DATE: Monday, November 3, 1997              TAG: 9711030208

SECTION: LOCAL                   PAGE: B8   EDITION: FINAL 

TYPE: OPINION 

SOURCE: BY H. NORMAN ABRAMSON 

                                            LENGTH:   82 lines

TAKING STOCK OF OUR ECONOMIC STRENGTHS

The current economic expansion soon will be the longest in the nation's history. Indeed, except for a slight downturn in late 1990 and early 1991, the U.S. economy has now been growing for 15 straight years.

Not everything about the economy is perfect, but many things are obviously going well. Why is our growth so strong compared to the erratic economies of Japan and most European countries?

I recently had an opportunity to study the flow of technology among organizations in the United States and Germany, and the contrast was revealing. The German system is organized to excel in the application of new technologies in existing industries. The U.S. system is structured to excel in opening up new technological frontiers and launching new industries such as biotechnology, microelectronics and software development.

Consider the example of ``start-up'' companies, which are almost nonexistent in Germany. A start-up company in the United States usually originates with an idea held by someone or a small group at a company, a university or a government laboratory. They might see how a new research finding could meet a commercial need, or they might recognize a way for an existing technology to be used for a new purpose. The entrepreneurial culture in the United States encourages them to strike out on their own.

Several things are needed for this process to work. The first is a sophisticated financial market. It is especially important to have access to a large volume of venture capital and highly developed public equity markets, like the Nasdaq and other stock exchanges.

Start-up companies also rely on the size, mobility and entrepreneurial instincts of the U.S. technical work force. Compared to workers in Germany, who often are constrained by civil service laws and institutional practices, many U.S. workers are eager to tie their fortunes to those of a small company.

Good ideas come from many sources, but one of the most fertile is the research sponsored by the federal government. Because much of this research is nonproprietary and openly published, it offers a font of new knowledge upon which entrepreneurs can draw.

Also, government policies in the United States are conducive to forming high-tech, start-up companies. For example, the federal government has been much more aggressive than the German government in fostering the commercialization of innovations spawned by research done in universities and government laboratories.

Finally, the U.S. organizations that perform research and development are very diverse. They range from well-known universities and government laboratories to low-profile but critically important private nonacademic organizations such as the Southwest Research Institute in engineering, the Fred Hutchinson Cancer Research Center in medicine and industry-oriented institutions like SEMATECH. This diversity gives the United States a flexibility and dynamism for innovation that is unequaled elsewhere.

Germany does have several important lessons to teach us about technology transfer. The German system is much better at meeting the technological needs of mature industries, especially among small and medium-sized enterprises. A dense network of public and quasi-public institutions ensures that firms in these core German industries have ample access to new technology. In the United States, in contrast, small and medium-sized companies in mature industries often stagnate technologically.

The U.S. government can help these industries more by sponsoring the research that underlies their long-term technological vitality. The private sector tends to underfund this generic, infrastructural research because its outputs go to the entire industry rather than to a single firm.

Government also can do more to publicize and multiply the success stories of recent years. In the early 1990s, for example, the Semiconductor Industry Association inventoried the industry's sources of technology and forecast its future technological needs. This road map helped focus the attention of the industry and the federal government on a shared conception of technological challenges and opportunities.

The flexibility and diversity of the U.S. economy have made it the envy of the world. But the good economic times cannot last forever, and when the economy falters, people will be asking what went wrong. Now is the time to identify the things we have done right so that we will be able to call on them when they are needed. MEMO: H. Norman Abramson retired in 1991 as the executive vice president

of Southwest Research Institute in San Antonio. A member of the

National Academy of Engineering, he recently chaired the U.S. side of a

binational panel that studied technology transfer systems in the United

States and Germany.

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