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ALFRED
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WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
Technological
Its
Mechanisms
"Spin-Off":
and
National
Contexts
Jong-Tsong Chiang
WP
June 1991
3307-91 -BPS
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE. MASSACHUSETTS 02139
:„«(.•-;
.^^^.
J
Technological
Its
Mechanisms
and
"Spin-Off":
National
Contexts
Jong-Tsong Chiang
June 1991
Forthcoming
in
WP
3307-91 -BPS
Technological Forecasting and Social Change,
Vol. 40, No. 4, 1991.
Technological
Its
Mechanisms
"Spin-off":
and
Contexts
National
Abstract
This paper
oriented,
U.S.
first
to
is
seeic
particular
in
implications of "spin-off" from mission-
strategic
defense-related,
has worldly unmatched military technological capabilities, this paper
how different
and economic systems may affect
focuses on the U.S. experience.
In
"country sizes," development stages,
technological
Sweden,
their
Because the
technology programs.
"spin-off,"
Israel
paper also briefly examines the experience of
this
and the USSR.
huge national resources
By
technological levels.
These three countries have
to
military
investigating
computers,
semiconductors,
order to understand
nuclear
R&D
committed
all
and achieved high
several fields, in particular
power,
aircraft
and systems
technology, this paper identifies three critical mechanisms as well as two
increasingly unfavorable trends in the U.S. context.
relating
to
the
of technology,
characteristics
paper also suggests
this
several rules to grapple the logic of "spin-off."
Using perspectives
But most other countries
could not expect as significant contribution from "spin-off" as in the U.S.
Small countries usually have no slack
may
countries
relatively
underdeveloped
from abroad
off"
benefit from
is
rather
"spin-off"
while
advanced.
to
when
military
In
promote "spin-off."
their
civilian
technology
centrally
Developing
industry
mainly
is
introduced
planned economies, "spin-
tends to be distorted or stymied for lack of a vigorous market-oriented
civilian
industry
to
capitalize
on the opportunities should they
arise.
"Spin-Off":
Technological
Mechanisms
Its
Programs
Mission-Oriented
1.
Briefly
and
speaking,
"spin-off"
and
refers
fundamental
spill-over of
the
the
to
civilian
sector.
government mission-oriented
research,
basic
or
Spin-Off
to
government "mission-oriented programs"
Unlike
Contexts
National
programs are guided by specific missions defined by so-called
These agencies, typified by the defense ministry,
"mission agencies."
have
operational
operating
R&D
mandate rather immediate
that
and make the agencies under constant pressure
goals
produce results
So,
responsibilities
a rather tangible
in
way
to justify
their
to
existence.
endorsed and undertaken by these agencies
activities
normally pertain to their missions and, more specifically, their
procurement
interest.
programs also differ from the so-called
Mission-oriented
users
Mission agencies are the primary end
programs."
"diffusion-oriented
of the outcomes of their mission-oriented programs.
organizations
responsible
principal end
users
of the outcomes of their programs.
programs are intended
The
users.
farmers
R&D
through
to
contribute
results thus
agricultural
have
R&D
for
in
War
the post-World
be diffused
to
network,
many
era,
II
their
as
and
small
or
technical
local
partly
for instance,
to,
centers.
a result of the military
experience during the war and partly because of the arms race
the
some
cold
war,
many
industrialized
compared with
their
military
countries
civilian
(and aerospace) technology programs
were highly sophisticated when
counterparts.
These programs might
R&D
even account for a significant portion of the national
The opportunity cost was very
that,
Instead,
numerous outside potential
to
extension
medium-sized enterprises through
In
programs are not the
diffusion-oriented
for
But the
in
addition
to
high.
Therefore,
it
is
resources.
often expected
accomplishing the designated missions, these
programs can also contribute
to
the civilian sector.
relevance the search for strategy to enhance
This brings into
spin-off.
In
however, the spin-off from most civilian
paper,
this
programs will not be discussed, because civilian technology
agencies'
development and/or diffusion
In
the
into
falls
direct
their
responsibilities.
well-known examples include the Cooperative Extension
U.S.,
Service of the Department of Agriculture, the Applied Energy
Program of
Department of Energy, the Center for Manufacturing
the
Engineering of the National Institute of Standards and Technology
(NIST, the institutional successor
Standards),
generic
the
to
Bureau of
the National
and testing of the
aeronautical research
National Aeronautics and Space Agency (NASA), and the health care
technology development and diffusion of the National Institutes of
Health (NIH).
should be added
It
government investment
is
programs for civilian purposes
and General Rules of Spin-Off
Properties
many dimensions.
Spin-off has
some
knowledge
boost
industries,
base,
technological
In
may provide employment,
It
manpower, enlarge
technical
cultivate
strengthen
technology development.
the
country, the Federal
this
small as compared with that in military programs.
quite
2.
technology
in
in
that,
infrastructure,
this
paper,
and
the
spin-off from military
economic
main concern centers on
programs
role of the defense industry,
is
beyond
though some background understanding
example,
military
civilian
to
the
civilian
Therefore, a broader economic analysis, including the
industry.
paper,
benefit
it
is
total
found that there
and
R&D
is
the
is
scope of
For
crucial.
a negative correlation
this
between the
expenditure shares and the industrial
among major nonAnd the
the 1960s.i
investment as well as productivity growth
communist industrialized countries after
West Germany and Japan, both with far lower
R&D
share in
erosion
since
of the
the
GNP
U.S.
military
rise
of
budget and
than the U.S., have often been contrasted with the
competitiveness
in
many manufacturing
industries
1970s.2
As regards
technological spin-off, normally
automatically translated
into
it
will
not be
commercial products or processes.
be commercially successful, there usually are
many
things
to
To
be done
on the part of the civilian industry, including attaining economic
defined by the civilian market which
viability
government market.
This
the civilian
from the
different
may
be complex,
The contribution of technological
time-consuming and costly.
off to
process"
"translation
is
(or commercial)
spin-
innovation or competitiveness
is
mostly incomplete and indirect.
thus
What
is
more, spin-off basically
serendipitous,
is
because
beyond the scope of these programs' main missions.
falls
words, spin-off
And
this
is
In
it
other
by and large not planned deliberately beforehand.
is
a critical challenge to the strategic thinking about spin-
off.
As an
initial
approximation to
this
topic,
is
it
reasonable to
hypothesize that spin-off would be more intense, the more similar
the
military
and civilian technologies, or the more closely interactive
the
military
and civilian concerned communities,
Guided by
equal.
general rule, spin-off
this
may
consultation,
provision,
technology
demonstration,
from mission-oriented programs
the
to
being
cooperation,
technical
data
and the mobility of personnel
conferences,
publications,
others
be facilitated
R&D
through such mechanisms as personal contact,
technical
all
civilian
industry.
It
also
follows that spin-off would be easier the more the civilian industry's
involvement
military
in
Additionally, even
if
the
military
weapon systems
are
highly
and distinctly different from the civilian products, and
specialized
the
programs.
defense prime contractors are restricted in the communication of
more "dual-use" properties (meaning
information,
classified
technology can have both military and civilian applications)
exist
in
subsystems,
that
a
may
components, materials, capital equipment
parts,
and relevant technical services, and the vast number of
subcontractors
to
strict
these
working
security
levels
may
for
these
regulations.
therefore
businesses
may
not
be so subjected
Technology sharing and transfer
have more
common
grounds and
at
less
obstacles.
3.
U.S.
Unique Experience and
However,
it
is
Policy
Principles
very doubtful that the above general argument
can rather satisfactorily explain the U.S. impressive spin-off history,
many
exemplified by
may
countries
radical and
Many
innovations.
"big"
do the regular and incremental spin-off, and
similarly
have extensive participation from the civilian industry
military technical
Therefore,
affairs.
it
is
most
in
highly desirable to pay
special attention to the U.S. experience and to seek lessons
number
of
portion
of defense
spin-off cases, which
"big"
its
R&D
consumed
computers,
nuclear
doubt among the most exemplary.
whose dominant position
1980s.
until
the
fully
electronic
In
a considerable
In
this
regard,
power, and aircraft are without
In
semiconductors, both
and integrated circuits (ICs) were invented
transistors
from a
outlays^ or were historically pivotal to the
U.S. technological or industrial leadership.
semiconductors,
other
the
in
in
the
U.S.
world market was not challenged
computers, the U.S. introduced the world's
In
model and
maintains
still
its
first
leadership in the world.
nuclear power, the U.S. amassed by far the most relevant
technology after the war and brought about the the two most widely
used
reactor
types--pressurized-water
water reactor (BWR).
In
aircraft,
the
(PWR) and
reactor
boiling-
Boeing 707 successfully
launched the age of commercial jet transport
in
the West,
and the
U.S. enjoyed a virtual monopoly in the whole post-war era until the
recent rise of Airbus.
could even be referred to as a representative
In fact, the U.S.
"mission-oriented country"
policy"
in
light
of
its
traditional
"technology
mainly on mission-oriented programs (or absence of
relying
technology policy except for a cumulation of mission-oriented
programs), as
more emphasis on
put
technology
the U.S.
with
to
"diffusion-oriented countries,"
such as
Germany, Sweden and Switzerland, whose government
Japan,
in
opposed
its
in
acquisition, diffusion
industry. "^
policies
and assimilation of
So, spin-off has played a
much
heavier role
than in most other advanced countries, and this has to do
institutional
background and policy principles.
Without a tradition of explicit industrial policy, implementation
under the shield of "national security"
only,
In
"legitimate"
this
regard,
mission-oriented
tool
the
for the U.S.
military and,
programs,
in
to
is
the
government
a
most, and sometimes the
to
execute similar jobs.
lesser degree,
aerospace
which government has a strong and
^
direct
procurement
reflected
the
in
fact
in
that
R&D
share of the Federal
62%
play a very important role,
interest,
73%
1980, and
in
91%
(e.g.,
57%
1960,
1970, and
in
R&D
47%
Department of Defense (DOD) and,
(DOE)
in
to
R&D
activities
to
up
set
in
"Defense," in 1972 within
jurisdictions
the
R&D
has military mission as
1969
the
is
In
armed
R&D,
modest
for
recent years,
RDT&E
it
1958 and renamed
DOD.
6.2),
DOD's
restrict
with
DARPA,
with prefix
This agency was an organizational
DARPA
services.
underwrites long-term
including basic research and generic technology
as
compared with
was only about
that
But
its
budget
is
under the Services' control.
DOD's
one-thirtieth of
total
funding
(Research, Development, Testing and Evaluation), and
about one-fifth of
including
to
Advanced Research Projects
development, and thus functions more broadly.
relatively
its
Soviet Sputnik and cut across the traditional
of the
and advanced
Department
field.
those areas directly concerned
One exception
Agency (ARPA)
to
aerospace
in
defense appropriation in
the
to
needs.
response
the
This practice was reinforced by the Mansfield
explicit focus.
military
are
a lesser degree, the
(NASA)
Normally, the defense-related
technological
64%
(e.g.,
nuclear weapon-related topics, and the National
Aeronautics and Space Agency
Amendment
funding
In the U.S., the mission
1980).6
in
lion's
1970,
in
expenditure
agencies responsible for defense and aerospace
of Energy
R&D
is
the
82%
1960,
in
1989),5 while the Federal
accounts for half or more of the national
in
consume
these programs usually
funding
which
research
DOD's funding
(category
for
"technology base programs" —
exploratory
6.1),
development (category
and advanced exploratory development (category 6.3A) but
excluding those covered by the Strategic Defense Initiative (SDI).''
Therefore, basically the defense
R&D
investment
is
indirectly
The
marginally relevant to the civilian technology and industry.
exploitation of defense
R&D
results
for civilian
applications
generally considered to be a matter of the private
It
is
or
is
sector.
important to note that mission-oriented programs and
mission agencies were relied on more than before under the Reagan
administration
science and
which emphasized the integration of economy and
technology (S&T)
to
bolster
industrial
competitiveness.
During Reagan's eight years' term, defense
to
68%
1988.^
in
very costly "mega programs,"
the
promoted,
accompanied
Moreover,
this
by
competitiveness.
DOD
10
R&D
such as the National Aerospace Plane,
proponents'
administration
to help the civilian
Federal
total
meantime, a number of
In the
Space Station, and the Strategic Defense
(DOD)
funding, along with
was escalated from 50% of
the military build-up,
investment in 1980
R&D
arguments.
spin-off
urged the Department of Defense
also
industry which
thus
(SDI), were
Initiative
was losing
became more
some programs with broader application
its
international
active in underwriting
Well-known
potential.
examples include the Very High Speed Integrated Circuits Program,
the
Strategic
SEMATECH
Computing Program, and
support of the
financial
the
consortium and the research on high-definition television
(HDTV).
However,
this
trend seems to have been reversed in the
administration, reflected
Technology
in
its
mentions
little
to
the
Report)^^ --publishQd
including
transfer
its
in
Instead,
it
content to diffusion-oriented
of Federally
funded technology,
commercial applications of defense and space
government participation
in
This statement
U.S. Congress.
about major mission-oriented programs.
devotes a significant part of
measures,
technology policy statement--t/.5.
first
Policy (or called Bromley
September 1990 and delivered
Bush
precompetitive
R&D
results,
research
on
and
generic
technologies that have the potential to contribute to a broad range of
government and commercial
applications. ^^
These volatile recent developments seem
U.S. there
still
has not been strong
to
common ground
the pros and cons for the "spin-off strategy" (if
into a coherent policy
devoted
to
experience
4.
framework.
searching for this
The
very
it
to
accommodate
could be so called)
analysis that follows will
common ground
be
by examining the U.S.
first.
Impacts of Spin-Off and
Evaluation
During the three decades following World
off
suggest that in the
War
II,
the U.S. spin-
achievements of a number of mission-oriented programs were
impressive.
Well-known examples include
jet
engines (for
missile
trajectories),
computers (for plotting
bombers),
and
high-performance fighters
semiconductors (for missile guidance systems),
numerical control (for carving out aircraft structural parts), nuclear
energy (for naval nuclear propulsion), lasers (for tank range finders
and beam weapons), and time sharing, digital communications and
computer graphics
air
defense system).
apparent that the impacts of some U.S. spin-off cases are
is
It
(for
Semiconductors
very far-reaching.
and (electronic) computers together
circuits)
and integrated
transistors
(i.e.,
this
illustrate
They have triggered "technological paradigm" change.
miniaturization,
with
associated
They have
also
"Mechatronics,"
data processing, digital
Revolutionary
communications,
new information technology
brought about new "technology
the
etc.
systems."
"techno-economic paradigm"
foundation for a modern "information society."^
By any measure,
What
may reduce
or
the
and
more,
is
laid
"^
U.S. spin-off achievements in the post-war
However,
it
in
is
really
rough
Generally speaking, military (and aerospace)
cost or increase
the
R&D
capability for performing civilian
by sharing very expensive equipment
(e.g.,
large
wind tunnels
supercomputers) with civilian research projects, by introducing
highly
or
shift,
measure the spin-off impacts, even only
to
economic terms.
R&D
the
unmatched by any other country.
difficult
all
computer-based automation, and the integration of
they have even caused
era were
are
paradigm. ^^
(IT)
computing and communications are obvious examples.
the
very well.
sophisticated
instrumentation
by transferring military
R&D
But the magnitude of influence
Additionally,
many
issues
fundamental difficulties
in
to
civilian
research
laboratories,
experience to civilian research arena.
is
not easy to determine.
involved are also concerned with the
technological
assessing
innovation.
