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The Advanced Technology Program (ATP) in the National Institute of Standards and Technology (NIST) of the Department of Commerce was established under authority of the Omnibus Trade and Competitiveness Act of 1988 (the "Trade Act") signed by President Ronald Reagan. Implemented as a pilot program in 1990 by the Bush administration, ATP has become the flagship of the Clinton-Gore civilian technology policy, as well as the focal point of conservative critique of that policy. This chapter describes the evolution and implementation of ATP, as well as its strengths and weaknesses, and it proposes actions to improve ATP on which the Clinton administration and Congress should be able to find common ground.
(1) Origins of ATP
The ATP was one of a series of modest steps in the evolution of U.S. civilian technology policy. ATP is the realization of a idea under development for more than a quarter of a century: that the federal government should financially support development and utilization of new and improved technology by industry. Its specific form, however, was a response by Congress to concerns about the competitiveness of U.S. industry in the 1980s.
In 1962, the Kennedy administration proposed, without success, to establish a Civilian Industrial Technology Program in the Department of Commerce (DOC) to fund research for lagging industries. Its State Technical Services Program, which funded state programs to disseminate existing technology to small firms, was adopted in 1965 and operated until 1969.
The Nixon administration considered a multi-billion dollar proposal for a New Technological Opportunities program to address the economic downturn of the late 1960s, as well as to respond to the threat to national technological resolve from the high profile defeat in Congress of the supersonic transport program.
President Jimmy Carter oversaw a domestic policy review of industrial innovation that recommended in 1979 an array of policies to help industry respond to the period''s slow economic growth and high inflation. These same conditions, however, contributed to Carter''s defeat by Ronald Reagan in 1980, and most of Carter''s recommendations were not acted on.
The Stevenson-Wydler Technology Innovation Act of 1980 gave the DOC authority to assist Centers for Industrial Technology at universities or other non-profit organizations. These Centers would conduct research and development (R&D) on generic technologies cooperatively with industry, provide education and training about the innovation process, and offer technical assistance to industry. The Centers program was not adopted by the Reagan administration, although it did embrace the part of the Act making technology transfer a mission of all federal R&D agencies.
During the early 1980s, the U.S. economy experienced a sharp downturn; the U.S. balance of trade, especially with Japan, became highly unfavorable; and key industrial sectors such as autos, consumer electronics, machine tools, and semiconductor electronics lost both domestic and international market shares to Japanese firms. By the late 1980s, the debate over the declining "competitiveness" of U.S. industry was in full swing, and many proposals were made for programs and policies to improve U.S. industrial performance. Opponents argued vigorously on both ideological and practical grounds that such proposals would constitute unwarranted and ineffective intrusions into the private economy.
An early response to this challenge was the Engineering Research Centers program under which the National Science Foundation (NSF) funded interdisciplinary centers at leading universities to conduct research on technologies important to industry. Obtaining matching funds from industry was a condition of federal funding. NSF did not specify which technologies it would support, but depended instead on peer review of the quality of proposals to determine which technologies and centers to fund.
By 1987, Congress and the president were under considerable pressure to pass new trade legislation to reauthorize both the Export Administration Act and the president''s authority for "fast-track" negotiation of trade agreements. However, the Reagan administration''s draft trade legislation, presented in February 1987, soon became the legislative vehicle for a plethora of proposals to address the competitiveness problem. At passage, the Act had grown to include ten major titles with countless sections, subsections, and provisions addressing such matters as trade, export, and international financial policies; agricultural trade; foreign corrupt practices; education and training; small business assistance; patent policy; and ocean and air transportation, as well as technology policy.
A part of the Trade Act, entitled the Technology Competitiveness Act, established ATP and changed the name of the National Bureau of Standards (NBS) to the National Institute of Standards and Technology (NIST), to reflect its enhanced role in supporting the development and use of advanced technology in industry.
The National Institute of Standards and Technology Authorization Act for FY 1989, adopted a few weeks after the Trade Act, restructured the technology programs in the DOC. It created a new Technology Administration (TA), headed by a new Under Secretary of Commerce for Technology. Both the director of NIST and a new Assistant Secretary for Technology Policy, who oversees the Office of Technology Policy (OTP), report to the under secretary.
ATP might have been implemented directly by staff of the TA, an administrative agency, rather than through NIST, a federal laboratory. However, the arguments for assigning ATP to NIST were compelling. Only NIST had the technically skilled staff needed to act as reviewers of proposals and overseers of ATP projects, and it had a well-deserved reputation for integrity and fairness in dealing with complex technical matters, both in support of industrial performance and in the public interest. Furthermore, NIST had an "industrial technical services" office with an experienced staff, whereas the TA had a small staff with limited technical expertise. Neither NIST nor the other parts of the TA had much experience in running competitive research programs. Nevertheless, with its new responsibility for ATP, NIST would for the first time administer a large and visible program of external research.
(1) ATP Implementation
In passing the ATP legislation, Congress and the president determined that the federal government should help U.S. industry by providing a limited amount of public funds on a competitive, cost-shared basis to firms and research consortia to help them develop new technologies that they and other firms could use to compete more effectively in world markets. In the words of Section 5131 of the Technology Competitiveness Act, ATP was established "for the purpose of assisting United States businesses in creating and applying the generic technology and research results necessary to (1) commercialize significant new scientific discoveries and technologies rapidly; and (2) refine manufacturing technologies."
