The Prague Post Online: Business: 10 Questions

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December 1st, 2008

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10 Questions

with Charles W. Wessner
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By Paul Voosen
Staff Writer, The Prague Post
July 4th, 2007 issue

KURT VINION/THE PRAGUE POST

Wessner says the circulation of human capital needs light and incentives to grow.

The Wessner file
Job title: Director of technology, innovation & entrepreneurship, National Academy of Sciences
Nationality: American
Previous position: Director, Office of International Technology Policy, Department of Commerce
Education: B.A. in International Affairs, Lafayette College; M.A., M.A.L.D. and Ph.D., Fletcher School of Law and Diplomacy

As the Czech Republic moves away from investment in heavy industries and toward a knowledge-based economy, integrating universities and small businesses into the “innovation sector” will be vital for the country’s future. The United States is considered the leader in fostering these ties. Charles W. Wessner of the National Academy of Sciences talks to The Prague Post about bridging innovation’s valley of death and why European universities should behave more like soccer clubs.

❶ What’s the state of the innovation industry worldwide?

The rate of change is enormous. China is not kidding. They are focused on innovation the way the U.S. focuses on military defense. And for the first time in my career, the problems facing China, the U.S. and the Czech Republic are the same: How do you convert research investment into innovations, which can then be developed into products that employ people and increase wealth, welfare and security?

You may not like Bush’s war on terror, but nobody likes anthrax. So the U.S. is increasing expenditures to develop vaccines and diagnostics — and 20 years from now people won’t remember why we made that progress. I’m told Nixon’s war on cancer was instrumental to developments in biotech today.

➋ How can a country like the Czech Republic improve its R&D sector?

Small businesses and universities are key elements in this process and they need to change. Sadly, in some of the EU accession countries, students have become quite conservative. They don’t want change. I’m staggered by that, because you have to change if you’re to compete.

They should apply the same principles Europeans have for their soccer teams. I’m serious. They don’t recruit professors from outside the country, but European soccer teams recruit from everywhere. They don’t say, ‘Oh we have to have one person from every town so it’s distributed geographically fairly.’ But when it comes to innovation, then they want to distribute it all around. They don’t recruit. You can’t even bring Czechs back easily to the country from the U.S.

➌ Does the country have anything going for it?

The Czechs do have advantages. They have all this foreign direct investment, a skilled work force, tremendous intellectual assets and an agreeable place to live. But a lot of it is based on large companies. Innovation and the spreading of higher wages — as the Irish have done — comes from using that investment to build a tissue network of supporting and spin-off companies, so they’ve got large companies with direct investment but it’s not flowing through the rest of the system. The universities seem reluctant to reform.

➍ What particular reforms would you advocate?

Recognize that universities are part of the innovation system, not sitting up in an ivory tower. Give directors more authority. Give them rewards. They should be running the university and not have a full teaching schedule.

Also, allow schools to raise money from outside. They need endowed chairs. Large companies will endow chairs if given the opportunity. But often it’s like in India, where a wealthy Indian entrepreneur offered a billion dollars to one of their best schools. But the government wouldn’t let him give it directly and said, “We’ll take the money and manage it for them.”

They also need to diversify the system. In the U.S., 18-year-old boys are into sports, sex, cars and alcohol. We grow out of this, maybe around 60 or 80 — at least the cars. But the point is our system provides a second chance through junior colleges like Santa Cruz. Do well in Santa Cruz and you can go to UC Berkeley for graduate school when you’re 24 or 28. There are multiple paths. Whereas in France, for example, you fail one test when you’re 18 and it’s over for you.

➎ Is it more difficult for European universities, which are largely state-controlled, to compete with one another?

This is important. Can a centrally planned, central funded and centrally directed university system adapt to the 21st century? They need agile and differentiated universities. But they are run in essentially a Soviet system. The face and intent is kinder, but you have ministries with a small number of people who think they know everything from the day they got there.

