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Understanding Early-stage Tech Development
The federal role in early-stage technology development (ESTD) is much more important than may be suggested by collective R&D statistics, suggests Between Invention and Innovation: An Analysis of Funding for Early-Stage Technology Development, a report by the National Institute of Standards and Technology (NIST). Prepared to support informed public policies concerning the transition from invention to innovation, the study finds that federal technology development funds complement, rather than substitute for, private funds.
The report states that economic growth will continue only with the constant pioneering of technological innovations that upset markets and generate new industries. Understanding the transition from invention-to-innovation is crucial in the creation of both public policies and private business strategies. Unfortunately, the report finds the practice in which an idea of potential commercial value is transformed into a successful product is complex, inadequately documented, and barely studied. The report attempts to fill that gap in this critical transition.
Two main questions are addressed. First, how do government programs compare with private sources in terms of scale and what is the allocation of funding for ESTD across diverse organizational categories? Second, what kinds of obstacles do firms face when attempting to locate funding for ESTD R&D projects and to what are these difficulties attributable?
Findings include:
- Most funding in the phase between invention and innovation comes from individual private equity investors, corporations and the federal government, not venture capitalists.
- Markets for allocating risk capital to early-stage technology ventures are not efficient.
- Despite market shortcomings, many arrangements have arisen for funding ESTD. Funding mechanisms evolve to match the motivations of entrepreneur and investors.
- Conditions for success in science-based, high-tech innovation are concentrated in a few geographical regions.
- The portion of R&D spending that is dedicated to ESTD within companies varies both among firms and within industries.
Between Invention and Innovation can be downloaded at: http://www.atp.nist.gov/eao/gcr02-841/gcr02-841.pdf