an effort during the 19708-much. ~ore Nixon Administration established theRese8ith attempt to turn university scientists and 8D.!lPneeJl"S search was an explicit objective. RANN ref.leC1teQ pressing U.S. economic and social problems. Its in 1975 (Figure 4), then declined just as s'!1ftiy

The Defense Department'. Unive ... tty R.elearcla

has provided financilltg, til .... '1tI'D1M1 communicate only infrequentl'g.

rWllllOtn complete aDDly to the

home -depart­years, only

another third tlftl1lurn that MRL-in multidiscipli ..

:lttlllc:(1;tIb"y, NSF established partial funding

and industry seien-

:=;;';'=IBB to strengthen univer­~t1tOlgie:s. The three serv­

'cUOPlled to $35 million for multidiseipli­defense, some of

"RI.w'aellv determined e8JllilllllvEtrsilties and mili ..

'fPQnIO!f8hip, While industry uni"ersllty scientists and the Innovation

for a New Partnership Process: Evaluatioa-Bued LlilllIIMb"~l[Jn (Amsterdam: North-HoIJand,

4A survey of induttry participants coveriq U8 c:ompletecl projects found c:ompaniu had undertaken 91fonow-on projects OD their own. with budpts averasms $98,000. D. Gray. B.C. Jobnaon. and T.R. Gild." "lnduatrJ .. Univentty Projects and Centers: An Empirical Compari­SOD of Two FecferaJly Funded Models of CooperatWe Scieace," Bvaluatioa RIwltIW, Vol. 10. December 1888. P. '88.

'Science Polley Study BacqroUlld Report No.1: A HiBtory otScifl1lce Polley In the United States. 1940-1985. prepared for the Task Force on Science Policy, COiiiiiiit"..ee on Science iiid T6Clmolo.it U.S. House of Repreeentattv88 (Wuhington. DC: U.S. C-cv=rnmant Pr.ntln; Officet

September 1986). '

108

geted R&D. (Chapter 5 discusses a number ofalternative approaches.)

Some academics have feared that increasesin funding for centers and other multidiscipli-nary programs would come at the expense ofsingle-investigator and small-group research.While a legitimate concern, figure 4 shows thatthe relative shift has been small. Without growthin the NSF budget, competition for limitedfunds will intensify. Independent research mustbe preserved. Even so, it would seem prudentto risk erring on the side of support for the new

multidisciplinary centers, rather than on theside of a continuation of traditional fundingpatterns.

There are other ways as well to foster a mul-tidisciplinary environment in the university sys-tem: for example, federally funded postdoctoralfellowships could be designed to encouragescientists and engineers planning academiccareers to to move laterally into related fields—e.g., from chemistry to materials, from electri-cal engineering to solid state physics (Option10).

Table 13.—lssue Area II: Strengthening Interactions Among Universities, Industry, and Government

Issue Options for Congress Advantages Disadvantages

A. University-industry interactions; Multidisciplinary ResearchOPTION 9. Congress could:Commercialization of HTS requires multidis-

ciplinary R&D, To do a better job of train-ing people who can help American firmscompete, universities will need to encouragemultidisciplinary research and teaching.Federal agencies, notably NSF, have beenincreasing support for multidisciplinaryresearch, but have had limited funds to ac-complish this,

Most of the incentives in American univer-sities reward those who pursue conventionalresearch careers; few encourage facultymembers to cross disciplinary boundaries.

. Provide full funding for NSF to launch itsproposed interdisciplinary Science andTechnology centers. The Foundationseeks a one-time appropriation for fiscal1989 of $150 million to support 10 to 15centers for 5 years.

● Appropriate funds at the $5 million orabove Ievel for NSF’s Industry/UniversityCooperative Research centers over eachof the next several years, ensuring thatthe newer centers do not overshadow thisprogram. Congress might also considerrenewed support for the industry/Uni-versity Cooperative Projects Program.

Ample continuing support for NSF’s En-gineering Research Centers, providedevacuations indicate they are effective, alsoseems appropriate.

OPTION 10. Direct NSF, along with otheragencies that fund postdoctoral fellowships,to establish programs specifically for scien-tists and engineers who chose to move toa related field for a year or more of research.

B. Government-industry interactions: Technology Transfer and Joint R&DOver the past few years, Congress has OPTION 11. Conduct early oversight on theenacted several pieces of legislation intend- responses of major R&D agencies—ed to encourage transfer of technology from particularly the Departments of Defense andFederal laboratories to industry. These pro- Energy–to recent laws and executivevide a framework for reform, with decen- branch actions aimed at speeding technol-tralized decision-making at the laboratory ogy transfer and commercialization of fed-Ievel. While some of the laboratories have erally funded R&D.responded enthusiastically to the new laws,it is not clear that the agencies–especiallyat higher levels—have embraced thismandate,

More support for multidisciplinary researchand teaching could help train engineers andscientists to do a better job of bridging thegaps between research and design, devel-opment and production, R&D and marketing.Not only will this be vital for competitive-ness in HTS, it is vital throughout the U.S.economy.

According to the National Research Council,such fellowships ‘‘would facilitate commu-nication among disciplines and ‘seed’ thefaculty with individuals who are experiencedin the cross-disciplinary approach. ‘d

The oversight process could help Congressdetermine whether further changes in thelegislative framework are needed. Mattersthat might be examined include:● Whether to require that Federal agencies

issue regulations for implementing the pro-visions of the Federal Technology Trans-fer Act of 1986, The law does not requireagencies to issue implementing regula-tions; indeed, it specifies that they shallnot delay implementation until rules are is-sued. But the situation is a new one forindustry too, and lack of guidelines maydiscourage them from approaching thelaboratories,

Without a corresponding increasein NSF’s overall budget (see Op-tion 4 in Table 9), money forcenters could come at the ex-pense of individual and smallgroup research–one of the out-standing strengths of the Ameri-can university system.

Without complementary changesin the university environment,such moves might hurt the careerprospects of those accepting fel-lowships.

Reforms take time to implement,It may be too early to get an ac-cura te read ing o f agencyresponses to the new rules fortechnology transfer, The oversightprocess itself could mean thatresponsible officials spend timeanswering inquiries that other-wise would go into improvingtransfer processes.

aD/reCt/on3 in Enginwring ReSearch: An ASSeS~ment of @poflun/t/es and Needs (Washington, Dc: National Academy press, 1987), p. 67.

109

Table 13.—lssue Area II: Strengthening Interactions Among Universities, industry, and Government-Continued

Issue Options for Congress Advantages Disadvantages

Technology transfer may get few resourcesand little attention when it is not viewed aspart of the agency’s own mission, For HTS,effective transfer mechanisms could be es-pecially important, DoD, with more moneyto spend on this technology than otheragencies, has fewer reasons for workinghard to transfer R&D results to commercial(non-defense) industry

Demonstration projects could help Identifybetter methods for transferring technologiesto industry, but little funding has been avail-able. The same is true of demonstration pro-jects involving R&D cooperation between thenational laboratories and industry.

If the national laboratories are to transfertechnologies to industry effectively, manymore laboratory employees will need to un-derstand industrial needs and marketplacerealities While industrial (or university)scientists can arrange to work in a Federallaboratory with little difficulty, the primaryneed is for movement in the other direc-tion–from the laboratories to industry.

DOE’s national laboratories are seeking amajor role in helping U.S. industry commer-cialize HTS, but as yet have limited ex-perience in cooperative R&D with the privatesector, Working out R&D arrangements thatsuit industry’s needs without detracting

OPTION 12. Direct DoD, working with DOEand the Federal Laboratory Consortium forTechnology Transfer, to use on a trial ba-sis an intermediary or adjunct organizationfor transfer of HTS technology to non-defense firms. The intermediary would needto have well-established working relation-ships with the private sector, and strongmotives for making the transfer processfunction effectively.

OPTION 13. Appropriate or allow moremoney to be set aside for the FederalLaboratory Consortium for TechnologyTransfer to undertake three or more demon-stration projects on technology transferand/or R&D cooperation over the next yearor two. Projects with outcomes relevant toseveral agencies would be most useful. Pos-sibilities include:. pilot programs at the State level (see Op-

tion 17 below);● development of guidelines, and trials, in-

volving intermediary organisations (seeOption 12 above),

● preparation and testing of a technologytransfer training program for laboratory(and industry) employees.

OPTION 14. Authorize and encourage tem-porary exchanges of technical personnel(and sharing of personnel), as well ascooperative R&D projects between industryand the national laboratories. HTS could getspecial attention.Alternatively, Congress could create abroader exchange program to send en-gineers and scientists from national labora-tories to private corporations for periods of6 months to 2 years. One hundred fellow-ships per year would begin reaching enoughlaboratory employees to make a difference.Laboratory engineers and scientists couldbe required to work on problems of mutualinterest, with the Government paying halftheir salaries and maintaining pension eligi-bility benefits.

OPTION 15. Direct DOE to encourage an ex-perimental approach to cooperation with in-dustry, As the Department’s laboratoriesestablish pilot centers for HTS R&D, and en-gage in other collaborative efforts with in-dustry and universities, each center could

● Actions taken by the laboratories to im-prove institutional support for technologytransfer through personnel policies andprovisions for royalty sharing withinventors,

. Effects of agency mission on the courseof technology transfer. Congress mightalso ask DoD and DOE how, specifically,their procedures will apply to HTS.

● The success of the Federal LaboratoryConsortium in living up to its mandate un-der the 1986 Act.

Given DoD’s funding Ievels for HTS R&D,transfers to the civilian side of the economycould have substantial impacts on commer-cialization. Once R&D results were approvedfor transfer by DoD, the intermediary couldtake on the job of working with industry,minimizing interference with the primary mis-sions of DARPA, SDIO, and the services.

Regardless of the mechanism chosen, anHTS technology transfer program could beviewed as a demonstration—with high visi-bility and potential relevance for other tech-nologies.

The FLC received about $700,000 during1987 under a set-aside specified in PublicLaw 99-502, with only 5 percent available fordemonstration projects, Additional funds fordemonstrations–perhaps $300,000 peryear–would begin to address the need.

Such a program would serve a need largelyunmet–giving laboratory employees hands-on industrial experience, thereby speedingcommercialization. Fellowships could bemade available to laboratory personnel on acompetitive basis.

Temporary assignments in universities wouldnot serve the same purpose, nor would pro-grams that focus only on bringing industrypeople into the laboratories. Cost sharing bycompanies would help ensure that the labora-tory fellows worked on commercially relevantproblems.

An experimental approach would help thelaboratories learn to work with industry with-out consuming a disproportionate share ofHTS research dollars, Trying a number ofdifferent approaches implies learning fromthe results, hence provision for evaluation;

Transfers from DoD might come tobe viewed as substitutes for R&Dfunding by civilian agencies, tothe possible detriment of commer-cial technology development,

Each technology transfer situationis unique, putting limits on thelessons to be learned, Nor can acookbook approach to technologytransfer function effectively.

Such a program carries risks ofconflict of interest, as well as theappearance of subsidy, Moreover,the laboratories might find indus-try hiring away some of their morevaluable people. Some firmsmight fear they could lose controlover proprietary technology.

Relying too heavily on cooperationbetween the laboratories and in-dustry, particularly to the exclu-sion of other policies for speedingcommercialization, would be amistake. There is a second dan-

110

Table 13.—lssue Area II: Strengthening Interactions Among Universities, Industry, and Government—Continued

Issue Options for Congress Advantages Disadvantages

from broader laboratory missions could re-quire considerable experimentation

Under the right circumstances, collabora-tive R&D–involving several private firms inpre-competitive projects–could be an effi-cient mechanism for building the HTS tech-nology base. Yet the time horizons ofindustry consortia are unlikely to be thatmuch longer than those of individual firms

State Governments have a broad range ofeconomic development tools at their dis-posal. In addition to the direct funding forR&D that some have provided, States couldhelp commercialize HTS through programsthat accelerate the diffusion of researchresults to industry. At present, however,linkages between State Governments andnational laboratories within their borderstend to bead hoc and not very well estab-lished.

be designed somewhat differently, eventhough all were charged with aiding in com-mercialization

OPTION 16. The Federal Government couldmake funds for HTS R&D available on acost-sharing basis to industry consortia,provided the funding agency determinesthat public money will serve to extend theR&D time horizons.

OPTION 17. Congress could:● Provide small planning grants to the

States for strengthening R&D-based eco-nomic development initiatives, includinggrants for the evaluation of existing pro-grams, H may take 5 years or more forStates to put new programs in place;planning grants available now couldmean better capabilities at the State lev-el when HTS technologies begin movingout of the laboratory,

● Fund several State Government pilotprojects embodying different approachesto the transfer and commercialization offederally-funded HTS R&D (conducted inuniversities as well as national labora-tories).

. Direct Federal agencies to give greaterweight to support from State Govern-ments in evaluating proposals foruniversity-based R&D centers, and otherproposals where commercialization is amajor objective.

to succeed, the laboratories will have to beself-critical Approaches that worked for HTScould be adopted elsewhere.

Cost-sharing of longer-term R&D would ad-dress a critical problem for U.S. competitive-ness. The Federal contribution could involveprovision of facilities (e.g., at a nationallaboratory) and/or temporary assignments ofpersonnel to a consortium, in addition tofinancing,

Strengthened capacities in the States to as-sist smaller businesses in commercializinginnovative technologies would complementFederal SBIR (Small Business InnovationResearch) programs, particularly Phase Ill ef-forts, Planning grants could also help theStates find ways of bridging the gap betweenPhase I and Phase II awards.

ger as well: DOE and the labora-tories might find it difficult to shutdown cooperative projects thatproved ineffective, or were nolonger needed

Any project involving Federalfunding would be subject to thevagaries of the budget process.Unless Government, as well as in-dustry, lengthened its timehorizons, money could be wast-ed. On the other hand, cost-sharing, once started, might bedifficult to stop–even if, in time,the justification vanished.

Few State programs have beenevaluated by independent parties;little is known about the ap-proaches that work best

Federal assistance could end upfavoring States that might needhelp the least–e g , those thatalready have well-developedprograms

SOURCE: Office of Technology Assessment, 1988

TECHNOLOGY TRANSFER: THE FEDERAL LABORATORIESMuch of the Federal funding for HTS R&D for commercialization until they have proven

is going to government laboratories—mostly fa- themselves.cilities run by DoD and DOE, but also to NBSand NASA research centers. These laboratoriesdiffer in missions, in their historical ties with New Rules for the Laboratoriesindustry, and in operating arrangements. WhileNBS has long had good relations with indus- For many years—as congressional hearingstry, and DoD laboratories often work closely and an accumulation of studies pointed to thewith military contractors, few Federal labora- large fraction (said to be 90 percent) of feder-tories have accomplished much in commerciali- ally owned patents never licensed or otherwisezation. This has not, after all, been one of their commercialized—the U.S. Government hastasks. Whether the laboratory system will be sought to stimulate commercial use of publiclyable to contribute much beyond a general funded R&D. Since 1980, Congress has enactedstrengthening of the HTS technology base a series of laws intended to give industry greaterremains an open question. Certainly it would access to the laboratory system, and to speedbe a mistake to rely heavily on the laboratories transfers of technology to the private sector.

111

As a result of patent law changes in 1980,small businesses, non-profit organizations, anduniversities can gain title with relative ease toinventions they make in the course of R&D paidfor by Government. In 1984, Congress extendedthis statutory policy to contractor-operated lab-oratories, including several DOE facilities. (Thestatutory policy does not extend to weapons lab-oratories , or DOE laboratories operated byl a rge , f o r -p ro f i t bus ine s se s , a l t hough t heAdministration has initiated changes here aswell.) The most recent step, the 1986 FederalTechnology Transfer Act, seeks tighter linksbetween government-operated laboratories andindustry. This law:

● provides clear authorizat ion for govern-ment-owned and -operated laboratories toenter into cooperative R&D with privatef i rms.

● Gives the Federal Laboratory Consortiumon Technology Transfer (FLC) a statutorycharter. About 400 laboratories, represent-ing 11 agencies, belong to the FLC, whichwas organized to facilitate use of federallydeveloped technologies .15

● provides for agencies to return licensingincome to the originating laboratory, andrequires that at least 15 percent of royal-ties or other income go to the employeesresponsible .

● Directs laboratory directors to considertechnology transfer activities in perform-ance evaluations and promotions, and toinclude it in job descriptions.

The 1986 Act decentralizes many adminis-trative responsibilities, giving substantial dis-cret ion to the laboratory directors . Beyondthese statutory changes, President Reagan’sApril 1987 Executive Order 12591, on facilitat-ing access to science and technology, estab-lishes guidelines for all the laboratories.

While many of the laboratories have ex-panded their technology transfer activities overthe past several years, the pace of change atthe agency level has often been slow. Moreover,

‘s’’ Strategic Plan: 1988-1992,” Federal Laboratory Consortiumfor Technology Transfer Administrator, Fresno, CA, October1987.

the discretionary authority given to laboratorydirectors in the 1986 Act applies only to gov-ernment-operated laboratories, not to contrac-tor-operated facilities like DOE’s. To help de-termine whether further policy modificationsmight be needed, Congress could conduct over-sight on the responses of the mission agenciesto the 1986 Technology Transfer Act, other re-cent changes in the law, and to Executive Or-der 12591 (Option 11, table 13).

Transferring HTS R&D

While a new framework for technology trans-fer exists, it is far from clear that industry andthe laboratories will be able to forge effectivepartnerships for commercializing technologieslike HTS. Many of the formal barriers havecome partway down, but the culture of these700-plus institutions insulates them from indus-try and marketplace. The laboratories also dif-fer greatly in style and tradition. Some stressengineering, others research for the sake of re-search. Policies with much to recommend fora DOE facility maybe irrelevant for NIH, whileconflicting with DoD security requirements.

Technology Transfer from DoD

Much of the Federal funding for supercon-ductivity passes through DoD, which operatesmore than 70 laboratories, a pattern that willprobably continue. While defense agencieswork hard at transferring technologies to mili-tary contractors, diffusion to the civilian sideof the economy poses special problems. Thesebegin with the frequent requirements for secrecy,and end with the likely reluctance of the Pen-tagon to accept such a burden as a major ongo-ing responsibility.

In authorizing an HTS program for fiscalyears 1988 and 1989, Congress instructed DoD(and DOE, when its laboratories receive DoDfunds) to give special attention to transfers oftechnology to the private sector.16 Apparently,

~esection 218 of the National Defense Authorization Act fOr1988 and 1989 (Public Law 100-180) earmarked $60.56 millionannually for 2 years for a DoD program on HTS. Congress appro-priated only $15 million for fiscal 1988 under this provision,which went to DARPA for initial funding of its processing R&Deffort, described earlier in the chapter.

.

112

DoD intends to use existing mechanisms to im-plement the requirements of the Defense Au-thorization Act, rather than establish proce-dures specifically for HTS. While currentpractices may suffice for transferring HTS tech-nologies to defense industries, they will prob-ably be less effective for transfers to firms onthe civilian side of the economy. Instead, itmight make sense to assign the task of work-ing with non-defense firms to an intermediaryorganization (Option 12).

A number of arrangements seem feasible.Several DOE laboratories—including Argonne,Oak Ridge, and Ames—have set up adjunctorganizations to handle technology transfer.DoD could contract directly with an existingorganization—e.g., a not-for-profit R&D labora-tory like Battelle. An intermediary charged ex-clusively with transferring technical knowledgeto commercial enterprises could play a usefulrole during the stages of technology develop-ment and commercialization processes that arenot germane to DoD’s mission.

Demonstration and Evaluation

Technology transfer has significance goingbeyond HTS. So does cooperation in R&D be-tween industry and the national laboratories.But both in the laboratories and at middle andupper ranks in the agencies, commitment tomeaningful change has not always been visi-ble. Information about what works would help;successful demonstration projects could haveconsiderable impact (Option 13). The FLC hasthe authority to conduct demonstrations, butits set-aside funds from the agencies paid foronly one such project during 1987.

Making technology transfer function effec-tively and efficiently will demand systematic,empirically-based analysis of transfer processes(including cooperative R&D), and of subsequentimpacts on innovation and commercialization.Demonstration projects without critical evalu-ation of results may not accomplish much.

Laboratory Personnel

People transfer technology much more effec-tively in person than through reports, and they

do so best when they work together (rather thanin meetings). Transferring HTS technologiesfrom the national laboratories means: 1) bring-ing people from industry into the laboratoriesto work on HTS, perhaps through cooperativeR&D projects; and 2) sending people from thelaboratories to industry so they can learn whatcommercialization is all about. In the short run,the first of these steps has much to offer forHTS. The second step is necessary for lastingchanges in the culture of the laboratories, andfor long-run success in better integrating thelaboratories into the Nation’s R&D infrastruc-ture. Because of possible conflicts with DoDmissions, personnel exchanges have greater po-tential attraction at DOE (non-weapons) labora-tories.

The laboratory system attracts many highlycompetent people with more interest in re-search than in the practical problems ofindustry—no surprise, given that commerciali-zation has not been a mission of the labora-tories. Some people join a laboratory preciselybecause they have no wish to work on indus-trial problems. They may be highly capableprofessionals, dedicated to research, but evenif motivated to work with industry, laboratoryemployees may not know how—through lackof exposure to corporate life and the realitiesof the marketplace.

Agency policies have been broadened in re-cent years, so that many Federal employees cando consulting (on their own time), or take leavesof absence to work in industry. Both these stepswill make a difference. So could a program oftemporary appointments sending laboratorypersonnel to the private sector (Option 14). Al-though industry employees can come to the lab-oratories quite easily, flow in the other direc-tion will have more impact in changing thelaboratory culture. Congress could explicitlyauthorize and encourage fellowships and/or ex-changes. Several of the HTS bills introducedin the 100th Congress authorize industrial fel-lowships at Federal laboratories, but not fel-lowships that would send laboratory employ-ees to industry. Others have tied personnelexchanges to cooperative R&D programs. Theneed is a broad one: there seems no necessary

113

reason to tie personnel exchanges either to co-operative R&D or to HTS.17

Cooperative R&D

Cooperative research bringing together lab-oratory employees with those from industry—and perhaps from universities—offers anotherway to integrate the laboratories more effec-tively into the Nation’s technological infrastruc-ture. The possible arrangements serve needsranging from efficiency—avoiding too muchduplication —to lengthening industry’s timehorizons, as discussed in the next chapter (seebox R on collaborative R&D). The discussionbelow focuses on HTS–e.g., approaches suchas the proposed National Laboratory Coopera-tive Research Initiative Act, S. 1480 in the 100thCongress. 18

DOE has itself moved toward closer cooper-ation with industry. In April 1988, the Secre-tary of Energy designated three national labora-tories—Los Alamos, Argonne, and Oak Ridge—as superconductivity pilot centers. The pilotcenter approach, including expedited proce-dures for contracting and project approval, andtransfer of intellectual property rights, had beeninitially proposed by Los Alamos, which hadbeen asked by the Secretary to explore mecha-nisms for cooperative ventures.

DOE user facilities have begun attracting theattention of private firms: the Department’sfigures show 1600 industrial visits in 1987, com-pared with 260 in 1981.19 But collaborative

~TThe president’s Commission on Executive Exchange, in re-sponse to the April 1987 Executive Order, has been working ona small-scale plan for exchanges of technical personnel betweenindustry and Federal laboratories. Industrial participants willprobably be limited to relatively large companies that can af-ford to share the administrative expenses, as well as picking uppart of the costs of the exchange. Contractor-operated labora-tories may not be covered—thus excluding most DOE facilities.

InIntroduced in 1987, S. 1480 also includes provisions for co-operative R&D on mapping the human genome and semicon-ductor manufacturing. The bill, in its original and modified ver-sions (Senate Amendment 1627, introduced in March 1988) woulddirect the Secretary of Energy to establish cooperative centersat DOE national laboratories for HTS R&D, and give the labora-tories greater autonomy in negotiating agreements with privatecompanies and universities.

leThe Ig87 estimate comes from DOE’s Laboratory Manage-ment Division, that for 1981 from the statement of Dr. James

projects with industry, though on the rise, in-volved just 57 companies and R&D valued atabout $110 million during 1987 (for the multi-program laboratories). Given this so-far mod-est showing, Congress might direct DOE to takean explicitly experimental approach to coop-eration with industry (Option 15). Rather thana full-scale effort, structured trials could helpindustry and the laboratories find ways of work-ing together while avoiding unrealistic expec-tations and the danger of steering too manyHTS R&D dollars to untested programs. Pilotprojects could take a variety of forms: firmsmight work with the laboratories singly or ingroups; potential rivals could choose to pursuepre-competitive projects jointly; firms with sim-ilar R&D objectives, though in different busi-nesses, could cooperate, along with those hav-ing supplier-customer relationships.