To accomplish this purpose, the Act further states that the secretary of commerce, acting through the director of NIST, may:
aid [industry-led] United States joint research and development ventures...through (A) provision of organizational and technical advice and (B) participation in such joint ventures...which may include (i) partial start-up funding, (ii) provision of a minority share of the cost of such joint ventures for up to 5 years, and (iii) making available equipment, facilities, and personnel, provided that emphasis is placed on areas where the Institute has scientific or technological expertise, on solving generic problems of specific industries, and on making those industries more competitive in world markets.
Furthermore, the secretary, acting through the director, may:
[provide grants to and] enter into contracts and cooperative agreements with United States businesses, especially small businesses, and with independent research organizations, provided that emphasis is placed on applying the Institute''s research, research techniques, and expertise to those organization''s research programs.
The two inserts in brackets [ ] were added in 1992 by the American Technology Preeminence Act.
(2) Implementation by the Bush Administration
The Reagan administration did not implement the Advanced Technology Program, in part because it was adopted near the end of his second term. This was not unexpected: the supporters of ATP were creating a framework within which future administrations of either party might implement a program to assist U.S. industry.
Senior members of the Bush administration, including the Deputy Secretary of Commerce, Thomas Murrin, and the Under Secretary for Technology, Robert M. White, were concerned about the competitive performance of U.S. industry and were generally supportive of ATP. The administration sought FY 1990 funds to implement the ATP, and $9 million was made available for the first round of ATP awards. ATP was assigned to a small group at NIST under the direction of George Uriano. The program announced by NIST in July 1990 would "focus on supporting private sector development of precompetitive generic technologies and [would participate] in a number of industry initiatives." It would "avoid participation in development of specific products and processes by the private sector."
Generic technology was defined by ATP in its first operating rule as "a concept, component, or process, or the further investigation of scientific phenomena, that has the potential to be applied to a broad range of products or processes." Precompetitive technology was defined as "research and development activities up to the stage where technical uncertainties are sufficiently reduced to permit preliminary assessment of commercial potential and prior to development of application-specific commercial prototypes." The rule also stated that "precompetitive generic technologies are ''enabling,'' in that they offer wide breadth of potential application and form an important technical basis for the future product-specific applications; and ''high value,'' in that, when applied, they offer significant benefits to the economy."
Projects to be funded were selected by two-stage competitive review of written proposals. The first stage examined scientific and technical merit; the second business and economic merit for those that survived stage one. The technical reviewers were largely NIST staff, and the business review was done by consultants expert in business planning, finance, and technology transfer.
Projects could be supported by grants or cooperative agreements (NIST has used only the latter), and awards could be made either to individual firms or to joint research and development ventures ("consortia"). R&D consortia could include businesses, academic institutions, independent research organizations, and government entities. Since the amendments of 1992, eligible consortia must include two or more United States businesses. To receive ATP funds, R&D joint ventures must register with the Department of Justice pursuant to the National Cooperative Research Act of 1984.
Individual firms could receive awards of up to $2 million over three years. Such awards could be used to offset up to 100 percent of the direct costs of a project, but indirect costs had to be paid by the recipient. Consortia could receive awards for up to five years, the amount limited only by the availability of appropriated funds. ATP can pay for up to 50 percent of the costs of consortium projects (including a maximum of 50 percent of indirect costs). ATP does not provide any funds directly to other governmental entities or to academic institutions, even though both could participate in joint ventures and in subordinate roles to business or joint venture awardees.
The title to intellectual property resulting from an ATP-supported project is required to be held by businesses incorporated in the United States. A university, non-profit, or government agency partner cannot hold title to any invention resulting from ATP projects, (notwithstanding the Bayh-Dole Act of 1980 that gave universities, non-profits, and some private firms the rights to inventions made with federal funds). However, academic institutions and non-profit organizations may share in the royalties or licensing fees resulting from these inventions on whatever terms the participants agree to. In all events, the federal government retains the right to a royalty-free license to use ATP-based technologies for its own purposes.
In the first competition in 1990, eleven projects were funded from a total of 249 proposals; in the 1991 competition, 28 of 241 proposals were funded. The 1992 and 1993 competitions funded 21 and 29 projects respectively. Appropriations for ATP were 10, 36, 47 and 68 million dollars in fiscal years 1990 through 1993.
Some important changes in ATP were made by the American Technology Preeminence Act of 1992. The federal government would no longer receive a share of royalty payments and license fees resulting from ATP awards. Independent research institutions were no longer eligible to apply as single applicants for awards, but could participate in industry-led joint ventures. Furthermore, a new ATP rule issued by NIST under the revised authorization clarified that a research joint venture must include at least two United States businesses that would be eligible to apply to ATP individually, both of which must participate in the proposed R&D program and contribute to the cost-sharing requirement. The 1992 Act also laid out a complicated set of conditions under which foreign firms could receive financial assistance from ATP.
(2) Implementation by the Clinton Administration
ATP was a key element of the new Clinton administration''s technology policy. In its February 22, 1993, statement on technology policy, the administration promised that ATP would be expanded "significantly." Additional funds for ATP were included in the administration''s supplemental FY1993 budget "stimulus package." These funds were not forthcoming, however, owing to defeat of the package in Congress in March 1993.
ATP has grown substantially during the Clinton years, despite fierce opposition to the program by the newly-ascendant Republican majority elected to Congress in November 1994. Appropriations in fiscal years 1994 through 1997 have been 199, 341, 221, and 225 million dollars respectively. The decline from 1995 to 1996 reflects congressional opposition. The administration has asked for $276 million for FY 1998. In 1994, 88 new projects were funded. The number was 103 new projects in 1995, but it fell sharply to eight in 1996.
The Clinton administration published a revised rule in the Federal Register detailing procedures for the ATP in January 1994, incorporating several important changes. First, in some competitions ATP now accepts pre-proposals to help proposers avoid investing in proposals that are unlikely to succeed. Successful pre-proposers then submit full proposals for review.
