The Advanced Technology Program:

Contents:

Credits

As part of the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418), the Congress authorized the establishment within the Department of Commerce of a new program that would focus directly on U.S. economic growth by fostering the development in the private sector of innovative, high-risk enabling technologies with the potential for important commercial applications.

Operated from FY 1990 through FY 1993 as an experimental effort, the Advanced Technology Program (ATP) began expansion to a full-scale national effort in FY 1994 (Appendix A). Managed by the Commerce Department's National Institute of Standards and Technology (NIST), the ATP was designed from the start to incorporate thorough and ongoing self evaluation.

Under Title II of the American Technology Preeminence Act of 1991 (P.L. 102-245, enacted in 1992), the Congress further directed that:

The Secretary [of the Department of Commerce] shall, not later than 4 years after the date of enactment of this Act, submit to each House of the Congress and the President a comprehensive report on the results of the Advanced Technology Program established under section 28 of the National Institute of Standards and Technology Act (15 U.S.C. 278n), including any activities in the areas of high-resolution information systems, advanced manufacturing technology, and advanced materials.

This report, submitted pursuant to that directive, draws on five years of experience with the ATP and detailed analyses of the program's progress in meeting its goal of enhancing U.S. competitiveness and the nation's economy through industry-government partnerships.

Overview of the Advanced Technology Program

The NIST Advanced Technology Program is a unique partnership between government and private industry to accelerate the development of high-risk technologies that promise significant commercial pay-offs and widespread benefits for the economy. In an era of fierce global competition and rapid technological change, the nation's industries have shifted their R&D to narrower, shorter-term investments to maximize returns to the company. The ATP provides a mechanism for industry to extend its technological reach, to push out the envelope of what can be attempted. The ATP has several critical features that set it apart from other government R&D programs:

• The goal of the ATP is economic growth and the good jobs and quality of life that come with economic growth -- opening new opportunities for U.S. business and industry in the world's markets by fostering enabling technologies that will lead to new, innovative products, services, and industrial processes. For this reason, ATP projects focus on the technology needs of U.S. industry, not those of government. The ATP is industry driven, which keeps the program grounded in real-world needs. Research priorities for the ATP are set by industry: for-profit companies conceive, propose, co-fund, and execute ATP projects and programs based on their understanding of the marketplace and research opportunities.

• The ATP does not fund product development. It supports enabling technologies that are essential to the development of new products, processes, and services across diverse application areas.

Private industry bears the costs of product development, production, marketing, sales, and distribution.

• ATP awards are made strictly on the basis of rigorous competitions designed to select the proposals that are best qualified in terms of the technological ideas, the potential economic benefits to the nation (not just the applicant), and the strength of the plan for eventual commercialization of the results. Expert reviewers (without conflicts of interest) drawn from the business community, government, and academe carefully examine and rate each proposal according to published selection criteria that focus on both business and technical potential. Political considerations are not part of the selection criteria. (The basic ATP selection criteria and the proposal evaluation process are summarized in Appendix B.)

• The ATP has strict cost-sharing rules. Joint ventures must pay at least half of the project costs. Single companies working on ATP projects must pay all indirect costs associated with the project. (This provision encourages small companies, particularly start-ups, that have much lower overhead rates than large firms.)

• ATP support does not become a perpetual subsidy or entitlement -- each project and each major program area has goals, specific funding allocations, and completion dates established at the outset. Projects and focused programs are monitored and can be terminated for cause before completion.

• The ATP benefits companies of all sizes. Large firms can work with the ATP, especially in joint ventures, to develop critical, high-risk technologies that would be difficult for any one company to justify because, for example, the benefits spread across the industry as a whole. For smaller, start-up firms, early support from the ATP can spell the difference between success and failure. To date, nearly half (46 percent) of the ATP awards have gone to individual small businesses or to joint ventures led by a small business. Universities and non-profit independent research organizations also play significant roles as participants in ATP projects. More than 100 different universities are involved in about 150 ATP projects as either joint-venture participants or subcontractors.

  COMPANY SIZE PROFILE

  

  ATP project leaders are about evenly divided between small companies and medium/large firms.

• Since its inception, the ATP has made economic evaluation of the outcomes of ATP projects a central element of its operations. The ATP has developed and implemented a thorough measurement program that pushes the state of the art in evaluating the long-term outcomes of an R&D investment.