Industry will have to take much of the initia-tive if the DOE laboratories are to aid in com-mercialization of HTS. Companies must be will-ing to search out areas of expertise in thelaboratory system, and seek to take advantageof them—contributing a substantial share ofproject funds. If Federal dollars cover too higha fraction, the company may no longer feel ithas a stake in outcomes; projects can stray fromthe needs of commercial technology develop-ment. The laboratories might also find that theonly companies working with them were thosewith few prospects for commercial success, andlittle choice but to take whatever help DOEmight offer.

At the same time, while few firms are likelyto make substantial financial commitmentswithout guarantees of influence over researchgoals, industry cannot have too much control,else planning horizons will shorten: unless co-operative projects have riskier and/or moregeneric R&D objectives than companies wouldpursue on their own, there is little justificationfor Government participation. These consider-

Decker at the Joint Hearing on Technology Transfer before theHouse Committee on Science and Technology and the Subcom-mittee on Energy Research and Development of the SenateEnergy and Natural Resources Committee, Sept. 4, 1986 (Wash-ington, DC: U.S. Government Printing Office, 1987), p. 22.

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ations suggest projects that last 3 to 5 years ormore, with industry cost sharing in the rangeof 40 to 60 percent.

It might also be appropriate for Federal agen-cies to share costs with industry-based col-laborative R&D ventures (Option 16—also seech. 5). The justification? Longer time horizons.While national laboratory participation mightsometimes be desirable, there seems no reasonto make this a precondition.

Regardless of final policy decisions on coop-erative R&D, mechanisms for evaluating differ-ing approaches, and disseminating the results—and not just the success stories—will be needed.The approaches emerging could have relevancegoing well beyond superconductivity.

State Programs and Approaches

Over the past decade, many States, in thename of economic development, have estab-lished programs for supporting high-technologybusinesses. Some already support HTS.

Among the more visible initiatives:●

●

●

●

●

advanced technology centers intended toattract and work with high-technology in-dustry;centers of excellence at state-supporteduniversities (several—e.g., at the Univer-sity of Houston and the State Universityof New York at Buffalo—have been estab-lished in superconductivity);small business innovation research pro-grams, patterned after those at the Federallevel (adopted quite recently by half a dozenStates);technology extension services, intended tohelp companies attack technical problemsand diffuse know-how to industry;financial assistance for start-up firms andsmall businesses.

Many State governments have also establishedadvisory commissions and councils on scienceand technology.

The variety and innovative nature of Stateprograms also mean that some of the under-takings have been fragmentary. Few States have

comprehensive efforts. The New York State Sci-ence and Technology Foundation, and Penn-sylvania’s Ben Franklin Partnership, have beenamong the more extensive. Still, State govern-ments have some tools to call upon for aidingHTS technology transfer and commercializa-tion that are not available to the Federal Gov-ernment. They also have compelling motiva-tions—jobs and income.

OTA has previously suggested that Federalmatching funds for State programs such as tech-nology extension services could be appropri-ate.20 Additional possibilities (Option 17) in-clude small planning grants to the States forstrengthening R&D-based economic develop-ment initiatives. Pilot projects might includea demonstration program for State technologyextension services, as provided for in S. 907(incorporated in the omnibus trade bill passedby Congress but vetoed by President Reaganin May 1988).

This option could complement existing Fed-eral Small Business Innovation Research (SBIR)programs. Under the Small Business Innova-tion Development Act of 1982, Federal agen-cies must allocate 1.25 percent of extramuralR&D budgets exceeding $100 million for SBIRawards:

●

●

●

Phase 1 contracts provide up to $50,000for demonstrating the merit of an idea.Under Phase II, agencies may award upto $500,000 for taking Phase I concepts tothe pre-prototype stage.In Phase III, companies can proceed withdevelopment using non-federal funds, orseek non-SBIR money from Federalagencies.

‘“’’ Development and Diffusion of Commercial Technologies:Should the Federal Government Redefine Its Role?” staff memo-randum, Office of Technology Assessment, Washington, DC,March 1984, pp. 10 and 48.

Precedents for assistance to the States include Federal fund-ing during the 1960s and early 1970s for strengthening State andlocal capacities in dealing with issues of technology and science.At the time, these efforts were primarily focused on “publictechnology” —e.g., the direct needs of State and local govern-ments, rather than economic development and business needs.

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SBIR money has gone in the past for LTS re- ness advisory services, some of which offersearch; Federal agencies, including DoD and assistance in applying for Federal SBIR grants.DOE, are currently evacuating well over 100 planning grants could help the States go fur-SBIR proposals for HTS awards. ther in complementing the Federal effort. Con-. .

So far, half a dozen States have establishedgress might also consider raising the Phase I

small business innovation research programsceiling from $50,000—which buys relatively lit-tle today—to, say, $100,000.

of their own. Many States operate small busi-

TECHNOLOGY INTERCHANGE WITH JAPANPresident Reagan’s superconductivity initia-

tive speaks of reciprocal opportunities for theUnited States and Japan to cooperate in R&D.The Japanese Government’s pronouncementson HTS also stress international cooperation—e.g., foreign participation in government-spon-sored superconductivity projects such as theNew Superconductivity Materials Research As-sociation, and the International superconduc-tivity Technology Center (ISTEC, ch. 3).

If nothing else, Japan has sought to respondto criticism that its research system has beenclosed to foreigners. But agencies of the Japa-nese Government also have quite concrete ben-efits in view—notably, new perspectives andnew ideas that could strengthen Japan’s capa-bilities in basic science. More than symbolism,international cooperation could help the Japa-nese reach their own objective—a more crea-tive R&D system. The Japanese also realize thatthey risk loss of access to research from theUnited States and other countries if they do notopen up their own laboratories.

New developments in HTS will continue tocome from Japanese laboratories . Americancompanies —as well as individual scientists andengineers—stand to gain from participating incooperative projects, but only in full partner-ship with Japanese companies and Japanese sci-entists. More than direct benefits are at stake.Hands-on involvement in Japanese R&D willhelp Americans–as organizations and individ-uals—understand how the Japanese competeso effectively.

Participation and Monitoring

As this report was being completed, no U.S.firm had agreed to join one of Japan’s coopera-

tive projects as a full member, although a fewhad become affiliates. American companies, atthis point, feel that the costs are too high—andnot only the fees (full membership in ISTECruns about $800,000). To benefit from full mem-bership, a company would have to assign oneor more highly competent professionals—fluentin Japanese—to the cooperative project. Scien-tists with relevant skills and experience are rarein both countries. American firms would bereluctant to send one of their best people to Ja-pan, even if they had someone who spoke thelanguage. (Evidently, few U.S. subsidiaries inJapan have not had much success in hiring top-rank engineers and scientists.)

For smaller U.S. firms, especially those with-out Japanese affiliates, any form of participa-tion may be difficult to justify. If U.S.-basedprofessional societies or trade associationswere permitted to join Japan’s government-sponsored projects, spreading the costs, Amer-ican industry could gain better access to Japa-nese HTS R&D. Alternatively, a number ofAmerican firms might form a joint venture forsuch purposes as monitoring HTS R&D in Ja-pan, keeping members aware of opportunitiesfor individuals as well as companies, and help-ing transfer technology to the United States.The U.S. Government could support such aneffort, perhaps by helping finance an office inJapan, or as part of a larger program such asNSF’s Japan Initiative (see Option 18 in table14). Federal support for such an office wouldbuild on precedents including aid provided bythe Commerce Department in 1984 to the Amer-ican Electronics Association for a trade officein Tokyo.

Some American companies already operateJapanese affiliates primarily as listening posts,

—

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Table 14.—lssue Area Ill: Technology Interchange with Japan

Issue Options for Congress Advantages Disadvantages

Smaller U.S. companies may not have theresources to keep up with fast-breakingdevelopments in Japan. While the Japa-nese have offered foreign firms opportu-nities to participate in government-sponsored cooperative projects, theresponse to date has been tepid. A jointventure or an organization such as aprofessional society or trade associationmight be able to spread the costs and helpAmerican industry gain access to Japa-nese HTS R&D.

Few technical professionals in the Unit-ed States have the language skills or in-clination to take temporary appointmentsin Japanese laboratories—the most directmeans for transferring technology andknow-how from Japan to the UnitedStates, and a necessary step in improv-ing American understanding of Japan’sresearch system.

No more than a tiny fraction of U.S. scien-tists and engineers will learn Japanese inthe near future, leaving an ongoing needfor prompt translations of Japanese scien-tific, technical, and business publica-tions–including informally circulated“gray literature. ”

OPTION 18. Provide a seed grant to aprofessional society or trade associationfor an office in Japan to monitor develop-ments in HTS, with funds sufficient tooperate the office for perhaps 5 years. Anon-profit organization such as the Ameri-can Institute of Physics, the AmericanChemical Society, or the Federation ofMaterials Societies should bean accept-able vehicle in Japanese eyes.

OPTION 19. Monitor progress in imple-menting NSF’s Japan Initiative, appropri-ating additional money if U.S. funds–together with contributions from Japan–cannot sustain all components of theprogram.

OPTION 20. Direct the Department ofCommerce, as part of its responsibilitiesunder the Japanese Technical LiteratureAct of 1986 (Public Law 99-382), to es-tablish a program specifically for gather-ing, evaluating, and disseminatinginformation on Japanese science/technol-ogy and business activities as they relateto HTS. The effort might be viewed as amodel for improving the effectiveness ofCommerce’s programs on Japanese infor-mation. For insightful evaluations of tech-nical efforts in Japan, Commerce willprobably need help from Federal agencieswith greater expertise in engineering andscience.

SOURCE: Office of Technology Assessment, 1988.

just as the Japanese maintain technology cen-ters in the United States. The Japanese shouldbe willing to allow group participation by Amer-ican firms in information-exchange activitiessuch as the New Superconductivity MaterialsResearch Association. Moreover, there is noreason why a corporation setup as a joint ven-ture should not qualify to join ISTEC.

Language Training; FellowshipsLaboratories

in Japanese

If the United States is to make better use ofR&D conducted in other countries, more Ameri-cans will have to seek and take temporary as-signments in foreign laboratories. At present,

One way or another, the United Statesshould take the Japanese up on theiroffers to cooperate in HTS research. Inaddition to serving as liaison to forumslike the New Superconductivity MaterialsResearch Association, a professional so-ciety or trade organization could helpscreen the latest scientific and technicalinformation in Japanese, identifying HTSresearch reports for translation and dis-tribution. This function could complementthe current effort, quite small, by theCommerce Department under the Japa-nese Technical Literature Act (see Option20 below).

To take advantage of R&D opportunities,and Japanese technical know-how, moreAmericans need, not only language train-ing, but experience working In Japan.

Access to foreign scientific and technicalinformation has become increasingly im-portant as U.S. technological advantageshave diminished. In the past, technicaltranslations from German and Russianhave been more common than fromJapanese.

Japan might gain more than the UnitedStates from cooperation in HTS. Much ofthe U.S. work will take place in universi-ties, where it will be relatively open; muchof Japan’s work will take place in indus-trial laboratories.

Sending more engineers and scientists toJapan, and funding language training forprofessionals, will be only small steps for-ward, Longer-term needs begin with lan-guage training in U.S. primary andsecondary schools.

Translations and technical evaluations willneed substantially higher funding levelsto accomplish much. During fiscal 1987,Commerce reprogrammed $300,000 toimplement the Japanese Technical Liter-ature Act; in 1988, the Department plansto reprogram $500,000 for this purpose.An aggressive effort on HTS alone couldwell consume most or all of this. Screen-ing and evaluation of technical informa-tion is particularly important, butexpensive. To this point, U.S. companieshave shown little interest in Japanesetechnical and scientific literature.

few U.S. engineers or scientists have the rightcombination of technical qualifications, lan-guage skills, and motivation to work in Japan(in part because they may feel that their em-ployer—and the U.S. labor market as a whole—will not reward them for learning Japanese andspending time there). As many as 7,000 Japa-nese engineers and scientists are currently atwork in the United States—in government fa-cilities, as well as universities; perhaps 500Americans work in Japanese laboratories.21

Japan offers research fellowships for foreign-ers under the sponsorship of its Key Technol-

21E. LaChiCa, “U. S., Japanese Negotiators Deadlocked on Tap-ping Each Other’s Technology,” Wall Street Journal, Jan. 22,1988.

717

ogy Center, as well as the Ministries of ForeignAffairs and Education. Given the paucity of lan-guage skills within the U.S. technical commun-ity—and such less tangible but no less substan-tial barriers as difficulty in finding employmentfor husbands or wives—not many Americanshave sought out these opportunities. Culturaldifferences and high living costs create obsta-cles particularly for more senior Americanengineers and scientists, including those inR&D management positions.

NSF’s Japan Initiative, launched in 1988 withan allocation of $800,000 from the Foundation’sbudget for bilateral programs, is designed toencourage more Americans to take advantageof research opportunities in Japan. The pro-gram offers fellowships for language training,as well as financial support while in Japan.Japan’s Prime Minister Takeshita, moreover,has announced that that his government willgive NSF $4.8 million to finance work in Japanby U.S. researchers, With this offer, near-termfunding for the Japan Initiative seems adequate.NSF is seeking $1.6 million for the program infiscal year 1989; Congress might monitorprogress in implementing the program, andappropriate additional money if U.S. funds (to-gether with contributions from Japan) cannotsustain all its elements (Option 19). Congressmight also wish to consider greater Federalassistance to American schools and universi-ties for language training.

Technical Information

Most U.S. scientists and engineers neces-sarily will continue to rely upon translationsfor technical information from Japan. Congresscould direct the Commerce Department to ex-pand its small program for translations of Jap-anese technical literature under the JapaneseTechnical Literature Act, perhaps appropriat-ing funds specifically for information on HTS(Option 20). A professional society or tradeorganization (as discussed under Option 18),in addition to serving as liaison to organiza-tions like the New Superconducting MaterialsForum, could help screen the latest scientificand technical information on HTS.

While major scientific findings from Japaneselaboratories normally see publication in Eng-lish or another Western language, less of theJapanese engineering literature is translated.Moreover, Japan produces a large volume of“gray literature”—company, university, andgovernment reports, as well as other informaldocuments not widely circulated. The gray liter-ature, hard to acquire outside Japan, often in-cludes important technical and business infor-mation.

Foreign Access to U.S. Technology

The U.S. Government has signaled Japan andother nations that it may restrict outflows ofinformation from Federal HTS research. TheJuly 1987 Federal conference, at which Presi-dent Reagan announced his superconductivity

initiative, was itself off-limits to representativesof foreign governments. In the private sector,the Council on Superconductivity for AmericanCompetitiveness limits its membership to U.S.corporations and citizens. One title of the Ad-ministration’s proposed SuperconductivityCompetitiveness Act, sent to Congress in Feb-ruary 1988, would permit agencies to witholdscientific and technical information requestedunder the Freedom of Information Act undersome circumstances.

The scientific community has long arguedthat restrictions on information exchange harmits enterprise, and can only be justified on strictgrounds of national security. But the questionfor HTS is rather different. Proposals such asthe Administration’s seem to assume that theUnited States is far enough ahead in HTS tohave something to protect. OTA has found noevidence supporting such an assumption. Lack-ing a decisive lead in the R&D race, measuresseeking an equitable two-way flow with coun-tries such as Japan have much more to recom-mend them. Of course, the threat of embargoeson scientific and technical information helpskeep the pressure on other nations to provideaccess to their own research systems (box P).

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CONCLUDINGIn the months following the initial break-

throughs in superconductivity, the U.S. Gov-ernment moved quickly to redirect R&D sup-port. The growth in funding–from virtuallynothing in fiscal 1986, to $45 million in 1987,and $95 million in fiscal 1988—demonstratesthe responsiveness of the system. Yet there arereal reasons for concern: lack of new moneyfor HTS; the possibility of a reaction againstcontinuing high levels of R&D spending unlessexciting new results keep coming in; heavy defacto reliance on DoD and DOE to generatetechnology that industry can commercialize.Budget uncertainties in the R&D agencies,which lasted well into the current fiscal year,put many federally funded projects on hold,slowing U.S. progress.

Defense-related spending—centerpiece of theFederal R&D budget since World War II—leadsto major new commercial products or processesless frequently than in earlier years. The rea-sons include a drop in support for both genericand high-risk, long-term R&D relative to theoverall DoD R&D budget, as well as growingisolation of the defense sector of the economy.Meanwhile, funds for applied research that

would fill the gap between basic science andthe short-term projects conducted by industryhave been cut back: the U.S. Government spendslittle money on work that would strengthen thefoundations for commercial industries.

At present, DoD has roughly half the Federalmoney for HTS. The field is new, still in theresearch stages. Much DoD-sponsored R&Dover the next few years should yield broadlyuseful results. Thus DoD’s ample resourcescould become a major asset in commercializ-ing HTS. But the Pentagon will begin steeringdollars to support mission-specific applicationsas soon as these are in view—indeed, may al-ready be doing so.

When it comes to the Department of Energy,which is getting 30 percent of the Federal funds,the primary questions concern the ability of thenational laboratories to forge new cooperativerelations with industry. The laboratories arechanging. But the system is a big one, burdenedwith inertia; commercialization has not beena significant mission. It will take a major depar-ture from business as usual for the laboratoriesto have much impact on commercialization of

1 1 9—

HTS (which is not to say that when the nextset of opportunities comes along, the DOE lab-oratory system may not be in a better positionto respond).

The Federal Government pays for about two-thirds of the R&D carried out on the Nation’scampuses, chiefly through awards to individ-ual faculty members, Given the short-term ori-entation of most business-funded R&D, the NSFbudget for HTS is particularly critical. Policiesaimed at breaking down some of the discipli-nary barriers in American universities, and cre-ating environments where truly interdisciplinaryresearch could flourish, would help broadly inthe commercialization of this and other tech-nologies.

The R&D budget is not the whole of technol-ogy policy. Nor is technology the only ingre-dient in successful commercialization. All ofthe policy options covered in this chapter, takentogether, would be no more than a first stepin addressing the competitive difficulties ofAmerican industry. Still, the money Federalagencies spend on R&D, the ways they spendit , their efforts to t ransfer technologies to

industry—actions taken every day by more thana dozen agencies—have enormous long-run im-pacts. When companies search for competitiveadvantages through propr ie tary technology,they draw continually on this publicly funded,publicly available technology base. More effec-tive interactions among the major players inthe R&D system—industry, the national labora-tories, universities—would speed the genera-tion of technical knowledge, and, perhaps moreimportantly, its use.

In a time of budgetary stringencies, mecha-nisms for establishing R&D priorities across theagencies become more critical than ever. Thisis perhaps the s ingle most important pointraised in this chapter. To maintain its competi-tiveness, the United States must generate todaythe technical knowledge that industry will de-pend on tomorrow, For HTS, this means, notonly effective mechanisms for setting R&D pri-orities, but stability and continuity in funding.These needs imply another: a strategic view ofthe ways in which federally funded R&D canspur economic growth and competitiveness—the subject of the next chapter.

———.

Chapter 5

Strategies for Commercial TechnologyDevelopment: High-Temperature

Superconductivity and Beyond

—*

CONTENTS

PageSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................123Strategy l: Flexible Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........128

The Current Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........128Strengths and Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......129

Strategy 2 : Unaggress ive Response to HTS . . . . . . . . . . . . . . . . . . . . . . . . . . .132A Larger Role for NSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ...........132Industrial Consortia with Federal Cost Sharing . ......................133A Working Group on Commercialization. . . . . . . . . . . . . . . . . . , . . , . . . . . . .137

Strategy 3: A Federal Technology Agency—Three Alternatives . .........,138An Umbrella Agency for Science and Technology . ...................140Higher Priorities for Technology and Engineering . ...................141An Agency for Commercial Technology Development . ................142

Concluding Remarks.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............147

BoxesBox PageQ. Strategy: Key Ingredients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124R. National Laboratories or Universities?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131S. Collaborative R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............135T. Aggressive Support for Commercialization: Other Possibilities . ........139U. An Advanced Technology Program . . . . . . . . . . . . . . . . . . . . . . . .........143V. An Advanced Civilian Technology Agency, as Proposed in S.1233 .. ...144W. Project Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................146

TableTable Page15. Desirable Features in a Federal Agency for the Support of

Commercial Technology Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147

Chapter 5

Strategies for Commercial Technology Development:High-Temperature Superconductivity and Beyond

SUMMARY

Together, a collection of government actionsconstitutes a strategy, just as the actions of acorporation’s upper management constitute astrategy. De facto strategies, though hardly un-heard of in business, are more common in gov-ernment. indeed, to some, the very notion ofstrategy implies a measure of loss in one of theprimary strengths of U.S. technology policies—the flexibility of Federal agencies, their abilityto respond quickly to new circumstances,

Regardless of approach for promoting com-mercial development of high-temperature super-conductivity (HTS)—and regardless of whetherthe approach is called a strategy—success willrequire diversity in sources of funding and inthe R&D programs that Government moneysupports, Earlier chapters stressed the uncer-tain in prospects for HTS. With several agen-cies involved, good ideas will get a hearing—atthe Defense Advanced Research Projects Agen-cy (DARPA), if not the Department of Energy(DOE) or the National Science Foundation (NSF).Duplication, in any case unavoidable, can spurcompetition. Continuity, likewise, will be im-portant. To encourage U.S. industry to take alonger view, the Federal Government must doso itself (a need addressed by several of the pol-icy options in ch. 4).

In keeping with continuity and stability infunding, any strategy for HTS should avoid highvisibility. If policy makers or the public look toFederal programs for near-term breakthroughs,disillusionment will follow. Technological ad-vance cannot keep up with expectations fed bythe media.

The Federal Government will have to let mar-ket forces drive HTS technology as much aspossible. Historically, governments have donea poor job of trying to anticipate what marketswill demand, if not the course of technologicalevolution; picking R&D fields ripe for major

technical advance is one thing, picking win-ning commercial appl icat ions qui te another .Policies that pull technologies into the market-place in more subtle ways—e.g., through gov-ernment procurement—can work, especially inconjunct ion with R&D funding designed topush the technology along. Market pull coupledwith technology push—in a policy environmentthat encourages collaboration among industry,universities, and Government—will help speedcommercial technology development. Box Qdiscusses these and other operating principlesin more detail.

This chapter considers three approachesthrough which the Federal Government mightfoster commercialization of HTS:

●

●

Flexible response, Strategy 1—the current,de facto U.S. policy–grows naturally outof postwar U.S. technology policy. Char-acterized by strong support for basic sci-ence and for mission-oriented technologydevelopment, direct measures for support-ing commercial technology developmentfind little place.

An aggressive response, Strategy 2, woulddiffer in three major ways from current pol-icies. First, NSF would have more moneyfor HTS—in essence, an insurance policyto make certain that good ideas for basicresearch have a shot at funding. Second,the Federal Government would share in thecosts of private sector collaborative R&Dventures. The rationale: more work withinindustry on long-term, high-risk HTS R&D.Third, a working group of experts fromindustry, universities, and governmentwould be assembled to decide which col-laborative R&D proposals were worthy ofsupport, and to otherwise advise on pol-icy measures,

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Box Q.--Strategy: Key Ingredients

Disagreements over strategies for technology development reflect differences of opinion over tech-nical questions (How long will it take to develop flexible conductors made from the new superconduc-tors?) and over market conditions (What applications will be most attractive at liquid nitrogen temper-atures?), as well as over matters of political preference (Is it proper for government to supportcommercial technology development directly?). Some policies—e.g., support for basic research—findnearly universal support. So do some of the other ingredients that would find a place in almost anystrategy for supporting HTS:

Diversity in sources of R&D support. No one knows what new discoveries may emerge in su-perconductivity, where they will come from, or when. A portfolio of research makes more sensethan one or a few centers of excellence; so do multiple sources for contracts and grants.Continuity in support, over a period that could easily be a decade (as emphasized in ch. 4).A judicious balance of technology push and market pull. Technology push via R&D supportworks best when accompanied by policies such as government purchases and demonstrationprojects that help pull high-risk, high-cost technologies into the marketplace. Overall, however,government should let industry drive technology as much as possible.Measures that encourage collaboration among universities, industry, and Government.

DiversityMany sources of support, and many centers for R&D, may mean duplication of effort, but that

is not necessarily bad. Overlap breeds competition and helps ensure that no path goes unexplored.There is another side to diversity. Accountability can suffer: if everyone is responsible for HTS, thenno one is fully accountable. Still, lacking an overriding goal—sending a spacecraft to Mars, or build-ing a magnetically-levitated (maglev) rail system along the Eastern seaboard—where is the need forcentralized responsibility? Development of HTS is a broad objective, and also a fuzzy one: the tech-nology cuts across the missions of a number of agencies.

