Research Institutes Have Become Industry Partners: These Institutes Have Evolved into Competitive Players in the Market for Technical Solutions to Industrial Problems

By Lyne, M. Bruce | Research-Technology Management, July-August 2007 | Go to article overview

Research Institutes Have Become Industry Partners: These Institutes Have Evolved into Competitive Players in the Market for Technical Solutions to Industrial Problems


Lyne, M. Bruce, Research-Technology Management


From the perspective of economists, industrial research institutes exist to compensate for chronic under-spending by companies in research and development. Left to their own devices, companies are generally too risk averse to support the early phases of research and unable to appropriate an exclusive position when they come aboard late in the R&D pipeline. Further, SMEs (companies with fewer than 250 employees) tend to under-invest in R&D for lack of technical competence, because of the high risks of innovation and for want of financial resources (1). The solution in European countries is to rely heavily on research and technology organizations to provide industry the research support it needs to be competitive and grow.

Over 40 percent of the money spent by the EU 15 governments goes to fund R&D in public sector research institutes. This translates to 13.6 percent of the gross domestic expenditure (both public and private) on R&D in these countries, and is roughly comparable to the OECD countries where public research institutes account for 11 percent of the gross domestic expenditure on R&D (2).

The origins of public research institutes are diverse. One root is the need for certification such as for national safety standards, engineering consultancy, and technology services (e.g., NIST, Battelle, and SP--Sweden's Testing and Research Institute). Another root is the desire of national governments to provide the domestic industry with technology push in areas vital to economic development (e.g., Fraunhofer, TNO in the Netherlands, or VTT in Finland). Companies often band together in research associations to share the risk in early technology development by spawning industrial branch institutes (e.g., The Pulp and Paper Research Institute of Canada).

Last but not least is the root stemming from frustration over the inability of universities to capture and develop for industry many high-potential concepts coming from academic research. The resulting institution is a hybrid involving basic research, contractual problem solving, and development of concepts to the point where they can be transferred to companies, often including SMEs and spin-offs. Some of these institutes are associated with just one university (e.g., UniServices at the University of Auckland, Sintef in Norway), while others draw from many universities (e.g., YKI--The Institute for Surface Chemistry).

Public funding is a common denominator of these industrial research institutes. Running institutes on a mix of private and public funding is a way to bring industry to the table by leveraging its support. The public portion also fuels preliminary research and the development of new competences. This keeps an institute's offerings fresh, and with appropriate guidance from industrial reference groups it develops the institute's technology portfolio to remain relevant to the needs and interests of its industrial clients.

In cases where public funding of institutes has declined, it has proven virtually impossible to garner industrial funding for this vital renewal because the benefits are realized on too long a time scale. Hence, for an industrial research institute to thrive, it must make persuasive arguments to both industry and public funding bodies.

Just as industry is consolidating to achieve synergy and economies of scale in an increasingly global market, so are industrial research institutes clustering and forming partnerships to compete more effectively for public funding and for an increasingly international client base. In Europe, for example, there has been a shift from national funding of research to EU funding, with an attendant bias toward the bigger research institutes and research clusters that can mount programs sufficiently large to have an effect on the European economy.

Besides visibility in Brussels, the larger research institutes and institute systems are better equipped to deal with the complexity of EU research applications. …

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