ATP Focused Programs

Since 1994, the majority of ATP funds have been committed to focused program areas, which are established by the ATP in response to ideas from industry and the broader technical community. These programs reflect widespread industry support for this approach, which maximizes the ATP's leverage in driving key strategic technologies identified by industry. Focused programs concentrate on specific technical and business goals that require a number of interdependent R&D projects. Eleven programs have been established to date (see Appendix C):

• Component-Based Software
• Information Infrastructure for Healthcare
• Digital Video in Information Networks
• Technologies for the Integration of Manufacturing Applications
• Digital Data Storage
• Manufacturing Composite Structures
• Materials Processing for Heavy Manufacturing
• Vapor Compression Refrigeration Technology
• Motor Vehicle Manufacturing Technology
• Catalysis and Biocatalysis Technologies
• Tools for DNA Diagnostics

Why the ATP?

The ATP works by encouraging a change in how industry approaches R&D. Major forces -- globalization of markets and the pace of technology change -- continue to drive private R&D to a narrower, shorter-term focus. Private capital is reluctant to invest in anything less than a "sure thing" in terms of its own returns. In sharing the relatively high development risks of technologies that potentially enable a broad range of new commercial opportunities, possibly across several industries, the ATP fosters projects with a high pay-off for the nation as a whole -- in addition to strong corporate rates of return. The nature of ATP projects, risky but broadly applicable, stimulates joint research ventures that link small suppliers with users, or that link several firms together to solve a generic problem common to all.

It is important not to focus solely on the individual companies that have competed for ATP awards -- what really matters is the benefit to the economy as a whole. Criteria for individual projects and for focused programs make it very clear that NIST is seeking to promote industry's ability to take on technological challenges that will have broad economic impacts. The benefits will accrue not just to individual ATP participants but to entire industrial sectors and the economy as a whole.

The ATP focused program in Information Infrastructure for Healthcare is a case in point. Studies indicate that a full 20 percent of the nation's $1 trillion healthcare cost is related to the processing of information. A seamless, user-friendly information infrastructure is the critical ingredient for reducing those costs by many billions of dollars. But existing efforts in healthcare information technology lack the coordination and integration needed to share information nationwide and to develop tools that aid, not hinder, the healthcare provider. The ATP is helping industry lay the foundation for the more efficient use of computer technology in doctors' offices, hospitals, and clinics by cost sharing with industry the development of innovative enabling technologies -- technologies that will allow the medical community to reduce paperwork, improve the quality of diagnosis and treatment, and bring better medical care to rural areas. The beneficiaries of the ATP focused program extend well beyond the individual com-panies and consortia that are cost sharing and conducting the research. If the technical challenges can be overcome, the benefits will reverberate throughout the economy and the beneficiaries will be our entire citizenry.

Evaluating the ATP

Evaluation should be a core function of any government program to ensure wise investment of taxpayer dollars, and the ATP has emphasized rigorous evaluation of its procedures and results from the start. (See Appendix D.) ATP projects are expected to make significant contributions to scientific and technical knowledge, produce new technologies that will be developed and introduced into the marketplace by the project awardees (using their own funds), and in the long run yield substantial benefits to the economy beyond those accruing directly to the award recipients.

This is a lengthy process. ATP projects typically run from two to five years. The commercialization phase could add several more years, and the full economic impact may not be realized for some years after commercial introduction. In the last couple of years, for example, the Internet has begun to produce significant commercial opportunities, predominantly for U.S. firms, but the basic technology was developed with Defense Department and other government funding starting 20 years ago.

Similarly, the economic benefits of the ATP will occur significantly later than the ATP projects that lead to them. Companies must spend additional time, effort, and money to pursue product development and marketing. Because of the risks involved, some ATP projects will fail. Others may proceed faster than anticipated, and intermediate results may lead to marketable products even before the ATP project ends. Regardless of whether initial commercialization takes place before an ATP project ends, or long after, the company must invest its own money to design specific products incorporating the technology and to pay any other costs associated with commercialization.

COMPLETION DATES FOR 280 PROJECTS

The most important results of the ATP lie in the future--to date, very few projects have been completed.

Beyond that, true economic impacts occur when ATP-fostered technologies enter the market -- and not just as products. Long-term evaluation of the ATP must take into account downstream effects of the technologies: higher productivity and lower reject rates for manufacturers using new processes and equipment based on ATP technologies; better medical care at lower costs from hospitals and clinics that benefit from ATP biotechnology projects or the ATP programs on DNA diagnostics and information technologies for healthcare; and longer-lived, lower maintenance structures and equipment made possible by ATP programs in advanced composites. Such long-range effects are real -- but very difficult to measure accurately.