Second, ATP augmented its open competitions with "focused programs" in specific technology areas selected after consultation with industry. Firms and consortia are encouraged to submit white papers to ATP outlining technical needs and opportunities in specific technologies. ATP uses the number and quality of white papers to indicate industrial interest and builds focused programs around clusters of white papers on similar topics. Thus, the focused program areas are determined in response to industry initiative. Five focused competitions were announced in 1994. The number of focused programs has grown to twelve by 1997, and some have had more than one round of competition.
The revised proposal preparation kit released in May 1996 includes a list of the members of the Science and Technology Council of the States, a unit of the National Governors Association. The members are prepared to offer technical assistance to prospective and current ATP recipients.
ATP awards have been made to a wide variety of industries and technologies, and they have gone to both small and large firms, as well as to a variety of consortia. Universities are active members of many of the funded consortia, as are other nonprofit organizations and some federal laboratories. NIST has characterized ATP awards as follows:
288 total awards, involving 740 firms;
184 awards to single applicants, including 106 small businesses;
104 awards to joint ventures, including 28 led by small businesses;
262 known instances of university participation in the 288 awards, involving more than 100 institutions; and
a total commitment of $989 million in ATP funds.
Although attribution of R&D projects to specific fields of technology is somewhat arbitrary, since many projects involve multiple technical fields, NIST reports that the ATP funds have been distributed as follows:
32 percent to computing, information and communications;
15 percent to biotechnology;
16 percent to electronics;
14 percent to materials;
11 percent to manufacturing;
8 percent to chemicals and processing; and
4 percent to energy and environment.
(1) The Debate Over ATP''s Existence
Despite the fact that ATP has been in place for more than seven years, its legitimacy and existence continue to be debated. The decision to try a pilot ATP program in 1990 was not universally popular in the Bush administration, especially among leading conservatives on the White House staff. ATP enjoyed a brief period of relative tranquillity during the first two years of the Clinton administration, but it came under attack in the congressional campaign in 1994. Since the change in political leadership in Congress in early 1995, the very existence of ATP has repeatedly been called into question by influential members in both Houses. Before turning to a discussion of how this long-standing debate might be satisfactorily resolved, it is useful to review the positions taken by ATP''s supporters and opponents, especially during its establishment.
(2) Arguments in Support of ATP
Supporters saw ATP as one way to address the challenge to American markets and the American standard of living from strong foreign competition. They were especially concerned that U.S. firms were facing competition from abroad from companies whose home governments were offering substantial financial assistance for developing and adopting new technology. Both Japan and the European Community were seen as subsidizing commercial industrial technology. In fact, ATP was, in part, a direct response to industrial R&D consortia organized or funded by the Japanese Ministry of International Trade and Industry (MITI).
In addition, the National Cooperative Research Act of 1984 had stimulated a new awareness of how industrial R&D consortia could help to both develop new technology and facilitate its diffusion among participating firms. U.S. consortia such as the Microelectronics and Computer Technology Corporation (MCC) and the Electric Power Research Institute (EPRI) were seen as models of what could be done on a broader scale if all industries were able to compete openly for federal assistance. Thus, the ATP can also be seen as an attempt to revive the Stevenson-Wydler Act''s concept of Centers for Industrial Technology, which had never been implemented.
Furthermore, ATP was to be a means through which the federal government could help ensure that U.S. industry would take advantage of new technical opportunities, whether they are spin-offs from mission R&D programs, inventions made in universities or government laboratories, "orphan" discoveries made in industrial laboratories devoted to other technologies, or developments in other countries. In several high-profile cases during the 1980s, promising high-tech start-up companies had been unable to obtain domestic financing for their risky operations and were, as a result, sold to foreign interests. Furthermore, U.S. industry had lost its commanding positions in a number of industries. And, while the United States was among the world''s best at discovering new science and making new inventions, it was lagging behind other countries in moving swiftly to commercialize these new discoveries and inventions. To address these problems, ATP was to identify promising new technologies in which U.S. industry was not investing adequately and to promote them with public investments.
ATP was also seen as a means of limiting the practice of direct congressional funding for specific technologies. Throughout the 1980s, various industries had sought federal help in developing new technologies to fend off tough or unfair foreign competition. Highly visible and expensive technology programs implemented through the Department of Defense, such as SEMATECH and the National Center for Manufacturing Sciences (NCMS), were prominent examples. Some of its supporters believed that ATP could subject such proposals to systematic scrutiny on their technical and financial merits and that this could relieve the Congress, which is ill-suited to making such determinations, from such tasks.
Finally, some supporters embraced a "market failure" rationale from modern economic theory as a basis for ATP. According to this theory, private firms tend to under-invest in high-risk, long-term, precompetitive research on enabling technologies, especially on manufacturing technologies that could be used by many firms, not just those undertaking the research. Several market failures are pertinent. For example, the high risks of uncertain future payoff from R&D cannot be reduced to acceptable levels by individual firms. Furthermore, the firms that pay for and perform R&D cannot always appropriate enough of its benefits to make the necessary investments worthwhile, because a significant part of the benefits, but not the costs, "spill over" to other firms and to society at large. Using the ideal free market as a touchstone, the theory argues that society is better off if public subsidies or other incentives are offered to firms to get them to spend more on R&D than they would spend acting in their own interests. Thus, by paying some of a firm''s costs for R&D, ATP would act as a surrogate both for society as a whole and for other firms that would indirectly benefit from the R&D. By funding R&D consortia, ATP should help ensure that more than one firm would benefit and that the new technology would be disseminated broadly.