NSF funds research proposals rated highly on grounds of their promise in advancing scienceand technology; the subject of the research carries less weight. Not without controversy, the processnonetheless has found wide acceptance. But when it comes to projects in the mission agencies, decision-makers do not always see eye-to-eye on what should be supported. In the early days of computertechnology, visionary projects such as Whirlwind and ILLIAC were as fiercely opposed by one setof agencies as they were favored by those paying the bills; U.S. computer technology would not haveadvanced so quickly had any one agency been solely responsible.1

ContinuityIn reality, diversity is seldom a problem in the decentralized U.S. system–it comes naturally.

The more common problem is continuity. Stop-and-go decisions have bedeviled U.S. technology pol-icies, as chapter 4 makes clear. Congress passes the Stevenson-Wydler Act, but a new Administrationdoes not fully implement it. The executive branch seeks to double the NSF budget over five years,but Congress does not appropriate the funds.

If there is a secret to Japanese technology policy, it lies in continuity-stability in commitmentand financing, without rigidity. Publicly-funded R&D programs in Japan, many of which have en-hanced the competitiveness of Japanese industry although budget levels have been modest, often be-gin with an 8- or 10-year planning horizon. R&D priorities change over the course of the maglev trainprogram (ch. 3) or the fifth-generation computer project as results come in and new directions open.Budgets may change too. But sharp reversals are rare. A decade-long time horizon stands for all tosee as a demonstration of commitment by both government and industry. R&D sponsored by the U.S.Government often lives from one budget cycle to the next; the consistency seen in Japanese policies

“’Government’s Role in Computers and Superconductors,” prepared for OTA by K, Flamm under contract No, H36470, March 1988, pp. 9-27.

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has few precedents, even in defense (just as few American firms have shown the persistence in prod-uct development that led to export successes like video-cassette recorders for the Japanese).

In the United States, the spectacular success of a few flagship efforts like the Manhattan Projectand Apollo left a trail of unrealistic expectations. NSF’s RANN program (box O, ch. 4) sprang fromthe notion that the technical expertise needed to put men on the moon could be turned, almost asdirectly, to social problems. Operation Breakthrough, the Department of Housing and Urban Devel-opment’s effort to revolutionize the technology of residential construction, grew from the same soil.RANN came and went in half a dozen years, Operation Breakthrough even more quickly.

HTS will be equally vulnerable. The public’s expectations have been raised by a year and a halfof scientific discoveries, a Federal conference featuring the President and three cabinet officers, anda Nobel Prize—all accompanied by ample media coverage. In the absence of steady progress, publicsupport may wane; the painstaking and laborious work needed to turn science into useful technologyspawns few headlines.

Low VisibilityIn the United States, publicly-supported R&D programs have generally been more successful, and

more durable, when they avoid high visibility.2 Apollo was the exception, not the rule. If policy makersor the public look to a Federal HTS program for immediate technological or commercial triumphs—inthe extreme, as a flagship in the international competitive struggle—they will be disappointed. A high-visibility, crisis-driven program such as the synthetic fuels initiative of the 1970s may collapse onitself, and in doing so harm the cause of future support for related efforts.

Technology Push and Market PullVisibility, by itself, did not do in the synthetic fuels program. The failure lay in attempts by gov-

ernment bodies to anticipate the course of technological evolution and the needs of the marketplace.(Japan has not been immune: the Ministry of International Trade and Industry tried to force Hondaout of the auto business in the 1960s.) The lesson, repeated many times over: in the absence of con-vincing reasons for doing otherwise, let market forces drive technology.

Although picking winners is something that Federal agencies have never done well, policies thatserve to pull the market in more subtle ways have proved beneficial. They are particularly effectivein conjunction with R&D funding designed to push the technology along.

To elaborate, the Federal government has confined its role in (non-defense) technology develop-ment largely to funding research, on the assumption that the commercial market could and wouldcreate the necessary demand for resulting products. But this is an area where the market does notfunction perfectly. Because product development efforts in high-risk technologies are extremelyexpensive—accounting for nearly 80 percent of R&D costs—firms must have some confidence thatthere are customers at the end of the tunnel; potential customers often do not have enough informa-tion or certainty to provide that assurance, however. Thus, there is a role for government in helpingassure an early market for such products.

In computers and semiconductors, Federal Government procurement provided that assurance.The defense-space share of the total computer hardware market was 100 percent in 1954, and it ex-ceeded 50 percent until 1962. Similarly, during the early years of integrated circuit production, de-fense and space procurement accounted for almost 100 percent of sales. Given assurances of stable–indeed growing—demand, companies raised their own R&D spending. Technological advances cou-pled with learning and scale economies led to dramatic price reductions for computers. Even moreimportant was the “demonstration effect”: successful use of computers by military and space agen-cies proved their value to a skeptical business community.

Defense procurement was effective at pulling computer and semiconductor technologies alongfor two reasons. The government’s mission-based needs meant that agencies evaluated technological

“’Collaborative Research: An Assessment of Its Potential Role in the Development of High Temperature Superconductivity,” prepared forOTA by D.C. Mowery under contract No. H36730, January 1988, pp. 13-14 and 67-88.

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alternatives carefully and provided valuable user feedback to suppliers. Moreover, agency needs, andthe technologies they spawned, meshed closely with business needs. (As one computer executive ob-served, “Space and defense computer applications .,. served as a ‘crystal ball’ for predicting the fu-ture direction of computer use in industry.”] Federal demonstration projects have been similarly ef-fective under the same conditions, i.e., when mission-based government support of a developingtechnology steers it in a direction which converges with commercial interests.

Lacking this, though, the synergy can quickly vanish. Because of the growing divergence betweenmilitary and civilian technologies and markets, defense procurement no longer has the positive im-pact it once did on commercial technology development. That issue aside, procurement and demon-stration projects have been less effective when they have been done without the guidance of an agencymission.

Governments can strengthen market forces in other ways: in Japan, government-financed enter-prises buy computers and robots and lease them to end users. The result? Guaranteed markets forthe manufacturers, and reduced risk for the customers, who can turn back the equipment if theyfind it unsatisfactory.

Finally, government regulations can also pull technologies into the market, sometimes with goodresults. Federal fuel economy standards created incentives for American automakers to improve theircapabilities in engineering and producing small cam. Technical standards (e.g., for computer lan-guages) can be an important spur to technology diffusion.3

As this discussion suggests, market pull policies create vexing dilemmas for governments. Pol-icies to support the adoption of publicly-funded R&D results are an essential component of a govern-ment effort to develop technology. But insofar as these incentives for technology adaption target spe-cific applications, policymakers are placed in the position of trying to forecast the course of technologicalevolution and anticipate the commercial market. This is a task they have done poorly in the past.

Interactions Among Industry, Universities, and GovernmentA final principle, again emerging from the postwar history of high technology: collaborative inter-

actions among universities and industry speed technological advance, particularly when supplementedby government R&D support and procurement. Coupling between industry and universities playeda major role in the development of computing during the 1940s. The first practical electronic machinewas built at the University of Pennsylvania. After the war, many of the key scientists and engineersleft university and government laboratories to staff fledgling computer manufacturers like Univac.

In the late 1970a, genetic engineering and biotechnology--supported in universities and the lab-oratories of the National Institutes of Health with Federal dollars--moved rapidly into the privatesector, aided by abundant infusions of venture capital. Today, the United States remains well aheadof Japan and Europe in biotechnology. At this stage, coupling among universities, industry, and gov-ernment makes sense for HTS: much of the research remains well-suited to academic settings; firmsin many industries want a window on the technology; Federal agencies are already putting money in.

%ee lntefmtio.ual Competft&m k 8arv&Iu (#WW@On, N: OffiW Of Technology Aaweamen& ~ 19s7). pp. 315-317,Airline -tiomih by MrMing p~ff competiticm, fOr@ carriers tO * other insane d Mer@fa@ their uervicea. Thy vied to offer

truvelem the lateet equipment in order to compete cm apeed uncl comfort, buying planes from Boeing, LocldwL and McDonnelWouglaa. Thesemanufacturers, in turn, developed new mxlds.

● A Federal technology agency. Strategy 3 that would substantially raise priorities forconsiders proposals for altering govern- engineering research; and direct supportment responsibilities for science and tech- for civilian, commercial technologies. Thenology—a subject that goes far beyond the second two hold more promise than theparticular needs of HTS. OTA analyzes first. Of course, such changes would takethree variants: a cabinet-level science and time, meaning that they have little to offertechnology agency: institutional changes in terms of the immediate needs in HTS.

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Each of the strategies has advantages anddisadvantages. Strategy 1 is in place and work-ing; the initial Federal response to HTS illus-trates the considerable strength of the tradition-al approach. Mission agencies moved quickly,funneling millions of dollars into HTS R&Dina matter of months. The scientific communitymoved even faster, with large numbers of skilledprofessionals shifting into HTS from relatedfields. The magnitude of the response reflectsthe sheer size of the pool of scientific expertisein the United States—itself a major source ofadvantage.

Several weaknesses are apparent in the U.S.response. First, the universities are having ahard time competing for funds; DOE labora-tories are getting roughly as much money forHTS research as NSF has for all the Nation’suniversities. The second weakness: almost com-plete reliance on mission agencies to supportHTS R&D. As a result, not enough R&D moneyflows to non-defense industries–which mightnot be a problem, were American firms pursu-ing HTS as aggressively as Japanese firms. Nei-ther DOE nor the Department of Defense (DoD)can be expected to provide broad support forindustrial R&D in HTS. HTS technologies stem-ming from DoD R&D may eventually find theirway into the marketplace, but time lags thatmade little difference in the 1950s and 1960s,when the United States dominated the techno-logical frontier, can be fatal in the 1980s.

OTA’s analysis suggests that continuing alongthe lines of Strategy 1—the current approach—will more than likely leave the United Statesbehind in superconductivity. In mid-1988, theU.S. position in HTS looked like a strong one.But this is because HTS remains largely a mat-ter for scientific inquiry. With progress towardapplications, the picture will change. At best,a lead in science creates small advantages, oftenfleeting. The real contest will be over applica-tions engineering and manufacturing—whereJapan excels, and where proprietary technol-ogy, much of it developed in industry, will makethe difference.

Strategy Z, an aggressive Federal response,would, first of all, assign NSF a greater role in

sponsoring R&D. Although basic research inHTS does not seem underfunded, more moneyfor the Foundation—perhaps $20 million overa 5-year period, specifically for HTS—wouldguard against missed opportunities in relativelyfundamental work. With enough funding avail-able for its research center programs, NSFwould also be in a position to support one ormore proposals for centers dedicated to HTS.

As the second step in a more aggressive strat-egy, the Federal Government could share insome of the costs of R&D conducted by indus-try consortia. This is the simplest and quickestway to steer more resources into applied re-search and generic technology development.Government could direct public funds to R&Dindustry views with favor, but where the bene-fits would be difficult for individual firms tocapture.

A working group on HTS would be assem-bled to help carry out this second strategy, andin particular to make decisions on cost-sharing.The aggressive response approach requiresagreement on an R&D agenda—a consensusthat should not leave out the universities or thenational laboratories, even though industry’sview of commercial needs would have to comefirst. The primary task for the working group:deciding which R&D consortia receive Federaldollars—a sticky issue, one involving decisionsgoing beyond the scientific merits of alterna-tive projects.

This strategy skirts the “picking winners”problem raised by Federal subsidies for privateR&D by, in effect, allocating government re-sources to the highest bidders, That is, amongproposed R&D consortia—all of which weretechnically qualified—funds would go to thosewhose members were willing to make the longestterm financial commitment and self-finance thehighest fraction of total costs. These criteriawould allocate government financing to jointR&D ventures with the greatest expected pay-offs over the medium to long term. The aggres-sive strategy for commercializing HTS couldsubstantially improve prospects for rapid com-mercialization of HTS in the United States atrelatively modest cost.

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Under Strategy 3, OTA addresses prospectsfor a Federal agency charged with supportingcommercial technologies, A perennial issue inU.S. science and technology policy, many alter-natives have been proposed over the years. Thepossibilities range from a small, independentagency with a budget of less than $100 million,to a cabinet-level Department of Science andTechnology pulling together some (thoughhardly all) of the R&D activities of existingagencies,

The cabinet-level Department of Science andTechnology came forward once more in 1985as the lead recommendation of the Young Com-mission on competitiveness, but found no moresupport than in the past. Alternatively, is it pos-sible to envision a smaller Federal agency withindustrial technology as its mission? Onceagain, proposals have been common—e.g., fora national technology foundation, parallelingNSF’s role in support of science, or a civilianversion of DARPA. The latter has attracted par-ticular attention, given DARPA’s enviable repu-tation—a small group of creative people, withthe judgment and experience to seek out andsupport the best ideas. But DARPA has a mis-sion, and a critical one—support of long-termR&D with potentially big payoffs in militarysystems.

Lack of a comparable mission is the poten-tial Achilles’ heel for a civilian technologyagency. All such proposals face a commonproblem: providing money for industrial R&D,in the name of commercialization and competi-tiveness, without a well-understood and widely-accepted mission, (Competitiveness is a notori-ously slippery concept—more so than national

defense or health.) Lacking such a mission tolend discipline to the process of setting priori-ties and making funding decisions, a Federaltechnology agency could easily end up subsidiz-ing marginal projects,

The more of its funds such an agency chan-neled to industry, the deeper the possible pit-falls. Direct funding of industrial R&D raisesthe specter of subsidies won by lobbying ratherthan merit. Yet if the technology is to be usefulto industry, then much of it should be devel-oped by industry, Dealing with the many andcontentious issues posed by a Federal agencyfor commercial technology development wouldbe difficult, although not necessarily impossi-ble. If such an agency is to support R&Din thepublic interest, it will need to find ways of iden-tifying what that public interest is, convincingpotential critics that it has done so fairly, andthat the results justify continuing support.

Plainly, the three strategies analyzed in thischapter are not exclusive. They do representdiffering views of the strengths and weaknessesof the U.S. approach to technology develop-ment. Those who believe that the fundamentalstrengths of the U.S. system remain intact feelthat industry will be able to commercialize HTSwhen the time is right. Those advocating a moreaggressive policy stress the dangers of a busi-ness-as-usual mentality, given the surprisingspeed with which U.S. industry has lost itsearlier advantages in high technology. Theunderlying worries over loss of competitiveadvantage lead those who would favor the thirdstrategy, or something like it, to argue that theUnited States needs to thoroughly overhaul itsapproach to technology policy.

STRATEGY 1: FLEXIBLE RESPONSE

The Current Approach

This strategy presumes that the existing pol-icy framework is appropriate and sufficient forsupporting HTS.1 To those who advocate this

‘For general background, see A.H. Teich and J.H. Pace, Sci-ence and Technology in the USA (Essex, UK: Longman, 1986);also H. Ergas, “Does Technology Policy Matter?” Technology

approach, a major departure from the currentcourse would be premature—at least during theearly stages of HTS. With a good deal morebasic research required to overcome the tech-nical obstacles posed by the new materials, the.—and Global Industry: Companies in the World Economy, B.R,Guile and H. Brooks (eds.) (Washington, DC: National AcademyPress, 1987], p. 191.

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President’s initiative (box B, ch. 2), along withother executive branch actions, will provide asound basis for industry to commercialize HTS—when the time comes, And, so the argumentgoes, if the pace quickens, or foreign competi-tion intensifies, there will be ample opportu-nity to agree on a stepped-up response.

This is the de facto U.S. strategy. The FederalGovernment is following traditional channels,relying on existing institutional arrangements,and avoiding direct support for commercialtechnology development. A continuation of thisapproach (indeed, almost any approach) willmean:

●

●

●

Heavy ongoing funding for defense appli-cations of HTS. The Strategic Defense Ini-tiative (SDI) will continue providing a gooddeal of the money, and DARPA will prob-ably continue to have a prominent placeas well. Both industry and universitieswould get research money—some of the thelatter through DoD’s University ResearchInitiative—but within half a dozen years,aerospace firms and military systems houseswould probably be conducting the bulk ofDoD-sponsored superconductivity R&D.Although DARPA has stated that the re-sults of its processing contracts will remainunclassified, such a policy will be subjectto change, depending on outcomes. AsR&D moves on to defense-specific appli-cations, classified programs may becomecommon.

DOE and the National Aeronautics andSpace Administration (NASA) would pur-sue their own mission-oriented projects,with most of the Energy Department’smoney going to the national laboratories.Much of DOE’s support will probably gofor R&D and demonstration projects di-rected at electric power applications. DOEand NASA might pick up a few projectsof interest to DoD.

NSF would continue to fund HTS in theuniversities, with some of the Foundation’ssupport going to individual investigatorsand some to research centers.

Other ongoing shifts in U.S. technology policywould proceed along lines suggested in chap-ter 4:

●

●

●

●

The executive branch will continue its ef-forts to open up the national laboratories,as well as to strengthen university-industryrelationships and stimulate technology de-velopment and transfer through such ini-tiatives as NSF’s Engineering ResearchCenters (ERCs) and agency Small BusinessInnovation Research (SBIR) programs.The Administration would also continueto press for stronger intellectual propertyprotection, both at home (process patents)and overseas (negotiations with foreigngovernments aimed at stronger laws andtougher enforcement].Some State governments would channelsupport, direct and indirect, to HTS as partof technology-based economic develop-ment programs,Venture-financed companies dedicated toHTS would continue to emerge. Privatefirms, both new and established, would ne-gotiate collaborative R&D arrangements,nationally and perhaps internationally.

Over the next several years, the United Stateswill continue to take the course outlined above.Will such a response, by itself, be adequate? Thefollowing analysis indicates that it will not.

Strengths and Weaknesses

In many respects, the current approach toHTS illustrates the great strength of the U.S.system of technology development. Althoughsuperconductivity had become something of ascientific backwater by the mid-1970s, NSF foryears supported people like Paul Chu at theUniversity of Houston (an institution much likea hundred others below the top ranks in termsof research funding or prestige), and at leasta few large U.S. corporations maintained smallsuperconductivity research programs. More-over, when HTS broke, American scientistscould quickly take advantage of facilities rang-ing from neutron scattering equipment to theNational Magnet Laboratory at MIT—facilitiesalready in place, the result of years of Federal

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funding. Agencies with their own laboratories–DoD, DOE, NASA–began new R&D internally,while contracting out other work.

U.S. scientists not only responded quickly,but in large numbers, as measured by the floodof proposals to NSF, and papers published inprofessional journals and delivered at scientificmeetings. This response reflects the sheer sizeof the pool of scientific and technical exper-tise in the United States-–a notable strength.It also reflects the flexibility of the U.S. R&Dsystem.

NSF was perhaps the most agile of the Fed-eral agencies, moving quickly to provide funds–largely redirected–to individual researchgroups and to the Materials Research Labora-tories (MRLs). NSF-funded investigators work-ing in related areas were able to shift their at-tention immediately to HTS, because of theflexibility of Foundation grants.

Scientists with DoD and DOE contracts orgrants were also able to move quickly. In addi-tion, DoD redirected millions of dollars in a fewmonths, as various defense agencies exercisedtheir much-valued fiscal autonomy. Each wentits own way, with a resulting diversity of tech-nical approaches that is probably healthy over-all. Likewise in DOE, laboratories competed tostake their claim in the newly discovered terri-tory of HTS, resulting in an aggressive, if some-what fragmented, effort, Interagency coordina-tion, though largely informal, has been relativelyeffective: program managers and contract mon-itors working in superconductivity know oneanother and feel a shared sense of responsibil-ity (box M, ch. 4).

Like government, venture capitalists reactedquickly to the new opportunities, lining up tech-nical experts, many of them university facultymembers, and quickly investing nearly $20 mil-lion in entrepreneurial startups (box G, ch. 3).These startups are just one illustration of closeindustry-university links in HTS—another sig-nificant asset of the U.S. system. The Octoberstock market plunge led at least one HTS startupto cancel plans for a public offering but, over-all, availability of capital has not been a majorconstraint.

In sum, U.S. R&D in HTS will continue tobenefit from the unparalleled breadth, depth,flexibility, and diversity of the Nation’s researchsystem. It is easy to see why many people feelthe current U.S. response to HTS is sufficient—at least for now. But weaknesses have also be-gun to surface, and others will probably appearover the next year or two.

Funding for basic research in HTS could bea problem, though probably not a serious one.As the ongoing flood of technical papers indi-cates, the scientific effort remains broad andintense. (At the March 1988 meeting of theAmerican Physical Society, more than 600 of3,500 papers presented dealt with superconduc-tivity. Most were written by scientists basedin the United States.) There are no obvious gapsin fundamental science: people somewhere arepursuing almost every possibility imaginable.More than likely, the ongoing university effortswill suffice to train enough people for indus-try’s eventual manpower needs.

On the other hand, basic research in HTS mayalready have reached its peak, More sophisti-cated laboratory equipment will be needed tokeep up in the future (e.g., for work on thinfilms), and costs will rise, Some of the investi-gators who used existing grants and contractsto move into HTS will have trouble getting newmoney to continue; they will have to show realpromise, rather than routine results, to qualifyfor ongoing support. And even if there isenough money in total for basic research inHTS, the money might be better spent (box R).As noted earlier, the national laboratories havean HTS budget in 1988 roughly equal to thatof NSF, an allocation that seems out of propor-tion, given the trouble universities have had get-ting funds.

Even if mission-oriented R&D funded by DOEand DoD were to transfer to the commercialmarketplace, it would not do so immediately,The time lags made little difference in the 1950sand 1960s, when American companies were farahead in technology. Today, the United Statescannot afford to wait while know-how diffusesat its own pace from Federal laboratories to theprivate sector.

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Box R.—National Laboratories or Universities?

Postwar U.S. science and technology policy has relied heavily on the university system, with thenational laboratories concentrating on mission-oriented R&D. Since the budget cutbacks of the early1970s, many laboratories have sought to broaden their R&D—a trend that, arguably, has already cutinto the share of Federal resources flowing to the universities. With DOE efforts to move beyondthe big science role inherited from the Atomic Energy Commission (i.e., big physics) into fields suchas mapping the human genome, it may not be much of an exaggeration to say that the Energy Depart-ment seems to be trying to become a general-purpose science agency.

This expansion raises issues of balance. Compared to the DOE laboratories, the university systemis more open and supports a more diverse set of R&D projects. The universities operate with provensystems of self-governance, intellectual autonomy, and quality control through peer review. Bad sci-ence cannot hide for too long. Perhaps most important, industry’s need for trained people gives theuniversities a special claim on Federal R&D funds. No other set of research institutions trains scien-tists and engineers for industry in large numbers. When these people move to the private sector, theytake the latest knowledge with them.

While the laboratories’ performance in technology transfer has certainly improved over the fiveyears since the Packard Commission report (ch. 2), some of the remaining problems concern the amountof autonomy that should be given to mission-oriented facilities operated under contract to the Govern-ment. In addition, the laboratories are poorly positioned to deal with problems related to manufactur-ing. Laboratory personnel, unfamiliar with industry and the marketplace, often ignore the need toaddress processing early enough in development. University engineering departments have also falleninto this trap, but seem to be doing more to dig themselves out. Moreover, universities have beenwilling and able to work with industry; the DOE laboratories, until recently, have shown few signsof the flexibility needed to adapt their ways to industry’s needs. At present, some people in industryview the laboratories with suspicion—and also as competitors for Federal R&D dollars.1

The laboratories can claim advantages over the university system—including a capacity for inter-disciplinary research, sophisticated facilities, and experience with large-scale projects. But, as em-phasized in chapter 4, even if policies put in place to change the laboratory system prove successful,the process will take time. Neither the universities nor the national laboratories should or could be-come centerpieces of a strategy for commercializing HTS. Their strengths lie elsewhere.

Y%, for example, “National Labs Struggle With Technology Transfer,” New Technology Week, Sept. 28, 1987; Allan S. Gelb (Director,Marlow Industries, Inc.), testimony to the House Subcommittee on Energy Research and Development, Committee on Science, Space, and Tech-nology, Oct. 20, 1987.