The ATP uses a variety of evaluation tools to assess the efficiency of its procedures, the progress of ongoing research projects, near-term results, and long-term results. These tools include:

• peer evaluation -- to rank project proposals according to scientific and technical merit and business and economic merit;

• site visits and annual reviews -- by ATP project management teams to monitor the progress of ongoing projects;

• a business reporting system -- using efficient computerized questionnaires to gather in-progress project information for use in statistical analyses and future studies;

• third-party surveys -- commissioned by the ATP to assess the opinions of participating organizations and identify near-term project impacts;

• econometric and other statistical analyses -- to help project impacts from individual firms to an industry or the economy as a whole and to increase our understanding of spillover benefits and the effects of collaborative research;

• surveys of patent and technical paper citations -- to trace these avenues for the transfer of R&D knowledge developed through the ATP across scientific organizations, firms, and industries; and

• project case studies -- to gather in-depth information on specific aspects of the ATP, including long-range impact.

Case studies conducted at an early stage of a project may focus narrowly on changes experienced by the participating company or companies as a result of the ATP project (such as research efficiencies experienced by joint ventures, reductions in research cycle time, or new business opportunities as a result of the ATP award). Other case studies explore the rate of adoption of the technology and attempt to measure "spillover" effects -- both benefits and costs extending beyond the ATP participants. Econometric approaches also are being used to increase our understanding of spillover mechanisms -- critical factors in selecting projects and evaluating the ATP. Experiments currently are under way to couple case study data with large-scale economic models to project impacts from the level of individual firms to the economy as a whole. The ATP also is exploring other approaches to measuring its long-term impact on the economy and periodically convenes working sessions with leading research economists to discuss evaluation models, results, and opportunities.

Near-Term Results of the ATP

Because the ATP is a relatively young program that only recently expanded beyond a pilot scale, only a small percentage of the earliest ATP projects have even completed their ATP-sponsored R&D stage. However, several studies have documented the most important near-term results of the ATP. These include:

• Industry has been able to pursue challenging research projects that would have been delayed or scaled down significantly without the ATP. The bottom line: U.S. industry today has important new technical capabilities that would not exist without the ATP.

• U.S. firms have found new commercial opportunities -- and some early growth -- based on these new technical capabilities.

• A new element in the R&D culture is emerging -- one that emphasizes more high-risk, high-payoff, enabling R&D and greater use of cooperative research ventures and industrial alliances, and that views government and industry as partners rather than opponents.

New Technical Capabilities

• A survey conducted for the ATP by Silber & Associates found that of 125 companies participating in ATP projects during the first three years of the program, 70 percent said chances were slim to non-existent that they would have pursued the technology development at all without the ATP. Of the 30 percent that would have gone ahead anyway without the ATP's assistance, nine out of 10 said their goals and level of effort would have been scaled back significantly and progress would have been significantly slower.

• A parallel study by the U.S. General Account-ing Office in 1995 for the House Science Committee found similar results. In a survey that included 89 companies that worked on ATP projects as the lead or sole organization during the first four years of the program, only 40 percent (36 out of 89) said they probably would have pursued the research without the ATP's support, and virtually all (34 out of 36) of those said the research would have gone significantly slower than with the ATP's help.

LIKELIHOOD OF DEVELOPING TECHNOLOGY WITHOUT THE ATP AWARD

(Shown with changes in the level of effort and rate of progress)

The large majority of ATP projects most likely would not have happened without the ATP. The others would have proceeded more slowly or with more modest goals. (Source: Survey of ATP 1990-1992 awardees by Silber & Associates)

Specific instances highlight the way the ATP enables U.S. industry to pursue new, challenging technologies:

• At several automobile assembly plants, Chrysler and General Motors workers have implemented new technologies to help them control variations in the fit of automobile body parts to 2 millimeters -- about the thickness of a nickel -- or less. The "2 mm Program" partnership of the Auto Body Consortium (ABC), a group of eight small automobile technology suppliers, together with Chrysler, GM, the University of Michigan, and Wayne State University, resulted in software and modeling tools for controlling and streamlining automobile manufacturing processes, laser-based sensors for controlling part dimensions, and precision clamping technologies to reduce tiny warps and bends on large sheet metal parts. The industrial partners also worked with the auto workers to develop training techniques to help the workers quickly introduce the new tools and techniques into production lines. The ABC technologies are not only effective, they are "agile" -- readily adaptable to new models and likely applicable to the manufacture of other products. The plants that already have implemented the 2mm Program have been rewarded with significant improvements in customer satisfaction scores. More importantly, they have been able to meet the challenge of foreign competitors, especially in Japan, that also have achieved variation control at 2 mm or better. International competitiveness is a life-or-death issue in the auto industry, which affects one in every seven jobs in the United States.

• Tissue Engineering, Inc., a young company in Massachusetts founded by a former MIT professor, came to the ATP with an innovative idea: create "prosthetic tissue" from animal byproducts that are processed and woven like a cloth to make biodegradable implants that would serve as matrices where the body's own cells could grow and eventually replace damaged tissues. The research is at the leading edge of the infant science of tissue engineering, integrating advanced technologies in cellular biology and textile manufacturing. This ATP project has already opened up a whole new range of reconstructive treatments for damaged periodontal, orthopedic, skin, and vascular tissues and created a line of products for the research and testing markets.