(2) Arguments in Opposition to ATP
Opponents of ATP have also been diversely motivated. Opposition to ATP and its predecessors has centered on the view that U.S. industry does and should operate in a competitive free market arena, in which each firm is responsible for taking action— including the development and use of new technology— to maximize its chances of thriving and of contributing to the economic well-being of the nation. Any government engagement in the market economy is undesirable, and, from this perspective, when government must act, it should do so in the least intrusive manner possible. While many proponents of the unfettered market do recognize the existence of important imperfections in the market for new knowledge, they argue that these imperfections are largely limited to the realm of basic research, in which firms are unlikely to invest and for which government funding is appropriate, particularly at academic institutions. ATP opponents who do favor incentives for industrial R&D often prefer the Research and Experimentation Tax Credit, first adopted in 1981, as a superior alternative because it avoids having a government agency make determinations about which projects will be supported.
Other reasons for opposing ATP are more pragmatic and political in character. Opponents argue that even if ATP were a good idea in theory, government officials can not effectively "out-guess" the marketplace in practice; in fact, they are likely to be less well-informed about all aspects of market needs and opportunities, as well as about technology and production possibilities, than is the aggregate of industrial firms. Furthermore, government officials, it is argued, will be heavily influenced by non-market considerations in deciding which projects and performers to support, with the result that public funds will be spent less efficiently than those same funds would be if they were left in the hands of private parties.
Some oppose ATP-like programs because they can be seen as domestic-subsidy based impediments to efficiency-enhancing international trade. From this perspective, it would be better to work through international negotiations and world trade bodies to discourage other nations from subsidizing their domestic industries via technology support programs, than it would be to adopt our own in response.
Finally, some argue that U.S. industry annually spends nearly $100 billion of its own money on R&D and that ATP''s budget of a few hundred million dollars is very unlikely to have a significant impact on industrial technology development in the United States.
(1) Evaluation of ATP
Relative to its size and age, ATP has been the focus of an extraordinary level and quality of evaluation. In-house evaluations have been done by economists from ATP and other parts of NIST. In addition, ATP has contracted for evaluations by firms such as Solomon Associates and Silber and Associates, as well as with the National Bureau of Economic Research and academic economists including Zvi Griliches, Edwin Mansfield, Albert Link, and Adam Jaffe. The General Accounting Office (GAO) has conducted at least three ATP evaluations.
Some ATP evaluations examine the administration of the program using data from its operations and surveys of program participants. These studies are concerned with ATP leadership and management and with effects on participants'' organizations. They also look for early indications of project outcomes, impacts, and difficulties.
Other evaluations seek to determine whether ATP has achieved its goal of improving the performance of U.S. businesses. Some analysts have tried to estimate the private and social economic returns to ATP projects; however, such work remains largely at the conceptual level. Others have developed case studies of the outcomes of successful and unsuccessful projects.
ATP has supported research on analytical frameworks for evaluation that might help identify and characterize the spill-overs of knowledge created by ATP funded projects, as well as the benefits of the projects to participants and to others that flow through market transactions.
Little effort has been addressed to assessment of other impacts of ATP on technology development and firm performance. For example, ATP''s operations may signal to industry that certain topics are ripe for technical effort, may overcome some of the reluctance of firms to join R&D consortia owing to their concerns about a loss of competitive advantage or the threat of antitrust action, may energize the formation of partnerships outside the ATP umbrella, and may facilitate communication among firms (and even within firms) about focused program topics. If these impacts are large, ATP''s overall value will exceed the sum of the values of its individual projects. These areas seem ripe for further study, most likely outside the neoclassical economic paradigm that informs the current ATP evaluation effort. (See the discussion of possible ATP contributions to social capital in Chapter 4.)
Thus, the value of the ATP program remains uncertain. The studies mentioned above include fragmentary data and suggestive analyses, but none of them attempts to make a summary statement of the social benefits of the program. Furthermore, as discussed below, it is not clear that it will ever be possible to do an evaluation of ATP that will satisfy those who hope to demonstrate conclusively that it is either a great success or a complete failure.
(2) Limitations on ATP Evaluation
Analytical methods of evaluation have important limitations, whether used for project selection, project evaluation, or program evaluation. First, R&D projects are investments in the unknown, whose uncertainties are larger to the extent that projects are longer-term, higher-risk, or more generic in nature. Furthermore, the pay-off to research investments usually comes only after additional non-R&D investments are made to commercialize, produce, and market the resulting products and processes, so the "success" of an R&D project is contingent on the success of other activities over which R&D has no control. For these reasons, very few firms use formal, analytical processes for R&D project selection and assessment, even for the relatively simple case of development projects financed and conducted entirely within a single company.
Second, some of the benefits of ATP projects are intended to "spill over" to firms other than those that receive ATP funds, but it is difficult, if not impossible, to identify and quantify the many spill-over pathways. For example, some benefits spill over to the project participants, others to their suppliers and customers, others to competitors that use the new knowledge (both with and without payment of royalties or fees), and still others to firms in other industries and markets. Thus, evaluation will almost certainly underestimate the total project benefits, but to an unknowable extent.
Third, the value of an ATP project should be assessed in comparison with what would have happened in the absence of the ATP support. However, determining the counter-factual circumstance for specific ATP projects is necessarily conjectural. There is no way to judge, for example, whether participants who are surveyed to find out what they would have done without ATP support respond accurately. One way to address this problem is to compare the performance of ATP awardees, not with their own counter-factual situation, but with the performance of a control group of firms that are not awardees, as has been done by GAO.