Granted, the mission agencies are trying toaddress national concerns over competitive-ness in their pursuit of HTS—e.g., throughDARPA’s processing R&D initiative. However,the near-term focus of the DARPA processingprogram in HTS may not take advantage of theagency’s own strengths—funding of visionaryresearch. Finally, DARPA must ultimately serveDoD missions, which means that when civil-ian and military needs diverge, commerciali-zation will recede as an objective. Only if theagency can link its HTS R&D with military ob-jectives will it find continued support withinthe Pentagon. Other problems aside, the pro-gram is relatively small—only about $18 mil-

lion in 1988—and it was not fully underway asthis report went to press,

In short, the lack of more direct mechanismsfor Federal support of commercially orientedR&D has become a weakness in the U.S. ap-proach to technology development. The issueis not overall funding levels for HTS. The is-sue is the allocation of those funds: mission-oriented R&D does not provide enough supportfor commercialization to ensure that Americanfirms will be able to keep up in HTS.

The problem is particularly acute because ofthe wait-and-see attitude in much of Americanindustry. As described in chapter 3, the Japa-

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nese are putting more effort into exploring ap-plications. Furthermore, Japanese companies,with their strengths in engineering and manu-facturing, would probably be able to catch upeven if U.S. firms were first to reach the mar-ket with innovative products.

In sum, the current U.S. response to HTS dis-plays the strengths and weaknesses that havecharacterized the performance of Americancompanies in high technology. The U.S. effortlooks formidable in the middle of 1988, but thatis to be expected: the challenges so far havebeen largely matters for the research laboratory.If there is a surprise, it is that the Japanese—notknown for innovation in science—have alreadyposted such a strong showing.

As HTS moves toward applications, sciencewill recede in importance. Basic research re-sults, by their nature, will diffuse rapidly, pro-viding little in the way of national advantage

in commercialization. (Patent coverage suffi-ciently broad and strong to lock up a criticalclass of HTS materials seems unlikely.) Rather,the critical technological advantages are likelyto reside in proprietary know-how associatedwith processing and fabrication techniques,and design-manufacturing relationships—precisely where Japanese companies have dem-onstrated an advantage over many of theirAmerican counterparts.

A continued response along the lines of Strat-egy 1 is quite likely to fall short: the widely ex-pressed fear that Americans will win in science,while the Japanese take the commercial mar-kets could come true. Support for science andfor military technology—the essence of thisstrategy—served the United States well from1950 to the middle 1970s. But the lesson of thepast 15 years is clear: in a world of increasinglyeffective national competitors, these two leversno longer suffice.

STRATEGY 2: AN AGGRESSIVE RESPONSE TO HTS

Three primary features distinguish this sec-ond

1.

2.

3.

strategy from the current approach:

A larger role for NSF, both in funding in-dividual research at universities, andthrough the establishment of one or moreuniversity centers in superconductivity.Federal cost-sharing of long-term, high-riskR&D planned and conducted by industryconsortia.A working group on commercialization ofHTS charged with helping shape consensuson an R&D agenda, and making decisionson Federal cost-sharing.

This strategy preserves the strengths of thetraditional U.S. approach to technology devel-opment, while compensating for the weak-nesses brought out by stronger internationalcompetition —i.e., lack of breadth in industrialR&D, and heavy reliance on mission agenciesfor Federal support.

Step One: A Larger Role for NSF

The initial step toward a more aggressive re-sponse to HTS should be straightforward: givethe National Science Foundation more moneyfor university research. For reasons outlinedearlier in this report, a dollar spent by NSFshould contribute more to commercial devel-opment, on the average, than a dollar spent byDoD or DOE. In view of this, NSF’s existing15 percent share of the total Federal R&D bud-get for HTS is too small.

There are two complementary ways for Con-gress to expand NSF’s role, An otherwise un-restricted appropriation, earmarked for HTS—money that the Foundation could spend on su-perconductivity as it sees fit—would permitNSF to fund some of the highly rated HTS pro-posals that it is currently forced to turn away.

As noted above, OTA has found no evidenceof serious underfunding in basic research on

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superconductivity. Nonetheless, with an NSFresearch budget that has been flat in real termsfor several years, funds for condensed matterphysics were cut back during fiscal 1988.2 (Ch.4, which discussed this and other symptomsof the pressure on the NSF budget at somelength, included a number of policy options ad-dressing the general problem.) As part of Strat-egy 2, Congress might consider appropriating,say, $20 million (in additional new money) forNSF for the 5-year period beginning in fiscal1989, specifying that the funds go for HTS re-search. Such a step would help ensure that thebasic science underlying superconductivi tygets adequate support , without cut t ing intobudgets for NSF-sponsored R&D in other fields.

In addition (or as an alternative), Congresscould authorize and appropriate funds to NSFspecifically for one or more university centersdedicated to HTS research, To give NSF maxi-mum flexibility, the centers could be establishedunder one of several exis t ing programs, orthrough a new program altogether.

While none of the Foundation’s existing orproposed center programs (discussed inch. 4–see especially box N) seems ideally suited tothe needs in HTS, an ERC comes closest. Al-though a number of the MRLs have good ex-perimental facilities, and active research insuperconductivity, industry involvement hasrarely been a major goal. Nor are the proposedS&T centers, although emphasizing multidis-ciplinary research, likely to focus as stronglyon industry interactions as the ERCs. While theprogram is relatively new, and as yet few ofthe ERCs have themselves demonstrated closeworking relationships with the private sector,their focus means the ERC program fits theneeds in HTS more closely than other candi-

20vercom mit ments by the Division of Materials Research dur-ing 1987, in the expectation of a substantial budget increase,forced the cuts. Not only NSF, but DoD and DOE maintain thata considerable number of highly rated research proposals aregoing unfunded. The problem is not a new one, particularly forNSF. But the problem has gotten worse, and program managersunderstandably feel uncomfortable trying to draw lines betweenproposals that are almost indistinguishable in quality.

dates. (None of the existing ERCs has a researchagenda embracing HTS.)

Several bills introduced in the 100th Congress—e.g., H.R. 3048 and H.R. 3217—would instructNSF to establish a program for interdiscipli-nary National Superconductivity ResearchCenters. Would a new center program for HTS—one with the explicit mission of building astrong technology base for commercialization,and one with teeth in the requirements for mul-tidisciplinary work and industry involvement—do more for HTS than funding for one or moreERCs or S&T centers? The answer has to beyes, if Congress appropriates the money andif NSF moves relatively quickly. (The Founda-tion would have to solicit new proposals, whileit already has proposals in hand for S&T centerson superconductivity,)

In sum, congressional funding for several(say, one to three) new multidisciplinary centersin HTS could represent a modest but impor-tant step. It would not be realistic to expect sucha measure to expedite commercialization dra-matically. University centers, even at majorschools, would no doubt remain relatively smallin scale and scope. Sums of $10 million to $20million annually (perhaps $5 million, at most,per center) are about the maximum that makesense for an NSF center program—the Foun-dation does not do business on a scale muchabove this, Such centers would serve primar-ily as a source of new ideas and trained peo-ple—an important contribution to commerciali-zation, not to be undervalued,

Step Two: Industrial Consortia withFederal Cost-Sharing

As another element in a more aggressive strat-egy, Congress could direct the Administrationto partially offset the costs of joint industrialinvestment in long-term, high-risk R&D. Sucha policy—designed to address the gaps in HTSR&D in U.S. industry—would be based on twopremises discussed at length in this report,First, just as the Federal Government supportsbasic research, it must bear part of the burden

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Photo credit: Superconductive Components, Inc.

Pellets of HTS ceramic material

of exploring risky, radical industrial technol-ogies, which often provide large public bene-fits but only small private returns. Second, al-though DoD has borne much of this burden inthe past, the growing specialization of defensetechnologies, and continuing pressure to meetthe immediate needs of the services, mean thatthe United States now lacks a consistent cham-pion for major new technologies with potentialimpacts on the civilian side of the economy.

Partial Federal support for one or more in-dustry consortia—establishethe, as discussed inbox S, to share R&D costs–is a simple andworkable policy to address this problem. Fi-nancing some fraction of joint industry effortswith Federal funds (or tax expenditures) wouldpull more resources into applied research andgeneric technology development, and raise theoverall level of R&D investment. The approachwould direct public funds into areas that in-dustry itself thinks will have the highest payoffs,but where the benefits would be difficult forindividual firms to capture.

In some respects, the approach envisionedfor HTS resembles that of Sematech, the micro-electronics industry’s new R&D consortium (towhich more than a dozen firms have pledged1 percent of their revenues). While providingsubstantial funding, the Federal Governmentwould be a largely silent partner, with an R&Dagenda put together and managed by member

firms. And as with Sematech, there would beexplicit linkages with universities and DOE na-tional laboratories, so as to tie publicly-fundedbasic research to the joint R&D.

The differences between Sematech and theHTS R&D consortia envisioned for Strategy 2are perhaps more important. First, the semi-conductor industry itself proposed and foughtfor a Federally-supported venture. The compa-nies likely to be involved in HTS consortia havemade no such effort, and are not likely to; thus,the job of initiating and organizing such pro-grams would fall in part on Government.

Second, DoD, through DARPA, serves as thefinancial channel to Sematech. A report by aDefense Science Board Task Force argued thatthe industry’s troubles imperiled national se-curity—one reason for DoD’s oversight role.Moreover, DoD was perhaps alone among Fed-eral agencies in having the technical expertiseto monitor microelectronics R&D. Even if theDoD arrangement proves satisfactory in thecase of Sematech, it holds small promise as amodel for HTS. DoD—as well as DOE and NSF—could be involved with HTS consortia, butnone of these agencies should oversee them,lest their purposes be subordinated to ongoingagency missions. This point is discussed fur-ther in the following section, which deals withinstitutional mechanisms.

Finally, Sematech has a focused R&D agenda,stemming from a consensus within the indus-try that manufacturing technology has been amajor source of competitive difficulty. Ratherthan a single, well-defined focus, HTS lendsitself to multiple agendas, different sets of par-ticipants, Three among many possible can-didates:

● Electric Utility Applications.—Utilities nor-mally make highly conservative investmentdecisions. They are unlikely to adopt a newtechnology until sure it will work reliablyfor many years. Thus, there may be a use-ful role for Government in accelerating thedevelopment of the engineering databaseand field service experience in HTS throughsupport for cooperative projects (whichcould involve DOE laboratories),

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Box S.—Collaborative R&D1

The breakthroughs in superconductivity brought forth many proposals echoing the theme of strength throughcollaboration. The President’s initiative urged Federal agencies to cooperate with universities and the privatesector. Legislation has been introduced in Congress with similar objectives. In part, these calls for collaborationrepresent a response to rising R&D costs and the loss of U.S. technological advantage. To some extent, theystem from a misapprehension of the sources of Japan’s success (the myth of cooperation discussed in ch. 3).

Although joint research is nothing new, the past decade has seen a steady growth in U.S. R&D consortia,and a marked change in research focus. Firms that once cooperated only on matters such as technical standardshave increasingly banded together to undertake pre-competitive R&D—projects on new technologies with directcommercial relevance. The best-known—the joint venture Microelectronics and Computer Technology Corp.(MCC)–has begun exploratory work on HTS.

The economics of joint R&D hold considerable appeal. By pooling resources and avoiding duplication, coop-erative research increases the potential leverage of each firm’s R&D budget, while limiting the costs to any onefirm of a failed project. Joint efforts also enable participants to monitor developments in a technical field withoutdeveloping a full capability in-house.

While the benefits of cooperative research are sizable, so are the limitations. Most important, joint endeavorscannot substitute for in-house R&D efforts, only complement them. The participating firms must absorb the re-sults, and transform them into commercially relevant products or processes—something that requires a sophisti-cated and independent internal effort. For such reasons, government efforts to encourage cooperative researchprograms in industries where firms pursue little or no R&D on their own have seldom succeeded.2

A second limitation may prove more serious. Ideally, cooperation in research should help lengthen projecttime horizons; but many of the participants in cooperative ventures shift R&D strategies in two ways: 1) by focus-ing their internal research on still shorter-term work; and 2) by seeking to move the cooperative’s agenda awayfrom basic research and toward more applied projects. The trend has been evident in MCC, which recently re-structured its largest program—in advanced computer architectures—to emphasize more immediate paybacks.

Collaborative efforts involving universities (or government laboratories) have an easier time focusing on long-term research, often with little interference from participating firms, because the firms are not seeking specificR&D results so much as access to skilled graduates and faculty expertise. Of course, the financial commitmentsare generally much smaller than those for participation in a joint venture such as MCC (and may be viewedin part by the firm as good corporate citizenship). While cooperative R&D programs housed in universities helpmaintain a strong technological infrastructure, they should not be viewed as engines of commercialization.

Finally, the sheer difficulty of organizing and managing a collaborative research venture creates its ownset of limits. Fundamental issues—reaching agreement on an R&D agenda, finding ways to share technologiesand business information, controlling costs and determining intellectual property rights—can pose enormousobstacles, particularly when the collaborators are also competitors. These are among the reasons that coopera-tive research accounted for only $1.6 billion of the more than $50 billion spent by American industry on R&Din 1985. Of this total, 85 percent ($1.4 billion) went to support R&D cooperatives in the communications, gas,and electric utility industries, whose members do not compete directly. It is no surprise to find that industryleaders rarely put cooperative R&D very high on the list of steps needed for rebuilding U.S. competitiveness.3

Joint R&D has a role to play–in HTS and in solving the more general problems visible in the U.S. technologybase–but that role will inevitably be circumscribed by tensions between competition and cooperation amongthe participating companies. Firms seek proprietary technologies in order to compete with one another. Cooper-ation between firms in the same business can only go so far; cooperation between firms having supplier-customerrelationships, or those in different industries with common R&D goals, holds more promise.

ISee “Collaborative Research: An Assessment of Its Potential Role in the Development of High Temperature Superconductivity, ’ preparedfor OTA by D.C. Mowery under contract No. H36730, January 1988.

zNSF’S Industry/University Cooperative Research Center program (IUCR, box O, ch. 4) was initially designed to substitute for in-houseR&D in technologically moribund industries. An NSF evaluation found that “Companies with little research background, such as the utilitiesand furniture companies, are traditionally conservative with respect to new technology and depend on their suppliers for whatever changesthey adopt. ” An Analysis of the National Science Foundation’s University-Zndustry Cooperative Research Centers Experiment (Washington,DC: National Science Foundation, 1979). IUCR programs have gone on to more success in other industries.

sFor the results of a recent survey of corporate executives, see C’The Role of Science and Technology in Economic Competitiveness, ” finalreport prepared by the National Governors’ Association and The Conference Board for the National Science Foundation, September 1987, pp.20-30. The R&D spending figures for cooperatives come from P.F. Smidt, “US Industrial Cooperation in R& D,” remarks at the Annual ESPRITConference, Brussels, Belgium, Sept. 25, 1985.

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●

●

HTS Magnets. –Strong magnetic fields, bydampening thermal fluctuations, can givepurer, more uniform crystals of silicon andother semiconductor materials, makingthis a natural candidate for superconduct-ing magnets. R&D directed at HTS-basedmagnets could, at the same time, help moveHTS out of the research laboratory andlessen U.S. dependence on foreign sourcesof semiconductor wafers. X-ray lithographyusing compact synchrotrons—a promisingcandidate for making next-generation in-tegrated circuits—likewise could serve asa spur for HTS R&D while filling a chinkin U.S. microelectronics capabilities.Superconducting Computer Components.—HTS interconnects may help improve theperformance of computers. Hybrid semi-conducting/superconducting electronicsmay also prove viable. Collaborative proj-ects on prototype circuitry, with subse-quent Federal purchases of very high-per-formance machines if the technology pannedout, might help speed commercial devel-opment of HTS, while at the same time pre-serving the U.S. lead in high-end machines.Such a program would have a substantialbasic research component, but involvemanufacturability and applications issuesas the technology began to mature.

Whatever the substantive agenda, the privatesector should take the lead, insofar as practi-cal, with Government participation limited tothat necessary to achieve the Government ob-jectives–leveraging critical R&D, filling gapsin the technology base, lengthening time hori-zons. Federal cost-sharing justifies such pro-cedural rules as these:

● Government participation should be con-ditional on significant investment by indus-try—say 50 percent or more. (The Sematechformula—40 percent from both industryand DoD, and 20 percent from State andlocal Government—provides an alterna-tive.) The less of their own money compa-nies contribute, the greater the risk of R&Dthat strays from marketplace needs. So longas Government funding decisions can belimited to choosing among alternative ap-

●

●

●

●

●

preaches, all of which industry is preparedto back, some of the problems of pickingwinners can be skirted.By also requiring, as a minimum, a 3-yearfinancial commitment on the part of con-sortium members, the Government willhave added assurance that public fundswill help support medium- to long-termR&D. (MCC requires only a l-year commit-ment, down from 3 years initially; thischange is both cause and consequence ofpressures for tangible early R&D results.)Companies should be either in or out.MCC, which permits members to join proj-ects selectively, has found itself trying towall off some of its work to prevent R&Dresults from leaking to companies that havenot joined a particular project.Entrance requirements should be transpar-ent, lest the consortium become a smoke-screen for anti-competitive behavior; anyeligible U.S. firm should be able to join(those without majority U.S. ownershipmight reasonably be barred).people transfer technologies most effec-tively. To see that knowledge flows out ofthe consortium, employees of the membercompanies should be heavily representedamong the R&D staff. It seems reasonableto insist that half or more of a consortium’sstaff come from member companies (ratherthan new hiring). Assignments might betemporary, but should be long enough—perhaps 6 months as a minimum—formeaningful contributions to R&D, and forlearning purposes.

Furthermore, member firms should beencouraged to send their best people. MCCdealt with this by retaining—and exercis-ing liberally—the right to reject employeessent by shareholders (initially, it turneddown 95 percent).3 University involvementcan also help attract the best industry sci-entists.No less important if the consortium is toaffect commercialization, member firmsmust conduct ongoing complementary R&D

sB.R. Inman, “Collaborative Research and Development,” Com-mercializing SD] Technologies, S. Nozette and R.L, Kuhn (eds.)(New York: Praeger, 1987), p. 65.

of their own. MCC encourages “shadowresearch” by members, paralleling the jointventure’s work. This ups the ante for mem-bers; Digital Equipment Corp. spends halfagain its investment in MCC seeking waysto use the consortium’s results—a level ofcommitment that has, however, been rare.Parallel efforts will be particularly impor-tant for firms with little or no experiencein superconductivity. They will have morelearning to do than companies with back-grounds in, say, LTS.

● If one purpose of Federal funding is to stim-ulate visionary R&D, it may make sense todiscourage too much publicity, By reduc-ing the pressures—political and other—forshort-run success stories, the chance of suc-cess stories over the longer term should goup.A long-term orientation also suggests thata consortium’s work stop well short of full-scale commercial development efforts—i.e., at the prototype stage, leaving furtherdevelopment to the members’ own efforts.

Step 3: A Working Group on Commercialization

The final step in the aggressive strategy wouldbe to establish a working group of experts—drawn from industry, universities, and govern-ment—with a limited mandate to promote thenew technology. Such a group—with a lifetimefixed at, say, 10 years—could serve a numberof important functions.

The first is fact-finding and analysis. Cur-rently, no public or private body has a continu-ing responsibility to provide authoritative pol-icy guidance concerning such questions as:What problems do we need to start on now toassure rapid commercialization? How muchmoney will it take? Are some HTS R&D areasgetting too much money? Which areas are notgetting enough? While such questions neverhave definitive answers, the first step towardgood decisions—given that the Federal Govern-ment will have to make decisions in any case—is to understand what is going on in both gov-ernment and industry, here and in other coun-tries. The problem is not inadequate coordina-tion. Rather, the problem is that no one has the

task of drawing even a crude map of the roadto commercialization, and setting the necessarypriorities along the way. To do so will requiresolid and timely analysis, on a continuing ba-sis. (The President’s Wise Men’s advisory com-mittee on HTS will evidently prepare a one-timereport, rather than provide ongoing policyguidance,)

While the working group’s responsibilitieswould involve decisions on Federal cost-shar-ing in response to proposals from private sec-tor consortia, it might first have to engage inconsortium-building and facilitation. In con-trast to Sematech, HTS consortia are not likelyto organize themselves spontaneously, at leastuntil guidelines for Federal cost-sharing havebeen set down. The working group might beable to play a match-making role, helping bringtogether companies, universities, and govern-ment laboratories, and aiding them in reach-ing consensus on research needs—a functionthat could continue even after the joint R&Deffort was underway; as the experience ofSematech and many other joint ventures dem-onstrates, conflict will be inherent in any con-sortium of independent firms,

The working group’s ability to get things donewill flow in part from its power to allocate Fed-eral resources. Decisions on who is to get Gov-ernment money will hinge not only on techni-cal questions, but on economic judgments.Technical evaluations of competing projectscan rely on the tried and tested approach ofexternal review by recognized experts withouta stake in the outcome,

Evaluating the economic merits—i.e., likelyimpacts on commercialization—would be moredifficult, but the problem can be sidesteppedto considerable extent by using procedural rulesto allocate public funds. First, a consortium’sproposed R&D agenda would have to meet min-imum criteria, which the working group wouldset, based not only on technical merit, but, asdiscussed above, on rules for participation, andprovisions for member funding and R&D timehorizons, Then, among the qualifying proposals,funds would go to the “highest bidders” asmeasured by length of time commitment par-

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ticipants in the consortium were willing tomake, and the fraction of total costs they werewilling to self-finance. (A third criterion—theinvestments of members in complementary in-ternal R&D—is also relevant, but it would bedifficult to determine what was “complemen-tary” and what was not.) These measures shouldhelp to allocate government resources to jointR&D projects with the longest term payoffs, andthe greatest value to industry.

If the working group makes decisions onfunding, the issue of administering such a pro-gram remains. As an ad hoc body outside theordinary apparatus of Government, the work-ing group would need to look to an existingagency for help with staffing and managing itsresponsibilities. This poses a dilemma. As dis-cussed above, the working group is not simplyan advisory body, but a center for decision-making on commercialization policies. Yet onlya minority of its members would be Federal em-ployees, it would go out of existence after someperiod of years, and the intent is not only tocomplement the activities of existing agenciesbut, to considerable extent, to substitute for theagencies—to undertake tasks that they do not(and perhaps cannot). Attaching the workinggroup, even for administrative convenience, toan existing agency could undermine its impact.

Each of the three agencies heavily involvedin funding HTS R&D—DoD, DOE, and NSF—has noteworthy strengths: experience in fund-ing LTS research, technical competence, andthe administrative tools needed for monitoringthe expenditure of Government funds. But eachhas flaws as well: DoD’s military mission willalways come first; later if not sooner, commer-cial technology development will probably de-volve into a secondary objective of consortia

with Pentagon involvement. DOE has less ex-perience with the private sector than DoD—e.g., in managing extramural R&D—and a nar-rower base of technical expertise. For NSF, theassignment would be a substantial departurefrom the norm; the Foundation has limited tiesto the private sector, and few employees withindustrial experience. Its past attempts to fos-ter applied research have not met with greatsuccess.

Are there other possibilities? The CommerceDepartment is seldom seen as a technologyagency. The Office of Science and TechnologyPolicy (OSTP), as pointed out in the precedingchapter, has a small staff and is not set up tohandle the kind of tasks the working groupwould need to pass along, (A Federal technol-ogy agency, as described in the final sectionof this chapter, might be well-suited; but evenif Congress were to pass legislation creatingsuch an agency, it would not be ready in timeto serve the working group.)

In the end, the best solution is probably toset up the working group as an ad hoc inde-pendent body, with a small staff of its own, andattach it to OSTP. As such, it should have thenecessary qualities for promoting commerciali-zation of HTS: the flexibility and substantivedepth to learn by doing, tailoring its proceduresto the special needs of HTS as these becameapparent,

The mission agencies will take care of theirown needs in superconductivity. What is lack-ing is an organization to look after the broadernational interest in commercializing this newtechnology. Federal support of joint private-sector R&D investments addresses the need.This is not the only alternative—box T sum-marizes others—but it seems a promising one.

STRATEGY 3: A FEDERAL TECHNOLOGY AGENCY–THREE ALTERNATIVES

The Federal structure for science and tech- R&D. In 1950, after prolonged debate, Congressnology policy has changed little since the late passed the authorizing act for the National Sci-1950s. Within DoD, the Office of Naval Re- ence Foundation. The same year saw majorsearch set the post-1945 pattern for support of new legislation setting the National Institutes

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Box T.—Aggressive Support for Commercialization: Other Possibilities

Flagship ProjectsThe symbolic and potential economic importance of HTS have led to calls for a flagship approach. With

HTS already a symbol, among other things, of U.S.-Japan economic competition, advocates of the flagship alter-native see virtue in Government initiatives that likewise have symbolic value. A flagship should rally industry,universities, and the public sector, building on the enthusiasm created in the media and galvanizing the Nation’screative and entrepreneurial vigor in a race, not to the moon, but over the hurdles of some earthbound Olympics—anOlympics of science, technology, and competitiveness. This country’s strength is in meeting crises–the Manhat-tan project, Sputnik—not in incrementalism, say advocates of this approach. Political consensus, and a boldnational effort, could pull superconductivity out of the laboratory and into the global marketplace. Visibilitycan be a strength as well as a potential source of weakness.