• At Optex Communications (Rockville, Md.), researchers completed a prototype of a novel high-speed, high-capacity optical data storage system based on technology developed with ATP support. Using quantum-electronic rather than thermal effects, the Optex drive is aimed at achieving much higher recording and reading rates than conventional technologies allow. This improved performance will enable new markets in digital video and other information technologies. The Optex work also resulted in a new type of data encoding allowing higher data densities in its system.

Accelerated R&D

Timing is everything -- and time has become enormously compressed in today's marketplace. Product cycles are shorter, and a lead time of only a few months can be the difference between success and failure in the introduction of a new product -- or an entire company. This is particularly important in the technology-driven industries most affected by the ATP.

By accelerating the development of high-risk technologies, the ATP helps U.S. industry compete in these time-critical markets. The ATP not only enables companies to pursue high-risk R&D that otherwise would be dropped entirely, it also makes it feasible to accelerate greatly research on technologies that, because of risk, otherwise would be relegated to the back burner.

Ninety-five percent of respondents to the Silber study said that the ATP project had significantly accelerated their R&D program. A sizable majority (74.2 percent) anticipated that the ATP project would save them two years or more. Several survey respondents commented on this factor. Typical comments (the identity of respondents was not disclosed) include:

• "Without the award we wouldn't be finished now; it gave our technology a sense of urgency. Because of the award, divergent companies came together who wouldn't have otherwise. ATP advanced the research by about five years and enabled us and other companies to keep ahead of the Japanese, who are investing enormous amounts."

• "We would have been much slower, probably three years out, which in this industry is forever. Our product development cycle is under one year."

• "ATP was critical for us. Time to market is critical, and we would have been delayed. We never could have recovered that time."

• "We accomplished in two years what would have taken five to six. It kept us from missing the window of opportunity, which was extremely critical."

One of the most important post-project consequences of shortening the R&D cycle is to speed the entry of the new technology into the market. In the Silber study, 81.1 percent of the respondents described speed to market as "very important" or "critically important" to their companies.

• In a case study of the ATP Printed Wiring Board Joint Venture, members reported that midway through the project new test equipment and software shared as a result of the project had been implemented and adopted by the participants 18 months sooner than if they had attempted to develop them individually. Nine separate tasks under the project reported an average savings in time to implement new practices of 12.7 months.

  YEARS AHEAD OF SCHEDULE BECAUSE OF ATP AWARD

  

  Ninety-five percent of participants in ATP projects believe the ATP has significantly accelerated their R&D progress. (Source: Survey of ATP 1990-1992 awardees by Silber & Associates)

• Communication Intelligence Corporation (Redwood Shores, Calif.) received an ATP award in 1991 to develop basic technology and development tools for systems that allow computers to recognize and process natural, cursive handwriting. A powerful, efficient, and reliable natural-handwriting interface for personal computers would be the springboard for a whole new family of computing products, particularly extremely small, high-powered data-entry and retrieval systems. CIC is currently in the process of releasing new products that make use of technology developed with ATP support to both the retail and corporate markets. CIC estimates that the ATP support accelerated their development of handwriting recognition technologies by 18 months to two years.

• GelTex Pharmaceuticals, Inc. (Waltham, Mass.) is exploring a radically new approach to treating certain gastrointestinal diseases such as human rotavirus, which causes diarrhea in children, and Cryptosporidium parvum. No effective therapy currently exists for either disease. The GelTex technology uses specially tailored polymers that are not absorbed by the body but rather unfold in the gastrointestinal tract like tiny molecular nets to selectively trap pathogens or their toxins. Since the research is important to their core technology, GelTex researchers say they probably would have pursued the research without the ATP's support, but it would have taken them two to three times as long to make the accomplishments they've already achieved under the ATP project.

In the ever-changing global market, such time savings are critical. Competitive advantage and marketplace success generally go to the company -- and the nation -- that gets there first. For this reason, the ATP will support technologies that might have been pursued by industry anyway, but at a slower pace or smaller scope, if the ATP's support will bring together the critical concentration of resources needed to significantly accelerate and expand the work.

New Commercial Opportunities

By helping to make new technologies and new technical capabilities available now, the ATP opens up new commercial strategies and gives U.S. companies new business opportunities.