For
may
example,
let
relatively
easy to calculate the cost saving or price increase resulting
alone the indirect and long-term contribution,
from process innovations, but
innovations,
new
lines
modern
some
is
may be
even new
of which
of business or
military
it
R&D
performance than on
primarily
costs.
So
be
usually hard to assess product
so novel or so radical as to create
industries.
puts
it
it
In this respect, U.S.
much more emphasis on
tends to contribute
more
to
product
innovation than to process innovation, and indeed
many new
of measuring the
benefits
This adds to the difficulty
is
taken into account, the complexity of
becomes even more insurmountable.
evaluation
resources
did have created
of spin-off.
the opportunity cost
If
are
and new industries.
frontiers
it
Except that there
remaining idle and rather readily available, the
For
of limited resources exists.
possibility of diversion or "draining"
example, the defense technology programs could be compared with
R&D
sponsored by NSF, by other Federal agencies, or by commercial
They could
companies.
And
managed.
along
also be
assessed against a system differently
could even be investments of different weights
there
spectrum of basic research, applied research, development,
the
engineering, testing and validation.
could be used.i^
criteria
In
fact,
many
Though without accurate measurement,
the U.S., given the very large share of national
consumed by
Certainly,
military
standards and
R&D,
the
R&D
in
resources
opportunity cost must be very high.
could be argued that the consideration of spin-off cost
it
is
inappropriate because the cost should be charged against the
targeted missions.
advocated as one reason
is
to
of the investment or as an implicit strategy to bolster
part
justify
But when spin-off
technology which has to emphasize cost effectiveness, the
civilian
concern about cost makes some sense.
Crucial
5.
Spin-Off Mechanisms
Without attempting
attention
"big"
technologies--semiconductors,
aircraft
The
is
the
Contracts,
first
spin-off
its
in
the
Then
paper turns the
As noted above, four
nuclear
first
power,
and
by tracing
their
a special category,
systems character, will be examined.
Subsidies
and Collaboration
mechanism concerning technology generation
R&D
mission agencies' substantial
collaboration
this
be studied
and exploitation.
systems technology, with
R&D
spin-off,
computers,
well as jet engines)— will
(as
generation, diffusion,
5.1.
evaluate
spin-off mechanisms.
the crucial
to
to
critical
technological
contracts,
areas
subsidies and
of potentially
commercial relevance, without which the civilian industry may
8
because of the perceived unaffordably high risks or
under-invest
The
costs.
successful commercial jet aircraft as well as the big progress in
first
jet
of electronic computers and nuclear power, and the
birth
engines have directly benefited from this mechanism.
contrast,
though
research,
the
DOD
and
NASA
In
supported relevant semiconductor
most radical technological progress,
i.e.,
transistors
in
Laboratories and integrated circuits (ICs) in Texas Instruments
Bell
and Fairchild, did not take place under their direct sponsorship of
R&D.
computers,
In
government support of architecture and
component technology development
R&D
Before the military contracted
University
Institute
1930s,
of Pennsylvania
to the
loose
in
early
the
years
Moore School
cooperation
pivotal. ^^
is
of the
with Massachusetts
of Technology (MIT) for ballistics research in the mid-
had been a variety of commercial computing machines
there
for business
R&D
huge
in
electronic
and public service.
But the war triggered the military's
support, and led to the birth of the world's
computer
ENIAC
(Electronic Numerical
Integrator
Calculator) for calculating trajectories of shells and
Moore School
in
1945.
ENIAC was
fully
first
and
bombs from
capable of computing
at
the
speeds
over one thousand times faster than the earlier machines, such as
Labs'
Bell
the
armed
Relay Computers--using telephone relay devices--built for
and IBM's Mark I--an electromechanical
forces,
So
calculator—donated to Harvard University.
great
technological
impetus
to
the
ENIAC
provided a
computer industry and created
a
cadre of computer engineers and scientists, including John von
Neumann.
Then
DOD
financed the development of stored-program
computers, one type of which--EDVAC, a joint product by von
Neumann and Eckert-Mauchly--became the well-known UNIVAC
1947.
Up to 1950, the R&D of electronic computers was almost
entirely
underwritten by
DOD
and, to a lesser degree, by
agencies like the Atomic Energy Commission
(AEC) and
in
some other
the National
Bureau of Standards, because no comparable commercial applications
needing large computing capability for purposes like ballistics
calculation
the
and government census were recognized then.
mid-1950s, when enormous progress
in
logic
designs,
Only
in
memory
and programming techniques had been made, did
storage
systems,
private
investment begin
many
soar rapidly,
to
of which were less costly, smaller in scale, less sophisticated in
functions--begin
government
prosper.
to
R&D
60%
represented
^"^
During the decade of the 1950s,
80%
about
R&D
of IBM's total
at
significant
70%
computers)
DOD
Around 1960,
expenditure.
Sperry and Control Data, and
in
STRETCH
contracts (including the large
funded major computer firms
still
and commercial versions--
for example,
levels,
in
Burroughs. ^^
In
following decades, despite the fast growing commercial market,
the
government agencies,
DOD, NASA and AEC
in particular
(which was
succeeded by the Energy Research and Development Agency and
DOE), continued
then
key
such as advanced computer architecture and
fields,
DOD's
intelligence.
example.
targets
major supporters of computer
to be the
This program, with
total
in
artificial
is
good
a
budget of about $600 million,
advanced microelectronics,
architecture,
parallel
Computing Program
recent Strategic
R&D
etc.,
and
is
expected to also contribute to civilian sphere. ^^
with developing
Under AEC's
the
AEC
nuclear power,
In
national
was established
a
1946 and charged
and civilian nuclear technologies.
both military
direction,
in
variety of reactor types were developed in
For submarine propulsion, the Navy
laboratories.
in
1946 adopted the pressurized-water reactor (PWR) type, by virtue of
its
simplicity
relative
Laboratory.
AEC
technology from
to
the
and compact design, from the Clinton
provided
the
funds and helped transfer nuclear
all
military
programs and the national laboratories
private firms involved in
Under
program.
this
this
arrangement, Westinghouse set up a laboratory, closely controlled by
the Navy's task force leader
1955
the
first
nuclear-powered
successful operation,
other
hand,
60
began
with a Westinghouse-developed
PWR.
AEC
plant.
1982.
In
the
In
its
On
the
Rickover had also
with the construction of a pilot nuclear power
In
1957 the
power and continued operating
in
PWR.
submarine Nautilus
Westinghouse again was contracted the task
MWe PWR
down
Rickover, to develop
before finishing this military program,
been entrusted by
plant.
Hyman
in
pilot plant
in
achieved
various roles
until
1953
its
to
build a
design
finally
shut
meantime, GE, while operating government-
10
owned plutonium-producing
laboratory under
build
AEC's
also
reactors,
auspices, and
full
worked with Rickover
PWR.
out to be uncompetitive with Westinghouse's
(BWR)
picked up the boiling-water reactor
Laboratory, and went on
the genesis of the
at
two reactor types,
PWR
develop
to
and
BWR,
BWR.
GE became
PWR
and
BWR
Unlike
the
This
is
that finally
And
dominated the Western world's nuclear power industry.
Westinghouse and
GE
Later on,
concept from the Argonne
own expense
its
to
But GE's reactor turned
sodium-cooled submarine reactor.
a
up a nuclear research
set
main suppliers and licensors of
respectively. 20
semiconductors,
computers and nuclear power, worldly
revolutionary or radical innovations are difficult to find in the U.S.
early aircraft industry.
In
fact,
War
before World
II,
lagged
the U.S.
behind Germany, the U.K. and some other European countries
on
research
the
high-speed
in
the
aerodynamics and turbojet engines, though
U.S. --based on a "pragmatic" policy emphasizing development
than
rather
unmatched
research--accumulated
scientific
empirical
design data for normal subsonic aircraft and for piston enginepropeller
propulsion
commercial
aircraft
However, during
systems,
and produced the world's best
without apparent technological
the
whole post-war era
making constant technological progress
in
this
a
country has been
wide
front,
dominating the world commercial aircraft market.
many. 22
Technologically, one
is
the legacy of
edge.^i
leading
and
Reasons are
World War
II,
which the U.S. established an enormous infrastructure of
during
aircraft
technology, tooling, and production capabilities, as well as skills in
design,
development, production, and project management.
After the
war, the role played by the military (and aerospace) programs
pivotal.
For example,
industry,
for the
past
in
is
also
the aircraft (including engines) and missiles
two decades the Federal government
R&D
funds have been most of the time three or more times private firms'
funds. 23
But
it
should also be noted that
leveraging of technologies
the
"indirect"
is
not easy to estimate the
multiple products
and markets, and
application of military funds to commercial
Aircraft consists
plant,
across
it
of numerous
airframe, avionics, etc.
R&D.
subsystems and parts, such as power
The
.discussion below only focuses on
11
some aspects perceived
be of utmost importance in the spin-off
to
history.
Among
various technologies, aerodynamics
the
is
critical
challenge to aircraft design, and a major task for prime
manufacturers
many
engine,
system integrators).
(i.e.,
civilian
were similar
they
and bombers
transports
So spin-off could be quite
and streamlines.
emerging
were military derivatives, because
aircraft
military
to
the earlier era of piston
In
problems
aerodynamic
many new
supersonic speeds).
In
problems
aerothermodynamic
(or
After the war, the
direct.
engine technology brought about
jet
geometry
in
under
Boeing 707 and Douglas DC-8
the U.S.,
30° (in
extensively the technologies and, most notably, the critical
the
DC-8) and 35°
wing design generated by the
the 707) swept
(in
post-war jet bomber program.
They both entered
1958 and successfully launched the commercial
This
in
is
commercial
contrast with
striking
jetliner
the
and
much higher
this
respect, the case of Boeing,
operating
two-thirds of the world's
than
costs
aircraft. ^5
piston-engined
embarked on
the
707 and,
jet
the past
for
aircraft
commercial
largest
famous DC-3
as
aircraft
a
company
unlike
its
commercial
aircraft
Moreover,
British
prototype.
manufacturers, had
the designer for the
also responsible
German
the
in
counterpart,
jetliner
for
research
intercontinental
1950s with
the
transport market at
previously failed four times in
transports.
in
"dominant design"— still hesitated
company had no commercial
the
to
its
late
it
efforts
to
to
its
early
start,
this
Besides,
all.
had
it
supply commercial
1940s, the U.S. Federal government,
of a
refused to finance the construction
So Boeing,
use
its
own
like
other commercial
funds.
However, Boeing
B-17 and the B-29 during the war.
first jet
to
same time, when Douglas--the
the
at
In
which has accounted for one half
commercial
large
first
than the 707 and the DC-8)
decades, ^6 deserves special attention, because, when
three
speed. ^4
Comet— the
abortive British
much slower
it
with
era
aircraft
jet
in
1952 but with a more traditional
introduced in
20° wing sweep (making
was
market
the
operating costs and two-fifths increase in
one-third drop in
utilized
bomber B-47, using
the
It
was
acquired
on swept wing aerodynamics, and the very large
bomber B-52, introduced
12
in
1951.
Based on
this
9
experience, Boeing incorporated both the swept wing design in the B-
47 and the B-52 and the engine J-57 used for the B-52 into
prototype the 367-80, from which
KC-135 were
tanker
military
paved the way for Boeing
company
aircraft
benefited
from
greatly
to
become by
And
the world.
in
As
derived.
its
it
is
707 and
jet
turned out, the 707 was
it
which effectively
1000 units were sold)27
success (nearly
a big
commercial
its
its
the
far
commercial
largest
evident that Boeing
deep involvement
programs
military
in
which had validated many high-risk, expensive technologies
swept wings) for
its
(e.g.,
After the 707 (and the
commercial endeavors. ^8
DC-8), the aircraft design advances were basically incremental.
four-engine configuration
was followed by variations of
and twin-engine designs.
Finally, in the
experience in the Korean
War
DOD,
1960s,
and Berlin
tri-engine
spurred by the
subsidized firms to
Airlift,
develop a very heavy military transport beyond the existing
Lockheed won
the art.
cost overruns
afterwards.
This experience also led Lockheed to introduce
commercial L-1011 (but for big
loss
Lockheed
the
in
its
canceled
finally
program and withdrew from commercial business
this
1980s).
However, Boeing again made another big commercial success on
747, an adaptation of
In
turbine
aircraft
military design failing in
its
engines,
several
countries
during and after World
possibilities
maturing of the piston/propeller engine.
innovation
in
1951
that
&
Pratt
this
competition. 2
explored the various
War
because of the
II,
the U.S.
the first big
This design had efficiency about twice
former single-spool engine by permitting higher pressure
and was much more controllable and
reliable.
It
about one third more efficient than the piston engine.
after
powering the B-52 and the
speed of sound
707
(as
in
level
well as the
commercial
exceptions
(e.g.,
jet
flight,
jet
first
5
the
DC-8, thus
literally
13
in
the
supporting
Currently, with few
RB-211 which has
engines are twin-spool.
Consequently,
was also used
transports in the U.S.
the Rolls-Royce
was also
U.S. fighters to exceed the
the J-57 engine
KC-135) and
the age of
commercial
its
Whitney's J-57 two-spool engine introduced
B-52 bomber.
for the
of the
ratios,
was
In
of
be solved
to
left
state
C-5A, with big
the contract and produced the
and many technical problems
Its
three spools),
So, the J-57 was truly a
ail
new
The next important innovation
"dominant design."
history
by-pass ratio turbofan engine coupling a fan
the high
is
the jet engine
in
through a turbine to improve the efficiency.
In
the U.S. the major
impetus similarly came from the Air Force which asked for engines
with two or three times the thrust of existing power plants for
heavy transports
55%
R&D
of the
costs,
and
won
the contract.
Its
&
Nonetheless, Pratt
GE
by either
program,
this
DOD
covered
and the Federal Aviation
GE
Finally,
&
defeated Pratt
Whitney
engine TF-39 was used in the C-5A.
Whitney's revised product JT-9D was
incorporated into the 747.
and L-1011 were
NASA
and
13%. 30
Administration (FA A)
For
mid-1960s.
the
in
powered by a family of
all
&
or Pratt
DC-10
turbofan engines made
Later on, 727, 737, 757, 767, DC-9,
Because the power plants
Whitney. 3'
developed for military purposes could be used quite directly
commercial
aircraft,
its
the
in
could thus be asserted that the development
it
of commercial jet engines in the U.S. in reality were heavily cross-
by
subsidized
programs.
military
Procurement
5.2.
The second important mechanism
exploitation
the
is
is
crucial
to
well as jet engines).
important,
to
technology
mission agencies' procurement of
expensive products, which creates the
mechanism
related
new and
markets.
initial
This
semiconductors, computers, and aircraft (as
In the last case,
procurement units are also
because the modification of individual models
is
usually
modest, and so the number of units can be used to calculate the
learning curve effect and the recovery of the launch costs
(i.e.,
the
nonrecurring costs of designing, developing, and fabricating tooling
new model).
for a
in
the early
years promoted by
many different
benefiting much from
led
task
the case of nuclear power, the purchase
was mainly made by many decentralized
decision
though
In
to
repeatedly.
In
So
plant
AEG.
situation
is
different
DOD's and NASA's
14
without
by doing (almost) the same
from the other cases.
semiconductors, though the most radical
progress was not under
utilities,
This decision pattern
designs and constructions
learning economies
the
local
direct
technological
support, their
a
procurement of high performance products
assured
miniaturization
R&D resources. Then
and DOD and/or NASA
own
invest their
breakthroughs,
For example,
largest customers.
the
any prices encouraged many firms
virtually
at
terms of
in
some of them achieved
immediately became the early
DOD
1952,
in
to
purchased nearly
all
90,000 transistors, mostly produced by Western Electric—
AT&T
branch of the
group.