As appealing as such images might seem, HTS is not the kind of technology that lends itself to a massive,concentrated effort. Although bills have been introduced dealing with magnetically levitated trains, public andpolitical attitudes toward rail transportation would probably have to change a good deal before maglev wouldhave broad appeal. Talk of an energy crisis evokes little response today. Superconducting computers will justbe black boxes; no one much cares what is inside. Defense systems do not fill the bill either.

There is another dilemma. A flagship has visibility. It must succeed, if only for such reasons. This forcestechnological conservatism on decisionmakers. Apollo’s achievements were in systems engineering and large-scale project management, not in revolutionary technologies; space is no place for trying out unproven technol-ogies. Pressures for success—or pressures to avoid the appearance of failure—mean safe choices by the managersof such projects. If the goal is Government support for long-term, risky technology development, the flagshipapproach has little to offer.

DoD Processing R&DProcessing will be vital in commercializing HTS, and several legislative proposals have made it a central

element. For example, H.R. 3024 would authorize $400 million for a 5-year, DARPA-centered effort also involv-ing DOE, NSF, and NBS.

DARPA has left a deep imprint on U.S. high technology, most of all in computers. Chapter 4 discussed DARPA’scurrent HTS processing initiative—an effort that could fill an important gap in superconductivity R&D. GivingDARPA the lead in a more ambitious effort, as in H.R. 3024, might seem appropriate, On the other hand, pro-grams aimed explicitly at (non-defense) commercialization fall well outside DARPA’s historical mission and ex-perience; in part because it seems to critics in the Pentagon too far removed from military needs, DARPA’sHTS program has not found widespread support inside DoD. Congressional enthusiasm—reflected in a directappropriation—made the program possible, but if Congress loses interest, the program could fade away. Onlyif DARPA could link the R&D with military objectives would it get internal support in the face of budget pressuresand competing DoD demands.

In the past, such pressures have periodically led DARPA to abandon longer-term R&D and embrace moreimmediate military objectives. DARPA’s transfer of the MRLs to NSF marked the first of these periods (box O,ch. 4). After the end of the Vietnam War, fatter R&D budgets enabled DARPA to move back toward long-termresearch. But in the early 1980s, the pendulum swung once again, with the Strategic Computing Program a primecase in point; DARPA has channeled much of the program’s funds to military contractors, rather than the univer-sity laboratories responsible for most of its earlier successes in computing technology, and set program objec-tives that will appeal to the services. Ironically, over the last few years, DARPA has behaved much like Americancorporations—stressing projects with quick payoffs. Finally, there seems little question that major breakthroughsin HTS resulting from DoD-sponsored R&D would be classified, should the Pentagon feel that, as a practicalmatter, they could thereby be kept from the Soviet Union.

The DOE LaboratoriesAlthough no one has formally proposed the designation of a lead laboratory for HTS, the suggestion has

been in the air, There are at least 10 DOE laboratories with work of one sort or another underway in HTS.The chief argument for greater concentration and centralization is one of efficiency: with all the laboratories

on the HTS bandwagon, duplication of effort will be hard to avoid. By giving a clear mandate to one, DOE shouldbe better able to manage the division of labor. On the other hand, with HTS remaining primarily a matter ofresearch—research with fuzzy objectives—centralization for its own sake has little to offer. The conventionalmanagement wisdom that basic research is cheap, the benefits of competition among scientists great, makescentral control unnecessary and undesirable. Nor is there an obvious candidate for a lead laboratory in HTS.

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of Health on a course it has continued to fol-low.’ At the end of the 1950s, the Soviet Sput-niks spurred another set of changes: the estab-lishment of NASA and DARPA. NASA grewout of the National Advisory Committee forAeronautics (NACA). Founded in 1915 to con-duct research and testing, NACA remainedsmall until World War II, when its staff grewto nearly 7,000 people. NASA’s staff eventuallyreached five times that level, while its budgetgrew even faster (NASA contracted out muchmore of its work). DARPA, setup in 1958—andoriginally given the mission of developing a U.S.space program, later passed to NASA—quicklyestablished itself as the home of long-range R&Dwithin the Defense Department.

Since this period, the Federal R&D budget hasgrown steadily, but organizational changeshave been minor. In 1950, the Federal Govern-ment spent about $1 billion on R&D. Today, halfa dozen Federal agencies each spend over $1billion annually, and more than a dozen othersspend lesser amounts. Given this growth inR&D spending, and the increasing concern overthe Nation’s ability to utilize its technology ef-fectively, many proposals to reorganize Fed-eral science and technology functions havecome before Congress during the 1980s. (Thisis nothing new: in 1913, during the debatepreceding the formation of NACA, some of theopponents of a new organization for aeronau-tics research saw it as a stalking horse for acabinet-level science department.)

An Umbrella Agency for Scienceand Technology

The more ambitious sounding proposals oftencall for a science and technology (S&T) agency

%ee, for example, J.A. Shannon, “The National Institutes ofHealth: Some Critical Years, 1955-1957,” Science, Aug. 21, 1987,P. 865.

On NACA and NASA, below, see F.W. Anderson, Jr., Ordersof Magnitude:A History of NACA and NASA, 1915-1980, NASASP-4403 (Washington, DC: National Aeronautics and SpaceAdministration, 1981); and A. Roland, Model Research: The Na-tionzd Advisory Committee for Aeronautics, 1915-1958, vol. 1,NASA SP-4103 (Washington, DC: National Aeronautics andSpace Administration, 1985); also “Collaborative Research: AnAssessment of Its Potential Role in the Development of HighTemperature Superconductivity,” prepared for OTA by D.C.Mowery under contract No. H36730, January 1988, pp. 29-34.

to consolidate Federal R&D functions. Advo-cates of consolidation argue that an umbrellaorganization would lead to clearer priorities,less duplication, and greater efficiency—in aword, to better management. They point, forinstance, to the more than 700 national labora-tories, managed, often quite loosely, by manydifferent agencies, and note the frequent criti-cism that the laboratory system has come under.

In fact, calls for a Department of Science andTechnology tend to be a bit misleading. Becausethe mission agencies control most of the Fed-eral R&D budget, the resulting changes wouldnecessarily be modest. When the Young Com-mission called for a cabinet-level S&T agencyin 1985, it offered no guidance on how sucha proposal might be implemented.5 The prob-lem is clear enough. Some 70 percent of Fed-eral R&D goes for defense and space. Much ofthe rest pays for health-related research.

It is hard to envision moving more than a fewbits and pieces of DoD’s current R&D–say abillion dollars or so—into another part of Gov-ernment. Moreover, since creating the AtomicEnergy Commission in 1946, Congress has keptnuclear weapons research isolated; currently,nuclear weapons account for about half ofDOE’s R&D budget.

The second largest R&D agency, Health andHuman Services (DOE is third), operates a re-search arm—NIH—with a hundred-year traditionof excellence. Why risk disrupting organiza-tions like NIH in the name of management effi-ciency?

Even the strongest advocates of an S&T de-partment acknowledge that consolidation couldnot go too far without harming the ability ofagencies to manage R&D in support of theirown missions. But without pulling much of theR&D that is currently the responsibility of theseagencies under the new S&T umbrella, there

‘Globa~ Competition: The New Reality, vol. I (Washington, DC:U.S. Government Printing Office, January 1985), p. 51. The Com-mission simply said that the department should include “majorcivilian research and development agencies. ”

For extensive discussion of proposals for an S&T agency, seethe special issue of Technologyln Society, vol. 8, Nos. 1/2, 1986,entitled “A Department of Science and Technology: In the Na-tional Interest?”

..—

.

would be little left, It would be hard to take seri-ously a cabinet-level S&T agency that wouldoversee perhaps 10 percent of the Federal R&Dbudget.

Given this dominance of R&D by the missionagencies, most of the legislative proposals forreorganization have had quite modest objec-tives. H.R. 2164, for example, is fairly typical.This bill—introduced in the 100th Congress tocreate a Department of Science and Technol-ogy—would pull together NSF and the NationalBureau of Standards (NBS), together with sev-eral smaller Commerce Department programs,while also also creating a National Bureau ofTechnology Transfer and an Advanced ResearchProjects Foundation. The latter—charged withsupporting generic, industrial R&D—representsone variant of a recurring proposal—a proposalthat, according to the analysis below, has morein its favor than an umbrella agency for sci-ence and technology.

Higher Priorities for Technologyand Engineering

Proposals for a technology agency that wouldstand alongside NSF—perhaps called a NationalTechnology Foundation (NTF)—start with thepremise that technology does not always de-pend on science. Indeed, development of newtechnology—a goal-directed, problem-solvingactivity—differs fundamentally from scientificresearch. Even where the interrelationships areclose, as they often are in high technologies,the two activities depend on different kinds ofpeople, with different skills and expertise. Sci-ence seeks understanding. Technology seekssatisfactory solutions to practical problems. Sci-ence looks to technology for tools—computersto unravel the structure of DNA, or to guidepowerful telescopes as they scan the heavens.By the same token, technology looks to sciencefor tools: knowledge of DNA leads to new phar-maceutical products; theoretical insights intocomputer software now guide the design ofhardware.

U.S. problems in commercialization lie intechnology, not science. And while scientistsmake their contributions to innovation and

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Photo credjf Biomagnet/c Technologies /nc

Brain scan using equipment incorporatingsuperconducting quantum interference

devices (SQUIDS)

competitiveness, the engineering professioncarries much of the burden (ch. 2). Raising pri-orities within Government for engineering re-search—work directed at technology rather thanscience—would be a straightforward and posi-tive step toward renewed competitiveness.

NSF has made considerable progress at thisin recent years, most notably through its ERCprogram, while amendments to the NSF char-ter have also given engineering more promi-nence. Moreover, the Foundation’s current di-rector, Erich Bloch, who came to NSF fromindustry, has provided strong leadership for ini-tiatives such as the ERCs. But Bloch will notbe there forever. And NSF’s fundamental jobis the support of science—science for its ownsake. The Foundation cannot tilt too far towardengineering without provoking a strong reactionfrom its primary, and well-organized constit-uency—university scientists. Indeed, the ERCshave already provoked such a reaction. NSF

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is unlikely to shift its priorities much furtherunless pushed from the outside.

Currently, about 10 percent of NSF’s budgetgoes for engineering. It is hard to envision theFoundation, as presently constituted, increas-ing the proportion for engineering to more than15 or 20 percent. The Engineering Directorate’sbudget has been spread among several thou-sand departments in the Nation’s nearly 300engineering schools. With relatively low levelsof support from NSF, faculty have turned toDoD for money, skewing research toward spe-cialized military problems. (This trend affectscurricula and course contents as well, althoughless directly.)

An NTF, independent of NSF and DoD, couldbe a powerful lever for moving university re-search back toward the civilian side of the econ-omy, and for steering engineering educationback towards practical industrial problems.Nonetheless, OTA’s past analyses have foundrestructuring NSF—making it, say, into a Na-tional Science and Technology Foundation—to be a more attractive option than creating aseparate National Technology Foundation.6 Sci-ence and engineering do depend on one another.Thus, an integrated agency, charged with sup-porting both engineering and science, makesmore sense than two parallel agencies—pro-vided sufficient resources can be guaranteed forengineering.

In this variant of Strategy 3, with the focuson engineering research in the universities, im-pacts on commercialization would be long-termand indirect—both a strength and a weakness.Government money would not go directly forcommercial technology development in indus-try, avoiding the problems such a step wouldraise. But it would take time before the re-sources flowing to new research in engineer-ing could make a difference for competitive-ness and commercialization. In particular,creating an NTF would not do much for HTS.

e“Development and Diffusion of Commercial Technologies:Should the Federal Government Redefine Its Role?” staff memo-randum, Office of Technology Assessment, Washington, DC,March 1984.

Other suggested reorganizations would tar-get industrial technologies more directly. BoxU, for example, discusses one recent proposal,in this case a reorientation of NBS.

An Agency for CommercialTechnology Development

For years, DARPA has enjoyed an enviablereputation: an elite band of non-bureaucrats,able to pick technological winners and drivethem forward. Why not, many have asked, dothe same on the civilian side of the economy?The response follows just as quickly. DARPAcan pick winning technologies because it hasa reasonably clearcut mission, whereas a civil-ian DARPA would have a much fuzzier charge.Nonetheless, at a time when U.S. industry haslost ground competitively, the notion of a ci-vilian DARPA holds considerable appeal—anagency devoted to championing high-risk, long-term projects, technologies that could make areal difference in international competition,The huge U.S. trade deficit, and especially theimbalance with Japan, is today’s Sputnik. Some-body has to do something.

DARPA has, in fact, been able to anticipatetechnologies important to civilian industry. Al-though commercialization per se has not beenDARPA’s goal, for most of the agency’s historythe defense mission has not tightly constrainedits decisions. Rather, DARPA has invested inwhat it regarded as high-payoff technologies,on the rationale that DoD would ultimately ben-efit as a purchaser.

If DARPA can make make technically sounddecisions, a civilian agency should also be ableto do so. But the DARPA analogy can be takenonly so far. A civilian DARPA, by its nature,would be much more difficult to run efficiently:nurturing new technologies intended to suc-ceed in the marketplace is a more complex andexacting undertaking than supporting a tech-nology for which the Government is the enduser. In addition, a civilian DARPA would havehigh visibility politically. Technology develop-ment is now seen as the sine qua non of eco-nomic prosperity. This means that a civilianDARPA would be under strong pressure from

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Box U.—An Advanced Technology Program

Among reorganization proposals, the proposed Technology Competitiveness Act has comeclosest to implementation. The bill—incorporated in the omnibus trade package passed by Con-gress in the spring of 1988 (and vetoed by the President)—would:

. rename the Commerce Department’s National Bureau of Standards (NBS) the NationalInstitute of Standards and Technology;

● authorize regional centers for the transfer of manufacturing technology;. provide for technical assistance to State technology programs;● establish a clearinghouse on State and local initiatives on productivity, technology, and

innovation;. create an Advanced Technology Program as part of the revamped NBS.

The technology transfer and State assistance provisions in the bill could be useful. But it is theAdvanced Technology Program (ATP) that would most directly address U.S. needs for indus-trial technology.

The ATP would assist businesses in applying generic technologies, and in research neededfor refining manufacturing technologies and for rapid commercialization of new scientific dis-coveries. This would be accomplished through, among other things, aid to joint R&D ventures(including ATP participation in such ventures under some circumstances). The bill also author-izes cooperative agreements and contracts with small business, and involvement of the Federallaboratories in the program. Although the trade bill itself does not appear to specifically author-ize appropriations for the ATP, a predecessor bill in the Senate (S. 907) would have authorized$15 million for the ATP in its first year.

special interests, States, and Congress itself tosteer resources to particular projects, In otherwords, a civilian DARPA could easily becomea pork barrel. Political interests could overrideeconomic sense.

Could a Civilian Technology Agency (CTA)avoid these pitfalls? What might it look like, andwhat it would do? In many versions it wouldbe small and lean (DARPA’s staff numbersabout 125), emphasizing flexibility and makinguse of experienced professionals on temporaryassignment from the established mission agen-cies, In more expansive alternatives, a CTAmight pull in relevant functions from elsewherein Government, such as support for university-based engineering research (from NSF), a tech-nology extension effort, and perhaps aero-dynamics programs (from NASA). Box V out-lines one recently proposed agency. Beyondquestions of size and scope, a CTA’s effective-ness would depend heavily on four questions:1) its mission; 2) project selection and moni-

toring; 3) the quality of its staff; and 4) intra-mural research.

Mission

The CTA’s central mission would be to ex-tend the time horizons of U.S. industrial R&D,and help fill some of the gaps in the Nation’stechnology base. More specifically, it would beresponsible for supporting two rather differ-ent kinds of work. The first is long-term, high-risk 17&D at pre-commercial stages, with thegoal being relatively dramatic advances in tech-nology. For example, candidate projects in themanufacturing area might include direct reduc-tion steelmaking, or expert systems for shop-floor production scheduling. HTS examplescould begin with three-terminal electronic de-vices, or integration of semiconductor and su-perconducting electronics,

The second area is generic technology devel-opment, which would typically be incremental.

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Box V.—An Advanced Civilian Technology Agency, as Proposed in S. 1233

S. 1233—the Economic Competitiveness, International Trade, and Technology Development Actof 1987—reported by the Senate Governmental Affairs Committee in 1987. It was then incorporatedin that house’s omnibus trade bill, later to be dropped. S. 1233 is of interest here because of its provi-sions for an Advanced Civilian Technology Agency (ACTA), which would have been part of a newDepartment of Industry and Technology-the latter created through a major reorganization of Fed-eral Government responsibilities.

The ACTA provisions in Title I, Part III of S. 1233 represent the closest. that Congress has yetcome to implementing some form of civilian DARPA. l Intended to support technology developmentand commercialization through contracts and grants, cost-shared with industry, the agency wouldgive particular attention to risky, long-term projects. Technology-related functions transferred fromthe Commerce Department, including NBS, would stand alongside the ACTA (rather than becomingpart of it). The bill authorized an ACTA budget big enough to make a difference—$80 million in thefirst year, rising to $240 million in the third year. Financial support to industry would be permittedthrough the stage of prototype development.

S. 1233 would provide for a high-level outside advisory board, but in most other respects leaveagency operations up to the Secretary of the new department and his or her deputies. Report languagecalls for a small professional staff (35, initially), coming largely from industry, with considerable useof scientists and engineers on loan from the private sector.

IAS explicitly stated in Economic Competitiveness, International Trade, and Twhnologyl?ewdopment Act of 19S7: Report of the Committeaon Governmental Affairs, United Stfites SmMte, To Accompany S. 1233, Report No. 100-82 (Washington, DC: U.S. Government Printing Office,lune 23,19871, P. 10. In *tion 122 of the bill, the a8ency fS directed to coordinate i~ activities with those Of ~th DARpA and NSF~ the dir@ctorsof which are to be members of its advisory board.

Many projects here would aim to reduce re-search to practice. The work would help manycompanies, but would rarely lead directly toproprietary advantage. Examples (again frommanufacturing): nondestructive evaluation tech-niques, especially those suited to real-time oper-ation as part of feedback control systems; smallhand tools for mass production that are ergo-nomically designed for ease and speed of use(something that gets little attention in the UnitedStates compared to Japan and Europe). HTSexamples include processing of the new ce-ramic materials, and magnet design and devel-opment for applications such as separation ofsteel scrap, or refining of ores.

Why is mission so important? Because it isa precondition for accountability. DARPA’smission creates discipline over the decisionsof its staff and managers: only so long as DARPAcan show that the work it funds will supportfuture military requirements can the agency ex-pect support from the Office of the Secretaryof Defense and the relevant committees inCongress.

For a civilian agency, vague statements con-cerning commercialization or competitivenesswill not do. Lack of agreement on mission isone of the reasons why none of the many billsintroduced over the years to create a new tech-nology agency has become law. Consensus onmission is critical for any agency with substan-tial budget authority—and given the size of theU.S. economy, and the needs for industrial tech-nology, a CTA would have to have an annualR&D budget of $100 million or more for mean-ingful impact (DARPA’s current budget is about$800 million).

Whatever form a CTA might take, it wouldnever have a mission as clearly defined as thatof DARPA or NASA. The overall goal—support-ing commercial technologies in order to sup-port the international competitiveness of U.S.industry—does not lend itself to neat and cleandecisionmaking. Competitiveness is difficult tomeasure, harder to predict, and depends onlypartially on technology. Many people and manygroups may view competitiveness as a legiti-mate goal. But as a practical matter, it would

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not be possible to judge the merits of a CTA’swork—or evaluate the outcomes of completedR&D projects—by linking that work to competi-tiveness. The linkages are too loose, the causalconnections often spanning many years. Evenso, it should be possible to define the techno-logical objectives of a CTA tangibly enough toprovide a handle on mission.

Project Selection and Monitoring

With the charge of supporting commercialtechnology development, much of a CTA’s bud-get would have to go for contracts with the pri-vate sector (including consortia), on a cost-shared basis. Some money might also flow tonon-profit laboratories, and to universitiesthrough grants and contracts, But the point,after all, is to channel direct support to indus-trial technology, supplementing the many in-direct measures the Federal Government al-ready calls on.

A CTA would not be able to rely exclusivelyon review panels or outside experts to developan overall strategy—a broad view of where re-sources should go—or for help in setting pri-orities. Outside experts, by definition, have anarrow view. The further science and technol-ogy advance, the greater the specializationamong experts. The CTA would have to dependon the collective judgment of its own staff forstrategy and priorities.

How about project-specific decisions? Moneyfor private firms raises questions. The agencywould have to choose projects on grounds thatwould be accepted as fair. Again, the answerbegins with a competent staff, combined withmerit review processes (box W).

The CTA Staff

Federal support for commercial technologieswill always run the risk of devolving into littlemore than a program of subsidies for industry,with much of the money going to marginalprojects, The primary guarantee against thatdanger is to staff the CTA with professionalswho have the independence of judgment andthe technical knowledge to make good deci-sions and stick to them,

To gain the respect of their industrial coun-terparts, CTA employees—technical specialists,program managers, administrators—wouldneed a good grasp of market realities, as wellas of industry’s technical requirements. Theywould need to function as part of a peer groupthat includes industrial scientists, engineers,and R&D managers.

If the agency’s managers were to provide ex-citing work, give employees substantial respon-sibilities, and maintain a selective and competi-tive personnel policy—more like DARPA or theOffice of the U.S. Trade Representative thanthe Commerce Department—a CTA shouldhave little trouble in assembling a capable staff,Finding people with strong technical creden-tials is relatively easy (American universitiesexcel at deep but narrow training of engineersand scientists). Breadth and experience—indus-trial experience, in particular—are harder tofind, Bringing in people from industry mightrequire exceptions to normal civil service re-quirements,

Given that the Federal Government alreadyemploys many highly competent engineers andscientists, the CTA could begin by assemblinga core staff borrowed from other agencies. Con-tinued use of detailees would ensure a steadyflow of fresh perspectives, while also helpingwith inter-agency coordination and technologytransfer. Industry sabbaticals that sent CTA em-ployees to the private sector for periods of 6months to 2 years could help serve the samepurpose (as suggested inch. 4 for national lab-oratory employees),

Intramural R&D

Although most of its projects would be con-tracted to industry, it would also seem desira-ble for a CTA to carry out in-house R&D in itsown facilities. This need not be a large-scaleundertaking (say, 5 percent of the agency’s bud-get). But it would allow staff members to keeptheir hands in. Some technical employees mightrotate through the CTA’s laboratories. Otherscould spend part of their time engaged in R&Dmore or less continuously.

,, ~,,I – 1’ t – I : .’ ,

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Box W.-Project Review

When it comes to selecting projects for extramural funding, Federal mission agencies rely primar-ily on expert technical reviews. DoD conducts many of its technical reviews internally, but also kinksto external bodies, permanent and ad hoc, on occasion.l NSF and NIH use outside review panelsextensively, aiming at merit-based rankings reflecting the collective judgment of a group of recog-nized experts-the peer review model.

Not perfect, these processes can be criticized if the reviewers do not have appropriate qualifica-tions (a problem particularly for internal agency reviews), or represent the conventional wisdom whenthe need may be to break the mold of ongoing research. Sometimes reviewers may favor their friends(true anonymity may be impossible in a specialized field). But the general approach has been widelyaccepted. It works, and-if applied appropriately-should work for sponsorship of industrial R&Dby a CTA.

Once a broad agenda of R&D priorities had been set, the CTA could look to review panels formerit-based judgments, mixing outside engineers and scientists with the agency’s own staff. The out-side people would have to come from organizations without a direct stake in outcomes. There is noreason why a materials scientist working for an electronics firm could not give a fair review to thematerials-related portions of HTS proposals on electrical machinery. Alone, such an individual wouldnot have the expertise. In a group, he or she would contribute a useful perspective.

Contract monitoring, necessarily, would be the responsibility of the CTA staff. Agency employeeswould need to keep a critical distance from sponsored work, and be willing to cut off funding tocompanies that failed to perform (something DoD has difficulty doing on occasion).

ll%e Advisory Group on Electron Devices, ~ longstanding committee of specialists fiorn the three military services, industry, and tmiversi-ties, exerted considerable influence in shaping the Very HiglMpeed Integrated Circuit program, See “Federal Support for Industrial Technol-ogy: Lessons From VHSIC and VLSI,” prepared for OTA by G.R. Fong under contract No, H3651o, December 1S87.