• In 1992, $2 million in ATP cost sharing with a small California company called Accuwave allowed the company to extend its new technology -- using laser holography to "write" very high-resolution optical elements such as filters in the interior of crystals -- to the rapidly growing fiber-optics communication industry. The work involves a risky extension of the base Accuwave technology to new wavelengths and more complex, integrated structures. The company did not have the in-house resources to fund this research, and since Accuwave was a small, new firm with no track record in the huge, highly competitive telecommunications industry, without the ATP it wouldn't have had external funding either -- the risks were just too high. With help from the ATP, Accuwave already has made important progress. In 1994 the company introduced three new products, early spin-offs of the ATP-sponsored technology: an optical network monitor, a wavelength standard, and a "wavelength locker." In 1995, the company added a fourth spin-off, an electronic wavelength controller. The new devices are small, not much bigger than a matchbox, and designed for use on circuit boards. They replace a benchtop of lab equipment costing tens of thousands of dollars. Accuwave currently is selling these products to major telecommunications companies worldwide. "Our entry into the telecommunications market has largely been as a result of the ATP," says CEO Neven Karlovac.

  IMPORTANCE OF SPEED TO MARKET

  

  An important effect of the ATP is to shorten R&D cycles and so increase speed to market of the resulting technologies. (Source: Survey of ATP 1990-1992 awardees by Silber & Associates)

• Diamond Semiconductor Group (Gloucester, Mass.) credits the ATP with helping it to attract outside development capital from Varian Associates for a prototype ion-implant machine for semiconductor manufacture. "We spent a year and a half looking for funding, mostly from U.S. companies," according to DSG President Manny Sieradzki. "Winning the ATP award was absolutely crucial to us ... It's clear that without the ATP we wouldn't have secured domestic funding for this." As a result, DSG and Varian Associates were able to announce, early in 1996, an "industry first" -- successful ion-implantation of a 300 mm wafer (two-and-a-half times larger than the industry standard) using the new technology.

• Spectra Diode Laboratories Inc. (San Jose, Calif.), in partnership with Xerox Corp., received an ATP award in the 1991 competition for a challenging project to develop integrated arrays of high-powered, multiwavelength laser diodes. Such devices would have applications across a broad spectrum of industries, but particularly in electronic imaging and printing. The infusion of ATP funds enabled the partnership to accelerate greatly the pace of their R&D and gave SDL the opportunity to develop three short-term spin-off products grounded in the ATP-sponsored technology. One, says SDL President Donald Scifres, probably would have been developed anyway, but over a much longer period. The other two, he says, "might never have happened without the ATP award." Revenues from these early applications have amounted to about $5.5 million to date and are expected to exceed $15 million by 1997.

Because the ATP is widely recognized in industry -- and in the industrial research community -- as a rigorously competitive program, it has the important effect of raising the credibility of award winners. Nine out of 10 respondents to the Silber study said their companies were benefiting from the enhanced credibility associated with the ATP. "We're developing new technology and an ATP award is recognized as difficult to attain. The message is that the research must be first-rate," commented one respondent.

This enhanced credibility carries over to investors. Of the companies surveyed by the Silber study, 40 percent had obtained additional funding for the ATP project in the wake of the award announcement. Seventy-eight percent of this group attributed their success at gaining additional funding to the ATP award.

• MicroFab Technologies, Inc. (Plano, Texas) has developed a new technology for micro-soldering tiny leads on integrated circuits, essentially using ink-jet printing with molten metal instead of ink. The new soldering technology promises to increase greatly productivity and flexibility in the production of circuit boards and significantly reduces hazardous wastes as a bonus. "We'd done some preliminary technical work, feasibility studies to show that our concept had viability, but it was at a stage where it was far too risky to get venture capital or investment from the large end-user companies that would be the beneficiaries of the technology," according to MicroFab research director David Wallace. The ATP award enabled the small 18-person company to attract additional funding for product development from a consortium of six major electronics manufacturers.

Because the ATP only supports pre-product R&D for new technologies that enable or underlie possible products, companies generally must invest considerably more time and resources to develop, test, market, and sell new products based on the ATP technology. The ATP insists that even before the R&D begins, companies have a credible commercialization plan to exploit the technology beyond ATP funding if the research objectives are met. In the majority of the current ATP projects, such product development activities still lie in the future (assuming the R&D effort is successful). The Silber study found that 62 percent of respondents were planning to commercialize the technology (often in joint ventures only some participants plan to commercialize the technology; others have a purely R&D role). Many of the early participants already have made significant progress in laying the groundwork for future commercialization, and some were earning revenues from spin-off products.

• Sixty-one percent of those planning to commercialize the ATP-sponsored technology said they had uncovered an average of three new, unforeseen applications since the project began.

• Over 86 percent of the participants believe the ATP award will enable them to make a better product, in terms of quality and performance. (Companies must pay all costs for product development; ATP funds may not be used.)