DOD
introduced to the market,
By
$4 million.
NASA
and
when
1966, the last year
more than
slightly
1962 when ICs were for the
In
half of the
consumed
they
first
time
the total output
accounted for
still
market $165 million, the average
total
IC unit price had been reduced by an order of magnitude—from
1962's $50 to $5.32
accelerated
Therefore,
computers, when the
In
GE
delivered to
in
was
UNIVAC
commercial
first
And
the defense
not until
1962 with
total
and space market for the
by the commercial market. ^3
surpassed
significantly
DOE), usually were
(or
performance computers
In
aircraft,
constantly
U.S.
the
first
time
DOD, NASA,
to
and
the first purchasers of the highest-
defined the state of the
that
market $2,300
Moreover, with respect
computer models, government agencies, especially
AEC
was
1955, the annual military market had already
reached $200 million.
million
NASA
and
progress of learning economies.
early
the
DOD
government
for
art.3 4
the past three decades
purchased more than two-thirds
to
one half of the
total
output (for domestic and foreign markets) of the two product
categories--complete
aircraft
and parts
engines and parts— except around
1981
government market was
again be noted that in reality
of smoothing
scale
1980
(i.e.,
in
engines)
the
than 40%). 35
less
it
(without
is
and
period of 1979-
However,
it
should
very difficult to estimate the effect
and rationalizing production and sharing leaning and
economies
between
government and
non-government
Here, take the early history of jet aircraft and
procurement projects.
engines as a "micro" example to illustrate the government
procurement
effect.
abreast coach
The 707 (with widened cabin
seating)
units
permit six-
and military tanker KC-135 were both the
close derivatives of the prototype 367-80.
800
to
DOD
purchased more than
of the KC-135, of which 450 were committed before any
15
orders were booked.
this
the actual
case,
However, because
not available.
learning curve data are
367-80 was then the
the
curve would
steeply.
from the
start
and move down the most
unit
first
78%
view of the average slope
In
World War
II
combat
of man-hours per unit for
aircraft in the U.S. ,36 if
80%
slope
man-hours per unit would be tremendously reduced
the
10%
than
450
for
used,
first jet
model, not a modified one of the earlier models, the learning
aircraft
all
In
units
and 800 units similarly.
is
used,
about
to
Even when 90% slope
is
corresponding figure for 450 units would be slightly less
the
40%.
So the learning
effect
And
must be very significant.
it
goes without saying that the launch costs could also be easily
recovered from
procurement
military
large
this
(e.g.,
one-eight
hundredth of the launch costs assigned to each military tanker).
It
is
important to also note that the KC-10, the model for the currently
largest
purchase of military tankers,
commercial DC- 10.
is
of the
a direct derivative
In this case, cost reduction effect is not clear for
lack of sales records. 37
in jet engines, the Pratt
&
Whitney's J-57
engines equipped about 750 B-52 bombers (each B-52 using 8
engines);38 and the GE's turbofan engines about 80
by mid-1973 (each C-5A using 4 engines). ^9
C-5A
transports
Hence, the cost
reduction effect could also be expected to be significant for both
As
cases.
a reference, according to an estimate
1980s, which
may
three decades
ago,
sold
for
third
competition,
"industrial
all
break even.'^o
and
Diffusion
mechanism
critical
which expands the
spin-off
industrial
To varying
metabolism."
transistors,
DOD
after
Bell
is
these mission
base and enhances
degrees,
strategy
this
Labs' demonstrated
initial
soon funded the military application research
computers, communications and
the
to
Competition
Industry
the
was used
the four "big" cases.
In
1948,
to
promotion of technology diffusion and industry
agencies'
in
the late
about 600 aircraft and 2000 engine sales must be
new models
The
in
not be exactly applied to the situations two to
Technology
5.3.
made
new knowledge
to
industry
missiles;
supported
the
success in
in
digital
diffusion
and research community through
16
of
^
many
and
Western
standardization
orchestrated
of
RCA
technology was
operating
AT&T's consent
settlement
mid-lQSOs.^^i
the
in
miniaturization
ICs,
In
and extremely high
on
a
the diffusion of
to
license
to
part
as
in
finally
characteristics
from open market competition
refrain
facilities
and Sylvania; and
Another factor contributing
national basis.
to
GE, Raytheon,
Electric,
transistor
underwrote manufacturing
Semiconductor;
Pacific
RCA
financed engineering development in Bell,
conferences;
and
patents
its
of an antitrust
demanded by extensive
reliability,
NASA
the
instituted
Microelectronics Reliability Program to set criteria for acceptance of
products and to guide inspection of production
NASA
facilities.
also
provided technical assistance to many firms, including major ones
like
Motorola, Fairchild and Harris, to help them comply with
stringent
specifications.'^^
DOD
Moreover,
and
buy products from small and untried firms
competition
and
This
industry.
in
"intrapreneurship,"
and
were willing
order to boost
in
rejuvenate
an
industry
which
As
might otherwise be dominated by "slower" incumbent firms.
result,
firms
rest
producing electron tubes before the birth of transistors),
(those
had shrunk
to
group consisted of new firms established
semiconductors
(e.g.,
the
semiconductor market
General Instrument).
established
From
a
firms
And
third
by the fact
experimentation
contamination,
The
that
with
produce
initially
crystal
(e.g..
small before
Motorola and Hughes).'^
"industrial
on
preparation,
very
metabolism" was also
in
the early
deliberate
control
of
impurities
and exploitation of precision equipment
Therefore, established firms
The
Texas Instruments and
learning economies
depended
The
entrants.
group was made up of large
from other industries
semiconductor production
stages.
the
(e.g.,
technical point of view, this
facilitated
to
new
Transitron and National Semiconductor).
second group was that of existing firms but
entering
RCA, Raytheon,
one-third of the total semiconductor market.
of the market was shared by three groups of
first
a
by the end of the 1950s, the share of the large incumbent
such as Western Electric, GE, Sylvania, Westinghouse,
etc.,
to
encouraged entrepreneurship
practice
helped
NASA
very
its
at
most
merely based on their large
production scale or longer "learning by doing" experience from less
17
sophisticated,
generation products did not always enjoy
earlier
a
significant
advantage over new entrants which had strong new
generation
technical
background and better learning
strategy.
ENIAC, DOD began to
new technology. Though
In computers, right after the success of
many conferences
sponsor
competition-stimulating
the
was
practice
1950s and 1960s to support new firms
by former Sperry Rand employees
firms'
(in
position
vis-a-vis
IBM--then by
new
world.
improve some
to
leader in
strongest
the
far
and
AEC
employed many measures, including
to
help private industry
get
in
manufacturers
this
Under
line.
worked together on
aircraft,
it
94%
of
initiated
construction
the
and
plants.'* ^
though NASA's main mission was shifted
programs, which claimed
into
program, many
this
demonstration of a variety of experimental nuclear power
In
the
Power Reactor Demonstration Program
Its
1955 was an example
utilities
the
in
Control Data, established
1957) and
in
and technology transfer,
subsidies
(e.g..
that
industry.'*'*
nuclear power,
In
in
pronounced than
Sperry Rand's and Control Data's) competitive
particular,
computer
this
less
semiconductor industry, government also had a policy
the
in
diffuse the
to
to
space
budget from 1958 to 1983, after
its
succeeded the National Advisory Committee for Aeronautics
(NACA)
made
1958 as a response
in
expensive
its
test
to the
facilities,
industry .'*6
aircraft
On
some firms)
military
in
test
DOD
commercial markets
engines,
or
materials.
suppliers
As
a
as
results
among
into the jet engine area.
aircraft
of which
also
compete
in
equipment, components or
of structures,
historic event,
two largest
multiple
prime manufacturers of aircraft or
military during
the
the aircraft piston engine field. '*'7
world's
the
to
DOD's
R&D
sponsored
many
encouraged the steam turbine firms,
march
available
technology development and procurement
has cultivated multiple competitors,
the
results
the other hand, the
sourcing policy (including sharing
still
such as large wind tunnels for
aerodynamic research, and crucial
civilian
Soviet Sputnik, this agency
GE
World War
and Westinghouse,
After the war,
Now, GE and
GE
Pratt
&
to
II
enter
continued to
Whitney
are the
engine manufacturers (the third one
18
is
Rolls-Royce), which can design, develop, manufacture,
support a
line
full
Overview
5.4.
Mechanisms
Spin-Off
of
down
experience, and drive
new
the
in
businesses,
industries,
directly
would be more intense
-spin-off
infrastructure,
shows.
1
the
to
In essence,
connection
more closely
the
and civilian concerned communities.
military
close
especially
at
some
interaction,
thrive.
these
between the
the
early
may
stage,
more
similarities
Nonetheless, because
be influenced considerably by
procurement dominates the scene.
also cause
the
interactive
technology development,
civilian
requirements or specifications
military
may
the civilian
and civilian sectors, and follow one of the two general rules-
military
of the
reinforced
or
what Exhibit
like
is
mechanisms contribute
three
Then
the unit costs.
form of improved or new products or processes,
new
The whole process
upgrade their
institutes)
product design and production
acquire
capabilities,
discussed above, the
as
R&D
concerned industrial firms (and
applications,
and
of state-of-the-art engines.
Through the three mechanisms
technical
sell,
if
military
Therefore,
the
R&D
three
investment or
mechanisms
between military and civilian
technologies.
(Exhibit
Spin-Off of Systems
5.5.
1)
Technology
Aside from the above mentioned "technical" cases, the spin-off
of systems technology
is
worth special attention, because of
its
profound impacts across various technology systems.
potential
Huge
space systems programs like Apollo and Space Shuttle are
Because
exemplary.
reliability,
these
conservative
to
their
mandate extreme accuracy and
missions
systems programs normally have
avoid
unnecessary
uncertainties
mainly focus on exploiting the existing
attempting
to
Nevertheless,
design,
generate
these
engineering
separated,
significant
programs
scientific
and
be
technically
risks,
and
of the art rather than
and technical advances.
demand very advanced systems
and management
specialized efforts.
state
to
to
integrate
very
widely
Therefore, a very wide array of
19
^
PERT
techniques and methods, such as
simulation
etc.,
management information systems,
banks,
data
analysis,
have been employed
be discussed below),
(to
many space programs.
in
These methods
mostly originated elsewhere, but they were refined, augmented, and
integrated
in
these
for
Through
huge programs.
and the movement of experienced people, many
these programs
systems technologies have been diffused
delicate
participation
industry's
the
to
civilian
industry. '^^
have very
programs
many complex
space programs,
Besides
The spin-off of
systems capabilities, though difficult to track,
substantial.
In
Techniques)
Navy's urgent need
nuclear
to
establish
warheads and
also
ballistic
be
and Review
the
submarine missile system
missiles
armed with
from submerged submarines)
fired
enhanced
the
was because of
It
Polaris
the
range
intermediate
may
(Project Evaluation
a rather spectacular case.
is
(solid-fueled,
PERT
regard,
this
systems
development timetables and require
tight
systems design and integration.
strong
military
PERT to plan
PERT has become
in
the
late
1950s that the management developed
and control the
As
an indispensable
whole program.
tool
in
without question
An
systems technology.
the experience
basis
the
(including
belong to the category of
is
of consolidating radio technology
during the war and
to
national
the establishment of
in
1919, right
and industry on a
hence appreciated the strategic
security and
Navy's enthusiastic
economy.
In
fact,
advocacy and arrangements
buying out the British Marconi interests and resources
enable one company
with
broadcasting
GE
to
from
AT&T, GE
have patents enough
to
in
and Westinghouse
make
a
system),
RCA) and Westinghouse
the International Telegraph Company to get into radio
business after the formation of RCA) might have
big companies like
(allied
well
early dramatic case
the U.S. and pooling patent rights
to
as
promoted and designed by the Navy which had
I,
importance of radio
without
may
Radio Corporation of America (RCA)
the "all-American"
World War
engineering."*
C3I (Command, Control, Communications and
military
Intelligence)
national
turned out,
complex project management and systems
The
after
it
continued to adhere
to
(the
major investor of
their
traditional
20
manufacturing business.
So,
the
U.S. radio communications industry
for
its
far-sighted
The Air
and
laid
the
in
1950s
another good C3I
is
foundation for time sharing, digital communications and
SACCS
The following
owing
industry
development. 52
research;53
area networks (LANs),
ETHERNET,
also used the
communications technology and protocols from
packet-switched
from
ARPANET
system.54
most popular business language
In software,
the
DOD, which
developed
for the
it
in
started
1974
to
to
develop
ADA
frozen into a standard, and
crisis"
In
1983 ADA's specification was
use was mandated in
its
software systems, including C3I.
purpose
all
efficiency,
standard
As
things for
all
people," there
to
be seen.
Nonetheless,
ADA
military
is
debate over
its
its
real
impacts
has been adopted as the
language for the civilian avionics systems, among others.
a part of this
Technology
for
more generalized
Adaptable,
initiative,
Reliable
STARS
software production
It
is
technology,
including
in
6.
Unfavorable
the civilian
sector.5
5
Prospects
of
Spin-Off
21
in
software
expected that the results of
used
(Software
Systems) program, with annual
budget of roughly $60 million, also commenced
methods.
all
Because of ADA's
complexity, and commercial viability, and
remain
still
COBOL,
exemplified by the
mission-critical
"do
After
languages and the increasingly high
operation and maintenance costs.
to
came
multi-purpose, high-order language)
(a
cope with the "software
multitude of incompatible
COBOL
management of complex
defense logistics and procurement in the late 1950s.
DOD
for
DOD's
benefited from
the local
including the most widely supported
DOD's
manpower
unprecedented huge software
its
AT&T's UNIX
Additionally,
of networking
support
to
Command
(Strategic Air
Control System) also nurtured a large pool of software
civilian
(Semi-
teamed MIT, IBM, Bell Laboratories and Burroughs,
computer graphics. ^i
the
a great debt
SAGE
Force's real-time air defense system
SAGE
the
Navy
the
and systemic vision and patronage.^ ^
Automatic Ground Environment)
example.
owed
this
1982
tools
to
develop
and
program could
also be
Despite
war
many impressive
spin-off cases
especially
the
in
post-
recently there has been a growing skepticism in the U.S.
era,
about the "conventional wisdom" seeing spin-off as a desirable, albeit
declining
new
This
strategy.
implicit,
international
trend reflects a deep concern over the
competitiveness
R&D
notably semiconductors, while defense
share of Federal
lion's
R&D
many
of
most
industries,
accounts for the
still
funding and attracts a significant portion
of the nation's best scientific and technical talent.
Institutional
6.1.
Obstacles
Some
Possible reasons for the recent skepticism are many.
are
rooted in the institutional practices, of which five types related to
summarized
spin-off are
and the special accounting and monitoring system for
information
government sponsored
(sometimes even
leads
that
projects,
within
technology
inhibit
of the communication of classified
the restriction
First,
follows. ^^
as
formal
firms'
to
boundaries),
organizational
transfer.
R&D
Second, the separation of
contracts and production
contracts in order to avoid "lock-in" effect extended from
and encourage competition
production
incorporation
of
R&D
military
isolated
manufacturability
in
into
both
the
R&D
hampers the
areas
development phase.
Third, the multiple sourcing policy, which forces military
DOD
contractors to share
firms,
sponsored
R&D
results with
makes many competent firms decline
projects
fear of losing
for
advantage,
thus reducing
their
the
proprietary
possibility
to
to
DOD
bid on
R&D
specified
military
information and
of spin-off through
these
firms.