Despite the serious barriers to satisfactory evaluation, ATP should continue to assess the program and its portfolio of projects. Each bit of intelligence and insight should help program staff make better funding decisions and help policy-makers decide whether ATP as a whole is well-managed and worthwhile. It is important that ATP be examined and evaluated by experts not financially supported by the program itself.
(1) Issues Regarding ATP
A few of the most significant issues about ATP are discussed here, with a focus on how ATP might be modified to address them.
(2) Can ATP Achieve Greater Political Support?
ATP is in the unenviable position of having become highly politicized, while its traditional political support is not strong. The strong endorsement of ATP by President Clinton made ATP a target of conservatives who sought to deny him political victories across a wide range of public policies. ATP has appeared on conservative "hit-lists," as well as on lists of "corporate welfare" programs targeted for elimination by both liberals and conservatives. Leading members of Congress have made strong statements opposing ATP. To be sure, not all the opposition has been politically motivated; indeed, much of the opposition has been on ideological grounds: it is said that the government has no business helping industry fund R&D for commercial purposes, because that funding is an unwarranted intrusion into the private sector.
ATP has not had widespread political appeal at any time in its existence. It was established originally owing to the determination of activist members and staff in Congress, supported by a few firms and some vocal commentators on the competitiveness of U.S. industry. It was not a response to pressure from the constituency it was intended to serve, although in recent years some industrial interests have become strong supporters. The ATP authorization passed by Congress was signed by President Reagan, not because he supported the bill, but because it was part of the much broader omnibus trade bill which the President was under great pressure to approve.
President Bush treated ATP as an experimental program and did not make it a priority. President Clinton has made ATP a priority in the recent budget battles with Congress, but congressional opposition and the balanced budget agreement have made it difficult for him to make a strong public case for additional ATP funding.
Unlike the Small Business Innovation Research (SBIR) and the Manufacturing Extension Partnerships (MEP) program (see Chapter 8, by Scott Wallsten and 10, by Philip Shapira in this volume), which help large numbers of firms in many states and congressional districts, ATP has made relatively few awards to relatively few firms. As a result, it has engendered little "home-town" support in Congress or in the general public.
Furthermore, ATP and its congressional overseers have assiduously avoided using it to support projects advanced by special interests through appropriations earmarks. This has earned good marks for ATP among those devoted to the cause of merit review in selection of federally supported R&D projects. However, its determination to avoid pork-barrel projects has denied ATP some of the devoted supporters enjoyed by many other programs.
Clearly, the political challenge is complex. One possible solution is to modify ATP so that it would attract more visible and committed constituencies that could overcome ideologically-based opposition by, for example, tying ATP funding to specific national goals or to state and regional economic development strategies. Another approach would be to more tightly limit the kinds of firm that can participate in ATP projects by, for example, funding only R&D consortia, or imposing strict prohibitions on the participation of foreign-owned firms. However, each of these approaches has its limitations and undesirable consequences.
(2) Should ATP Fund Foreign-Owned Firms?
One of the most contentious issues surrounding ATP has been the question of how it should treat foreign-owned firms, especially those that are partners in research consortia that ATP might wish to support. Current law permits such participation but only pursuant to compliance by the firm and its home government with certain reciprocal privileges and certain protections of U.S. interests.
This issue highlights the question of whose interests ATP is intended to serve and how it can most effectively do so. In the case of "vertical" consortia, involving firms with differing capabilities, foreign firms may have unique technical strengths that would make important contributions to the outcome of an ATP project: in such cases their participation might be in the interests of the U.S. partners and of the United States as a whole, even if the foreign firm also benefited from its U.S. partners and ATP funding. However, foreign firms participating in "horizontal" consortia, in which all participants have similar technical capabilities, may stand to learn much more than they contribute.
Whether, in fact, foreign participation in any specific project yields benefits for U.S. corporations, shareholders, employees, or consumers probably depends on the facts of each project, making application of a blanket policy both difficult and not likely to be in the national interest. Thus, program officials need some latitude to judge whether foreign firms can participate in each case.
Complicating this issue is the fact that government support for ATP-like precompetitive industrial technology development programs has become an issue in international trade negotiations. Current the domestic subsidy rules of the General Agreement on Tariffs and Trade (GATT) permit such programs only under limited conditions. There was an attempt during the recently completed GATT Uruguay Round to impose more stringent controls on programs like ATP, as well as on the European Community''s "Framework" R&D program and similar activities in Japan and other countries. Additional challenges to such programs can be expected in future multilateral trade negotiations.
(2) Should ATP Fund Large Firms?
Much has been made of the fact that large, well-known and profitable firms such as IBM, AT&T, Dupont, and a consortium that includes the Big-Three automobile manufacturers— Ford, Chrysler, and General Motors— have received ATP funds. The R&D budgets of some of these firms are greater than the budgets of ATP, NIST, or the entire Department of Commerce. Opponents of ATP have seized on ATP support of large firms to argue that ATP is simply corporate welfare to "big business." Proponents have argued, on the other hand, that the participation and support of leading firms is important to achieving the program''s goals and essential to garnering effective political support for it.
Some of the concern about large-firm participation may result from a misunderstanding of ATP''s goals and operations. ATP does not fund individual firms just to help them become more profitable. Instead, it funds firms and consortia to achieve broader goals: improvements in the technology-based performance of U.S. businesses generally. Thus, ATP tries to fund projects and performers that have the best chance of achieving high ratios of social to private returns. In doing so, ATP may find that the best route is to leverage the capabilities of large firms, small firms, or large firms in concert with smaller ones, to conduct projects. From this point of view, it would be conceptually as well as politically unwise to exclude large firms.