• Fifty-five companies reported that they had adopted permanent process improvements in their own operations based on the ATP project.

• Eighty percent of those planning to commercialize the ATP technology reported that their companies have taken some steps toward marketing the products, processes, or services that ultimately are expected from the ATP project; one- third of these companies expected to earn revenue from ATP-based technology before the end of 1995; and 19 of the companies reported they were currently earning revenue at the time of the survey.

These numbers are expected to grow considerably as the results of ATP projects work their way into company-financed products and diffuse into the broader economy.

Business and Employment Growth

An important indicator of the economic impact of the ATP is the growth of companies -- particularly the growth of jobs -- as a result of ATP technology development. Immediate job growth as new research staff are brought in to work is a common effect. Fifty-six percent of the respondents to the Silber study reported that the project resulted in the creation of an average of six new jobs. Twenty-eight percent reported that the award enabled the company to retain an average of three jobs that otherwise would have been eliminated.

PROJECTED NEW HIRES WITHIN FIVE YEARS

New technology resources from ATP projects lead to new jobs. (Source: ATP survey of small-business, single-applicant participants in first four competitions)

Most of these positions are for scientists and engineers working on the ATP project and are not significant in evaluating ATP's impact on the economy. But when companies add new employees in production, marketing, and sales; experience other job growth as a result of the use of ATP-sponsored technologies in commercial production; and increase production and lower costs as a result of these technologies, then the ATP has had a relevant economic impact.

• Engineering Animation, Inc. (Ames, Iowa) received an ATP award in 1992 for a three-year project to develop ground-breaking computer modeling and visualization technology for a "virtual human" model, a technology that will have widespread applications in medicine, engineering, and product development. As a result of that work, the company has been able to establish alliances with Johns Hopkins University, the National Library of Medicine, Hewlett-Packard, and Silicon Graphics. The company has grown from fewer than 20 employees to 150 full- and part-time employees, and revenues have doubled every year since receiving the award. EAI attributes 14 percent of its business since 1992 to the core technology developed under the ATP.

• Third Wave Technologies, Inc. (Madison, Wis.), investigating a suite of technologies for DNA analysis under an ATP award, already has grown from a staff of six to 25 full-time and two part-time employees as a result of an early spin-off application of the ATP research.

• An ATP award to Cree Research (Durham, N.C.) involved developing improved processes for growing large silicon-carbide (SiC) crystals, a semiconductor material used for specialized optoelectronic devices such as the highly desired blue LEDs. The SiC market in 1992 was limited largely by difficulties in growing large, high-quality single crystals. With the ATP support, Cree was able to double the wafer size, with significant improvements in the quality of the larger wafers. As a result of the increased productivity (larger wafers) and yield (better quality), Cree's average price on an LED dropped from 46 cents to 18 cents, and they anticipate halving that when all the production improvements from the ATP project are implemented fully. Increased quality and decreased price have driven LED sales up 860 percent, largely as a result of the ATP-funded technology. Company revenues have more than doubled. Since it began work under the ATP, Cree Research has grown from 41 employees to 140 (not counting an additional 25 employees in a new Russian subsidiary). Cree attributes this growth in large measure to the ATP project.

• Diamond Semiconductor Group (Gloucester, Mass.), which began as two partners in a converted barn, has expanded to 55 full- and part-time employees. "We're here now only because of the ATP," says DSG President Manny Sieradzki.

Recent project-tracking data from 34 small firms working on ATP projects showed that over 90 percent expected to add new employees within five years as a result of ATP technologies; nearly half of the companies expected to add more than 25 employees.

Promoting Industrial Alliances

The ATP has encouraged industry to form cooperative R&D ventures for large projects. Joint ventures can facilitate the rapid diffusion of the results of ATP projects throughout an industry. Thirty-one percent of ATP awards (and 58 percent of the funds) from general competitions have gone to joint ventures. Forty-two percent of the ATP awards (and about 76 percent of the funds) from focused program competitions have gone to joint ventures.

Evidence from surveys and case studies indicates that the majority of the 102 joint ventures that have received awards to date were formed specifically for the ATP project. The 1995 GAO study of the winners and "near-winners" from the first four years of the ATP found that 76 percent of the joint ventures surveyed came together as a group specifically to pursue the ATP project.

The ATP has catalyzed the formation of strategic R&D alliances both horizontally, among competitors, and vertically, between customers and sup-pliers. Alliances are formed both through joint ventures and through the use of subcontractors and other less formal alliances. An internal review of the proposals for 89 ATP projects initiated from 1990 to 1993 showed that 13 percent planned to form horizontal alliances, 33 percent planned vertical alliances, and 35 percent planned hybrid vertical/horizontal alliances.