Fourth,
the
encumbrance, funding fluctuation, and
bureaucratic
"counter-commercial
productivity,"
usually
associated
with
government contracts, also discourage many firms from taking
in
many
military
Fifth,
many
containment, which
programs.
contracting practices do not encourage cost
is
crucial
in
commercial competition.
however, could not be deduced directly from the
exhibiting
that
the
part
fixed-price
(including
22
firm
official
fixed-price
This
fact,
records
and fixed-
So some elaboration
procurement.
is
On
needed.
the industry's
development work and partly because of the opportunistic
motives to get approval, costs are often underestimated
proposal stage.
Usually, after so
momentum
been gained
has
may want
change
to
its
surface.
On
the military's
requirements after the contract
may
It
also
want
have
be
Lockheed won
the design competition
consisting of the development
But
it
To continue
to
contract to bail
These
work and
meeting the
failed in
development.^^
Lockheed
a
there
result,
cost
often
is
an exemplary
is
over Boeing and received
fixed-price incentive contract for a "total package,"
billion
aircraft.
signed,
is
accommodate
to
The C-5A heavy transport program
circumvented.
lead
many schemes
it
jeopardize their
As
and hence the fixed-price contract type
overruns,
a $1.95
to
side,
prevent
to
may
serving the future defense needs.
in
and, sometimes,
case.
and psychological
political
important firms from suffering big loss which
competence
the
at
program cancelation becomes
to
incurring additional costs.
thus
much
that
many problems begin
difficult,
are
side,
because of the technical and other uncertainties involved in
partly
the
been the major way of military
contract type has
incentive)
price
Lockheed
institutional
initial
of 115
requirements in product
work without extra support might
the
bankruptcy.
the construction
So government renegotiated the
out.^^
obstacles,
particular the
in
first,
third
the
and the fourth, even work against one of the two previously
mentioned general rules— spin-off would be more intense, the more
closely
interactive
the
military
most of the related problems, which
guided by different goals
decisions
control,
fraud
and
scandal
reality
in
(e.g.,
prevention,
the
perceived
off rationale,
increasingly
involve
national
guarantee
They
supplies, etc.), have long been existing.
explain
However,
and civilian communities.
more plausible reasons
are
needed.
difficult
cost
security,
of domestic
are not
unfavorable
many
tide
In
new
issues.
against
this
the
regard,
To
spinthe
waning influence and leverage of mission-oriented programs and the
diverging trend of military and civilian technologies seem to be two
major causes.
"glorious"
The former challenges
the grounds of
many
old
cases in the spin-off history as discussed in the preceding
23
The
section.
general
highlights the negative prospect of the second
latter
would be more
rule--spin-off
military and civilian technologies.
similar the
the second and fifth
obstacles as noted above also belong to the second
institutional
may reduce
because they
category,
In fact,
more
the
intense,
manufacturability
(the
and
cost effectiveness
the
two important key success factors
the
in
commercial industry) of the developed military technologies.
Waning Leverage
6.2.
Programs
Mission-Oriented
of
many
Despite their enormous contribution in the early years,
programs have
mission-oriented
"leverage"
potential
many
in
significantly
lost
their
investment has become predominantly commercial.
review of the general trends
of the
(CMOS) and
the
R&D
aimed
assistance
DOD
the four technological fields.
in
entirely
lacked
support from
the
the
military—in
contract, early purchase of expensive products, or
at
improving production. ^^
accounted for only
3%
and
sales
less
Besides, in the mid-
10%
than
of
all
semiconductor
The 9-year Very High Speed
of the quantity of chips. ^0
(VHSIC) Program launched by DOD in 1980
trend.
Though mainly for military purposes, this
Integrated Circuit
reflects
this
program was construed more broadly
IC industry.
Its
was rather consistent with
So
program
to
part
And
this
enthusiastically. ^^
Nevertheless,
program's
potential
this
program's
investment--though
military
R&D.
to
spin-off
nearly $1
systems--was
very
Take 1985-about
illustration.
the
U.S.
is
still
the
billion
to
efforts.
development costs for
the
a major reason
is
this
was expanded
also to strengthen
mainstream industrial
the
some degree shared
commercial markets.
took
as
also
focus on silicon semiconductor's higher speed and
density
this
brief
microprocessor technologies, developed by Mostek and
form of
1980s
a
is
following complementary metal oxide semiconductor
respectively,
Intel
Here
semiconductors, unlike transistors and early ICs, the great
In
success
R&D
where procurement or
fields,
and
influence
the
quite
initial
why many
relative
firms
importance of
questionable,
budget $200
because
million
incorporate the technology into
modest when compared with commercial
the middle year of
VHSIC program-for
The U.S. semiconductor industry— excluding "captive
24
an
IBM
such as
firms"
AT&T
and
(with their semiconductor production
mainly for internal uses and not for sale
the
in
open markets
"merchant firms")— spent $1.8 billion or 18% of the
R&D. 62
Moreover,
VHSIC program
in
like
revenue
total
in
only the large established
systems companies were virtually qualified to participate, given the
high entry barrier
DOD
likelihood for
new
has
entrants
to
also
diminished.
had shrunk
for military use
With respect
tide. 63
IBM
only 3.6
to
though the defense build-up
that
in
early
the
R&D
to
%
1980s
military
computers
of U.S. annual production,
1980s slightly reversed
investment, the highly successful
1965 and 1971
1960,
10%
than
less
R&D
of the
investment came from the
most major computer firms. ^4
at
nuclear power, a similar trend could also be observed.
In
the early
government sponsored
years,
types in the national laboratories.
engineers, and
commercial
plants,
R&D
R&D
Later on,
In
of various reactor
architect
utilities,
(e.g.,
pilot or small
in constructing
and then developing larger-scale plants as well as
many emerging
tackling
all
nuclear steam supply system (NSSS) suppliers
Westinghouse and GE) joined
surpass
the
were completely financed by the company's own funds.
respectively,
of
By 1979
1401, 360 and 370 series, introduced in
In the
the
enhance "industrial metabolism" by supporting
computers, a similar pattern exists.
In
So
present semiconductor industry.
the
in
and environmental issues.
safety
In
terms
expenditures, the civilian industry began to significantly
AEC
In
1958.65
(including the Navy's reactors) in
aircraft,
for the
past
two decades, no new military transport
models have been developed, except the modification of the C-5A
into
C-5B with new wings, strengthened
the
corrosion
and
resistance,
KC-10
current tanker
other
there
military
transports,
a direct derivative
military
R&D
the
of the commercial DC-10.
though the
total
military
aircraft
accounted for the major share of the
than
And
improvements. 66
total
Because military transports are much more similar
aircraft
increased
have been no substantial procurements for large
Besides,
constantly
is
many
structure,
bombers and
fighters
are,
the
and procurement suggests that
25
to
sales
have
aircraft
output.
commercial
above mentioned trend
at
least
the
spin-off
in
from military transports
But there
the wane.
to
aircraft engines,
commercial
no indication
is
that
been largely on
has
aircraft
similar trend has happened
because many engines can be used for both
and commercial purposes without much
military
adaptation.
Trend of Military and Civilian Technologies
Diverging
6.3.
to
Regardless of those military technologies which are apparently
of
little
or no use to the civilian sector, like various kinds of
associated
directly
toward
tendency
many important
mechanisms, there has been
human-killing
with
diverging
military
weapons
and civilian requirements
a
in
where significant spin-off has taken place
fields
This will lead to diminishing commercial returns of military
before.
Under some circumstances, commercial
technological efforts.
may even be "distorted" or "misled" by
Some examples are illustrated here.
technology development
programs.
military
In
satellites,
technological
military
infrastructure
and control systems,
could grow.
the
launch
like
margins of which the civilian industry
satellites
pursued by the military, whereas
are
communications, the reverse
power sought by
the norm.
is
the
resolution
the
commercial applications could economically
In
and communications
vehicles
But for covertness, random-orbit rather than
geosynchronous
civilian
at
and aerospace programs have created a
design,
aircraft
the
the
new
B-1
justify. ^^
bomber, which was
combat
aircraft's
priority
on
speed
to
and
Modern
achieve supersonic speed.
technological
including
requirements,
maneuverability,
have
to
technology and
succeed the B-52, incorporated advanced "stealth"
variable-geometry wings
remote sensing,
been beyond what
has
military
strategic
In
in
far
more
been
higher
drastically
different
from the civilian needs. ^^
have
mainly emphasize efficiency, environmental impact, safety
to
and comforts.
different,
In
contrast,
commercial
So, military and civilian needs have
aircraft
become very
which has greatly reduced the commercial benefits of
work on airframes in particular.
As a result, airframe
companies which design and assemble the final products nowadays
military
have
to
fund most of their commercial
26
R&D
costs. ^^
The divergence
in
speed
aircraft
Despite the
also striking.
is
operational combat jet (F-86) to break the sound
first
(though only
a dive) in
in
1947, so far
barrier
civilian airliners are
all
subsonic, except a dozen odd Concorde jets operated by the British
and French national airlines under their governments' mandate.
major reason
is
consumption,
the
many problems concerning the efficiency of fuel
economy of strengthened structures and lighter
that
booms, the effects on ozone layer and climate,
the sonic
materials,
have not been solved.
etc.
the opposition
allocating large
to
impediments— in addition
these
In fact,
sums of public money
as early
1971
as
was intended
the
"Orient Express,"
March
Even
best.
Supersonic Transports (SST) Program which
from the hypersonic (with speeds higher than
most technical challenges
if
gy
recent advocacy for a commercial spin-off, the
National Aerospace Plane Program
5)
terminate
to
counter the Anglo-French Concorde program. "^^
to
same token,
the
the
to
fund
to
commercial product development--led the U.S. Congress
in
The
very premature at
is
those involved in the
like
ramjet or scramjet engine can be tackled eventually, similar
SST Program as well as the new logistic issues entailed
entirely new fuel system based on either hydrogen or methane
case of scramjet) will inevitably come up for the commercial
questions in
by an
(in
the
version
of hypersonic
^
aircraft.^
computer software, both the
In
civilian
and military sectors use
packaged commercial off-the-shelf (COTS) software
applications.
are
In
large-scale
applications,
So there
industries
at
this
much more
level.
Furthermore,
than
their
approved and documented
they
development.
rigid
Therefore,
In the early
to
telephone
amplifier,
Bell Labs' plan,
electronic
military
radio
its
will
govern
divergence,
transistors
receiver,
products.
not a
distinct
software
software as
software
requirements
Once
commercial counterparts.
the
if
history of transistors, there
According
civilian
initial
two
are
is
COTS
whereas commercial systems use as much
possible for efficiency's sake.
small-scale
however, defense systems
overwhelmingly custom-built, and design-to-cost
priority,
are
in
circuit
subsequent
may
any,
persist.^ ^
was a "gray"
were
to
case.
be used in
oscillator,
and other
But under the military's request
27
software
AT&T's
(because of
World War
1950s.
the
new
This may
On
AT&T
reduction— the two
cost
And
applications.
this
Nuclear power
seen.
the
in
own
telephone system until the
is
more
and the actual outcomes have
delicate,
Navy's early commitment
the
may
type
homogeneous
water-moderated
sodium-cooled
the
PWR
also for the
momentum. Some other reactor
the AEC's national laboratories
graphite-moderated
strong foothold for
its
against
organizations
Indeed,
Westinghouse's
background.
is
AEC's
the
PWR,
retired
strategic
construction
more,
dioxideits
very
could not easily get a
because many customer
naval
mistake
little
in
nuclear engineers
inducing small
R&D
with
in
contrast with
to
utilities--
experience--to
and demonstration of several
most experimental reactors could not prove
is
even with
GE
of experimental reactors with high technical
What
carbon
Another important factor contributing
with low technical capability and
in
reactors,
a modification of the earlier light-water
were staffed by
training
scenario
BWR,
salt
and
reactors,
Examples include
field.
molten
reactors,
strong technological and marketing position,
technology,
to
be literally well suited to submarine
graphite-moderated reactors.
viability.
commercial
plant created a great
pilot
participate
upgradation and unit
large-scale
for
hence did not take root in the nuclear energy
this
from the big progress
progress was in significant part due to the
concurrently developed in
PWR
obvious that during
is
But using the Navy's better understood
propulsion.
cooled
it
reliability
factors
large-scale
and dominant influence might not be without
PWR
serious flaws.
types
its
drastic
critical
AT&T's
the delay of
also benefited greatly
retrospect,
In
light-water reactors
civilian
purposes throughout
military
for
support.
military's
yet to be
chiefly
partly explain
reflected
transistors,
then very limited technical
its
the other hand, however,
period of time
this
to use
field
this
1960s.^3
early
had
of transistors even in
application
in
AT&T
II),
resources in
extensive experience in military projects during
varieties
So
uncertainty and risk.
their
some
commercial
reactors,
like
the
gas-
cooled graphite-moderated reactors (GCRs) which are fuelled by
natural
PWRs
uranium and were
and
BWRs
initially
chosen by France and the U.K.,
have to use uranium consisting of the
28
fissile
isotope
U-235 enriched from
nuclear power was
0.7% up
natural level
its
explored in the West, only the U.S. had
first
enrichment capacity principally for nuclear weapons.
BWR
When
about 3%.
to
technology was nurtured
the U.S. soil,
in
So,
PWR
and
became quickly
accepted by the U.S. industry, and "overwhelmed" other countries'
Consequently, France and the U.K. finally turned to
alternatives.
PWR
Westinghouse-designed
On
type.
the
AEC
early era of rapid industrial expansion,
regulatory
environmental
construct
scale
power
without really
As
MWe
pilot
and
safety
to
did not emphasized
the
plants
to
when
a result,
MWe
1000
recently
number of
AEC
different
response,
In
pioneers of the nuclear power industry, and a
to
new path and
seek a
concepts.^"*
requirements as the above cases show,
modem
military
and production of sophisticated weapon systems contribute
or
try
addition to the real or potential divergence in military and
In
civilian
many
and individuals— including the
institutions
chairman--have started
reactor
plant,
problems arose, and the treatment of
wastes became an intractable issue.
former
even adversely
affect,
serious
programs
incessantly
little
The main reason
pursue
product
that
is
improvements
performance
This tends to result in very costly
and very expensive designs
be produced, and
of
to
B-17 produced
more than 2,000
the successor B-1
at
R&D
make most
weapon systems demand only small volumes.
bombers, for example,
the propeller
little
high-tech
to,
most military
the expense of cost efficiency.
purchases
R&D
manufacturing productivity--now the U.S.
weakness.
industry's
In
of
scaling-up went on from the initial
the
plant through the current
PWR,
to
from previous plant
radioactive
inventor of
and
safety
take advantage of the economies
experience
learning
reliability
a
potential
its
and manufacturers also accelerated the pace
issues,
larger
operations.
60
and pay enough attention
role
other hand, during the
units,
for
let
13,000 units of
alone the nearly
World War
II,
the jet
and the B-52 about 750
was planned
for
only
100
units. ^^
B-47
units,
totaled a
whereas
jn fighters,
depending on different missions, the volumes of specific models
ordered by the military varied.
as that of tanks,
But the cost trend
ships, missiles, etc.
29
within their
is
own
fairly
clear, just
categories.
In
the
1950s, the cost of designing and testing the
F-lOO, F-102 and F-104 ranged between $55-365
fighters,
In
supersonic
first
million.
