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Public/Private Partnerships: Implications for Innovation in TransportationPrevious Section | Table of Contents | Next Section
II. Partnerships as Tools for InnovationA. Types and Motivations Many governmental strategies may stimulate the deployment of innovations. Traditionally, these include public sector support of private sector initiatives through tax incentives, grants, and other special considerations. Public/private partnerships offer another approach. Partnerships typically represent a diversity of motivations among the participants. Public sector participants may seek to advance a broad-based policy or research agenda. The federal government does this for R&D through its investment in basic research. Basic research is a fluid category of research, which may lack clearly defined goals. However, exploratory research at this level may identify future research targets. R&D partnerships may include participants other than the federal government and private industry. Non-federal public stakeholders in these arrangements may include state, regional, municipal, local, and tribal entities.9 Potential private partners include the academic sector, non-profit entities, foundations, or specialized groups (e.g., chambers of commerce, National Governors' Association). The private sector's interest in partnerships tends to have a narrow focus, due to stronger financial concerns and shortened time frames. Private sector partners may not have the finances, personnel, facilities, or other necessary resources to complete a project on their own. They may be even less willing to invest these resources if the potential dividends are unclear or distant in time. Private sector interests may also have more need for recognition of their contribution, both at the organizational and individual level. Increasing interest in public/private partnership activity is due to both economic and policy objectives. As government seeks to balance budgets and contain deficits, there is renewed interest in determining what functions can be more efficiently handled by private sector entities. B. Challenges to Creating Effective Partnerships The statements of experts and related literature reflect an apparent consensus that technology has great potential to address many of society's problems, particularly in the area of transportation. However, it is the 'institutional issues' that may impede the productive collaboration of government, industry, and universities. These issues can be categorized into four basic areas: 1) divergent motivation among the participants; 2) limited resources; 3) perceptions of legal and institutional barriers and inadequate protection from unfair competition; and 4) the evolving agendas of public and private institutions. 1. Motivations Entities that entered into a partnership for different reasons may find that the convergence of issues has limitations. Public sector partners have several inherent or explicit goals. The federal government facilitates innovations that enhance the Nation's well being and economic competitiveness. Administrations may seek to identify new funds and leverage existing resources in order to maintain programs, fulfill agency mandates, or save money. Overwhelming public attention to a specific policy area (e.g., transportation safety) may force the public sector to take action. Political considerations, as reflected in the needs of individual legislators and their constituents, may also motivate the public sector. John Gibbons, the former Assistant to the President for Science and Technology, described the White House's Transportation Science and Technology Strategy in 1997:
The private sector and universities, although interested in policy objectives, do not necessarily share a short-term stake in the development or implementation of these objectives. As Ratchford (1997) observes, private sector firms have two main interests in joining a collaborative effort: 1) increased profit may result from new technology that provides cost savings in existing systems, or that results in market growth via new products and services; and 2) development of new technologies often contributes to increased stock value (shareholder value). Private sector participation often is based upon a financial risk/benefit analysis. Risks include little or no return on investments and the potential release of proprietary information; the analysis weighs these against potential benefits to short-term plans and products. As a result, firms are attracted to research collaborative activities that contribute to a firm's short-term objectives and "technologies in the pipeline" (Hane, 1992). Roos, Field and Neely (1998) describe the strong private sector support for SEMATECH, a consortium set up to revitalize the ailing semiconductor industry. Over the course of a decade, the federal government invested $800 million into SEMATECH while practicing a "hands-off approach." Consequently, the consortium has enjoyed strong industry leadership (it is often managed by former industry researchers) and has been publicly championed by semiconductor executives. This decade of support, according to Roos, et al, is due to the clarity of the consortium's mission: "to improve the competitiveness of the U.S. chip manufacturers." This clearly articulated goal "helped participants overcome their hesitation about working together... concerns over revealing sensitive problems were alleviated when it became apparent that many parties were facing the same issues." The academic sector has motivations that are not necessarily congruent with private industry and the federal government. Universities seek to develop new knowledge and to convey that information to the next generation and to others in science. The eventual application of that research to policy or share holder objectives is often a secondary priority for many academic investigators. The "fragile contract" between research institutions, government, and industry requires addressing the interests of research sponsors while maintaining the integrity of the university mission. Many universities seek an ideal partnership in which a single institution provides significant funding for research and innovation. Many states use industrial and governmental support of state universities to develop university research parks that serve as incubators of innovation, thereby forming a loose partnership within a given industry sector. For example, the close collaboration between North Carolina State University (Raleigh) and nearby environmental technology firms is due, in part, to the Environmental Protection Agency's investment in the nearby Research Triangle Park, a major laboratory. 