NSF uaee criteria for rating proposals that includw technical competence of the proposed reeearch, baaed on past achievements, as wellas the details of the proposal; “intrin$ic merit of the research,” meaning the likely impacts on scientific advance; and relevance. See Guideto Frogramw FiaceJ Yesr 1988, NSF 87-57 (Washington, DC: National Science Foundation 1987), p. ix. For a recent examination of scientificpeer review, see University Funding: Information on the Role of Peer Review at NSFwrd NIH, GAOIRced-87-87FS (Washington, DC: U.S. Gen-eral Accounting Office, March 1987).

This activity would also force staff membersto demonstrate that they can produce what theywant others to produce—R&D that is relevant.The test is simple. If the intramural R&D ispicked up and used by industry, the CTA staffhas passed. Table 15 summarizes this and otherfeatures of a CTA.

Pitfalls

The primary difficulties for any agencycharged with supporting commercial technol-ogies are likely to be political rather than tech-nical. The problems of defining an R&D agenda,and recruiting a staff with the right mix of skillsand experience would be straightforward com-pared with the problems of establishing credi-bility within the broader system of U.S. policy-making. Like any Government institution thatseeks to endure, a CTA would have to respect

notions of democratic virtue. That requires—in add i t i on t o accoun tab i l i t y—prudence i nspending public funds, fairness in dealings withthe private sector, and some degree of balancewith respect to regional interests. 7

For a CTA to become a reality, any proposalwould have to satisfy constituencies havingvery different interests—some conflicting. TheFrost Belt, seeking to rebuild its technologicalbase and infrastructure, would no doubt want

7E. Bardach, “Implementing Industrial Policy, ” The IndustrialPolicy Debate, C. Johnson (cd.) (San Francisco: Institute for Con-temporary Studies Press, 1984), p. 103. The discussion follow-ing draws heavily on Bardach, Also see H. Heclo, “IndustrialPolicy and the Executive Capacities of Government, ” The Poli-tics of Industrial Policy, C.E. Barfield and W.A. Schembra (eds.)(Washington, DC: American Enterprise Institute, 1986), p. 292;and International Competitiveness in Electronics (Washington,DC: Office of Technology Assessment, November 1983), ch. 12,especially pp. 475-482,

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Table 15.—Desirable Features in a Federal Agency forthe Support of Commercial Technology Development

Budget.—$100 mill ion to $500 mill ion annually in early years,exclusive of industry cost sharing, with 90 percent or moregoing for the support of R&D projects. These projects mightbe split roughly as follows:

● Industry, both single companies and consortia-80 percent● Universities and non-profit research institutes—15 percent● Internal agency projects—5 percent

Cost-sharing on industry projects at 40 to 60 percent seemsappropriate to ensure that companies view the work as im-portant.

Staff.—At the $500 million level, the agency would probablyneed about 250 professional employees. At any one time,about half the professional staff time would be devoted tointramural R&D—with technical employees expected tospend some fraction of their time, over a period of years, ac-tively engaged in R&D.

Substantial use of detailees from other Federal missionagencies, as well as people on leave from universities andindustry would be desirable. The agency’s permanent staffmembers could also be expected to spend periodic tours inindustry.

Intramural R&D.—At the $500 million level for the agency,5 percent for intramural R&D means $25 million annually (andperhaps 100 full-time equivalent professionals), It would seempreferable to maintain a number of relatively small efforts,spread quite widely across the spectrum of industrial tech-nologies; given that the primary function of intramural R&Dis to maintain staff expertise, breadth would be essential.Even with half a dozen R&D areas, many staff members withother specialities would have to spend time in industriallaboratories to maintain hands-on R&D skills.SOURCE Office of Technology Assessment, 1988

parity with the Sun Belt; small business inter-ests would probably begin lobbying for set-asides. Long before it opened its doors, anagency with the mandate to “restore U.S. tech-nological competitiveness” would face pressuresfrom companies in financial straits, seeking,for instance, relaxation in the CTA’s require-ments for cost-sharing.

Other threats to neutral allocation of CTA re-sources would be almost as quick to material-ize. Perceived inequities between competingfirms and industries would be all but impossi-ble to avoid even with long-term R&D. CTA-funded R&D on magnetic separation of steelscrap would help minimills at the expense ofintegrated steel producers. Advances in mag-netic levitation rail technology would threatenaircraft manufacturers and airline companies.

Such pressures could easily jeopardize theCTA’s intended focus. Not only would distressedindustries be pushing for a quick fix, a nationalemergency—an energy crisis, say—would bringcalls for technological solutions. With high turn-over likely in its political leadership—on aver-age, assistant secretaries remain in Governmentfor only 18 months—a CTA would be underconstant pressure to show results. Pressures forimmediate results would coexist with pressuresto maintain funding for major projects, evenif they proved flawed. Managers would be re-luctant to admit mistakes, and–compared totheir private sector counterparts—have less in-centive to do so. Even flawed projects developconstituencies, moreover, ready to argue forcontinued funding.

In sum, a CTA—like any public institution—would have to win favor from enough well-sit-uated constituents to continue its work. Thatis as it should be. The danger—and a very realone—is that, as an institution charged withspending money, a CTA would become justanother forum for the distributive clashes thatalready consume Congress and much of the ex-ecutive branch. Said one close observer of sci-ence policy, “We have the most highly-devel-oped system of interest groups in the world,and they’ve discovered R& D.”

CONCLUDING REMARKS

The Federal Government’s responsibility for nology policy is not only to find and supportpromoting technology is plainest in two cases: such R&D, but to stimulate industry to use thesupport for basic research, and investment in results in timely fashion.risky and speculative technologies, In both, sub-stantial public benefits may coincide with mea- Basic research continues to flourish underger private returns. The problem for U.S. tech- the present system of U.S. support for science

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and technology: when the breakthroughs in HTSoccurred, the Nation had the resources and flex-ibility to mount a considerable effort in shortorder. To support advanced technologies, how-ever, the United States has traditionally reliedon the mission agencies—DoD, in particular.The approach reflects a philosophical distastefor government involvement in the economy,and also the belief that government cannot an-ticipate the needs of the marketplace; spinoffs,rather than direct financing, have supportedmany of the new technologies that Americanindustry commercialized.

The approach worked well for several dec-ades. But the world has changed. Military tech-nologies have grown steadily more specialized,the defense sector more isolated from the restof the economy, If DoD R&D funding was evera cornucopia for U.S. industry, it is no longer.Second, other countries have caught up in tech-nology. Today, both Japanese and West Ger-man firms spend higher proportions of theirrevenues on R&D than American firms. Thatspending has been one of the critical elementsin their competitive success,

The emerging pattern in HTS seems muchlike that in microelectronics. Japanese firms areinvesting their own funds heavily. Governmentpolicies support their efforts. In the UnitedStates, only a small fraction of the Federalmoney for HTS finds its way into industry, andmost of this will pass through DoD.

These and other indicators lead to the con-clusion that a continuation of current policiesfor supporting commercialization of HTS willleave U.S. industry behind its strongest inter-national competitors, The United States maycontinue to dominate the science of supercon-ductivity, and might pioneer in commercial in-novations. But the contest will eventually come

down to engineering and manufacturing, whereAmerican industry has fallen down in recentyears , and where the Japanese continue toimprove.

OTA has analyzed two alternatives to thebusiness-as-usual approach. One of the choices—creation of a Federal technology agency, withHTS as a piece of its territory—holds promisefor the future. Such an agency might supportindustrial technology directly; many proposalshave envisioned a kind of civilian DARPA,established to focus on R&D relevant on the ci-vilian side of the economy. The pitfalls are notso much technical—maintaining a sound port-folio of projects–as political. A CTA wouldhave to deal with the demands of distressed in-dustr ies , depressed regions, and companiessimply attracted by a pot of R&D money,

Whatever their merits, the alternatives underStrategy 3 cannot offer near-term support forHTS. The ad hoc measures outl ined underStrategy 2 could. This approach —Federal cost-sharing of joint R&D—would be explicitly de-signed to promote an industry-centered agendaof long-term, high-risk R&D in superconduc-tivity. Government’s role—carried out througha working group on commercialization—wouldbe as facilitator, as well as financier, helpingto establish consensus on a research agenda,and securing cooperat ion from univers i t ies ,Federal laboratories, and mission agencies, Thethree elements in Strategy 2 meet the needssummarized at the beginning of the chapter:diversity and continuity of Federal support;market-driven decisions; technology push com-plemented by market pull; low visibility; col-laborat ion among industry, universi t ies , andGovernment. In conjunction with ongoing ac-tivities in the mission agencies, they would sub-stantially improve the odds on U.S. industr y

in the race to commercialize HTS.

Appendixes

Appendix A

Glossary

Coil/rail gun: Uses a rapidly changing magneticfield in a spiral coil (coil gun) or a linear conduc-tor (rail gun) to accelerate a projectile via mag-netic forces. Much greater velocities can bereached than are possible with gas expansion (asin a conventional gun).

COMAT, Committee on Materials: An interagencygroup under the Federal Coordinating Councilfor Science, Engineering and Technology chairedby the White House science advisor. COMAT'sSuperconducting Materials Subcommittee, char-tered in June 1987, is comprised of program di-rectors and other representatives of Federal agen-cies involved in superconductivity R&D,

Critical current density: The maximum value ofthe electrical current per unit of cross-sectionalarea that a superconductor can carry withoutreverting to the normal (non-superconducting)state. The critical current density drops as thetemperature rises toward the transition temper-ature, and as the magnetic field increases,

CTA, Civilian Technology Agency: Several legis-lative proposals over the years would establisha Federal CTA focused on commercial technol-ogy development.

DARPA, Defense Advanced Research ProjectsAgency: A Defense Department R&D fundingagency that gives most of its support to long-term,high-risk projects, Examples include artificial in-telligence, and, currently, processing of high-temperature superconductors.

DPR, Domestic Policy Review of Industrial Inno-vation: A Carter Administration study of alter-native Federal policies for stimulating techno-logical innovation.

Electromagnetic launcher: See coil/rail gun.ERCs, Engineering Research Centers: Cross-dis-

ciplinary research centers funded by the NationalScience Foundation at universities.

ETL, Electrotechnical Laboratory: This Japaneselaboratory, administered by the Ministry of In-ternational Trade and Industry, has been involvedin superconductivity research since the mid-1960s

FCC, Fine Ceramics Center: A laboratory inNagoya, Japan jointly funded by industry and theMinistry of International Trade and Industry.participating firms send researchers to work atthe facility, which opened in the spring of 1987,

Fiber-optics: Use of glass fibers to transmit light(produced by lasers) for telecommunications andcomputer networking. Optical fibers can carrymuch more information than electrical wires.

FLC, Federal Laboratory Consortium on Technol-ogy Transfer: A network of technology transferofficers from 400 Federal laboratories and elevenagencies for facilitating transfers of technologyfrom the laboratories to industry. First setup in-formally in 1974, the FLC was given a statutorybasis in the Federal Technology Transfer Act of1986 (Public law 99-502).

HTS, high-temperature superconductor: Refers tomaterials—four classes of which have been dis-covered since 1986—with much higher transitiontemperatures than previously known supercon-ductors. (See LTS.)

Intermetallic compound: Chemical compounds ofnominally fixed composition, one or more ele-ments of which are metals. Most intermetalliccompounds—e.g., the superconductor niobium-tin (Nb3Sn)—are brittle and therefore hard towork with,

ISTEC, International Superconductivity Technol-ogy Center: An organization for superconduc-tivity R&D set up by Japan’s Ministry of Interna-tional Trade and Industry.

IUCRs, Industry-University Cooperative ResearchCenters: National Science Foundation programthat provides seed grants for cooperative R&Dat universities,

JJ, Josephson junction: Superconducting electronicdevices that can be used to sense electromagneticradiation and also as digital switches (hence aslogic devices in computers).

oK, degrees Kelvin: The absolute scale of tempera-tures, with O 0 K (-4940 F) equal to absolute zero(a temperature that can be approached but neverreached,

Logic chips: Integrated circuits consisting of arraysof gates each of which implements a Booleanfunction such as AND, OR, NOR, NAND. Com-puter processors are built from logic chips, asare many specialized digital systems.

LTS, low-temperature superconductor: Materialsthat become superconducting only when cooledto a few degrees above absolute zero. All super-conductors discovered before 1986 were low-temperature materials, with 230 K (-418 0 F) thehighest known transition temperature, (See HTS).

Magnetically-levitated train (maglev): Trains sus-pended and propelled by magnetic forces offerthe prospects of much higher speeds than canbe achieved by conventional wheel-on-rail tech-nologies. A prototype superconducting maglevtrain in Japan (also called a linear motor car) hasachieved speeds of over 300 miles per hour.

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152

Magnetometers: Sensors which measure magneticfield strength. Because magnetic fields accom-pany so many physical phenomena, magneto-meters—including ultrasensitive versions madefrom superconducting devices—have many uses.(See JJ, SQUID.)

Magnetic resonance imaging (MRI): Refers toequipment and techniques used in medical diag-nosis for imaging the soft tissues of the body. MRIsystems often use superconducting magnets.

MCC, Microelectronics and Computer Technol-ogy Corp: A joint venture that conducts R&D.MCC’s program to develop and evaluate elec-tronic applications of HTS had 13 participantsas of the spring of 1988.

MITI: Japan’s Ministry of International Trade andIndustry.

Monbusho: Japan’s Ministry of Education, whichsupports university research.

MRLs, Materials Research Laboratories: Now sup-ported by the National Science Foundation, sev-eral of the MRLs are conducting research onHTS.

Multicore Project: Established by Japan’s Scienceand Technology Agency to link nine laboratoriesand government organizations working on HTSwith one another and with industry.

NBS: National Bureau of Standards of the U.S. De-partment of Commerce.

New Superconductivity Materials Research Asso-ciation: Generally called the “superconductivityforum, ” this association was set up by Japan’sScience and Technology Agency. It providesworkshops, symposiums, and other opportuni-ties for interaction among corporations, univer-sities, and national laboratories.

NSA: U.S. National Security Agency.NSF: U.S. National Science Foundation.1-2-3 superconductor: One of a new class of high-

temperature superconductors, typified by yttrium-barium-copper-oxide and called 1-2-3 because oftheir generic chemical formula: RBazCOs07.X,with R almost any one of the rare-earth elements..Much of the research on the new superconduc-tors has focused on the 1-2-3 materials, whichtypically have transition temperatures above 900 K .

OSTP, Office of Science and Technology Policy:Headed by the White House science advisor,OSTP is part of the Executive Office of thePresident.

Perovskite: Refers to the crystal structure sharedby the 1-2-3 and other high-temperature super-conductors.

Rail gun: See coil/rail gun.

RAM chips: Integrated circuits that provide ran-dom access memory for computers and other dig-ital systems.

SBIR, Small Business Innovation Research: A Fed-eral program, in operation since fiscal 1983,which requires Federal agencies to set aside asmall percentage of extramural R&D budgetsfor contracts with small businesses.

SDI, SDIO: The Strategic Defense Initiative, andthe Defense Department organization that runs it.

Sematech: An R&D consortium, financed by 14member companies (as of the spring of 1988) andthe U.S. Government, established to pursue im-provements in semiconductor manufacturingtechnologies.

Signal-to-noise ratio: An important parameter forsensors, the signal-to-noise ratio compares thesignal the sensor is intended to measure withbackground noise (one source of which is ther-mal, rising with temperature).

SMES, superconducting magnetic energy storagesystem: A coil or solenoid of superconductingwire in which an electric current can circulate,storing energy until needed for purposes suchas feeding an electric utility grid or powering afree-electron laser.

SQUID, superconducting quantum interferencedevice: A very sensitive instrument, built withJosephson junctions, used to detect magneticsignals.

STA, Science and Technology Agency: Under thePrime Minister’s Office in Japan.

S&T centers, Science and Technology centers:Multidisciplinary centers proposed for fundingby the National Science Foundation.

Stevenson-Wydler Act: The Stevenson-Wydler Tech-nology Innovation Act of 1980 (Public law 96-480, as amended), placed increased emphasis ontechnology transfer from the Federal labora-tories. The 1986 Federal Technology TransferAct (Public law 99-502) amended the 1980 act toprovide (among other things) more emphasis oncooperative research between federally operatedlaboratories and industry.

Superconductivity: Total loss of resistance to di-rect electrical currents.

Superconducting magnet: An electromagnet woundwith superconducting wire. Essentially all thepower consumed goes for refrigeration to keepthe coil windings below their superconductingtransition temperatures.

Three-terminal electronic device: One which, likea transistor, can amplify a signal substantially.(See two-terminal device.)

Transition temperature: The highest temperature

.

at which a material becomes a superconductor,also known as the critical temperature. The tran-sition temperature drops as the magnetic fieldand current density increase.

Two-terminal electronic device: one which, likea Josephson junction, can serve only as a weakamplifier. (See three-terminal device.)

URI, University Research Initiative: A Depart-ment of Defense program, started in 1986, in-tended to support university capabilities in re-search, and training of scientists and engineers,in disciplines important for national defense.

153

VHSIC program: An R&D program begun by theDepartment of Defense in 1979 to develop ad-vanced integrated circuits for military systems.

VLSI program: Joint government-industry R&D ef-fort in Japan for developing very large-scale in-tegrated circuits (VLSI), in existence from 1976to 1980.

X-ray lithography: Creation of patterns for fabricat-ing integrated circuits using X-rays, Because X-rays have shorter wave lengths than visible light,they can produce finer patterns, hence densercircuits.

Appendix B

The Technology of Superconductivity

Electric currents travel through superconductorswith no resistance, hence no losses (provided thecurrent is steady—alternating currents meet resis-tance even in superconductors). When currentflows in an ordinary conductor, say a copper wire,some power is lost. In a light bulb or an electricstove, resistance creates light and heat, but in othercases the energy is simply wasted. With no resis-tance, magnets wound with superconductors cancreate very high fields without heating up and dis-sipating energy. Motors and generators with super-conducting windings could be smaller, lighter, andmore efficient than those built with copper. Veryhigh magnetic fields might be used to fire projec-tiles, to float molten metal in a steel mill, to levitatetrains.

Table B-1 lists some of the possible applications.During the 1960s, low-temperature superconduc-tors (LTS)—specially developed metal alloys likeniobium-titanium—came into use in specialized ap-plications such as magnets for scientific research.Some current LTS applications—e.g., ultrasensitivemagnetic field detectors—will not be superseded byhigh-temperature superconductivity (HTS) (becauseof higher thermal noise at higher temperatures).Other applications, possible but not practical withLTS, could become much more attractive with HTS.

As table B-1 indicates, superconductors not onlybanish electrical losses, and provide the basis forvery sensitive detectors of magnetic fields and otherradiation, but can also be used to produce the fastestpossible electronic switching devices. In addition,superconductors exclude magnetic fields, whichmeans they can be used as radiation shields. (Theexclusion of external magnetic fields is termed theMeissner effect, after the physicist who discoveredthe phenomenon in 1933.)

Many of the applications listed in table B-1 havebeen goals for engineers and scientists since super-conductivity was discovered early in the century.

I Much of the material in this appendix is drawn from ‘ ‘Superconduc-tive Materials and Devices, ” Business Technology Research, WellesleyHills, MA, September 1987; and “Technology of High Temperature Su-perconductivity,” prepared for OTA by G.J. Smith 11 under contract No.J3-21OO, January 1988. Also see Physics Today, Specia] Issue: Supercon-ductivity, March 1986; A.P. Malozemoff, W.J. Gallagher, and R.E. Schwall,“Applications of High-Temperature Superconductivity,” Chemistry ofHigh-Temperature Superconductors, ACS Symposium Series 3s1, D.L.Nelson, M.S. Whittingham, and T.F. George (eds.] (Washington, DC:American Chemical Society, 1987), p. 280; “Research Briefing on High-Temperature Superconductivity,” Committee on Science, Engineering,and Public Policy, National Academy of Sciences, Washington, DC, 1987.

Along with powerful magnets for a variety of pur-poses, prototype generators, electrical transmissionlines, and computer chips have all been made, oper-ating in most cases at liquid helium temperatures(about 4° K, or 4 degrees above absolute zero, fig-ure B-l). But the very low temperatures have beena barrier for many of the applications possible inprinciple.

High-temperature superconductors and liquidnitrogen cooling (77 0 K, figure B-1) would bring rela-tively modest improvements in costs, system com-plexity, and practicality for most of these applica-tions. Liquid nitrogen temperatures, after all, areonly high compared with the near-absolute zero ofliquid helium. Where system designs already in-corporate LTS—e.g., magnetic resonance imaging(MRI, ch. 2)–it might not pay to change over sim-ply to take advantage of HTS. In applications whereunattended operation is desirable—e.g., militarysurveillance or geophysical exploration—the muchreduced boil-off rate of liquid nitrogen would be amajor advantage. HTS also holds obvious attrac-tions for applications in space; beyond low-Earthorbit, passive cooling may suffice to maintain su-perconductivity in the new materials.

Nonetheless, it is quite possible that continuedR&D will bring new applications of HTS that can-not yet be anticipated. superconductivity at roomtemperature, moreover, would be truly revolution-ary. Compact and efficient small motors and actu-ators, for example, could find uses ranging fromhousehold products and automobiles to machinetool drives and power-packs for replacing aircrafthydraulic systems.

Superconductivity

Above its transition (or critical) temperature, asuperconductor exhibits electrical resistance likeany other material. Below the transition tempera-ture, the material has zero resistance to direct cur-rent (DC): a steady electric current will circulate ina superconducting coil forever, so far as anyoneknows. Variation in the flow of current does leadto electrical losses; thus a superconductor dissipatesenergy when turned on or off, or when carrying anordinary alternating current (AC losses). However,these losses are much less than those in a good nor-mal conductor (e. g., copper) at the same tem-perature.

154

155

Table B-1 .—Representative Applications of Superconductivity——————— -.

Large-scale passive:Shields, waveguides

Superconductors screen or reflect electromagnetic ra-diation; possible applications range from coating ofmicrowave cavity walls to protection from the elec-tromagnetic pulses of nuclear explosions.

BearingsRepulsive forces created by exclusion of magnetic fluxmake non-contact bearings possible.

High-current, high-field:Magnets

Medical imagingLTS magnets widely used in commercial systems.

Scientific equipmentLTS magnets used in fusion experiments and particleaccelerators.

Magnetic separationPossible uses include separating steel scrap, purify-ing ore streams, desulfurizing coal, and cleaning upstack gases, At least one LTS magnet is in current usefor purifying Kaolin clay.

Magnetic levitationLevitated trains have been extensively studied, withprototypes in Japan and Germany.

Launchers, coil/rail gunsElectromagnetic launching systems can accelerate ob-jects to much higher velocities than gas expansion;possible applications range from small guns for mili-tary purposes to aircraft catapults and rapidly repeat-able Earth satellite launching.

OtherPowerful magnets could eventually find a very widerange of uses. Examples: compact synchrotrons forlithographic processing of integrated circuits; growthof the crystals for integrated circuits (a strong mag-netic field yields more nearly perfect wafers of siliconand other semiconductor materials); MHD (magneto-hydrodynamic) systems for energy conversion. MHDthrusters might also be used in place of propellers todrive ships and torpedos.

Other static applicationsElectric power transmission

Prototypes of LTS underground lines have demon-strated feasibility, but such installations are not cost-effective (compared with overhead high-tension lines)at present.

Energy storageSolenoids wound with superconducting cable couldstore electrical energy indefinitely as a circuIating cur-rent; i n addition to utility applications (e. g., load level-i rig), superconducting storage could find uses in miIi-tary systems (e.g., pulsed power for large lasers). Cheapand reliable superconducting energy storage wouldeventually find many other applications.

Rotating machineryGenerators

A number of LTS prototypes have been buiIt to inves-tigate possible electric utility applications.

Motors, motor-generator setsUsed in conjunction with a superconducting genera-tor, a superconducting motor could be an efficientalternative to mechanical power transmission for ap-plications such as ship and submarine drives, railwaylocomotives, and perhaps even for helicopters. Suffi-ciently low costs would open up many industrial ap-plications.

Electronics:Passive

Superconducting wiring (interconnects) for computers,on-chip or between chip, could help increase process-ing speed.

SensorsSQUIDS (superconducting quantum interference de-vices) made from Josephson junctions (JJs) are themost sensitive detectors of electromagnetic signalsknown; applications range from detecting neural im-pulses in the human brain to geophysical exploration,detection of submarines in the deep ocean from air-planes or, potentially, from space, and nondestructiveinspection.