1970s, the F-16 development cost more than $730 million,
the
and the parallel F-18 cost nearly $1
Tactical Fighter
(ATF)
Now
billion.
the
Advanced
expected to cost several billion dollars.
is
In
terms of unit costs, the F-lOO was $2.5 million, the F-16 $20 million,
ATF
and the
about $100 million. "76
dollars, except the
ATFs
which
(All the above values are in
1991 dollars and,
in
is
125.7--the capital equipment price index
1982,
about $80 million
is
1982
in
adjusted by
using
Certainly, there
dollars.)
unit
costs
100 for
is
also a
result
from the decreasing production quantities which slow down
partly
the
1991
of April
The increasing
chicken-and-egg problem here.
if
1982
progression in learning and scale economies.
Another example
is
The U.S. present
advanced materials.
leadership in advanced composite technology of
all
types
is
a result
of military and, to a lesser degree, space programs aimed at higher
temperatures,
operating
toughness,
greater
lower radar observability.
But so
the
far
even
and
weight,
lighter
advanced materials
developed for these purposes are expensive, and the fabrication
processes are poorly suited for mass production.
commercial "market pull"
in
the
create
efforts
They focus on
commercial.
plastics,
most
in
and
maintain
and a "fledgling"
advanced materials are explicitly
Many
large
"market pull" through the applications
products,
R&D
fine ceramics, carbon
and amorphous alloys.
little
Nevertheless, in Japan which has
small indigenous military and space
industry,
aircraft
is
U.S. on advanced materials
technology, except civilian aircraft.
relatively
Hence, there
"technology
push"
fibers,
integrated
in
their
through
engineering
companies
existing
long-term
One example is
Toyota's diesel engine piston which consists of aluminum locally
reinforced with ceramic fibers.
In Europe, many companies also
investment
cooperate
in
developing
in
automobile
gaining production experience.
structures. '^'^
advanced polymer matrix composites for
In
contrast,
mainly emphasize higher performance
What
is
the U.S. counterparts
at
the
still
expense of lower cost.^^
more, even for manufacturing technology, not for
product performance, military programs
30
may
still
guide the efforts
in
a direction
the detriment of the civilian
to
performance
manufacturing
reason--favoring
industry for a similar
the
at
Numerical control (NC) has often been so
manufacturing cost.
Originally for making aircraft and
NC
Force guaranteed
began
lucrative
1940s.
the late
in
most
returns,
cited.
which required complex
missiles
machining and uniformity, under the Air Force's
development of
expense of
auspices, the
full
But because the Air
efforts
the meantime,
were geared
many
meet
to
NC
the Air Force
specifications.
users found
too costly and too complex to utilize the hardware and
it
In
potential
software resulting from the Air Force's program--which also tried to
NC
diffuse
technology
technology enough
the
and smaller firms.
industry)
aircraft
In
the Japanese
contrast,
NC
companies imported the U.S. technology, standardized
and made them easier
tools,
more
use,
to
the
tool
7.
Synthesis
of
and
machine
less
is,
the U.S.
NC
technology via the Japanese.^ ^
Experience
U.S.
The above unfavorable prospects of spin-off suggest
three
crucial
mechanisms
out previously
pointed
as
are
ostensibly
"negative forces."
apparent that
is
It
many
premises and conditions should also be taken into account.
several
section,
the
that
Exhibit 2 shows a more realistic picture
not straight "panacea."
including several
costly for
and many U.S. manufacturers outside
industry declined;
aerospace industry adopted
reliable,
The outcome
machining simpler shapes of products.
machine
the
and interest most industries (other than
suit
to
down"
the industry but did not "scale
to
perspectives
In
this
be applied to synthesize the
will
seemingly very diverse aspects of spin-off.
(Exhibit
Various
7.1.
By
not on
a loose definition,
the
paradigms
Features
of
Technology
a radical
general trajectory of
in
evolutionary.
some
which the progress
is
Therefore, the progress
revolutionary change
plan and manage.
It
is
is
2)
very difficult,
or revolutionary
existing
technology
is
technological
predominantly incremental or
stage of radical or
at
the
if
not impossible,
to
predict,
thus not very likely for mission agencies to
3
1
bet on the
a
"right horses"
new and promising
more
effective
through
Only
endorsement.
technological paradigm emerges could
it
R&D
technology diffusion,
procurement,
investment,
As
etc.
the
production
to
may remain
influence
missions and
their
The
becomes predominantly
theater
newly emerging and highly
to
field)
the recent
was already on
of computers
So DOD's
predictable track.
As regards
decisive.
jet
direct,
a
more or
R&D
strong
With respect
needed.
endorsement was
largely
and
of scientific
and profound learning experience were
to jet
aircraft,
bomber design even
the
benefited from the acquired Germany's technology.
Hence,
in
directly
a
technical sense, jet aircraft and engines were not too radical for
And
to bet.
the
707
worth special celebrity.
that is
the military
military
sensitivity
over
and
safety
in
In
nuclear power, because of
most basic technologies and
origin of
was very deeper
of
related
its
genesis.
environmental
impacts
aircraft, jet
large
R&D.
when
the public concern
soared,
government
it
is
were qualified
less likely that
DOD
to
take
part
in
initial
Moreover,
engines, and nuclear power, only a small
established firms
So
very high
government involvement
technologies,
Later on
the
promotional role turned into a largely regulatory one.
jet
DOD
Boeing's taking great commercial risk to introduce
is
it
the
less
by-pass fanjet, they were
the
engineering development, though a wide array
disciplines
Nevertheless,
engines, in particular the two innovations—
two-shaft turbojet and
technological
VHSIC
very limited influence on the development of
its
electronization
the
volatile
this
fits
physics was then a
solid-state
semiconductors of commercial relevance).
silicon
critical
being pursued vigorously.
still
history of semiconductors in the U.S. roughly
program (with
But
high-end fields which are
the
in
from the outset (when the
pattern
be
support,
commercial, the mission agencies' overall leverage will wane.
their
after
mission agencies to accelerate the progress
for
further
R&D
through direct
in
number of
the
large-scale
would contracted or subsidized
"wrong horses."
If
technological progress
directions,
then
or
innovation
radical
the
is
conceptual
looked upon in terms of more basic
distinction
between the revolutionary
and the evolutionary or incremental innovation
32
may become
as mentioned above
For example,
blurred.
be surprising to predict that technology will proceed
in
would not
it
the direction
of being faster, more powerful, more accurate, more reliable, more
more
accessible,
and
materials
available, etc.— given
or using less
input,
and being physically "lighter, thinner,
energy,
less
same
the
shorter and
smaller"--given the same output or functions.
perspective,
many
fairly
is
general
directions
recognizable, and the
Even
possible.
R&D
progress
of technological
endorsement
in
From
this
are
the right directions
the bet on a specific technical approach, device or
if
machine eventually proves incorrect, the knowledge and
infrastructure
accumulated may
still
be relevant and
significantly to the continuing progress once the
DOD's
Therefore,
identified.
processing
miniaturization,
can contribute
horse"
"right
is
early investment in the direction of
speed,
computing power, communications
capacity and compatibility, etc. for IT was generally correct and
congruent with the
later
much
long sponsored research on
"intelligence"
may
artificial
intelligence
(AI) for
Another case
well be so envisioned.
as
DOD's
commercial investment.
larger
in
point
is
DOD's support of gallium arsenide (GaAs) semiconductor technology.
Though the commercial potential of this technology is still being
retarded by the poor yields partly for lack of many specialized
production equipment, the basic characteristics of GaAs
semiconductors as compared with those of silicon semiconductors are
much
striking:
higher
speed,
power requirement, lower
well
as
light-emitting
further progress,
recognized
wider temperature tolerance, lower
noise,
property.
and stronger radiation hardness, as
As
can be expected
it
military
applications,
production technology makes
the
that,
in
many "new"
addition
civilian
which can take advantage of GaAs's "extra" properties
higher speed)
programs
it
at
schedule over cost,
efficiency
usually
the
already
applications
(i.e.,
not just
emerge.
will
Nevertheless,
military
to
is
should be cautioned
their
R&D
that,
prioritize
stage
because many
performance or time
low manufacturing productivity or process
their
programs should improve
weakness.
this
Whether or not military
weakness
is
an open question.
But the
commercial three-way balance among performance, time and cost
33
must be decided and pursued by the
the
industry
civilian
not by
itself,
mission agencies with their programs to be judged anyway by
In this sense,
different criteria.
unconvincing to relate the
is
it
obvious decline of the U.S. machine tool industry beginning in the
1970s
terms
(in
of,
U.S. production share in the world and
e.g.,
imported products' share
in
strong support of "inappropriate"
and 1950s, especially
market)^^ to the Air Force's
the U.S.
NC
technology in the
1940s
late
view of the decades' long time span
in
in
between, during which the U.S. industry definitely had enough time
to
assimilate
experience.
new technology and gain
Similarly, how to capitalize on
the
commercial purposes also mainly
From
shoulders.
of declining
falls
upon the
a broader point of view,
interest
in
the present advanced
from military programs for
generated
technologies
materials
learning
substantial
it
is
civilian
industry's
the U.S. general trend
manufacturing as a competitive advantage
and of the short-term investment strategy fostered by the financial
market that
eventually
stronger
is
to
some foreign competitors (Japan,
give
may
This weakness
be worried about.
semiconductor equipment industry
in
and
among related parties) better opportunities to
GaAs semiconductor product innovation in the
investment
large-scale
in
a
(e.g.,
related
particular,
exploit
with
cooperation
better
pioneering
the
U.S.
Moreover, as the case of nuclear power shows,
technology, device or machine
again
if
a specific core
basic reactor type) dictates a
and
infrastructure
technologies in a very closely integrated manner
(e.g.,
complementary
nuclear
the
steam supply system, the radioactive fuel processing and wastes
treatment, etc.),
momentum
"critical
then
there
created chiefly
mass"
difficult
to
is
for
potential
a
military
resist,
danger that the
and commercial
hierarchy
is
the
into
a
reverse or change, and the whole
to
the
civilian
sector.
divergence and convergence of military
technologies,
instrumental.
may grow
purposes
development direction may not be optimum
To accommodate
initial
another perspective
At the systems
level,
of
systems
military
and
commercial requirements may look very different from each other
because of their integrative character.
common
But both may contain many
subsystem, element or functional dimensions, despite being
34
weighted differently.
It
lower functional level that mission-
this
at
is
oriented
programs could be more definitely conducive
sector.
In
the
civilian
consideration of economic viability or systems equilibria,
commercial applications may not
The
programs.
military
the
to
the-art
of these
future
commercial
fully
however, may
latter,
define the
state-of-
and provide clues for the
technologies
functional
still
from
results
the
utilize
efforts.
This perspective could be applied quite well to semiconductors,
computer architecture, graphics, networking, numerical control,
remote sensing, and the elements of
propulsion,
whole
structures,
which
aircraft
materials,
is,
such as aerodynamics,
aircraft
and avionics, but
less
to
the
example, one level higher than engine
for
systems hierarchy, and hence should be defined more
commercial
well
military
in
in
or
missions.
The two perspectives of "general
direction of technological
and "functional technology" as suggested above are slightly
progress"
from the perspective of "generic technology."
different
Briefly
speaking, generic technology means a concept, component or process,
or
investigation
further
the
phenomena,
of scientific
that
has the
potential to be applied to a broad range of products or processes.
it
is
may
be of both commercial and military relevance.
an
basically
research
and prior
and
"pre-competitive"
where technical uncertainties are
the
identified
to
permit assessment of commercial
stage
two perspectives proposed
the
"precompetitive"
limitation.
development,
production
modification,
and
is
fertilizing.
is
even
evident,
As
they
here,
are
constructed
in
So they do not have the
They could cover advanced
and construction, field
planned
however,
use,
further
phase-out.
these
that
three
perspectives
are
cross-
"Generic technology" could be a criterion for initiating
mission-oriented
(which
potential
development of application-specific prototypes.
to
it
covering
technology,
to
terms of the contribution to the missions.
It
Nonetheless,
up
activities
sufficiently
regards
"upstream"
So
technology
programs
beyond the scope of
this
with
paper).
more spin-off
potential
"General direction" and
"functional technology," on the other hand, could be a guidance for
35
identifying
to
opportunities
spin-off
the
mission-oriented
in
programs
capitalize on.
Features
Special
7.2.
When compared
technology
oriented
special
attention.
of
with
Programs
Mission-Oriented
commercial counterparts, mission-
their
some unique
programs have
deserving
features
because national security cannot be judged
First,
commercial terms, relatively long-term commitment
some
to
in
critical
technologies (not necessarily specific products) could be more easily
Second, because these programs are mission-focused and
assured.
under big pressure from the military commanding system,
usually
concentrating efforts on some mission-critical fields would be a
normal strategy.
when
Third,
necessary, resources could be
As
mobilized on a national basis.
functional technologies,
a result,
or specific
efficient,
in
not necessarily more
albeit
pioneering some critical technological (not scientific)
or attaining designated
frontiers
the general directions,
of investment are sound,
foci
programs may be more effective,
military
if
This could
technological objectives.
explain the U.S.
mission agencies' consistently paramount role in
some
C3I and aerospace technologies, and particularly
fields
like
on many state-of-the-art and even radical or
influence
strong
seemingly "exotic" technological
where
fields,
the
civilian
industry
alone could not achieve.
From
in
systems perspective, because of
a
criticality
national and global missions, the U.S. C3I could be judged to have
no comparison
terms of
face
the
military
its
its
the civilian sector or even in the
in
scale,
Therefore,
it
mission-oriented
A
that
there
from C31-related
similar rationale
may
civilian
programs.
management
though usually difficult
to
R&D
programs
the
in
scale
many
and
The spin-off of systems
may be
36
to
as well be applied to
capabilities
track,
network).
has been a flow of
systems programs which are larger
more complex than
and
telecommunications
like
seems not surprising
sector.
engineering
and many other functions (here excluding
infrastructure
important contribution
civilian
in
complexity, speed, "intelligence," survivability (in
of counter-measures),
generalized
whole world
from
rather
these
programs,
substantial.
also worth noting that at the initial diffusion stage of
is
It
may
technology, reliance on pure private efforts
radical
not be so
On
desirable from the standpoint of the whole social benefits.
of the
part
not be
private
sufficient
inventors,
unfolded by the
exploit the opportunities
fully
to
would very probably
resources
their
new technology, and
their
order
economic rewards exclusively
appropriate
to
may slow down
may have been more
This
is
the
the
anti-trust
R&D
and militarily
of them
and accelerated
settlement
because promoting
government legitimate
into
falls
government
in
innovations,
critical
sometimes be restricted
national
for
by
costs.
though, on the other hand, the diffusion scope
responsibilities,
may
industry-wide
earlier
which helped drive down the unit
applications
utilization
agencies
compensated by the
one of the potential advantages inherent
sponsored
themselves
to
new technology. From this point of
transistors in AT&T's own telephone system
than
mandated by
military
the
attempt to protect proprietary rights in
the diffusion of
view, the delay of using
utilization,
the
security's
and responsible
sake,
be even "slower" than private firms.
may
In
this
regard, a
distinction
between mission agencies and "diffusion agencies" also
surfaces.
Mission agencies are directly pressured by their missions
to
develop and exploit new technology
"Functional
conducive
technologies"
to
their
Whether and how
to
the civilian
topic
in
"potential"
agencies
clients,
whom
the
to
may
therefore
be easy to identify.
only
whom
"indirectly"
the
to
what
is
a central
diffusion-oriented programs, the
in
pressured
by their
new technology "should"
new technology
what technologies up
sake.
can eventually be beneficial widely
activities
contrast,
are
own
for their
another question and, certainly,
is
By
spin-off.
responsible
and by
sector
least
and "general technological directions"
missions
their
at
supposed
is
R&D
stages are
developed by these agencies and diffused
to
to
be diffused,
Then
be exploited.
