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July 11, 2005 – Managing the process of global partner selection in the complex environment of disruptive technology raises questions that have perhaps not been contemplated since the innovation-led era of early space exploration.
The technological innovations that propelled the U.S. economy for nearly four decades now manifest themselves in all aspects of U.S. daily life. However, non-U.S. global industries now dominate the further development of these innovations themselves. The semiconductor and electronics industries are the most obvious examples.
The U.S. Commerce Department is keenly aware that, insofar as nanotechnology is a nascent industry, it has the potential to disrupt future global economies. The best comparison is to how space-led innovation drove the recent past. And U.S. defense — both economic and military — will witness the impact of scientific development and discovery rivaling the semiconductor revolution that followed. The addition of several members of the private nanotech business sector to the President’s Export Committee Subcommittee on Export Administration (PECSEA) suggests the U.S. government has a growing interest in better understanding the impact of nanotechnology to our future economy.
But therein lies the dilemma for nano startups attempting to commercialize disruptive technology. While many U.S. corporations continue to invest in new technology, a chasm appears to exist between corporate R&D expenditures and the operating business units. Corporate R&D most often represents an “internal tax” in the form of an expense allocation for the operating business units. And yet business units, by design, are profit-motivated and measured for their performance in fiscal quarters. This scenario can create a counter-incentive to develop disruptive technology with the potential for long-term economic benefit.
Startups attempting to bridge this chasm on their own are compelled to internally finance early product development in the hopes of luring the business units to the negotiating table. Our U.S. culture continues to excel in innovation and fosters a drive for entrepreneurs to move from academics to early stage startup businesses. But a few million venture dollars invested in a startup is a far cry from the long-term efforts of multinational corporations.
Nanotech entrepreneurs know this. They recognize that complex product development paralleling the technological achievements of the past will require no less time to commercialize. However, the operating environment and the last decade’s trend to short-term, cost-driven profit will compel the leaders of many nano startups to seek foreign, patient investment capital in the form of corporate partnerships and strategic investment.
Without passing judgment on the righteousness of global partner selection, one need only recognize that — at least for the so-called nanotech industry that exists today — partnering with global companies is simply the economics of survival. And recent and continuing announcements of global alliances by technically innovative U.S. based nanotechnology companies provide better than anecdotal evidence that this trend is accelerating without an appropriate response from major U.S. corporations.
As a result, perhaps the nano industry will be the first in history to begin with globalization as a target without regard for geo-political boundaries as a critical factor to its own success. What that means for the United States remains to be seen.