Digital devicesJJs can also be used for digital switches, opening upsuch applications as computer logic and memory; com-petitive three-terminal devices with substantial gain mayeventually be developed; combined semiconductor-superconductor devices or systems also hold many at-tractions.

Other devicesAnalog/digital converters, voltage standards, manytypes of signal processors, and microwave mixers canall be designed, in principle, with superconductors;some of these applications (e. g., voltage standards)have been reduced to practice with LTS JJs.—

NOTE This Iist IS based on known properties of known materials. It IS not exhaustive, even for existing, well. understood Iow-temperature superconductors

SOURCE Off Ice of Technology Assessment, 1988

Until 1986, the highest known transition temper-ature was 23° K (in niobium-germanium). Then twoIBM scientists in Zurich discovered a new class ofmaterials that showed superconductivity at 35-40°K (see box C, ch. 2). Shortly thereafter, the com-positions now termed the 1-2-3 superconductorswere found, with transition temperatures in the vi-cinity of 95° K. The first of the 1-2-3 materials an-

nounced contained yttrium, barium, and copperoxide. More recently, copper-oxide ceramics con-taining bismuth or thallium have been found. Thesehave superconducting critical temperatures in therange, respectively, of 110° K and 125° K. In April1988, the first HTS compositions containing no cop-per were announced, with transition temperaturesup to 30° K.

156

Figure B-1 .—Temperature Scales University of Leiden had developed cryogenic re-frigeration equipment capable of reaching thesevery low temperatures, In 1913, Kamerlingh-Onnesfound that lead became superconducting at 7.20 K.At this point, the Leiden group built a supercon-ducting magnet with lead windings, only to find thelead reverting back to its normal state when themagnetic field reached a few hundred gauss—a se-vere limitation on practical use, given that a com-mon kitchen magnet creates a field of about 1,000gauss. (The average magnetic field of the Earth isone-half gauss; the windings in electric motors cre-ate fields of about 10,000 gauss,)

Critical Properties.—Later it was learned that main-taining the superconducting state requires that boththe magnetic field and the electrical current den-sity, as well as the temperature, remain below criti-cal values that depend on the material. Figure B-2shows this schematically, while table B-2 gives thecritical values of temperature and field for a num-ber of superconducting materials, Practical appli-cations, in general, require that both the transitiontemperature and the critical current density be high;in some cases, relatively high magnetic fields are

SOURCE: Office of Technology Assessment, 1988. necessary as well.

A major advantage of the new materials, of course,is the potential for simpler, less expensive cooling,For technical reasons, superconductors must beoperated well below their transition temperatures—as a rule of thumb, at half to three-quarters the tran-sition value. In fact, then, liquid nitrogen tempera-tures will be marginal for the 1-2-3 compositions(although the practical advantages of operating inthe range of 40 0 K rather than 4° K can be great),If the more recently discovered ceramics, with crit-ical temperatures of 110° K and up prove to haveotherwise useful properties, liquid nitrogen cool-ing will almost certainly prove adequate.

All the HTS compositions so far discovered areceramics, rather than metals. They are new mate-rials, poorly understood. All ceramics are brittle;they require processing and fabrication methodsvery different from metals and alloys.

Superconducting Properties and Behavior

In 1911, Heike Kamerlingh-Onnes, a Dutch phys-icist, made the astounding discovery that mercurylost all electrical resistance at 4° K. Earlier,Kamerlingh-Onnes and his research group at the

Figure B-2. —Dependence of the SuperconductingState on Temperature, Magnetic Field, and

Current DensityTemperature, T

A Critical surface

if outside)

SOURCE: Off Ice of Technology Assessment, 1988

157

Table B-2.—Critical Values for Superconducting Materials

Temperature Magnetic field Current density a

(degrees Kelvin) (gauss) (amps per square centimeter)— —Aluminum . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . .Mercury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Lead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Niobium. ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Niobium (75%) - titanium (25%) ., . . . . . . . . . . . . . . . . . . . .Niobium - tin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-2-3 ceramic (YBa2Cu 3069) . . . . . . . . . . . . . . . . . . . . . . . . .aAt Zero magnetic f(eldbuppercnhcal field (Type H superconductor

cAt42 KdAt77 K Thehlghestvaluesare reached wlthor!ented Slngie-crystat f i lms

SOURCE Offrceof Techr?ology Assessmen! 1988

By the late 1930s, scientists had distinguishedType I and Type II superconductors. Type I mate-rials, in which the phenomenon had first been stud-ied, shift abruptly to their normal state above thecritical magnetic field. Type II superconductors ex-hibit a mixed state between two values of magneticfield, the lower and upper critical fields. The newHTS materials show Type II behavior, with extremelyhigh critical fields (table B-2)–indeed, so high inthe 1-2-3 compositions that simply measuring themhas proven very difficult.

As Kamerlingh-Onnes found with his lead-woundmagnet, Type I superconductors have critical fieldstoo low to make useful magnets. While Type II ma-terials have much higher critical fields, the newHTS materials have proved to have disappointinglylow values of the third critical parameter—the cur-rent density (table B-2).

Raising allowable current densities in the 1-2-3ceramics from the values found initially in poly-crystalline samples (consisting of many grains, ran-domly oriented)—below 103 amps per square centi-meter—quickly became a major research target. Formost applications, improvements of 100 times ormore—to the range of 105 or 106 amps per squarecentimeter—will be needed, This is important notonly for high-power applications; electronic devicescarry small currents, but current densities are highbecause cross-sectional areas are microscopic.

Not a fundamental limitation, the low currentdensities are materials processing problems (criti-cal current density depends on the microstructureof the material, hence on its processing). Many yearsof R&D were needed to raise the critical values forType II superconductors like niobium-titanium tothe values shown in table B-2, Similar effort liesahead for the new HTS materials; so far, progresshas been most rapid in thin films,

From the 1930s to the 1980s.—The 1930s and 1940ssaw a good deal of progress in the cooling and re-frigeration systems needed to reach very low tem-peratures, spurred in part by wartime needs for liq-uid oxygen.2 After the end of the Second World War,the newly formed Office of Naval Research estab-lished a major research program in low-temperaturephysics. One consequence—rapid improvements inthe technology for producing liquid helium—madeexperimental research in superconductivity mucheasier.

Federal support during the 1960s included devel-opment of very powerful superconducting magnets,principally for conducting experiments in high-energy physics and nuclear fusion, as well as ex-ploratory studies of possible electronic applicationsof superconductivity. The first of the current gen-eration of conductors, niobium-tin, was developedduring the early 1960s. A brittle intermetallic, verydifficult to work with, niobium-tin found little use.Within a few years, almost all LTS magnets werebeing wound with niobium-titanium—more ductile,though with a lower critical field.

With steady progress in processing techniques,niobium-titanium conductors could be fabricatedas braided cables each containing thousands of veryfine filaments. Small filaments—less than the di-ameter of a human hair—reduce the AC losses stem-ming from variations in current, and have otherhighly desirable properties for magnet applications.These filaments are embedded in a copper matrix,capable of carrying the full current in the event ofan accidental loss of superconductivity. The con-ductors must be flexible enough for winding, and

j“Government’s Role in Computers and Supercondu{:tors, ” preparedfor OTA by K. Flamm under rontra( t No H3f?J470, March 1988, pp 43ff.

158

mechanically strong because the magnetic field cre-ates very high forces. Many years of R&D have ledto steady improvements in LTS magnets.

The discovery of the Josephson effect in the early1960s opened up a new class of possible applica-tions in electronics. Josephson junctions (JJs), madewith a thin insulating layer (a matter of a few atomicdiameters) separating two superconductors, can actas very fast electronic switches—comfortably ex-ceeding the fastest semiconductor devices. Becausethey dissipate so little power—about 1,000 times lessthan semiconductors—JJ electronics can be moretightly packed, which also contributes to speed.

Theory

Theoretical work had likewise moved ahead, cul-minating in 1957 in the Bardeen-Cooper-Schrieffer(BCS) model, for which a Nobel Prize was laterawarded. The BCS theory explains superconduc-tivity in terms of interactions between electrons(which carry current) and phonons (atomic vibra-tions). Under normal conditions, the electrons col-lide with atoms, leading to electrical resistance andenergy loss. In the superconducting state, electronsmove in coordinated fashion without any collisions.

While the BCS model explains superconductivityin the old materials, so far HTS has baffled the the-orists. Until 1986, most of those working in the fieldhad agreed that BCS superconductivity at temper-atures above about 30 0 K was impossible. Given therecent experimental results, the theoretical commu-nity has been scrambling to extend the BCS modelor find some new explanation.

Although the Josephson effect was first predictedtheoretically, and later confirmed by experiment,theory gave little or no guidance in the search forLTS materials with higher transition temperatures.Thus the situation is really no worse for HTS. Look-ing for materials with higher transition tempera-tures remains largely a matter of trial-and-error,guided by intuition—laboratory research that istime-consuming and expensive.

Processing and Fabrication

Tailoring HTS materials for applications eitherin electronics or where high currents and/or fieldsare needed (e.g., electric power) will entail designand processing at size scales from the atomic levelon up. Engineers and scientists engaged in appli-cations developments, as well as materials process-ing, will have to concern themselves with electronicstructure (energy gaps), crystal structure (the ar-rangement of atoms in the material), microstruc-

ture (grain boundaries), and the fabrication of films,filaments, tapes, and cables.

The HTS ceramics are not only brittle, and chem-ically reactive, but highly anisotropic—meaning thatproperties vary with direction within a grain of thematerial. The 1-2-3 ceramics, for instance, showdifferences of as much as 30:1 in critical currentdensity depending on grain orientation. Some ofthe current density limitations can be traced toanisotropy, but grain boundaries seem to be the pri-mary culprit.

Some of the processing and fabrication tech-niques familiar from work with electronic and struc-tural ceramics hold promise for the new supercon-ductors. Bulk samples of HTS material can be madeby hot pressing, extrusion, and tape casting, amongother methods. The anisotropy in the 1-2-3 materi-als has led many research groups to seek processesfor aligning the grains—e.g., extruding a slurry ofsingle crystals in a high magnetic field to create atape. Semiconductor fabrication techniques, like-wise, can in some cases be adapted for making thinfilms.

Past work on niobium-tin, a brittle intermetalliccompound, may also hold lessons for HTS materi-als, which, like other ceramics, cannot deformplastically. Because they break easily and withoutwarning–like glass, being very sensitive to smallimperfections (hence the scribed lines used to “cut”glass)—practical applications may require special-ized in-situ processing, as well as careful design tominimize strain. Magnets wound with niobium-tinare made starting with strands of niobium in acopper-tin alloy matrix–flexible and ductile. Heattreatment after the wires have been drawn andwound into coils causes the tin to combine with theniobium, forming the superconducting compound,with its vastly different properties. Some R&Dgroups have pursued similar processes for ceramicsuperconductors.

Progress has been faster with thin films, whichcan be created via a wide range of well-known tech-niques—e.g., sputtering, and evaporation by mo-lecular or electron beams, Finding good substrateson which to deposit the HTS layer has been the pri-mary problem. The HTS compounds react chemi-cally with many otherwise desirable substrate ma-terials, including those used for integrated circuits(silicon, sapphire). Strontium titanate gives highcurrent densities compared to other choices, butis expensive and has otherwise undesirable prop-erties. Silicon would be ideal as a step toward com-bining semiconductor and superconducting elec-tronics. While the temperatures so far required forcreating the proper HTS composition have posed

159

difficulties, many research groups have been work-ing on the problems, with encouraging results.

Applications

Much of the excitement over HTS has been stirredby speculation concerning such possible applica-tions as low-loss electric power transmission ormagnetically levitated trains. In some of these cases,commercialization will depend more on systemcosts and progress in competing technologies thanon the specifics of HTS. Both transmission lines andlevitated trains have been demonstrated with LTSmaterials. Superconducting transmission lines, whichmust be run underground because of the coolingrequirements, may eventually prove cost-effectiverelative to conventional underground transmission;thus far, however, these applications have not movedout of the test stage, Maglev trains could be builtby the end of the century in Japan and West Ger-many. Competing technologies sometimes presenta moving target for superconductivity: after morethan 10 years of R&D aimed at a Josephson com-puter, IBM concluded that competing semiconduc-tor technologies were improving rapidly enoughthat its approach to JJ computer elements wouldprobably not bear fruit.

More than likely, then, 5 to 10 years of R&D lieahead before many applications of HTS emerge.Those that come earlier are likely to be highlyspecialized—perhaps in military systems, perhapstargeted on very demanding civilian needs (for ex-ample, Hypres’ very high-speed data sampler,which incorporates LTS electronics]. The ongoingR&D will involve:

1.

2.

3

Basic research, both theoretical and experi-mental, aimed at explaining HTS, at findingnew materials and exploring their properties,and at understanding structure-property rela-tionships.Applied research, focused particularly on de-velopment of processing methods and optimi-zation of material properties through manipu-lation of processing variables, A great deal ofR&D will be needed before routine productionof tapes and multifilamentary conductors couldbegin, with substantial improvements in criti-cal currents an early step. Josephson junctionsfor electronics will also be difficult to reduceto practice.Applications engineering (for HTS)—e.g., de-velopment of prototype chips containing manyJJs–including extensive testing under realisticoperating conditions (environmental exposure,

4.

5.

thermal cycling, mechanical vibrations, elec-trical surges, loss of temperature control), Join-ing techniques for conductors will be needed;so will repair methods.Process engineering—manufacturing methodsfor routine (rather than laboratory) production.Problems here will include yields and reliabil-ity in superconducting circuits, and methodsfor producing long continuous lengths of su-perconducting cable. Inspection, testing, andquality control procedures will need a gooddeal of attention.Systems engineering—design, development,and demonstration of applications in which su-perconducting components are integrated intosuch end products as computers, electricalgenerators, and coil or rail guns. For instance,without further progress in transition temper-atures, HTS interconnects in computers willrequire cooling to liquid nitrogen temperatures.Fortunately, these temperatures also offer per-formance advantages for semiconductor chips.

Many of these activities can go forward in parallel.In some cases it makes sense to proceed sequen-tially. For instance, applied research aimed at in-creasing current density can and should proceedin conjunction with process R&D, because process-ing affects microstructure, and microstructure af-fects current density. But work on production scale-up must wait until the effects of processing varia-bles can be reasonably well understood. On theother hand, research intended to discover whethera particular processing technique—e.g., laserannealing—compromises some properties will beneeded early.

High-Current, High-Field Applications

Magnets.—Most past applications of superconduc-tivity have involved the design and construction ofpowerful magnets wound with LTS materials andcooled with liquid helium. Such magnets have beenused in scientific experiments (e. g., the Tevatron,ch. 2), and in MRI. Learning to design and buildmagnets helps with more demanding applications,such as rotating machinery.

Almost all the power consumed by a supercon-ducting magnet goes to operate the cooling system.For a big magnet wound with copper, resistivelosses far outweigh the refrigeration costs for anequally powerful LTS magnet. Indeed, large copper-wound magnets need their own cooling systems justto carry off the heat generated through resistance.The cost comparison below, for a bubble chamber

160

magnet at Argonne National Laboratory—a typicalearly scientific application—shows that a conven-tional magnet would cost five times more tooperate:3

Annual operating costs (thousands of dollars)Superconducting Conventional

magnet magnet(actual) (estimated)

Electrical power. ... . . . . . $17.5 $550Cooling . . . . . . . . . . 81.3 4Maintenance . . . . . . . . . . . . . 5.2 ?

$104 $554 +

Superconducting magnets have other advantagescompared with conventional magnets. Stability iseasier to achieve, for instance. In a conventionalmagnet, the field strength varies as the windingsheat up and expand. The stability characteristicsof LTS magnets give them advantages both in sci-entific apparatus and in MRI.

With LTS magnet technology well in hand, HTSdesigns will have to perform at least as well (in termsof characteristics such as stability) before their sim-pler cooling systems and lower operating costs willmake them competitive. Fabricating the conductorswill be difficult, Stable operation and protectionagainst overheating in the event of refrigerationfailures require multifilamentary cables, just as forLTS, with filament diameters of a few microns.4

Given the brittleness of the new ceramics, methodsfor producing filaments and for fabricating cablesare not yet in sight.

Once HTS wire and cable become available, ap-plications-specific requirements will come to thefore. MRI, for example, while requiring highly sta-ble fields for good image quality, does not other-wise make heavy demands on the magnet system.Still, joining methods that eliminate resistive im-perfections will be needed for image quality com-parable with that already achieved using LTS.

MRI systems are expensive, and savings from sim-pler cooling will not make that much difference forcommercial competition. Magnetic separation is

3P. J. Reardon, “High Energy Physics and Applied Superconductivity, ”IEEE Transactions on Magnetics, vol. MAG-13, 1977, p, 705, This mag-net, for Argonne’s 12-foot bubble chamber, draws 1800 amperes, pro-ducing a field of 1.8 X 10 3 gauss. The cost figures assume 140 operatingdays per year.

As another example, a magnetic separator for purifying Kaolin clay(table B-1 ) consuming 270 kilowatts [kW) if built wltb a conventional mag-net, plus another 30 kk%’ for cooling the magnet, could today be replacedwith an LTS magnet that needed no more than 60 kW, all for refrigerat-ing the windings,

4Report of the Basic Energ~’ Sciences Advisorj Committee Panel onHigh-Tc Superconducting Afagnet Applications in Particle Phjsics,D~E/Ef7-0358 (Washington, DC: Department of Energy, December 1987),pp. 9-12.

another story. Here, for instance, cheap but power-ful magnets could be used to sort scrap metal forrecycling, in refining ores, purifying chemicals,removing sulfur from pulverized coal, and clean-ing up waste water, In all these applications, cost,reliability, and ease of use (including maintenance)by a largely blue-collar labor force become signifi-cant design considerations. Design considerationsfor maglev trains likewise include cost, reliabilityand longevity, and safety. But the political and eco-nomic questions loom even larger than for, say,desulfurizing coal, In the United States, investmentsin fixed-rail transportation would have to clear ob-stacles ranging from opposition by airlines to highcosts for rights-of-way. In Japan, where the needsand constraints differ, R&D on HTS-based maglevis much more likely to go forward.

Electric Power and Utility Applications.—Magnets haveno moving parts. Technical complexities grow inelectrical machinery, and in the entire range of elec-tric utility applications. Transformers, for example,would demand more attention to AC losses thanmagnets, while superconducting transmission lineswill almost certainly have to go underground, solong as refrigeration is required. Underground linesare costly, although already in use in many urbanareas. Still, the over-riding design requirement isreliability, Utilities are quite willing to trade offhigher operating costs against lower probability offailures and down-time, A disabling failure, afterall, can lead, not only to a blackout, but to an ongo-ing need to purchase power from other suppliersuntil repairs have been completed.

In general, HTS-based generators will need con-ductors similar to those for magnets. Dynamicforces, however, will add to static forces, while cool-ing also becomes more difficult. Large conventionalgenerators already have efficiencies greater than 98percent. Superconducting field windings can in-crease this to more than 99 percent, In a largemachine, an improvement of 0.5 percent to 1 per-cent in efficiency can be significant—reducing thelosses by half—while superconducting generatorshave the additional advantage (for utility applica-tions) of increasing network stability (they are lesssensitive to shifts in electrical load).

Worldwide, at least two dozen LTS generatorR&D projects have been undertaken since the mid-dle 1960s, but none has gone beyond constructionand testing of a prototype. Utilities will have to beconvinced that such machines offer reliable serv-ice over periods of many years before investing;HTS will not affect the economics much comparedto LTS, and, lacking even the experience base of

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LTS systems, the new materials have an added hur-dle to overcome. Energy storage rings—with nomoving parts, and tolerable failure modes—willalmost certainly come first.

Other Electrical Machinery.–For non-utility applica-tions, characteristics other than efficiency and relia-bility come to the fore: superconducting machinespromise to be smaller and lighter than conventionalmotors and generators by half and more, These arethe attractions for ship propulsion, where a super-conducting generator driving a superconductingmotor could eliminate the gearing and shafting be-tween turbine (or other prime mover) and propel-ler. With much more freedom in packaging, nuclearsubmarines could carry more weapons (or be smaller),So could surface ships. Submarines might also provequieter, perhaps even faster. Moreover, with the mo-tor/generator set(s) providing speed control (andreversing), efficiency during part load operationwould rise (the turbine can run at its optimumspeed).

As table B-1 indicated, other, more cost-sensitive,applications for motor/generator sets might alsoopen up at some point. And of course, given highenough operating temperatures, the many largeelectric motors used throughout industry (rangingfrom pump, fan, and blower drives to machine toolsand rolling mills) would be candidates for re-placement.

Electronics

From the beginning, Josephson junctions havebeen the basis for many superconducting electronicdevices, SQUIDs—superconducting quantum inter-ference devices, simple circuits incorporating JJs–have extremely high sensitivity levels, which haveled to a considerable range of practical uses for LTSSQUIDS. The Josephson effect can also be exploitedfor computer logic and memory; although a num-ber of practical problems stand in the way, JJs couldin principle replace semiconductor chips in power-ful digital processors (box J, ch. 3).

Sensors.–SQUIDs can detect the very faint sig-nals produced by the human heart (10 -6 gauss) andbrain ( 1 0-9 gauss). These simple circuits can alsomeasure a wide variety of other electromagnetic sig-nals (anything with an associated magnetic signa-ture from DC up to microwave frequencies). SQUIDSare about 1,000 times more sensitive than the nextbest magnetic field detectors, They can sense thedisturbances in the Earth’s magnetic field causedby a submarine deep in the ocean, or the field dis-tributions caused by geologic formations holdingoil or mineral deposits, Requiring, in simplest form,

only one or two JJs (rather than the large numbersrequired in computer applications), LTS SQUIDs—typically fabricated from niobium—are now maderoutinely.

To minimize thermal noise, SQUIDS should beoperated at the lowest possible temperature, andin any case at less than half to two-thirds of the su-perconducting transition temperature, At liquid ni-trogen temperatures, for instance, sensitivity willbe 20 times poorer than at liquid helium tempera-ture, Even so, an HTS SQUID would still be a moresensitive magnetic field detector than any of the al-ternatives except an LTS SQUID, If they can be builtsuccessfully, HTS SQUIDS will quickly find a con-siderable range of applications (though none ofthese are likely to be high-production-volume ap-plications).

Computers and Other Digital Systems.—JJ-based elec-tronic devices promise switching speeds 10 timesfaster than the very best compound semiconduc-tors. Because the energy losses are several ordersof magnitude smaller, JJ-based integrated circuitscould be packed much more densely, However, thepractical problems of making JJ-based chips far ex-ceed those of SQUIDS.

Even if the practical problems were solved, Jo-sephson computers might not be commercialized.The competing technologies extend well beyondsilicon and gallium arsenide chips: a good deal ofR&D has been going into alternative computerarchitectures such as massively parallel processors.Much of this work seeks increases in processingpower without major advances in components. Still,faster chips will always promise faster machines,But, in a further contrast with SQUIDs—which arethe most sensitive magnetic field detectors known—the theoretical limits of JJ-based logic devices fallwell short of what might eventually be possible, forexample, using optical switching. Thus the windowof opportunity for JJ-based computing may neveropen. (It may never open for optical computing, ei-ther.) On the other hand, advances in device de-sign—and, in particular, a practical three-terminaldevice that would erase the primary drawback ofJJ chips, low gain–could open a broad new fron-tier. 5 It is simply too early to say,

R&D in the United States and Japan on LTS-basedJJ computing illustrates some of the problems thatdesigners of HTS logic and memory would face.IBM was able to build logic chips with 5,000 junc-tions reliably, but had trouble with cache memory.

5S. G, Davis, “The Superconducti\’e Computer In Your Future, ” Data-mation, Aug. 15, 1987, p 74,

162

(Fast logic does no good without fast cache mem-ory for support.) IBM’s prototype memory chips,with over 20,000 JJs, proved susceptible to errorscaused by slight variations in control current—agood example of the kind of problem that a 3-terminal device would help solve. More recently,Japanese companies have built several kinds of LTSchips incorporating niobium JJs. Fujitsu’s 4-bitmicroprocessor, 25 times faster than a similar sili-con chip, and 10 times faster than a gallium-arsen-ide microprocessor, consumes only 0.5 percent asmuch power as either. NEC has produced a 1,000bit dynamic memory, containing 10,000 JJs; accesstime is a factor of 200 better than for silicon.

The first applications of HTS in computers maybe interconnects–electrical pathways joining other-wise conventional chips. Signal dispersion andother problems associated with transmitting elec-trical pulses within the processor limit perform-ance; practical means for incorporating HTS inter-connects should find ready application in large andpowerful machines.