"appropriate" to be
what users
is
a big
question which should be dealt with by the approach of "generic
technology."
In
this
sense,
more uncertainties
in
the direction
investment are faced by the diffusion agencies and diffusionoriented
technology
programs.
37
of
for mission's
Finally,
some firms
to bail
may sometimes
mission agencies
sake,
This practice especially in the high-end
out.
may
technological fields with high risk and uncertainty
the
without which
progress,
critical
try
development may be interrupted,
thus
sustain
long-term technology
The
temporarily.
least
at
development of supercomputers presents a classic story covering
nearly
facets a mission
all
AEC
nuclear research,
that
dominated
agency can do
For
"partner."
to its civilian
underwrote Control Data's 6600--the machine
supercomputing
throughout
1960s— by advance
the
payments, software support, and the Livermore Lab's purchase of
two of the
first
pioneered in
four computers built. ^^
this
In
1970s, Cray Research
the
Cray also worked closely with DOE's Los
field.
Alamos Laboratory which needed massive computing power to
simulate the operation of nuclear weapons and nuclear power plants.
R&D
The laboratory paid incurred
study
applications
software,
and suggested design changes
When Cray was
Alamos purchased
laboratory
opportunities
on the verge of bankruptcy
Cray's
had bought
machine
first
of
in
(Exhibit
Spin-Off and
National
Generalization
In
it
of
suit
its
1976, Los
in
out.
better
to
By 1989,
the
to
the
potential
from mission-oriented programs
spin-off
by the strategic thinking as discussed
8.1.
experts to
machines. ^^
Cray
14
to bail
summarizes the approaches
Exhibit 3
8.
many
machines, developed both an operating system and
Cray's
needs.
assigned
costs,
this
synthetic
unfolded
section.
3)
Contexts
Experience
U.S.
applying the strategic implications derived from the U.S.
experience
examined.
to
In
other countries,
U.S. uniqueness should
the
R&D
terms of military
investment and high-
performance product procurement, the U.S.
country
in
defense
R&D
the
Western world.
investment
records for an illustration.
$46.3 billion, equal
to
is
In
more
is
by far the largest
the
respect,
this
easily
available.
In this year the U.S.
one third of
its
38
be
first
national
statistics
of
Just take the
defense
R&D
R&D
1989
totaled
spending $134.2
and five times
billion,
spending $9.3
all
billion. 83
OECD
the other
countries' defense
Another important
fact
most productive economy by virtually
technological
War
the
II
increasingly important role in
86%
1982
of
was done
in
was
II
the
world's
measures and the
Besides, after World
broad front. ^'^
leader across a very
private industry in
all
that the U.S.
is
War
during the quarter century following World
R&D
country began to play an
this
For example,
military programs.
in
DOD's weapon R&D, production and maintenance work
the private industry. 85
As a result of the multiplying
effect of these factors, the U.S. effectively leads all the other
new
countries by a significant edge in both the generation of
technologies from the
programs, and the exploitation of
military
technologies in the commercial sector— or
these
where
at
least
in
the
fields
new
maintains a leading industrial position and implements
it
technologies not less fast than foreign competitors (again the
multiplying effect of technology exploitation
As
a corollary,
spin-off in
may
it
out that even similarly advanced
turn
may be rendered
(advanced) countries
other
here).
uncompetitive eventually, because the alternative spin-off
tends
to
in
have better learning economies, though not without
shortcomings
potential
abandonment of
the
France and the U.K.
Therefore,
it
is
illustrates
quite
nuclear reactor
really
that
radical
innovations
U.S. counterparts in
their
terms of resources invested and technological levels targeted.
that
unradical innovations
the
civilian
industry
of commercial relevance,
has already
U.S. or in
some other advanced
where
military
the
difficult
efforts
to justify
commercial
countries,
the cost effectiveness
criteria),
if
still
the
are
option
many
to
if
is
As
to
very likely
in
the
not in the countries
Then
it
would be very
of the conscious spin-off
things to be done to meet the
transfer
the
commercial firms, even across national borders,
39
it
played a dominant role
programs are located.
(noting that there
in
technology programs,
military
countries'
which almost certainly would lag behind
the
types
point.
this
unlikely
would originate from other
its
The ultimate
under certain circumstances.
indigenously developed
U.S.
the
technology among
exists.
Therefore,
it
does not seem pragmatic for most other countries to expect
Challenges
Special
8.2.
from spin-off.
contribution
significant
Among
Advanced
Small
to
Countries
advanced countries, the above unfavorable prospect
the
of spin-off would naturally be more serious for small countries,
others being equal.
Sweden's
regard,
this
war was
last
Sweden
an exemplary case.
Since then
1809.
in
is
it
has never been
Unlike Switzerland's
with any foreign country.
allied
militarily
In
all
permanent neutrality which has been recognized by international
law and universally accepted since the Vienna Congress
Sweden's "armed neutrality" was based on
to
be supported in word and in deed.
flexibly purchase
be more careful.
neutrality,
While Switzerland could rather
GDP
0.04%
(e.g.,
in
This policy could support the credibility of
reduce the danger of an interruption
facilitate
the
specially
suited
Swedish
terrain
weapon
vital
and operational doctrine for
Nordic and Arctic warfare, and make weapons
countermeasures.8^
in
development and production of equipment
supplies,
to
R&D
Sweden had
1981^^),
in
"Buy Swedish" was thus strongly favored
procurement.
military
policy and had
weapons, thus with very low defense
foreign
expenditure as a fraction of
to
national
its
1815,
in
In the late
1980s,
15%
less
vulnerable to
of the military
equipment was directly imported by the armed forces, and another
15% by
the defense
Such high
components.
small country,
consequence,
differs
in
industry in
has
form of subsystems and
the
self-sufficiency,
MBT
Swedish
produced
domestically
some important
plate
in
main
and aimed
aspects
technical
elevation
battle tank,
in
traverse
other countries in the
1980s,
very unusual for a
the
105
military
As
from the equipment of
For example,
mm
gun
is
Bofors Strv
in its
fixed in the glacis
by pivoting the vehicle on
aircraft,
a
equipment
its
by adjusting the hydropneumatic suspension;
Viggen and Gripen combat
early
is
been maintained for several decades. ^^
any of the political or military blocs.
103
which
canard configuration
is
world adopted these unique designs.
tracks
in
its
used.
and
Saab
No
Since the
however, joint development and joint production with
foreign firms have been growing in
40
high-tech
weapon systems.
The
main purpose
base
to
is
share risk and costs, and to enlarge production
markets. ^^
and
Sweden's defense strategy centered on providing a small part
of the
necessarily
the
distributing
Therefore,
forces.
quantity. ^^
quality
advanced equipment among
less
has
all
been traditionally prioritized over
This strategy has led the country to shoulder very high
R&D
military
in
with the most advanced materiel rather than
forces
28%
and
1960/61
49%
spending, for example,
Sweden's military
in
R&D
1969/70.91
was 0.31%
of government
R&D
in terms of the share in
budget
GDP,
1986--the fourth largest in
in
OECD
group, only behind the U.S. (0.88%), the U.K. (0.68%) and France
(0.46%). 92
Owing
allocated to
R&D
to the rising
R&D
doubled from 6.2%
costs, the
in
Swedish defense budget
1970/71 to 13.8% in 1987/88.
During the same period, the defense budget remained roughly stable
in
fixed value. 93
As
for
each
Volvo, Bofors, Ericsson, Haegglunds (part of
FFV--supplied
state-owned
many
Besides,
production.
joint
strategy
Six corporations— Saab-Scania,
product category.
military
a concentration
There were only one or two producers for
defense industry.
its
Sweden adopted
small country,
a
the
majority
of
ASEA
since
equipment.
military
ventures were formed for defense
This strategy has certain advantages.
producer-customer relations
and
more or
less
1972) and
R&D
and
continuous
First,
guaranteed
orders
could allow the long-term build-up of competence and the on-going
R&D
use of
and production capacity.
which could lower
longer,
However, the armed
not on any indirect benefits for the Swedish
effects,
forces'
were entirely based on the calculation of direct defense
decisions
society as a whole.
policy
costs. 94
Second, production runs are
imposed
a
The major reason
is
that
economy
or
the self-sufficiency
very heavy burden on fulfillment of just the main
military missions, given the soaring
R&D
and unit costs.
In
fact,
the
indigenous development and production of major items such as
aircraft,
air-to-air
missiles
and tanks soaked up funds which could
otherwise be used to
purchase greater numbers of the finished
product from
suppliers. 95
producers'
foreign
opportunities
and
Therefore, spin-off
responsibilities.
41
is
chiefly the
Computer technology
7
is
Sweden was among
good example.
a
valve-based computers
construct
IBM
products.
Viggen
procurement, except in the construction of the
Its
fighter,
did
contribution to the domestic computer
little
Today, Sweden
industry. 96
alone computers.
procurement
to
to
But the military favored
1953.
in
Europe
the earliest in
is
contrast,
In
nurture
very weak in
still
kinds of stand-
all
neighbor, Norway, used military
its
domestic companies, including Kongsberg
its
V&penfabrikk (though facing many
difficulties
recent
in
with
years),
a certain degree of success. ^
ownership, the Swedish government has not increased
In
Even
share in the defense industry for the past several decades.
War
during the rearmament period associated with World
10% of the total purchase
owned manufacturers.
On
producers were
II,
only
of military equipment was from stateother hand,
the
private
the
arms
Their arms
big engineering conglomerates.
all
its
production accounted for only a small part of their quite diversified
So, the fluctuation of military orders would not affect
businesses.
their
And much technology
survival.
sharing
between military and
commercial departments was within firm's boundaries. ^^ Because
the
and the
of disarmament,
recent policy
production
military
pressing issue.
more
benefit
It
if
to
was found
the
lower specialization
civilian
production
that the
defense-related
in
staff
and
export conditions
stricter
mandated by the Swedish government, the
feasibility
has
of converting
become an increasingly
commercial divisions tend
to
have higher technology,
divisions
facilities,
of
stronger civilian
market
and lower share of business within the whole company
sense,
group. 99
Modern Sweden's defense favored
to
60%
air
force
of military equipment grants during
and about
80%
of military
had firm and stable policy
for nearly
five decades.
R&D
to
the
grants in the
establish
its
which received 50
1960s and
1970s. i^i
military
1970s,^oo
Sweden has
aircraft
industry
This country has been able to build up and
run a "complete" combat aircraft industry with the capabilities to
define,
develop and produce original products adapted for
and specifications.
several
its
needs
This feat usually could only be achieved by
major powers, or by multinational efforts as
42
in
the case of
the
European fighter Tornado
So Sweden
Italy).
accumulation
is
really an exception.
never been
has
Germany and
(joint efforts of the U.K.,
experience
Its
government long-term
and
interrupted,
support of "national champions"--Saab-Scania in aircraft and Volvo
Flygmotor
been discontinued. ^^^
never
engine--has
in
Sweden developed Tunnan
Viggen
Viggen (which
the recent
force
It
1970s, and Gripen
the
in
is
1950s, Draken in the
the
in
underway)
(still
Take
1980s.
the
in
1960s,
used by the majority of the present
squadrons) as an example.
aerodynamic design
Its
air
unique.
is
has good short take-off properties as well as supersonic
performance, and
new Gripen
However,
surpass
the
combat
world's best
the
designed for multiple roles.
is
requirements
among
is
Viggen
previous
the
many
in
operational
targeted
Its
respects.^ ^3
development costs for Viggen were barely
those for Draken and 20 times those for Tunnan,
The
aircraft.
^O"^
times
3
and the
development costs for Gripen would be even higher, also many times
those of Viggen'05
(all
measured
Viggen's development costs,
at
constant prices).
many imported
large part of vital avionics and other
and the
The main reason
very small in size.
10,000
had
people,
In
the
one-third
that
is
in
down
bring
be used.
to
the
Swedish
in
industry
aircraft
is
1970s, this industry employed only around
development and the remainder
in
production of aircraft, engines, weapons and other equipment.
employment
present
hardly
size
A
components was from the U.S.,
engine was a U.S. design produced under license
jet
Sweden.
parts
To
was only about
This
one-fortieth of the U.S.'s.'^^
In the
Gripen program, the dependence on foreign suppliers could
The
be reduced.
wingsets for the
first
British
few planes;
Aerospace delivered carbon-fiber
GE
provided basic engine design
and co-produced with Volvo Flygmotor;
many
vital
components were
mainly from the U.S., though Ericsson was responsible for some
important
systems
With respect
like
to
radars
the
and computers. '^^
possible exploitation
of military technology,
Saab-Scania was a subcontractor for foreign civilian aircraft
components
like
wing
flaps.
Its
joint venture with U.S.
develop light civilian inter-city aircraft was shaky
owing
to
Fairchild's financial problems
43
in
its
in
in
Fairchild to
the
1980s
main business.
Besides,
'
Saab-Scania's
very
aircraft
was largely technology-oriented and
division
business-oriented. ^^8
little
development of
civilian
Volvo Flygmotor,
jn
aircraft engine
joint
its
GE
together with
and Garret
Corporation was probably of the great long-term economic
importance.
'09
Ericsson--which dominated the Swedish IT
in
75%
IT employment and handled nearly
of national
industry
with
military
electronics,' '^
was found
it
control,
air-traffic
applications.'
had big difficulties
investment as a fraction o(
finding commercial
Sweden
U.S.,
capital-related
GDP
is
very small in terms of
is
among
constantly
still
only about one hundredth. "2
procurement size
its
between Sweden and the U.S.
gross domestic
defense
its
needs-pull effect of the
If the
even more
is
several
the
taken into account, the distinction
also
is
On
striking.
the whole,
above brief discussion of Sweden's experience suggests
the
small
country pursues self-dependence
combat
have
aircraft,
battle
concentrate
to
its
very
in
some
final
that
may
it
on
technological resources
limited
a
if
such
products,
submarines and missiles,
tanks,
R&D
Sweden's
resources.
investment was only one fortieth of the U.S.'s, and
military
as
in
But, in the mid-1980s,
highest in the world.
R&D
R&D
except radars for
aircraft,
'
As compared with the
absolute size of human
the
complicated and
that all
advanced systems designed for military
all
systems design and integration, and rely heavily on readily available
subsystems, components,
and functional technologies
at
home and
from abroad, because of the large threshold investment required
developing modern high-tech military systems.
As an example,
in
just
aerodynamics and the interfaces among many subsystems for a
combat
aircraft
already extremely complex
are
Therefore, spin-off
may mostly
technology and capabilities.
no slack
to
own first class weapon
when compared with larger
8.3.
is
In
Development
Stages
countries--to
and
the
systems
In a small country,
systems--certainly
already an extremely
to
difficult.
meantime, the military may have
the
deliberately promote spin-off.
its
missions
be confined
and
big
merely
challenge.
Spin-Off
44
much fewer
fulfill
its
in
to
have
models
military
In
developing country, usually the domestic capabilities for a
a
item evolve in the following sequence: maintenance and
military
subsystems, and
of
independent design and production of whole
finally
systems (certainly
subsystems).
and upgrading, independent production of
production
licensed
repair,
In
on other countries for many parts and
relying
still
the
parallel,
evolution also proceeds in the direction
making more sophisticated weapon systems J
dynamic
development
industrial
developing country which
how would
countries,
stages?
In
the U.S.
history,
expanded what had been done
Army imposed
the U.S.
like
may provide some
early
its
spin-off be
gap with advanced
its
development
different
at
regard, the U.S. early experience and Israel's rapid
this
industrialization
In
the
considered in the context of a
is
shortening
is
When
^^
in
relevant
lessons.
borrowed, assimilated and
Europe.