Furthermore, some ATP projects take advantage of new technical knowledge in large firms that may promise to be socially useful, but which the firm would not take advantage of itself. The new knowledge may not support the firm''s current market strategy, the project may be too uncertain, or the project may not be expected to yield a defensible intellectual property position for the firm. These are exactly the kinds of circumstances for which ATP was established. In such cases ATP can help exploit new knowledge when a project would otherwise not meet the performer''s own criteria for R&D investments.
Additionally, R&D is typically decentralized in large firms, and the divisions may operate more like independent small firms than as parts of a large one. ATP funds may help divisions finance projects at the divisional level for which corporate funds are not forthcoming. ATP can also support the entrepreneurial interests of individual researchers in large firms whose good ideas are not supported by their employers.
On balance, ATP funding of large firms is entirely consistent with the program''s goals and should not be circumscribed. However, the political reality is that the program is under considerable pressure to change. If ATP is to survive and thrive, adjustments may be necessary. Furthermore, the Technology Competitiveness Act incorporates an explicit preference for funding small businesses over large ones. Thus, ATP should re-emphasize the roles of small firms as individual and consortium participants, but it should also maintain the option of funding large firms when it is in the public interest to do so.
(2) Should ATP Fund Consortia Only?
It has been argued that ATP should fund only research consortia, typically on the political grounds that it is not appropriate for government to help one firm outperform its competitors by subsidizing technology improvements, or on the economic grounds that consortia provide a ready channel for knowledge to spill over to member firms.
The Technology Competitiveness Act can be read to give a mild preference to joint ventures for ATP funds, both because its provisions for funding joint ventures are more explicit and because joint ventures can be funded on terms more favorable to the participating firms than can individual firms.
On the other hand, if one keeps firmly in mind the public purpose of ATP— to fund the development of high-risk enabling technologies— then the selection of the vehicle for accomplishing this goal should be made on pragmatic grounds. One firm may have all the necessary capabilities to advance a technology that would offer significant benefits to other firms and to society, but it might not be able to capture enough profits to make the investment worthwhile, owing either to high risk or the inappropriability of the results. If the firm needs no technological help from other firms and institutions, and if no other firm is willing to enter into a joint venture, then the public interest may well be served by making an ATP award to one firm.
In the final analysis, ATP should be able to pursue a flexible strategy under which it may fund both individual firms and research consortia. At the same time, ATP should recognize that the public and key decision makers may better appreciate the arguments for public support of consortia.
(2) Should Universities be Eligible for ATP Awards?
The Technology Competitiveness Act, as amended, requires that ATP awards be made to single businesses or to consortia led by two or more businesses. Academic institutions are welcome to participate as consortium partners and to receive federal funds indirectly in that role, but they cannot be the lead partners in a joint venture to obtain ATP funding.
The clear intent of the Act was to provide partial support to firms and consortia to help realize the benefits of new technology in a fairly direct way on behalf of the American people. Commercialization of new products and processes is not a core activity of academic institutions, however, and it was thought to be essential that private firms that are active in the marketplace play the lead role in ATP projects to enhance the chances that new developments supported by ATP would be effectively commercialized.
Undoubtedly, some academic institutions could organize consortia involving private firms to obtain ATP awards. Nevertheless, in view of the multitude of alternative sources of federal funds available to academic institutions and of the basic purposes of ATP, the current policy is sound.
(2) Should ATP Forego Cost-Sharing for Small Firms?
Some small firms, individually or in consortia, have complained that they cannot afford to match ATP''s funds with their own and that this has kept them from participating in ATP. However, the principle of cost sharing was embraced in the ATP legislation to ensure that the participating firms put their own resources at risk so that they will apply only for significant projects and will complete ATP-supported projects successfully and in a timely manner. ATP is not an "assistance" program; instead, it implements a strategy of using private firms to accomplish public objectives. Furthermore, the cost-sharing requirement also means that proposing firms must diligently seek other private sources of funds if they have no internal funds to invest. This helps to ensure that ATP will not become the "source of first resort" for project funding.
(1) Opportunities to Improve ATP
The ATP is in many ways the paradigm of a well-run and successful government program. It is based on a rigorously competitive process; it features an appropriate mix of incentives that encourage private participation and serve a broader national interest; and it engages in continuous self-examination and evaluation to ensure that its processes and strategies are effective. It is remarkably free of partisan and personal political influences and bases its decisions on the best available technical and business assessments. Nevertheless, ATP has become a focal point for continued political attack. Thus, one approaches the task of making recommendations to enhance ATP with some trepidation. The following sections offer a few specific ideas for changes in the program, not to repair its faults but to move it to the next level of success. Any changes in the program must preserve its professionalism and freedom from undue political influence, while also seeking a broader political consensus on which a stable program and budget can be sustained.
(2) Stabilize the ATP Budget
The Clinton administration has promoted an aggressive growth path for ATP. Yet political battles over ATP''s legitimacy, combined with the government-wide struggle to control federal deficit spending, have combined to create an air of uncertainty over ATP''s future. Almost every year its budget has been in doubt, and for the past three years, the continued existence of the program has been threatened.
The ups and downs of ATP''s budget and the continual challenges to the program''s legitimacy have not contributed constructively to building a solid program with a sound fiscal administration and a secure image among its industrial constituency. Thus, the most important immediate goals of Congress and the administration should be to find a basis for ATP to continue and to focus the annual policy discussion on ATP''s budget and on how its operations might be improved.