The Silber study has documented this effect of the ATP in some detail. Only one of the joint-venture projects in the first three years of the ATP involved a consortium of companies that previously worked together. On average, each joint venture included six formal participants. Even single companies working on ATP projects often forged new collaborative relationships. Twenty-two out of 42 single applicants reported bringing an average of four outside companies into their projects as subcontractors. On average, ATP participants reported establishing new alliances with five companies with whom they had never done business before.

A number of respondents commented in particular on the value of collaborations -- both between competitors and between manufacturers and end users -- formed as a result of the ATP:

• "In the past we looked at each other as competition, but in reality we're all competing against the Japanese. ATP brought us together, and that has been unbelievably valuable ... forming the consortium has been the greatest benefit of the ATP."

• "ATP gives the supplier companies and user companies a very unusual joint venture format to become partners and understand each other's world view."

• "One of the premier things ATP did was provide a framework for little guys and big guys to get together under circumstances they never would have."

• "There has been a new awareness of the value of consortiums. Management and the president of our company use it as an example of how cooperative research can be done. Individual companies can't do broad research. ATP has allowed a broad-based consortium to work together, which is very cost-effective."

Of the 115 respondents to the Silber survey who worked collaboratively on their ATP projects -- either in formal research ventures or as single companies working in informal arrangements -- 95 percent felt that their companies had benefited "to a great or moderate extent" from the collaboration. Respondents said that the major benefits of collaborations included:

• the opportunity to share ideas and "stimulate creative thinking" as a "great or moderate benefit" of the program;

• more rapid commercialization of the resulting technology a great or moderate benefit;

• increased customer acceptance a great or moderate benefit; and

• access to R&D expertise not available in-house a great or moderate benefit.

In addition, 92 percent of joint-venture participants reported that their experience with the ATP has influenced them to pursue other joint ventures in the future.

A New Research Culture

As the preceding results suggest, there are a number of indications that one of the more important long-term effects of the ATP will be to encourage a new R&D culture in U.S. industry that encourages cooperation in pursuit of mutual goals, both among competitors and among suppliers and manufacturers. The Silber study, for example, asked respondents, "Based on the ATP experience, will your company pursue more joint ventures?" Nearly 96 percent answered "yes." This effect is inherently difficult to document quantitatively, but several industry managers working on ATP projects have commented on it.

The following observations, all by industry respondents, were reported in the Silber study:

• "It's uncommon for OEMs [original equipment manufacturers] to work jointly with materials suppliers. The OEMs are not usually involved because it's not part of their culture -- they're usually focused on their own customers. But for a materials supplier to go into this without the OEM is a very high risk. Unlike the ATP, many programs focus on the end product and neglect the large underbelly of suppliers. Without the ATP we wouldn't have gotten into this technology. We got a subcontractor involved, and they normally wouldn't have been part of it."

• "The key benefit of ATP has been improving relations with our major users. We've had beneficial collaborations, which lead to better products moving to market faster. The end users jointly participate with the suppliers and decrease the market risk of the product."

• "Collaboration, cooperation, and learning to operate in a consortium with competitors were key outcomes of the ATP. We saw and experienced the value of working together with competitors. The ability to leverage knowledge has been so tremendous. It has broken invisible barriers."

• "The ATP award has opened the eyes of management that technological projects like this one are valuable. Our company used to turn away from outside collaborations. We had a history of zero; we were an inward-looking company. We were skeptical at first of collaboration, but not now."

• "We helped start [professional organization] which began as a group of people interested in our ATP work. The association has a quarterly newspaper and a mailing distribution of 500 people outside of our company. This never would have happened without the ATP program."

Failures

That some ATP projects will fail is a foregone conclusion, given the high-risk nature of ATP research, the difficult road to commercialization, and the uncertainty of how rapidly industry will adopt the proposed technology. Failure may occur because the technical challenge cannot be overcome, because the business climate changes in unforeseen ways, because others do not adopt the technology, or some combination of the three.

Often, however, important scientific knowledge may be gained even in what appear to be failures. Eventual business and economic success may come from technical results that, for a period, languish.

Just as it is too early in the history of the program to see the long-term economic effects of the ATP, it is too soon to see the true failure rate. To date, the ATP has cancelled two projects (out of 280) when it became clear that the support no longer was justified. Five other ATP projects were cancelled either before they started or after an introductory planning period because of some combination of new technical advances, changes in research priorities at the companies involved, and difficulties in reaching agreement among the members of a planned joint venture. Some possible causes for cancellation include:

• inability to agree on the sharing of intellectual property rights among joint-venture participants;

• the results of the research already completed demonstrate that the technical objectives are unrealistic;

• conversely, the technical challenges prove to be easier than anticipated and the planned research agenda is fully complete before the expected end of the project; or

• unexpected developments in alternative technologies render the technical focus of the project obsolete.