2. Resources Experts cite the availability and distribution of resources as a primary issue in the development and progress of research collaborations. Resources include funding, staff, capital facilities, and equipment. Members of the private sector, who perceive the federal government as the source of many regulations or policy goals that require new technological solutions, argue that the government should provide funding to help develop and implement these alternatives. As one respondent exclaimed - "it [the partnership] amounted to Congress legislating that my company spend millions of its own money on their project!" However, federal spending in support of industrial consortia is a controversial policy. The use of increasingly scarce federal resources for partnerships is frequently attacked as an inappropriate cost to the public. Branscomb and Florida (1998) note that the public opinion on such spending resembles a pendulum. Federal support for SEMATECH, the Advanced Technology Program (ATP), and the Technology Reinvestment Project (TRP) has been characterized as a public subsidy to industry or as "corporate welfare": by many elected decision makers and opinion leaders. Others express concerns that such investments result in a de facto technology policy in which the government selects winners and losers, thus interfering with the marketplace. 3. Legal and Institutional Framework Research partnerships are often thwarted at their initiation or fail during their operation because of perceived legal constraints or inadequate protections afforded to industry and university participants. For example, questions remain regarding ownership of intellectual, licensing or property rights resulting from federally sponsored research. A review of the Department of Transportation's University Transportation Centers Program (1997) suggests that these issues have impeded private sector participation. Consequently, many projects sponsored by the Program do not receive private funding that matches the federal government's investment, resulting in diminished potential to leverage public funding. It is difficult to document the legal basis of this concern. Federal legislation, such as the Bayh-Dole University and Small Business Patent Act of 1980, enables universities and firms to license and patent the results of federally funded research. However, as indicated in the University Transportation Centers Program study, the perception of legal obstacles is one of many issues that dissuade private firms from joining partnership consortia. 4. Agendas The recent record of collaborative R&D partnerships reflects the impact of change on established plans and relationships. For example, changing agendas in both the public and private sectors--as well as the arrival or departure of leaders who may champion or oppose the collaboration--are influencing factors. The private sector, which often has a short time horizon, must respond to its own planning cycle and, in many cases, to shareholders' concerns. As a result, corporate managers may choose to end their participation prematurely if short-term benefits do not materialize. The federal government must address time frames as they relate to the complex budget cycle and to the political longevity of coalitions that support specific programs. For example, although Congress authorized the National Maglev Initiative, established by the 1991 Intermodal Surface Transportation Efficiency Act (ISTEA), the Department of Transportation chose not to request funding at those levels. Over time, a policy emerged that favored incremental advances in intercity ground transportation over attempts to "leap frog" to a very high performance, but costly and commercially unproven, technology. This policy eventually resulted in the program's dissolution. The nature of a democratically elected government can also affect partnerships. Individuals who support a program may not be reelected or may be voted out of office by a new majority. Maidique (1988) argues that successful partnership and innovation requires a special combination of entrepreneurial leadership, management acumen, and technological expertise. Successful partnerships benefit from the existence of an obvious issue entrepreneur, or "champion." Vice President Al Gore is one such champion of the National Information Infrastructure (NII) program. By serving as the spokesman and by identifying resources, the Vice President keeps the NII on the national agenda and influences private sector participation. Issue entrepreneurs need not be in the White House to successfully support a partnership initiative. They must, however, demonstrate the ability to articulate clear goals, define the problem in a way that is inclusive to the participants, and maintain the status of the issue within the agency, company, or national agenda over time. 9 Funding available from non-federal sources is usually minor. Recent state and local support comprised less than $400 million of an overall R&D budget of more than $160 billion. Public/Private Partnerships |
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