Despite its difficulties, the ATP budget has grown from $10 million to more than $200 million over the past seven years. On the one hand, this is an impressive rate of growth; on the other, even $200 million is a relatively small amount to invest in the nation''s technological future. Taking other similar programs into account, a budget of the order of $0.5 to $1.5 billion annually would not be unreasonable for ATP. An ATP budget of $1.5 billion would amount to only two percent of federal R&D funds. On the other hand, it would be equivalent to nearly 20 percent of industrial funds for basic research and could make a real difference to the technology base of the nation if properly leveraged with industry''s own funds. Growth to this level should be proposed by the administration and appropriated by the Congress over the next decade, which would imply average growth of about $100 million annually.
(2) Tie Some ATP Funds to Specific National Goals
ATP was not designed to be a "problem focused" program whose research agenda would be driven by high-profile national goals such as crime, terrorism, safety and environmental quality, affordable housing, infrastructure redevelopment, manufacturing quality, or national security. Instead, it was designed to be organized around domains of technology, such as bioprocessing, robotics, computers, semiconductor design, manufacturing processes, and the like. The tacit theory of this mode of organization is that societal ends will ultimately be served by the development of new technology and that the relationship of technology development to particular goals need not be an organizing principle for the program.
On the other hand, the present design has the unfortunate consequence of not appearing to focus in any direct and concrete way on important national needs that ordinary citizens and legislators can easily identify. Such relatively abstract goals as productivity, competitiveness, economic growth, and improved balance of trade have their supporters and enthusiasts, to be sure, but they seem unable to galvanize strong public support. The even more abstract goal of correcting "market failures" has essentially no constituency other than members of the economics profession and the community of "policy wonks."
The European Union''s Framework Program for the support of industrial technology development suggests a useful alternative way to organize an ATP, keeping in mind that it has an order of magnitude greater funding than ATP to serve an industrial base of roughly the same size. Framework addresses abstract categories, such as growth and jobs; industrial technologies, such as materials; and specific national and multinational objectives such as better transportation systems and improved health care. The contributions of ATP projects on automobile manufacturing to the goals of the Partnership for a New Generation of Vehicles (PNGV) suggests a similar model. While PNGV is a controversial program, it has the real virtue that ordinary citizens can understand its objectives.
Other federal R&D agencies with broad mandates structure their science and technology-driven programs around meeting national needs. For example, NIH is organized and funded around specific diseases, although it awards project funds along scientific lines. Similarly, the Department of Defense (DOD) awards its basic research (so-called "6.1") funds to fields of science and engineering, but specific program goals are already identified at that level.
A modest portion of ATP funds should be awarded through "focused programs" that reflect the kinds of national needs listed above. Devoting five to ten percent of next year''s new funds to a pilot project of this type might be appropriate. A focus on environmentally sustainable manufacturing technologies, which would be compatible with the administration''s Environmental Technology Initiative, would be an interesting choice. (See Chapter 11 by George Heaton and Darryl Banks in this volume).
(2) Tie ATP Funds to State and Regional Development Strategies
During the past decade, the states have developed a new interest and competence in mobilizing technological change as a strategic approach to economic and social development (See Chapter 16 by Christopher Coburn and Duncan Brown in this
volume). Every state has an array of programs and incentives intended to strengthen indigenous firms and to encourage new firms to initiate technology-based businesses to create jobs and wealth within the state. Many programs seek to focus state resources on strategic industrial goals that reflect the sectors and markets in which they have established strengths and inherent advantages. ATP now refers potential recipients of its funds to state science and technology program offices for technical assistance.
ATP could reinforce these state-based efforts by allocating a portion of its resources to work with regional consortia of firms, non-profits, local and state governments, and academic institutions to build technological strength in key sectors. It could conduct a competitive program that would make matching awards to consortia that take explicit account of the value of local and regional technology-based industrial agglomerations. Using existing authority, ATP should experiment with a "focused program" of awards to industry-led consortia organized on a regional or state basis in cooperation with nonprofit organizations and local governmental bodies. The major difference between this approach and the current focused program approach would be the addition of an additional criterion: a focus on a critical mass of regional or state-based firms structured around a particular technology or industry.
In addition to building on state and regional efforts, this approach would have the obvious political advantage of developing a higher profile for ATP in certain regions and would focus its limited funds in a way that further leverages the available state program and private funds. On the other hand, many research consortia form naturally among firms separated by long distances, so it would not be wise to limit ATP funds to state and regionally-based projects.
(1) Beyond ATP: Strengthening the Role of the Department of Commerce
ATP is just one of many small steps taken during the last three decades to build a national civilian technology policy. ATP was not to be the final step; however, as the focus of sustained political debate, it has had to carry more of the load than it should. The Technology Administration (TA), established at nearly the same time as ATP, should be the institutional framework for a civilian technology policy that is broader than ATP''s project-based R&D subsidies. This chapter concludes with a few suggestions to build on the ATP''s success and the TA''s charter to develop a more balanced and complete civilian technology policy.
A condition for building an effective TA is that it have a budget appropriate to an operating bureau, rather than the "policy shop" budget it now enjoys. The TA will also need a larger, technically rich staff. One way to accomplish that would be for it to employ temporary technical program staff, or "rotators," following the very successful practices of the Defense Advanced Research Projects Agency (DARPA) and NSF.
(2) Move ATP to the Technology Administration
Putting ATP at NIST made great sense when ATP was a small, experimental program and when the TA was a new effort to rebuild its nearly moribund predecessor, the Office of Productivity, Technology, and Innovation. Today, however, ATP has grown to the point that its budget competes for funds with NIST''s laboratory programs and that its direction and political defense absorb a substantial part of the attention of NIST''s leadership.