War
the pre-Civil
In
era,
an enormous degree of uniformity on the
arms industry's procedures for development, testing and production.
This
shifted
the
away from
industry
mechanical manufacturing methods.
extensive
military's
machine
production.!
In
first
to
the
This
decades,
civilian
bicycles
is
Then, partly through the
and subsidizing network, the
manufacturing
the origin of the
the
sector,
sewing machine industry was the
and automobiles followed.
II,
as
subsequent
the
the
moving assembly
transfer
line,
During World
major auto companies were also responsible for the
the
production
Then,
advanced the high volume
greatly
methods--such
In
machines, grinding machines and stamping machines.
War
to
"American system" of
mechanization and standardization.
auto industry
the
systematized,
I'*
benefit from
typewriters,
to
and interchangeable manufacturing were diffused
tools
the civilian sector.
mass
contracting
craft
of military
hardware, notably
aircraft.
For example,
Chrysler became prime contractor for Martin aircraft designs.
General Motors for North American designs, and Ford for
Consolidated
In
designs.' '^
Israel,
due
to
the
difficult
political
situation
in
the
Middle
East and international arms boycotts, embargoes and sales subject to
political
conditions,
a
sound indigenous military industry has always
45
been
GNP,
Israel's
To
top priority.
its
consume
date, the defense costs
But
the highest proportion in the world.
has designed and produced
patrol
boats,
own combat
its
country
this
main
aircraft,
battle
and many other
military electronics,
missiles,
a third of
tanks,
fast
items,
which have been
"battle
tested"
those imported from the
USSR
and used by the neighboring Arab
and are mostly superior
Partly because of the financial difficulties,
nations.
and
subsystems.^
^^
military industry
Its
Israel
self-sufficient.
is
many advanced
systems. ^^'^
about $600 million, or 2.7% of
the
most technologically
does not mean that
this
GDP,
its
the mid-1980s,
In
R&D,
sectors.^ ^^
On
annually on
evenly between the military and civilian
hand, during the mere four decades since
Israel
also
presently depends heavily on the U.S. for
It
military
But
world."
"industrializing
the
in
among
is
broadest in categories, largest in production and
advanced
is
modifying and upgrading old military systems with new
excellent in
designs
Israel
to
split
roughly
the other
independence
its
spent
Israel
in
1948,
been rapidly industrialized from a mostly agricultural
has
basis. 119
Israel's
technological
military
early
were
efforts
to
produce
machine guns, and maintain, refurbish and repair imported tanks,
and combat
artillery
the
1960s,
Israel
Toward
aircraft.
began licensed co-production of
provided by foreign partners.
educated
civilian
and
skilled
industry could
alleviate
the
During
immigrants
So
absorb.
period,
this
the
than
the
military
trainers,
was needed.
In
general,
After the
the
undeveloped
little
"brain
local
1967 Six Day War,
Israel
imposed arms embargo by some countries,
fast patrol
its
original
boats.
By
agreement
the
strongly pushed
to
like
deliver the
end of the 1970s,
manufactured the Nesher (an
innovation
main content of spin-off.
and procurement of systems and components, because
adhere to
drain."
management techniques and
industrial
of people constituted
had more
Israel
investment helped
unemployment problem and prevent
Because the technology was mainly imported,
training
jet
in
and military electronics with technology and components
mortars
highly
end of the 1950s and
the
Israeli
46
version
it
local
design
was
France which did not
Mirage
Israel
aircraft
and
had designed and
of Mirage
III)
and the
Merkava
Kfir combat aircraft, the
missiles,
total
artillery,
and various types of
tanks,
investment increased
during
significantly
technological risk or innovation involved was
still
Mirage design, and used the same U.S.
The Merkava tank
(Phantom).
opportunity cost in terms of
Most
not much.
Many new
period.
engine as that for the F-4
jet
human
capital
was also modest
control
^20
j^
the
in
educated immigrants from abroad
spin-off,
by the mid-1970s the
Nevertheless,
ample supply of high quality human
disappeared.
The
also incorporated the U.S. engine.
continued to join the industry.
had radically
capital
management and
industrial
quality
complex weapon systems integration were major new
for
Through
experience.
system ranging
subcontracting
extensive
the
from a small number of large public military producers
number of decentralized
in
the
For example, the Kfir was based on the French
foreign countries.
initial
period,
this
the
and key components for advanced products came from
designs
early
Though
and ammunition for various weapons.
particular
private
firms,
"dual
technologies,
use"
communications equipment and
computers,
electronics,
many
software, were diffused widely to the civilian industry.
meantime,
government-owned
the
established in
a great
to
1953 for making combat
Industry
Aircraft
Israel
aircraft,
In
also
the
(lAI),
utilized
its
experience to produce executive jet planes under Rockwell
Standard's
In
license
the
in
1980s,
1960s.
the
the
Israeli
military
advanced, but also increasingly specialized
which were
industries,
less
hand,
costly,
notably electronics, were already
in
were also
particular
of the
state
at
in
art.
the
world
On
the other
more
far
"crowding effect" by making some
electronics,
difficult
to
recruit
sufficient
personnel.
Combat
which was to
developed
the
at
civilian
development programs became
military
and even resulted
qualified
levels
and production
Some
Therefore, useful spin-off became scanty.
many new
industries,
R&D
in
relevant to the civilian sector.
Their managerial and production
standard.
became more
sector
in
aircraft is
a typical example.
incorporate a
the
In
new airframe and
a
new Lavi program,
new engine
cooperation with Pratt and Whitney, only
47
R&D
to
be
costs
were estimated
alone
and economic resources.
technical
the Israeli
composite materials and
jet
on
unprecedented burden
billion— an
$1.8
at
engine design
However, the
the
in
development plan
could not be readily useful in the civilian sector, nor would they
contribute
development or reinforcement.
infrastructure
to
the
In
meantime, lAI, with slightly more than 20,000 employees (one
employment
of the total
in
the military
industry),
is
third
very small
still
and narrow when compared with Boeing, McDonnell Douglas,
Grummann,
Aerospace or Aerospatiale.
British
Besides, in this small
country, there are few other firms that are capable of utilizing the
aeronautical engineers
flexibility
its
another in order to prevent
to
and dispersion of experienced personnel.
layoffs
the objection
So, despite
from the armed forces, lAI (under the Defense
approval) designed
Ministry's
For lack of
business in commercial aviation during each
from one military program
transition
and produced a short take-off and
(STOL) Arava, and an improved executive
landing aircraft
both rather successful.
program
lAI does not need them.
allow shifts between firms or projects, lAI has been
to
forced to seek
large
if
Finally,
1987
in
spending $1.5 billion
after
in
jet
Astra,
canceled the Lavi
Israel
development, and decided
to
buy U.S. F-16S.121
The U.S.
history
and the
early experience
"contracted" dynamic
suggest that a general model consisting of three stages
At the
be used for a developing country.
industry
Israel's
is
underdeveloped.
Military
first
may
stage, the civilian
technology chiefly imported
from abroad may help transfer relatively simple technology and
management
the
to
infrastructure
local
industry,
by training people
and upgrade industrial
uniform
in
maintenance and
production--a key element of modern military technology.
military
resolve
in
industry,
if
demonstrating and diffusing
further
may
Taylorist
the
play
a
production
leading role
and
At the second stage, the civilian industry has been
developed;
the
Taylorist
production
system has taken root;
and the local content of more complex military products has
increased.
the
pushed forward with great resources and
by the military commanding system,
management.
So,
The
private
industry
may now
48
participate
in
more
Some
advanced weapon production.
firms
large
may even become
prime contractors working on systems design and integration for
some
technologies,
aircraft),
many
Through these
items.
military
firms,
many
"dual use"
example, electronics and systems engineering (for
for
could be diffused to the civilian sector.
technology and management.
adversely
As
is
may even
be
far
centrally planned
as
Economies
Planned
Centrally
in
economies are concerned, the
This country's huge military investment
representative.
of procurement and
R&D
aerospace technology
evidence that
little
indigenous military programs
if
technology development
civilian
Spin-off
impacted.
Spin-Off
8.4.
Besides,
difficult.
expand too much,
stage,
The technological capability gap
between the two sectors has been further shortened.
becomes more
third
have attained rather high levels of
industries
civilian
At the
is
this
only matched by the U.S.
is
terms
military and
Its
also second to none but the U.S.
in
USSR
But there
is
country has had significant spin-off, with the
exception of aircraft and nuclear power.
In
the
USSR,
were normally developed by the
the airliners
same organizations, such
as
well-known Tupolev and Ilyushin
the
Design Bureaus, that worked also on military transports, bombers
and fighters.
Though
military
projects
many
versions
derived
from
civilian
remarkable technological records.
were traditionally
their
In
was displaced by the Boeing 747
In
airliner.
is
the
first
until
successful
as
the
This family only
1957.
world's largest, heaviest
operational jetliner,
the entry of the
707 and the DC-8.
109 was the world's largest operating
also longer than
until
in
1956 the TU-104 joined the Aeroflot Airline's
world's
two years
models achieved
post-war era, the huge
the
turboprop TU-114 entered civilian service
later
military
the
1980 with good
at
707 and the DC-8.
reliability
prioritized,
that
This
fleet.
without peers for
Its
time.
Its
jet
engine
M-
range was
The TU-104 provided service
and safety record.
This nearly
all-
Soviet product, like Sputnik, was seen as another proof of the rapid
scientific
that
and technological progress
both the
TU-114 and
the
in
the
USSR.
It
is
noteworthy
TU-104 had been developed
49
TU-16
inexpensively from the military designs, the Bear and the
bombers respectively,
was indeed very
However,
strong pursuit of speed, range and capacity,
the
more economically
characterized the Soviet civilian
aircraft
cost accounting
system
in
justifiable designs,
also
There was
development.
There was also no
profit incentive as a driving force.
"objective"
spin-off effect
high.
usually at the expense of
little
The
only eighteen months.
in
this
country to push aircraft
Therefore, despite the high cost
designs in the direction of efficiency.
consciousness on the designers' part to make economically viable
aircraft
also
for
world market, the hurdles rooted
the
counter-
the
in
productive institutional context proved to be too difficult to
completely
cross.
The TU-144 program which
led to the historic first flight of an
supersonic transport on December 31,
style
The 25
development.
1968 also typifies the Sovietinvestment pushed the
persistent
years'
program steadily forward and achieved high technological
aerodynamics, fuselage and engines, though
its
levels
in
and
electronics
comforts could not match the Western counterpart Concorde.
However,
its
commercial
unresolved weakness
1983 the supersonic
in
range, reliability, efficiency and
fleet
Before
this
in
its
noise.
plan
flight
final decision
after
more than 10,000
nuclear power technology, the
sector,
country
this
nuclear power plant (with
world's
first
fusion)
in
reactors.
tokamak
1968,
In
the
flight. ^^^
is
(i.e.,
operated
MWe)
output 5
the
the
almost totally
world's
in
self-
commitment,
reactor
R&D
large-scale
experimental
magnetic confinement for nuclear
the excellent technical
new
first
1954, developed the
and made remarkable progress
effect,
output scale and
term
USSR
this
Based on the basic technologies originating from the
dependent.
military
U.K.— despite
as in the U.S., or as in France and the
continuation of their Concorde program and
In
air-
was made, there had been no
pragmatic world of civilian aviation challenging the course of
program
In
was
of about a dozen and a half planes
dropped from the Aeroflot's
hours.
was eventually crippled
viability
in
the
fast
progress in terms of
was pushed forward by
investment
50
breeder
and
centralized
its
long-
On
management.
largely
neglected,
resulting
unacceptably bad safety designs
the
in
graphite-moderated reactors
water-cooled,
light
all
other hand, however, the safety factor was
the
type reactors)--according
most disastrous Chernobyl accident
voice
outside
against
the
This certainly does not imply that
extent.
is
some
creating a viable industrial
computers for
capabilities
poor
reliability
at
It
in
But
of
USSR
its
advanced
must have
advanced microelectronics,
this
country has failed
base comparable to the West.
RYAD
its
software support weak.
and
Many
another case in point.
technical
the
in
USSR.
computers and telecommunications.
IBM
system existed and warned
and space systems suggest that the
possessed
Had an independent
"unbalanced" development might have
not happen in the
Modern IT
military
1986.
and environmental issues as have been faced
safety
West would
some
to
in
controlled
very
the
pitfalls,
been rectified
many
centrally
its
Chernobyl-
(i.e.,
Western standards, and the world's
the
to
in
but the quality
series,
It
in
imitated
was bad and
produced ICs, but the yield rate was low
least in
those for non-military uses.
Even
in
microcomputers which do not really demand more advanced and
sophisticated
USSR
technological
grasp
to
larger
whole East European bloc)
(as well as the
vitality
than
capabilities
computers do, the
entirely lacks the
dynamically changing opportunities.
the
Consequently, the modern information technology in the
been described as a
serious
barrier
power.
crisis.
the
to
For example,
1988 the
USSR
fields,
1
its
simulator per 3 to
reactors.
Therefore,
in
including nuclear
had only 2 simulators for
58 reactors, whereas the West has an average of
4
has
This backwardness has constituted a
development of many
in
USSR
the
USSR.
on the whole, spin-off has been distorted or stymied
This country has a large pool of military and aerospace
technology, but
its
civilian
industry
caused by the institutional bias
civilian
industry
conscious and great efforts
there
incredibly
weak, which was
resource allocation against the
and the central planning and direction suffocating
commercial innovativeness.
purposes,
in
is
is
no
So, even
to
if
its
government makes
convert military technology for civilian
autonomous, vigorous and market-oriented
51
industry
civilian
could actively take advantage of the spin-off
that
opportunities according to the commercial rules.
institutional
weakness
R&D
many indigenous
military
the
USSR
industry in
civilian
supports
turn
long-term development of military
the
sector,
Furthermore, for lack of the "virtuous
results.
which a strong
circle"--in
this
fact,
manifest in the commercialization of
also
is
In
the
technology in
has also been seriously jeopardized. ^^3
Using the U.S. as a reference country and the experience from
the
USSR, Sweden and
Israel,
Exhibit 4 summarizes the possible spin-
along three dimensions of national context— economic
off scenarios
country size and development stage.
system,
(Exhibit
4)
Summary
9.
addition to
In
mechanisms
some general
and evaluation issues, three
rules
to the success of several
critical
"big" cases in the U.S.
The
spin-off history are identified in this paper.
agencies'
second
third
substantial
their
is
is
the
R&D
is
mission
and collaboration; the
subsidies
contracts,
first
procurement of new and expensive products; and the
promotion of technology diffusion and industry
However,
competition.
the
waning "leverage" of mission-oriented
programs and the diverging military and civilian technologies are
found
to
spin-off
suggests
programs tends
that
to
innovation
is
various
the
phenomena across
contribution
potential
be more crucial when
the stage of radical
the
fields
with "glorious"
history.
By comparing
paper
some
increasingly inhibit spin-off in
the
cases,
different
of
mission-oriented
targeted
technology
predominantly commercial and incremental.
predictable in
some
critical
"functional
complex systems programs
in
systems efforts, their spin-off contribution
technology
and engineering
seems
the
in
U.S.
the
substantial.