Moreover, at liquid nitrogen temperatures, super-conductors and semiconductors could operate com-patibly in hybrid designs. Ordinary semiconductorscannot be used at liquid helium temperatures; evenif they could be made to operate in otherwise satis-factory fashion, semiconductors would dissipate toomuch heat, overwhelming the cooling system. Giventhat hybrid LTS-semiconductor systems are not fea-sible, past work on Josephson computing has in-volved either all-superconducting chips, or uniquedesigns with controlled temperature gradients. TheHypres data sampler, for example, uses an inte-grated circuit cooled to liquid helium temperatureon one end only—that end holding about 100 LTSJJs.

Three-terminal devices could be a big step for-ward in superconducting electronics, making pos-sible logic designs at the chip level much like thosenow used with semiconductors. It could well be,however, that major advances in HTS electronicswould come only with devices that departed in amajor way from currently known electronic de-vices, The first requirement, in any case, is mas-tery of thin-film fabrication technology.

Military Systems

As table B-1 indicated, possible defense applica-tions of superconductivity range from shieldingagainst nuclear blasts to high-speed computers andmotor-generators for ships. Conceptually, there maybe little difference between military and commer-cial applications. But in practice, differences will

be pervasive at levels all the way from devices andcomponents (e.g., radiation hardening) to the sys-tem configuration itself (cost-performance tradeoffsmuch different than for commercial markets). Com-puting requirements for smart weapons—for exam-ple, real-time signal processing—tend to be quitedifferent from those important in the civilian econ-omy. Thus, as development proceeds, military usesof superconductivity will diverge in many respectsfrom civilian applications.

Some of the military applications could be com-pelling. Submarine detection with SQUID-basedsensors, for instance, offers at least a factor of 1 0improvement over current methods. Conventionalelectric generators for shipboard or vehicle use, orfor producing electric power under battlefield con-ditions, produce about 2 horsepower per pound;prototype LTS generators have already reached 25horsepower per pound. Superconducting coil or railguns promise increases in projectile velocities of5 to 10 times.

The U.S. Department of Defense (DoD) has fundedsuperconductivity R&D since the early 1950s, con-tributing to the development of large, high-fieldmagnets, electrical machinery, LTS sensors, and su-perconducting computers. DoD (and the Depart-ment of Energy) also supported much of the mate-rials processing R&D that proved necessary toachieve high current densities in LTS wire and ca-ble. Since 1983, the R&D objectives of DoD pro-grams in LTS have been redirected, and the pro-grams have grown, as a result of the StrategicDefense Initiative (SDI).

For SDI, HTS shielding, waveguides, and sensors(for use in space) hold obvious attractions, whileLTS work also continues; early in 1988, Bechtel andEbasco began an SDI-funded design competition onLTS magnetic energy storage for powering ground-based free-electron lasers. SDI has also targeted veryhigh-frequency communication systems, whereLTS could offer substantial improvements in per-formance and extended frequency range. Here, the1-2-3 ceramics seem to offer theoretically promis-ing electronic characteristics (i. e., larger energygaps). They would also avoid the many practicalproblems that liquid helium cooling poses in a mil-itary environment.

DoD has also renewed its attention to two of theprospective high-field, high-power applications—ship propulsion, and coil/rail guns, Military fund-ing of R&D on LTS machinery began in the middle1960s, with a 300()-horsepower prototype completedseveral years ago. Magnetohydrodynamic (MHD)thrusters offer a wholly different alternative, doingaway with propellers, as well as shafts and gear-

163

ing. In 1978, the Defense Advanced ResearchProjects Agency began funding R&D on electromag-netic launchers, or coil/rail guns. The initial goal,apparently, was a cannon for the Navy. With theadvent of SDI, much of the DoD work has beenredirected toward higher velocity systems, capableof launching a projectile into space. Like the com-mercial applications, the requirements, whether formachines or for coil/rail guns, start with good con-ductors.

Developing the SuperconductivityTechnology Base

Table B-3 gives a sampling of expert opinion ontiming for a number of the applications discussedabove, Without too much oversimplification, theR&D needed for supporting these and other appli-cations can be pictured as in figure B-3.

Leaving aside military applications, particularlythose in which the superconductor serves as a pas-sive shielding medium, sensors and other relativelystraightforward electronics applications will prob-ably come first. As noted earlier, without new andmuch more tractable families of HTS materials,learning to make practical wire and cable will bea long and tedious process. As a result, the high-current, high-field applications will be slower inreaching the marketplace than thin- and thick-filmelectronics.

The R&D tasks outlined in figure B-3 will take awide range of skills. Materials synthesis and charac-terization demands well-equipped laboratories andsophisticated experimental techniques—e.g., X-ray

Table B-3.—Estimated Development Times forProspective HTS Applications

Application Time a

SQUIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less than 5 yearsSensors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 yearsComputer interconnects . . . . . . . . . . . . . Less than 5 yearsSuperconducting computer. . . . . . . . . . . Long-termMultifilamentary composite cable . . . . . 5 to 10 yearsMagnet system . . . . . . . . . . . . . . . . . . . . . over 10 yearsMagnetic energy storage . . . . ... , . . . . Long-termTransmission lines . . . . . . . . . . . . . . . . . . Long-termElectrical generators . . . . . . . . . . . . . . . . Long-termauntll ~mall.scale commercial Production

SOURCE “Technology of High Temperature Superconductivity, ” prepared forOTA by G J Sm!th II under contract No J3-21OO, January 1988, p. V.97,based on interviews

and neutron diffraction, electron microscopy,molecular beam epitaxy. Making thin and thickfilms of the 1-2-3 materials with adequate current-carrying capacity will probably mean oriented grainstructures—a good deal more difficult in productionthan in the laboratory. Fabricating useful Joseph-son junctions will mean controlling the depositionof very thin layers. The processing techniques arelikely to be more demanding than related semicon-ductor processing technologies.

Still, there is much that can be learned from re-lated technologies, not only in microelectronics, butin ceramics. Applications of both structural andelectronic ceramics demand very pure starting ma-terials, careful control of processing (and therebystructure), and sensitive nondestructive inspectiontechniques, Some of this experience base will trans-late to HTS, especially to fabrication processes forfilaments and wires.

As figure B-3 suggests, cryogenics technologieswill be needed for most applications of HTS (in theabsence of room-temperature superconductivity],Space is the exception, Even if much higher transi-tion temperatures emerge, good performance maystill require cooling—e.g., to minimize electricalnoise, or increase current-carrying capacity, Al-though much of the speculation concerning HTShas assumed liquid nitrogen cooling, closed-cyclerefrigeration systems can reach temperatures as lowas 100 K, and would probably be the technology ofchoice in many systems.

Much of the R&D needed for commercializationof HTS will have to go on more-or-less simultane-ously. For simplicity, one-way arrows join the boxesin figure B-3: a more realistic picture would be fullof feedback loops representing the flows of knowl-edge accompanying development of a complex newtechnology (ch. 2), As conductor fabrication tech-nology evolves, the design constraints for magnetsand machines will take shape. System level studiesof digital processors will feed back to the devicelevel.

Developing the technology base in HTS meansmultidisciplinary research, and productive interac-tions among universities, national laboratories, andindustry. Developing a technology base quickly, sothat U.S. industry can keep up with Japanese in-dustry, will mean taking risks, and managing over-lapping R&D projects. The examples of industriesranging from automobiles to microelectronics (ch.2) demonstrate that competing in HTS will requirean R&D system that effectively supports parallel de-velopment on many different but inter-relatedproblems.

164

Figure B-3. – HTS R&D

Making Making wires, tapes,films and other high-current

conductors

Thick ThinI

v

Shielding,interconnects,

Devices,sensors

(many types)

Systems

Magnets

Machinery

Electric utility applications

SOURCE: Office of Technology Assessment, 1988

Index

Index

Advanced Civilian Technology Agency (ACTA), pro-posal for, 144

Advanced Technology Program, proposal for , 143Altair, 31American Superconductor Corp. , 60Ampex, 45Anti trust , enforcement and U.S. industr ial competi-

tiveness, 5, 6, 22Applications

high-current, high field, 40-41, 65, 136, 159-160,162-163

LTS, 154, 157military, 162-163prospective HTS, 40-41, 44-48, 134-136, 159-163superconducting electronics, 41, 136, 161-162

Appropriations. See Budgets; FundingAtomic Energy Commission U.S. (AEC), 25, 131, 140AT&T, R&D funding by, 7, 21, 55, 56, 57, 58, 59, 71,

72, 102

Bardeen-Cooper-Schieffer (BCS) model, 158Bednorz, J. C., 26Bellcore, R&D by, 56, 59Bloch, Eric, 141Boeing, 98BRITE (Basic Research on Industrial Technologies in

Europe), 43Budgets

CTA R&D, 144, 147Federal Government R&D, 5, 9, 17, 23, 83, 87Japanese superconductivity R&D, 10, 61, 65, 68, 69,

70, 71-72, 73, 75see also Funding

California, University of—Berkeley, 58, 60Carter, Jimmy, 22Central Electric Power Research Institute—Japan, 70Ceramics

commercializing R&D results pertaining to struc-tural for use in heat engines, 27, 28, 44-45

Japanese expertise and leadership in, 19, 27, 61superconductivity materials made of, 3, 6, 27, 44-

45, 155, 156, 157, 158, 162China, 3Chu, Paul, 26, 129Civilian Technology Agency (CTA)

desirable features of, 144, 145-146, 147mission of, 143-145potential problems with, 146-147project selection and review for, 145, 146proposals for, 13, 126, 141-142, 143

Collaborationindustrial R&D, 133-137industry/Federal Government R&D, 5, 12-13, 23, 86,

113-114industry /university/Government, 123, 124, 126industry/university HTS, 59, 60, 130, 131

international HTS research, 11, 77-79, 86, 115-118in Japanese R&D system, 9-10, 11, 62-63, 73-77policy issues and options concerning strengthening

university /industry/Government, 8, 9, 85-86,104-115

Commercialization, 3-5, 17-20, 42-44aggressive support strategy for, 132-138, 139European HTS, 43factors influencing U.S. HTS, 35-40Federal Government’s role in high-technology, 3-5,

9, 20-27flagship approach to technology, 125, 139overview of technology, 3-5, 17-20strategies for HTS technology, 12-13, 123-142summaries of specific examples of technology}’ R&D,

27-28, 44-48working group on, 137-138see also Management; Marketing; Research and de-

velopment [R&D)Committee on Materials (COMAT), 90Conductus Inc., 60Costs. See Budgets; FundingCurrent density, critical, 156, 157

Defense Advanced Research Projects Agency(DARPA)–DoD, 139

as precedent for CTA, 142-143R&D support by, 9, 25, 44, 85, 93, 104, 139, 163

Defense. See Department of Defense, U.S. (DoD);Military

Department of Commerce, U.S. (DOC), 138, 143, 145Department of Defense, U.S. (DoD), 90, 91

high-technology development [postwar history),96-98

HTS R&D funding by, 6, 12, 24, 41, 85, 93-99, 112,

1 6 2 - 1 6 3

R&D budget of, 23, 87see also Defense Advanced Research Projects

Agency (DARPA); MilitaryDepartment of Energy, U.S. (DOE), 90, 91

collaboration with industry by, 5, 23HTS R&D funding by, 6, 12, 24, 28, 44, 85, 99-101see also National laboratories

Development, See Commercialization; Research anddevelopment (R&D)

Digital Equipment Corp., 31, 137Domestic Policy Review of Industrial Innovation

(DPR), 22Du Pont, R&D by, 6, 7, 51, 57, 58

Eastman Kodak, 57Economic Competitiveness, International Trade, and

Technology Development Act—1987, 144Economic Policy Council (EPC), 90Education

HTS personnel, 130, 133U.S. engineering, 4, 142

167

168

Electric powerHTS applications involving, 160-161shortage in Japan, 9, 40

Electric Power Research Institute, 90, 101Electronics, superconducting, 41, 136, 161-162Energy Research and Development Administration

(ERDA], See Department of Energy (DOE)Engineering

education, 4, 142parallel, process for HTS, 34-35, 159, 163raising priority of research on, 13, 141-142

Engineering Research Centers (ERCs)–NSF, 9, 103,104, 106, 107, 108

ESPRIT (European Strategic Program of Research inInformation Technology), 43

Eureka (program), 43European Community (EC), 43, 78Expenditures. See Budgets; FundingExxon, 55

Fabrication. See ProcessingFederal Government. See Government, FederalFederal laboratories. See National laboratoriesFine Ceramics Center (FCC)–Japan, 70, 76Food and Drug Administration, U.S. (FDA), 47France

basic research support by, 26government involvement in industry affairs by, 22R&D support by, 43

Fundingcontinuity in R&D, 8, 85, 91, 123, 124-125Federal HTS R&D, 6, 9, 24, 84, 86-93Federal objectives of R&D, 9, 23-27, 84industrial R&D, 6-7, 21, 54, 57, 58, 60, 61, 84R&D at U.S. universities, 6, 12, 85, 102, 103, 104,

132-133see also Budgets

Fujitsu, 71, 72

General Electric (GE), R&D support by, 46, 55, 57, 59General Motors Corp. (GM), 21, 98Germany, Federal Republic of. See West GermanyGovernment, Federal (U.S.)

HTS funding by, 6, 9, 24, 84, 86-93industry support by, 3-5, 12, 20-23, 128, 131,

133-137procedural rules for R&D cost sharing by, 136-137R&D budget, 5, 9, 17, 23, 83, 87R&D funding objectives of, 9, 23-27, 84technology commercialization strategy options for,

12-13, 123-148see also Military; individual agencies in

Government, State, HTS support by, 11, 23, 114-115,129

Heat engines, 44-45History, of superconductivity development, 26,

154-158Hitachi Co.

business strategy of, 51R&D support by, 7, 64, 71

Hoechst AG, 43Honda, 32, 33Houston, University of, 58, 129Hypres Co., 41, 159

IBM, 41, 43, 51, 98R&D funding by , 7 , 21, 55, 56, 58, 59, 71, 72, 102

transit ion temperature breakthrough by, 3, 26, 155Imsai, 31Incentives

indirect, for commercialization, 5, 6, 12, 20, 22Japanese energy shortage as HTS R&D, 9, 40

Industrycompetitiveness of U.S. high-technology, 3-5, 8-9, 32direct support from Federal Government to, 5, 12,

20-23, 128, 131, 133-137HTS R&D consortia, 127, 133-137HTS R&D strategies of U. S., 6-7, 57-59R&D funding by, 6-7, 21, 54, 57, 58, 60, 61, 84R&D strategies of Japanese, 9-11, 29, 33-35, 51-52,

60-67R&D strategies of U. S., 4, 6-7, 10, 34, 35, 51-52,

53-59“wait and see” attitude of U. S., 4, 6-7, 10, 52, 53,

55-56, 131-132Industry/University Cooperative Research Centers

(IUCRs)–NSF, 107Intermagnetics General Corp. (IGC), 48International Superconductivity Technology Center

(ISTEC)–Japan, 65, 72, 77-79Investment. See Budgets; Funding

Japanbasic research support by, 7, 9, 26, 61, 68, 75ceramics technologies expertise of, 19, 27corporate R&D strategies in, 9-11, 29, 33-35, 51-52,

60-67HTS policy of, 9, 10-11, 67-79, 86HTS R&D initiatives in, 3, 7, 9, 10-11, 67-80industry support by government in, 9-10, 22, 62-63,

73-77national laboratories of, 9, 69, 70, 76, 78policy issues and options concerning technology in-

terchange with, 9, 86, 116-117U.S. technology interchange with, 11, 77-79, 86,

115-118Josephson junctions (JJs)

computer applications using, 41, 64, 71-72, 161-162reproducible HTS, 30, 41R&D for, 57, 70, 163

Keyworth, George, 91Knowledge base

Federal Government’s contribution to, 3, 5, 11-12,21, 96

for superconductivity, 163gaps in U.S. technology, 11, 83, 85, 91, 136private sector’s access to, 3, 5, 21

Korea, Republic of. See South Korea

Legislation. See individual statutes

—.

Low-temperature superconductivity (LTS), 5, 6, 25, 65historical development of, 154, 156, 157-158magnet technology, 29, 40, 41, 48, 64, 154properties and behavior of, 156, 157R&D funding for, 93, 95, 99see also Josephson junctions (JJs); Magnets

Maglev (magnetically levitated] trains, 73, 74, 159,160

Magnetic resonance imaging (MRI), commercializingR&D results involving, 27, 29, 31, 41, 47-48,154, 160

MagnetsHTS, 29, 160LTS, 48, 157, 159-160

Maintenance, See ManagementManagement

Japanese industrial R&D, 63U.S. industrial R&D, 54-57, 135

Marketingpolicy, 143, 144R&D applications, 8-9, 29-31research, 43

Market pull, policies encouraging, 123, 124, 125-126Massachusetts Institute of Technology (MIT), 60, 96Materials Research Laboratories (MRLs), 103-104,

106-107Matsushita, 29, 45Microelectronics

consortium, 5, 35, 134, 136as precedent for HTS commercialization, 35-40

Microelectronics & Computer Technology Corp.(MCC), 79, 135, 136, 137

Militarycommercial spin-offs from R&D spending by, 4, 5,

9, 84-85, 94-95R&D directed toward, 25, 83, 84, 85superconductivity applications, 162-163see also Department of Defense, U.S. (DoD)

Ministry of Education (Monbusho)–Japan, HTS sup-port by, 68, 70-73

Ministry of International Trade and Industry(MITI)-Japan, 63, 71, 72

HTS support by, 68, 69-70, 75, 76International Superconductivity Technology Center

(ISTEC), 65, 73, 77-79Ministry of Transport—Japan, HTS support by, 68,

73, 74Mitsubishi Electric, R&D support by, 64, 74Muller, K. A., 26Multicore Project (STA)–Japan, 69, 76, 77Muto, Yoshio, 73

National Academy of Sciences (NAS), 86, 87National Aeronautics and Space Administration, U.S.

(NASA], 91-92, 101-102National Bureau of Standards, U.S. (NBS), 24, 77, 87,

90, 101National Cooperative Research Act—1984, 22, 24National Critical Materials Council (NCMC), 89,

90-91

169

National defense. See Department of Defense, U.S.(DoD); Military

National Institutes of Health, U.S. (NIH), 25, 138-140National laboratories

HTS R&D in, 85, 110-114, 131, 139LTS magnet research at, 48technology transfer to private sector from, 19, 22,

23, 83, 86, 110-114, 130see also Department of Energy, U.S. (DOE)

National Security Agency, U.S. (NSA), 71, 97National Science Foundation, U.S. (NSF), 90, 91

Engineering Research Centers, 9, 103, 104, 106,107, 108

HTS R&D funding by, 6, 12, 85, 102, 103, 104,132-133

Industry/Universi ty Cooperat ive Research Centers(IUCRs), 107

Japanese industry superconductivi ty survey by, 64,65-66

Japan Initiative of, 116mult idiscipl inary R&D encouragement by, 9, 85,

102-103, 105, 106, 107Research Applied to National Needs (RANN) pro-

gram of, 107, 125science and technology (S&T) centers (proposed),

104National Technology Foundation (NTF), proposal for,

141-142NEC Co., R&D support of, 7, 71, 72Netherlands, The, 43Nippon Steel, 51, 67Nippon Telephone & Telegraph (NTT), 71Nissan. 33

Office of Science and Technology Policy (OSTP), 89,90, 93, 138

1-2-3 ceramics. See CeramicsOnnes, Heike, 156, 157Oxide ceramics. See Ceramics

Packard, David, 23Packard Commission, 131Patents, as indirect incentive to industrial invest-

ment, 6, 20, 22, 111Personnel

CTA, 145, 147exchange program (industry/national laboratories),

86, 112-113, 116-117Japanese superconductivity R&D, 64, 65U.S. superconductivity R&D, 11, 64, 130, 133

Philips, 43Planning. See ManagementPolicy

commercialization and U.S. technology, 3-5, 9, I 1 -

1 2 , 2 0 - 2 7 , 8 3 - 8 6 , 1 2 8 - 1 3 2issues and options for Congress, 83-119Japanese HTS, 9, 10-11, 67-79, 124-125see also Strategies

Polymorphic Systems, 31Private sector. See Industry

170

Processingas central element in HTS commercialization, 139HTS applications marketing and methods of, 8-9,

30R&D funding of, 95, 98techniques for HTS materials, 157-159

RACE (R&D in Advanced Communication-technologyfor Europe), 43

RCAR&D support by, 55VCR commercialization and, 29, 46-47

Reagan, RonaldHTS initiative of, 6, 34, 128-129R&D support by, 12, 23, 83, 85, 90, 91Young Commission and, 22

Regulation, as indirect incentive for industrial invest-ment, 5, 20, 22

ResearchFederal support for directed, 25-27, 83Japanese support for basic, 7, 9, 26, 61U.S. support for basic, 12, 23, 24, 56, 83, 130, 133,

139marketing, 34multidisciplinary, 9, 85, 102-103, 105-107, 133

Research and development (R&D), 3-5, 7-11, 17-20collaborative HTS, 133-137continuity in funding, 123, 124-125coordinating Federal, 89, 90, 128, 140-141corporate strategies for, 4, 6-7, 9-11, 29, 32-35, 51-59CTA intramural, 145-146, 147diversity in support for, 123, 124Federal budget for, 5, 9, 17, 23, 83, 87Federal funding of HTS, 6, 9, 23-27, 84, 86-93, 128,

133-137, 140-141industrial funding of, 6-7, 21, 54, 57, 58, 60, 61, 84,

163, 164marketing of, 8-9, 29-31parallel, 34-35, 66, 67, 163policy issues and options concerning funding levels

and priorities for Federal, 8, 9, 85-86, 87-93science and technology (S&T) agency for coordinat-

ing, 128, 140-141U.S. industry view of long-term, 4, 6-7, 10, 52, 53,

55-56, 131-132Research Applied to National Needs (RANN)

program—NSF, 107, 125

Saito, Shinroku, 76Science. See ResearchScience and Technology Agency (STA)–Japan, HTS

support by, 68, 69, 76Science base. See Knowledge baseSematech, 5, 35, 134, 136Siemens, 43Sloan, Alfred, 33Small Business Innovation

22, 115Small Business Innovation

115

Development Act–1982,

Research, Federal (SBIR),

Sony, VCR development by, 31, 46South Korea

export policy effectiveness of, 5, 61VCR development by, 46

Sperry Univac, 71, 72SQUIDS, 161, 162Stanford University, 58, 60Stevenson-Wydler Technology Innovation Act–1980,

22, 143Strategic Defense Initiative (SDI)

HTS use in, 24, 85LTS research for, 40, 162

Strategic Defense Initiative Organization (SDIO), 93Strategies

Japanese R&D, 9, 10-11, 29, 33-35, 51-52, 60-67key ingredients of Federal HTS development, 123,

124options for Federal Government HTS commercial i-

zation, 12-13product/process, 33-34U.S. industrial R&D, 4, 6-7, 10, 34, 35, 51-52, 53-59see also Policy

Tanaka, Shoji, 72-73, 76Taxes, as indirect incentive to industr ial investment,

5, 20, 22, 92-93Technologies

commercialization of (overview), 3-5, 17-20DoD’s postwar development of, 96-98industr ial competi t iveness and development level

of, 4, 21strategies for commercializing HTS, 12-13, 123-142

Technology base. See Knowledge baseTechnology push, 123, 124, 125-126Technology transfer

from Federal laboratories, 9, 22, 23, 83, 86, 110-114,130

policy issues and options concerning U.S./Japanese,9, 86, 115-117

Technology Transfer Act—1986, 111, 118Toshiba

R&D support by, 64, 74, 76VCR development by, 29, 31, 45

Training. See EducationTransition temperatures

current flow and, 154discovery of ceramics’ higher, 26, 155,

United States. See Government, FederalUniversities

163

Us.

funding for HTS R&D at U. S., 6, 12, 85, 102, 103,104, 132-133

HTS R&D in Japanese, 72-73multidisciplinary R&D within, 9, 85, 102-103, 105-

1 0 7 , 1 3 1University Research Initiative (URI)–DoD, 107U.S. Steel, 55

171

Video-cassette recorders (VCRs), commercialization of Westinghouse, 59R&D results involving, 29, 31, 45-47

Visibility, level of R&D programs, 123, 125, 137, 139 Young, John, 22Young Commission, 22, 128, 140

West Germanyexport policy effectiveness of, 5 Zenith, 46R&D support by, 43