Therefore, consideration should be given to relocating the responsibility for ATP from NIST in Gaithersburg, Maryland, to the TA in the main Commerce building in downtown Washington, D.C. Since NIST is overseen by the TA, the chain of responsibility for the ATP would continue to run through the under-secretary for technology in DOC. Furthermore, the TA could continue to draw on the scientific and technical capabilities of the NIST staff to review ATP proposals and to help define new focus program topics. Only the program staff would be relocated; the NIST technical staff participants would continue to be located at NIST. Bringing ATP closer to the routine operations of DOC would also facilitate improved integration of all federal industrial programs concerned with technology, investment policy, labor-management relations, trade, training, regulation, and the like.
(2) Supporting Large-Scale Research Consortia
Large-scale R&D consortia, such as SEMATECH and National Center for Manufacturing Sciences (NCMS), and comprehensive integrated technology initiatives, such as PNGV and the American Textile consortium (AMTEX), involve federal funding that exceeds ATP''s resources. They are also tied more closely to a national political agenda or to international trade policy than are the typical joint ventures supported by ATP. The TA should have the responsibility to ascertain the need for such large-scale consortia and should have a budget with which it would support them only if they pass rigorous merit review and after consultation with affected firms, industries, and other interests. This change may require new authorizing legislation.
(2) Support for Technology-Related Graduate Research and Education
Nearly every federal agency that draws upon the nation''s supply of scientists and engineers supports advanced education and research in relevant fields. While NSF is the agency most responsible for graduate education and training across the board, DoD, DOE, NASA, NIH, and the Department of Agriculture also support university-based graduate education and research tied to their missions. DOC is conspicuous by its failure to support advanced education in manufacturing engineering, applied sciences, the management of technology, and technology policy related to its industrial technology missions.
DOC should establish a program to support academic research and education in such areas, working in cooperation with the NSF Engineering Directorate and in consultation with leading educators. Section 6 of the Stevenson-Wydler Act seems to give DOC the authority for such a program; all that is needed are a budget, program rules, and staff.
(2) Enhancing DOC''s Analytical Capability
One of the purposes of TA is to do analysis for DOC in technology policy, technology strategy, and the management of technology. TA needs a larger budget and additional staff to fulfill this mission adequately. To ensure that the in-house studies are done objectively and to the highest standards, it should also give grants and offer contracts for such studies to academic researchers, analytical firms, and the Critical Technologies Institute at RAND. Support of graduate education and research would nicely complement this activity, as would management of ATP by the TA.
(2) Strengthening Access to Foreign and Government Technical Information
The United States no longer dominates the world''s scientific and technical development. Most new ideas come from other countries, increasingly from places where language, cultural differences, and long distances are significant barriers to awareness and understanding of what others are doing. The TA has a program to obtain and disseminate foreign scientific and technical information, building on the Office of Japanese Technical Information established under the Japanese Technical Literature Act of 1987. The National Technical Information Service aids in information distribution, and the NSF''s World Technology Program at Loyola University does focused analyses of the state of the art of important technologies around the world, especially in Japan. Additional resources to support each of these efforts would be money well spent in avoiding duplication of effort by firms and universities and in ensuring that U.S. R&D organizations have effective access to the latest international developments.
(2) Building U.S. Capability to Participate in International Technology Programs
International industrial R&D consortia initiatives, such as the Intelligent Manufacturing Systems (IMS) project initiated by Japan in the late 1980s, have been a problem for potential U.S. participants owing to the fact that no U.S. governmental agency has the authority and the budget to represent national interests and to support participation by universities and non-profit consortia. The TA should have the authority and budget to respond effectively to foreign R&D initiatives and to initiate such programs when they meet U.S. objectives. Other nations have used such programs to help them catch up to the United States in key technologies, and the TA should consider initiating international cooperative R&D as one approach to learning from the best around the world.
(2) Establishing a Permanent High-Level Advisory Committee on Civilian Technology
The undersecretary for technology should establish a permanent, high-level, external advisory committee to provide a direct means for continual advice and evaluation of the TA''s programs and policy initiatives. Such a body could also advise the secretary of commerce on broader questions of industrial technology policy. It would be the counterpart for civilian technology of NSF''s National Science Board and DOD''s Defense Science Board. Members could be drawn from technology-based firms, labor, academia, the financial community, and consumer interests. Members should be experienced and skilled in such fields as industrial technology, analysis of the impact of technology on the workplace and society, the financing of technology-based enterprises, and public policy making.
(1) Conclusion
The Advanced Technology Program was authorized by Congress nearly a decade ago to help U.S. businesses develop and improve commercial technology. It has succeeded admirably in building a substantial and well-managed program, despite the lack of consensus among political leaders regarding its appropriateness. Most of the criticism of ATP has focused, not on its operations or outcomes, but on its role and mission. While policy analysis and evaluation can contribute to improved management of ATP and may make a small difference in the views of its skeptics, resolving the question of its long-term stability is largely a matter of political will.
Opportunities exist to strengthen ATP substantively and politically. A few new experiments in ATP''s operations could teach us a great deal about their potential to strengthen ATP. Similarly, a stronger Technology Administration could assume the responsibility for operating ATP, in cooperation with NIST staff, and could move further toward meeting the national need for an effective home for civilian technology policy and programs.
The rationales for government support of industrial technology were not universally accepted during the late 1980s when ATP was founded, nor are they now. Some would limit the government''s role in technology development to actions clearly derivable from the economic theory of market failure. They are not convinced by the pragmatic, international, and political rationales for ATP. They should support ATP even on their own terms, however, because market failures abound in technology development. Furthermore, in a democracy, public policy should respond to political imperatives and to pressures resulting from other countries'' actions, as well as to economic theory. The United States will be well-served if an enduring consensus can be reached on the need for and design of the ATP.