In addition, not all technically successful projects will achieve the long-run test of economic success. Projects can "fail" in the larger, business sense, sometimes long after the technical work is successfully completed and the ATP funding has ceased. Any number of economic or market obstacles can arise. Rapidly changing financial and market conditions can hamper the development or commercialization of ATP-sponsored technologies.

The small, entrepreneurial firms that make up a sizable percentage of ATP winners are particularly vulnerable. One company, for example, was dissolved in bankruptcy after successfully completing the research in an ATP project. Rights to key elements of the research, however, are held by a second company, which participated in the project, leaving open the possibility of a successful outcome. Another company had to drop its longer-term, high-risk ATP research to focus on current cash-flow problems.

The challenge for the ATP is not to avoid all failures but rather to manage the project portfolio so that the successes much more than compensate for the failures. Once the ATP selects a project it will work actively with the company to make the project a success. ATP managers add value by providing:

• technical advice and support -- ATP project managers are technical experts in their own right, and if necessary can bring in the talents and resources of the NIST laboratories for specialized technical support;

• a broad industrial perspective -- from NIST's national vantage point, project managers can sometimes help companies identify sources of needed technical resources; and

• a focal point for companies with common interests to come together.

This sort of support can mean the difference between success and failure, particularly for small companies pursuing projects on their own.

The ATP Project Portfolio

ATP HAS A DIVERSE PORTFOLIO

280 ATP awards by technology area as a percentage of the $970 million awarded

To date, nearly 800 project participants, including companies, universities, independent non-profit research organizations, and government laboratories, have participated directly in ATP projects. Several hundred additional organizations have participated as subcontractors and strategic partners. ATP managers have carried out a vigorous outreach program to make firms and economic development organizations in states and localities across the country more aware of the ATP, its potential, and its procedures.

The ATP portfolio is highly diversified. The 280 projects selected in the first 22 competitions span a broad array of key technologies, with particular concentrations in information technology, electronics, biotechnology, and advanced materials.

Since its inception in 1990, the ATP has conducted 22 competitions, both general (open to proposals from all areas of technology) and for focused programs:

• A total of 2,210 proposals were submitted, and 280 awards were made. (See Appendix E.)

• The 280 awards commit a total of $970 million in ATP funds and $1 billion in cost-sharing funds from industry, assuming all projects are pursued to conclusion.

• Small businesses play a vital role in these projects. Forty-six percent of ATP projects are led by a small business, either as a single applicant or as the leader in a joint venture, and small businesses make up a significant percentage of the membership in ATP joint ventures, forming strategic partnerships with larger firms. (See Appendix F.)

• Universities also play a significant role in ATP projects. More than 100 different universities are involved in about 150 ATP projects as either joint-venture participants or subcontractors. There are more than 250 separate incidences of university participation in ATP research. (See Appendix G.)

Industry's involvement in the ATP goes far beyond the organizations participating in the funded projects. Several thousand industry representatives have taken part in ATP workshops. As industry representatives have attested, these sessions are important not just in planning programs that reflect industry needs but in convening different segments of industry to discuss mutual goals and interests.

Conclusions

At present, it is impossible to measure the full economic effect of the Advanced Technology Program simply because it is too early for such effects to have occurred. Success of the ATP will depend ultimately on its ability to stimulate meaningful, broad-based economic impact for the nation. While only a handful of early projects are out of the ATP R&D phase and entering the commercialization phase, NIST has put into place systematic mechanisms to gather data and provide the analysis as the long-term effects unfold. These mechanisms include an information collection system for tracking the business progress and economic results of ATP projects; a series of microeconomic case studies of individual projects; the experimental use of macroeconomic models for projecting outcomes; and the development and application of approaches and tools for estimating the benefits not only to the participating companies and institutions working on the ATP projects but to the industry as a whole, consumers, and the economy.

Today, the studies and data that are available demonstrate that the ATP is on track to deliver significant economic benefits to the nation. These studies document:

• the successful, and accelerated, development of new technologies and technical capabilities as a result of the ATP;

• company projections of reduced time to market based on ATP-supported technologies;

• early progress toward commercializing ATP-supported technologies; and

• company expansion and projections of future growth based on ATP-supported technologies.

The ATP also is having a real effect on the industrial R&D culture. Results show that the ATP is:

• encouraging industry to pursue more high-risk, enabling R&D projects, projects that would not have been attempted in the same time-frame without ATP support;

• encouraging companies to team with other firms to best take advantage of new markets; and

• promoting industrial R&D alliances both horizontally, among competitors, and vertically, between customers and suppliers -- alliances that are leading to increased efficiencies in R&D and reduced time to market.