52
to
the
In
be more
technologies"
and
Because many C3I and
"general directions of technological progress."
large-scale
at
is
change, and confined to the high-end fields when
meantime, the contribution of these programs also tends
steady and
this
demand
field
great
of systems
Because of the U.S. superpower position
military technology,
in
generalization of the U.S. experience to other countries should be
the
On
cautioned.
however,
the whole,
seems not pragmatic for most
it
More
other countries to expect significant contribution from spin-off.
small advanced countries have
specifically,
spin-off,
and spin-off would mainly be confined
systems
technology
some high-tech
may
spin-off
system
industry.
in
As
the
to
more advanced "dual
of
transfer
the
to
compared with
sector as
civilian
self-dependence
depending on the relative development stages of
technologies,
the
of
field
range from the introduction and diffusion of the
Taylorist production
use"
the
in
promote
to
For developing countries,
products.
military
final
pursue
countries
these
if
slack
little
the
technology and
military
USSR,
other military superpower--the
spin-off
its
has been either distorted or stymied for lack of a strong marketindustry to capitalize on the opportunities.
oriented civilian
very weakness
deeply rooted
is
in
planned economic
centrally
its
This
system.
Notes
^
The data from 1960 through
countries
industrialized
have
1980s of 17 noncommunist,
the early
analyzed
be
using
regression
multiple
in
DeGrasse (1983), pp. 35-76.
^
According
economic
Nelson (1990), the U.S. obvious erosion
to
^
Though without
the
two
and
equipment
and
accounted for
51%
and
statistics
the
in
about individual
R&D
Federal
equipment
electrical
electronic
1970s.
the
in
detailed
categories
largest
aircraft/missiles
28%
in
1970.
47%
funding
(including
For
components).
items,
and
example,
27%
The typology
policies
is
of
"mission-oriented"
discussed in Ergas (1986).
with
Ergas on categorizing the
both
countries,
national
R&D
despite
their
expenditures,
U.K.
high
are
and
But
communications
they
not
really
53
51%
p.
R&D
like
and
26%
into
the
investment
technology
the
U.S.
in
former group
as
a
in
587..
author does not completely
and France
defense
respectively
"diffusion-oriented"
this
decades
past
have been
1980. and
in
the
for
See Statistical Abstract of the United States, 1990 edition,
1985.
'^
began
leadership
and
technological
in
share
creating
agree
because
of
many
the
very
5
early
may
Japan
from
technologies
radical
of some
new
industries.
classified
into
the
stages
be
well
Statistical Abstract of the
p.
594; 1990 edition,
6
Statistical Abstract
p.
593; 1990 edition,
mission-oriented
their
programs
Besides,
or
in
competing
author thinks that
this
group.
"diffusion-oriented"
United States,
1973 edition,
p.
524;
1982-83 edition,
United States,
1973 edition,
p.
523;
1982-83 edition,
585.
p.
of the
583.
p.
^
For DOD's recent budget, see Office of Technology Assessment (1989),
^
See, for example, Lepkowski (1984) and Keyworth (1985).
Keyworth
was science advisor
II
to
President
10
11
Abstract of the United States, 1990 edition,
Statistical
p.
20.
George A.
Reagan and director of
House Office of Science and Technology Policy during
9
in
the
White
1981-1988.
p.
585.
Smith (1990), pp. 143-145.
Bromley (1990).
D.
Allan Bromley
presently
is
science advisor to President
Bush and director of the White House Office of Science and Technology Policy.
12
See Chiang (1991) for a more detailed discussion of the U.S. recent trend
technology
industrial
toward
1-^
I'*
10
see
mission-oriented
paradigm
paradigm.
and "techno-economic
Freeman and Perez (1986).
standards used to evaluate the effects of defense
1^
a
For
Carter (1989), pp.
compilation
of
R&D
spending are
4-6.
U.S.
government funding
for
principal
developments
computer technology, see Flamm (1988), pp. 259-269.
17
Phillips
18
Flamm
(1987), pp. 97-99.
19
Flamm
(1987), pp. 65-70.
20
Thompson
21
Constant (1980), pp.
(1982), pp.
162-179.
(1984).
151-177.
For a brief discussion of the U.S. commercial aircraft industry, see
Dertouzos
23
the
For the impacts of IT on "technology systems"
in
22
from
For the impacts of IT on "technological paradigm," see Dosi (1982).
discussed
in
shifting
diffusion-oriented
the
paradigm,"
15
policy
in
el
Calculation
1990 edition,
aircraft
are
(1989), pp. 201-216.
al.
is
p.
not
based on data from Statistical Abstract of the
587;
and similar tables
in
available.
54
various back issues.
United States,
Separate data for
24
Miller and Sawers (1970). p.
25
For the British Comet, see Miller and Sawers (1970). pp.
26
March (1990),
27
Bacher (1984),
28
For the early history of developing the 707 and the DC-8, see Miller and
Mowery and Rosenberg
p.29;
(1982).
p.
179-182.
111.
9.
p.
Sawers (1970), pp.
3.
191-196.
29
Rosenberg (1986), pp. 24-25.
30
Rosenberg (1986),
31
For a brief review of the development of
24.
p.
see White
engines,
jet
(1984), pp.
10-18.
32
Braun and Macdonald (1982),
33
Schnee (1978),
34
Hamm
35
Calculation
98.
9.
p.
108-110.
(1987), pp.
based on the data of 1959-1983 from Standard
is
Surveys, Aug. 29, 1968,
Industry
p.
A35; Nov. 25, 1976,
p.
&
A26; April
p.
A25; and Statistical Abstract of the United States, 1982-83 edition,
edition,
According
621.
p.
the
to
"U-type"
trend
1983
are
of the
supposed
Cold War
build-up
in
the
be
to
the
in
second
first
case,
Burnett and Scherer (1990),
37
There
only
Rosenberg (1986),
procurement
Industry
for
indirect
26,
p.
large
Surveys, Oct.
terminating
the
637;
p.
1959
1959
1986
through
and
after
Reagan administration's military
the
case.
36
is
and
1980, p.
Korean War and the beginning
of the
higher because
3,
during
government market shares of the industry output before
1983,
10
apparent
Poor's
299.
information
1982,
procurement
available
to
author.
this
1970s there had been no
since
military
7,
p.
for
A22,
many
DOD
to
ordered 44
new KC-lOs
years.
So
the
Standard
total
&
Poor's
after
procurement of KC-
must be quite limited.
38
Donald (1987),
p.
44.
39
Donald (1987),
p.
56.
40
March (1990),
p.
20.
41
Misa (1987).
42
Schnee (1978), pp. 15-16.
43
Braun and Macdonald (1978), pp. 59-63, and Schnee (1978), pp.
"^4
Schnee (1978), pp. 13-14.
55
to
substantial
According
transports.
p.
According
11-13.
^^5
46
Thompson
67-68.
(1984), pp.
Langford (1987),
37.
p.
^^7
Constant (1980), pp. 221-223.
-^S
Schnee (1977).
'^^
For the Polaris program, see Sapolsky (1972).
PERT,
history of
50
Moder
see
For a brief review of
et
al.
this
51
Flamm
(1987), pp. 48-49.
52
Flamm
(1987), pp.
121-122.
53
Flamm
(1987), pp.
121-123.
54
Flamm
(1987), pp. 59-61.
55
Flamm
(1987), pp. 75-76;
170 and
(1983), pp.
history,
For a brief review of the
10-14.
see Chiang (1991).
Office of Technology Assessment (1989), pp.
169-
173-174.
56
Except the
and
161-163.
57
For a brief discussion of the technical issues of the C-5A transport, see
Seamans (1972),
For the
5 8
contracting
and Scherer (1990), pp.
59
DeGrasse (1983),
60
Dallmeyer (1987),
61
For
62
Statistics
behavior and
p.
from
Flamm
(1987), pp. 97-99.
Thompson
66
For the C-5B, see Donald (1987),
67
Rosenberg (1986),
68
For a brief discussion, see Frostic (1989).
69
Dertouzos
72
Burnett
Dataquest.
65
Altes
see
Program, see Yoshino and Fong (1985).
64
108.
(1984), pp. 68-72.
ct
al.
p.
p.
56.
27.
(1989),
p.
206.
There are many reports about Concorde.
U.S.
case,
48.
(1987), p.
'1
Lockheed
pp. 84-96.
Flamm
For the
the
300-305.
63
70
Assessment (1990), pp. 33-35
2-4.
pp.
military
VHSIC
Office of Technology
see
type,
fifth
Supersonic
Transports
Program,
See,
see
for
example, Feldman (1985).
Horwitch
(1982).
For a brief discussion of the National Aerospace Program, see Korthals(1987).
Office of Technology Assessment (1989), pp.
56
169-170 and
173-174.
73
Misa (1987).
74
Thompson
75
Donald (1987),
(1984), pp. 68-73; Lee et
14. 38,
pp.
44 and
(1990), pp. 83-89.
al.
62.
76
Burnett and Scherer (1990), pp. 295-300.
unit
costs
the
from the news report on April 23,
is
YF-22 pototype,
Dynamics,
But the information about the
than
rather
YF-23
the
when
the
Air Force chose
Lockheed together with Boeing and General
by
built
1991
ATF
prototype,
built
Northrop
by
with
McDonnell
Douglas.
77
Office of Technology
78
For a comparison of advanced materials technology strategies, see Office of
Technology
79
Assessment
Assessment (1989), pp. 167-168.
(1988).
For the development of
NC
and the "distortion" of commercial efforts, see
Noble (1984).
^^
For a brief review, see Dertouzos
81
Flamm
82
Office of Technology Assessment(1990),
As
Standard
&
Cray shipped
Poor's Industry
Surveys, Oct.
Smith (1990),
84
Nelson (1990).
85
Burnett and Scherer (1990), pp.
p.
1,
1987,
p.
in
Flamm
88
Sweden Foreign Ministry
(1989),
C80.
89
Sweden Foreign Ministry
(1989),
90
Hoimstroem and Olsson (1983),
91
OECD
1618-1619.
p.
20.
pp.
pp.
22-23.
144-145.
1971, reprinted from Freeman (1982),
92
OECD/STllD Data Bank, May
93
Ries (1989),
1987.
1618.
94
Hoimstroem and Olsson (1983),
95
Ries (1989),
96
Dalum
ct
al.
(1988), pp.120-121.
97
Dalum
et
al.
(1988), pp. 126-127.
98
Hoimstroem and Olsson (1983),
99
Sweden Foreign Ministry
pp.
145-147.
pp.
145-153.
1619.
(1989),
pp.
116-120.
57
(1987), pp.
March 1985.
1987.
Ries (1989), pp.
p.
and
294-295.
87
p.
188;
133.
OECD/STIID Data Bank, May
statistics
p.
supercomputer
100th
its
83
86
(1989), pp. 232-247.
al.
(1987), pp. 78-80.
reference,
a
et
p.
191.
81-82.
See
'00
Holmstroem and Olsson (1983).
p.
145.
'01
Holmstroem and Olsson (1983),
p.
174.
'02
Gullstrand (1987).
p.
148.
'03
Hewish (1987).
'04
Holmstroem and Olsson (1983).
'05
Ries (1989),
'06
p.
902.
1618.
p.
Holmstroem and Olsson (1983),
United States, 1982-83 edition,
'07
108
p.
637.
Hewish (1987).
por Saab-Scania's efforts
Sjoelander (1990),
pp.
in
Holmstroem and Olsson (1983),
"0
Dalum
1"
Holmstroem and Olsson (1983),
et al.
"2 OECD/STIID
"3 Wulf (1983).
''^
managing technology, see Granstrand and
46-52.
'09
"4
"5
148-150; Statistical Abstract of the
pp.
(1988), pp.
Data Bank,
155-156.
pp.
118-121.
May
p.
156.
1987.
Smith (1987).
Ayres (1988).
For
Israel's
ability
to
modify and upgrade military systems, see Rosenbaum
(1988).
"7
"8
''^
Steinberg (1983). Brower (1986). and
Steinberg (1985),
p.
Wulf
395.
The following discussion, except otherwise
civilian
industries
is
mainly
on
based
Steinberg
'20
Justman and Teubal (1988). pp. 241-243.
'2'
Burnett and Scherer (1990),
'22
Por the
transports,
'
23
other
in
Por the
USSR,
see
Moon
cited,
of the
(1983)
and
Israeli
defense and
(1985).
308.
p.
development history of
the
314-316..
(1983). pp.
aircraft,
including
the
supersonic
(1989).
development of nuclear power, information technology,
technologies
in
the
USSR
and
Eastern
(1990).
58
Europe,
see.
for
example,
and
some
Chiang
Exhibit
1.
"Spin-Off" from Mission-Oriented Technology Programs
Mission
Requirements
i
Needs of Key Technologies
/
Government Labs' In-House
Duse
R&D ^
\
\
/
R&D
Contracts to Industry
Mission Test, Integration, Utilization and Modification
/
\
i
Technology Transfer
Industry's
Follow-On Procurements
Capability
i
Production
i
Industry's Tec
Government's
to Industry
\
/
Upg
Expansion and Experience Accumulation
;
Cost Reduction and Quality Improvement
i
Applications "^
Civilian
i
Improved or
New
Industries
or
Products,
Processes,
Infrastructure
Exhibit
Factors Influencing "Spin-Off"
2.
Factors)
(Institutional
Government
National
Security
Multiple
Sourcing
Counter-Productive
Concern
Policy
Practices
Cost-Plus Separation of R&D
Contracting
and Production
Practice
Contracts
t
Communication
to
Cost
Manufacturability
Containment
ofR&D
Reluctance
Firms'
of
Restriction
Participate
Spin-Off
(2 General
Interaction
M
and
Rules)
of
Similarity
M
C Communities
and
C
of
Technologies
+
R&D
Military
Diffusion
Mission-Oriented
•
in
•
R&D
in
in
of
and
C
Technologies
Application
•
Mechanisms)
(3
Waning Leverage
M
Technology
and
Procurement
Collaboration
Subsidies
Diverging Trend of
Promotion of
Contracts,
in
Requirements
Cost Efficiency
(2 Negative Prospects
of "Spin-Off")
Programs
investment
Procurement
Note: M--Military, C--Civilian.
The
"-I-"
sign
means
the stronger (or weaker) the preceding factor, the
stronger (or weaker) the follower factor.
opposite situation.
The
"-"
sign refers to the
Exhibit
Opportunities of "Spin-Off" from Mission-Oriented Programs
3.
Approaches
Scenarios
Program
is
aimed
revolutionary
at
radical or
technological
change
Program's
•
leverage
wanes
systems
requirements diverge
civilian
of
Wait until technological trajectory
emerges
•
Look
for clues
from mission-critical
high-end technological fields
•
from
Focus on
common
functional
technologies
requirements
Program has adverse impact
on manufacturing productivity
Program is large-scale complex
systems program
"Spin-off"
directions
•
to
Program's
general
technological progress
predominantly
commercial innovations
due
Identify
goal
is
mission-oriented
imposed upon
program
•
•
Seek commercial balance among
performance, time and cost
Capitalize on
systems engineering
and management expertise gained
•
Incorporate
element
at
generic
technology
program design stage
Exhibit
National
4.
Contexts
"Spin-Off" Potential and National Contexts
"Spin-Off"
U.S. (as a reference)
Potential
Strong in generation of technology from
mission-oriented
of technology in
programs and exploitation
commercial sector
Economic system — > Centrally planned economies (e.g., USSR)
Commercial exploitation of technology
generated from mission-oriented programs
distorted
Country size
->
or
stymied
Sweden)
Generation of technology from missionoriented programs uncompetitive or confined
in commercial exploitation
Small advanced countries
Development stage
Industrializing
(e.g.,
countries
(e.g.,
Israel)
Depending on capability gap between
(imported) military technology and
production and local civilian industry
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