➏ So everyone should follow the U.S. model?

The U.S. has real problems. It’s not this well-oiled innovation machine where you put money in the Defense Department and out comes Microsoft. That’s a myth. There have been reports from serious people — businessmen and universities — saying that we can easily lose our scientific lead if we don’t get our act together.

It’s difficult to learn that there is no inevitable technological trajectory. Plenty of good ideas lie buried in laboratories and will never see the light of day. There is a valley of death for innovation in the U.S., and getting through there requires not just venture capital — funding from venture capital is quite small for start-ups. What you need are more deals, more start-ups and more companies. It’s surprising how much the federal government helps in the early stages. I was surprised when I first saw that in the beginning of my career, because you’d think all that funding came from industry.

➐ How does the federal government send out this money?

A lot of it comes from the Small Business Innovation Research [SBIR] program. It costs about $2 billion a year — you know the old Washington joke, “a billion here and a billion there and pretty soon you’re talking real money.”

SBIR has a number of key characteristics. All the agencies support the program, so there isn’t one tech agency doing it: transport, health, defense, they’re all solving their needs by turning to small companies. I’d describe it as a program that can meet Czech social needs with Czech resources and Czech companies. We’ve learned that it works and it’s a way of generating the 21st-century university, one that teaches people to work on real issues. It funds curiosity-driven research but also brings science to social problems while generating market-ready students.

➑ I imagine many professors don’t see themselves as entrepreneurs. Do programs like SBIR encounter resistance from them?

The key to SBIR is that it lets professors self-select. We don’t tell them, “Go forth and found a company.” Some people are never going to do that in a thousand years, while others will do it in a minute if given the opportunity.

In 1980, the U.S. system was exactly where the Czech system is now, with no corporate cooperation. We changed the laws, we added incentives for commercializing, SBIR played a role and of course the Bayh-Dole Act [of 1980], which gave universities intellectual property rights to inventions that came out of federally funded research.

The result was changed behavior. There’s been a steady rise in business creation. Is it perfect? No. Are there problems? Absolutely. Many American professors object to it, but many others take advantage of it. Professors are moving out of universities and working in companies and then moving back into universities. There’s very little of that in Europe. That circulation of human capital, we call it a national innovation ecosystem. It’s a system that can evolve and change like a garden over time if you add light and water and fertilizer. That’s what they need to do: Add more light and incentives.

➒ Are any EU countries doing a good job right now?

Finland comes to mind. The Finns have adopted some of our recommendations and the Swedes have adopted an SBIR program. I’m seeing the Dutch in a week to talk about their pilot program. They understand what I mentioned earlier: You involve different ministries instead of just one tech agency — though it is good to have one central focus for policy — and you get the whole system trying to innovate. Because it’s not all nanotubes: It’s nanoparticles for car paint, for windshields, for engine blocks, for better road signs and better road construction, which they could use here.

Sometimes people are defiant and don’t like SBIR. That’s fine. But tell us what’s better and do it and we’ll copy it. But the idea of not having anything that addresses that valley of death and just putting money into research, well, that’s not going to handle the Chinese.

➓ Is there room in the innovation field for both Europeans and the U.S. to follow similar models?

Innovation is good for everybody. If there’s a great company here, a multinational may want to buy it and a large number of them are American or German or French. Growth is important for everyone. The multinationals are a major asset because they’ve brought training and managerial talent and technology into the system. But the real value is if they get small companies to meet their quality standards. Then those businesses are integrated with the global supply chain. The multinationals need small companies for innovative ideas and small companies need large companies for market access and knowledge about current trends. It’s a very symbiotic relationship.

Countries like the Czech Republic have intellectual assets and they just need to upgrade the physical capital of their universities. But how do you tell them this? They’ve got to step up, use the structural funds, increase investment in the university system and intelligently change its structure.

Want your top manager to answer our 10 Questions? Send a message to Paul Voosen at pvoosen@praguepost.com

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