Hi-tech giants eschew corporate R&D, says report

IBM’s latest crop of research fellows: are big companies cutting back on fundamental research? (Courtesy: IBM)

By Hamish Johnston

“Think” has been motto of the US-based computer giant IBM since it was coined in the early 20th century by founder Thomas Watson. Many would argue that IBM has succeeded over the past 100 years because physicists and other scientists were given the freedom to think while working at the company’s research labs. And science has benefitted too, with three Nobel prizes won or shared by physicists working at the firm’s labs. Even more impressive is that a whopping seven physics Nobels have been awarded to physicists at Bell Labs – originally Bell Telephone Laboratories.

But the days of these corporate “idea factories” are over according to a new study published by the American Institute of Physics (AIP). Entitled Physics Entrepreneurship and Innovation (PDF), the 308-page report argues that many large businesses are closing in-house research facilities and instead buying in new expertise and technologies by acquiring hi-tech start-ups.

“Small start-ups have replaced corporate research centres as the drivers of American innovation,” explains report co-author and science historian Orville Butler.

Physicists interviewed for the study say that nearly all “blue-sky” research in the US is now done at universities and national labs rather than by companies. As a result, small companies that have spun out of academia or national labs are now providing the crucial links between industry and fundamental research.

The report is based on interviews with 140 physicists with PhDs who have founded or co-founded more than 90 companies across the US.  The firms are in a wide range of commercial sectors including medicine, tool-making, renewable energy, nanotechnology and optics. Some companies were founded in the 1980s, while others are less than a decade old.

While many companies are located in famous tech hotspots such as Silicon Valley or Boston, others have sprouted up in southern or mid-western states where both venture capital and hi-tech expertise can be in short supply.  Co-author Joe Anderson of the AIP points out that start-up success doesn’t necessarily hinge on being in an environment like Silicon Valley. “There is no one winning formula for a successful physics start-up,” he observes, adding “One of the deliberate things people try to do in the United States and abroad is to create another Silicon Valley, but it doesn’t always work.”

Not surprisingly, the two biggest challenges identified by interviewees are securing funding and commercializing their technologies. However, many also identified US immigration policies as a constant headache. Ron Reedy, a co-founder of Peregrine Semiconductor, described tight restrictions on foreigners working in the US as “the most self-inflicted, worthless, damaging policy the United States has”.

Arms export restrictions, which also apply to technologies that could be used in weapons systems, were also identified as a major barrier to success. Indeed, Reedy says that some companies have gone so far as to design such technologies outside of the US to ensure that they can be sold worldwide. Like current immigration policies, which encourage US-educated foreigners to return home rather than seek employment in the US, arms export restrictions are also leading to a drain of expertise from the US, says the report.

You can download a PDF of the report here.